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What's New in the Third Edition?
In the Third Edition, you’ll:
the Horror of Hell on Your Desktop as Steve Ballmer unleashes Windows 8 on an unsuspecting world. Gasp as Microsoft’s entire mobile platform (and Ballmer’s executive career) is destroyed!
Shiver in awe as Jeff Bezos channels Steve Jobs’ spirit during the Amazon Fire Phone development but is possessed by Alfred E. Neuman instead!
Gaze in amazement as high-tech CEOs keep self-destructing on a planet where everyone has a smartphone and everything you say goes viral immediately!
Scream in disbelief as Hollywood makes a movie about Steve Jobs that doesn’t contain a single actual fact!
Watch in amazement as Hugh Howey, Joe Konrath, David Gaughran and the rest of AAAG (Aggregated Amazon Ankle Grabbers) transform 8,661 independent writers into mutant sheep who leap mindlessly to their financial doom while clutching their Kindles!
Feel the fear as Amazon, Google, Facebook, Twitter, YouTube, Instagram, LinkedIn, and other social networks launch mass censorship attacks on everyone to the right of Karl Marx, disintermediate their subscribers from their personal networks, and help China enslave over 1 billion people via the Great Social Credit System!
Not to mention new cartoons, expanded analysis on how every disaster in Stupidity could have been avoided, an updated glossary of terms and much more! Enjoy the quick visual tour below.
Read excerpts from selected chapters
Welcome to the third edition of In Search of Stupidity: Over 40 Years of High-Tech Marketing Disasters. (As opposed to 20.) When I wrote the first edition of the book, one of my chief motives was revenge against In Search of Excellence by Tom Peters and Robert Waterman and its successors. Like many others in high-tech, I’d been forced to read the books and attend the seminars that preached the cult of excellence while most of the firms profiled in Excellence crashed and burned. I decided that since I was never going to reclaim all those misspent hours, I might as well have some fun with the experience.
To my great satisfaction, In Search of Stupidity has transcended my petty resentments. Since the release of the first edition in 2002, In Search of Stupidity has become a best-selling worldwide business classic, with editions having been released in several languages, including Chinese, German, Italian, Hebrew, Polish, Korean, and Japanese. As one commentator remarked, “In Search of Stupidity is high-tech’s version of Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds, only more relevant.” (By the way, if you’re interested in reading the prefaces to the first and second editions, the forewords, as well as other material that was removed from this edition in the interest of brevity, they’re available online at www.softletter.com.)
That’s high praise, but since the release of the second edition in 2006, high-tech has undergone massive change. Mackay had the luxury of writing about stupid events and thinking in an era when societal and technological evolution took decades and even centuries. I don’t have that luxury; in the 21st century, 14 years is an eternity. We have a lot to review!
Before I begin, I want to reassure you that the primary mission of this book remains unchanged. Within this third edition you’ll find a carefully curated collection of only the best of the worst and the newest of the stupid (and all of them completely avoidable). Similar to Dante’s Inferno, this book is designed to embark you on a grim journey to the hot stygian depths of Marketing Hell, where your soul will be riven by scenes of woe and suffering. There’s Steve Ballmer lashed to a rock for eternity as hordes of Windows 8 users devour his liver while screaming “Where’s the Start Button!” Next to him we can see Jeff Bezos endlessly stacking unsold pallets of Fire Phones in a warehouse that always adds a new level just when it seems the building is full. Not far away, Sundar Pinchai is strapped to a chair and forced to explain forever (or until the Department of Justice finishes its anti-trust probe, whichever comes first) how Google search algorithms work to zombie-eyed members of Congress who immediately forget everything they’ve just been told.
But not to worry. As with Dante and Virgil, I’m here to guide you safely around the horrors and tragedies that inhabit this place. Let’s head past the crackling flames and leave the horrid screams and moans of despair behind us as we ascend to the world of light and sanity. We need to get cracking on catching up, but we’ll be returning soon to learn more.
When I wrote the first edition of In Search of Stupidity, people did the following:
- Trudged out to their mailboxes or driveways to pick up their daily newspaper.
- Unloaded mailboxes stuffed with flyers and advertisements.
- Sent business documents via fax.
- Listened to dial tones on their land line phones before dialing out.
- Went to bars to meet dates or mates.
- Bought paper books, either hard-covered or paperbacks.
- Wore Japanese and Swiss wristwatches all the time.
- Read magazines such as Time, Newsweek, PC World and many others.
- Navigated to new locations via paper maps in their laps while driving.
- Used dial-up modems which made strange squealing sounds before logging into AOL, Compuserve, Prodigy, etc.
- Installed software from CDs/DVDs packed in boxes.
- Listened to music on CDs.
- Carried Sony Walkmans to the gym.
- Took pictures cameras loaded with Kodachrome (film).
- Went to Blockbuster to rent movies.
- Watched TV shows at set times on set days.
In 2020, people do the following:
- Abandon newspapers.
- Wonder when the Post Office will shut down as paper mail fades away.
- Sell their fax machines at yard sales.
- Cancel their landline service.
- Watch TV and movies whenever they want.
- Meet dates and mates via Match.com, Tindr, and other online dating services.
- Don’t read magazines because very few are still for sale.
- Navigate to new locations via the GPS embedded in their smartphone.
- Don’t wear Japanese and Swiss wristwatches very much.
- Buy increasing numbers of digital and audio books to read and listen to on smartphones and tablets.
- What’s a Sony Walkman?
- What’s film?
- What’s AOL?
- What’s Blockbuster?
The above lists just scratch the surface of the changes rippling through society.
