Well, two issues there. The first is Nintendo making a cool console that has appeal. That's the gimmick that I mention. I don't think Nintendo is really trying to change the industry (thoug hI'm sure they wouldn't mind) -- I think they are trying to define a space for themselves. I happen to think they'll succeed. I personally will buy a Wii, not because I think it will be the best console, but because it's cheaper and it's a game console, not a media center. True-to-form for the industry.
This brings me to your second point, which I think is very valid -- Sony and MS have chosen to focus on too much more than games. If anything, Nintendo's innovation here is that they are returning to the roots of consoles -- providing a way for people to have fun playing video games.
The big problem I have with the TFA is that it states that the purpose of niche products is to drive innovation among the market leaders. From a whole-market perspective, that may be the role they end up fulfilling, but that is not their purpose at all... their purpose is to make money for their producers. Failure to enter the market strongly is still failure.
In any established industry (as the videogame industry has become) there are market leaders with enough 'mindshare', and enough resources, to adapt innovations for their next release. As large companies, and given the nature of consoles, they are not likely to take a big risk with a major release (as stated in the article). Other, small, companies take those risks, and the next generation of major consoles will incorporate some of those innovations. This is just like a lot of industries -- look at the airline industry and how most of the large airlines now have regional affiliates modeled on JetBlue's pricing and service.
What's important to note, though, is that the Wii (which, in the end, is the focus of the article) doesn't fit the bill as well as the author would like. Nintendo is not a new, small company taking a risk by innovating. Nintendo is a former giant that that still commands a loyal following, yet is now more agile than its main competitors. What Nintendo has recognized is that there is no room for three 'major' consoles. So instead they opt to compete at a different level.
Not to knock on the Wii, but it really reminds me of Go-Bots... transformers for people who don't want to spend as much cash. The differences are that they have a following that will continue to love them despite the inferiority of their machine, they have a gimmick to promote interest in the new console (the controller), and the game franchise history they've established will sell consoles and games.
In the end, I think the Wii will be successful -- not because of any innovation, but because of pricing and because Nintendo will stick with the tried-and-true focus on games for kids.
Even if I can't predict what will happen on the next pull of the slot machine, I can still predict that if I play for 12 hours straight I'm pretty much going to end up broke.
Yet if you play the right machines (the ones programmed to pay out more often) and you only play progressive machines, you're right that over a 12-hour period you're likely to end up broke. But over several lifetimes, you're likely to end up positive. The hard part is the discipline -- only playing the good machines, and sitting tight until they become available; and keeping at it while the losses pile up before the payout. The not-quite-so-hard-but-still-not-easy part is recognizing which machines to play. This is, of course, assuming you've got the seed cash to cover the investment and living expenses.
Re:Changing times call for changing business model
on
Re-Inventing Hotwheels
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· Score: 1
I used to save up my allowance ($1 per week) for 20-30 weeks to buy a kit. My parents were nice enough to pay shipping from Germany.
Good luck with that. 6k is a drop in the bucket when you look at the big picture, but when you look at departmental budgets, it's a different story. Particularly when you're looking at membership fees and dues. Few trade groups charge fees so large, and without a demonstrable impact on the bottom line, or on worker productivity, most controllers I've come across would red-flag and deny that expenditure out-of-hand.
This holds true especially for private companies -- ownership sees that as six grand taken out of their pockets.
Nope. There are equivalent substitute goods easily available.
Also, 'entertainment' as a category isn't a good, it's a type of good. If you want to discuss movie DVDs, that's fine -- in which case they still can't be a Geffen good, since they are not inferior quality (all joking aside, that is).
Re:Why does everything need to be tech based?
on
Re-Inventing Hotwheels
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· Score: 4, Insightful
I'm not so sure of that. My parents rarely had time to play with the kids, and the same is true for previous generations, IMHO. We amused ourselves outside because that was our best option. We wanted to play with the newest and coolest toys -- we just didn't have them, so we made do with building forts in the woods, playing tag, playing catch, etc.
I think you hit the nail on the nead, though, when you mention "a few kids of the right age." Larger houses, smaller families, and fear of predators have led to kids playing inside by themselves, or maybe with a sibling or one friend. Gone are the days of all the neighborhood's kids playing outside, unsupervised, in the afternoon.
I guess my main point here is that it's not parents not playing with their kids that is the issue -- it's kids playing solo. It's not like parents 50 years ago magically had more time to play with the kids, or more of a drive to play with their kids.
Then again, my perceptions are skewed -- I grew up on a farm with six kids.
Re:Changing times call for changing business model
on
Re-Inventing Hotwheels
·
· Score: 3, Interesting
Sure, Lego has three main lines now -- Legos, Bionicle, and Technik (sp?).
