The Secret to Apple's Success

Apart from messing up the tagline "Designed by Apple in California," this article from Businessweek is right on point. When most computer firms are basically marketing firms for outsourced production, Apple continues to keep design in-house and exercises extremely tight control over manufacturing.

Many executives believe that outsourcing design allows them to lower the salaries they must pay, and lets them have engineers working on the products across all time zones. Jobs thinks that's short-sighted. He argues that the cost-savings aren't worth what you give up in terms of teamwork, communication, and the ability to get groups of people working together to bring a new idea to life. Indeed, with top-notch mechanical, electrical, software, and industrial designers all housed at Apple's Infinite Loop campus in Cupertino, Calif., the company's design capability is more vertically integrated than almost any other tech outfit.

The result is the often-imitated, but never-duplicated Apple user experience. Things look right, feel right and work right because Apple excercises obsessive control over design and manufacturing. Apple is the design leader in its field and one of the most profitable manufacturers because it doesn't outsource a lot of functions, more than because it does.

Funny, I don't see any horns or tail....

There's a rule on internet message boards that the first person that mentions Hitler or Nazis automatically loses the argument. Fair enough. Typically, mentions of Hitler are merely overwrought attempts to cover up an inability to build a cogent argument in support of one's point.

But I think I've found a subject upon which comparing somebody to Hitler is probably apt. And I'm not talking about Saddam Hussein or even W. I'm talking about the jewbaiting apparently going on in Guantánamo Bay.

In one case, a lawyer said, a military interrogator recently told a detainee that he should not trust his lawyers because they are Jews. [...] "The government should not be trying to come between these people and their lawyers," Mr. Wilner said in an interview. "And I'm especially offended that they tried to use the fact that I'm Jewish to do it."

Wow. Just wow.

Brother, can you spare a dime?

Or maybe a quarter? The L.A. Times is reporting that Congress has been working on a bill to allow tolls on Interstates. I don't think this is such a bad idea. On the other hand, I drive less than 8,000 miles a year and rarely on highways. According to the San Mateo County Times, "These charges could be levied to raise money for new highway construction. Or motorists could be charged varying tolls during the day, with higher tolls in effect during rush hours to nudge drivers into making some of their trips during less busy times."

As you might imagine, truckers and the AAA are not happy about this, as they claim that drivers are already taxed through gasoline taxes. This raises a good point, why not just raise the gasoline tax? It would not only raise revenue (as this new tax would), but also encourage conservation.

Oh, and by the way, isn't this a new tax? Hmm....

Congratulations to the Illini

In an earlier post, I pointed out how much of a pleasure it is to watch this Illini team. It seems that the media and coaches caught on. All five starters were honored by the Big Ten writers and coaches: Deron Williams, Luther Head and Dee Brown have been named first team All-Big Ten, James Augustine was a third team selection and Roger Powell, Jr. earned Honorable Mention. Good work, guys. Also, Brown, Head and Williams have been named to various All American lists. (Dear CNN/SI: how did you manage to leave Luther Head off of your list?) Individually, Brown was named both Big Ten player of the year and defensive player of the year. Bruce Weber was named coach of the year.

Down...reloaded

A little while ago, I mentioned that I didn't really buy the conventional wisdom that the Big Ten is down this year in basketball. Sure, the Big Ten may not be quite as strong, top to bottom, as the Big East or even the overhyped ACC, but it's probably on par with the Big XII and certainly better than the other "power" hoops conferences, the SEC, Pac10 and Conference USA. The Chicago Tribune's Skip Myslenski and I seem to be cribbing from the same notes. His article contrasts Indiana's young, improving team to Georgia Tech's veteran, declining squad. Myslenski also points out that, aside from Wake, Duke and Carolina, the ACC's teams have faded into mediocrity.

Myslenski could have been more convincing, though. He could have pointed out that Iowa was 12-1 (having beaten likely tournament teams Louisville and Texas in Hawaii) and ranked in the top 15 prior to being bludgeoned to death during Big Ten play. And he left out the fact that merely moving to the ACC turned Miami and Virginia Tech, both 4-12 in the Big East last year, into respectable, and sometimes formidable, clubs. Sure, Virginia Tech beat Duke, but it lost to VMI (Jason Conley doesn't play there anymore), St. John's and Western Michigan. Those three teams went a combined 37-47 this year. Miami lost to South Carolina State. At home. These two shoddy clubs were elevated during the conference season into bubble teams. That, my friends, is a sign of a weak conference.

Chinese Government-Owned Company to Buy IBM's Computer Business

Reports indicate that the Committee on Foreign Investments in the United States has approved IBM's sale of its computer business to Lenovo Group Ltd., a company partially owned by the Chinese government. Republican House members Duncan Hunter of California and Henry Hyde and Don Manzullo of Illinois have expressed concerns that the sale "may result in certain U.S. government contracts with or involving personal computers being fulfilled or participated in by the Chinese government." Does this strike anybody as scary?

It seems that Americans are satisfied living the myth of the friendly PRC. This despite Tiananmen Square, despite the countless forced abortions, despite widespread reports of slave labor and despite the fact that the ordinary Chinese have no political or civil rights. I wonder if I will someday wake up to find China telling the US what to do.