The reason for the changes is the SaaS (Software as a Service) Revolution. When we first met SaaS in the first edition of Stupidity in 2002, it was called ASP (application service provider) and was melting down. In 2006, for the second edition, I noted that the ASP movement was reviving under the rubric of SaaS and used the book’s disruption model to analyze its chances of success. In 2006, Softletter introduced the first report that provided hard statistics on the movement’s growth and performance. In 2007, I hosted the industry’s first SaaS conferences, an educational series that continued through 2015. In 2012, I wrote SaaS Entrepreneur: The Definitive Guide to Succeeding in Your Cloud Application Business, the most comprehensive book about running and operating a SaaS enterprise.
The SaaS market revived for two main reasons. The first was that they addressed industries and markets not accessible to on-premise applications. For example, imagine you are a U.S. state and by law have specific election practices and standards you must follow. Imposing and managing rules and regulations on a statewide basis using desktop or even client/server software was difficult. Many municipality or polling stations were unable to properly support a desktop computer or terminal station. But today, everyone has access to a computer with a browser, enabling a uniform set of rules and regulations to be uniformly deployed across a widespread geographical region.
The classic example of this syndrome is one of the oldest. Salesforce became a SaaS superstar because many sales managers had used desktop packages such as TeleMagic to manage the prospect contact cycle and loved them. Unfortunately, mounting networked versions of these packages on company servers was difficult and often never happened. Well-publicized failures by companies such as Oracle and Siebel Systems to deploy enterprise-wide client/server versions of what had evolved into customer relationship managers (CRMs) were widely publicized. But when Marc Benioff and his browser-based CRM appeared, there was a built-in audience ready to buy. And they did.
Of course, SaaS was also critical in driving the worldwide acceptance of smartphones. Until the virtual high-speed digital pipes necessary to support SaaS existed, the concept of using your phone as a supercomputer in your pocket wasn’t feasible. By 2008, it was, and the smartphone market began exploding exponentially.
The second reason was that SaaS systems concentrate their subscribers and users into virtual data pools and communities. Once a SaaS system went live, it could track every aspect of a subscriber’s interaction with the system, including what features were used, how often, which were unused, how long they remained online, their login location, and literally hundreds of other data points. SaaS-based software companies could discover information and trends about their market and subscribers at speeds never possible for on-premise products. That alone was enough to ensure their ascendancy over their on-premise rivals. By 2013, SaaS had become the de facto means for bringing new software products to market and investment capital for other products disappeared. Every major software company still selling on-premise software is frantically jumping on the SaaS bandwagon.
SaaS also laid the foundation for the IoT, the internet of things. Once the digital architecture to support SaaS was in place, stable, and sufficiently quick, companies turned to stuffing internet-enabled gizmos into every building, car, store, house, watch, piece of clothing, etc. they could get their hands on. The IoT made it possible for you to open your garage door from half a planet away, track your dog when he escaped out the front door, inform on you to the police when you broke the speed limit just before you rear ended the car in front of you, and much more. Why, the IoT is even able to check the quality of the cannabis (pot) cartridges you slip into your vaping pipe, ensuring you enjoy the safest possible toking experience (assuming you’re sure that soaking your tissues with a potent and highly fat-soluble psychedelic that will remain in your body for days, impairs memory, promotes over-eating, and makes you laugh at jokes that aren’t funny is “safe”).
The IoT also makes privacy obsolete, but as that great statesman and social thought leader Robespierre once said, “You can’t make an omelet without breaking eggs.” (Or it might have been Stalin.) In any event, you understand the point.
The SaaS Revolution also changed the way high-tech funded new companies. In the 1980s and 90s, new ventures were expected to turn profitable within 3-7 years after the first major investments, but Amazon upended this model. Founded in 1994, Amazon went public in 1997 and promptly began losing money hand over fist. In the first and second editions of Stupidity, I had a lot of fun at the company’s expense by marveling at the streams of red ink that puddled around Amazon’s financial statements. At a certain point, I began to think of the company as a ZPE, a zero profit enterprise designed to never actually make money.
But Amazon and CEO Jeff Bezos appear to have had the last laugh. In 2017, the company finally seemed to reach the shores of profitability that had seemed so distant for the first 24 years of its existence, posting a solid GAAP net profit of $3 billion on total revenues of $177.87 billion. Though, this being Amazon, there were some caveats. Its international operations lost $3 billion during this period, counteracting the $2.8 billion earned by its North American business. It was Amazon’s Web Services (AWS) business unit that provided the $4.3 billion in operating profits that pushed Amazon solidly into the black. It was time to take ZPEs seriously.
The model is built around the concept that a startup should use investment money to focus on building revenues and market share while eschewing “premature” drives to profitability. High financial losses are acceptable as long as revenues continue to grow and the company maintains positive cash flow. The bet being placed is that driven by visions of the radiant future, the market will drive the company’s stock price higher, helping insure the ZPE can return to the public markets for more cash, while monopolies and large chunks of market share will eventually deliver significant profits.
It wasn’t just the software industry that underwent disruption. So did shopping. As it grew, Amazon became increasingly more expert in using the data it collected to understand what, when, why, and how much you wanted to pay for items and services, and it only became better as it collected more information. It also enabled shoppers to comparison shop across a huge virtual inventory of offerings. Many traditional stores couldn’t match these abilities and succumbed to Amazon’s data dragons. One-time giant Sears, the 19th century’s equivalent of Amazon, was on the brink of extinction in 2019. Dozens of other retail powers preceded it, including Toys R Us, Payless Shoes, CompUSA, Sports Authority, and many, many more. The Big Data claws swung wide and sharp.