But most of Legos "innovation" now comes not from new products, but from licensing. I recently went to a Lego store for the first time (awesome! the only problem was I didn't have a kid with me, so it would have creeped people out if I stayed there too long...) and was amazed at what was available... for $60-$100. Star Wars, Batman, etc.
Lego's patent is expiring/has expired. The shift to Bionicle and Technik reflects the concern that basic Legos will be facing cheap competition in the very near future. The shift to licensed subjects for kits also addresses this issue. I'll be able to buy basic "legos" for next to nothing... but if I want that AT-ST Lego model, I'll be paying through the nose for it.
That said, does anyone recall what happened to Fischer-Technik? Those were the most amazing toys when I was growing up... expensive, but I got a solid foundation in mechanics from play.
Well, the paint they are talking about in the article is water-based. Much easier/cheaper to apply, dispose of, etc. IIRC, the paint-on metals from our youths were enamels.
He still had regional monopolies. He was able to stave off any competition because he did have a monopoly.
Or do you think that monopolies exist only in a vacuum? As far as I can tell, your definition of a monopoly would be when there are NO attempts to compete. This is not what a monopoly is. Hill was able to control supply and pricing unilaterally -- that is what a monopoly is.
In the entire scheme of things, customers KEPT saving money.As compared to what? Just because customers were paying $X at one point in time doesn't mean that $(X-5) is 'saving' money over the non-monopoly case. Perhaps if he didn't hold a monopoly, they would have been paying $(X-20). Hill reduced prices not as a favor to consumers but in order to maximize profits. His gains in efficiency that allowed him to remain extremely profitable while reducing prices during the Great Depression are notable, of course, but they are completely secondary to the discussion of competition. A second player in any of his regional monopolies could likely have reduced prices in that region even further.
Everyone made money. Look at the railroads today -- oversubsidized to the point of irrelevance.
That is nonsensical. First, subsidization of an industry does not lead to irrelevance of that industry. What has made the regional railroads irrelevant has been the preferential subsidization of the automobile industry and the highway system. A lot of this was a direct result of public antipathy for the railroad robber barons of the first half of the 20th century.
Second, not everyone made money. Quite a few attempted railroad lines lost money because of the huge amounts of capital required to build a railroad, and the ability of already-in-place railroads to undercut new competition because of their monopoly status. Many didn't get off the ground because of the mere threat of undercutting the minimum pricing for profitability of a new line. Others failed because of violent actions by companies holding a monopoly. Not everyone made money -- those who got there first made money. The natural monopoly caused by the high entrance cost caused most newcoming competitors to either fail or never get started.
What about Mr J. J. Hill, who you are so fond of? Did he or did he not establish regional monopolies without the force of the state to back him up?
For you to deny the concept of a natural monopoly flies in the face of every major modern economic school of thought... I'm very curious as to why you just dismiss the notion. Even the Austrian model requires adjustments for mono/oligopoly force.
I'd rather live in a world where those 9 people who were hurt are still hurt, maybe 27 people even, than in a world where 591 people go to jail or lose in court because of the State's desire for more power and money and the control of the expansion of both power and money.
And yet the free market ideals you espouse would allow corporations to, in effect, do the same thing. The difference is that, ideally, government acts in the interest of the people (though it tends to become misguided), whereas an ultra-powerful corporation would act in no such way. To believe that an unrestricted market would not create superpowerful individual [people|companies] who'd be in position to act as the State is misguided. I'm still curious as to how you defend the Austrian school of thought given that it still requires assumptions of an ideal market in order to work.
Whether or not MSFT can pay the fine out of cash is moot (though they can), my point was that the significance of the fine is better explained in terms of the income statement than their market cap.
As to your example of a growing company continually operating at a loss in order to self-finance growth capital... being cash positive is important (crucial even). But this business model is fatally flawed... the question is not if that company will go bust, it is when. It's like a Ponzi scheme -- you're dependent on growth to meet your cash requirements. 'Engineering a soft landing' -- do you mean changing allocation of cash from growth investment to paying down debt?
Market cap is not the important figure here, since that doesn't represent the actual capital that MSFT has on hand, but rather the market valuation of their shares. It's the income statement you want to look at.
For the FY ending 6/30/05, MSFT had a net income of US$ 12.2 billion. So, a fine of US $357 million IS significant -- it's roughly 3% of their net income.
And apparently you missed an entire point of my post... that people name products and methodologies for a reason. Choosing to ignore those reasons is ill-advised, as it makes one look like an idiot, hence "ill-advised" in my OP.
