<![CDATA[Perezonomics - Home]]>Sun, 23 Apr 2017 22:21:37 -0500Weebly<![CDATA[Tim Cook Threatened to Destroy Uber]]>Sun, 23 Apr 2017 18:45:32 GMThttp://perezonomics.com/home/tim-cook-threatened-to-destroy-uberDon't Mess With Privacy
So, the New York Times is reporting that Tim Cook threatened to pull Uber from the App Store.

For months, Mr. Kalanick had pulled a fast one on Apple by directing his employees to help camouflage the ride-hailing app from Apple’s engineers. The reason? So Apple would not find out that Uber had secretly been tracking iPhones even after its app had been deleted from the devices, violating Apple’s privacy guidelines.

​But Apple was on to the deception, and when Mr. Kalanick arrived at the midafternoon meeting sporting his favorite pair of bright red sneakers and hot-pink socks, Mr. Cook was prepared. “So, I’ve heard you’ve been breaking some of our rules,” Mr. Cook said in his calm, Southern tone. Stop the trickery, Mr. Cook then demanded, or Uber’s app would be kicked out of Apple’s App Store. –Mike Isaac, New York Times
Wow, and I don’t use that word lightly. If it is true, that’s like threatening McDonalds’ access to all future purchases of beef. It was basically a threat to burn someone’s business to the ground. I’m sure Tim was calm when he made the statement, but nonetheless, a bomb like that would have had Travis quaking in his seat.

I remember at the September 2016 special event when Tim Cook was on stage just prior to the unveiling of the iPhone 7, he did something that I briefly thought curious. I forgot about it until now. But before he brought Phil Schiller on stage, he went though some of iOS 10’s new features. He demonstrated Siri’s ability to call for a car by calling for a Lyft. I remember wondering why he didn’t call for an Uber since they’re the market leader. I wondered if he went out of his away not to mention Uber.

Well, I guess now we know why. 
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<![CDATA[Apple Could Play the Low Price Game and Win]]>Sun, 23 Apr 2017 12:36:01 GMThttp://perezonomics.com/home/apple-could-play-the-low-price-game-and-winBut Why Would They Do It?
​Periodically the manufacturing analyst in me wonders what kind of market share Apple could command in the mobile-phone space if they were to intentionally make a push into the budget arena. Not that that they ever would, and I don’t think I’d ever recommend it, but I can’t help but ponder the question. Would Apple be successful at it?
​Generally, large companies are much more successful at selling products based on price. They can afford expensive automation and have a lot of purchasing clout which helps bring costs down. Without a material cost advantage, small companies have a hard time selling based on price. When I was at Gateway Computers, Ted Waitt wanted to sell product based on price while our main competitors all had exponentially greater volume. It didn’t end well.
 
Smaller companies tend to gravitate towards premium products. It’s universal law that the higher you go in price for anything, the smaller and smaller your market becomes. Selling premium products helps small companies recoup their investment when their material and labor costs are higher than the big guys. Plus, large companies may not want to deal with low-volume products that can’t be automated.
 
But Apple occupies somewhat of an enviable position. They are an extremely large corporation that has a disproportionate mix of premium products, an oddity in business. Their few lower-priced products make up a minority of their sales. All companies would love to have this situation. It’s the opposite of an automotive company whose product lines are like a pyramid, the base comprised of the lower-priced models and the top is generally premium products.
 
Apple doesn’t attack the low end of the market because they don’t want to. But this is not because they wouldn’t be successful. If Apple so chose, they could compete on the basis of price and win. They have both the purchasing power and volume to offer lower-priced devices than anyone. And I’m not talking about $450 iPhones either. Much lower than that.
 
Everyone likes to focus on the fact that iOS has about 20% of the global smartphone market. However, that’s only if you lump all the Android volume from various companies together. If you compare smartphone volume by individual company, Apple is the largest.
 
If Apple focused their energy on pulling out premium features like fast memory, super responsive touch screens, and color calibrations, they could cut a lot of additional cost from even an iPhone SE. Further, if they started using low-cost materials like plastic in place of aluminum and glass, they could compete against the cheapest of the low-cost no-name Android stuff and win. They could undercut everyone and still make a profit.
 
But there would be a huge risk in Apple ever doing this. Apple could undercut everyone and make a profit, but it wouldn’t be as large of a profit as they’re getting from their current products. Pulling in a new customer segment would yield incremental profit, but if their current customers start to shift their purchases to the low end, that would be a big problem. Apple definitely doesn’t want to swap high-margin products for lower-margin ones.
 
Then there’s the danger to the brand. When you see the Apple logo on a product, you expect premium materials and high quality. Using lower-cost materials and cheaper components doesn’t dovetail with Apple’s brand. Although, this problem is solvable.
 
When I was working as a financial analyst for the Herman Miller Company, the second largest office furniture manufacturer in America, we wanted to make a push into the South American market. The problem was that Herman Miller furniture was a premium brand with premium materials, built to American standards that called for thicker gauge steel, more fire retardant, etc. So what did we do? We looked at purchasing another company and using the acquired brand to market our new products. This way we could still leverage our purchasing power, lean manufacturing techniques, and supply-chain management skills. Combine all that with cheaper materials and less warranty coverage, and it would be a fair fight that we could win.
 
If Apple wanted to attack the low end of the market, they would need to do something similar. It would need to be a different brand and couldn’t have the Apple logo on it. This would allow Apple to use low-cost materials, shorten the warranty, and follow different customer service policies. Combining Apple’s massive material purchasing power and world-class supply-chain management, their new product could become the low-cost leader.
 
I have a hard time thinking that Apple would ever risk damaging their premium iPhone market by doing this. If the market is snapping up every iPhone that rolls of the assembly line, keep your focus there. There’s no reason to shift your resources unless Apple all of a sudden cares about iOS vs Android market share, something that has never bothered them before.
 
On the Mac side, though, it might be worth considering. It would be much preferable to licensing macOS to third parties. If Apple created another brand, they could still control the entire supply chain and quality. Offering easy-to-upgrade plastic boxes that were competing on the same playing field as cheaper PCs, they’d probably gain new customers, people who would otherwise be making “Hackintoshes”, buying a Windows PC, or abandoning Macs altogether and switching to iPads.
 
It’s fascinating to ponder how the landscape would change if all of a sudden iOS commanded 50% of the market versus today’s 20%. iOS would be able to gain market share in developing nations like India. Apple branded devices would still be at 20% or less since most of the new volume would come from the low-cost line.
 
But how would this impact Google? Even though they make money off of iOS, they’d have to tailor their strategy to favor iOS even more. Would Apple shift their focus more to services revenue to offset the device gross margin lost? Is iOS important enough to split off from the Apple Brand?
 
I’m sure Apple has discussed and rejected this idea many times. But I'm convinced that if Apple were to make a concerted effort at growing iOS market share through low cost devices, they would be wildly successful at it. Perhaps too much so due to the risk that it poses to the gold mine which is iPhone. So I wouldn’t get my hopes up that this would ever happen.
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<![CDATA[Apple’s iPhone Processor Advantage Is More Important Than You Think]]>Sat, 22 Apr 2017 13:06:54 GMThttp://perezonomics.com/home/apples-iphone-processor-advantage-is-more-important-than-you-thinkAndroid Could Be in Trouble
Apple has spent a long time cultivating a big lead in mobile processors for its iPhone and iPad. They aren’t sparing any amount of time and treasure, and yet, very few seem to be asking why. Apple isn’t interested in simply owning bragging rights by consistently beating Samsung in mobile phone speed tests. The big picture is…bigger.
I used to be in charge of inventory management system installations for a global company with over fifty wholly owned companies in Europe, Asia, and South America. We had our own army of programmers in-house developing the business applications that we used. One of the challenges we always had to manage was the varying levels of server power and equipment used by our different foreign subsidiaries. If we pushed the boundaries of what the software could do, we would face expensive capital equipment purchases to allow for the upgrade. We had to gear our aspirations closer towards the lowest common denominator.  