The shopping malls weren’t spared. By 2013, ecommerce had brought large mall growth in the U.S. to a stop, then began to whittle them down. In 2017, there were approximately 1,200 major malls in the U.S. By 2023, it’s estimated 50% of them will be gone. Small town and villages weren’t spared from the winnowing, as they discovered that Amazon Prime and best price guarantees were able to empty out an adorable village center of its Shoppes and Ye Oldes as efficiently as Walmart ever had.
This isn’t quite as devastating as it sounds. At the beginning of the 21st century, many retail industry observers thought too many malls were being built in a saturated market. The dot.com collapse put off the reckoning and the malls continued to sprout, but the current contraction was inevitable. Nonetheless, brick and mortar stores still outstrip ecommerce sales by a factor of 10 to 1, and retail is adapting under the threat of Amazon and changes in generational shopping habits, as we’ll discuss in “Purple Haze All Through My Brain.”
Other industries are continuing to suffer disruption at the hands of SaaS. The taxi business, dining, couponing, and hundreds of others are being displaced and reshaped by the Revolution. It’s an overused phrase, but SaaS did represent the most massive paradigm shift computing had witnessed since the advent of personal and “microcomputing” in the mid-1970s.
“Big, bold … and broken: is the US shopping mall in a fatal decline?” (https://www.theguardian.com/us-news/2017/jul/22/mall-of-america-minnesota-retail-anniversary), Dominic Rushe, Sunday 23, 2017.
n 2011, Steve Jobs passed away from pancreatic cancer. Like most “solid” organ cancers, it’s a tough customer. Your internal organs have no nerves and the cancer normally metastasizes and spreads before it’s detected. Victims typically die months after the first diagnosis.
Jobs was lucky in that he was diagnosed with a rarer form of the disease, neuroendocrine islet cell carcinoma. Unlike the more common and lethal adenocarcinoma, islet cell cancer is often detected earlier and is more responsive to treatment. It can be cured if found early and treated promptly.
As befitting the career of one of high-tech’s most paradoxical personalities, when Jobs was first diagnosed, instead of seeking the assistance of modern medicine and immediately undergoing surgery, he first took a nine-month detour into various alternative treatments, including fad diets and “spiritual healing,” which science has demonstrated are useless. Jobs finally underwent the surgery, which prolonged his life, but he later regretted not acting immediately when there was perhaps a chance for a cure. During an interview about his biography of the Apple titan, Steve Jobs, author Walter Isaacson stated he’d felt Jobs had delayed the operation because:
“I think that he kind of felt that if you ignore something, if you don’t want something to exist, you can have magical thinking.”
While his behavior was foolish and brought sorrow to his friends and family, you almost can’t blame Jobs for believing he possessed some sort of magic. When he returned to Apple in 1996 and resumed full control of the company in 1997, Apple was a fading power in computing and seemed destined for irrelevance, if not erasure. From 1997 to the year of his death, he executed the most remarkable turnaround in business history, releasing three massive hits in a row—the iPod, iPhone, and iPad, not to mention iTunes and the Apple App Store. By the time he passed away, Jobs had achieved more than a business transformation and turnaround. He’d transformed into a totem, a mystical figure with a special mana that, if you could somehow tap into it, would grant you with the power to bend marketing space and time to your own personal reality as well.
Inspired by Jobs and all that luscious iPhone revenue, Jeff Bezos began planning for Amazon to enter the smartphone market in 2013. On the face of it, it was a logical decision. In 2007, Amazon’s first hardware product, the Kindle ereader, had captured the ebook market. In 2011, Amazon introduced its first tablet, the Kindle Fire, and it too had been a solid success.
The function of both devices in Amazon’s sales strategy were to act as low cost, loss leader purchases designed to whisk you into Amazon’s virtual bookstore and warehouses, where you would hopefully buy enough merchandise and services to cover the costs incurred in building them. As such, the design of both the ereader and tablet were minimalist and as cheap to build as possible.
For his smartphone, Jeff Bezos had a different plan entirely. By 2013, he no longer thought of Amazon as just a store, but also as a technology powerhouse, a unique amalgam of merchant and high-tech empire. Bezos felt he competed against not only against Walmart, but also against Google, Microsoft, and, of course, Apple, the coolest brand on the planet, which until only recently had been led by the coolest guy in high-tech. Bezos thought he could be cool too, and like many other Silicon Valley CEOs, fired up a virtual Ouija board in search of some of that powerful Steve Jobs mana. Soon, he’d loaded up with spiritual power and the Fire Phone development effort began.
The project, code named “Tyto,” was set up in Amazon’s Lab126 under Bezos’ watchful eye. The facility is Amazon’s design studio and a conscious homage to Jobs and his immortal “pirate” building at Apple HQ where the original Macintosh was developed. Channeling Jobs further, Bezos appointed himself the device’s “super product manager” and made every major design and functionality decision for Tyto during its development cycle. ”
As the device took shape, Bezos became fixated on providing a unique new feature for the new phone, a 3-D effect for the screen called “Dynamic Perspective.” Implementing it required four power-sucking cameras installed in each corner of the phone. Dynamic Perspective’s only practical use was to make your lock screen look 3-D. Sort of. Which wasn’t practical. But in Benzos’ mind, this one feature branded the Fire Phone a high-end, luxury device.
From a design standpoint, the rest of the Fire Phone was an undistinguished black polycarbonate slab with a soft black, a design cue taken from entry-level Chevrolets. During the product’s live rollout, much was made of the “injection molded steel connectors,” but the slides also included the term “rubber frame.” The latex fetishists in the audience may have been excited, but the rest of the audience was unimpressed.
