Jiri Donat's weblog

Are we living in a simulation?

2024-04-04T11:30:00.000-07:00

Preface: this post is purely a speculation, actually it's a reflection on some posts of Elon Musk who speculates that we live in a simulation. In fact, we can never prove or disprove this, and we can't even define what "simulation" exactly means. So we can't come to any conclusion of the question which is not defined. Anyway, enjoy reading!

Let me share some thoughts on the question of whether we are living in a simulation and how likely it is that simulated universes exist. I will present a point of view where such scenario is quite likely and is even a natural consequence of evolution as we know it.

Let's start by observation of our civilization. Development of faster and more capable information processing tools (in our world they are called "computers" and this development is Moore's Law) inevitably leads to the phenomenon of emergence, when an artificially created system acquires properties that its author cannot predict and does not even understand. This is exactly what happened on a truly massive scale last year, in 2023, in the field of AI, when the first surprisingly good chat tools of general artificial intelligence emerged, unprecedented until then and even unexpected among experts. An advanced emergent system may then also have consciousness (but we are unable to confirm, disprove, or even define this - so the question of whether the system has consciousness is unfortunately meaningless). But we do know that such a system will greatly accelerate the development of knowledge - we are able to infer this from our brief experience so far with emergent systems such as neural networks. Likewise, we are able to deduce that we are unable to control emergent systems by our primitive means (see, for example, the algorithms of Google and Microsoft, which are desperate to prevent their systems from being misused to perform illegal or violent acts, but these barriers can be easily circumvented by asking the system, for example, for advice on what to avoid or to consider a hypothetical situation - and this is where the qualitative difference between an emergent and an algorithmic system becomes clear). However, if we are unable to control emergent systems, it can be inferred that such systems will evolve completely autonomously and decide their own direction. Thus, a new, higher layer of intelligence will emerge that will escape the hands of the intelligence that created it and follow its own evolutionary path. But then this new, higher intelligence will very likely develop its own "computers", i.e. other and even more advanced information processing technologies, which will be again an order of magnitude higher in capability than ours. Such systems may regain "consciousness", again in a new quality. For now, however, we are still part of our world; artificial intelligence is not creating a new world. But even that is only a matter of time. Indeed, emergent systems themselves are so interesting that they attract intelligence, whether "natural" or artificial, to examine their principles more closely. And how else to investigate the phenomenon of emergence than by observing it in some artificial environment, separated as far as possible from our real world, so as to filter out influences that would disturb this observation? Quite naturally, then, we (or the AI) decide to create some sort of "sandbox" to simulate another world. We can suggest that at this point we become the creators, or something like gods, of that new world. In reality, however, our role begins and ends with the mere creation of the environment and rules. From that moment on, we are just observers - not omniscient beings who understand everything that happens in this emergent environment. Yes, the creation of the rules can be seen as the role of God, but it cannot be said that the God who established the rules (such as the laws of physics) is smarter than what he created.

But evolution doesn't stop there either. So now we have a new "sandbox", a new universe, carefully separated from ours. And here we are again at the beginning of evolution; a new intelligence, this time in a sterile separate environment, can begin to evolve according to the rules we have set for it. Even in this simulated environment, consciousness can arise; even this intelligence in the simulation will eventually develop its advanced information processing tools ("computers"), and with their help it will create a new, even higher type of consciousness. And, of course, this consciousness may also begin to test the ubiquitous phenomenon of emergence, and to do so, create another simulation of another world that will be part of the original simulation. And once again we find ourselves at the beginning of a new world, this time with parameters defined by the intelligence that has evolved in the simulation. And so on, the recursive evolution of new universes continues.

This reflection leads us to the interesting conclusion that even if we accept the hypothesis that there is a simulation, there are still underlying mechanisms that are not controlled by the creator of the simulation. The second conclusion then is that the creator, or God, may be at a lower level of intelligence than his creation.

Why the Project Ara will never take off?

2013-11-26T13:12:00.001-08:00

Google's Motorola Mobility division and 3D Systems, a maker of 3D printing technology, on Friday said they had entered into a multiyear deal to create a platform for designing and distributing components for Motorola's Project Ara. Project Ara represents Motorola Mobility's attempt to bring the relative openness and extensibility of Android software to hardware. It aspires to be "a free, open hardware platform for creating highly modular smartphones."

Project Ara aims for Lego-style durable mobile phone

There are however some principal problems with this idea.

First of all, the level of customization will be limited by the common design of the phone. While users of traditional phones will have wide choice of phones e.g. in different design and sizes, users of project Ara phone will have just “onesquare shape size that fits all”. This is in direct contrast to the original idea of customizability.
Second, the level of customizability will be limited by the number of parts available on the market (and number vendors that sign to this idea). Users of traditional phones will have the option to select e.g. phones with extremely high-resolution cameras (like those from Nokia), while most definitely not all these components will not available in the form of Ara phone components (for example, Nokia will very unlikely support the platform endorsed by its direct competitor).
And third, also the durability of such a phone is in question. If the market with Ara components will not take off, users will be very likely forced to abandon their Ara phone puzzle in exchange for newer and more advanced technology.

And last but not least. These components are supposed to be designed and produced by phone manufacturers. But these companies have indeed no reason at all to support a product which, if successful, will decrease their market by two thirds.

Custom printed circuits will not change a bit on these reasons, not to say that the biggest problem is not to print customized circuits, but to design them.

In summary, Ara phone is an interesting idea which will however never take off.

What is wrong with Samsung smartwatch? How to make smartwatches really fly?

2013-11-21T12:26:00.002-08:00

Written for Start2Cloud.com.