Likewise, iOS software developers face a similar predicament with how they design their applications. Where do they draw the line of which devices to include? Do they make their applications more powerful but potentially leave money on the table by excluding older iPhones? Currently, just like we did at my old company, the developers target the lower end of the performance spectrum so as not to disappoint too many potential customers.

But Apple’s lead in processors seems to be growing. Android and iOS phones in the early days used to seesaw back and forth with the newest phones winning the battle. Within the last year or two, things changed to where the new Android phones were still less powerful than the previous year’s iPhone. But not by too much. Now, the Samsung Galaxy S8 was just launched, and the previous year’s iPhone is almost twice as fast in real world tests. The gap is widening.

This power differential is going to have consequences.

iOS already occupies the high ground when it comes to the battle for developers. Profitability is significantly better in Apple’s App Store than it is on Google Play. Google has gained some ground in the last two or three years due to the sheer number of Android devices out there. But there is still a perception that the software in Apple’s App Store is better designed and the developers are making better money there.

However, if iOS devices continue to pull away in terms of processing power, I could see a scenario where software made for iOS and Android are no longer equivalents. Right now, even though the iPhone 7 is significantly faster than the fastest Android phones, there is still a lot of overlap between the two platforms. If you’re wanting to include the iPhone 5C and up, there are a lot of Android phones that fit into that spectrum of capability. But what happens if the oldest iPhone that developers are targeting is more powerful than 80% of the Android installed base?

We’ll end up with software made for iPhones and iPads that is significantly more powerful than the Android equivalent. Not just better designed, but more features and more capable. Gaming is already so much better on iOS than Android that many Android gamers are either switching to iPhone or tempted to take the plunge.

If virtual reality, gaming, and productivity apps are all better on the iPhone, it won’t take long before people start choosing iPhones over Androids because of that advantage. Apple’s new bokeh effect in the dual-camera iPhone 7 Plus is made possible by the massive computing power in the A10 Fusion chip. Even Google’s advantage in deep-learning could be negated somewhat if Apple is able to employ artificial intelligence locally on-device, giving it an advantage in speed and off-line access.

Has this been Apple’s plan all along? Grow their processor advantage to the point where Android phones are looked upon like second-class hardware due to less powerful applications? Is this a stealth attack that Google never saw coming? Would Google really care? They make money whether the market chooses iOS or Android.

The real loser would be Samsung. I wouldn’t be surprised if the management at Samsung electronics is nothing but obsessed with the iPhone. I imagine the guys at Samsung live and breathe every little iPhone rumor. Is there anything they can do to prevent the iPhone from continuing to pull away in terms of processing power, causing a software disparity? Because if there is, they need to be on it.

So this processor advantage that the iPhone enjoys could end up being much more than bragging rights. Developers will target the lower end of the performance spectrum, but if the low end on iOS is much higher than Android, it will cause problems. It would eventually turn into software and capabilities that either only work on the iPhone or work much better in iOS. 
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<![CDATA[The End of the Mossberg Era]]>Fri, 21 Apr 2017 02:15:53 GMThttp://perezonomics.com/home/the-end-of-the-mossberg-eraSo Long, and Thanks for All the Fish
In the world of tech journalism they don’t come any bigger than Walt Mossberg. He is to journalism as Tom Brady is to Football. Huge. I started reading his stuff when he was with the Wall Street Journal and later when he co-founded Recode. And yet, no matter how big of a celebrity he got to be, his writing was always to the common man. I appreciated that. Now after 47 years of journalism he’s retiring.

Walt wrote me a nice e-mail a couple of months after I had started my blog and complimented one of my posts as being a “smart piece”. I was absolutely beaming for a week. The thing was, unbeknownst to Walt, I was on the verge of giving up on blogging. His compliment came at just the right time that I decided to keep going.

Even though Walt was at the top of the tech world I appreciated his willingness to take a few minutes out of his day to say a few kind words to a nobody like me. He may even have forgotten, but I never will.

Thanks Walt and enjoy your retirement. 
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<![CDATA[Dictated by Siri]]>Wed, 19 Apr 2017 02:52:08 GMThttp://perezonomics.com/home/dictated-by-siriApple Needs to Add One More Disclaimer
​My wife and I enjoy going out for walks after dinner. We always take our iPhones with us but we never use them. They only serve as communication beacons for our Apple Watches. Often while out walking, one of us may punctuate our conversation with a quick text back to the kids to remind them about something. Or we’ll receive a text that needs a quick response.
​The preferred method of said communication is by dictating via Siri on our Apple Watches. Part of the fun of dictating when we’re around each other is laughing at the mistakes that Siri might make. Siri is actually pretty good on the Apple Watch, so I’m not trying to insinuate that it’s terrible. But there are still mistakes that occasionally happen. When I’m by myself, they’re irritating. When I’m with my wife, they’re actually kind of fun since we can laugh about them.
 
Since we’re out walking we typically don’t correct dictation mistakes in the message if we think that they can be understood by our kids. Especially if it’s a funny one. We just figure that they’ll understand it anyway. It’s kind of like Apple’s own version of Mad Gab.
 
But we wish that there was some way to denote under our iMessage that this particular text message was “Dictated by Siri”. That way when the receiving party saw our text with the Siri disclaimer they’d think “Oh oh, I had better be prepared to think about this one”.
 
Apple had created a default “Sent by my iPhone” message for people when smartphones were a new thing. I can only presume that was to alert the receiving party that you were typing with your thumbs so forgive the brief message and any typos. I would think that dictating a message with Siri should also require some kind of disclaimer. Even more so than thumb-typing would. Dictation could lead to entire words being wrong as opposed to just an errant mis-keyed letter.
 
I suppose we could always send the audio. But we rarely ever do. I find audio messages when someone is exercising to be quite unpleasant. And that’s assuming there aren’t noisy cars or lawn mowers in the background ruining the recording. But that’s a whole other blog post.
 
No, texting via Siri is still preferred even over audio messages. And if Apple were to add a Siri disclaimer to give me a little more grace I’d appreciate it. 
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<![CDATA[ The iPhone 7 Is Twice as Fast as the Quickest Android Phone ]]>Sun, 16 Apr 2017 20:21:51 GMThttp://perezonomics.com/home/-the-iphone-7-is-twice-as-fast-as-the-quickest-android-phoneSingle-Threaded Performance Is More Important Than Multi-Threaded
This is too funny to let slip by unmentioned. So what happens when you gather the best that Android has to offer and put them up against Apple's aging iPhone 7? The iPhone is already past halfway through its life cycle. 
​The popular YouTube channel EverythingApplePro has just put the most popular premium smartphones through a torture test to see which ones were the fastest. Spoiler, the iPhone was twice as fast as the quickest Android phone which was the new Galaxy S8. This just goes to show how single-threaded performance is way more important than multi-threaded performance. 
And for all the crowd that would like to argue that these tests are not important because they don’t reflect real-world usage. You’re wrong on multiple levels. These stress tests are important but I’ve already discussed that here: Drag Racing iPhones
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<![CDATA[The Web Is Better on Wider iPhones]]>Sun, 16 Apr 2017 15:13:27 GMThttp://perezonomics.com/home/-the-web-is-better-on-wider-iphonesNow Samsung Values Hand Feel?
I had written yesterday about a couple of reasons that I didn’t want Apple to make Samsung’s mistake in opting for a taller and narrower aspect ratio. This form handicaps both watching landscaped video in portrait mode and reaching the top of the screen.

