May 27, 2011

What our Economy Needs: More Developers

America is saddled with 9% unemployment. Yet, every single company I talk to can't find developers to advance their business. We at Rackspace have our own shortage (apply here!)

Something about our society is not creating enough developers. We have a glut of MBAs, accountants and lawyers (yours truly included). Where are all the good techies? Truth is being a developer has not been a focus of our society for very long. Even today I doubt many parents are thrilled when their kids come home declaring their desire to be a Python developer. I think we need an all out campaign to make writing code the next great occupation in America. Let me give you a few good reasons why:

1. The demand is there and it won't stop. If you want to know part of the reason why, take a look at one of my earlier posts: We are All Software Companies Now.

2. Don't believe the hype about offshoring. Building products and business process improvements requires deep contextual knowledge. Yes, companies are augmenting with outsourced help (for simple projects, QA, etc.), but I know very few companies that aren't seeking a strong set of resources embedded within their company, and they are willing to pay more for it. Software is now core for almost everyone. You don't outsource your core.

3. These are great jobs. Yes, the Valley talent bubble is likely out of hand (another post I can never get to), but even when it comes down to earth, the ability for a good (even decent) developer to make real money at a young age exceeds pretty much any other job I can imagine today. And it is not by any means a career dead end. Even if you stay a hard core coder and individual contributor, you can make a heck of career as a developer.

(If you know me you likely know this developer turned successful entrepreneur)

4. Developers are the key to company formation. Truth is most small businesses over the last 50 years were doctors and lawyers hanging up shingles or trade practitioners going alone and getting after it. Today, if you want to to start a business, you better be capable of creating a new experience in the technical world. And, if we want jobs we better build new companies. Developers are uniquely positioned to make it happen. Mark Zuckerberg, Chad Hurley, Larry Page, Bill Gates…they all had an idea and got to work making it real – that day. If you are not technical, this is not easy today, and that is often enough for an idea to die in your head. America's free system generates a lot of ideas, we need these hard skills to make them a reality.

5. If developers are not starting companies, they are shaping them. If you don't have the risk tolerance to build your own company, as a developer you are likely to be where you can make a major difference, learn new skills and grow with really smart people (what else can you ask from a job?). Senior engineers on key products have to think about customers, pricing, experience, profitability and all the other things that drive a business. The skill development needed to build marketing, operations, even finance leaders are built into this path.

6. Harvard degrees are not required. Truth is, being a developer or engineer is often a self taught activity. The most talented resources learn their skills from peers, books, videos and other tools, not from their doctorates. When you learn to code, you don't study the masters of old, you learn from the current thought leaders, and that is a never ending process. Your resume is much less important than your newest skills and accomplishments. This is unique from the biggest careers of recent history, and it creates real opportunity for many people. Of course, being a Harvard drop-out has worked pretty well for a few folks - especially developers.

Now all we need is a system that creates more developers. We need a society that prizes these skills. We need CS departments that teach relevant web technologies. We need business schools that demand technical knowledge. We need the Khan Academy of Python and Rails (a good start is here.). Who knows how we get there, but I think it should be a public policy goal to create at least a million incremental developers in 3 years. And millions more beyond that. Nothing I can think of will drive employment or economic innovation more.

February 22, 2011

The Answer to America's Problems

America has big problems. Let me summarize:

1. No jobs

2. No money

Now your particular issue might be education or terrorism or energy or even too many taxes, but I assure you all of them fundamentally are a fact of "no money." Until we get in a sustainable fiscal situation, your pet cause will never get the resources you think it needs.

An item caught my eye in Saturday's paper that has, at its heart, the answer to all these issues. It was titled: "Study of Breast Biopsies Finds Surgery Used Too Extensively." Huh? Bear with me.

At the core of our jobs and fiscal situation is one simple fact:

Healthcare is eating into all of our economic activities. The simple fact that healthcare costs are outpacing wage growth at this alarming rate ensures a number of things. One, any business with employees (all of them!) is getting more and more expensive to run with no increase in output. Two, any society that plans to take care of the health of its elderly or indigent has escalating costs that will eventually be unsustainable. Three, anyone who needs healthcare (everyone!) needs more and more wealth just to stay in the same financial situation. This is a recipe for disaster. If you look at our budget issues (state or federal), I assure you if you fix healthcare costs, you fix the budget. Take education. Every single school teacher's healthcare rises 3x inflation each year. That is a huge cost that means fewer teachers, no salary increases, and more red ink. And as far as businesses go, well, each employee continues to cost more and more (without salary increases) crowding out hiring and new investments.