Yes, the Fire Phone had a 13 MPS front camera, while an iPhone only had eight, a tangle-proof headphone cord, and a software bundle that sounded nice, but it looked like something you bought at the bargain end of the smartphone counter at Best Buy. And while Amazon wanted you to watch lots of videos on your Fire Phone, it lacked an HD screen.
On June 14, 2014 in Seattle, Jeff Bezos, doing his very best to imitate Steve Jobs live on stage, introduced the Fire Phone. But it soon became apparent that whatever spirit force Bezos had filched from Jobs, it had failed to charge him with the hoped-for charisma and presence. His presentation was overlong, flat, and rushed through natural applause points. As the plodding session ground on, you could feel the Jobs mana draining from Bezos’ body. When he reached the section discussing the Fire Phone’s rubber frame, the spirit force had already spiraled off the stage and headed back to the afterworld. When Bezos was finally done, everyone felt relieved.
fter the tremendous success of Windows 3.0 in 1990, the market was clamoring for Microsoft’s next act, an OS that would enable PC owners to pull even with the Macintosh. Windows NT was announced and for the next three years Microsoft spent considerable time proclaiming that this new version of the product, once known as OS/2 3.0, would be the 32-bit successor to the Windows 3.x product line. But as NT neared completion, complaints began to surface that the product was too big and resource-hungry to fit the market’s existing desktop profile. Microsoft had heard this before with other products, but Moore’s Law which, roughly paraphrased, states that computing capacity doubles every 18 months and was fully operative at the time, had in the past bailed out the company. But this time, Microsoft blinked. NT was quickly hustled offstage while Microsoft cobbled together a 16/32-bit hybrid that would eventually be known as Windows 95 and switched promotional gears, telling everyone that this product was in fact the desktop upgrade Microsoft had been promising.
After Windows 95’s release, Windows 3.x’s huge installed base, IBM’s ineptitude in marketing the competing OS/2, and a massive promotional campaign all contributed to the product’s tremendous sales success. But over time, the positioning problem grew in the critical desktop arena. Windows NT, then 2000 (the more things change . . .), had always been available in a “workstation” version that directly competed with the Windows 9x family. After all, both product lines were called Windows. They were both advertised as 32-bit operating systems. The desktop versions were comparably priced. They looked alike. So, which to buy?
Microsoft tried to help customers make the decision via a classically bad 1996 ad campaign many referred to as “Two Nags Racing.” A two-page spread, it featured a picture of two horses running neck-and-neck with the caption “You See a Horse Race. We See Two Thoroughbreds.” Apparently no one at Microsoft had realized that, uh, yes, but the horses are racing. And as we all know, only one horse can win. So, which customer is going to ride the losing steed? Faced with such a choice, corporate America paused (and the ad was quickly yanked).
Luckily for Microsoft, a way out of the dilemma appeared. Windows NT was repositioned as a network operating system (NOS) and aimed at Novell, where it achieved massive success due to the Utah firm’s marketing ineptitude. Despite some ongoing speculation and criticism, this enabled Microsoft to successfully navigate away from the dark and stormy positioning clouds that loomed ahead of it and towards further product success. In 2001, company grasped the Holy Grail of product line integration with the release of Windows XP, which enabled the company to offer one product named Windows to the market. Despite the weather, everything became sunny every day in Seattle.
By 2005, Microsoft was 10 years into its rule over computing and the view from Redmond was splendid. Microsoft Office’s grip on the desktop applications market had been locked down and seemed unassailable. Internet Explorer’s market share hovered close to 90%. The company enjoyed strong sales of its development, server and SQL database products. Microsoft set the standards now, not IBM.
Even better, a new marketing was opening up and Microsoft was sitting pretty there as well. A new term, “smartphone,” was entering computing’s lexicon. A smartphone was a hybrid device, a blend of a mobile phone and a personal digital assistant (PDA). While PDAs had never become the multi-billion dollar category foretold since the introduction of the Apple Newton, they’d carved out a foothold in the market and Microsoft’s Windows Mobile OS had made a nice transition from PDAs to hot new smartphones such as Samsung’s BlackJack. By 2007, Windows Mobile enjoyed a 30% market share in smartphone OSs. To drive the point home, that year BlackJack owners were sweating out the possibility that Windows Mobile 6.0 would not be released for their devices.
There were a few splotchy clouds drifting across what was otherwise a crystalline horizon. Losing that anti-trust suit to the U.S. DOJ had been painful. Bill Gates had been forced to relinquish executive control of Microsoft, and that was a blow, though his replacement Steve Ballmer remained in fine spirits throughout the ordeal. More inconvenient was that after the case had been settled, the DOJ draped an anti-trust anaconda around Microsoft’s windpipe with instructions to squeeze if Redmond started to show signs of reverting to its bad old ways. Fortunately, reptiles tend to sleep most of the time, though the snake did become agitated if Microsoft engineers started becoming too busy with browser technology.
And of course, as everyone knew they would after the case was settled, the Euros started suing the company left and right. Annoying, but when you enjoy two major high-tech monopolies, your profits can easily cover the costs of keeping legal vultures at bay. Just the cost of doing business.
It started becoming less good in 2006 with the release of what was supposed to be Windows XP’s successor, Windows Vista. Codenamed “Longhorn,” Microsoft promised it would be stuffed with all sorts of good things such as a journaling file system that, like Doctor Who’s TARDIS, could practically travel back in time to retrieve files, security protection that even super computers couldn’t crack, a gorgeous new interface, better printing, searching, networking, and on and on. Everyone in the industry had already heard this a million times in the past and the company’s Marketspeak was translated into a standard statement that read Longhorn would be late, it would have bugs, they would be fixed over the course of several incremental releases, most of the new features would eventually work, and Microsoft would sell a ton of it. What choice did anyone have?