But the drawbacks don’t stop there. There is also the issue of how websites look on a mobile phone screen. Simply put, the web looks better on a wider screen than a narrow one. More horizontal space allows for larger font sizes for your text. Extra vertical space does not. You get more text, but the font size isn’t any larger. The net result is that web pages are much more readable on phones that have a fatter aspect ratio. 
Anyone who’s ever tried to print a large spreadsheet onto 8.5"x11" paper knows how important horizontal space is. It’s amazing how big of an impact decreasing your side margins to allow for more space has in improving the readability of your text.

Now I will admit that whether you feel websites look better on wide or narrow screens depends somewhat on whether you prefer to look at desktop or mobile versions of a site. And this may depend on how good your eyesight is. I much prefer looking at the full desktop versions. The mobile versions are almost always pared down versions that leave a lot of content out. Mobile sites are easier to read but at the expense of overly large font sizes that require excessive scrolling.

One of the great benefits of the iPhone 7 Plus is that the relatively wide screen makes desktop web sites like the Drudge Report still relatively useable. You can see three columns as opposed to one at a time because the text can be larger. There is no scrolling necessary. If you have good eyesight, wider phones give you the option of maximum information delivery.

I’ve received feedback from Samsung fans since yesterday which has been interesting. None of them dispute the facts of what I’m stating, but they now make the case that the feel of the phone in the hand is so much better with a narrow phone. Oddly, they are now saying that narrow phones are the way of the future.

No, narrow phones that feel good in your hand are a blast from the past. More specifically, 2007-2014 when Apple doggedly stuck to narrow phones in the face of larger Android competition. This battle has been fought and won. Screen usability trumps hand feel.

Android fans all of a sudden have had a change of heart which strikes me as disingenuous. Before when Apple made the case that one-handed usability was important and Samsung didn’t care, the Android fans said that Apple was stuck in the past. Now, all of a sudden one-handed usability is important because Samsung says so? Screen real estate is now second fiddle?

Narrow vertical aspect ratios are a mistake. Foldable phones are right around the corner. So moving web developers wholesale to displaying info on a grocery-receipt–sized screen is ridiculous when we’ll be asking them to move back to wider aspect ratios a little later.

And mark my words, when Samsung comes out with foldable phones and shows the benefits of an expansive wide screen, the Samsung fans will be saying that narrow aspect ratios are dumb relics of the past. 
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<![CDATA[I Don’t Want a Narrower iPhone]]>Sat, 15 Apr 2017 10:07:37 GMThttp://perezonomics.com/home/-i-dont-want-a-narrower-iphoneWidth Is Good and the Galaxy S8 Was a Mistake
​All the rumors about Apple changing the aspect ratio of the next iPhone to a taller and narrower screen are troubling. I’m hoping that they’re wrong but the release of Samsung’s Galaxy S8 in a taller and narrower configuration have me starting to think it might happen. 
There are two things I don’t like about phones in general.
  1. Landscape video in portrait mode sucks
  2. It’s the length of the phone that is uncomfortable in my front pocket, not the width.

​One of the main reasons I opted for my iPhone 7 Plus was because it makes watching landscaped video in portrait mode a little bit easier. The 7 Plus is significantly wider than the regular iPhone 7 and when you’re watching videos that makes a huge difference. A little bit more room on the sides allows those landscaped videos to get taller as well. Mobile screens are starved for width.

Then there’s the comfort issue. There's no other way to say it other than the iPhone 7 Plus is too long. The tallness of the phone digs into my hip when I sit down. The width doesn’t bother me at all. If Apple keeps the same dimensions but elongates the screen I will be so let down. I’d love the same size screen in a half inch shorter body. I’ve had many complaints about the size of my Plus-sized iPhone ever since I got one, but that it was too wide has never been one of them.

Then there’s the thumb reach issue. I can get anywhere on the bottom half of my screen one-handed. The top half? Not so much. Giving us a bigger screen by elongating the height only exacerbates the problem.

I don’t want a taller and narrower screen. That would negate one of the main advantages of the current 5.5” screen which is the width. If I was using a Samsung Galaxy phone I’d consider switching to iPhone just for the better aspect ratio. Who wants a screen that makes you feel like you're reading a grocery store receipt?

​Related: The Web Is Better on Wider iPhones
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<![CDATA[ I’ve Just Discovered Apple’s Live Photos ]]>Thu, 13 Apr 2017 02:08:45 GMThttp://perezonomics.com/home/-ive-just-discovered-apples-live-photosSome Things Get Better With Age
​Apple’s Live Photos are seriously cool. Only, I didn’t realize this until about a month ago because Live Photos are like an old school yearbook. When you first get it, you thumb though the pages once and throw it on a shelf to collect dust. Only years later do you actually appreciate seeing the names and faces of people who you never thought you’d forget, jogging your memory. 
​I treat my iOS photo library like a precious garden that needs to be weeded and cultivated on a regular basis. I’m always snapping pictures of my kids, and I like to err on the side of taking too many as opposed to too few pictures. So later on, usually while watching TV, I open up the photos app and start my own version of photo Tinder where I make two-second snap decisions. Keep or delete. I offset my predisposition of taking too many pictures by later using the rule “if in doubt, throw it out”. Unless the picture immediately speaks to me in two seconds, I delete it and never look back.

Recently during one of my culling sessions, I spontaneously kept flipping back through history. It took me all the way back to some great photos from 2015 when Live Photos first became a thing. It was far enough back in time that my mind had started to forget the details. Little things like why did someone have that look on their face? Was that a marching band playing in the background? Or, wow, I forgot so-and-so was standing next to me when I took that photo.

I’ve never enjoyed looking through my photos as much as I did this time. You get just enough video to get a flavor for the scene and remind you of some details that you would have otherwise forgotten. And the genius of the way Apple has set it up is that it was enabled by default. Unlike slo-mo or portrait mode, I never had to remember to turn on this new feature.

The only thing that marred my experience was when I would get to a batch where I had switched Live Photos off for some reason. That was usually because I was taking a low-light photo. I’m not sure if it’s still true or not, but I’d read somewhere that turning off Live Photos will improve low-light photography. But then I’d forget to switch it back on. Now I’m filled with regret because I know I can never get those scenes back. They’re gone forever making the still photos seem almost dead by comparison.

Live Photos is an example of something that Apple has definitely done right. Like Apple’s new Portrait Mode, it’s another one of those little reasons that reminds me why I like iOS so much. Is it perfect? No. The quality could be a little better, and I wish there was a setting for turning off Live Photos only for a certain time period.

When Live Photos was first released, the jaded tech press seemed a little underwhelmed. I wasn’t too different. I thought it was neat, but when you look at the photo and you still remember all the details, you don’t see the magic. The same as looking at your yearbook while you still saw all those kids on a daily basis. It’s not until much later that you really appreciate it.