Entitlement reform is about WHO pays for healthcare. Even if you move the current public burdens off the government onto private individuals or businesses, the economic headwinds are catastrophic.

We have to solve this problem, and I am increasingly convinced it is not only possible, but not that hard. Which brings me back to Breast Biopsies.

If you read the article you will see data has proven that 300,000 more surgical biopsies are being conducted than should be. The result: over a billion dollars of extra cost, more complications for patients and no more information about diagnosis than could be obtained with the less expensive method. This is pure economic waste. Over a billion dollars of it. For one procedure. One of thousands in the healthcare industry.

This example is at the core of how we fix healthcare. We treat it as an industry that has accelerating returns. One that can get cheaper AND better. It can. We just need to get totally focused on fixing it. Arguing about WHO pays is not nearly as important as WHY we are paying so much. Here are a few steps (of many) in my mind to turning the tide:

1. Admit we have a problem. We spend more than 2x per capita than other advanced economies on healthcare and get no better results. This does not mean we have to copy these other systems, but our system is generating a terrible return on investment. Admit it.

2. Apply Moore's law thinking. Returns accelerate where information is the key input. Healthcare is just such an industry. We need systemic ways to generate and apply learnings just like the biopsy example. This means accepting that doing the cheaper thing can be the best thing - in fact it means if we are not lowering costs and/or improving results we are failing. This is a huge shift in mindset.

3. Data, data, data. We need data standards, data rules, even ways for patients to share data with researchers. Information is the key to insight and right now it is way too hard to collect data, store it, mine it, and share it. There are huge opportunities here - for government, insurance companies and even entrepreneurs.

4. Reshape our view of the doctor. We tend to think of doctors as demigods. Well trained experts making tons of judgement calls uniquely within their individual power. But doctors are much more like airline pilots. They require a ton of special training to do something that 99% of the time is predictable. Their real value is applying judgement in those other 1% of cases. Unlike pilots however, the information and technology applied in healthcare is highly dynamic (akin to a new plane coming out weekly). We have to get this data to doctors and ensure they act on it. Will the information about biopsies translate into action that gets lower costs and better results? There is not an easy way for it to happen throughout the system today.

5. Tort reform. Mistakes are predictable in healthcare. They are a cost of a highly complex system. We need to create an efficient way to deal with them. Like workers comp, many such models can be easily applied. The real cost of torts in healthcare is not the actual damages, but the wasteful medicine applied to avoid them. We need a more balanced system if we want to avoid statistically ineffective treatments.

6. Hot spot focus. Healthcare has 80/20 dynamics. A few spots drive a large percentage of the waste. The surgeon Atul Gawande has written persuasively about the high costs of the chronically and terminally ill. If we start here (a targeted place to direct data needs and better decision making), surely we can start to show the power of new models.

Of course there are many many other issues to tackle - the role of insurance companies, doctor and patient incentives, and so on. It will take some big and many small changes.

Why are we not moving down this path? There is bi-partisan blame to go around. But, it has to start with voters and patients. We have to realize and accept that healthcare can get better and cheaper. We have to be open to policies that have at their core cuts in medical costs (but not drops in effectiveness). At this point, if we don't, expect our big problems to stick around a long time.

January 21, 2010

Want to Reduce Deficit Spending? Prove it.

The tea bag crowd is outraged at our out of control spending. It is THE positioning issue for the GOP - which is smart given the deficit is a massive issue facing our nation. We absolutely have to get it under control over time. But, if you want to fix it, you only have a few options. You have to hurt one of 3 groups:

1. The old (entitlements)

2. The military (defense)

3. The rich (tax increases)

Fact is all the other options don't add up to much. For details here is a pie chart.

So if you are someone sick of all this spending you have to prove it. What do you want to cut?