Samsung says it has sold 800,000 of its widely panned Galaxy Gear smartwatches. At least, that’s the word from Reuters. What is Samsung doing wrong? And why this segment didn’t took off yet?

Smartwatches won’t sell until someone figures out what they’re for. The title of today’s article in Wired speaks for itself. So, what are smartwatches actually good for?

Principially, there are two main use cases in which smartwatches have definitely its place on the market - and in our lives:

First, the display of smartwatches can be put into our view much easier than display of any other consumer device, and this is true even in situations when our hands are busy doing other things. Smartwatches are unique in this aspect, comparable only to smart glasses, which however don’t really exist on the market yet.
Second, the act of glancing at our watch is a commonly accepted social custom, while the act of removing our smartphone from the pocket and looking on it during conversation is (still) perceived as rude. Here again smartwatches take the lead over smartphones, tablets and other devices.

On the other hand, we must calculate also with their limitations. Because of their small display size, smart watches are not suitable for displaying a full fledged “information cockpit”-style screen we know so well from our smartphones, and they are also not good for any interaction. They are ideal to display just one piece of information at the time, and because there is no space for more, this piece must be indeed selected very carefully. It should be information that is relevant to our actual situation - the most important piece of information we need at this particular moment. This information can be current time, time to our next meeting, short message that just arrived - and that’s just it. Smartwatches are not suitable for displaying too big text, and are also inherently inconvenient for any interaction. This functionality should thus be solved via other devices, which will be work together with smartwatches; for example, if I remove my smartphone from the pocket, my phone should display the same message as my smartwatch does, but with additional options to display more text, more details like pictures, and indeed with ability to conveniently reply.

In other words, smartwatches definitely have place in our world, but only if they are designed with respect to these limitations.

Those manufacturers who will keep in mind the rules above are on the right way to succeed - and will sell billions of devices instead of just hundreds of thousands.

Will Facebook Reader threaten traditional newspapers?

2013-06-24T17:07:00.000-07:00

Written for Start2Cloud.com
According to the Wall Street Journal, Facebook is working on a mobile service that gives users personalized news in a very attractive graphical form. The service is called internally Reader and reminds successful Flipboard service that allows users to browse news of participating media as well as current updates published by our friends.

The original idea of Flipboard came from the brainstorming of its founders, who thought about how would the web look lite if they could design it from the ground up. The result was resembling a color printed magazine, without any windows, but with full page pictures, in which users browse in a very natural way by turning pages just like in a printed magazine.

Facebook COO Sheryl Sandberg recently said that every team within Facebook is now focused on development of mobile applications. The company is increasingly focusing on mobile services as it is the area that urgently needs to increase advertising revenue. In a situation where people are increasingly using smart phones at home and at work Facebook has to call for a fundamental change in its corporate priorities. If Facebook succeeds in mobile services, it can reach out to its users through highly targeted advertising virtually anytime and in any situation. If it however fails here, it will leave this lucrative segment to other players.

At this moment it seems that Facebook mobile strategy works well. Facebook "owns" one of every seven minutes PC users spend on the internet, and one of every fifth minute of users who access the Internet from mobile devices. Mobile use of Facebook clearly grows, but what is even more positive for Facebook is the growing revenue from this area. Facebook now gets 30% of its income from the mobile serment, which compared to zero in the time of Facebook's IPO is a truly excellent result.

Facebook Reader is likely going a similar direction as the recently launched Facebook Home - it is a full-screen skin of Facebook interspersed with interactive advertising. In comparison to Facebook Home, Facebook Reader can be for its users more useful and less obtrusive. And that is exactly what Facebook wants to achieve - to dominate the area of mobile devices, and through this to dominate the time of its mobile users.

Apple iRadio marks the end of music industry in its current form

2013-06-10T13:25:00.001-07:00

Written for Start2Cloud.
Today, Apple officially unveiled its new iRadio service - free internet radio broadcasting personalized stream of songs funded by advertising. At first glance, it is not no breakthrough; there are already numerous similar services on the market - let’s name for example Spotify, Last.fm, Musicovery, Google Play Music All Access, and especially the founder of this segment, the Pandora service. Yet this step is very important, and it is because of the one who makes it.

Apple's new service iRadio

Apple iRadio is a classic proof of the claim that if two people are doing the same thing, it's not the same. The importance of iRadio is not in its innovativeness (by the way, Pandora offers a similar service for 13 years), but in the power of the Apple brand, which can accelerate, and eventually promote this significant change in the mass market. No one else has the power to force changes in the habits of millions of music listeners so dramatically and quickly, just like Apple. Apple is not only the market leader in IT and consumer electronics, but also the number one in online music sale. Its iTunes Store is since April 2008 the largest music retailer in the United States, and since February 2010 the largest music retailer in the world. Apple will compete in the new market not only with other steaming music competitors, but also with itself. It will cannibalize its own sales of online songs - the more audience Apple manages to get to its iRadio, the less songs it will sell.

Apple is however forced to take this step, because it can not ignore the ongoing general music industry transition from sales of albums and tracks to sale of services. Sales of songs has been declining since 1999, and during this period fell from $ 38 billion to 16.5 billion last year. If Apple did not build its position in emerging markets in time, surely someone else would, and Apple would have missed its chance. By the way Apple is not the first company which decided to cannibalize its existing markets. A similar step was made by Internet bookstore Amazon.com, who reacted to the decline in sales of paper books by developing its own e-book Amazon Kindle, effectively accelerating the paper books decline.