I challenge any of those skeptics to try going back to 2015 and take another look at their photos. That’s what I did, and going forward, I’m never switching it off. 
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<![CDATA[Designing a New Computer: How Long Does It Take?]]>Sun, 09 Apr 2017 12:53:46 GMThttp://perezonomics.com/home/designing-a-new-computer-how-long-does-it-take
Apple(AAPL) announced last week that they are starting over with the Mac Pro and redesigning it from the ground up. We were told not to expect it any time in 2017. Which has a lot of people asking a couple of questions.
 
  1. How long does it take to design and deploy a new design?
  2. When did Apple start the process?
​I thought it might be helpful to shed a little light on what it takes to get a product to market from the R&D phase. I’ve watched Gateway Computers launch new computer models and I’ve been involved with the process in many other companies as well. Accounting is typically brought into the loop at the beginning to make sure that the project is financially viable.
 
There are three main phases to designing a new computer and getting it ready for sale.
 
  1. Design
  2. Prototyping
  3. Manufacturing Setup
 
The Design phase is the big variable between various projects. This is usually setup as a sort of competition where you have multiple teams concurrently working on their own vision of what the product should do or look like. At Gateway, these teams would ask for input from someone in manufacturing finance on the labor costs involved with their particular design. Any design presentation to executive management would include data on the cost to manufacture and expected gross margins.
 
The paper design phase is the Wild West where anything goes. I remember seeing proposals for computers that were built into desk lamps or disguised as a piece of art. The various paper designs are presented to executive management and only a few will be chosen to proceed on to the prototype phase. These big reviews seem to average about once per quarter.
 
The prototype phase is where purchasing is brought into the loop to procure parts that don’t exist. That means that every single component needs to have a detailed schematic drawn up that an outside vendor can use to produce parts. After these schematics are done, they get sent out and the vendors can get their dies and molds created. About two months to actually get parts seems to be about average for items that don’t exist anywhere in the world.
 
However, the guys in Apple’s design lab have a distinct advantage when it comes to getting parts that they need. From what I’ve seen in the press, they actually have in-house resources to create their parts without going to outside vendors. This would speed up that whole procurement process. However, it could also slow them down if the designers are getting really involved with manufacturing their own parts. They could become like cooks who have to go out and butcher their own meat as opposed to just getting it delivered to the restaurant. The guys at Gateway sent out the specs and they shifted their focus to other projects while they waited for their parts to arrive.
 
Once the prototypes were ready they’d go to another set of engineers for testing. These guys would stress test the hardware and look for software conflicts. This would take at least a couple of weeks.
 
Once all the prototypes were finished there would be another big review. A round of cuts would be made and a single design would be crowned the new model. The baton gets handed over to the purchasing and manufacturing groups to get the new model manufactured.
 
While the purchasing group works with vendors to get shipments of components scheduled the manufacturing group is designing their new manufacturing cell and hiring new people to staff it. How long this takes really depends on how large the volume is. The bigger the volume the longer it takes.
 
If everything is operating smoothly, I’d expect that a new design could proceed from concept to ready for sale within 9-12 months. This is my prior experience which has nothing to do with the way Apple does things.
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<![CDATA[Does the MacBook Have a Mustang Problem?]]>Sat, 08 Apr 2017 13:32:22 GMThttp://perezonomics.com/home/-does-the-macbook-have-a-mustang-problemThe Majority Subsidize the Few
I was never really worried that Apple would kill the Mac Pro. It’s the MacBook Pro that has me worried. Most people would find that preposterous because the MacBook Pro is the lions share of a stable market. Further, Apple’s executive management has just came out verbally stating their commitment to the Mac. Everyone assumes that applies to the MacBooks as well. 
The problem is when you look down the road a few years. The dynamics driving the MacBook Pro today remind of another iconic product that went through an existential crisis. Ford’s Mustang.
 
The Mustang is a product that rises above appliance status for a small but very enthusiastic group of owners. These guys love their Mustangs and will not hesitate to tell Ford what they think about it. Good or bad.
 
But Ford, as much as they’d like, can’t afford to make the Mustang just for this small group of enthusiasts. Most of the Mustang’s sales are to the non-performance crowd who simply want a stylish commuter car. The sales of all those V6 models to college girls and retirees helps to subsidize the fixed costs that are shared by the fire breathing V8 Mustang GT.
 
Ford can’t afford to lose the casual Mustang buyers who only want the look. If they do, the V8 Mustang GT would end up a casualty.
 
I see the MacBook Pro as similar to the Mustang in that it is made up of two groups of people. Those who need a high performance work machine and those who simply need an internet appliance around the house to do some online shopping or write the occasional e-mail.
 
If the casual MacBook user abandons the Mac because they finally ask why do they need to spend $2000 on a machine to surf the web then Apple will be left in a very difficult position. My mother recently went to the Apple Store to buy a new MacBook Pro and walked out with an iPad. Her reasoning? It was cheaper and did what she needed.
 
There is still a lot of inertia behind the idea of buying a laptop computer because, that’s just what you do. I suspect at least half of all MacBook sales are to people who don’t need a MacBook.
 
As I’ve written before, MacBook sales are not down because they’re gaining new converts from Windows PCs. These Windows users buy iPhones and decide to go “all Apple”. But eventually this will start to diminish. Or, the Macbook will start to lose more unit sales to iOS than it gains from Windows. That’s when things start to get interesting for the MacBook.
 
Apple says that it is committed to the Mac. But not necessarily all of its current forms.
 
I knew that Apple would eventually commit to a new desktop computers. The Mac Pro/iMac market is small but it is homogenous in that the majority of its market is looking for high performance. There is no substitute. The MacBook Pro market, however, is split.
 
Ford is willing to lose money on a low volume halo car like the Ford GT. It showcases their technological prowess and the low unit sales keeps the red ink down. They’re not willing to lose money on the Mustang. Losses on that scale of volume could wipe them out. The MacBook is in a similar situation.
 
It’s popular in tech circles to say “Let the Mac be Mac and the iPad be iPad” meaning that you buy what you need and let them co-exist. But the economics of the MacBook are against that. If the MacBook Pro loses the segment of their market that is paying the bills. They can’t go on without bleeding huge amounts of cash. If MacBook sales were to fall from 4 million to 2 million and Apple loses $100 per unit due to additional fixed cost allocations, that would be $200 million in red ink. Not even Apple would be willing to absorb losses of that magnitude.
 
Apple itself may not even be aware of the danger the MacBook Pro could be in. I have years of experience at Gateway computers modeling laptop profitability in the face of varying volumes. I know how quickly the picture can change if volume starts to fall. If they don’t believe it will happen they won’t run the models. But I suspect Apple is fully aware. They always keep their commitment to the “Mac” in general terms so that it could include the MacBook or could not. Also, they have an all-out blitz going on right now positioning their iPad Pro as a work machine.  
 
This is all moot if MacBook sales continue on as they are now. But as I’ve written, I don’t think that’s going to be the case. Then the question becomes, how much money is Apple willing to lose on the MacBook?
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<![CDATA[ Target Blamed Apple and Got Caught Red-Handed ]]>Fri, 07 Apr 2017 01:27:30 GMThttp://perezonomics.com/home/-target-blamed-apple-and-got-caught-red-handed
Last August Target tried to pin the blame for their Q2 sales implosion on terrible iPhone and iPad sales and got caught red-handed. At the time, I wasn’t buying the story that Apple was to blame because the numbers didn’t make sense, and I publicly called Target out.
Now, one year later, they’re finally admitting that their Q2 sales decline was of their own doing. Hayley Peterson of the Business Insider brings us the rest of the story. Target’s real problem was that they didn’t expect a nationwide backlash to their decree that men were free to use the women’s room…
 
The boycott cost the company millions in lost sales and added expenses. Shopper traffic and same-store sales started sliding for the first time in years after [a blog post publicizing its new transgender policy], and the company was forced to spend $20 million installing single-occupancy bathrooms in all its stores to give critics of the policy more privacy.—Hayley Peterson, Business Insider
 
They’re not doing it to be magnanimous to Apple but because they suffered two more quarters of declines whereas aggregate Apple sales rebounded spectacularly in the fall. Exactly what I thought at the time.
 