On January 2007, Vista was duly released, and everyone stepped politely aside to avoid impeding the inevitable upgrade stampede. And waited. And waited some more. Then even more before everyone realized the stampede wasn’t coming.
It was a puzzle. It couldn’t have been lack of awareness of the product; it had been covered relentlessly by the high-tech press for years. When it was released, Microsoft pulled out all the normal PR stops with an expensive launch event, extensive advertising, an on-stage show starring Bill Gates and Steve Ballmer, and much more. All the normal PR bases were covered, but Vista just refused to sell? Why?
The answer came back to a positioning failure. Vista didn’t sell because it violated one of the three fundamental laws of product positioning—the product’s feature set as delivered (not promised) failed to convince Windows XP users, Vista’s primary competition, that it was worth the time and hassle of replacing a perfectly fine and working installation.
In the years between the product’s announcement and its delivery, Microsoft had steadily chopped away at the advanced features that were supposed to make Vista a compelling purchase. The advanced file system went to the same place that Doctor Who’s TARDIS does when it dematerializes. The “hacker proof” code was scrapped and your new Vista system could still be cracked open by the 15-year-old next door. The new “Aero” interface that was supposed to be more beautiful than Hawaiian sunsets, drained power from your laptop at an alarming rate, leading people to turn it off and settle for a look more akin to Seattle during a drizzle.
Making it worse was that some of the things that Microsoft did add weren’t wanted or were annoying. For example, copy protection, and a “User Account Control” (UAC) notification system that when you wanted to move or copy a file asked, “Are you sure?” And when you said yes, asked “Absolutely positive?” And when you said “YES,” asked you, “Are you sure you don’t want to change your mind?” That was often the last thing it said before you put your fist through the screen.
In short, there was no compelling reason to buy Vista and people didn’t. Microsoft gamed the adoption figures, but no one was fooled. Windows XP remained the preferred version for several more years. It turned out that Windows users did have a choice after all.
Vista’s market flop shocked Microsoft and certainly didn’t help the company’s bottom line, but no one panicked. Microsoft was still powerful, still set the standards, and still owned two invaluable monopolies. Vista was a setback, not a catastrophe. Microsoft’s attitude was reinforced with the success of Windows 7 in 2009. The product was well reviewed, avoided many of the issues that plagued Vista, and was a solid sales success.
Despite Windows 7’s success, a danger sign presented itself after the launch. This was the continued unwillingness of many Windows XP users to give up the OS. Many people remained unconvinced that the features offered by Windows 7 justified the pain of switching. In 2012, XP enjoyed a worldwide market share of 47% compared to Windows 7’s 36%.
n October 11, 2011, Steve Jobs, as we all must do, passed away from this earth from complications caused by pancreatic cancer. While he died much younger and sooner than he, his friends and family, and most of the general public would have wished, Jobs had the satisfaction of knowing he left this life at the very peak of his career and impact on high-tech. When he took complete control of Apple in in 1997 (Jobs during his first turn at Apple was kept on a leash and was never the company’s CEO), Apple seemed to be past its peak and sales and revenue were sliding. In fact, under Jobs the slide continued, with revenue declining from around $11 billion in 1997 to $6 billion in 2001, despite some widely heralded marketing campaigns and huge media coverage of the return of Apple’s prodigal son. It seemed that Jobs was no magic man despite his outsized reputation.
Jobs failure to return Apple to computing’s pinnacle of power was not surprising, and I wrote about it fairly extensively in the second edition of Stupidity. Here’s what I said in 2005:
Why not take a stab at planning to put Apple back on the throne from which it once reigned microcomputing 25 years ago? After all, everyone is bored with Windows. Linux, the only possible other competitor, has all the computing charm of a diesel truck and requires a degree in computer science to install. And everything the Apple Fairy Godmother said is true, and she left out some hard revenue facts besides. In 2001, Apple’s annual revenue hovered around $6 billion. In 2005, Apple sold more than 32 million iPods, and more one billion songs were downloaded from its iTunes service by the winter of 2006. Yearly revenues from 2005 were almost $14 billion with more than a billion of that being profit…
… Apple’s growth is coming from consumer electronics, not computers, and no one on this planet has ever figured out how to take a company from 4% market share to industry dominance in the face of an entrenched competitor determined to defend its turf. Apple came close to industry supremacy in the early 1970s and 1980s, but this was before IBM woke up. And despite Microsoft’s creeping development of the senescence that inevitably afflicts all megasized corporations, unless a big meteor hits Redmond and Bellevue, Apple cannot hope Steve Ballmer and Bill Gates are going to stand idly by while Apple lops off significant amounts of market share and money from Microsoft.
This was exactly right. Apple has never come close to regaining its former prominence in manufacturing and selling laptop, desktop, and server systems, nor does it any longer want to. Beginning with the iPod, Jobs “pivoted” (this is the new hot “wonder term” that’s replaced the more prosaic “do something else”) into consumer electronics, the iPod being succeeded by the iPhone, Jobs’ piece de resistance, and as his encore, the iPad, computing’s most successful tablet. The Macintosh is now an insignificant part of Apple’s revenues, and as I pointed out earlier, the company is in the process of preparing to leave that aspect of its business behind via a transition strategy.
The result of Jobs’ strategy took Apple to 2011 revenues of $108 billion. No turnaround of such a magnitude had ever been seen before in business anywhere and we may never see such an achievement again. The market made up its mind. Jobs was indeed magic, and high-tech CEOs everywhere decided they wanted to transfer some of his marketing and sales fairy dust to themselves.
