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The STRATEGIC NEWS SERVICE N E W S L E T T E R
The most accurate predictive letter in computing and telecommunications,
***SNS*** Predictions for 2011
“[The SNS New York Dinner] was an outstanding event and great networking opportunity. Mark... is quite a dynamic individual and a great host.”
– Eric Green, President, ELG Consulting
» Predictions for 2011
Last week we hosted the Sixth Annual SNS Annual Predictions Dinner, again at the Waldorf=Astoria Hotel. Participant Oliver Dominick, CEO of Hyla Partners LLC, called it “the best one yet,” and he has been to all of them.
The caliber of participants also was perhaps as interesting as it’s ever been, with representatives from Bloomberg TV, CNBC, HarperCollins, the World Bank, Wired, and Fortune, in addition to a selection of technology CEOs.
And finally, we had the honor of hosting Richard Marshall, a friend from my recent trip to Heidelberg:
“Special Interview with Richard H.L. Marshall, Esq. – Director of Global Cyber Security Management, National Cyber Security Division, Department of Homeland Security: ‘Economic Cyberwar’”
After a reception and dinner, we led off with this conversation, and I will rush to point out that: a) this title was my own invention; like most in this field, Richard does not like the use of the term “war” except when shots are fired or real physical damage done; and b) he was speaking for himself, and not on behalf of the government.
I think many attendees found that conversation to be a real high point of the evening, which we will make available to members as a video within the next week or so.
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As usual, I started my annual Predictions Dinner conversation with suggestions of how the landscape would appear in the coming year, before offering 10 predictions. And, before that, I offered my current scoring. Members already know how the calls from last year went (starting with the rather shocking Google cloud hack by China just days after the event).
Here are the current numbers.
Recent Past Predictions Totals:
2009 Year = 95.4% (Note: I missed one of the 10 calls, only measurable after year end: the predicted peak in entertainment box sales in 2009. All three makers peaked in February-April of 2010, too late to help the score. Since this was technically a completely failed prediction, I gave it zero points, leading to the above figure.
2010 Year = 95% (Note: I missed this call: “MobileApps and Mobile Content drive MicroPayments; these move from niche to mainstream payment models. By year end, paying in this way is common, and most people have worked schemes out for personal use.” I think this was common (such as giving to charities, paying for parking, with your phone), but not mainstream; for a call half-right, I added 5 points. Instead of 10.)
Total Average Since 2005, including Year 2010 Predictions: = 95.33%
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Here is the landscape I think the world of technology and economics faces as we make the turn into early 2011:
Economic Cyberwar Becomes a Front and Center Concern. By this term, I mean: we come to understand we are in an economic trade war, and that cybertheft is its primary weapon. This war is not in the future; it is almost over. As corporations and governments around the world recognize that they have already been hacked, and most of their crown jewels stolen, the watchword of the year becomes: Security, Security, Security. In 2011, the world finally “gets” the value of Intellectual Property, and starts getting more serious about protecting it.
Mexico Will Be a Failed State. It is already the most corrupt, with (incidentally) the highest broadband pricing in the world. The U.S. will step up military involvement.
Countries that Shine in 2011: Brazil, India, South Korea, Canada, Australia, Sweden, Germany. This is South Korea’s year, in phones, pads, chips, TVs, white goods, and cars.
Russia Confronts Its Karma: No democracy, No judiciary, No free markets, No free speech: No thanks. Russia will begin the long road to becoming a market-oriented economy again (vs. the government stealing oil fields and having the FSB kill or imprison all dissenters). Venezuela ’s decline accelerates.
The Developed World Loses Tolerance for Islam, organizing specifically against it in law, political, and military action. The words “Islam” and “Radical Islam” become conflated. This is a direct result of the clash between the power of individuals to wreak havoc and the lack of governments’ ability to prevent it. (Since this was written, an Islamic bomber has struck Stockholm, of all places. Take that, tolerant nation.)
China Overplays Its Hand, represented by military adventurism, currency isolation, and continued renminbi deal forcing, with pollution threatening progress. China’s strategy of challenging global tech standards (TDS/CDMA, windmill wattage, etc.) will fail. You might say, “An increasingly aggressive China will not ‘kowtow’ to the West,” but the results will not be exactly what China had in mind.