Regardless of how you feel about this subject, it’s interesting to note that there was very little critical thought from the press in evaluating Target’s story last year. Headlines everywhere theorized how the iPhone was a sinking ship dragging Target down with it. For a short while, stories about the demise of the iPhone were everywhere. As far as I know, I’m the only person who wrote that Target’s story didn’t hold up to scrutiny. 
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<![CDATA[ The Potential of Apple Watch’s Theatre Mode ]]>Thu, 06 Apr 2017 02:46:50 GMThttp://perezonomics.com/home/-the-potential-of-apple-watchs-theatre-mode
​I’m finding Apple’s new Theatre Mode on the Apple Watch quite handy. I used to get self-conscious about my watch going off in concerts, classes, or church because I didn’t want the screen to light up if I raised my arm in the air. So a big thanks to Apple for putting my mind at ease about that. 
​But this week on The iOS Show, Jeff Gamet had an amazingly good idea that I wish I had thought of. Apple should expand on the Apple Watch Theatre Mode so that it includes settings on your iPhone. A ”Theatre Mode Theme” that includes your iPhone as well. Wouldn’t it be cool if selecting Theatre Mode on your watch also caused your iPhone to downshift to a dim screen setting and switch to vibrate mode? It would be way more convenient then getting your phone out of your jeans.
 
I liked this idea so much I felt compelled to write about it. Podcasts are great, but unless these guys document their ideas they just float away like leaves in the wind. If it’s not written down, it’s like it was never said.  I hope Apple is working on interactive Watch/iPhone themes already, but just in case they aren’t, this would be a great place for them to get started.
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<![CDATA[The Smartphone as Main Computer]]>Tue, 04 Apr 2017 02:58:43 GMThttp://perezonomics.com/home/the-smartphone-as-main-computerOnly Apple
Anyone who doesn’t think that something like this is in our future either has their head in the sand or is a Mac App developer. Samsung's dockable Galaxy S8 is yet another entrant into the smartphone as a computer market for a big reason. I’m surrounded daily by busy professionals who spend more time out of their office than in it. These guys for the most part manage their days using Apple’s iPhone. More and more, laptop computers are becoming like those big wired phones that sit on everyone’s desk. Anyone who ignores this new trend does so at their own peril.
Although, I’m not too crazy about Samsung’s wired dock. I’d love to see an Apple display that didn’t need a dock but could hook wirelessly to my iPhone, iPad, or Mac Pro. It was Apple’s very own W1 chip in my Powerbeats3s that made me see the possibilities. But dock or no, this is a step in the right direction and I respect Samsung’s move.
 
And only Apple could really make this work. Android, and by extension Samsung, are non-players in the corporate world. There’s no enthusiasm for Android amongst security-minded IT departments and Android apps have been historically awful on large screens. Windows Phone would have had a shot but they’re non-players in the mobile world. Business professionals don’t want to carry Windows phones. Apple has both the most popular smartphone and the most desirable enterprise platform. They could do what no one else has been able to do yet.
 
In the early 2000’s when I was working for Gateway Computers I loved talking to the engineers in R&D about what they were working on. Gateway placed the global financial analysts right next to R&D on the 3rd floor of the main building. Even back then before the iPhone, they believed the biggest threat to the PC was the mobile phone. I laughed at them. I didn’t see how a weak device with a tiny screen could ever fit the bill.
 
But I see it now. Only having one device that can be with you in a conference room, lunchtime restaurant, or with you in front of the television at home. A device where you never had to worry about transferring files to take home. Or you never had to be disappointed that the photo you needed was on your work computer.  
 
I’m not laughing anymore. 
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<![CDATA[The Limits of Artificial Intelligence]]>Sun, 02 Apr 2017 20:12:15 GMThttp://perezonomics.com/home/the-limits-of-artificial-intelligenceBig Data Is Not the Answer
Great interview with one of the leading experts on AI, Gary Marcus, by Alice Lloyd George who was writing for TechCrunch. Like myself, he’s skeptical of how far companies like Google can get with big data when it comes to artificial intelligence. 

The Limits of Artificial Intelligence
ALG: Gary you are well known as a critic of this technique; you’ve said that it’s over-hyped. That there’s low hanging fruit that deep learning’s good at — specific narrow tasks like perception and categorization, and maybe beating humans at chess, but you felt that this deep learning mania was taking the field of AI in the wrong direction, that we’re not making progress on cognition and strong AI. Or as you’ve put it, “we wanted Rosie the robot, and instead we got the roomba.” So you’ve advocated for bringing psychology back into the mix, because there’s a lot of things that humans do better, and that we should be studying humans to understand why they do things better. Is this still how you feel about the field?

GM: Pretty much. There was probably a little more low hanging fruit than I anticipated. I saw somebody else say it more concisely, which is simply, deep learning does not equal AGI (AGI is “artificial general intelligence.”) There’s all the stuff you can do with deep learning, like it makes your speech recognition better. It makes your object recognition better. But that doesn’t mean it’s intelligence. Intelligence is a multi-dimensional variable. There are lots of things that go into it.

I’d go a step further than Gary and say that today’s approach to artificial intelligence is hampered by the computer’s inability to dream the impossible and imagine alternate realities. I’m not sure that this is something that can ever be replicated by a machine. This may be a part of our spiritual being.
 
Our brains are tools that are wielded by our spirit much like a car is a machine driven by a person. Today’s artificial intelligence is somewhat akin to a hospital ventilator that can pump your blood through your body while you are brain dead.
 
Robots can follow complex instructions to give the illusion of intelligence, but they’ll never become self-aware or have emotion like a spiritual being. That’s because the core of human personality and intelligence has nothing to do with the material world. 

Related:
Google's Machine Learning Is Destined to Disappoint
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<![CDATA[One Reason to Choose an iPad Over a Mac]]>Sun, 02 Apr 2017 15:01:37 GMThttp://perezonomics.com/home/one-reason-to-choose-an-ipad-over-a-macReading vs Typing
I read a lot more than I write. That’s a big reason why I prefer using Apple’s  iPad much more than a Mac. When I hear of people who use only a Mac and an iPhone my first thought is always “Where do they do their reading?”. Like, real reading. Not just a thirty second article during a commercial break. When a Mac person wants to sit down on a Saturday night with a Brad Thor spy novel and read for two hours straight. Or on Sunday morning when you want to grab a cup of coffee and catch up on an hours worth of tech blog articles from the week. Where do they do all that reading?
​I know where I want to do it. My 9.7” iPad Pro. The low reflectivity screen and vibrant colors make websites pop off the page. And compared to the MacBook Airs, the iPad screen is far superior. At less than a pound of weight, I can carry it with me like a book if I want to run to the kitchen or bathroom. I can pinch and zoom on pictures related to articles. Maybe most importantly, I can sit comfortably in my chair the way I want. I’m not precluded from crossing my legs to balance a laptop.
 
