Apple vs. Google

This week Peter Burrows of BusinessWeek reports on the growing rivalry, and dare we say feud between Apple and Google.


As time goes by – and it always passes quickly in Silicon Valley – Apple and Google are becoming more alike and increasingly treading on each other’s turf. At the start of 2010, on January 5, Google introduced its smartphone, the Nexus One which runs on the Android operating system. This is a clear competitor to the ubiquitous iPhone. Apple, on the same day, announced the acquisition of Quattro Wireless, an advertising company that targets mobile phone users. In the past, before these moves, Apple was the shining star in the smartphone market, and Google was the leader in advertising. Now that the two companies have crossed paths, what will happen next?

BusinessWeek says “when companies start to imitate one another, it’s usually an extreme case of flattery – or war”. Eric Schmidt, CEO of Google, and Steve Jobs, CEO of Apple are the same age, and have known each other for years. As we all know, Jobs has been at Apple for a long time, since he founded the company in the 70s, with a little time off in the late 80s and early 90s before rejoining the company. Eric Schmidt was at Sun Microsystems and Novell, and has experience taking on Microsoft as a competitor. In 2006, Eric Schmidt joined Apple’s board. In August of 2009, Schmidt was off the board. Why? The two companies were overlapping more frequently, and Schmidt had to recuse himself more and more during meetings.

Why the growing overlap? Because the world has changed. Just a few years ago, we all used desktops and laptops for computing, and cell phones were a calling device. Then in 2002, Research In Motion(RIM) introduced the first smartphone, the BlackBerry. This market of smartphones soon grew, competitors sprang up and in 2007, the iPhone entered the market. Computing and internet access soon became something to do on a phone, and something you could do anywhere without lugging a laptop. Most people in the industry predict only a growth of mobile computing, and less of a dependence on desktop and laptop devices. Even the growth of netbooks turned the corner for consumers who want less computing power, not more, just access to the internet.

Apple and Google are strong players, and want to become stronger. But with two of them on the same turf, who will come out ahead? BW managed to get a statement from Apple, attributed to an internal manager. “Apple is a valued partner of ours and we continue to work closely with hem to move the entire mobile ecosystem ahead”. For now each company still need the other. Google dominates search(in spite of Steve Ballmer’s attempts with Bing) and for now it is still on the iPhone. The iPhone does not dominate the smartphone market, but it is certainly a key influence and Google needs more people to access the internet so it can sell advertising.

Mobile computing is clearly the wave of the immediate future, but how to make money off of it? This reminds me of the earlier days of the internet when various companies tried to gain customers regardless of profits. It took Amazon years to turn a profit. In this case, both companies make enormous profits in other lines of business, so they can afford to take a few losses in one area in the hopes of more profitability in the future.

BW says that Apple has the lead in this business. Currently the iPhone has 14% of the smartphone market and the Nexus One has 3.5%. One new wrinkle is that app developers are now starting to have a tough time earning money on their apps. But with more than 125,000 apps in existence, maybe that doesn’t matter.

And if anyone has the creativity to come up with a whiz-bang product, most of us would place our bets on Apple. From the iPod to the iPhone, and all the neat things in between, there seems to have no end to creativity and innovation. BW says that Jobs and company are trying to come up with a way to revolutionize mobile computing. If anyone can do it, I would predict Apple. Google may be brilliant with algorithms, but data manipulation and search just aren’t the same as the innovation we have seen from Apple. Apple’s acquisition of Quattro Wireless puts it in the driver’s seat going forward with mobile ads.

Google may have a problem because people don’t seem to use computing the same way when they are at their desks and when they are on the road. Mobile search has not taken off. The search bars are small, and people can bypass search by using an app, which is more direct, with fewer keystrokes. And Apple knows a lot about you. If you buy music on iTunes, subscribe to podcasts, watch videos and give your credit card number and home address, they have a lot of valuable information about your buying habits. This information is precisely the gold standard of market research that advertisers have been after for decades. Now Apple has a one-stop shop for targeted ads. In the past, Google had a significant head start by knowing search habits, but Apple’s hard data may be even more of an advantage.