Currency Wars Turn Explosive, as free-market nations, becoming impoverished by the mercantilists, become desperate. Asymmetric trade benefits for mercantilists become obvious to all. Political and military conflicts occur as a direct result of foreign exchange manipulations – specifically the China peg. The euro fades further against global currencies.
The Division of Interests between global corporations and countries, outlined last year, continues, with these interesting country groupings:
Corporations Dominate Governments: Japan, the U.S., South Korea. Leading to: Dysfunctional America and Dysfunctional Japan. The U.S. is becoming a country of sharks and rubes: those who hire lobbyists and those who are victimized by them.
Governments Dominate Corporations: China, Russia, Burma, Venezuela, Cuba, Zimbabwe.
People Control Their Own Destinies: Socialist/liberal countries seem the only ones remaining where individuals control their governments and corporations: Sweden, Finland, the U.K., Canada, France, Australia.
Global Liquidity remains the greatest risk; most nations are now carry-trade centers, with inflation held back only by the extent of prior damage. Inflation already threatens wherever the local economy is not unemployment-impaired (China, Australia). What Fed Chief Bernanke is missing: “The Slingshot Effect” – i.e., overshooting inflation targets when the upswing of the other half of the U.S. economy gets under way.
The New “China Price”: Commodities are going up, based not just on Chinese (and Asian) growth in consumption, but also in new policies of sequestering resources, buying forward commodities contracts in massive amounts, etc. Silver, platinum, iron, copper will likely all be much more expensive.
Peak Oil Is Over: The two tests put forward by the most religious believers in Peak Oil have both already failed:
1) Instead of no more new “elephant” oil discoveries, we are having them almost monthly, all over the world, from Brazil to Ghana to the Arctic; and
2) Instead of technology failing to meet its promise of increased productivity in new and old wells, technology is now vastly increasing productivity, both in allowing much deeper new wells and in getting more from existing wells.
We now have Oil for Generations to Come. I expect pricing this year of $70-$90/bbl, held back by the split global economy, alternative energy source growth, natural gas everywhere, and a loss of distribution and market control. The future promises lower and more sustainable pricing than in the past.
Technology Will Continue to Drive the U.S. Economy in 2011. Unemployment will remain in the 9%+ range.
U.S. Healthcare and Higher-Ed Costs Will Continue to Grow Wildly Out of Control: These are the financial cancers of America, not yet cured, nor even properly analyzed as problems. If Western medicine doesn’t kill you, its higher education costs will make you bankrupt.
» 2011: A “VEVEM” Year: Very Exciting, and Very Messy
And don’t forget: “Security, security, security.”
Because they need to stand on their own, and be graded, I won’t add any commentary that might confuse interpretation. Here they are:
2011 Top Ten Predictions
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Well, that’s it. Please feel free to write in with suggestions, disagreements, or extensions of any of these ideas and calls.
Your comments are always welcome.
Sincerely, Mark R. Anderson CEO
“It’s more than just a better way to push a bullet out of the barrel. That’s pretty juicy technology.” – Nevin Carr, Chief of Naval Research, U.S. Navy; in the Washington Post.
Yes, folks, the railgun is almost here.
“This is the beginning of a new era. This is a step moving to full convertibility of the yuan and is a major change of the international financial landscape.” – Norman Chan, head of the Hong Kong Central Bank ;in the Wall Street Journal.
If you watch closely, you will see China setting up Hong Kong as the pivot point for yuan trade, driven not by market pricing as much as forced yuan-denominated trade deals outside China.
“People recognize that if they want a level of performance and graphics, they probably aren’t going to get that for $299. We’re creating a willingness for our customers to pay a bit more.” – Wayne Surdam, Hewlett-Packard VP, on increased PC pricing; in the WSJ.
“After the U.S., we saw Asia go crazy.” – Andy Rubin, executive in charge of Google’s mobile software effort; on burgeoning sales of the Android OS in Asia.
“The biggest change from previous guidelines will be the shift from North to South. Strengthening defenses in the Nansei area is going to be a major pillar.” – Jun Azumi, Senior Vice Minister of Defense, Japan; in the Financial Times.
Japan is restructuring its military to oppose China, instead of Russia.
“This is a major victory, particularly for American workers and businesses. We have said all along our imposition of duties on Chinese tires was fully consistent with our WTO obligations.” – Ron Kirk, U.S. trade representative; in the FT.
