Lions financed by Donkeys: US wireless gurus battle ghosts of VC past
Silicon Valley shoot-out
General Ludendorff, a German commander in the First World War, famously contrasted the bravery of the British troops with the stupidity of their leaders as "lions led by donkeys"[*].
In post-doomsday Silicon Valley, there's a similar gulf between the start-up entrepreneurs pitting their wits in a market that's the most hostile imaginable, and their venture capital financiers. The old phrase is fairly appropriate, but how we really wish this wasn't so: because we like to have our prejudices disrupted.
Last night, a panel discussion at the Hyatt - the latest in a series of excellent seminars hosted by the Churchill Club - butted Handpring (and former Palm lynchpin) luminary Joe Sipher with Danger chief Andy Rubin against with a name with some notoriety to regular Register are familiar with: VC Stewart Alsop.
How we wished, if only to upset the racing form book, that Rubin or Sipher would say something really stupid while Alsop would provide some strategic insight of great wisdom. But can you guess what happened, dear readers?
Rubin and Sipher were playful and as bright as buttons, spinning off good ideas. While they talked, Alsop yawned and scratched himself, took pictures of the audience or the moderator, his bulky frame a picture of indifference and complacency. A greater contrast would be hard to imagine.
The opening question set the tone. Had the panelists seen any cool new gadgets?
Rubin had brought along several: a robot Hoover, an Ethernet camera, a tiny 2-Megapixel camera, and a tiny Sony notebook PC. Sipher, after a few squirts of the audience with a "pump action" waterpistol, revealed his collection of gizmos, and they could all be had for under $50: his $10 retractable earphone cable and $10 gameboy had a serious point: gadgets can defy taste or fancy MBA-style market segmentation, so long as they have some utility. And that's a terrific point to make.
How about Stew? Alsop had a camera phone "all the way from Japan" - and it was a mobile phone which had a camera in it. How about that? It looked one of those first-generation J-Phones that were introduced a couple years ago.
Rubin pointed out - showing he's more aware of the Japanese market than Alsop - that it wasn't possible to buy a phone there now that didn't have a camera, such was its ubiquity. In fact, he anticipated the day when cheap cameras would be sold with built-in data cards, making them network-aware, always on picture transmission devices. Which is a fascinating idea.
A questioner prompted a discussion of why the US couldn't adopt world standards. It was the "multiple network" problem, agreed Alsop. They all agreed what a money-earner text messaging had been for the carriers, over in Asia and Europe. Sipher said the problem was the government hadn't asked for a common standard, and let everyone do what they want:
"The problem is our government managed the spectrum in this way, and allowed anyone to use anything, and this has hurt us compared to the rest of the world," he said.
"Do you want some government setting standards?" he cried, leaping from his supine, scratching pose of just a moment before. Sipher was mouthing something that looked like "not technical standards" when Alsop started beating his chest with the microphone, like a rare gorilla given a stick by a TV documentary wildlife producer, and went off into a strange little mini-rant, about GOVERNMENT INTERFERENCE! ? the details of which need not detain us here.
"Well, at least some common protocols would be nice," said Sipher, painfully aware of how difficult America's divided market made it for device makers, like Handspring, who want to create a richer platform. See, GSM standards weren't mandated by any government - those governments just agreed that a standard would be to the common good, and let the engineers go off and design one. It worked. A hush marked some recognition of this from the audience, and the gorilla fell still, examining his microphone thoughtfully.
Then he spoke.
"Will we learn how to text message like the Europeans? Maybe. But will the Europeans start using email like we do?" asked Alsop.
No, that's what he said. Apparently there is some secret email protocol in use here in the United States, it's known to Stew, and it's calling to us, like Silent Tristero.
While we pondered on that very profound (but quite unfathomable) pontification from Alsop, the debate continued, with Rubin expanding into some genuinely original and imaginative recent discoveries he'd made which could help the wireless business. He'd seen some killer subscription services, noted a recent academic breakthrough that made WiFi clusters much more economical, and even noted a lithographic technique that could make this next picture-swapping phone craze more immediate. Rubin was full of good ideas, and they were spinning off like fireworks, and his fellow entrepreneurs (including Ed from Microsoft) were on a riff. It was all getting quite cordial, and creative.
But in the corner the ape was bristling, and a certain point he snapped. Perhaps resentful of the enfolding conversation, he proclaimed -
"Let's all have 802.11 telephones! Hey, anyone can build telephones!"
"Wouldn't it be great," he continued, "if the carriers all got put out of business by their own private protocols, and we built our own democratic technologies instead!"
A rebel yell went up from the audience, indicating that Alsop had touched a visceral point - and this year's most virulent meme, we fear - by declaring UDI. Wasn't all that time spent negotiating with foreigners over common - or communistic, or something - standards just a waste of time, he suggested?
Yes, Alsop wants us to do away with those debt-ridden and permanently stupid carriers - and sure, we all know how stupid they are - and build a home-grown data and voice network, cobbled together as it may be by miles of cable, hundreds of thousands of Airport base stations? and a whole lotta hope.
This meme is fairly contagious amongst isolationist types here, I've noticed, but it's going to be this year's bubble. The "Wi-Fi as phones" meme taps into several American neuroses all at once, and in times of crisis people like to reach for a powerful and reassuring narrative. "Wi-Fi as phones" taps most strongly into a New Frontier narrative: the New Frontier is more tempting than the prospect of fixing old messes.
(You can hear it amongst oilmen and reactionary industrialists outside the tech industry: the desire to, when the times comes, flee this Earth and conquer new planets, because they've pretty much gone and ruined the one they had to start with).
However back of the envelope economics show that such a network would be impossibly inefficient, and if built, only benefit a few swanky Palo Alto folk who happened to be on the right side of the 101. Forget about putting an infrastructure in the evil, crime-ridden half of Palo Alto. But simple maths doesn't stand a chance.
Alsop was away, and knew he was on to something: here was a pundit going for the kill, and by the end of his peroration he was practically raising the Confederate flag. That kind of knocked everyone sideways, and although the great ape had made its point, we were left further away from a solution that we had been, a few minutes before.
This had us thinking how naïve, and sweet is New York's Attorney General Eliot Spitzer in believing that transparency in the brokerages will lead to more efficient "capital formation". Efficient capital formation is at the core of Spitzer's drive to clean up the trouser-filling, dishonest buddy deals on Wall Street that marked the last tech boom. Spitzer might think he's cleansed the temple by sacrificing some brokerage chiefs, but he hasn't got to the core of the problem: he hasn't met Stew.
The difference between the business people - who want to get on and build markets, with smart ideas - and these financiers who are supposed to enable them and nurture them, was pretty starkly drawn in this discussion. Alsop, we learned, sits on the boards of seven companies.
If Sipher and Rubin are representative, the wireless business isn't short of smart and enterprising people. Lions for sure, but led by what, exactly? ®