Market of the new music industry will combine revenues of two major markets: Market of sales of tracks/albums and radio advertising market. The size of the second market is estimated at $ 14 billion per year (ie, only slightly smaller than the current market of sales of songs), and in addition, this market has not yet been affected at all by the digitization process. We should underline the word yet, because this is what can Apple change quickly, because of its great market power. In fact, it can change the radio advertisement market in a very similar way to how the company has influenced the music industry with its iTunes Store. As a result, Apple may substantially speed up the already long-going process of extinction of the music industry in its current form, based on sales of music tracks, and contribute to its faster transformation into a new form based on the sale of subscription services and services funded by advertising.

Recall on this occasion one more interesting thing: Apple enters a new market for the first time since the death of its co-founder Steve Jobs. As we can see, surprisingly, it is not the smart TV market, or the market of smart watches, which were so widely speculated about. It is very likely that Apple is working as well as products for these markets we mentioned, but apparently it has been unable to progress in these segments fast enough, so the streaming service came out first. In any case, all this development only confirms the closed and secretive nature of Apple’s business.

Crowded but growing market of streaming music

Therefore Apple is now entering a crowded, but growing market of streaming music and will compete with established players such as Pandora, Spotify or Google Play Music All Access, and also in addition with classical music radio stations - and indeed with itself. But regardless of who will ultimately be the winner of this battle, one thing is certain. The year 2013 will be written in history as the year when the music industry actually died in in its current form and was replaced by significant new services based on the new paradigm of personalized services.

#bitcoin - Would it be possible to create a mining algorithm that would promote general useful activity and not just consume 1 GWh a day?

2013-04-17T14:04:00.000-07:00

Bitcoin mining

Each currency has its costs,and for example in currencies that need bank of issue and various other institutions to exist, it is completely understandable. Surprisingly, however, its significant costs has also the virtual currency Bitcoin. Server Blockchain.info estimates that "mining" of currency Bitcoin, which is in fact the search for blocks of numbers that will succeed in certain clearly defined test, consumes daily 1 005,59 MWh.
Only the of electricity thus costs modern "gold diggers" $ 150,000 a day. Even so, it is a highly profitable business, because the dredged exchange is $ 470,000 - of course depending on the current exchange rate currency. If the currency will fare badly, this business can immediately turn into a loss.
The easiest way to get money is to start an additional process in your computer that utilizes its otherwise unused computing capacity. Today, however, by using this route of mining the cost of the energy exceeds the value of the dredged currency. Professional miners therefore use special computers, using either graphics processors that are actually parallel computers, or even ASICs (Application Specific Integrated Circuits) - specifically developed integrated circuits. Like many times in the history of real gold rushes, it’s those who are supplying the miners that are finding the real riches. Perhaps we can at least enjoy that, unlike during the real golden fevers, Bitcoin costs only the energy and money, not lives...
But that's a small relief, if we realize that this whole market that consumes large amounts of energy, engages a lot of people and even creates specialized segments in the computer market, is entirely artificial. One would say: what if all these resources and energy have been used for something meaningful? For example, to feed the poorest people in Africa; to create educational activities for the poor people in the developed countries; for the prevention of drug abuse; or on vaccination against infectious diseases?
Logical question that comes to mind, why creators of Bitcoin currency invented so complicated and energy-intensive algorithm of mining? The basis of each currency is its credibility. Rulers and governments have it easier, they may for example declare that they will accept taxes in their own currency, and this step alone makes their currency useful and valuable But hardly anyone can accept an offer from a stranger, who does not have an existing trust (or power over a group of people, such as a ruler) and starts selling the currency, which he declares that he owns. The principle of "mining" solves the problem quite well. It gives everyone the opportunity to create the currency under certain specified conditions, and thus follows the historically proven examples of mining precious metals.
Bitcoin is after his recent problems with volatility probably already written off: right now, it is suitable nor for investments, because it can quickly evaporate, nor for transactions, because they can currently take so long that the currency value changes significantly during the transaction. But certainly there will be new virtual currencies to follow, and these currencies can learn from current problems of Bitcoin. And it is quite possible that they will also come up with new ideas in the field of "mining" the currency.
For example, is it really necessary to use for mining only those algorithms that have no real usefulness? If we think about the problem more closely, we see that there may be ways to combine mining with certain beneficial activities in our real world. If someone came up with such a project, his virtual currency would actually sponsor worthwhile activities, since these activities would suddenly could be performed for a currency convertible with dollars. In all probability also the currency itself would benefit from such an philosophy, as it would become endowed with much more trust than the currency based on merely abstract algorithms. This mining would be difficult to define and even more difficult to control, but the result could however be a real influx of money into areas that need it most. I am convinced that sooner or later someone will come up with such a project - and will succeed.

A seemingly small change in Facebook functionality will trigger an avalanche of huge disruptive changes

2013-01-17T15:08:00.003-08:00

Let us predict the main consequences of yesterday’s move of Facebook into VoIP: they will go far beyond those for Microsoft and Skype. Facebook's move it will mean nothing less than merging the entire VoIP, messaging, and indeed also mobile telephony into social networks.

Facebook's iPhone users in the U.S. can now make calls to each other through the Facebook Messenger app anywhere they have a Wi-Fi or cellular data connection, avoiding carrier charges. Facebook said it was working on adding the feature to its Messenger app for Android and BlackBerry users. Right now, calls can only be made to another user who has Messenger installed on their iPhone. Users can not call a landline number, and they cannot even call a Facebook friend who is using Facebook via web browser.