Sharecropper Society

An excerpt from Berkshire Hathaway's newly released Annual Report:

This annual royalty paid the world – which would not disappear unless the U.S. massively underconsumed and began to run consistent and large trade surpluses – would undoubtedly produce significant political unrest in the U.S. Americans would still be living very well, indeed better than now because of the growth in our economy. But they would chafe at the idea of perpetually paying tribute to their creditors and owners abroad. A country that is now aspiring to an “Ownership Society” will not find happiness in – and I’ll use hyperbole here for emphasis – a “Sharecropper’s Society.” But that’s precisely where our trade policies, supported by Republicans and Democrats alike, are taking us.

Again, let's put this in the "thanks for not paying attention" file. A tip of the hat to the person who recommended this reading to me -- you know you you are. More of Warren Buffett's wisdom on this subject can be found here and here.

Sony's about to step in it....again....

Sony's a highly successful consumer electronics brand, but it has famously miscalculated the market numerous times. I never went to business school but I would bet that Beta would be a great case study for MBA-types. The MiniDisc likewise never lived up to the hype. Sony's foray into MP3 players has also been a failure.

Today, Sony introduced a line of MP3 Walkman devices aimed squarely at Apple's iPod Shuffle. According to a Sony corporate spokesman, these new devices "speak to the way people really use portable audio players." I'm not trying to be a jerk here, but what would Sony know about how people use portable, digital audio players? -- they have a paltry 6% of the market. Sony might be on the right track if its products undercut Apple's on price.

But unlike its other products, Apple's flash-memory MP3 player is the market leader on cost. A 512 MB player runs $99, while the 1 GB Shuffle is $149. In contrast, Sony's players start at $90 for a 256 MB version and range up to $200 for an 1 GB player. I'm a proud Shuffle owner, the device supplements my 40 GB click-wheel iPod, and I think I represent one part of the Shuffle's target market -- tech geeks that want a small, lightweight MP3 player for the gym, active sports, etc. The second natural market for the Shuffle is the opposite end of the spectrum, late adopters who want only to dip their toes into the MP3 pool -- they want to see what all the fuss is about without spending a lot of dough, or maybe they aren't into investing heavily in technology at all.

Both of these groups are price sensitive. To a tech geek like me $100 for a Shuffle beats the tar out of $250 for a mini (yes, I'm intentionally using the "old" price, because that's what minis cost when I bought my Shuffle), because I didn't need to pay for the complexity and features that I already had in my 40 GB model. To a late adopter, price is also key. They're already suspicious of the need for the technology, so a $149 investment (1 GB Shuffle) is more appealing than a $200 investment (1 GB Sony). I think on price alone, Sony has misjudged the target markets for these types of devices.

And the discussion above totally ignores the iPod's secret weapon, the iTMS. For people that already have an iPod, it's a no brainer, they already use and (typically) love the iTMS. Late adopters may not care about this as much, but if they do their homework, they'll probably find that the iTMS is easier to use and more prolific than any other online music store.

There's no cheating in baseball.....

Major League Baseball has given Barry Bonds dispensation to cheat. No, they're not providing sterile needles, they're allowing him to DH during home exhibition games. Ken Griffey, Jr. of the Cincinnati Reds is receiving similar treatment.

This is beyond stupid. It's cheating. MLB justifies its position because these games are exhibitions. Well, why not bend the rules to allow all players to rehab while DH'ing? If Bonds will indeed benefit from not playing in the field, why give him special treatment? Shouldn't every rehabbing major leaguer get the same benefits? Why not play all NL exhibition games with the DH rule in place? Why not experiment all through the pre-season? Raise or lower the mound, allow corked bats, spitballs -- why the heck not?

Lebanon

This Zogby Poll has some pretty surprising, and perhaps disturbing, findings. According to the poll, a huge percentage of Lebanese think either Israel or the United States had something to do with the assassination of former Prime Minister Rafiq Hariri. What scares the bejeezus out of me is that twenty-two percent of Marionite Christian respondents and thirty-six percent of Orthodox Christians blame Israel or the US. Pollster James Zogby, an American Arab makes the following observation:

before we begin celebrating falling dominos and claiming credit for them, it is important to know where they might fall and what might come after they land

Seems like good advice to me. In other news, thousands of supporters of the Syrian-backed terrorist militia Hezbollah took to the streets to oppose the pull-out of Syrian troops.

File this away...

...in the "thank you for not paying attention" department. MSNBC reports that China has approved military action against Taiwan if the island nation decides to formally secede. According to the law:

If possibilities for a peaceful reunification should be completely exhausted, the state shall employ nonpeaceful means and other necessary measures to protect China’s sovereignty and territorial integrity.

Coupled with recent reports that China's military presents a growing threat to the US and the Asia region, this is a pretty unfortunate development. Further, the US is bound to assist Taiwan in defending herself. Consider this policy statement from the Bush Administration:

Our policy is based on the principle that there must be no use of force by China against Taiwan. We deny the right of Beijing to impose its rule on the free Taiwanese people. All issues regarding Taiwan's future must be resolved peacefully and must be agreeable to the people of Taiwan. If China violates these principles and attacks Taiwan, then the United States will respond appropriately in accordance with the Taiwan Relations Act. America will help Taiwan defend itself.

The Bush Administration's stated position, which is not really different from the prior policy, is that the US will defend Taiwan militarily. Well, nobody's really paying attention to this stuff (Iraq and Jen and Brad and all) but this is scary stuff.

Illinois' Loss to Ohio State

Well, I got back from my trip to Philadelphia and missed the Illini game on Sunday. It was the first game I missed all year. Unfortunately, Illinois lost. Thankfully, Big Ten Wonk provides perspective on the loss.