As to the smugness... I think you're projecting onto the author. The piece is primarily observational, I'm not really sure where you're going with that statement about "look how smart WE are" (emphasis mine).
I'm guessing you weren't involved in big business in the past two decades, or even now. Corporate structure and methodologies ARE important. Management philosophies DO impact not only the bottom line, but the welfare of the employed.
Welch's words were practically gospel in the 80s/early 90s. A refutation of them is not unimportant, nor is it meaningless.
Do you really think that matters to the people voting the Republican party line on that one? Do you think it really matters to the functioning of government?
My point is not that the issue is insignificant in general... my point is that it's relatively insiginificant in terms of politics, in terms of Congressional activity, in terms of government operation.
Well, it's not all of a sudden. This has been building for years... what is new is the fact that the US Congress is considering legislation NOW (at the behest of the telcos, mind you).
In addition, have you seen the numerous articles on slashdot in the past year discussing how Verizon wants to have tiered pricing for different priorities for packets? This WILL have a direct effect on how we experience the internet.
Finally,
3) People in the federal government that have no knowledge whatsoever of the technology should be passing net neutrality bills.And who else in the federal government would be passing net neutrality bills? All sarcasm aside, the alternatives are either having bills that serve only the telcos get passed, or to have nothing done, and watch the internet as we know it go up in flames as a free medium for the exchange of ideas. I DO NOT want my internet access to end up like my wireless phone service.
I'll agree with you there. The big downside I see, though, is that the federal government has even MORE intertia than the telcos, and I fear we'd be using today's technology in 2050 (if we're lucky).
I haven't yet seen a good proposal that would incorporate both government control of the pipes and opportunity for multiple providers to compete to offer services on the same pipes.
The other big problem I see is potential for abuse. It's hard enough keeping my packets private with a layer of separation between the government and the data...
Yes, to the tune of hundreds of billions of dollars to date.Not just direct subsidization... government also subsidizes them by granting them monopoly rights. This allows the telcos to charge more to the consumer than we'd likely have to pay in a competitive market.
It's one thing to pay for the infrastructure out of tax dollars. It's quite another to then have no choice of who uses that publically-financed infrastructure.
Yep, flag-burning is a wedge issue. The purpose is not only to distract, but to create a meaningless* issue that can will unify (a majority of) people into an us-vs-them voting bloc.
"Family Values" comes to mind... as does embryonic stem-cell research, etc.
*Meaningless as in politically meaningless -- I don't mean to deride the value of a lot of these issues on a personal or even local level. When the nuts and bolts are counted, these wedge issues mean nothing in the big picture of what it is that Congress/POTUS actually does.
Six sigma," mentioned in the article, is a fine example of this. How many suits really understand what a "sigma" is in this (or any) context, or why six of them is an interesting quantity?
What? Six Sigma is the name of a specific approach to management of a company. It's copyrighted (owned by Motorola) and "Black Belts," "Green Belts," "Champions," etc. are the titles of specific roles within the program. It's not a generic (which is a mistake in TFA, they should have capitalized it) term, it's a proper term.
Your ill-advised rant (which has nothing much to do with the concepts in TFA anyway) is akin to griping about Microsoft having a program they've titled "Windows" -- the name is meant to convey something. Ditto for Six Sigma and the roles' titles -- keep in mind that Motorola developed this program to instill a new way of thinking about management.
That being said, I agree that this is an article for suits (well, what do you expect from Fortune) and it's packed with business jargon that means very little.
Means very little to you, you mean. To people who focus on strategy rather than tactics, there is a lot of meaningful dialogue in the article. Whether or not you get anything out of it is a different story.
Where the hell is that coming from? Sorry the parent to your post was a bit tongue-in-cheek, but you're claiming the OP of the thread knows what he's talking about in re: ideal markets vs. real markets... yet he fails to consider the differences, and continues to apply ideal market theory to the telecomm market.
As to efficient allocation of limited resources... why do you assume I don't understand the concept? I happen to believe that the market process concept of ever-increasing efficiences in allocation of limited resources is fundamentally flawed in the Austrian model, since it also requires utopian market conditions requiring adjustments to account for force and fraud in order for the model to work. Both government force (regulations) and [mon|oli]gopoly force.
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Well, two issues there. The first is Nintendo making a cool console that has appeal. That's the gimmick that I mention. I don't think Nintendo is really trying to change the industry (thoug hI'm sure they wouldn't mind) -- I think they are trying to define a space for themselves. I happen to think they'll succeed. I personally will buy a Wii, not because I think it will be the best console, but because it's cheaper and it's a game console, not a media center. True-to-form for the industry.