It is interesting to note that the Android operating system was developed with the hopes that it would be used on devices not owned by Google. However, Google went ahead and purchased Nexus One, which indicate they may feel they can’t depend on other companies – they need to be a one-stop shop in the smartphone market just like Apple.

Here’s the key question: could Apple take Google off of its iPhones and computers? Sounds possible. Steve Ballmer is chomping at the bit to increase market share for Bing. In spite of the acrimonious nature of previous relations between Apple and Microsoft, BW predicts it is possible for them to come to a truce and start putting Bing as the default on Apple products.

What I hope is that the consumer will win out in this big battle. I don’t think any of us will complain if competition drives prices down, produces superior products, and generally makes life easier for those of us end users. I remember when people used to talk about Pepsi vs. Coke, now it is Nexus One vs. iPhone. Stay tuned folks – I’m sure we’ll be hearing more on this one.

The Disposable Worker

Remember the movie “The Temp”? It came out in the 90s, when the economy was booming, which seems like eons ago. This week Peter Coy, Michelle Conlin and Maria Herbst of BusinessWeek report on “how companies are making the era of the temp less than temporary”.

If you have a traditional, old-fashioned job, thank your lucky stars. What am I talking about? The sort of job where the worker is classified as an employee, with full benefits such as health insurance and a 401k, promotion opportunities, paid vacation and just maybe, an employment contract. Those jobs seem to be going the way of the Dodo bird and the 8-track tape. (Remember those? The CD and the DVD are on their way out also).

The temp is here to stay, and it just may be you some day. That job you are not enamored of may be one you miss – at least you’ll miss the 401k and paid vacation.

I’ve read plenty of reports, and most seem to predict a rebound of employment to 2005 levels sometime in 2015, 2018 or even 2019. That’s a long time, folks. If you have a newborn baby now, that child may be in the fifth grade before this country is happy about employment again. Jobs are going overseas, processes are being automated, management techniques are changing, and good ol’regulation may be to blame. BW gave the scary example that because managers are now responsible for more people, and in a more detached way, it is easier for them to conduct layoffs because they have less of a connection to the people they supervise.

Even if you are an executive, you might find yourself as a “C-level to go” after a few years. What’s that? A C-level temp, willing to take skills and services wherever needed. The CEO of Kelly Services, a staffing firm, said “We’re all temps now”. Barry Asin of Staffing Industry Analysts also says that “The idea that any job is permanent has been well proven not to be true.”

Payroll used to be a fixed cost and it is becoming more and more a variable cost. We’ve all heard of just-in-time inventory, now there is just-in-time employment. The business risk is being transferred from the employer to the employee. When bad times come, the employer doesn’t worry; the brunt will be borne by the employee.

Chronic underemployment and unemployment have a lot of victims. Older people go into early retirement and younger people have a bad start to their career. Even 15 years out of school, that head start has a lasting impact. BW reports that people who graduated in a recession earn 2.5% less than if they had graduated in prosperous times.

Yikes. What’s a salaryman or woman to do? Have highly sought-after skills, that’s what. Get educated. Be in the right industry. The poorly educated and low-skilled fare the worst in this type of system.

Are there any consequences for employers? Do they just get off scot-free? Indeed, they are stuck with an “alienated, dispirited workforce”. That can’t be good for productivity. BW says “poor morale can devastate performance”. No kidding. UBS, Credit Suisse and American Express have all hired a Harvard psychology lecturer to train employees in positive thinking. How about a little decent treatment by the employer? That could work wonders for positive thinking in any organization. Used to work in the old days. And it seems to work for companies like Google and Zappos.

But, corporate profits have been good with a lower payroll. And most of us still hold stocks of some companies.