This move will have much broader consequences than is immediately apparent. Let us mention here the three most important:

Microsoft is out of the Messaging / Telephony game because once messaging merges with social networks, MS will be unable to compete in this field with heavyweights Facebook and Google. This is indeed a bad news namely for Skype and Lync. With its acquisition of Skype in May 2011 for US$8.5 billion, Microsoft bought namely users (because similar technology Microsoft already had, and even in the form of three different applications: Windows Messenger for common users, Xbox Live for Xbox users, and Lync for corporate users). But these expensively bought users will now switch to Facebook (or Google+), which they already use anyway. This step will be only logical from their point of view, as it will allow them to get rid of the need to use two separate applications for similar functionality.
Google will become the biggest competitor of Facebook, thanks to its Gmail, Google+, and related voice and videotelephony services. Let us recall that Google has a head start here: it is offering video calls already since its launch of Google+ in June 2011, and since March 2012 it even offers free calls from Google+ to ordinary telephone numbers in the US and Canada. The battle between Facebook and Google will be very balanced - both competitors have chances for victory. Facebook has more users, while Google has better technology, namely in messaging where Facebook up till now depended on technological partners.
Last but not least: This move is indeed very bad news for telephone operators. VoIP ceases to be a technology used only by enthusiasts and becomes a mainstream commonplace. A typical user will prefer to call his friends directly from his favourite social network, no matter whether he is on computer or mobile phone, as it will be indeed much simpler than manually dialling the number on his phone (in case he is on computer) or leaving the application in order to make a call (in case he is on mobile). Using VoIP instead of carrier voice telephony will thus no more mean any complication for a user. The opposite is true: VoIP calls will be simpler and more convenient, offering additional related services. At this moment, billing based on length of the calls and their distance will become history, and so will become the voice telephony service that was the main cash cow of telcos for more than a century.

A seemingly small change in Facebook functionality will thus likely trigger an avalanche of huge disruptive changes in several important sectors.

Facebook launches telephony - Microsoft may write off its $ 8.5 billion investment in Skype

2013-01-09T09:32:00.002-08:00

Written for Start2Cloud.com.
Since last Thursday, Canadian users of smartphones running iOS and Android can use Facebook for voice calls directly from Facebook. The call is routed through VoIP, so it uses existing data plans, not a voice plan of the user. Facebook thus started to offer - so far only in Canada and so far without video - the same service as Skype. For Microsoft, which bought Skype in May 2011 for $ 8.5 billion, it's a bad news.

Above all, we must say that the voice communication is a logical function of social networks and it was only a matter of time when it becomes their natural part. The primary aim of social networks is to connect people through various forms of communication: short messaging, photo sharing, video sharing, and also the voice and video telephony. This is well understood not only by Facebook, but also by its main competitor, social network Google+. Google+ is in this direction significantly ahead of its competitor offering video calls (via its custom function Hangouts) since its launch in June 2011, and continuously improving its VoIP functionality. Since September 2011 it is possible to use Hangouts directly from the Google+ app for mobile smart phones and tablets, and since March 2012 it is possible to make calls from Google+ on ordinary telephone numbers; moreover, calls to numbers in the U.S. and Canada are even free. While Facebook already offers voice calls as well, from April 2011, it is not via its own service, but via a service called Bobsled provided by a partner company T-Mobile. Since June 2011 Facebook offers also video calling, but again through technological partner, which is in this case just Skype. In both cases, users must however download a separate application and switch to this application to start the call; calls directly from Facebook are not yet possible - unlike calls in Google+. Facebook is thus clearly under pressure of its biggest competitor, and has to react.

Fortunately for Facebook, Facebook has all the potential to succeed, and not only that, it is even probable that it can completely dominate this market. In telephony, like in social networks, the so-called network effect takes place. Telephone service is the more useful, the more users we are able to reach through it. And here comes Facebook with its claimed billion of users on the top, without serious competition. For the user it does not make sense to have a green phone on the table from which he is able to reach a billion users, and next to it still a yellow phone from which he can reach 600 million users, who significantly overlaps with the first group. Users will retain only one service, and it is that one which is most universal.

As a result, there is no bright future for once famous and successful company Skype. The VoIP technology is now so mature that it is itself no differentiator from the user’s perspective. What matters is number of other users available through this service, and a seamless interconnection with other useful services – namely with other ways to communicate with our friends, such as sharing of photos, videos, and of course contacts. To sum up, at the same time when Facebook launches its global telephony, Microsoft may write off its 8.5 billion dollar investment in Skype, because Facebook users will no more need Skype as a separate application.

Anyway, history is only repeating itself. Microsoft itself could tell - for example, how did browser in the 1996 became an integral part of the functionality of the Windows operating system, which caused current leader in browsers, Netscape, to lose its market. That time the problem was that Netscape users were also users of Windows which brought them the browsing functionality they needed, so they had no reason to buy another product with the same functionality. Today, therefore, this story will play again, albeit with a slightly different cast. Facebook will beat Skype simply by expanding its functionality to the field of its opponent. Unfortunately for Skype, also in this case, its users are also users of Facebook.

Self-Driving Cars may launch revolution with larger effects than seen at first glance

2013-01-08T08:49:00.005-08:00

Written for Start2Cloud.com.

The highlight of this year's Consumer Electronics Show CES 2013 in Las Vegas may become strangely products that we did not up till now include at all into the category of consumer electronics - self-driving cars. Cars of Toyota, and Audi presented at the currently ongoing CES 2013 are of course built on the latest technologies. Their foundation is a GPS location service that can very accurately determine the position of the car, and when combined with today's advanced car navigation services can in fact lead the car to any place of the civilized world. Navigation system is also combined with precise laser distance meter that continuously measures the position of the car from the surrounding objects, radars, position estimator and camera, and thanks to all this equipment the car is able to respond to the current traffic situation.

Toyota self-driving car

Cars at the Consumer Electronics Show are actually just the next logical step in the expansion of the IT industry. Recall that it was not so long ago, when even the major exhibits on today’s fair were not part of the IT. Being it smart phones, music players, or TVs - all these devices were part of completely different industries.