There was obviously no practical way this could be accomplished; while the Catholic Church and some Buddhist denominations encourage the collection of physical remainders of saints under the label of “holy relics,” Jobs and his family had no interest in this sort of thing.
Another option was available, and that was “sympathetic magic.” Sympathetic magic works under the assumption that if you behave, dress, and can even resemble a magical person, some measure of their spirit will transfer to you. Unfortunately, the process is fraught with challenges. We’ve already seen what happened when Jeff Bezos built a special workshop just like Steve Jobs’ original “Macintosh Pirate HQ” and attempted to recreate the magic of the original Mac rollout. Ugh. The failure came about because while Bezos had the lab, he completely lacked Jobs’ understanding of product positioning.
Then there was Travis Kalanick, one-time CEO of hot, hot, hot unicorn Uber. During his tenure as CEO, Uber became the number one ride sharing company and its IPO ended with the company having at its peak a market capitalization close to $70 billion. However, in an attempt to reproduce the Jolly Roger atmosphere Jobs generated at Apple during the Mac’s development, Kalanick apparently amped things up to the point where he had to issue an executive memo asking company employees to stop having sex with their bosses, throwing beer kegs out of windows, and puking on the office furniture. Kalanick also over-channeled Jobs when he was recorded screaming at Uber drivers unhappy with the firm’s payment structure. This seemed a bit unfair because Jobs was also famous for publicly abusing people (smoothie ladies, Daniel Kottke, the MobileMe guy, random employees) and no one became that worked up about it. However, Jobs had the good luck to die before he could be hoist by the petard he’d created, a smartphone with high definition camera and video recorders in everyone’s hands. Kalanick didn’t and was escorted out of the CEO suite as his antics came to light and went viral across the globe.
For the first few years, Amazon’s relationship with the publishers was amicable, but by 2005 the publishers realized they badly misjudged the size and magnitude of change the internet was bringing to the industry. A new, ominous phrase began to be whispered throughout book environs: “Browse B, buy A”; in other words, head down to your favorite bookstore to browse the shelves for new reads, then buy them online at Amazon where you could take advantage of low prices, no sales tax in most cases, and free shipping if you were a Prime customer.
Amazon also introduced new features to the shopping experience that help negate the social advantages the bookstores assumed they enjoyed. You might not be able to ask the opinion of a store clerk about a book, but you could look at how other people rated it through the Amazon review engine. You can’t physically browse an ebook, but with Amazon’s “Look Inside the Book” technology you could sample it. And while superstores such as Borders and Barnes & Nobel bragged about their selection of 150,000 titles per location, they were dwarfed by Amazon, which offered eight million and was also able to offer access to a huge selection of older, out of print, and used works. Amazon hasn’t figured out how to serve you coffee while you shop, but there are always Starbucks gift cards.
The most important factor the publishers missed was that Amazon’s online model enabled it to accumulate massive amounts of data from their customers. If you bought a mystery novel in a particular genre, Amazon tracked that information, and the next time you visited the site it displayed additional mysteries in which you might also be interested. The more you bought, the more it knew and the more it could sell you. The cross-promotional and follow-up sales the site could generate were new in retailing, and Amazon first began to nibble at, then devour its channel competition.
By 2008, Amazon sold more books in the U.S. than all other resellers combined, and the company began bypassing the distributors and purchasing directly from the publishers. This increased its channel power and Jeff Bezos began to play the MDF game with a ruthlessness never before seen in the industry. One of Bezos’ most famous quotes is “Your margin is my opportunity.” Everyone in publishing would soon learn exactly what he meant.
Amazon began with the larger trade publishers (companies that produce books for general audiences). The company began to demand bigger discounts for bulk purchases and pointed out it only returned about 4% of its stock, while the other resellers traditionally returned up to 40%. If a publisher balked, Amazon’s personalization and search engines would stop displaying their books online. When this happened, sales could fall by as much as 60%. Particularly painful was the fact that Amazon, not the publishers, had discovered the value of the long tail. Back catalogs had become valuable profit centers and Amazon controlled access to them.
Amazon received its discounts.
Bezos then initiated his infamous “Gazelle Project.” Its goal was to track down and extract more MDF from the smaller publishers using tactics similar to those employed by cheetahs tracking down sick antelopes. In addition to new concessions that granted Amazon discounts as high as 60%, new MDF programs were introduced that included charges for page placement, SEO rankings, “late” shipping of books, promotional newsletter placement, cross promotions of books, and finally demands for a percentage of sales. Refusal to pay inevitably meant that Buy buttons from your book displays and your titles disappeared from Amazon’s virtual shelves.
The small guys paid up.
As is often the case with MDF, Amazon provided almost no information on what return on investment publishers would receive from their MDF payments. It was well understood there would be none in most cases. For example, in 2004, Amazon asked for an MDF payment from Melville House, a small publishing house beginning operations in Brooklyn, New York, while refusing to tell the publisher how many of its books it sold on the site. When Melville’s founder, Dennis Johnson, refused, the house’s books promptly disappeared from Amazon and Johnson was forced to kick in. Other publishers learned their lesson and chalked all the extra fees up to the cost of doing business with the industry’s largest book reseller.
Amazon was not the first nor is it the last channel player to extract maximum margin and MDF from its vendors. Walmart is famous for summoning its suppliers to Bentonville, Arkansas, always high in the rankings for America’s most uninteresting city, and brow beating them for MDF and better prices. But Amazon’s ever-growing knowledge of its customers and increasing domination of online shopping gave it the ability to extor…errr…drive the efficiency of MDF creation and collection to hitherto unmatched levels.
