danajohnhill.org | Hard Times Come Again No More

Allow me to offer some free, unbiased financial advice. Do not buy stock in Facebook. Actually, allow me to qualify my statement, and offer some explanation. If you can buy Facebook stock on Friday when it goes public, go ahead. If you can buy enough of it you will make a fortune. But if you cannot get it when it goes on sale, forget it.

For the record, I use Facebook. I find it a convenient way to stay in touch with a small group friends and family, some of whom live in far away places. I may see most of these people in person on a regular basis, but some I cannot, and Facebook makes staying in touch much easier. I have frequently noted that I graduated high school just before the internet became the ubiquitous entity it is today, and, in spite of my best intentions, within a year or two of graduation, I found it impossible to keep tabs on the many friends whose company I enjoyed, but who had moved away to attend college or see the world. I wasn’t able to exchange email addresses with my classmates, and none of them knew at the time what their telephone numbers would be for the next six months, let alone six years. (Remember, too, that, at that time, almost no one had a mobile phone, and even those who did had to get a new number each time they moved.) Facebook, for better or for worse, has made it possible to keep up with the lives of the people you care about, even if you cannot be near them.

Facebook reportedly has nearly a billion active users worldwide, with revenue, mostly from advertising, at over $3 billion per year. When its stock goes public on Friday—at an initial price of nearly $40 per share—it is expected to bring in more than $100 billion, and make its CEO one of the richest men on earth.

But let us put this in perspective. The Coca-Cola Company, in business since 1892, sells well over a billion drinks every day. It earns tens of billions of dollars each year in revenue and employs well over a hundred thousand people. There is a Coke bottling plant in my town. The Ford Motor Company, in business since 1903, is the world’s fifth largest auto maker, selling millions of vehicles each year in the United States alone. Its net profit in 2011 was over $6.5 billion. Ford employs over two hundred thousand people not including the many thousands who work at Ford dealerships across the country, selling and servicing the vehicles. As I write this, Ford stock is trading at $10.28 per share; Coke is trading at $62.46 per share.

By the end of trading on Friday, who knows where Facebook’s stock will be trading? Maybe $75 per share. Perhaps $100. It will certainly be trading higher than Ford, but may trade higher than Coca-Cola, or even McDonald’s. It will be trading higher than Microsoft, the company that makes the software that a vast majority of Facebook users use to access the site. This defies reason. Facebook may have millions of users; it may be hugely popular; it may be open in your internet browser right now, but Facebook is not worth more than Ford, or Coke, or McDonald’s.

I am not saying Facebook is not a valuable brand. Obviously, with so many users, the potential for ad revenue is substantial. But the internet is an entity even more mysterious than the stock market, and history has shown us that investor enthusiasm for internet companies has a tremendously costly downside. America Online was once the most-used internet service provider in the United States. Its name was practically synonymous with “internet”. It became so large that it was able to buy Time Warner, the company that owns half of the entertainment you consume each year. A decade after the AOL/Time Warner merger, AOL had a net revenue of -$700 million per year.

I don’t know if I believe that Facebook will someday crash as spectacularly as AOL did, but I don’t believe it will be the final social networking site on the internet, and I don’t believe it will worth much ten years from now. Amazon.com is one of the few websites that survived the dot com bubble of the early 2000s and came out stronger. But Amazon actually sells things. Lots of things. So does Ford. So does Coke. Facebook doesn’t. In fact, if Facebook tried to sell its service, tens of millions of people would immediately stop using it. Likewise, the advertising that supports the site can only become so pervasive before users resent it and flee to some other, perhaps yet-to-be-developed service. This may already be happening. Ask yourself how Facebook, whose revenue is dependent on advertising, could become worth more than the Time Warner Company (trading today at $35 per share), which owns Time Warner Cable, and at least ten cable television channels, all of which are bursting with advertising. It doesn’t make sense. And when you consider how readily users abandoned Friendster and MySpace, the future doesn’t look bright for Facebook.

So, consider my warning: Unless you can buy Facebook stock when it goes on sale on Friday—and quickly dump it—don’t buy it at all, because I don’t see any way that, ten years from now, Facebook’s stock price will be anywhere near where it closes on Friday afternoon. And however popular it is today, no serious person could believe that Facebook will be around as long as Ford or Coke.

Filed under: Current Events, Technology on May 15th, 2012 | 5 Comments »

I saw the future tonight.