Like other digital consumer electronics, however, even self-driving cars cannot exist without online (cloud) services - only these services will breathe full functionality into these products. The cornerstone of such services for “smart cars” will be of course navigation. It will of course know the actual road closures and detours, current traffic, but also the state of weather and road conditions. The main difference to existing navigation services will be that this navigation will be two-way, interactive - navigation will not only pass on information about current traffic, but also will be able to actively manage and coordinate the traffic. When the automatic cars spread, it will be possible to prevent most today’s conflict situations in transport, such as congestions, and poor predictability, when in fact we get to our destination. At that moment, the roads will also be able to get rid of traffic lights and traffic signs. Second significant change will be in substantial increase of car sharing services, which will not only cause a revolution in taxis, but will be also essential in optimizing the number of cars that are actually needed. Do we have a parking problem at our house or office? No problem – let us send our car on, let it serve to other people. They will pay us the cost of gasoline and maintenance. Do we need our car only sporadically? Then we can become members of a number of schemes for car sharing. Car will be always available when we need it – and of course, on the spot where we need it.

Audi TTS self-driving car

These services will become highly attractive because they will allow to take advantage of the car at a significantly lower cost than today. No more we will need to cover the entire cost of car ownership, garaging and car maintenance for a car that is most of the day just standing. The automotive industry will then be able to optimize the number of cars with respect to the real transportation needs - scheme to be well known e.g. from aviation. This is of course contrary to the interest of automakers, but so be it. You cannot launch disruptive innovation, such as self-driving cars, and avoid its logical consequences.

So who knows? Maybe one day our cities will be free from cars that now line the edges of all sidewalks and are trying to squeeze in every place of our living space. And right now, we are witnessing the actual moment when this revolution begins.

Will Google enter the PC hardware market?

2012-11-27T04:48:00.004-08:00

China Times reports Google intends to launch Chrome OS netbooks equipped with touchscreens. Compal, a Taiwan-based ODM, is tasked with the manufacturing. Per this report, Google placed the order itself rather than relying on a 3rd party like Acer or Asus as with the Nexus products. Internal components will begin shipping to Compal this month, a sign that China Times takes to mean the product itself will ship yet in 2012.

Google Chromebook

If this reports proves true, it is indeed a bad news for Microsoft, which will be threatened in its own market using its own strategy. See my today's full comment on Start2Cloud.com.

Apple's organization was built for a dictator, but without Steve Jobs, such an organization will not work

2012-11-14T04:04:00.001-08:00

Apple's most important competitive advantage is its ability to create single corporate-wide strategy that made all its products and services mutually supportive. To be able to manage company in such a holistic way, you have to build a structure that resembles dictatorship.

Apple's co-founder Steve Jobs

For such a structure to work, you however need to have a trusted dictator. See more in my today's article at Start2Cloud.

Apple should open its ecosystem to OEM partners

2012-10-30T14:13:00.002-07:00

Samsung sold twice as many smartphones as Apple last quarter, according to IDC.

Apple Macintosh, 1984

It is time for Apple to open its ecosystem to hardware partners. Otherwise it will repeat the same mistake it made with its Macintosh 19 years ago. Also then Apple was the first on the market, but eventually not the one who benefited most. This privilege went to Microsoft. Now Samsung will become the biggest consumer electronics company in the world, unless Apple makes changes in its very own philosophy of keeping its ecosystem closed.

Inkpad - the method to get adult Indian people to school

2012-10-24T02:44:00.001-07:00

This is a heartbreaking idea - just presented by one of mine Indian students. Our life should not be just about business...

Intel sales and profits fall in third quarter. The Post PC market brings substantial changes to the hardware landscape.

2012-10-17T22:42:00.001-07:00

As you may recall, three years ago we wrote here about the PC Sales Cycle which was the way how Microsoft periodically renewed the market for its hardware partners and application software partners, letting them to earn approximately 18 dollars for one dollar which Microsoft earned on Windows. This was an excellent strategy that gave Microsoft the power to manage the computing market for 20 years and catapulted it to the position of the biggest IT company in the world.

Now, when the PC Cycle is over, the market for PC is logically declining. It now faces two problems:

There is no more a tool that periodically renewed the entire PC market,
Serious competition from growing segments of consumer electronics, namely tablets and smartphones.

Among the affected is also the world's largest and highest valued semiconductor chip maker Intel. Intel is similar to Microsoft in the way that also its business heavily depends on PCs and doesn't have big enough share in the growing segments of smartphones and tablets. Read more in my today's comment on Start2Cloud.com

Microsoft Surface Tablet Priced as iPad - how serious is Microsoft about entering this market?

2012-10-16T22:11:00.002-07:00

Microsoft Surface Tablet

Microsoft announced the price of its tablet - it will start at $499, priced at the same level as the market leader iPad. Is it possible to earn money at the same time when we fight against the market leader? I don't think so.

Everything is suggesting that this year's Christmas season will be a big tablet surge, and Microsoft further supports it with introducing its own products. From Microsoft's perspective, it may be not a smart move, because it speeds up the decline of its main PC market, where it makes money, while not creating a significant share on the new one. Read more in my today's comment at Start2Cloud.com.

Can Microsoft be saved?

2012-10-14T06:37:00.003-07:00

Steve Ballmer’s last weeks’s annoucement makes it clear: Microsoft is transformed into a hardware company. It is however also a very risky decision, as Microsoft now becomes direct competitor with its biggest OEM allies, like Dell, HP, or Acer, which are essential for its Windows related business that brings the company nearly all its profits.

