Sunday, June 30, 2013

(BN) Outshines Facebook in Russia With Monsters on Mobiles

(Bloomberg) Group Ltd. (MAIL) is reducing reliance on advertising revenue in Russia and plans to expand against Facebook Inc. (FB) by luring mobile users with a combination of online communication and entertainment.

While online games in the U.S. and Europe have historically been based on subscriptions, the Russian company follows a free-to-play model developed in Asia by operators including Tencent Holdings Ltd. (700), Dmitry Grishin, chief executive officer of, the country's largest social-network operator, said in an interview.

"We don't say: pay $20 or you can't go to the next level" of a game, Grishin said at's new 26-story headquarters in northern Moscow. "People can play for free, but they can purchase some extra features -- for instance, better protective ammunition in our military game 'Warface.' This model aligns interests of users and the company and at the end allows earning more money without coercion.", controlled by Russian billionaire Alisher Usmanov, saw revenue from Internet value-added services, or IVAS, including sales of virtual gifts in social networks and extra features in games, surge 51 percent to $369 million last year. Mobile users often have phone accounts linked to their credit cards to pay for applications and this encourages spending. That makes IVAS even more important, said 34-year-old Grishin.

Virtual Gifts

"While advertising largely depends on economic booms and slowdowns, IVAS is a stable revenue stream," Grishin said. "It's a very sticky thing. When some holiday or someone's birthday is coming, people are buying virtual gifts. It's pretty much the same culture as you have offline." plans to boost total sales by as much as 28 percent this year. In 2012, revenue climbed 39 percent to about $680 million as online advertising rose 23 percent to $239 million.

"Our 'communitainment' strategy works really well for mobile devices as that's what people do on them -- they interact with each other and play games," Grishin said. "For many Internet companies it's a problem that people don't use their product on mobile."

Wednesday, June 26, 2013

Science vs Sports Entertainment

The 2007 Nobel Prize Lecture, by Roger B. Myerson, was presented in a small auditorium that was almost empty.

On the other hand, the 2013 NBA finals were attended by tens of thousands of people and televised to millions.

 I wonder why...

Tuesday, June 25, 2013

(BN) Oracle Mends Fences With Microsoft, Salesforce in Cloud Push

(Bloomberg ) Oracle Corp. (ORCL) is casting aside longstanding rivalries with Microsoft Corp. (MSFT) and Inc. (CRM), with partnerships to bolster its cloud-computing services aimed at businesses moving their software online.

In one alliance, Microsoft's Windows Azure cloud-computing service will run Oracle's database software, Java programming tools and application-connecting middleware, Microsoft Chief Executive Officer Steve Ballmer and Oracle co-President Mark Hurd said. Under a separate nine-year pact, Salesforce is buying Oracle hardware and software to power its applications.

"When customers choose cloud applications they expect rapid low-cost implementations," Ellison said in a statement today announcing the Salesforce partnership. "They also expect application integrations to work right out of the box -- even when the applications are from different vendors."

Oracle is mending fences with former foes as it shifts focus to subscription-based online software rather than programs installed on customers' own machines, a transition forced in part by nimbler cloud-computing rivals including Salesforce. Microsoft is competing with Google Inc. (GOOG) and Inc. (AMZN) as it seeks new sources of revenue from online services, as demand for personal computers slumps.

"It's about time, and we're really glad to have the chance to work in this much newer and more constructive way with Oracle," Ballmer said. "The partnership has an immediate benefit to customers of every size and shape."

Compatible Software

Microsoft and Oracle's collaboration would lure customers seeking more technical compatibility between products. Oracle plans to support versions of its database and Java software that customers run through the online Azure service, and when using Microsoft's Hyper-V virtualization software, which lets servers run more efficiently, Hurd said. Oracle also will let customers use their current software licenses on Azure, he said.

Oracle's database, which will be upgraded later this year as a new version called 12c, competes with Microsoft's own SQL Server. Companies using Microsoft's Azure cloud service, which lets companies build and run programs online, will be able to put information into Oracle's database.

The alliance with Microsoft lets Oracle offer its customers the option of sticking with its database and middleware at a time when businesses are moving more of their software to cloud-computing services. Oracle reported on June 20 that fiscal fourth-quarter software license and subscription sales grew just 1 percent, less than analysts had projected.

Database Market

Oracle controlled 45 percent of the $28.2 billion worldwide database market in 2012, compared with 20 percent for Microsoft and 18 percent for International Business Machines Corp. (IBM), according to IDC.

Azure's main competitor is Amazon Web Services, in a growing area called infrastructure as a service, which lets companies rent computing power, storage and database software via the Internet. That's the fastest-growing part of the cloud market, according to Gartner Inc., which estimates sales in the market segment to surge by an average of 38 percent annually to $30.6 billion by 2017, from $6.17 billion last year.

Microsoft, which said in April that revenue from Azure and related software sales topped $1 billion annually, has pledged to match Amazon Web Services' prices.