And sorry, but a Plus sized iPhone is quite inferior to an iPad for real reading. The 7 Plus screen is much nicer than the iPhone 7 but it’s not two-hours-of-reading nice. The advantages of the iPad over the iPhone Plus are twofold. You can both make the text larger so it’s easier to read or you can adjust the settings so that you can fit more on the screen and scroll less.
 
For me, it’s much more convenient to add a keyboard to my iPad when I need one then it is to deal with a Mac. Plus, I can choose the keyboard that fits what I’m doing. I hate all laptop  keyboards that don’t have a number keypad. I don’t need the Macs greater processor power or automation features.
 
Whenever someone asks me whether they should buy an iPad or a Mac for their main device I always ask the same question. What do you do more? Reading or Typing? If the answer is reading than I recommend an iPad. 
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<![CDATA[GE's Immelt on Factory Automation]]>Sat, 01 Apr 2017 15:41:39 GMThttp://perezonomics.com/home/ges-immelt-on-factory-automationSilicon Valley Doesn't Understand the Manufacturing Rust Belt
General Electric’s Jeff Immelt had some common sense views to share on automation. The fears of robots causing mass unemployment are rooted in a misunderstanding of the economics of manufacturing. 
There seems to be two camps forming around this issue. Those of us immersed in the world of manufacturing and who have first-hand experience with automation who are not worried about mass unemployment. And those outside of manufacturing who are in a panic.
 
Show me a study that claims six jobs are lost for every robot deployed and I’ll show you an analyst who is ignoring the full picture. There are real consequences that result from a large corporation consolidating its product line in order to automate. Both from the Automator winning new business due to being the new low-cost leader or to smaller companies that can now enter an abandoned product niche that didn’t make sense to automate to larger corporations.
 
Silicon Valley is not talking to the manufacturing rust belt. There needs to be a more balanced discussion that includes both viewpoints. 

Related:
Steve Mnuchin Gets Automation

Elon Musk Is Wrong About Factory Automation
 
Is Automation to Blame for Jobless Recoveries?
 
How to Prepare for Employment in the Age of Artificial Intelligence

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<![CDATA[Which Is More Important to the iPad? Enterprise or Education?]]>Sat, 01 Apr 2017 13:36:52 GMThttp://perezonomics.com/home/which-is-more-important-to-the-ipad-enterprise-or-educationWho Gets the Last Word?
​There’s been a lot of hay made lately about Apple’s(AAPL) new affordable iPad and how it may signal a new assault on the education market. I suppose that’s possible but it seems like Apple waited an awful long time to do so. If Apple is able to eke out a larger share of the education market, that’s great, but I don’t think this is where Apple’s focus is. If you judge Apple by the old rule, “actions speak louder than words” then you’d be hard-pressed not to come away with the conclusion that the enterprise market is more important to Apple than education.
​Apple has made the minimal effort to reach out to the education market. They came out with the education multi-ID iPad capability last year and this year they’re introducing a de-contented iPad that lines up better for what education needs. But with Enterprise, Apple seems to be moving at a quicker pace. From a software perspective, there is some really good work going on to make iOS more enterprise friendly.
 
Conventional wisdom says that if you expose kids to your operating system during their formative years, that you lock them into your ecosystem and you have a customer for life. That is true to an extent but kids get pulled into an even stronger gravitational force later on, their workplace.
 
Education isn’t the only institution with the capacity to assimilate people into a particular ecosystem. It may not even be the most important. You could make a strong case that crown actually belongs to the workplace. During the 90’s, when everyone was buying their first computers they weighed their options between IBM clones and Mac. Mac was part of the equation because that’s what most schools used. And yet, most of these students eventually ended up using Windows.
 
Where I grew up in Michigan all the schools were 100% Apple operations. We all played history games, practiced our times tables, and played games on Apple computers. Later we all went to college, got jobs in American industry, and bought Windows PCs.
 
What happened? When it came time to buy our first computer we mostly all chose Windows PCs for three main reasons.
  1. The kids who went on to college and white collar jobs were issued Windows PCs at work.
  2. The kids who didn’t go to college chose Windows PCs because they were cheaper.
  3. Software selection was much broader in the Windows ecosystem.
 
The part that I think is greatly underestimated by most people, but not Apple, is point #1. What you use at work has a huge impact on what many people will buy. Especially if you’re the non-technical type. Further most big corporations have contracts written up that allow them to extend their PC discounts to their employees. In some cases, these discounted PC purchases are strongly pushed by the corporation onto its employees in order to achieve some kind of end-of-year rebate if they attain certain purchase targets.
 
But the real kicker is this. In the past, Corporate worker bees wanted the flexibility of using their home machine to get some work done. Back in the 80’s and 90’s when PCs were still novel and laptops were not as prevalent, people wanted a compatible machine at home that they could use in a pinch. Most white-collar workers, whether they used Macs in school or not, ended up going with Windows because they could save files to disk at work and pop it into their home machine later after dinner if they needed to.
 
At this point some would make the argument that things are different now. That using an OS requires you to setup an account and invest in apps. Somehow this account will anchor you to Google or Apple forever. I don’t think so.
 
Most people still value simplicity. If their workplace is on Windows, they’d prefer to be on Windows at home. But what would happen if iPads made a big push into corporate? You’d have the same “enterprise effect” working in reverse, pushing people to iOS, away from Windows.

  1. One segment will purchase iPads simply because “I get a special discount and if it’s good enough for my work, it’s good enough for me”
  2. Another segment will see the compatibility advantages of going all-in on Apple. If you have an iPad at home, you may not have to bring your work iPad home to finish a project later in the evening. You won’t even need a disk or USB stick, it’ll just be there.
  3. iOS, unlike Mac, is not at a software disadvantage to Windows. In fact, most people have a vague perception that iOS is where all the best software is these days. The iOS App Store is a vibrant advantage.
 
I’m not saying that the education market is not important. It is. Back in the 90s, the reason many purchasers even considered Macs as opposed to just plunging headlong into Windows was because they were exposed to Macs in school. Apple’s education involvement allowed them to be a part of the decision making process. I’m sure if Apple had their druthers, they’d still like to own education.
 
But if you do a cold, hard cost-to-benefit analysis, the numbers probably tell you that it’s better to prioritize the enterprise market higher than education. So it makes sense that iOS is advancing more quickly on the enterprise front than it is in education.
 
I think the iPads position relative to enterprise and education can be summed up with a picture of how political liberals look at education. Enterprise is kind of like the University system. It’s better to own the formative grade school years, but if you don’t, the university will get the last word later.
 
So Google can pump all the money they want into below-margin education sales, Apple will get those sales back later in enterprise. At a high margin.
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<![CDATA[The FCC Allows Others to Do What Google Already Does]]>Fri, 31 Mar 2017 03:21:36 GMThttp://perezonomics.com/home/the-fcc-allows-others-to-do-what-google-already-doesEither All or None, Which Is It?
The Wall Street Journal has an interesting write-up wherein they explain how the FCC rule change is essentially allowing internet providers to do what Google already does. Profit from your online history.
 
The telecom providers had argued the rules put them at a competitive disadvantage to online ad giants Google and Facebook,which generally aren’t regulated by the FCC.
Google and Facebook have built huge businesses powered by reams of data they collect about consumers’ online actions, both on their own properties and across the web. That trove of information largely explains their dominance -- combined, they have a roughly 47% share of the global digital ad market, according to eMarketer. – Jack Marshall, Wall Street Journal
​I value my privacy. That’s a big reason why I use an iPhone over a plethora of cheaper Android devices that are available.
 
