Comments on ReCode Interview Rick Osterloh SVP Hardware Google

In the October 13, 2017 “Too Embarrassed To Ask” show from VOX Media/ReCode, Kara Swisher and Lauren Goode interview Rick Osterloh, SVP of Google Hardware. A few points stand out for me:

1) Mr. Osterloh claims he was actually hired by Google to run the Motorola unit (post acquisition), but Mr. Osterloh’s LinkedIn public profile page says he ran the Android division of Motorola Mobility back in 2007. Is Mr. Osterloh not completely pleased with Motorola’s performance?
2) When asked whether the Google Assistant feature of Google Home products is leveraging the same, familiar, web Google search service, he added “yes, but we’ve tweaked it a bit”. But he did not offer any clear assurances this leveraging is not the case.
3) Ms. Swisher started the interview by noting Google’s new call “we do hardware better than anybody else”. Unfortunately neither Ms. Swisher, nor Ms. Goode pick up on this statement during the interview. Obviously this statement voices the core of “competition to be the best”. Investors bullish on Alphabet should think about whether a strategy built around this “king of the unprofitable hill” of duplicating features, trashing prices, is a smart one promising more profitability, or not.
4) When asked about what, if any, impact concerns about consumer privacy had on the design of the Google Home product, Mr. Osterloh merely answers “if you don’t use the attention phrase, we don’t listen in”. Once again, neither Ms. Swisher, nor Ms. Goode probed any deeper on this point.
5) When asked what the key differentiator is, from his point of view, between Google’s hardware, and “everybody else”, he replied “our AI. Which doesn’t answer your question (chuckles)”.
6) When asked what drove the HTC acquisition, he answers “we hired 2K new engineers”. Once again, investors bullish on Alphabet may want to ask just why the 2K + engineers acquired from Motorola Mobility didn’t cut it, but the 2K engineers from HTC will cut it. Analysts should also take a look at the expense of moving all these people in and out of employment status at Google impacts on the bottom line.
7) Mr. Osterloh pointed to the camera features of the new Pixel phones as an example of big improvements in their hardware devices. (In a recent review of Apple’s new iPhone 8 Plus, we heard very much the same story – “the camera is terrific, 4K video, etc”) Neither Ms. Swisher, nor Ms. Goode probed further on Mr. Osterloh’s comments on this point. Too bad. Pixels & iPhones are smartphones — not cameras with phones included as accessories. Or are they? Anyone interested in what “innovation” means, should take a look at how leading manufacturers of smartphones are producing their latest models. In our opinion, “innovation” has been long gone from any of these devices. Contact us to learn more.
8) Mr. Osterloh disclosed Google Assistant is using the same prescriptive, rote, learning method as other “personal assistants” (Cortana, Siri, Alexa, etc). The lexicon is simply massively larger (he mentioned 100 million possible query strings). So the “intelligence” still isn’t their in any of these devices to “naturally” answer posed questions.


Mixed Reality Features of Microsoft’s Windows 10 Fall 2017 Creators Update

We recently upgraded 2 of our PCs to Microsoft’s Windows 10 Creators Update. The update includes “mixed reality” features — 3d image manipulation, video simulation via still image manipulation and more. In a story, “Why Microsoft released a Windows update with a bunch of stuff you may never use” published by the Washington Post on Thursday, October 19th, written by Hayley Tsukayama, Ms. Tsukayama contends

“Adoption of augmented- and virtual-reality technology has been slow for a variety of reasons, including high cost, the fact that they are still fairly new and that their purpose has yet to find a solid footing in the everyday life of consumers.”

The user she has in mind is a consumer. But we think Microsoft decided to include these features for a mostly business audience. So we would counter the pricing of gear required to produce “mixed reality” experiences for businesses is not “high”. Further, given today’s trends in personal computing, PC users will more likely be located at a desk doing some work for business, than they would be using PCs for entertainment. Microsoft also included features, by the way, directed to gamers using PCs in this release.

But the real target for the 3d image manipulation, etc. are businesses.

So why this effort by Microsoft? When word came out a few months ago of Apple & Google’s intentions to shift the “tip of the spear” for augmented reality and virtual reality from hardware, to software, the task of magnetizing customer interest in the underlying technology shifted beneath Microsoft’s feet. Microsoft had made very serious efforts to compete in the emerging markets via hardware, specifically Hololens. Now the game was changing. Worse yet, should Apple & Google’s efforts succeed, the sheer number of devices already capable of playing in their respective AR & VR games will be staggering. Unless …

Unless you look at the number of PCs deployed, albeit for business purposes, running Microsoft software and, in all likelihood, Windows 10. By incorporating these “mixed reality” features into the Windows 10 Fall 2017 Creators Update, Microsoft is equipping a lot of strictly business “eye balls” with the capability of using “mixed reality” experiences. In our opinion, this is a late, but smart move to shore up a base of users for Microsoft’s approach.


Is Venture Capital Pointing Entrepreneurs in a Socially Dangerous Direction?

“Bulk up really big and really fast” is a widely understood underlying objective of venture capital investing. VCs invest in lots of early stage businesses, but really they are after the handful (or even one or two) with the promise to magnetize enormous numbers of customers in the shortest possible time.

Wait, did I just say customers? Actually, in 2017, in VC parlance, customers has become synonymous with users. This equivalence (result of incorrect thinking) is the norm because most of the businesses capable of hitting the ultra difficult growth requirements of these VCs do businesses only online and, more often than not, in virtual/non physical products. So the method for the very few businesses capable of convincing VCs to invest, and to invest repeatedly, round after round, usually includes an important freemium phase of selling. Most people will buy something if it is free.

Selling? Sorry, I meant signing up. Signing up has become the preferred method of closing sales to these customers since a big section of these few businesses peddle subscription offers for something online: Streaming music, Office Productivity suites, etc.

Great for VCs. They plunk some money into a lot of early stage businesses (but don’t forget each of these is selected through a rigorous rejection process with maybe hundreds of other businesses left out). These businesses, in turn, hit their growth metrics and our world welcomes a few more very, very, wealthy people.

But what about all of us other folks left out in the cold? Since most of the products sold in this cycle are virtual, there is no need for natural materials to produce them, no need for delivery services to deliver them, no need for shelves to stock them. I could go on, but I’m sure you get the drift. With the exception of Alibaba/Amazon/Walmart-Jet/ the other really big hits — facebook, Twitter, Google, Office 365 (if you believe Microsoft’s claims) — are all about intellectual property, services and anything other than hard goods.

But, you may argue, what about Uber, Lyft and AirBnB? Their sharing services require cars and, in the case of AirBnB, homes. Sure, but the cars are already owned by drivers. Uber/Lyft/AirBnB are all simply booking and collection services. They aren’t adding to what Economists here in the US dreamed up a while ago as the Gross Domestic Product.

Facebook currently enjoys a market cap of in excess of $470 Bil. General Motors enjoys a market cap of $67 Bil (approx.). But I argue the network of manufacturers, producers, suppliers, delivery services, assembly services, and more circling GM does a million times better job of employing people across the entire social spectrum than Facebook, et al, will every do.

VCs plow money into the Facebooks of the world, while their colleagues on Wall Street diss GM, GE, and other “legacy busineses” and sell off their stocks, complaining about their paltry growth and growth potential. This phenomenon is definitely not positive one and must be closely monitored since it could prove lethal.