'Platform Wars'

"This deal gives Microsoft clear competitive advantages against two of its top rivals," James Staten, an analyst at Forrester Research, said in a blog post. It bolsters Microsoft's efforts to compete with VMware Inc. (VMW), the market leader in virtualization software, and "gives Windows Azure near-equal position against Amazon Web Services in the cloud platform wars," he said.

Oracle also will make its version of the open-source Linux operating system available through Azure.

"The cloud is the tipping point that made this happen," Hurd said. "This made a lot of sense for both of us."

The two companies have a long history of competition stretching back to the dawn of personal computers in the 1970s. Oracle CEO Larry Ellison, who first publicized the alliance on his company's earnings conference call last week, used to deride Redmond, Washington-based Microsoft as a "convicted monopolist" after it was found guilty in federal court of illegally defending its Windows monopoly to squelch competition.

Trash Inspection

In 2000, Redwood City, California-based Oracle said it hired detectives to comb the trash of two organizations supporting Microsoft in its antitrust trial. Ellison added that he'd be happy to ship his garbage to Redmond for inspection.

Still, Microsoft and Oracle have cooperated before. Oracle's database also runs on Windows, and developers using Microsoft's Web services software can build applications using Oracle's software tools.

Ballmer said that the companies would continue to compete, and that much of their cooperation so far had been done out of public view. The very nature of cloud computing, in which software applications span multiple companies' infrastructure software and Web sites, meant that approach was no longer sufficient, he said.

"That behind-the-scenes collaboration is not enough. People wanted more from us," Ballmer said. "In the world of cloud, you've got to do that kind of partnership actively, not passively."

Past Detente

The announcement was reminiscent of a 2004 detente between Ballmer and former Sun Microsystems CEO Scott McNealy, who appeared onstage together at a San Francisco hotel to swap hockey jerseys, demonstrate interoperability between their products and announce a settlement to legal disputes between the longtime rivals.

The deal with Salesforce comes after CEO Marc Benioff was scratched from a speaking spot at Oracle's OpenWorld conference in 2011, leading Benioff to stage a mock protest before speaking at a nearby hotel. Benioff, who used to work for Ellison as an Oracle salesman, has been winning business from Oracle with online tools for customer management, marketing and human resources.

Salesforce, which already uses Oracle's database software to run its cloud service, committed to continued use of that product, Oracle's Java middleware, and its Exadata server computers. Salesforce will use Oracle's financial management and HR software internally, and the two companies' applications will share some data.

"Larry and I both agree that and Oracle need to integrate our clouds," Benioff said.

Ellison also said last week that he planned an alliance with NetSuite Inc. (N) -- of which he's a partial owner -- to use the upcoming 12c database. NetSuite and Salesforce already run Oracle's database to power its applications.

(BN) Fish Tie Kremlin to New Owner of Facebook’s Russian Rival

(Bloomberg ) While Facebook Inc. (FB) founder Mark Zuckerberg's motto is "move fast and break things," his new Russian rival says his is "stay discreet and reel them in."

Ilya Sherbovich, who's helped craft deals for people close to Vladimir Putin throughout his career, is the biggest shareholder in VKontakte, the social network with four times more subscribers than Facebook in Russia. Unlike Zuckerberg, the 38-year-old investor doesn't yet use his company's product because he's less interested in connecting people around the world than he is in catching fish.

"My real passion is Atlantic salmon," Sherbovich said in interviews in April after his Moscow-based United Capital Partners bought 48 percent of VKontakte from co-founders Vyacheslav Mirilashvili and Lev Leviev for an undisclosed sum.

Sherbovich's love for fishing led to the 2006 purchase of Ponoi River Co., which operates Arctic fishing camps on the Kola Peninsula near the Barents Sea. His customers have included Sergei Ivanov, the former KBG spy who's now President Putin's chief of staff, and Prime Minister Dmitry Medvedev, whose photos with Sherbovich are featured on Ponoi's website. Former Vice President Dick Cheney and former Federal Reserve Chairman Paul Volcker have also been guests at Ponoi, where a week's lodging can exceed $13,000.

Those fishing trips and Sherbovich's tenure on the board of OAO Rosneft (ROSN), the state oil champion run by long time Putin ally Igor Sechin, suggest he's backed by a Kremlin that's keen to control the Internet the way it does television, according to Yevgeny Minchenko, an independent political analyst in Moscow.

'Ignite Strife'

"Of course the Kremlin wants loyal owners at VK," Minchenko said. "Putin's entourage knows the opposition could use VK's 50 million users to ignite political strife."

Case in point is Alexei Navalny, who emerged as a leader of the opposition during protests in Moscow in 2011 and 2012 that were organized via VKontakte, where he and his supporters have 300,000 followers. Those demonstrations, which peaked when tens of thousands of people took to the streets Feb. 4, 2012, are the largest Putin has faced since coming to power in 2000.

Navalny, 37, has since been put on trial for defrauding a state timber company out of about $500,000, charges that could lead to 10 years in prison. He denies any wrongdoing and links the prosecution to his politics. Navalny said VKontakte's popularity is partly tied to the maverick attitude of its creator and chief executive officer, Pavel Durov, who was 15 when Putin succeeded Boris Yeltsin in the Kremlin in 2000.