But what really has me surprised is that Android users would be up in arms about the FCC rules change. Are they not aware that Republicans are simply leveling the playing field so that Comcast and AT&T are able to do the same thing as Google? For years, Google has been tracking web surfers’ online habits and then selling targeted ads to people who want to reach their demographic. Comcast wants to do the same thing.
 
The question is should it be illegal? If you say “no”, then shut up and quit your bellyachin’. If you say “yes”, then Congress should stop Google and Facebook from doing it as well. There is no middle ground here. Either companies should be allowed to profit from the data they acquire from you or they shouldn’t. Why is Google given a special status whereas AT&T isn’t?
 
Oh, but Google doesn’t reveal my name you say? It’s doubtful that Comcast or AT&T would act much differently in regards to your privacy. In the short term, names are not revealed so that the advertiser can’t bypass the seller and go directly to potential customers. Besides, AT&T doesn’t want to cause a mass switch to a rival provider, so competitive pressures will keep these guys in check for the near future.
 
That’s what keeps Google honest, the existence of a privacy-minded alternative. Not the government.
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<![CDATA[The Circle Is About Google, Not Apple]]>Wed, 29 Mar 2017 01:37:42 GMThttp://perezonomics.com/home/the-circle-is-about-google-not-apple
​Talk about an uncanny resemblance. A movie that’s all about a tech company which is collecting data on every person alive. Hmm, who could that be?
 
The movie The Circle opens on April 28th and it looks great. I'm a sucker for anything with Tom Hanks in it anyway.
​I actually saw one writer say that this movie is about Apple because, in the movie, the headquarters is round like Apple’s new yet-to-be-opened campus. Never mind that Apple is all about NOT collecting your data, and further, they encrypt everything you do.
 
No, this movie is all about Google despite the producer’s assertion that it's about the tech world in general. But to be fair, the loss of privacy goes way beyond Google. Our internet providers and every website we visit has their hands in the honey pot as well. Google just puts everyone else to shame with the most efficient data gathering operation known to man. 
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<![CDATA[Trouble Ahead for Samsung]]>Tue, 28 Mar 2017 01:33:32 GMThttp://perezonomics.com/home/trouble-ahead-for-samsungLet the Android Civil War Continue
​When Google unveiled their Pixel phone the tech press went crazy with how Google was attacking Apple(AAPL) on their own turf. The high-margin premium smart phone market.
 
Despite Google’s assertions otherwise, I wasn’t buying it. This was a phone aimed at people who liked Android but were thinking about switching to iOS simply because they like the iPhone’s reputation for quality, design, and craftsmanship. It wasn’t really aimed at trying to get iPhone users to switch to Android. 
Sean Hollister writing for CNET detailed why he’s switching from Samsung’s Galaxy line to the Google Pixel. This guy is dumping Samsung because of poor battery life, a laggy OS, untimely updates, etc. This is exactly what I predicted would happen. The Pixel is pulling from Samsung, not Apple. Google’s Pixel phone is much more of a threat to Samsung then it ever will be to Apple.
 
My Samsung Galaxy S7 isn't a bad phone. Not by a long shot. But this makes twice (my Verizon Galaxy S6 and now my T-Mobile Galaxy S7) that Samsung has let me down. No matter what Samsung announces on March 29, I have no reason to believe things will be different this time around. 

Sure, there's a snowball's chance in hell they proclaim the Galaxy S8 will come with stock Android and support every LTE band simultaneously, but I'll bet $100 it doesn't happen this year.

So as soon as I can stomach the cost of another phone, I plan to defect. I'll buy a Google Pixelwith Google's Project Fi service -- from the Google Store, too, so I don't end up like my colleague Dan.
–Sean Hollister, CNET

There needs to be an alternative to Samsung when Galaxy customers quit the brand and swear to go somewhere else. That’s why the Google Pixel exists.
 
I suppose that’s where Apple will get negatively impacted. It’s not that they’re going to lose current iOS customers, they just won’t pick up as many Android-to-iOS switchers. The Pixel will scoop up lots of unhappy Samsung customers who in the past would have switched to the iPhone.
 
Tim Cook loves to proclaim how iOS is picking up record numbers of Android switchers at ever higher rates. It’ll be interesting to see if this remains true once Google gets their manufacturing issues squared away. 

Related: Google's Pixel Is Samsung's Problem, Not Apple's
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<![CDATA[ How to Prepare for Employment in the Age of Artificial Intelligence ]]>Sun, 26 Mar 2017 18:57:55 GMThttp://perezonomics.com/home/-how-to-prepare-for-employment-in-the-age-of-artificial-intelligenceIt's Still Decades Away
Excellent article by Ben Dickson from The Next Web regarding how to prepare for AI in the workplace.
 
With developments in artificial intelligence continuing at a chaotic pace, fears of robots ultimately replacing humans are increasing.However, while AI continues to master an increasing number of tasks, we’re still decades away from human jobs going extinct. With AI finding its way into more and more domains, the demand for tech talent is growing.—Ben Dickson, The Next Web
​Basically, we both agree that AI actually replacing humans to the point where there is a net loss is many decades away.
 
We’re not saying that automation isn’t already replacing humans or about to in the short term. I agree that is happening. But the law of unintended consequences causes offsets.
 
For instance, Lets say that 15% of all long-haul truck drivers are replaced by self-driving trucks within 15 years. Is that a negative? Not necessarily. Technology is also causing people to give up on getting their own merchandise from the local store and ordering it online.
 
It’s much more efficient for a national transportation infrastructure to deliver full truckloads to local staging points (stores) and have consumers pick up their items. Moving to an online system where customers are willing to have items shipped directly to their door is much less efficient and is causing trucking miles travelled to increase.
 
Small shipments to individual houses on the rise will result in exponential growth in the transportation industry. Even if we moved to a drone-centric model that would require many more distribution centers then exist today. 85% of a much larger pie could actually mean there are more truck drivers in the future than now.
 
But even if there is a loss, the net loss will be much less then most people think because they aren’t modeling the full impact. They’re only adding up the losses.  

Related:
Steve Mnuchin Gets Automation
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<![CDATA[I Wish I Could Use Two iPhones]]>Sun, 26 Mar 2017 12:30:28 GMThttp://perezonomics.com/home/i-wish-i-could-use-two-iphonesThe Apple Watch Is the Answer
​In the latest podcast episode of The Committed, Kirk McElhearn brought up a thought that I’ve had often. He was torn between using the smaller iPhone 7 and the larger 7 Plus. He made the statement that he wished he could use the 7 Plus around the house and the smaller 7 for when he was out running errands. 
​Like Kirk, I also wish that I could pick my screen size based on what activities I had planned for the day. But I’d go a step further and say that on some days I’d like to take my 9.7” iPad Pro instead of a phone. With as few calls as I ever get, if I have my iPad in my man-bag it seems redundant to have my iPhone on me. And on other days, I wish I could take nothing and still use my Apple Watch for emergency call and texts.
 
We don’t live in a two iPhone world mainly because our cell service is anchored to one specific device. That’s why I find the idea of making the Apple Watch the central hub for all cellular so attractive. It would be great if I could just strap on my watch in the morning and then whatever screen I was using had an active internet connection and cell service. Siri on the watch would be better, app response times would be quicker, etc. The only drawback, and this is a killer, would be battery life.
 
