Cashmore on Technology’s Paradigm Shift

Here’s an interesting conversation between Pete Cashmore, the social media blog Mashable’s founder, and Margaret Brennan of Bloomberg Television. The two were talking about Eric Schmidt, the Chairman and former CEO of Google. The tech world is buzzing about Schmidt’s admission yesterday that Google blew it when they underestimated Facebook.

Now, Cashmore’s site is all about social media, the epicenter of Web 2.0. So, he knows what he’s talking about when it comes to new media. His view is that Schmidt is being too hard on himself for missing "the friend thing" because Google simply doesn’t have social DNA. Essentially, Cashmore is saying Google is all about search and advertising and that they can’t be expected to make a natural transition into social. It was also interesting to hear Cashmore talk about Nokia’s fall from grace and the symbiosis of a Microsoft-Nokia takeover.

Schmidt mentioned the “Gang of Four” Internet companies as Google, Facebook, Amazon and Apple. So, he’s saying in effect, “forget about Cisco, Microsoft and Intel”. I see this as another part of the paradigm shift in technology as it moves to a mobile-centric world. Just a generation ago, people were chained to their IBM desktop computers. When the clone wars decimated IBM’s market, Microsoft and Intel emerged as Kings of the Hill. The Internet bubble was all about the move away from the Wintel duopoly. But mobile data was in its infancy. That world was still very much focused on the Internet as content within a Wintel-based ecosystem. Cisco, Microsoft and Intel were still major factors. The Internet’s “Gang of Four” back then was Yahoo, AOL, Amazon, and eBay.

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Fast forward to today and we are really talking about the Internet as the new area of focus for content delivery. But now its a mobile world with Android and iOS as dominant platforms, not Windows.

Here are my questions:

  • IBM bled red ink in the first jobless recovery in the early 1990s. I think of them a little like Nokia today. How did IBM make the transition from also-ran PC maker to still leading edge technology company? Is there something in that model for others?
  • What’s with Amazon as the ONLY member of the Gang of Four during both the Internet bubble days and in the new Web 2.0 version? Remember, they were unprofitable and leveraged during the Internet bust and many thought Amazon would go bankrupt. Do they have some special sauce that others can benefit from? I tend to see Amazon as a leading example of ‘creative destruction’
  • How about Cisco, Microsoft and Intel. Are they out of paradigm, and if so, how do they get back in the game?
  • What about Yahoo!, AOL and eBay. No one’s really talking about them. In the Internet bubble hey-day they rivalled Intel, Microsoft and Cisco for valuation. Is their goose cooked? What can they do?

My take: These are the kind of questions people like Eric Schmidt should be asking themselves. First and foremost is the Cashmore social DNA question: “are we out of paradigm? If we are, how do we get back in paradigm without wasting shareholder money?” Microsoft needs to be looking at IBM because they are clearly out of paradigm.

Bloomberg video below

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5 Comments
  1. Roger Malcolm says

    Another story to explore is what the Ma Bells of the world are doing. The so-called Web 2.0 is built on the platform of cheap and virtually unlimited bandwidth. But what if the providers of that bandwidth were successful in extracting economic rent by way of limiting and pricing bandwidth. AT&T, Comcast, Time Warner and now Verizon are entertaining bandwidth caps. Currently the caps are 150 to 200 GB per month, which is fairly high in comparison to average personal usage today but average use today was excessive use 5 years ago. So as Web 2.0 becomes successful, most will hit those caps then the platform built on cheap virtually unlimited bandwidth will come crashing down. To prevent that crash one or two things will likely have to happen: (1) Government regulation treatingthe Ma Bells as the monopolies they are and regulating their rates to cover their costs and “normal” margin and restricting them from limiting something that is not physically limited (i.e. the caps are not justified by their abundance in capacity) or (2) those content providers of Web 2.0 will have to pay economic rent to the Ma Bells to open the pipes (the likely goal the Ma Bells are seeking.)

    1. Edward Harrison says

      Good comments. The telcos are a problem in my view. Last June when I was talking about the future of computing I wrote:

      http://pro.creditwritedowns.com/2010/06/the-future-of-computing-and-the-coming-apple-android-wars.html

      “You can gatekeep by controlling network access. This is what telcos are trying to do, especially in squelching net neutrality. They want to turn themselves from dumb pipes into gatekeepers who can extract rents by controlling which applications and websites are preferred.  Quite frankly, I see this behaviour anti-competitive. But, in due course, this kind of behaviour will invite competition and the telcos will find their monopoly rents diminishing.”