“It is really a tale of regions, with European banks seeking capital to repair battered balance sheets, while in Asia funds are used solely to fund growth.” – Matthew Koder, head of global capital markets at UBS; in the FT.
China IPOs are triple the value of the U.S. in 2010.
» What Is a Hohlraum? (See “Upgrades”)
“The indirect drive approach to inertial confinement fusion is as follows; the fusion fuel capsule is held inside a cylindrical hohlraum. The radiation source (e.g., laser) is pointed at the interior of the hohlraum, which absorbs and re-radiates the energy as X-rays, rather than on the capsule itself, a process known as indirect drive. The advantage to this approach is that the energy is re-radiated in a much more symmetric fashion than would be possible in the direct drive approach, resulting in a more uniform implosion.
“The X-ray intensity around the capsule must be very symmetrical to avoid hydrodynamic instabilities during compression. Earlier designs had radiators at the ends of the Holhraum, but it proved difficult to maintain adequate X-ray symmetry with this geometry. By the end of the 1990s, target physicists developed a new family of designs in which the ion beams are absorbed in the hohlraum walls, so that X rays are radiated from a large fraction of the solid angle surrounding the capsule. With a judicious choice of absorbing materials, this arrangement, referred to as a ‘distributed-radiator’ target, gives better X-ray symmetry and target gain in simulations than earlier designs.”
– From Wikipedia.
Mockup of a gold-plated hohlraum designed for use in the National Ignition Facility.
Re: SNS: “Faking ROIs, Warping Markets”
Mark,
What’s Google making? According to the buyers at DSG (Dixons Store Group – behind PC World, the major PC and electronics outlet for the UK), Google makes 250 from every PC sold in the UK, from search revenue. I’d love to see a figure for phones, and I’m going to assume if it’s not the same today, it will be higher soon.
Everything Google does in all areas of its business (apart from possibly Google Apps in enterprise and government, and it may apply there too) is designed to either put Google ads in front of more searchers on more platforms or to give the Google search engine more training data in order to improve the search engine that puts ads in front of searchers (like getting the contract to machine translate for the European Patent Office -- first lawsuit from a badly translated patent, anyone?).
Gmail, Picasa, translation, the Google Maps sensor probes you have to take to get Android on your phone – they all get more data for Google to crunch. Their business model is transforming the information of the world into a source of targeted ads. Is it still cross-subsidy when it’s a company strategy? When does someone spot that it’s kind of a monopoly? (Maybe this week, if you’re the EU?)
There’s an interesting transition in the IE team who are currently all utterly engaged folks who love standards. They love them so much they’d like to make them a lot better. I prophesy an interesting collision here, and the ramifications for Silverlight and Windows 8 and Windows Phone are fascinating, but you can’t say the IE team have no passion. :)
All the best,
Mary Branscombe Technology journalism & consultancy [London]
Mary,
I think there are two Googles, as you can interpret from my predictions for next year. In fact, it almost seems as though there are two independent processes involved in running the company.
Because of a fair amount of (warranted?) criticism, Google seems to now pay increasing attention to the strategy you have described: what is the relation of any new project to getting ad revenues? In general, this part of Google is going to have the greatest database on customer behavior and desires of any firm.
This is the part of the company that privacy experts properly fear, and – like Facebook – I see no limit to Google’s desire for your personal information. Even things that seem innocuous, like picture posting, are fraught: Eric Schmidt recently suggested that he could identify any individual just from their posting of around 14 personal photos.
On the other hand, there is a second process, which randomly generates things like multi-year projects with driverless cars. This second, apparently random, process, is not a trivial part of the company, but one that occupies a fair amount of corporate attention. Although it is probably socially benign, the outshoots from this process come, I think, directly from individual engineering suggestions, and from the company policy of 10% free time.
While I can appreciate this part of the company from the intellectual perspective, and even from the charitable (don’t forget that Google.org is not a nonprofit), this is the process that leads to random outcomes, unrelated to strategy of any kind – other than keeping employees happy, and good PR.
You could call these Google I and Google II, or Work Google and Play Google.
For shareholders, however, there is only one class of stock, and that makes for problems.