Written for Start2Cloud.com.
In his annual letter to the shareholders Ballmer specifically mentioned that Microsoft will focus on market development around its Xbox game console and the newly announced tablet Surface, and it will also develop other devices running Windows as needed (speculations are mainly about mobile phones). It will also continue developing its online services such as Xbox Music, Video, Games, and applications such as SmartGlass that interacts with these services and allows you to control the Xbox game console from mobile phones and tablets, so it is possible, for example start watching a movie on the phone and then switcih it to the big screen of the TV.
This announcement represents a major change of Microsoft’s strategy. So far, Microsoft focused on software development, while it left the hardware market to its OEM partners, in particular the giant companies such as HP, DELL and IBM (now Lenovo, to which IBM sold its PC division). These partners have actually managed to push Windows as the de facto standard in the market by selling their computers that came preinstalled with Windows. It is mainly thanks to its excellent partner strategy, that Microsoft became the largest IT company of its time in the world.

But if Microsoft will now enter the hardware market, it instantly becomes one of the key competitor of its vitally important partners, thereby threatening its core profitable segment that feeds him. Step that was now made by Microsoft by its announcement of Surface tablet and Ballmer’s letter of last week is thus not easy. Microsoft enters path with no return, if it goes wrong.

The journey is all the more risky, that Microsoft is already trying to move into new market segments for a long time, but till now with very poor results. For example, its Internet services (including search engine Bing) are long-term subsidized by income from Windows and Office. Thus, if such income dries up now and the transition to hardware market fails, Microsoft will no longer have any backup plan that would save him.

What is the main problem of Microsoft?

But times have changed, and Microsoft must make a change now. It is pushed by the relative decline in the size of its core market - the market of commercial software for the PC. Personal computer on which the Microsoft dominates is no more the only or even the most important IT market. As a result of the gradual transition of the IT industry towards Internet (cloud) services and the increasing role of consumer electronics, the importance of PC decreases and with it decreases also the market for commercial software for the PC on which Microsoft makes almost all its profits. Microsoft now simply has to move away from the declining PC market towards the markets that grow, otherwise it will only watch how its core business disappear, without having been able to create another one. But although Microsoft is already trying for many years to invest in the transition to new markets, with the exception of the Xbox game console, he's still failed.
Microsoft's problem can be thus defined as follows:

Firstly, the exclusivity of PCs, where Microsoft has its dominance, expires; hardware market no longer consists solely from a PC, but now its majority is constituted by a variety of other devices (mainly smartphones and tablets), where Microsoft has only a negligible share.

Second, the whole market of the commercial software is declining and will terminate - even on the PC. It is now newly challenged by competing Internet services that are cheaper (often free) and offer better performance, especially in the area of communication and data sharing. Thanks to the Internet (or cloud) services users do not need any more to buy software to obtain the functionality they need.

Let us now describe Microsoft’s both problems in detail, and then we look at possible steps, how could Microsoft solve the situation.
PC exclusivity ends
Since 2010, when Apple introduced its successful iPod, the PC market is declining (in two years it declined according to research company Gartner by 8% and now it quarterly sells 87.5 million PCs), compared to the smartphone market which is on the other hand growing rapidly. Over the last year the smartphone market increased by 42.7% and quarterly sells 154 million units. Another fast growing market is, according to Gartner, market of tablets, which this year is to sell 119 million units, up 98 percent compared to 2011. In the same report, Gartner expects Microsoft tablets will constitute only 4.1% of this number .
From these figures we clearly see that the share of PC in the IT market is dramatically declining. PC (where Microsoft has the dominant market share) is no longer synonymous with computers, more and more users are accessing Internet services from other devices, particularly from mobile phones and tablets, where the market share of Microsoft is negligible. Microsoft therefore loses the market in which it is dominant with its Windows operating system share of 92% and where it also makes most of the money on Windows and on its office suite Microsoft Office. The market is shifting to areas where Microsoft is not successful at all. And this is a serious situation indeed.
Which emerging markets are thus available?
Let us summarize, then, that in the "Post PC" era (the time of consumer electronics, or the time of cloud) PC exclusivity ends along with the market of commercial software. On the other hand, there are two new giant markets emerging: market of Internet (cloud) services that will replace not only today’s market of software, but also market of media, advertising, music, games, entertainment and selected professional services, and mass market of consumer electronics, which will serve as terminals for the use of these services. Both markets may be the target of Microsoft. Both are huge, we can even say the greatest ever created by mankind. Consumer electronics market will have the size in the tens of billions of devices, while the market for services will serve this giant market and through it also to almost every person on the planet, and among other things will absorb the advertising market, which will also become the main pillar of its business model. So Steve Ballmer in his report to shareholders does not say anything radically new. Microsoft needs to move from areas which it dominates, but which are gradually disappearing, into new markets of hardware and services that grow.

Now that we have explained the nature of the problem Microsoft faces due to external changes in the IT market, let's look also at the second problem - we can call it an internal problem of Microsoft. It consists from the fact that Microsoft has long been trying to enter both these markets (in some cases even for over twenty years), and yet it has not yet been successful, with the exception of Xbox.
Attempt No. 1: mobile operating system
Among the first attempts of Microsoft was a natural effort to transfer its dominance in the market for PC operating systems to the market of operating systems for mobile devices. Today, after 22 years of development, is a worldwide market share of Microsoft’s mobile operating systems only 3.2%. Compared with 16.4% share of iOS, which came on the market only 5 years ago in 2007, or 68.1% share of Android, which came on the market even a year later, it is certainly not a success. In recent years, Microsoft position is even worsening, as can be seen from the graph below (source):