FSB Snub

"When the FSB demanded that Durov shut down our VK blog, Durov refused to do it," Navalny said in an interview in Moscow, referring to the Federal Security Service (SFDL), the main successor to the Soviet-era KGB. "Naturally, authorities are not happy about that."

Durov responded to the FSB by posting a photo of a panting German shepherd wearing a hoodie. Earlier, after billionaire Alisher Usmanov's Group Ltd., which owns 40 percent of VKontakte, offered to buy out Durov and his partners, Durov posted a picture of himself with his middle finger extended, calling it his "official answer to trash holding" Usmanov later ceded the voting rights of his stake to the 28-year-old Durov, who owns 12 percent of the company.

Zuckerberg, Durov

Durov and Zuckerberg, who is five months older, both opened their networks to the public at about the same time in 2006. Vkontakte, which is based in St. Petersburg, now has 78 million monthly users, including 46 million in Russia, according to researcher comScore Inc. Facebook, based in Menlo Park, California, has 818 million users, though just 11.7 million in Russia, comScore data show.

Less than two weeks before Durov's partners closed the sale to Sherbovich, police in St. Petersburg opened a criminal probe into Durov for allegedly being the driver of a car that injured a traffic cop. TV Rain, a channel focused on young adults, said the CEO left the country to avoid questioning. Investigators later dropped the case and fined Durov, who hasn't spoken publicly since the incident, about $30. VKontakte's spokesman, Georgy Lobushkin, said June 13 he wouldn't comment on the case or Durov's whereabouts.

Sherbovich, who joined Rosneft's board last year and owns about $50 million of the oil company's stock, said his VKontakte investment has nothing to do with politics and that he has no plans to seek Durov's dismissal.


"No one in the Kremlin, in the government or in the business community asked me to buy the VK shares," Sherbovich said. "There are no undisclosed third parties with ownership or control rights over our stake."

Neither Putin nor Rosneft had anything to do with the VK deal, according to Dmitry Peskov, Putin's spokesman, and Vladimir Tyulin, a spokesman for Rosneft. Natalya Timakova, Medvedev's spokeswoman, said that while the prime minister and Sherbovich are "acquainted" with each other, she isn't aware of any contact between the two about VKontakte.

Still, Sherbovich has gotten rich by serving the interests of officials and businessmen close to Putin. How rich, though, he declined to say. Three bankers who've worked with United Capital Partners said his personal fortune has risen about fivefold in the past six years to almost $1 billion. They asked not to be identified, saying the information is private.

Goldman Sachs

"Ilya's main advantage is that even though he knows a lot of senior officials, he never gets involved in politics," Nick Jordan, co-head of Russia for Goldman Sachs Group Inc., said in an interview in Moscow. "Unlike many Russian businessmen, he maintains complete confidentiality," said Jordan, who's known Sherbovich for more than a decade. "He simply executes orders and can be fully trusted."

Sherbovich entered the Plekhanov Academy of Economics in Moscow at the age of 16 in 1990, just as the Soviet Union was unraveling. His first job came two years later, after Iosif Bakaleinik, a friend of his father, arranged an interview at the International Finance Corp., a World Bank unit. Bakaleinik would later become chief financial officer of TNK, the oil company that formed part of BP Plc (BP/)'s Russian venture, TNK-BP, until Sechin's Rosneft bought it for $55 billion this year.

In 1995, Sherbovich joined United Financial Group, one of Russia's first brokerages, which had just been set up by U.S. investor Charles Ryan and former Finance Minister Boris Fedorov.

Gazprom Limits

Russia limited foreign ownership of OAO Gazprom (OGZD) at the time, so UFG and Sherbovich pioneered ways to capitalize on the growing demand for stock of the world's largest gas producer. Those limits created price disparities between local and foreign-listed shares that UFG and Sherbovich exploited using legal loopholes, said Vadim Melkumov, who worked then at UFG.

By 2001, UFG and its clients had accumulated more than 10 percent of Gazprom, enough to get its co-founder Fedorov elected to the board. UFG lobbied for greater transparency and efficiency and hired Gazprom's first outside auditor, efforts that were backed by Alexey Miller, the man Putin had just selected to replace Rem Vyakhirev, a Yeltsin appointee, as CEO.

Two years later, Deutsche Bank AG bought 40 percent of UFG for less than $70 million and renamed it Deutsche UFG. By then, Sherbovich had become the largest shareholder after Ryan and Fedorov, with about 20 percent. When Deutsche Bank exercised its option to buy the remaining 60 percent of UFG in 2006, it valued the company at about $1 billion, former colleagues said, asking not to be identified because the information is private. The deal earned Sherbovich more than $200 million, they said.

Yukos Offer

Sherbovich stayed on at Deutsche UFG as president, for another year, during which time he entered into the biggest corporate battle of the Putin era -- the dismantling of OAO Yukos, once the country's largest company by market value, after the jailing of its billionaire CEO Mikhail Khodorkovsky.

