View 761 Tuesday, February 05, 2013
I met Michael Dell at an Atlanta Comdex when his company was just becoming a major player in the PC community. We had dinner at one of the major Atlanta hotels with perhaps half a dozen other CEO’s, and I was impressed with him.
Possibly inspired by Amazon’s example of forgoing immediate profit for longer term goals, Dell, with the aid of a $2 Billion loan from Microsoft, is going private. One advantage of that is a considerable saving in paperwork – cubicle workers who do quarterly reports, regulation compliance reports, stockholder relations, minority stockholder relations, that sort of thing. An even greater advantage comes from not having to worry about analysts and the stock market going into panic mode if Dell choses to do long term investment and allow the price to earnings ratio to fall. There is also greater freedom from SEC supervision, and that’s worth a lot.
Like Steve Jobs, Mike Dell left the company he founded for a while, then came back. Perhaps he has ideas for the next new thing, and wants the flexibility to bet the company on them.
It’s also possible that he simply wants out of the growth expectations rat race, and wants to build a sound and stable company that will continue to make profits for a long time. That’s not glamorous, but it is what a major economy needs – job stability over the long haul without ups and downs. The market lives on growth expectations, and if you don’t meet them you get hammered. That will continue over on Wall Street, whose horizons go out a year at most. Analysts tend to see quarterly reports and compare actual earnings to those the analyst community expected; woe to the company that falls short of what the models said they should be making. “Flat earning” – which is to say steady profits – are a curse in the Wall Street community. After all, with price to earnings ratios of 10 an more, if you aren’t growing the investors are doomed. This can make for growth in aggregate but it’s sure hard on those who were merely flat.
Of course even achieving the goal of long term stability in the PC market and this economy will be very difficult. When Bill Gates set out to see that there was a computer in every office, and in every house, and in every classroom, few thought he or they would live to see that goal effectively accomplished. Thanks to competitors like Mike Dell it was achieved long before even they thought it would happen. As Possony and I postulated in The Strategy of Technology, technology grows in S curves, slow at first so that linear projections are always smaller than you thought, then steeply rising, before the rate of growth slows again and we reach the top knee of the S. Exponentials are hard to maintain because the high rates of growth get increasingly more difficult to accomplish. Small computer technology benefitted from a number of interacting growths, stemming at bottom from Moore’s Law on how many transistor you could put on a wafer. That resulted in faster computers, which facilitated better designs of mass storage devices, cheaper memory, better machines for lower costs – and more demand for small computers.
That trend is slowing. New Growth will need a new S curve. Finding those in this complicated world requires flexibility.
Companies under the SEC have the flexibility drained out of them by regulations.
It will be interesting to see what comes next. Steve Jobs came to a failing Apple and brought in the iPhone, iPod, iStore, and the lot, turning a doomed company into the largest company on the market.
Now Mike Dell is arranging to have the same flexibility.
Government sues Standard and Poor. Now there’s a story. How much of the economic mess we are in is due to the ‘ratings’ of of those real estate based complex “products” the same as government bonds? With those ratings you could sell that junk as if it were worth something. And the commissions flowed, and the good times rolled. All doomed of course, but putting that much new money into the real estate market had the predictable effect. A Ponzi Scheme rated AAA. And those who said this was madness were told they were mad.
It’s lunch time, and then I have to go write.
My wife just got what looks like a notice from EarthLink that her account is being suspended. It’s a phishing expedition of course. Apparently there a a bunch of them floating around now. Be careful out there.
“If you believe the President has the power to order U.S. citizens executed far from any battlefield with no charges or trial, then it’s truly hard to conceive of any asserted power you would find objectionable.”
There is a great deal to be said on this subject. Clearly those who have levied war on the United States are enemies and legitimate targets of executive action. The problem comes when it is American Citizens not on a battlefield. It is not illegal to be in Yemin so far as I know.
At least one proposal would require the equivalent of an indictment either by a grand jury or by a special court. And it really gets sticky if we are talking about straight out assassination on neutral territory, or even more extreme, on US territory. What makes someone subject to instant deadly attack as opposed to subject to arrest? And if you don’t nave enough evidence to get an indictment, do you have enough for an execution order?
© 2013, jerrypournelle. All rights reserved.