Attempt No. 2: online services
With regard to the Internet (or cloud) services, in this area, Microsoft has been involved, from August 1995. In 2011 server ZD Net calculated that for 9 years, Microsoft online division has lost $8,5 bn. In addition, the trend is not positive. This July, this division turned Microsoft the first time in Microsoft's history into the overall quarterly loss when writing off unsuccessful acquisition of advertising firm aQuantive in the amount of 6.2 billion USD. Over the past 5 years Microsoft Online Services Division has lost more than $ 10 billion.
Attempt No. 3: Search
The most visible effort in the field of Microsoft online services is its search engine, let us therefore discuss it specifically. In the course of development it had a number of names. The first search engine called MSN Search launched in the fall of 1998, incidentally the same year when the company Google was founded (which, however, began as a research project in 1996). This time Microsoft used third party search algorithm provided by Inktomi. In November 2004, Microsoft began using its own search. In 2006 the name was changed to Windows Live Search, and a year later to Live Search. In 2009, it changed the name last time to Bing. Thus we see that Microsoft offers its search service for the entire time as Google.
Now our traditional question: how successful is its search? As regards the global market share, the specific numbers vary by source, but, for example according to the company StatCounter, global share of Google search is 91% (September 2012), while Bing's share is just 3.1% and Yahoo with which Microsoft entered in July 2009 a ten-year contract in which they Yahoo pledged to use Bing, other 2.9%. This sums to 6% of Microsoft against 91% of Google.
Recall that search engine Bing has massive support of Microsoft’s top management: In 2009, Steve Ballmer said that during a period of up to five years, Microsoft is willing to invest in its search engine 5 to 10 percent of its operating profit, for a total of up to $ 11 billion.
And so we come to the financial side of things, which reveals an even bigger problem. Just in the last three years, from the time of renaming the search engine to Bing, Microsoft's search engine Bing has lost 5.5 billion USD. Can we thus consider the current 6% share in the global search after 14 years of service and a truly giant billion-dollar investments a success?
Game consoles - market success, but financial problem
Now we come to the segment in which Microsoft managed to settle down and become a world leader. It is a market of game consoles, which Microsoft dominates with his Xbox. But even here there is a catch. Just because something is popular does not mean that it is also financially successful.
Let us answer the question of whether Microsoft suceeded on the market of gaming consoles. In terms of dominating the market, yes, but if we look at the total investment by Microsoft to promote gaming consoles on the market, it unfortunately greatly exceed current revenues from this segment, and probably also possible revenue of this segment in the future. Both the original Xbox and the Xbox 360 were sold by the company for many years with the loss of about 125 USD on one device. Xbox total sales till the first quarter of 2012 were 67.2 million. Server The Motley Fool server calculated that the cumulative loss in the history of Microsoft Xbox till the first quarter of 2012 is $ 4.1 billion.
It is therefore questionable whether this segment of the market will last enough to at least recuperate that loss back. This question is very valid, by the way, because the general trend of the transition to the cloud services does not leave space on the market for the device where you install your games because these games will be indeed available online (using services like OnLive or Gaikai or today’s virtual worlds). Such equipment is not needed aven for storing on them recorded music and movies, and then from the home server sharing them in our iPads, tablets or smart phones. This functionality is a vital functionality of online media libraries that are as a matter of principle (because it is an internet service) available from any device in the world, without having to run your home server. At home, we really only need to have enough terminals (smartphones, tablets, televisions), plus internet access. Everything else will be arranged by relevant Internet services. How long will be Microsoft able to keep home entertainment server in our homes in the time of cloud?
What can thus Microsoft do?
Bottom line, Microsoft can actually enter two growing markets: the market for Internet services, and the market of consumer electronics. With the Internet service market is the problem that Microsoft has already entered it, and although he gives due priority to it and invests truly enormous sums in the tens of billions of dollars here, yet still failed to get significant share.
That leaves the hardware market as the only viable option, which is with an exception of video game consoles (and some PC peripherals) untouched by Microsoft. This market was taboo for Microsoft, because Microsoft did not want to offend its core hardware partners, on which depends its main business with operating system Windows.
But Microsoft is aware that it can wait no longer. PC market declines not only in relative but even in absolute terms, while in the segments that are growing rapidly (especially smartphones and tablets), Microsoft is "missing the boat". His partner policy doesn’t work here and share of Microsoft's operating system is in units of percent only. Even Microsoft’s alliance with Nokia failed, and didn’t help Microsoft to grow its smartphone OS market share. Everything therefore points to the fact that all options have been exhausted, and Microsoft has no choice but to enter this market alone.
Microsoft made one more trick. It united its successful Windows operating system for PCs with its failed operating system for mobile devices into one product. Even this is a risky way, it may in fact turn out both ways. Windows PC can transfer its popularity on Windows Phone, but it can also for example happen, that major modifications made to the user interface of Microsoft Windows will be too radical for existing standard Windows users, and the new Windows version will not take up.
Will Microsoft Surface tablets salvage Microsoft?
It seems that Microsoft now bet everything on one card - on its Microsoft Surface tablet. Technically, it is really nicely designed product. It has an innovative design (according to some opinions, even better than Apple), impressive build quality and interesting features (stand and keyboard cover), and also offers compatibility with the previous PC world. It will enter the market on 26th October this year. The question is whether or not it can reverse the situation on today’s tablet market dominated by iOS and Android.
A lot will depend on the price. There are many speculation on the internet on this topic. Some opinions say that Microsoft does not leave anything to chance and cheaper tablet model called Surface RT will be sold at a subsidized price of around $ 199, that is, the price at which Google sells its small tablet Nexus 7. If that were true, Surface RT would become the cheapest full size tablet on the market (for comparison, Apple sells the latest iPad for $ 499, Samsung Galaxy Tab 2 10.1 starts at $ 400, the Kindle Fire HD+ starts at 299 dollars and Barnes & Noble Nook HD+ starts at 269 dollars).
In this case Microsoft would then lose about $ 100 on each piece (with the increasing volume of production it will be less would reduce), so that if it has to sell 30 million units, which would provide a visible market share for it, it would need roughly $ 3 billion. It is a large sum, but for a company that has $ 56 billion of cash, this is not the biggest problem (as we have already mentioned, a bigger problem is the risk of loss of its key hardware partners). Although this speculative plan is really aggressive, these $ 3 billion would probably have been better invested than, say, the $ 8.5 billion that Microsoft paid in May 2011 for the purchase of Skype. In addition, Microsoft has already subsidized hardware ($ 125 per Xbox) with a good result: then he actually managed to successfully dominate the gaming consoles market.
We will see soon. On the 25th October Microsoft planned a press conference that will end the speculations.
Risky gamble
Personally, I think Microsoft has no other way but to invest all its energy to succeed in the field of consumer electronics hardware, even at the cost of subsidized production. The road is a risky gamble, but other routes have been already tried and failed. Microsoft must invest everything to break through in the field of hardware. This would not only open the new segment it so desperately needs, but also will give meaning to its ecosystem of online services, including search engine Bing.