As Yukos, which had already lost its largest asset to the government over tax claims, jockeyed to avoid complete liquidation in 2006, Sherbovich sent a letter to then-Yukos Chairman Viktor Gerashchenko offering to buy what was left of the company, debt and all.

"We were seriously studying the bankruptcy situation," Sherbovich said. "We thought the assets could be worth more than the debt obligations so we sent the letter, but it didn't go anywhere."

He left Deutsche UFG in 2007 to start United Capital Partners with the money he earned from selling his stake.

Sherbovich's skills have been appreciated by senior officials, who last year asked him to become a director at three state-run companies -- Rosneft, OAO Transneft and Federal Grid Co. (FEES) He said he agreed, "but only for a year,'' which in the case of Rosneft lasted until June 20.

For now, Sherbovich plans to focus on increasing the value of his VKontakte stake, which Forbes Russia estimated at about $1 billion. He told state television April 29 that he's aiming to boost the value of the company as a whole to $10 billion within a decade.

That is, of course, unless he sells out first -- to anyone who can afford it.

"We would be ready to sell the stake at any moment at a good price, assuming someone makes a relevant proposal," Sherbovich said.

Sunday, June 23, 2013

(BN) Lenovo Playing Games in China to Challenge Samsung Phones

(Bloomberg ) To offset falling PC sales and reduce its reliance on ThinkPad notebooks, Lenovo Group Ltd. (992) is adding a gaming service that the computer maker says can help it overtake Samsung Electronics Co. in smartphones in China.

Lenovo Game World will include social-networking features, software reviews and gameplay tips when it starts in the third quarter, offering popular titles like "Fruit Ninja" for devices such as the computer maker's Ideaphone K900 that run Google Inc. (GOOG)'s Android operating system.

Software and services underpin Chief Executive Officer Yang Yuanqing's push to sell more handsets as demand for personal computers slides. While Lenovo's app store has logged more than 1 billion downloads since it opened in 2010, the company is looking to Game World for an edge in the biggest market for handsets, where mobile-game sales of $1.6 billion this year will rise about 50 percent annually for the next three years, researcher Analysys International predicts.

Unlike the U.S., where Google and Inc. dominate sales of Android applications, China has hundreds of companies offering mobile software. Lenovo wants to set itself apart from that crowd with features like those available on Apple Inc. (AAPL)'s Game Center, such as global leader boards that let players see how they compare to the world's best.

"A mobile platform for entertainment is becoming more and more important in today's handset industry," said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. "The more fans Lenovo can get on their own platform, the more customers will want to use that kind of handset."

Air Hockey

Sales of mobile games in China will rise 55 percent to 9.6 billion yuan this year, Analysys forecast in a report last month. Users of mobile games will rise 30 percent to 280 million this year, Analysys says. While there is no comprehensive ranking of mobile application sellers in China, Lenovo's store is among the largest. China Mobile Ltd. (941), the world's largest wireless carrier, says its Mobile Market is the leading Chinese-language app store, with 600 million downloads last year. The company reported mobile gaming revenue of 869 million yuan ($142 million) for 2012.

Lenovo is expanding into smartphones, tablets, TVs and home entertainment systems such as the Horizon Table PC, a 27-inch touchscreen panel unveiled in January that lets multiple users play games like air hockey and Monopoly. The coffee table-sized Horizon, which uses Microsoft Corp.'s Windows 8 operating system, comes with accessories such as electronic dice and joysticks.

'Temple Run'

Lenovo plans to boost smartphone shipments 72 percent to 50 million units this year and start selling handsets in the U.S., CEO Yang said last month. With more than $3 billion in cash, Lenovo would consider acquisitions to help build its smartphone and software businesses, he said.

"Mobile devices are not just hardware," Yang said. "There's a combination of hardware, software, applications and content. We will further strengthen this area."

Reducing its reliance on ThinkPad personal computers is already paying off for Lenovo, which defied a slump in industry demand to post higher earnings last month. Net income jumped 90 percent to $127 million in the quarter ended in March, while global PC shipments fell 13.9 percent, according to researcher International Data Corp.

'Angry Birds'

Samsung buttresses its handset lineup with a Mandarin-language app store in China offering free downloads such as Tencent Holdings Ltd. (700)'s WeChat instant-messaging app and Rovio Entertainment Oy's "Angry Birds Star Wars" game. The site also sells games like "Where's My Water" and "Temple Run: Brave" for 6.08 yuan ($0.99) each.

Until recently, Android users haven't had a site like Apple's Game Center, which was introduced in 2010 with multiplayer games that include social features linking players. Google began offering similar functions last month with Google Play Game Services, but it hasn't been released in China. Google declined to say when it might be available there.

'Jetpack Joyride'

To mount its challenge to Samsung and Google, Lenovo teamed up with Shenzhen iDreamsky Technology Co., a software publisher backed by the investment arm of Lenovo's parent, Legend Holdings Ltd. IDreamsky has distribution rights in China to popular games such as "Temple Run 2," "Fruit Ninja" and "Jetpack Joyride."