This brings me to your second point, which I think is very valid -- Sony and MS have chosen to focus on too much more than games. If anything, Nintendo's innovation here is that they are returning to the roots of consoles -- providing a way for people to have fun playing video games.
Maybe feature bloat is killing the big consoles.
The big problem I have with the TFA is that it states that the purpose of niche products is to drive innovation among the market leaders. From a whole-market perspective, that may be the role they end up fulfilling, but that is not their purpose at all... their purpose is to make money for their producers. Failure to enter the market strongly is still failure.
In any established industry (as the videogame industry has become) there are market leaders with enough 'mindshare', and enough resources, to adapt innovations for their next release. As large companies, and given the nature of consoles, they are not likely to take a big risk with a major release (as stated in the article). Other, small, companies take those risks, and the next generation of major consoles will incorporate some of those innovations. This is just like a lot of industries -- look at the airline industry and how most of the large airlines now have regional affiliates modeled on JetBlue's pricing and service.
What's important to note, though, is that the Wii (which, in the end, is the focus of the article) doesn't fit the bill as well as the author would like. Nintendo is not a new, small company taking a risk by innovating. Nintendo is a former giant that that still commands a loyal following, yet is now more agile than its main competitors. What Nintendo has recognized is that there is no room for three 'major' consoles. So instead they opt to compete at a different level.
Not to knock on the Wii, but it really reminds me of Go-Bots... transformers for people who don't want to spend as much cash. The differences are that they have a following that will continue to love them despite the inferiority of their machine, they have a gimmick to promote interest in the new console (the controller), and the game franchise history they've established will sell consoles and games.
In the end, I think the Wii will be successful -- not because of any innovation, but because of pricing and because Nintendo will stick with the tried-and-true focus on games for kids.
I used to save up my allowance ($1 per week) for 20-30 weeks to buy a kit. My parents were nice enough to pay shipping from Germany.
Good luck with that. 6k is a drop in the bucket when you look at the big picture, but when you look at departmental budgets, it's a different story. Particularly when you're looking at membership fees and dues. Few trade groups charge fees so large, and without a demonstrable impact on the bottom line, or on worker productivity, most controllers I've come across would red-flag and deny that expenditure out-of-hand.
This holds true especially for private companies -- ownership sees that as six grand taken out of their pockets.
Nope. There are equivalent substitute goods easily available.
Also, 'entertainment' as a category isn't a good, it's a type of good. If you want to discuss movie DVDs, that's fine -- in which case they still can't be a Geffen good, since they are not inferior quality (all joking aside, that is).
I'm not so sure of that. My parents rarely had time to play with the kids, and the same is true for previous generations, IMHO. We amused ourselves outside because that was our best option. We wanted to play with the newest and coolest toys -- we just didn't have them, so we made do with building forts in the woods, playing tag, playing catch, etc.
I think you hit the nail on the nead, though, when you mention "a few kids of the right age." Larger houses, smaller families, and fear of predators have led to kids playing inside by themselves, or maybe with a sibling or one friend. Gone are the days of all the neighborhood's kids playing outside, unsupervised, in the afternoon.
I guess my main point here is that it's not parents not playing with their kids that is the issue -- it's kids playing solo. It's not like parents 50 years ago magically had more time to play with the kids, or more of a drive to play with their kids.
Then again, my perceptions are skewed -- I grew up on a farm with six kids.
Sure, Lego has three main lines now -- Legos, Bionicle, and Technik (sp?).
But most of Legos "innovation" now comes not from new products, but from licensing. I recently went to a Lego store for the first time (awesome! the only problem was I didn't have a kid with me, so it would have creeped people out if I stayed there too long...) and was amazed at what was available... for $60-$100. Star Wars, Batman, etc.
Lego's patent is expiring/has expired. The shift to Bionicle and Technik reflects the concern that basic Legos will be facing cheap competition in the very near future. The shift to licensed subjects for kits also addresses this issue. I'll be able to buy basic "legos" for next to nothing... but if I want that AT-ST Lego model, I'll be paying through the nose for it.
That said, does anyone recall what happened to Fischer-Technik? Those were the most amazing toys when I was growing up... expensive, but I got a solid foundation in mechanics from play.
Well, the paint they are talking about in the article is water-based. Much easier/cheaper to apply, dispose of, etc. IIRC, the paint-on metals from our youths were enamels.
Or do you think that monopolies exist only in a vacuum? As far as I can tell, your definition of a monopoly would be when there are NO attempts to compete. This is not what a monopoly is. Hill was able to control supply and pricing unilaterally -- that is what a monopoly is.
What about Mr J. J. Hill, who you are so fond of? Did he or did he not establish regional monopolies without the force of the state to back him up?