OnLive's video gaming tech was sold for less than $5m

2012-10-10T23:11:00.001-07:00

Cloud gaming service OnLive too much resembles the ASP model of IT delivery that never took really off in 2000's. Maybe this is why OnLive was sold for a bargain.

ASP was based on the idea of hosting the software written for PC on the server. Similarly, OnLive is based on hosting games written for PCs and videoconsoles on this online service. ASP never took really of and llater on, ASP was superseded by the SaaS model, where companies write software specifically intended for "as a service" delivery. This software can better utilize advantages of cloud, namely by allowing cooperation of multiple users and by interconnection to other internet services. Compare for example Google Docs with MS Office to see the difference in functionality.
Can we expect similar developments in the cloud gaming industry? Read more in my today's article on Start2Cloud.

Would Steve Jobs go for Apple iPad mini, or would he rather strive for something bigger (not only in size :-))?

2012-10-08T23:44:00.000-07:00

Apple's decision to go for mini iPad is a pragmatic one and will indeed harvest the market in the pre-Christmas season. One cannot however help in thinking what would Steve Jobs do for the Christmas market if he was still around.

Apple iTV - still only in our imagination

To my opinion, he would probably not go for iPad mini, but for a bigger idea that would again turn around the user experience. Maybe Apple is loosing its visionary spirit and goes too pragmatic. Read more in my today's article on Start2Cloud.

Gartner: Cloud will become an important export tool, namely for China, India, and Indonesia

2012-10-08T05:29:00.002-07:00

Gartner predicts that the fastest growing cloud markets will be in the Far East while the biggest spending will come from North America and Europe.

Taj Mahal, India

This makes cloud an important export tool, namely for China, India, and Indonesia. Read more in my today's comment.

Lenovo opens first U.S. manufacturing plant. China now exports not just cheap labour, but its know how.

2012-10-04T01:48:00.001-07:00

For years, the typical scheme was to invent and design in the West, where the labour was creative and educated, and manufacture in the East, where the labour was cheap. Now, times are changing, and China exports not just cheap labour, but increasingly also its know how. What will it mean for the global distribution of wealth?

Schuzou, China

Read more in my today's article at Start2Cloud.

Gap between iPad and Android closes. Should Apple open its ecosystem to others?

2012-10-02T23:54:00.005-07:00

In a new study that was released Monday, it’s said that around 25% of American adults own a tablet. The iPad has the greater market share, but not by much. 52% of tablet owners have an iPad, while the remaining 48% own an Android variant. Around the same time last year, the iPad owned 81% of the tablet market share.

This news shows that Apple’s advantage as the firstcomer to the tablet market is already over. Maybe it is time for Apple to revisit its traditional strategy of building a closed ecosystem and think instead more about involving others on its own success. In the opposite case, the history of near failure of Apple's in the 90’s may repeat. Well, no one company in the world is strong enough to successfully fight against the rest of the market. Read more in my today's comment.

Oracle to enter the overcrowded map market

2012-10-01T15:41:00.001-07:00

Phone maker Nokia said on Monday it has signed a deal that will give Oracle Corp.'s customers access to its mapping services.

Why there is so much interest in this one particular sector? Maps are probably the most natural way how to access information services. And indeed, there is still room to make computing even simpler and even more user friendly. This is why Oracle feels its chances here. And because at the same time it doesn't want to use maps of any of its strong competitor, it turns to Nokia. Read more in my today's comment on Start2Cloud.com

Can Sony be saved?

2012-09-30T23:07:00.001-07:00

Sony must desperately seek an emergency exit from the consumer electronic market it established. To play on today's complicated market of converged industries is much different than on the pure consumer electronics market of the past and requires much more holistic managerial style than Sony can offer. Sony now wants to move to "medical business, with the aim of developing it into a key pillar of our overall business portfolio," said Sony's chief executive Kazuo Hirai this Friday.

Can Sony be saved? Read more in my today's analysis at Start2Cloud.

Could EU regulations improve competitiveness in cloud computing?

2012-09-28T00:16:00.002-07:00

Personally, I doubt it. The biggest advantage cloud computing brings is that it removes bareers, so that companies can more freely compete in innovations. No new regulations will help here.

Google adds coral reef panoramas to Street View maps - is it on purpose, to show the imperfection of Apple maps?

2012-09-26T15:16:00.003-07:00

Mapping application is a platform - the more people use it, the better it is (and of course vice versa). These days are crucial for the success or failure of new maps from Apple. Google does not help his rival and adds another icing on the cake to his already mature maps.

Have a look at the nice corals in my today's article at Start2Cloud - and also a thought what Apple maps future may be.