Games need "deep localization" to make money in China, where few players are willing to pay for app downloads, according to Phil Larsen, chief marketing officer at Halfbrick Studios Pty, the maker of "Fruit Ninja." A key strategy is to add market-specific backgrounds, weapons and objects that give characters extra powers, which players pay extra for.

"China is so unique," Larsen said. "The business works totally differently."

Even if Lenovo can't get users in China to pay for app downloads, the game center can help the company strengthen its brand by creating a strong association between its handsets and the services that run on them, said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong.

"It is important to retain people on the hardware," Lafayeedney said. "So when they upgrade, they stay with Lenovo."

Misguided policies: Education, Skills, and Creativity.

Many economists and educators dismiss as odd cases when college dropouts like Bill Gates, Steve Jobs, Mark Zuckerberg, and others create incredibly successful businesses.

Nevertheless, a theory that accounts for the difference between education and skills would explain such successes. In fact, it appears that economists deliberately substitute education for skill because they can't measure the latter. Here's what Prof. Martha L. Olney says in her UC Berkeley lectures on US Economic History.
We can't measure (easily) skill, but we can measure educational attainment. [UC Berkeley. Economics 113, Spring 2013, Lecture 26. 8m 25s].

You can see from her slide that to improve the competitiveness of the US workers we need them to develop new skills (bullet 2), but since they cannot measure skill, economists advise for more education (bullet 3). That's how we get huge inflation in the education system.

How do things work out in education? Below are the results of a Gallup poll about skill attainment through education. The poll shows that the gap between education and real-life problem-solving skills gets closed substantially (65%) only by the time one gets a post graduate degree.

Such gap in skills would explain the growing income gap between top and bottom earners.

To summarize, while the US spends massively on education, its workforce remains non-competitive because our policies deliberately confuse education with skills. By contrast, Germany spends a lot of effort in developing skilled workers, who remain globally competitive despite their high wages.

A similar process takes place in creativity-related education. If students don't develop skills, they remain stuck in the left side of the skill-challenge space and, unlike Gates, Jobs, Zuckerberg, can't take on important challenges.

tags: education, creativity, system, control

The Problem Creation Problem: A Game of Thrones.

In "A Storm of Swords" (one of the fantasy novels that serve as a literary foundation for the popular HBO TV Show A Game of Thrones) the author creates a lot of problems for his characters to solve and for readers to enjoy. The more intractable the problem, the more entertainment value it provides because it requires ingenious solutions and plenty of opportunities for dangerous mistakes.
Personal intrigues about love, lust, and power aside, the novel poses interesting technical problems as well. For example, we find Jon Snow and less than a hundred of his fellow guards in charge of defending The Wall against more than a hundred thousand of Wildlings. The Wall itself is impregnable to the low tech assailants, but it has a narrow passage that allows people to get beyond the Wall. Jon Snow's biggest challenge is to prevent the Wildlings from getting through the passage.

In the book, both sides show great creativity in attacking and defending the passage. There's a king of giants who rips out its iron gate; there's a brave dozen of guards who kill him in the process, etc. The fight goes on for pages and its a lot of fun to read.

But when I put my inventor hat on, I wonder why have the passage at all. On the internal side of the Wall, the guards use an equivalent of a large elevator to get on and off the Wall. Since the guards on the Wall are in full control of the elevator, no enemy can get over the Wall. In short, the elevator is the safest method to get people "through" the Wall. You would think that the builders of the Wall should be smart enough to use the elevator on both sides; especially, on the dangerous side because the Wildlings would have no chance to penetrate the Wall when the guards lift or temporarily disable the elevator. Furthermore, according to the book, the passage is so narrow that its throughput capacity is no greater than that of the elevator. Then, why do we have the passage at all if it introduces a major design flaw?

Well, from a fun creation perspective, the passage is a "planted" intractable problem that allows the author to keep the struggle for the Wall going for pages and pages and pages. Not having the passage would be a great technology solution, but its entertainment value would be almost non-existent. As we discuss in the Prologue of Scalable Innovation, we humans prefer the entertainment value. That's why our discussions and practices of creativity are skewed toward fun and games, including games of thrones.

my earlier post on the Problem Creation Problem.

tags: problem, solution, entertainment, separation, bundle

(BN) Cisco Plans Israel’s Transformation Into First Digital Nation

(Bloomberg) Cisco Systems Inc. (CSCO) will make Israel the world's first fully digital country with a fiber-optic network to serve multiple requirements, showcasing technology that other nations may adopt, its chief executive officer said.

"Israel's transformation to next-generation 'Start-Up Nation,' the digitalization of the whole country, that is the future," CEO John Chambers said, referring to the title of a book on the country's technology industry. "Israel is going to be the first digital nation if we are successful."