      So I agree with you that they are getting to be monopolies AGAIN. But I don’t think the U.S. government will have any stomach for treating them as such. Content providers will have to start building competing networks, something Goggle is already contemplating. In Europe and Asia it will be different though.

      1. Roger Malcolm says

        Over the years, through state lobbying, the Ma Bells have prevented a host of municipalities from building out broadband services in about a dozen or more states (and in many of those cases, that was in semi-rural areas to get broadband access for some households who were not offered broadband by those companies.)

        I am certainly hopeful Google, and others, can build infrastructure to compete or likely surpass but there is a simple reason why America ranks so low in broadband service – the Ma Bells are extremely talented at lobbying. I am not so sure that Google can overcome that “talent.”

      2. Edward Harrison says

        I certainly hope the likes of Google can do. But Google is just one competitor. Realistically, the telcos’ networks are very expensive to replicate given existing technology. In the future, we are going to see more wireless technologies replicate their existing infrastructure, but the costs are going to be prohibitive for most Web 2.0 participants. 

        There is a great likelihood that they will be able to favor certain some traffic over other traffic without any regulatory oversight – such is the capture of government by big business. You are right about their lobbying ‘talent’. The Cable companies and their stranglehold on rural communities are one of the bigger problems.I am a lot less optimistic about net neutrality than I was a year ago. I really think there is a reasonable chance we are going to see bandwidth discrimination become the norm. This is a big threat to innovation in the US.

  2. Roger Malcolm says

    Another story to explore is what the Ma Bells of the world are doing. The so-called Web 2.0 is built on the platform of cheap and virtually unlimited bandwidth. But what if the providers of that bandwidth were successful in extracting economic rent by way of limiting and pricing bandwidth higher than its costs structure would predict. AT&T, Comcast, Time Warner and now Verizon are entertaining bandwidth caps. Currently the caps are 150 to 250 GB per month, which is fairly high in comparison to average personal usage today but average usage today was excessive usage 5 years ago. So as Web 2.0 becomes successful, usage will go up and many will hit those caps. As that happens, the Web 2.0 platform, built on cheap and virtually unlimited bandwidth, will likely crash.

    To prevent that crash one of two things will likely have to happen: (1) Government regulation, treating the Ma Bells as the monopolies they are, regulating their rates to cover their costs, capital build out, and “normal” margin and also restricting them from limiting something that is not physically limited (i.e. the caps are not justified by their abundance in capacity) be put into place or (2) those content providers of Web 2.0 will have to pay economic rent to the Ma Bells to open the pipes (the likely goal the Ma Bells are seeking.)

    1. Edward Harrison says

      Good comments. The telcos are a problem in my view. Last June when I was talking about the future of computing I wrote:

      http://pro.creditwritedowns.com/2010/06/the-future-of-computing-and-the-coming-apple-android-wars.html

      “You can gatekeep by controlling network access. This is what telcos are trying to do, especially in squelching net neutrality. They want to turn themselves from dumb pipes into gatekeepers who can extract rents by controlling which applications and websites are preferred.  Quite frankly, I see this behaviour anti-competitive. But, in due course, this kind of behaviour will invite competition and the telcos will find their monopoly rents diminishing.”

      So I agree with you that they are getting to be monopolies AGAIN. But I don’t think the U.S. government will have any stomach for treating them as such. Content providers will have to start building competing networks, something Goggle is already contemplating. In Europe and Asia it will be different though.

      1. Roger Malcolm says

        Over the years, through state lobbying, the Ma Bells have prevented a host of municipalities from building out broadband services in about a dozen or more states (and in many of those cases, that was in semi-rural areas to get broadband access for some households who were not offered broadband by those companies.)

        I am certainly hopeful Google, and others, can build infrastructure to compete or likely surpass but there is a simple reason why America ranks so low in broadband service – the Ma Bells are extremely talented at lobbying. I am not so sure that Google can overcome that “talent.”

        1. Edward Harrison says

          I certainly hope the likes of Google can do. But Google is just one competitor. Realistically, the telcos’ networks are very expensive to replicate given existing technology. In the future, we are going to see more wireless technologies replicate their existing infrastructure, but the costs are going to be prohibitive for most Web 2.0 participants. 