Still, it could have been worse. At least the book industry still controlled the process of creating, printing, and shipping all that paper. That provided the publishers with some protection from what many now regarded as the Reseller from Hell.
Then, in October 2007, Amazon released the Kindle and life for the publishers became hotter.
For a missile aimed at blowing apart a centuries-old nexus of culture, commerce, politics, and artistic creation, the Kindle ereader was somewhat underwhelming. The device was neither a piece of machine art nor an example of cutting-edge design. But as we’ve already seen with Microsoft Windows, if there’s enough pent-up demand for a technology, even the ordinary and adequate can spark a marketing stampede.
This was the case with the Kindle. As I wrote in the second edition of In Search of Stupidity, the only factor preventing the widespread adoption of ebooks was that the quality of experience was poor because all of the devices sucked. New pages took several seconds to display. The cell phones of 2005 were inadequate for prolonged reading. The tablets and laptops of the period were too heavy and clunky.
The Kindle didn’t suck, though its appearance was a bit awkward. It was light. Its low power E Ink display matched the experience of reading paper. Pages displayed at an acceptable speed. It could hold about 200 plus books and publications in its 250 MB of internal storage. Integrated 3G wireless let you easily download books off Amazon’s online store. The unit was comfortable to hold.
The Kindle wasn’t inexpensive at $399, but when you considered the convenience and the fact that ebooks could be expected to be cheaper than their print equivalents, the price was acceptable. And soon after the Kindle’s release, Kindle reader apps appeared for iOS, Android, PCs, and on Amazon’s own Fire tablets. Any device could now be a Kindle. And Amazon had spent much time and effort ensuring that close to 100,000 titles were available for sale on day one of the device’s release.
The quality of experience threshold had been met.
The Kindle was not a technology surprise. While I take some pride in correctly diagnosing why the 2001 ereader initiative failed and predicting the release of a successful device, I certainly wasn’t the only person to believe ereaders and ebooks were inevitable. To most of us pundits, the only question was when a successful unit would be released and what it would look like. The subsequent disruption to the book business would simply be an extension of the digital wave already overtaking newspapers, magazines, paper mail, fax, and other print technologies.
What we should have focused on more closely was who would release the breakthrough gizmo. In 2006, if you had asked technologists to guess who would create the first successful ereader, companies such as Microsoft, Apple, maybe Adobe because of its PDF technology, and perhaps HP because of its long association with digital printing, would have made the list of logical candidates. Some people might have pointed to this or that hot new startup. Few people would have guessed Amazon, thought of at the time as a mere merchant, not a member of the high-tech elite.
The first Kindle sold out in five hours and began to disrupt the book industry, to the publisher’s horror (though since Amazon had shown them prototypes of the device months before its release, they shouldn’t have been that surprised). Yet somehow the industry had persuaded itself that print was unassailable. Shortly before the launch, Barnes & Noble CEO Stephen Riggio was quoted saying, “The physical value of the book is something that cannot be replicated in digital form.” This was the same company that in its 2001 annual report proclaimed that it will “seize our future on all fronts: retail, online and digital.”
Making things worse for the publishers was that Amazon had failed to inform them that it intended to price all of its eBooks at $9.99, price rigging the ebook market at a single shot. They found out about it halfway through Jeff Bezos’ launch speech for the Kindle and its supporting platform, Kindle Direct Publishing (KDP) on November 19, 2007 at the Waldorf Hotel in New York City. Reportedly, they were stunned by the announcement, but it’s fair to ask why none of the major publishers thought to ask about Amazon’s pricing model while it was creating all that new content, and insisted on an answer before the event.
Demonstrating 2007’s initial demand was no fluke, by 2009, ebook purchases, almost all of them Kindle, reached 3 million. In 2010, 8 million. By 2013, ebooks accounted for 23% of trade publishing revenues, with 90% of sales flowing through the Kindle platform.
“Google is committed to creating a diverse and inclusive workforce. Our employees thrive when we get this right. We aim to create a workplace that celebrates the diversity of our employees, customers, and users. We endeavor to build products that work for everyone by including perspectives from backgrounds that vary by race, ethnicity, social background, religion, gender, age, disability, sexual orientation, veteran status, and national origin.”
The above is text taken directly from the Google website at https://diversity.google/commitments/. Note that the list of protected perspectives omits political beliefs.
On November 9, 2016, the greatest triggering event in the history of political correctness and the social justice warrior (SJW) movement took place. That night, Donald J. Trump, a New York City real estate developer, marketer, the star of the reality TV show The Apprentice, and very recent Republican, defeated Hillary Clinton, also from New York, a former First Lady, U.S. senator, and U.S. Secretary of State, in a free and open election for the 45th presidency of the United States. Despite the predictions of politicians, pundits, and pollsters, Trump won a solid Electoral College victory of 306 to 232 while simultaneously losing the popular vote 46.1% to Clinton’s 48.2%. It was the most surprising and unexpected upset in American political history.
The reaction of many Democrats upon the announcement of Trump’s victory was also unprecedented. Across the country, Clinton voters wailed, gnashed their teeth, screamed into the sky, and fell to the ground crying. On television, moisture forced itself visibly out of the tear ducts of some anchorfolks, while others became emotionally distraught. Breaking with all precedent, candidate Clinton did not appear on screen to gracefully concede the election, congratulate the winner, and roll out the eternal clichés about how she would continue the fight, the future for America remained bright, and how we should come together as a country until four years from now, when the American people would undoubtedly correct the mistake they’ve just made. Instead, she reportedly threw the mother of all temper tantrums and was not fit to appear in public until the next morning, at which time she dutifully performed the expected ritual.