Republicans number one attack on the health care bill was that it would CUT Medicare (this is not your Mother's Republican Party). They want to perpetually cut taxes and they would never consider hitting the military. So what is the plan? I want to hear it. Until then, it is just marketing. As for the Dems, well, Obama is going to put them to the test on it in the coming years (post recession when deficits actually do make sense). My hunch is the special interests will win again. Raise retirement age? Good luck. Streamline the military? The terrorists win. Increase taxes? We live in a socialist state.

At some point, we will have to make some hard calls. Who will have the guts to actually do it?

January 4, 2010

Hey Print Media, the Tablet is Your (Last?) Big Chance

Tablet mania has hit tech blogging circles with the world all abuzz about Apple's announcement of their new product later this month.

I think there is a good chance the tablet products coming could be a major disappointment - at least in terms of short term adoption. I have two main reasons for this concern. One, I am not sure what problem it is solving. Without a problem, there is no demand for a solution. And two, whatever problem it is solving, people change slowly unless it is remarkably better (or cheaper) than the current behavior.

There are all sorts of issues the tablet could solve. Some are not big enough issues (mobile browsing - thanks to the other Apple phenom, the iPhone people can already do this pretty well). Others have massive adoption hurdles (paperless offices and collaborating - we can't even get doctors to go electronic and they have a ton to gain).

I can see one place where the set of problems, human behavior issues and incentive all line up really well: print media.

I have discussed the path to survival for print media previously. Well, now is their chance to put the plan into action. Print media has a few things that are a real asset to tablet makers today. One, they have paid subscribers. Yes, it is declining, but the Wall St Journal has 2 million readers a day. People Magazine has 4 million a week. Two, they have an outrageously expensive and inefficient distribution system - mail and home delivery. Three, they have event based publishing (i.e. the issue).

All three add up to something pretty big. Your subscribers want and are willing to pay for your content. You can replace an expensive system with a cheap one by subsidizing the one time switching cost. And, you can make the tablet really useful without full time internet access - a big hurdle for the tablet.

Imagine this offer: renew your NY Times for 3 years and get a free Apple tablet. Or renew 2 magazines and get half off. The economics will work. The hard part is you need to go cold turkey. Make the tablet the de facto way of consuming your content. You have to get all the cost savings from shutting down the printing press and paperboys. And, you have to guarantee traction to the tablet guys. In return you take control of the new medium. Get great at it. Leverage it to gain access to your real time content once wifi is ubiquitous (or 3G is cheaper). Use it to get great real estate on the user interface. Do this:

Make the content king not the device. Make the device work for you, don't wait for Steve Jobs to figure it out so you have to come begging.

Yes, there are a million details to work out. But, signs suggest that media companies are getting after it. The time to be bold is now.

January 3, 2010

10 Essentials of 2009 Culture

I love Top 10 lists at year end. Cultural options are exploding and these lists collectively help us wade through it. I have no way to do a top 10 list for any one medium because I just can't consume enough of it. But, here is my list (in an order that promotes variety) of 10 things that I think were great in 2009.

Up in the Air. This one is on almost every top 10 film list out there, and I think for good reason. Jason Reitman took a mediocre (but hilarious) book by Walter Kirn and turned it into the perfect fable for the Lost Decade. Our obsession in the 2000s with perceived progress (see: Iraq, Real Estate Bubble, Pets.com) over real success has no better hero than George Clooney's rootless, airline-elite-status seeking layoff consultant.

I and Love and You, The Avett Brothers. No other album did I keep coming back to more than this one. Hard core fans seem to think these North Carolinians sold out given the big name producer (Rick Rubin) and more polished sound. For me, it is as good as it gets.

Morning Joe. I don't watch much TV, but in the mornings I like to have it on. After years of being a CNBC junkie, I just can't stand it anymore. The endless parade of people predicting the day's stock market direction just feels like a lie. Morning Joe is the perfect antidote. Varied topics, great guests, discussion not yelling, and the great Mika Brzezinsky leading the way.

Await Your Reply, Dan Chaon. Most of my year reading was spent on award winners from year's past (great stuff from the likes of Zadie Smith, Jhumpa Lahiri, Michael Chabon, Gabriel Garcia Marquez), but Chaon's literary page turner was a highlight. I could not put down this cautionary tale of the new era of virtual identity and reinvention.

