I’m Still Taken with Kinect

I’m am still dumbfounded by the Kinect platform.  It feels to me what the PC was to the word processor or more relevantly what Mosaic was to the World Wide Web.

I cannot see how this technology does not revolutionize computing.  It has been advertised as the Wii without the remote, however this seems quite short sighed to me as it beginning to look like a whole lot more.  As a Wii without a remote the implication is that it is “simply” enhancing/redefining the user’s interaction with existing software (games).  As amazing as that transformation would be by itself, the growing number of hacks of the technology being posted online show something far more sophisticated than that is now taking place.

I think this technology is truly disruptive in that it is creating entirely new applications which will soon be in search of a home.  And later, as the technology matures, experts will develop skills to create applications using 1st, 2nd or even 3rd order derivatives (hacks) of this real time 3D platform to meet complex problems.  I would imagine we may very soon see incubators and venture capital chasing this platform to build portfolios of IP, applications and products.

And the Kinect marvelously coincides with the television and film industries push into 3D displays.  It seems to me that 3D object recognition may be the precipice of an entirely new decade of technological advancement, and somehow I am not sure anyone else feels this way but me!  This either makes me irrationally exuberant about Kinect, or extremely naive.  And I am willing to accept either.  Since I’m a Mac guy though, this is not an intentional love fest for Microsoft.  The applications outside of gaming seem as endless as imagination itself.  I do wish Apple had owned this one!

Consider this seemingly simple hack below.  With a little vision, this could be come complete object recognition technology of the Star Trek variety. Forget scanning barcodes. Imagine a computer just looking at what you have in your hand and identifying it any any number of associated characteristics. Now imagine cross referencing a found object with a missing one, sorted for instance, by GPS coordinates.

Or imagine a full body scan in the comfort of your own home, with the data sent to your favorite apparel retailer for custom, made to order clothing that you can receive by mail.

My mind is small in comparison to some of the videos I have seen, and other people will certainly trump any pea-brained idea I may come up with.   But in general the possibilities seem truly endless.

Does anyone know how protected this platform is for Microsoft?  Is there room for them to build a monopoly around this technology?

 

No Shoes, No Shirt, No Service

In reading Barry Ritholtz’s post Will Retailing Ever Fully Recover ? I was inspired to consider the implications of what it means to see our service economy contract.

Our “service” economy is now exposed for what it was, a highly levered temporary utopia built on wealth extraction and cheap foreign labor.  The 70%  service economy we enjoyed will soon be a relic of the unsustainable past.

Wealth creation will be what drives consumption over the next cycle, not wealth extraction.  Too many Americans were not just living beyond their means, but more importantly beyond their incomes, guided by cheap easy credit and the idea that incomes and asset prices would continue their meteoric ascent.  This drove eye popping growth in retail, restaurants, and a host of discretionary income spending zones and we are now getting the early signs that we have simply been over consuming as retailers, one by one, retract their footprints and/or go bankrupt.

This poses two problems.  One is that as asset values implode, and wealth destruction ensues, people are underwater in interest burdens.  The other is that they then have to combine solutions of restructuring their finances by spending less, using up and liquidating personal inventories, saving more and working more (more hours or for more money or both!).  In an economy that is bleeding jobs, efforts focus on defense instead of offense, reducing assets and consumption.  The liquidation process of inventories (using that last tube of toothpaste from Costco) and the liquidation process of assets (think of the infomercial to sell your gold by mail) becomes self reinforcing.  Think ebay!

On the flip side, there is no better motivator for innovation than the necessity to improve one’s lot in life and the knowledge that the playing field has been thoroughly culled.  With the numbers of highly skilled and highly educated underemployed today, do expect some significant breakthroughs over the next 5 years from people’s garages much like Microsoft did in the trough of 1974-75, or as Michael Dell did just after the deep consumer recession of 1984.  And to think that those were just college kids inspired by a bleak job market then, imagine the levels of skill and inspiration today!

Lesson from the Microsoft Deal with Facebook

You don’t need to buy the whole company, you only need to make sure your competitors can’t afford it.

In October 2007 Microsoft made headlines by paying $240 million for a mere 1.6% stake in Facebook.  From one perspective this was an idiotic valuation for a social networking site.  However, from the other point of view it was brilliant as Microsoft essentially put all other suiters to bed.  Who knows what Facebook might really have been worth.  A couple of billion, maybe?  But such strategic buying is not about paying top dollar, its about sparing cash and stock for less speculative transactions.  The best way to conserve is to take less of the target, boosting its value, and sending potential rivals home for good.