If Apple were to revive the iPod line with updated specs and sizes that would be the final piece. If I had a cellular Apple Watch I wouldn’t need to spend the extra hundreds of dollars for the cellular hardware in an iPhone. Instead of buying a $800 iPhone, I’d be willing to buy two $400 iPod Touchs. A 4” and a 5.5”.
 
I love my 7 Plus but sometimes it’s just too dang big. 
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<![CDATA[Where Apple Sees Their Future]]>Sun, 26 Mar 2017 00:53:40 GMThttp://perezonomics.com/home/where-apple-sees-their-futureGoodbye Sal, Hello Workflow
​Apple (AAPL) announced this week that they were purchasing the popular iOS automation app, Workflow. Very interesting indeed. Workflow is all about taking iOS to the next level via automating various tasks in an “If This Then That” (IFTT) format. 
​Only five months ago Apple officially dissolved the Mac automation management job filled by longtime Mac evangelist Sal Soghoian. That was really the beginning of non-stop grousing by Mac fans that continues to this day. Long-time Mac power users are not too happy to see an apparent retreat by Apple on the AppleScript and Automator fronts.
 
If there is any doubt in anyone’s mind as to where Apple sees their future lying, it isn’t for lack of evidence. Shutting down the Mac automation group and only a few months later purchasing an entire company devoted to iOS automation is a pretty big indicator of where things are headed. Apple sees their future primarily in iPhones and iPads, not Macs.
 
Tim Cook only a few weeks ago at the annual shareholder’s meeting reiterated Apple’s commitment to the professional market when questioned on it. But as we always tell our kids, “actions speak louder than words”.
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<![CDATA[Steve Mnuchin Gets Automation]]>Sat, 25 Mar 2017 14:14:50 GMThttp://perezonomics.com/home/steve-mnuchin-gets-automationThe High Cost of Automating Jobs
Donald Trump’s new Treasury Secretary, Steve Mnuchin, has impressed me this week with his grasp of the economic reality of the manufacturing world. He’s right--technology won’t be a huge factor in overall job levels for many decades. If ever. 
Wild-Eyed Fantasies
If you could go back in time a hundred years, I wonder if there were sensationalist headlines about the future with new technology like automobiles and airplanes. Journalists could have written stories about how in the future any trip over 50 miles would be easy because everyone would just fly there in their personal aircraft, or children wouldn’t have to walk anywhere because their parents would all buy them their own automobiles.
 
Stories like these would have been confusing what was possible with what was economically feasible. Would it be possible for every family to own an airplane? Yes, but for the few times we’d actually use it, would it makes sense? Airplanes are too expensive for most families, and there is already investment sunk in the family’s autos. You don’t just buy an airplane. You also have to pay to maintain and store it. It’s cheaper just to get in your car and do your day drive. This dynamic holds true for corporations as well.
 
The same thing is happening en masse today. Journalists are getting a whiff of what technology is making possible, but they aren’t tempering their projections with sensible economic principles. There is no such thing as a free lunch.
 
A few years ago, I was invited to speak at Oracle’s annual OpenWorld convention by Anil Thomas who was a VP and founding member of MetaChain Consulting (now Avata). Anil and I had done some great work around “cluster cost analysis” which was a way of breaking down a supply chain’s true freight costs down to the product level. When a trucking fleet has a variable schedule that fluctuates often, you need to identify the cost of your city “clusters”. This allows you to break down freight rates to your product unit level.
 
I never ended up participating in OpenWorld because my employer considered this information too valuable to share with competitors. Most companies that operate their own trucking fleet don’t really understand their true delivery costs at the product level. So if they don’t get it, I’m sure academics in a think tank or journalists sitting behind a laptop don’t either.
 
The LA Times completely distorted the PWC study.
The Los Angeles Times postulated that “Robots could take over 38% of U.S. jobs within about fifteen years.”  Emphasis on “could”. That’s like saying that your iPhone could theoretically get up to 400Mbps of speed on LTE throughput. Not gonna happen in the real world.
 
My background in logistics analysis and over twenty years of manufacturing analysis on automating work makes me find click-bait headlines like these by the Los Angeles Times quite humorous. A more accurate headline would have been something along the lines of 3-5%, and that is assuming that the law of unintended consequences doesn’t kick in. I actually liked the PWC study. They gave credence to the reality that automation has an opposing downward force exerted by the high cost. I was happy to see their assertion that the economic justification of automation was a very real hurdle.
 
PWC was giving an upper range estimate on the potential job losses if everything went the wrong way. Kind of like if someone asks you what you think it would cost to build a house in a way that you’ve never done before. You give a wild range to cover yourself. That wasn’t meant to be a precise forecast.
 
Think about this rationally for a minute. 15 years ago was 2002. PWC would never try to say that in less than the time since the 9-11 terror attacks that 40% of Americans will lose their jobs to artificial intelligence. We still have companies running Windows XP for crying out loud.
 
What About Trucking?
Even if you take trucking, the big headliner profession that all the doomsday Chicken Littles love to bring up, it’s not nearly as bad as people think. That’s because most of the cost allocated to the product has nothing to do with the driver. The cost of capital and fuel are the big-ticket items.
 
The real boon of self-driving trucks is the fact that it is hard to find drivers willing to do cross-country routes. People don’t like those long routes where they are away from home for a week at a time. If you’re not familiar with the logistics business, know this one thing: there is an awful driver shortage that hurts everyone.
 
But only very large corporations with lots of volume are going to be able to make the necessary return on investment for multi-million dollar automated fleets. That’s because their capital costs would go up significantly and they’ll need to spread those costs over greater volume. As a result of these greater costs, they will give up delivering product lines that don’t cross the volume threshold they need.
 
The fact that smaller companies will pass on new technology is not a novel new idea. Even today, there is all manner of currently available software packages or hardware devices that could streamline their operations that don’t get purchased. Why? Because it doesn’t make financial sense given their volumes.  
 
The large companies that do take the plunge will ultimately focus their product portfolio. The product lines that are shed would fall down to the non-automated companies. These in turn would need to hire more drivers. But since the big guys are automating, they might actually be able to find the drivers that they need.
 
The Sky Isn’t Falling
The two most important facts to remember when critically thinking about the impact of technology on jobs are these:
  1. Automated systems are extremely expensive and very high maintenance.
  2. Most jobs are provided by small- to medium-sized companies. The least likely purchasers of automation.
 
As I’ve written before, jobs will go away at large corporations. But the unintended consequence of this movement is that large corporations will by necessity be forced to narrow their product offerings. This creates more opportunity that falls down to medium to small businesses.
 
I can say that in my twenty-five years of manufacturing analysis I have never seen a manufacturing plant shrink due to automation. That’s because automation has always allowed us to do more with the same number of people. Automation did reduce our costs and make us more competitive on price, which led to more business and often resulted in hiring more people.
 
The real downside to automation is to the corporations themselves. As corporations focus their product portfolios and move up in volume, they find that the market may not be able to support all the companies that are expanding their production capacity. There will be winners and losers. The winners will take the business from the losers. Jobs will be lost by the losers but gained by the winners for a net impact that is relatively small.
 
There are far too many people writing about something that they don’t understand, manufacturing. The problem isn’t that a finance guy like Steve Mnuchin misunderstands technology. The problem is that a bunch of journalists and technology guys misunderstand economics.

Related:
Elon Musk Is Wrong About Factory Automation
 
Is Automation to Blame for Jobless Recoveries
 
The Impact of Self-Driving Vehicles Is Overstated

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