(500) Days of Summer. The romantic comedy has to be one of the most bankrupt genres out there. Until 500 Days breathed new life into it. I just don't remember enjoying a movie more than this one (I Love You Man was right there too). Simple in plot and ambition, but super creative and well acted, this one nailed the joys and pitfalls of youthful romance. And, nothing was funnier than the dance sequence above celebrating the consummation of a long, awkward, yearning crush.

Far, Regina Spektor. There is something wholly original in Regina Spektor. Part pop and part indie, at times challenging and others completely accessible, this album (and her previous debut) is a must have.

Kindle 2. Not since Oprah has something made reading so cool as Amazon's e-reader. They nailed the basics (wireless downloading, readable screen) and are reaping the rewards. They also raised the bar on the mobile tech world and whole slew of innovation is coming in its wake. Whether it ends up the dominant platform is irrelevant to its legacy of starting it all. Bonus: if you get one, make sure you check out Feedbooks to get free classics in the Kindle format.

The essays of Thomas Friedman and Atul Gawande. No one is doing better thinking on the issues of our time than these two commentators. Friedman continues to lay out the challenges of our oil import obsessed nation and the creeping erosion it is inflicting on our competitive advantage. Gawande brings common sense and perspective to the health care debate based on real world experience as a surgeon. They are also two examples of how the main stream media still has a lot to offer.

The Hurt Locker. Not my favorite movie to sit through, but I just have not been able to get this one out of my mind. If you want to understand what we are up against and what we are putting our soldiers through physically and mentally, there is no better 2+ hours you can spend.

Oscar Dudamel. I am ignorant when it comes to classical music, but Dudamel, who took over the LA Philharmonic this year, is truly a rock star. I am not sure if it is his wild hair or the incredible performances with Youth Orchestras (both are in full display in above clip), but he makes you want to listen. And, given he is only 28, he is just getting started.

So that's what I liked. I am sure I will spend most of 2010 catching up on what I missed in 2009. Any suggestions?

August 2, 2009

We Are All Software Companies Now

HP recently admitted they might not be making calculators much longer. Their geeky financial and scientific calculators are now iPhone apps.

I got to thinking about all the products or even industries that the iPhone app store will disrupt towards pure software businesses. Here are a few I came up with: calculators, remote controls, video cameras, point and shoot cameras, organizers, GPS devices, mobile gaming, and I am sure many many more.

Truth is almost any industry you can imagine is being driven increasingly by software. Cars, media, computers, home appliances, switches and routers - you name it, it has a huge and growing software component. We at Rackspace are not immune. We are investing heavily in our software development capabilities as our offers grow from core dedicated computing services to include software powered cloud computing services. Making software is at the center of our future. I bet you it is at the core of your company's future too.

Here is a story about FreshDirect, an online grocer, writing "thousands of lines of code" to optimize how they pack boxes. Below is a photo of the upcoming Tesla dashboard - one big screen powered by software. The world is changing.

What does this mean for most businesses? A few things, I think:

1. IT and software/product engineering are not the same thing. Both are really important, but one supports the business, the other builds the business. Do not treat them as the same. Especially as businesses transition to needing more software development in their core offer, they tend to rely on their traditional IT organization to deliver. You need to create a focused group on building customer value.

2. You cannot outsource something core. Used to depending on an outsourcer or offshoring shop? Those can be tools, but if software hits your core (and the argument is it is hitting your core faster than you think), you better get good at it. Invest accordingly.

3. If you don't keep your best developers happy (and challenged), be careful. They will have opportunities. In fact, have them email me!

July 12, 2009

Microsoft Will Prevail, But Say Goodbye to Monopoly Profits

As everyone knows, Google is going after the core of the Microsoft franchise: Windows and Office/Exchange. They face incredibly long odds. Why? In the long run, Google has only one real weapon against Microsoft: lower cost. Yes, the Windows OS is bloated and not web centric. Windows 7 will close these gaps. Office and Exchange work well despite poor web integration, but expect this shortcoming to evaporate soon (this week?). Google is not offering something substantially better. They are offering something cheaper.