Well, Neuberger Berman’s “management” was awarded the firm in a contentious bidding process that ended yesterday.  In the deal, the current management team (comprised now heavily by former Lehman top-brass), bought 51% of the firm for an undisclosed sum giving them control of the once venerable money management firm.  While the details of the deal were not released, I’m willing to be that they pulled a Microsoft on this one.  Giving the firm a much higher valuation than another suitor would consider, but saving themselves the out of pocket expense by only acquiring half of the firm.

This pitch apparently went over well with the bankruptcy attorneys and judge, under the assumption that the balance of the equity could now be sold at a later date, and presumably at a richer valuation to pay off Lehman’s creditors.  By only selling 51% to Neuberger management, the Lehman estate maintains ownership of the remaining 49%, giving it the option to wait for markets to normalize and logically to try to sell it for a higher price.

However, I wonder what the valuation for this deal was.  If it was anything like the Microsoft deal, whereby the 51% purchased represented a much heftier price (but lower out of pocket expense) than Bain & Hellman were willing to pay, I wonder if in fact Lehman can sell a minority interest in an asset manager at some massively appreciated value in any reasonable period of time.  I suppose that assumes client attrition remains low and that markets cooperate.

Only time will tell if this was the best thing for Lehman’s creditors, in the meantime though, it certainly leaves you skin crawling to think that a bunch of ex-Lehman execs were able to co-opt the Bain Hellman deal.  I would wonder how client’s might feel if they are dually Neuberger Berman client’s but also a part of a Lehman creditor class?

Sources:
Microsoft invests $240 million in Facebook
Associated Press, October 24, 2007
http://www.msnbc.msn.com/id/21458486/

Neuberger Berman Management, Lehman to Purchase Investment
Jason Kelly and Jonathan Keehner, Bloomberg.com, December 4, 2008
http://www.bloomberg.com/apps/news?pid=20601103&sid=aXZnNdTGlz.g&refer=us

FREE SOFTWARE FOR THE MAC! TUESDAY ONLY!

This was sent to me today.  Apparently this CEO promised a free copy of his software to every American if one of a number of goals was met by George W. Bush by the end of his presidency.  It was a clever viral marketing scheme that will probably end up being a poor business decision.  The five goals were:

1. Reduce the Price of Gas: Gas costs about $3.79 a gallon in the Twin Cities, a full buck more than this time last year. If the average price here drops below $2.79 per gallon, this goal is met.
2. Reduce the Price of Food: With the rise of fuel prices has come a similar rise in food prices. A gallon of milk is about $5 these days. It was $3.50 a year ago. If the average price of a gallon of milk comes down to $3.50 gallon in the Twin Cities metro, this goal is met.
3. Create More Jobs: We started the year with 138,002,000 people in the U.S. working non-farm jobs. Since then, total non-farm employment has decreased by 366,000. If so much as a single job can be created this calendar year – meaning if employment can be at least 138,002,001, this goal is met.
4. Rejuvenate the Housing Market: Median home values in the Twin Cities have fallen 12 percent year over year – from $233,000 to $205,000. If that median returns to $233,000, this goal is met.
5. Bring Osama Bin-Laden to Justice: Every American would like to see Osama Bin-Laden captured or terminated. We won’t be picky about how President Bush gets him. If it happens, this goal is met.

An excerpt from the CEO:

My fellow Americans. As you probably know by now, we recently succeeded in reaching one of our Lame Duck Presidential Challenge Goals . Of course, we reached it in perhaps the worst way possible–by destroying the world economy. And while ostensibly President Bush was to get the credit/blame for meeting our goals, the bottom line is that I cannot help but feel personally responsible for the greatest financial collapse since the 1930s.

How was I to know that President Bush would take my challenge so seriously? And, give the man credit, I didn’t think there was *any* way he could pull it off. But engineering a total market meltdown – wow – that was pure genius. I clearly underestimated the man.

I’m ashamed that I goaded him into this and take full responsibility for the collapse of any savings you might have. Please accept our free software as my way of apologizing for the global calamity we now find ourselves embroiled in. [Press Release]

I haven’t tried the software yet, but if this is true, I intend to, sounds pretty cool.  The software apparently allows Mac users to run Windows applications without having to install Windows.  Only problem is, I’m not sure why I would want to run a Windows application on my MacBook.

Source:
If Bush gets it done, America gets FREE software!
http://lameduck.codeweavers.com/