Mark Anderson
Mark,
I’m a subscriber through Internode, and wanted to offer my thanks for your newsletter - it helps me avoid getting too stuck in the telco silo and talk with my customers.
I was interested to read your thoughts on the Comcast/Level 3 spat - I believe it is mistake to frame it purely as a network neutrality issue. I suspect adding the Netflix content would significantly change the balance of the Level3/Comcast peering agreement, and the costs for that increase are going to have to land somewhere.
I don’t mean to suggest that Comcast is innocent in this, but waving the network neutrality flag lets Level 3 gain public momentum for what is partly a peering dispute, and partly a battle for Netflix’s business, as per this post on NANOG:
www.merit.edu/mail.archives/nanog/msg15049.html
It looks like the peering playbook - www.gtnoise.net/papers/library/norton.pdf - needs another entry.
Kind regards,
Gareth Cleeves Sales Engineer Internode Melbourne
Gareth,
First, thank you for a helpful and deeper view of this contest.
I find it interesting that even the poster you have sent us to, in guessing at the details of what may be happening here, denies that this is a simple peering agreement issue.
What comes out most clearly, to me, are two aspects of this confrontation:
On perhaps an even deeper level, though, I have a new idea that I think you’ll like:
Level 3, by getting the Netflix business, is now acting like a direct competitor to Comcast – which also carries movies for content.
Whatever the details of why Comcast is trying to get more money from Netflix, it looks like both of their business models may be changing, bringing them much closer to a new competitor relationship than to the old backbone provider/customer relationship.
Thank you for an informed and useful letter,
Mark Anderson
Mark,
See my new graphic novel about U.S. industrial decline! for answers… and a way America might come back. Written with Jason Land.Printed version will be available soon from Amazon.Preview/pdf version is at https://forward.msci.org/tinkerers/graphicnovel.html#Join the Facebook page! www.facebook.com/pages/Tinkerers/159510830736055?ref=ts
Reviewed by the LA Times: <https://latimesblogs.latimes.com/money_co/2010/11/finally-a-graphic-novel-about-manufacturing.html>
Please spread the word/buzz!
David Brin Physicist and Author San Diego, CA
David,
This is a smart way to get new ideas out. Contrarian as you always are, yet the thoughts you’ve shared here ought to be read by all Americans. I hope that this medium turns out to be effective, for that very reason.
Thank you for giving SNS Members a preview of this work. We look forward to seeing you at FiRe 2011.
Mark Anderson
» New Weapons, New Ploughshares
Two events caught my attention this week in this vein. Both have been under development for years, and both have had recent, large successes after long periods of frustration.
First: The National Ignition Facility has been completed at Lawrence Livermore Laboratory, Berkeley.
The purpose of this (very expensive) program is to create fusion nuclear reactions using lasers.
During the first “indirect-drive hohlraum” experiments at the NIF (see “Takeout Window” for details), Professor Siegfried Glenzer reports this week (in an upcoming appearance at the University of Washington Physics Colloquium) that the team has generated “symmetric capsule implosions at unprecedented conditions of mega-joule laser energies.”
More specifically, “192 simultaneously-fired laser beams heated ignition hohlraums to radiation temperatures of 3.3 Million Kelvin compressing 2mm. capsules by the soft x-rays produced inside the hohlraum. Self-generated plasma optics gratings on either end of the hohlraum tune the laser power distribution on the hohlraum wall, producing symmetric x-ray drive, as inferred by capsule self-emission measurements,” according to the event pre-announcement.
In Glenzer’s words, these results include “unprecedented conditions of mega-joule laser energies.”
The hope here is that peaceful nuclear energy can be had without the horrible cost of waste products identified with fission energy. (The Hanford Nuclear Reservation, having just concluded one part of a multibillion-dollar cleanup, announced the discovery of a new contaminated site this week, so toxic as to kill humans on contact.)
Where is cold fusion when you need it?
And, second:
Stories in this press this week detailed a first by the U.S. Navy, as it ramped up the performance of a rail gun to a “world record” 33 mega-joules.
For those whose childhood or early education did not somehow include the design of the futuristic rail gun: this is a technique for accelerating any (conducting) mass, or any mass on a conducting car, along a (set of) rail, with the drive force provided by alternating electromagnetic fields at extreme energies.
In other words, projectiles without fuel.