Cisco is likely to start building the fast network for Israel Electric Corp. this year. It will compete with the networks of Hot Telecommunication System Ltd. and Bezeq The Israeli Telecommunication Corp. (BEZQ)and will eventually serve as the backbone for electricity, television, health care and even education, Chambers said in Jerusalem today.

"I'm beginning to believe this will actually happen," said Ori Licht, head of research at Tel Aviv-based IBI-Israel Brokerage & Investments, noting that the Israel Electric group now has enough money to start building the network, even as Israeli inexperience may raise obstacles.

The Finance Ministry has approved a group of investors and companies that will partner with Israel Electric for the project and the final signing is expected within weeks. Cisco will provide vendor financing of about $140 million and the cost of the entire infrastructure has been estimated at 5 billion shekels ($1.39 billion).

Growing Market

"There will be challenges and controversies along the way," said Chambers, without elaborating. "When you do something no other nation's done you are taking risk and it is a risk Cisco is very much committed to."

One challenge will be to protect the network, and San Jose, California-based Cisco will establish a lab in Israel to develop security technologies.

Israel is a good choice for the project because of the number of technology startups, the small land mass, the medium-size population, and the high level of education, Chambers said. The new network will be a model for other countries, and startups that develop for the infrastructure will find a growing market outside the country, he said.

Friday, June 21, 2013

Lunch Talk: (@Google) Intuition Pumps and Other Tools for Thinking .

Professor Dennett comes to Google to talk about his new book, Intuition Pumps and Other Tools for Thinking. Dennett deploys his thinking tools to gain traction on these thorny issues while offering readers insight into how and why each tool was built. Alongside well-known favorites like Occam's Razor and reductio ad absurdum lie thrilling descriptions of Dennett's own creations: Trapped in the Robot Control Room, Beware of the Prime Mammal, and The Wandering Two-Bitser. Ranging across disciplines as diverse as psychology, biology, computer science, and physics, Dennett's tools embrace in equal measure light-heartedness and accessibility as they welcome uninitiated and seasoned readers alike. As always, his goal remains to teach you how to "think reliably and even gracefully about really hard questions."

tags: creativity, thinking, tools

Friday, June 14, 2013

Scalable Innovation. Figures for Section III (chapters 21-27)

This post concludes the series of detailed figures from our book Scalable Innovation: A Guide for Inventors, Entrepreneurs, and IP Professionals.

Figures from the previous portions of the book are here:
- Introduction and Prologue: Unlearning What's Untrue.
- Section I. Using Systems Thinking for Understanding Technology, Inventions, and Patents.
- Section II. Thinking Outside the Box.
- Section III. System Evolution and Innovation Timing (Chapters 11-20)

Chapter 21.  Deconstructing Luck: Factors Affecting the Success of a System

Scalability is an inherent property of successful systems.
FIGURE 21.1 In large cities people walk faster than in small ones. Walking speed as a function of city population size. (From http://

FIGURE 21.2 Monthly minutes per active user, photo and video apps. (From http:// blog.␣
FIGURE 21.3 One of the early Facebook patents. Aaron Sittig and Mark Zuckerberg, US Patent 8,099,433

FIGURE 21.4    Network architecture diagrams from Baran’s 1962 paper on network reliability. Diagrams courtesy Rand Corporation [66].

FIGURE 21.5 Nicira platform as an interface between network software and hardware. The interface layer separates hardware and software, enabling rapid pace of innovation for both. Diagram courtesy of Nicira. US Patent Application 20100257263.

Chapter 22. Seeing the Invisible: The System behind the New Internet

FIGURE 22.1    A higher-level view of Facebook and other Internet services.

FIGURE 22.2 (a) Stated versus (b) actual distribution of privacy settings for individual posts.

FIGURE 22.3 Time that users spend on popular social networking services. (From

Chapter 26.  System Efficiency: Solving Detection Problems to Improve Control

FIGURE 26.1 TiVo Thumbs Up and Down interface, US Patent 7,840,986 [86].

FIGURE 27.1 Example: Reinvention of the brick-and-mortar shopping cart.

Thursday, June 13, 2013

Scalable Innovation. Figures for Section III (chapters 11-20)

This post continues with detailed figures from our book Scalable Innovation: A Guide for Inventors, Entrepreneurs, and IP Professionals.

Previously, on this blog:
- Introduction and Prologue: Unlearning What's Untrue.
- Section I. Using Systems Thinking for Understanding Technology, Inventions, and Patents.
- Section II. Thinking Outside the Box.

In Section III, we apply the model and outside-the-box thinking to determine the timing of a particular innovation.

Chapter 11. We start with the S-curve that describes a surprisingly diverse range of system evolution scenarios.

FIGURE 1.1a A generic S curve: Time/effort-performance. (From R.A. Burgelman, C.M. Christensen et al., Strategic Management of Technology and Innovation, 2009 [3].)

FIGURE 1.1b A typical age-weight S curve for a mammal, e.g. rat (From Geoffrey West, Ted Talk, July 2011 [4].)

FIGURE 1.1c Walmart: Time-Sales S curve. (From Geoffrey West, Ted Talk, July 2011 [4].)