          There is a great likelihood that they will be able to favor certain some traffic over other traffic without any regulatory oversight – such is the capture of government by big business. You are right about their lobbying ‘talent’. The Cable companies and their stranglehold on rural communities are one of the bigger problems.I am a lot less optimistic about net neutrality than I was a year ago. I really think there is a reasonable chance we are going to see bandwidth discrimination become the norm. This is a big threat to innovation in the US.

  3. Roger Malcolm says

    Added thought for Web 2.0, will Intel’s demise be ARM’s rise?

    ARM’s chip architecture is the core of around 90% of mobile devices (that is higher than Intel’s desktop share.) ARM’s dominance is because of its much higher performance to power usage ratio which is a prized attribute for the processor of mobile devices.

    Look at the trends:

    Arm already has 90%+ share of the CPUs in mobile devices;

    Apple already uses ARM design in its I-pads and I-phones and there are credible rumors that Apple will switch to ARM in its MAC and note books in the near future;

    Microsoft’s next version of Windows will work with ARM cores, along with Intel’s x86 platform – this will be the first time Microsoft will stray from strictly x86. While I doubt ARM will initially threaten Intel much in desktops/servers, as desktops and mobile devices converge, it very well could, and at the least it will put pressure on Intel to spend resources defending.

    And look at the Intel news a week or so ago: Intel might consider allowing none-Intel designs to be built for-hire in its foundries (i.e. rent is capacity to other chips), might show that Intel is following Clayton Christensen’s Innovator Dilemma (going for short term dollars at expensive of losing market to a disruptive technology) and throwing-in the towel.

    What I mean by this: ARM’s power advantage is in the situation of its active power usage (the electrical power consumed from active switching in the chips) is much more efficient than Intel’s. Intel’s x85 structure will never be able to match ARM because of its instruction set.

    But total power consumption, in chips, comes from two sources: active power (where ARM leads) and power leakage (power leaks from the circuits into the substrate.) Again, Intel can never match the active power efficiency of ARM but as chips become smaller and smaller, and circuits closer and closer, active power will likely take over as the overall driver of power consumption. One of Intel’s biggest advantage is its foundries. Through its superb engineering quality, Intel might be able to entertain an advantage if power leakage does drive power consumption as chips become smaller. But if it rents those foundries to other chip designs, then it is throwing that last chance away for short-term revenue.

    Bottom line: the trend seems to be all in favor of ARM. For investments, ARM might like a 1980s Intel.

  4. Roger Malcolm says

    Added thought for Web 2.0, will Intel’s demise be ARM’s rise?

    ARM’s chip architecture is the core of around 90% of mobile devices (that is higher than Intel’s desktop share.) ARM’s dominance is because of its much higher performance to power usage ratio which is a prized attribute for the processor of mobile devices.

    Look at the trends:

    Arm already has 90%+ share of the CPUs in mobile devices;

    Apple already uses ARM design in its I-pads and I-phones and there are credible rumors that Apple will switch to ARM in its MAC and note books in the near future;

    Microsoft’s next version of Windows will work with ARM cores, along with Intel’s x86 platform – this will be the first time Microsoft will stray from strictly x86. While I doubt ARM will initially threaten Intel much in desktops/servers, it very well could as time goes by with Microsoft opening the door for it (for example, if Apple moves to ARM in Macs, how tempting marketing-wise would it be for PC clones to do the same), and at the least it will put pressure on Intel to spend resources defending.

    And look at the Intel news from a week or so ago: Intel is considering allowing none-Intel designs to be built for-hire in its foundries (i.e. rent its capacity to other chip designs.) This is after years of trying with its Atom chip to crack the mobile market, so this news perhaps shows that Intel is following Clayton Christensen’s Innovator Dilemma (going for short term dollars at expensive of losing market to a disruptive technology) and throwing-in the towel.

    What I mean by this: ARM’s power advantage is in the situation of its active power usage (the electrical power consumed from active switching in the chips) being much more efficient than Intel’s. Intel’s x86 structure will never be able to match ARM because of its instruction set.

    But total power consumption, in chips, comes from two sources: active power (where ARM leads) and power leakage (power leaks from the circuits into the substrate.) Again, Intel can never match the active power efficiency of ARM but as chips become smaller and smaller, and circuits closer and closer, power leakage will likely take over as the overall driver of power consumption. One of Intel’s biggest advantage is its foundries. Through its superb engineering quality, Intel might be able to entertain an advantage if power leakage does drive power consumption as chips become smaller. But if it rents those foundries to other chip designs, which will probably include ARM designs, then it is throwing that last chance away for short-term earnings.

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