In the test firings on Friday at the Naval Surface Warfare Center in Dahlgren, Virginia, a 20-pound slug of aluminum was sent a mile from a railgun the size of a tractor trailer. Theoretically, railguns could be used to launch rockets or payloads into space, or 100 miles or more at the planet’s surface.
The eventual result of these efforts, but not yet: warships able to carry 100x the armament, with no powder or explosion issues. And, if you let your mind wander, you’ll think of plenty of additional military applications, from anti-missile tasks (funding began with Reagan’s SDI Initiative) to super-artillery.
What about the ploughshares? Science-fiction authors have long believed that this could represent a cheap and effective way of getting mass around the solar system: payloads into space, ores from planets back to the Earth.
Somehow, it makes sense compared with diesel fuel.
» PC Sales Up, Component Prices Up, Chip Sales Up, PC Prices Up
I have been watching component shortages lately, wondering how many are caused by real problems, and how many are caused by new OPEC-like behavior by suppliers. Those familiar with our successful layout of oil and gas-pricing schemes will recognize the question. Once there is a controlled supply of something, creating a shortage is easy, and the price jumps justify the risk of being caught in the market manipulation.
Make more by making less.
Lately, we have seen personal computers bucking the price trend of all other electronics, actually rising (see “Quotes of the Week”). When is the last time you heard of PC prices rising? Hello, is Gordon Moore home?
In these new Asian-supplier, post-Moore times, what matters more than how many transistors can be crammed onto a chip is: how many chips can you buy?
We have seen Apple take direct hits in the last year in iPhone and iPad sales because of component shortages, and several manufacturers have complained of uneven supply, theoretically caused by the global business upswing.
I have not seen upswings or market returns, nor their supply-chain issues, causing dramatic PC price rises before.
Here is the kind of issue that is bothering me most this week:
Toshiba announced last week that a power outage of .07 seconds at a NAND memory fab would result in a 20% production reduction for the next two months.
What? I’m sorry?
Anyone reading this who believes that story, please write in and explain it in more convincing terms than the company has to date.
Summary: I think we are seeing market manipulation of chip and component prices, driven by recognition of limited suppliers, and limited supplies in a ramping demand scenario. Why sell your widgets for $2, when you know you can wait a week and sell the same things for $4?
Get ready for a surprising jump in volatility in supply and pricing in the technology hardware world, driven by Asian suppliers.
Ninth annual Future in Review (FiRe) conference, May 24-27, 2011, at the Montage Laguna Beach Hotel, California:
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SNS is the most accurate predictive letter covering the computer and telecom industries. It is personally read by the top managers at companies such as Intel, Microsoft, Dell, HP, Cisco, Sun, Google, Yahoo!, Ericsson, Telstra, and China Mobile, as well as by leading financial analysts at the world’s top investment banks and venture capital funds, including Goldman Sachs, Merrill Lynch, Kleiner Perkins, Venrock, Warburg Pincus, and 3i. It is regularly quoted in top industry publications such as BusinessWeek, WIRED, Barron’s, Fortune, PC Magazine, ZDNet, Business 2.0, the Financial Times, the New York Times, the Wall Street Journal, and elsewhere.
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Mark Anderson is CEO of the Strategic News Service. He is the founder of two software companies and of the Washington Technology Industry Association “Fast Pitch” Forum, Washington’s premier software investment conference; and has participated in the launch of many software startups. He regularly appears on the CNN World News, CNBC and CNBC Europe, Reuters TV, the BBC, Wall Street Review/KSDO, and National Public Radio programs. He is a member of the Merrill Lynch Technology Advisory Board, and is an advisor and/or investor in OVP Ventures, Ignition Partners, Mohr Davidow Ventures, the UCSD Calit2 Laboratory, the Global Advisory Council of the mPedigree Network (Ghana), SwedeTrade, The Family Circle (Europe), and the Australian American Leadership Dialogue.
* On January 21st, Mark will share his predictions at the annual Technology Alliance Group Predictions Event in Bellingham, Washington, at Whatcom College.
In between times, he will be trying to see through the most intense rainfall on record for this month. Is that a cloud, or fog? Fog, or a field? Cow, or donkey? Sky, or ocean? Perhaps, in December, in the Northwest, they are all the same.
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SNS: Predictions for 2011