BW talks about a “trend toward a perma-temp world”. Companies that made big changes in the recession are sticking with those changes. It’s called “taking advantage of flexibility”. Microsoft, whose stock you might not mind holding, is a champ at using temporary teams. In spite of the bad things said about Steve Ballmer (some by me) they’re doing pretty well. The quality and pay of temps is no longer limited to “the girl from the agency” who comes in to file.

BW profiles a “temp exec” who does very well inside the C-level suite, albeit on a temporary basis. BW also mentions a lawyer with an MBA who is now on his own. More fancy degrees don’t necessarily translate into “sought-after skills” which would help the employer to justify hanging onto an employee.

At the bottom of the ladder, workers get the short end of the stick – nothing much they can do. Not surprisingly, depression and other mental health problems are on the rise. I think we would all agree with that. Career problems can be a prime source of stress and anxiety, as we all know. Better buy stock in pharmaceutical companies which sell sleep aids and anti-depressant medications.

Young people are losing out in the new world, unless they want to work as an unpaid intern. Even IBM, which seems like such a stalwart, old-economy company, had 71% of its workforce outside the U.S. in 2008. In 2009, it continued to reduce its workforce in the U.S., eliminating approximately 10,000 jobs.

When will it all stop? BW says that American workers will have to “swallow hard and accept lower pay”. The not-cheery statistic is that pay for 80% of the private workforce is 9% lower than it was in 1973, adjusted for inflation. So your paycheck may be larger in nominal terms (that’s the number on your paycheck) but the real term is lower (what you can buy with it is less). Consider the fact that GM was the largest employer in 1953, and today the largest employer in the U.S. is Wal-Mart. Something tells me the current Wal-Mart hourly wages and benefits don’t quite match up to what GM workers had in 1953.

BW proposes “rapid economic growth sustained over a long period” will fix the situation. Sounds great, but don’t hold your breath waiting. Clearly we could all use an economic stimulus – where will it come from? I wouldn’t bet on buying power from China – I’ve read enough reports that claim the Chinese economy is another bubble waiting to burst. India? Brazil – maybe they are building for the Olympics? Hmm. If anyone sees growth in a sector other than bankruptcy lawyers, let me know.

As usual, the political parties are sharply divided on what to do. Conservatives think the problem is too much government spending and involvement in the economy. Liberals, led by Paul Krugman, think there hasn’t been enough spending and job programs. At this point, I’m happy to see anything that works, regardless of the political affiliation.

BW points out in Europe, traditional jobs are much harder to come by and there is much greater use of temporary and contract employees. However, the big difference is that the temps and contractors receive full benefits, courtesy of the semi-socialist governments there.

One faint hope long in the future – if you are not a baby boomer – is that yes, the baby boomers will eventually retire, and someone needs to take those jobs. And take care of the baby boomers. So if you are starting medical school now, better specialize in geriatric medicine. In the nearer future, once the economy picks up all the employees who do not feel valued by their employers(that’s a lot!) will fly the coop when a better offer comes along. In the meantime, better keep that resume fresh, save for a rainy day and improve those skills.

Obama & Google

Obama & Google – The Fortune Cover Story October 30, 2009
Obama is not a fan of Corporate America, but he seems to have close ties to Google, a huge corporation. Google likes to portray themselves as Washington outsiders, yet they have a 20-person policy staff in their Washington office and their fingerprints on the Obama Administration.

Obama visited Google’s HQ in 2004 and again in 2007. During the first visit he developed two economic opinions, as Fortune says “support for more U.S. educated engineers and the expansion of internet services to poor and rural areas”.

Google donated $803,000 to the Obama Presidential campaign. This was third to Goldman Sachs and Microsoft. Christine Varney, Assistant Attorney General for Antitrust, alluded that Google might be looked at for antitrust. A Google representative says “what we offer is technological expertise…it’s a company that’s a think tank or a think tank that’s a company”.

Huh?