California, which had recently instituted an electoral system designed to suppress conservative and Republican turnout, shared in the progressive sorrow. A nascent secessionist movement revved up and the state did its best to imitate South Carolina circa 1861. A rumor spread that so many Golden Staters threw themselves to the ground to pound the tips of their patent leather shoes against the earth in protest against the cosmic injustice of it all that there were fears the vibrations would trigger the San Andreas Fault.
And then there was Google’s all hands corporate meeting at the Googleplex, held shortly after the election. The meeting ran just over an hour and was filmed for internal use only. In September 2018, the video was anonymously leaked and can be viewed in its entirety online at the link in the footnote.
These TGIF (thank god it’s Friday) meetings are held regularly at the world’s dominant search engine firm and allow employees to comment and grouse to upper management. Many other companies have their own version of these get-togethers. In every company I’ve ever worked or consulted for, political discussions were either brief or not welcome. Business was business and customer ideology and who they voted for was not relevant to the bottom line.
Not so at this meeting. If a video editor had removed every mention of the word Google and its derivations (googly, Googler, googleness) from the footage, a neutral observer would think they were watching an election post mortem held at the HQ of the California branch of the Democratic National Committee.
The video’s atmosphere is grim, moist, and huggy. Sergey Brin, Google co-founder, kicks off the proceedings by telling everyone that “most people are pretty upset and pretty sad.” But then he pivots to happier news by mentioning that California has legalized marijuana. This lifts the gloom a bit as the happy Googlers cheer the good news.
Celebrating their virtual contact high, everyone hugs each other. Then Eileen Naughton, Google VP of People Operations, promises to help fearful Googlers relocate to Canada. Sundar Pichai, Google CEO, drops broad hints that Google will be “adjusting” its search engines to deal with “filter bubbles.” No one comes right out and says Trump voters are Paleolithic neo-Nazis, but lots of hints are dropped— “tribalism that is destructive in the long term,” “voting is not a rational act,” “low-information voters,” and similar banal observations typically applied by the left to the right. VP for Global Affairs Kent Walker informs the rapt audience that Google’s “job is to educate policy makers.” (I’d always thought the company’s job was to build a search engine that gave the most accurate and neutral results possible, thus enabling people to educate themselves.)
Periodically, the prevailing narrative is interrupted by assurances that Google understands that conservatives may feel uncomfortable by disagreeing with the opinions held by every member of upper management and by what appears to be 100% of the members of the meeting. No one during the session stands up to offer viewpoints that differ in any way from the room’s prevailing zeitgeist.
The session reaches its penultimate point when the moistest white guy in the audience stands up and reads from a little script that urges everyone go through Google’s “unconscious” bias training (these programs are scams), watch a left-wing documentary currently playing at Google, and start political arguments during Thanksgiving.
As a Google stockholder, I was appalled. I found Brin’s delight over his employees’ easier access to a drug that makes you stupid and laugh at things that aren’t funny inappropriate. Were people who rely on Google’s much heralded navigation software going to have to worry that their self-driving car would one day run a solid red light and T-bone a minivan full of kids because a stoned Google programmer compiled the wrong code into the system while fumbling for a Twinkie to quell the munchies? That the people responsible for Google Maps may one day tell me to go left into a ravine instead of right onto a road because they were all sitting around giggling and not paying attention to the process of inputting accurate satellite data into their GPS mapping software?
The whole session was a PR disaster. It is very bad business to insult 50% of your potential customer base. I kept hoping that at some point a Google board member, perhaps one who’d attended the meeting on an impromptu basis, would leap on stage, throw a bag over Brin’s head, and drag him away before he could talk further. I started to speculate the whole get together was some sort of practice run for a Saturday Night Live satire about a group of rich, clueless, California high-tech nerds sitting around congratulating themselves for their inclusiveness while all believing and saying the same thing. But alas, no.
Book Details and History
- Item Weight : 1.8 pounds
- Paperback :679 pages
- ISBN-10 : 1590597214
- ISBN-13 : 978-1590597217
- LOC: 2019915097
- Dimensions : 5.98 x 0.93 x 9.02 inches
- E-formats: AZW3 and epub
- Publisher : Softletter; 3rd edition, (September, 2020)
- Language: English
The first edition of In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters was released in 2002. The second edition was released in 2006.
Worldwide sales for both editions are approximately 100k, with international versions having been released in Italian, Korean, Japanese, and Chinese, among others.
Italian Version, 2006
Japanese version of first edition. I have no idea what they were up to with this cover.
Selling Steve Jobs' Liver: A Story of Startups, Innovation, and Connectivity in the Clouds
Follow the adventures of serial-failure entrepreneurs Nate Pennington and Ignacio Loehman who through an accident of fate obtain Steve Jobs’ liver (the 1.0 version removed from his body in 2009’s transplant operation). Inspired by their good fortune, they begin their quest to establish a new company whose mission is to death and change the world. Assisted by Nate’s pregnant fiancé Angie Song, Russian “venture capitalist” Illarion Samsonov, and his brilliant (but very lonely) programming-genius nephew Boris, our crew pursues their dream as they:
• Ideate a brilliant sales and marketing plan.
• Innovate new technical solutions to monetize Steve Jobs’ liver.
• Inspire out-of-the box thinking as to overcome challenges and opposition to their business model.
Selling Steve Jobs’ Liver: A Story of Startups, Innovation, and Connectivity in the Clouds is a must read for anyone who’s dreamed of pursuing their passion, communicating great ideas, and putting a dent in the universe.