FIGURE 1.1d Market adoption S curve. TVs and PCs. A 1984 actual and forecast. (From Everett M. Rogers, The diffusion of home computers among households in Silicon Valley, Marriage & Family Review 8, 1985 [5].)

Chapter 12. A Stage of System Evolution: Synthesis.
Here, we start looking why certain inventions can be too early to the market and what kind of problems innovators have to solve to get the system off the ground.

FIGURE 12.1   1979.  Electronic book, US Patent 4,159,417. David P. Rubicam [8].

FIGURE 12.2 Gartner hypecycle. (From
FIGURE 12.3 Dr. Philips T. James et al., The worldwide obesity epidemic, Obesity Research 9, 2012 [11].

Chapter 13. A Stage of System Evolution: Early Growth. We talk about the key elements of system growth, including the Dominant Design and Copycats.

FIGURE 13.1 Dominant design: An ancient Roman bathtub in the Science Museum in London. The vast majority of modern bathtubs have the same form and function as this 2,000-year-old exhibit.

Chapter 15. A Paradigm Shift within the System. We discuss how growth enters a virtuous cycle.
FIGURE 15.1   The original shopping cart, US Patent 2,155,896
FIGURE 15.2    Shopping cart with multiple baskets, US Patent 2,196,914. You can see that Sylvan Goldman designed it using a folding chair and some wheels.

Chapter 16. Infrastructure Innovations: Timing Is Everything.

FIGURE 16.1    Google Fiber project diagram. (From a construction update, Google Fiber Blog, April 04, 2012 [33].)

Chapter 17. Infrastructure and Growth: Zooming In on the Micro Level
FIGURE 17.1 Moore’s original projection from 1965 to 1975. (From Gordon Moore, Cramming more components onto integrated circuits, Electronics 38, 1965.)

 FIGURE 17.2 3-D representation of a multilayer IC metallization scheme. (From

FIGURE 17.3 Optical versus electrical interconnect. (From Andrew Alduino and Mario Paniccia, Interconnects:␣Wiring electronics with light, Nature Photonics 1, 2007 [45].)

FIGURE 20.1   Wired: The web is dead. (From all/1.)

(To be continued...)

Wednesday, June 12, 2013

Scalable Innovation. Figures for Section II.

This post continues with detailed figures from our book Scalable Innovation: A Guide for Inventors, Entrepreneurs, and IP Professionals.

Previously, on this blog:
- Introduction and Prologue: Unlearning What's Untrue.
- Section I. Using Systems Thinking for Understanding Technology, Inventions, and Patents.

In Section II, we introduce tools for thinking outside the box, considers the role of luck in success of inventions, and presents tools for flexible thinking and imagination development.

Chapter 6. Outside the Box: Developing Skills for Creative Thinking.

The picture below illustrates how even a minor change in perspective can make a great change in  life of a "surprised turkey" from the Nassim Taleb's parable:
A turkey is fed for 1,000 days - every day lulling it more and more into the feeling that the human feeders are acting in its best interest. Except that on the 1,001st day, the butcher shows up and there is a surprise. The surprise is for the turkey, not the butcher.

FIGURE 6.2    Expanding “turkey” perspective beyond 1,000 days.

Chapter 7. Seeing the Outlines of the Box: Discovering the Boundaries of a System.

We show how to use the system model for changing perspective systematically, moving between "boxes", thinking outside or inside the box at will. In the example below, we discover a major innovation opportunity by seeing Edison's implementation as an element of a bigger system.

FIGURE 7.1 A diagram of a coal-based energy distribution system, with electrified Manhattan plugged in as an instance of the Tool. (1) Various city blocks “plugged” into the larger system (instances of the Tool). (2) Coal mines (instances of the Source). (3) Railroad routes for coal delivery (an instance of the Distribution). (4a) A coal barge (an instance of the Packaged Payload). (4b) A coal train (an instance of the Packaged Payload). (5) Railroad time table (representing an instance of the Control).
Chapter 8. Inventor’s Luck: A System Perspective.
success = talent + luck 
great success = a little more talent + a lot of luck
—Daniel Kahneman, psychologist, 2002 Nobel Laureate in Economics

[F]or the first fifteen years after sliced bread was available no one bought it; no one knew about it; it was a complete and total failure.
—Seth Godin, entrepreneur and author of eleven books on marketing␣methods␣

We use the story of Otto Rohwedder, the inventor of the original bread slicing machine, to show how an invention, not necessarily the inventor, can become "lucky."

FIGURE 8.1    The original design of the early GE toaster. (Courtesy www.toaster. org.)

FIGURE 8.2 Contemporary Toastmaster advertisement. (Courtesy www.toaster. org)

FIGURE 8.3    Contemporary advertisement for a commercial Toastmaster. (Courtesy

Chapter 9. The Three Magicians: Tools for Flexible Thinking

Below is an example of how we can use the method to understand a diverse range of user scenarios without missing critically important details, while maintaining our flexibility of perspective.