For you to deny the concept of a natural monopoly flies in the face of every major modern economic school of thought... I'm very curious as to why you just dismiss the notion. Even the Austrian model requires adjustments for mono/oligopoly force.
But I have a hat that says "Lion Tamer" on it. I got it at Harrod's...
I'm an accountant by trade, a techie at heart. I save the programming for hobby stuff and for one-offing quick manipulations for the financials.
FYI, I'm an accountant.
Whether or not MSFT can pay the fine out of cash is moot (though they can), my point was that the significance of the fine is better explained in terms of the income statement than their market cap.
As to your example of a growing company continually operating at a loss in order to self-finance growth capital... being cash positive is important (crucial even). But this business model is fatally flawed... the question is not if that company will go bust, it is when. It's like a Ponzi scheme -- you're dependent on growth to meet your cash requirements. 'Engineering a soft landing' -- do you mean changing allocation of cash from growth investment to paying down debt?
Market cap is not the important figure here, since that doesn't represent the actual capital that MSFT has on hand, but rather the market valuation of their shares. It's the income statement you want to look at.
For the FY ending 6/30/05, MSFT had a net income of US$ 12.2 billion. So, a fine of US $357 million IS significant -- it's roughly 3% of their net income.
And apparently you missed an entire point of my post... that people name products and methodologies for a reason. Choosing to ignore those reasons is ill-advised, as it makes one look like an idiot, hence "ill-advised" in my OP.
As to the smugness... I think you're projecting onto the author. The piece is primarily observational, I'm not really sure where you're going with that statement about "look how smart WE are" (emphasis mine).
I'm guessing you weren't involved in big business in the past two decades, or even now. Corporate structure and methodologies ARE important. Management philosophies DO impact not only the bottom line, but the welfare of the employed.
Welch's words were practically gospel in the 80s/early 90s. A refutation of them is not unimportant, nor is it meaningless.
Do you really think that matters to the people voting the Republican party line on that one? Do you think it really matters to the functioning of government?
My point is not that the issue is insignificant in general... my point is that it's relatively insiginificant in terms of politics, in terms of Congressional activity, in terms of government operation.
In addition, have you seen the numerous articles on slashdot in the past year discussing how Verizon wants to have tiered pricing for different priorities for packets? This WILL have a direct effect on how we experience the internet.
Finally,
I'll agree with you there. The big downside I see, though, is that the federal government has even MORE intertia than the telcos, and I fear we'd be using today's technology in 2050 (if we're lucky).
I haven't yet seen a good proposal that would incorporate both government control of the pipes and opportunity for multiple providers to compete to offer services on the same pipes.
The other big problem I see is potential for abuse. It's hard enough keeping my packets private with a layer of separation between the government and the data...
Yes, to the tune of hundreds of billions of dollars to date.Not just direct subsidization... government also subsidizes them by granting them monopoly rights. This allows the telcos to charge more to the consumer than we'd likely have to pay in a competitive market.
It's one thing to pay for the infrastructure out of tax dollars. It's quite another to then have no choice of who uses that publically-financed infrastructure.
Yep, flag-burning is a wedge issue. The purpose is not only to distract, but to create a meaningless* issue that can will unify (a majority of) people into an us-vs-them voting bloc.
"Family Values" comes to mind... as does embryonic stem-cell research, etc.
*Meaningless as in politically meaningless -- I don't mean to deride the value of a lot of these issues on a personal or even local level. When the nuts and bolts are counted, these wedge issues mean nothing in the big picture of what it is that Congress/POTUS actually does.
Your ill-advised rant (which has nothing much to do with the concepts in TFA anyway) is akin to griping about Microsoft having a program they've titled "Windows" -- the name is meant to convey something. Ditto for Six Sigma and the roles' titles -- keep in mind that Motorola developed this program to instill a new way of thinking about management.
Means very little to you, you mean. To people who focus on strategy rather than tactics, there is a lot of meaningful dialogue in the article. Whether or not you get anything out of it is a different story.
Where the hell is that coming from? Sorry the parent to your post was a bit tongue-in-cheek, but you're claiming the OP of the thread knows what he's talking about in re: ideal markets vs. real markets... yet he fails to consider the differences, and continues to apply ideal market theory to the telecomm market.
As to efficient allocation of limited resources... why do you assume I don't understand the concept? I happen to believe that the market process concept of ever-increasing efficiences in allocation of limited resources is fundamentally flawed in the Austrian model, since it also requires utopian market conditions requiring adjustments to account for force and fraud in order for the model to work. Both government force (regulations) and [mon|oli]gopoly force.