This is not to say Google v. Microsoft won't be a vicious war. It will. Google will be aggressive. They will get hardware makers to take Linux seriously. They will engage with big companies to use their products. They will get some victories. But, they will mostly invest money with little return.

By embracing the browser and web application model, Google will lower the network effect of the Windows OS, the source of their monopoly power. But, even with this strength diminished, there are still lots of benefit to using Windows: habit, ecosystem, sunk investment, etc. Everyone will dabble with leaving (partial enterprise use, threats, etc.), but in the end, they will get Windows and Office at an acceptable price and stay.

And, that's the best thing about this war: the consumer is going to win big time.

Google will raise the bar. Free, online services, unlimited storage. MS will respond. More investment, more features and lower prices. Goodbye monopoly rents.

In the end, the two best business models we have seen in the last 50 years are colliding. The massive profits from these business models are now going after each other. What will we end up with in 10 years? Two massively successful companies, a lot more innovation and lower prices. And how about for shareholders? Well, get ready for lower returns.

May 29, 2009

FriendFeed's Path to Relevance

Despite Robert Scoble's constant evangelizing of FriendFeed (we pay him and we don't get half the love!!), it remains a niche service. Since getting to know Robert, I have taken the time to understand FriendFeed. He is right about its potential: it is unlimited. But unfortunately, their current path will continue to keep it marginalized.

Here is the crux of the issue: is FriendFeed a social network or a feed service that aggregates other social networks?

Right now they are both. This is a losing strategy. They need to go full force on the latter.

Here is why doing both does not work. In terms of being a social network or microblogging service Twitter and Facebook have won. They are the engines that will drive most of the basic communicating. The good news is there are two (creating aggregation needs). And, they don't own all the relevant content. Blogs, flickr and other services are still very much alive. So, the opportunity is there to help people consume all of these better. FriendFeed tries, but fails. Why? I can't see all my twitter friend updates or all my Facebook friends, only those that have FF accounts. And, when it comes to blogs, the content creator determines if it shows up on Friendfeed, not the consumers. What? Content has to be pulled not pushed.

All this said, FF still has a huge opportunity. If they did the following, I would spend a lot of my Internet time on their site:

1. Realize your competitor is TweetDeck and Tweetie, not Twitter and Facebook. Kill your actual standalone microblogging engine.

2. Import all Twitter and Facebook friend posts - no FF account required.

3. Allow users to import their RSS feeds so they come in the steam as well. Potential side effect: become the de facto blog comments site.

4. Adjust the user interface to allow multiple streams (as customized) to flow on one screen. We all can't have screens draped across our house a la Scoble.

5. Create standalone apps or make it easy for your partners to do it

6. Just make the service plain easier to understand and work with.

I spend a ton of time on Tweetdeck and my RSS reader. This move would replace all of those. Why? Scoble has the key insight on why FF is so powerful. Their voting, searching and commenting is awesome and hugely powerful to users. The "like" system is much better than retweeting and much more efficient. The searching is highly customizable. I can set up a search to see posts by my friends that have 5 or more "likes." This guarantees I will see the key stories. This is Twitter and RSS with a community filter. Very powerful. And, the commenting means you can have real discussions on point and in real time right below the topic. Much better than the replies concept in twitter. All of this is why you are 10x better than tweetie or tweetdeck. This is a market you can lead. And, it will matter.

Now, there could be technical trades to be made. You might not be able to get the real time stream from twitter. But, updates every few minutes are not bad. There could be other issues. I am not an expert on the technologies and APIs. All I know is FF will remain a rarely visited site for me until it does more with its strengths and abandons its weaknesses.

May 10, 2009

The biggest issue facing America

It is not Pakistan. It is not the banking crisis. It is not even education.

It is healthcare. The future of our prosperity, the ability of America to wield power, our standing in the world, and our capacity to afford to educate our young all depend on us solving this one. Without solving it we cannot afford to tackle the other ones. I think most of America is clueless on how bad the healthcare mess is.

I am going to spend some of my reading time to getting smart on on it. I suggest you do too.

Here is why:

Look at the yellow and red. THEY are the issue. The purple (or interest) is just an echo of their impacts. Any budget forecast looks the same for one reason: healthcare burdens are looming and overwhelming.