FIGURE 9.1 Whiteboard Divide–Connect sketches during a practice invention session for a novel blood pressure device. Stanford University Continuous Studies Program. Principles of Invention and Innovation (BUS 74), summer 2012. Photo courtesy Silvia Ramos.

FIGURE 9.2    The 9-screen view. The turkey is preoccupied with the day-to-day supply of grain at the lower level. He doesn’t see the bigger picture at the higher level.

FIGURE 9.3    The 9-screen navigation logic. To understand the situation, the turkey needs to follow the top level (blue) arrows and see how the problem develops in space and time.

Chapter 10. Imagination Development: Seeing the World beyond Present-Day Constraints

An example of exponential thinking that lead to the creation of Kiva Systems, a company that develops robotic systems for warehouse automation (bought by Amazon for $775M).

FIGURE 10.1 From zero to in␣nity. Mick Mountz’s TED talk screen shot. (From Mick Mountz: Let the inventory walk and talk).

FIGURE 10.2    A bird’s eye view of a large-scale, distributed robotic warehouse. Each dot represents a mobile runner-robot that can hold and deliver a good to packing stations on the right. To reduce handling time, robots with popular items can stay closer to the packing stations.

An application of 10X thinking to the memristor technology.

FIGURE 10.3    Recon␣gurable multilayer circuit, US Patent Application 20120007038

Another example of exponential change: high-frequency stock trading.

FIGURE 10.4    High-frequency stock trading process. (From Charles Duhigg, Stock traders find speed pays, in milliseconds, New York Times, July 23, 2009, http://www. ).

(To be continued...)

Scalable Innovation: Figures for Section I (pages 3-59).

Today, I continue posting figures from our new book Scalable Innovation: A Guide for Inventors, Entrepreneurs, and IP Professionals. In my previous post I uploaded and explained figures from the Introduction and Prologue. Now we continue with Section I, where we introduce a system model that explains existing inventions, technologies, and patents. We also show how to use the model for developing new ideas.

Chapter 1. We start with Invention, a great children poem by Shel Silverstein. For copyright reasons the publisher is not allowed to print the poem in our book, but you can find it on the web.

Figure 1.1 illustrates the problem encountered by the inventor.

FIGURE 1.1    “The cord ain’t long enough.”

Chapter 2. In this chapter we show (in 3-D!) how to map our system model on the Invention and discover missing elements.

FIGURE 2.1    Invention as a system concept, mapped onto its physical implementation.

FIGURE 2.2    The system model.

FIGURE 2.3    A working invention with all the system elements present.

To further explain the system model, we follow up with a number of examples, starting with Edison's electricity distribution system. Why Edison? Because many people believe he is the greatest innovator of all time without really understanding what he actually invented.

FIGURE 2.4 The diagram is courtesy the Lemelson–MIT Program. (From Lance Whitney, "Edison tops Jobs as world’s greatest innovator," c|net, January 26, 2012)

We show that Edison's real breakthrough was the new, scalable parallel electric grid, not the light bulb. The picture below shows grid design "before" (a) and "after" (b) Edison.

FIGURE 2.6 Before: (a) In the old electric grid the voltage decreased with distance away from the electricity generator, causing the bulbs to glow less brightly, or requiring the use of thicker (and thus more expensive) wires. After: (b) Edison introduces a compensating line (ground return) that allows the use of high voltages (which reduced the amount of expensive copper wiring needed), and at the same time permits all light bulbs to continue operating, unaffected by any one burning out, for example, and also allowing for additional generators or lamp arrays to be connected more easily.

In our second example we apply the system model to Steve Job's system and show how it goes far beyond the iPhone.

FIGURE 2.8    Mapping Steve Jobs’ system in 3-D

FIGURE 2.9 A 2-D diagram of the implementation layer. Element positions correspond to their system level functionality.

Chapter 3. We use the model analyze and understand patents.

FIGURE 3.1 Guiding Plasmon Signal, US Patent 7,542,633.
FIGURE 3.2. Zooming in on a specific system element. Control subsystem within a system.

Chapter 4. We consider the paradox of system interfaces and how successful solutions enable rapid growth.

In the beginning of the 20th century, GE developed an ingenious brand marketing campaign to promote its light bulbs, positioning Edison as a celebrity inventor (The greatest innovator of all time!).
FIGURE 4.1 Edison’s light bulb: the Sun’s only rival. Pictures courtesy of The Smithsonian Institution. (From Carl Sulzberger, A bright and profitable idea: Four decades of Mazda incandescent lamps, Power & Energy 4, 3 (2006): 78.)

Few people know that Edison's longest lasting invention is the standard screw-in light bulb socket (a system interface between the grid and lighting device).

FIGURE 4.2    Edison screw-in socket, US Patent 438,310.

Another example of a long-lasting system interface:
FIGURE 4.4    The QWERTY keyboard. C. L. Sholes’ typewriter US Patent 207,559.

Chapter 5. Here we introduce the concept of system Control Points.

FIGURE 5.1 A system diagram with Control Points and interfaces.

(To be continued...)