Social security can be solved (raise retirement; tax benefits on the wealthy). Healthcare has no easy answers. It it strangling our public and private sector. Yet, any suggestion of reform gets all of America in a panic. I am here to tell you: change is coming. Or, we are doomed.

The situation looks the same for businesses. Their costs are either ballooning or they are passing them on to employees, lowering real income.

The debate is about to heat up. All of us need to get more educated on this issue.

Here are some of the things I want to figure out:

1. Why do we spend 2 times more than Europe per capita but live slightly less?
2. What value do insurance companies add to the equation?
3. How does the legal system contribute to the costs?
4. How do we deal with the ethical issues around treating very old members of society (e.g. heart surgery for a frail 90 year old)?
5. Where are we overspending or over treating (ie where can we save)?
6. How do we create incentives to ensure preventative care?
7. Is the system of creating supply for doctors flawed?
8. How do we trade universal healthcare needs with incentives for invention?
9. Do we know how well our treatments work? Is the default to act misinformed?

Know any good books or articles on the subject? Would love suggestions.

I don't have any firm answers. I am open to any proposal, Republican or Democrat. But, doing nothing is not an option. We have to all open our minds to the right set of adjustments. Will let you know what I learn.

April 29, 2009

Generational warfare

My town is having an election in early May that has become quite the scandal. The hubbub is due to a ballot initiative to freeze property taxes on citizens over 65 years of age.

When I heard about this proposal, I was immediately opposed. Since then I have learned this is a trend all over the country and already in place for many taxes in our area. Furthermore, I have been shocked by the friends and family all for it despite their conservative desire for personal accountability.

I think this issue is a microcosm of endemic bad thinking in America right now. And, to prove this is not generational war and selfish greed, I will have a compromise proposal.

So here are the arguments I have heard to give this preferential tax treatment to the elderly:

1. Its not that much money (and we can afford it). Even if you believe this, it has absolutely nothing to do with it. If we don't need the taxes, let's drop them slightly for everyone. The key issue is how we allocate burdens and should we give preferential treatment to a class of citizens?

2. It allows older people to plan. Since their ability to work is diminished, older people do have a reasonable case when it comes to fluctuating burdens. The problem with this logic is the old slippery slope. Isn't this true with almost all costs? Utility prices change radically. Food prices change. Income tax rates change. Should we exempt older people from all these headwinds? Shouldn't planning for retirement include some contingency for cost of living changes?

3. We can't just kick people out of their homes. First off, this is rarely the issue and generally used for dramatic purposes. Second, are we as a country prepared to make living in the home you want a right? Not any home, but the one you want? Is stopping the move from a house to an apartment a public policy issue that really needs to be prioritized? I simply think this is a right that does not exist and as a society we simply can't afford.

4. They don't use the services as much as younger people. Well, this one is just not true. The only key service it can be applied to is schools, but that is such false thinking. Not only do they likely have grandkids in these schools, the purpose of education is not micro, it is macro. The safety of their community and the development of the economy, depends on strong education. Saying they don't benefit from it is simply insulting.

Those are the most pronounced arguments I have heard for this initiative. All pretty weak in my mind. So, let me tell you the main reasons I am opposed.

1. We are sending a signal not to plan. We are just leaving an era of the most pronounced irresponsibility in our history. And, here we are sending a message that if you plan poorly for retirement, we will make concessions to help out. We have to send my generation an edict that saving is critical if you want to maintain your lifestyle in retirement. This does the opposite.

2. Old people are no more deserving than others. What about families with handicapped children? Or families whose breadwinner just got laid off? Or families who have been hit with expensive health issues that are forcing them to leave the neighborhood? These are all everyday realities for people just as deserving of special treatment. My wife (the nice one in the family) says help them all. While that is nice, we simply can't afford to and it is not how our system works.

The truth is these measures keep passing because older people are organized and vote. While I say vote NO on all these measures, I have a compromise should they pass. Have them expire in 10 years. The truth is the current generation of older folks are being hit with an economic crisis and have not planned for it (as a generalization, I admit), so let's help them. But, let's not let bad policy become a right and expectation.

UPDATE: The initiative failed. No freeze for those over 65. Vote was within 1%.