MLB.TV is like Netflix, insofar as you stream content through a device like a video game console, and select from menus like on Netflix. But instead of movies, you are selecting baseball games. Any baseball game, in fact, being played across all of Major League Baseball. So, want to see the Hated Yankees playing against the Orioles in Baltimore? No problem. St. Louis at Cincinnati? Sure. Kansas City at Oakland? Yep. You can even chose which announces you want to hear. That is, if you want to hear the regular Atlanta announcers in the game against Houston (playing tonight as the Colt .45s), you can do that. Or you can hear the Astros’ announcers. And, unlike, say, a DVR, which only allows you to rewind an unrecorded program as far back as the moment you tuned in, this service lets you rewind any game to the very beginning. Oh, and when the inning ends, instead of going to commercials, you see a blank screen. It’s enormously refreshing.

In 1989, Back to the Future, Part II predicted that by 2015 we would have hoverboards, flying cars, and holographic billboards for Jaws sequels. It didn’t predict this.

Filed under: Sports, Technology on April 10th, 2012 | No Comments »

Anyone who has had the misfortune of speaking to me in the last year and a half will know I am nearly obsessed with my beloved AR-3a loudspeakers. As I wrote at the conclusion of my project to restore them last year, these speakers are amazing. I could not love a non-living thing any more. I learned last Monday that the man behind these wonderful loudspeakers has died.

Edgar Villchur, who was ninety-four years old, gave the world the acoustic suspension loudspeaker. The AR-1, made by his company, Acoustic Research, changed the way speakers were produced. Unlike many of the existing speakers at the time, his speakers were fully enclosed, and virtually airtight. The vacuum inside would cause the drivers to “spring” back to their proper position automatically, whereas other speakers at the time used actual mechanical springs, and the cabinets that enclosed them were enormous. With Villchur’s technology, people could finally have loudspeakers that were unobtrusive in the home. My AR-3as are actually quite handsome, with walnut cabinets and grill cloths of Irish linen. Stereophile and The Absolute Sound will tell you that the 3a is at or near the top of the most important loudspeakers ever created.

For me, though, it isn’t the innovative technology or the appearance of my AR loudspeakers that makes me love them. It’s the sound. These speakers have changed the way I hear music. My enjoyment has been increased in ways I cannot fully articulate. Considering how important music is to me, I can, without hyperbole, tell you that they have made my life better. For that I am extremely grateful to Edgar Villchur.

Filed under: Current Events, Technology on October 24th, 2011 | No Comments »

Something must be done. I cannot live like this.

I receive hundreds of email messages each day. Approximately five of them are legitimate. The rest are what is commonly called spam. I get messages about pills, investing, internet auctions, vacation deals, and countless other things, but none are authentic communications from parties with whom I have any relationship whatever. On the contrary, many of these messages claim to have business with me, but manifestly do not.

Some of these spam messages attempt to deceive me with realistic looking subject titles, like “Student Loan Information”, or coincidentally come bearing the name of someone with whom I regularly engage in correspondence. In this way I sometimes click on a message believing it to be from my friend Anthony, only to find it is not. Sometimes, however, the spammers don’t even seem to be trying. “Follow-up to our talk about refinancing your house” is one I have received. Really? How absent minded would I have to be? One I got today was “Shocking Tim Russert Sex Tape”. Even if this was a real thing, why on earth would I want to see that? I mean, if I got one that said, “Shocking video of you eating cookies in your yard”, yeah, maybe I’d think that was real, and I’d be concerned enough to click a link. But the other thing? No way.

I hesitate to say anything about this here for risk of attracting more attention from spammers, but I assume many of them are robots anyway and don’t know the difference.

Something must be done. I have been using Mozilla Thunderbird for a month or so, and I have it set to filter junk mail, but I still have to regularly sift through the junk to see if any genuine correspondence has been misidentified. Every day something is. Is there a better way to handle this?

Filed under: Technology, Website on October 17th, 2011 | 2 Comments »

Since Wednesday, people have been tripping over themselves to hail Steve Jobs the best person in the history of the world. That is hyperbole, obviously, but if you have watched the news, held a newspaper, or read a blog this week, you know what I am talking about. Jobs had legions of admirers, and I don’t begrudge him that. But I think people are getting carried away.

I know many people who use an Apple product of some sort or another. Mrs. Hill uses an iPhone, and many of my friends and classmates have iPods and iMacs. Some of these people, like Miriam, find their Apple product useful, and appreciate whatever convenience it offers, but have not succumbed to the Cult of Apple. Others, however, are obsessed. Sadly, many journalists are in the latter group. I get why. They have iPads and iPhones and apps and all that, and since it’s cool to them they suppose it’s cool to everybody. And I admit, I have seen some iPhone apps that I have thought interesting and even amazing. But the coverage Jobs’ death has received seems somewhat out-of-proportion, as do the accolades some have gone out of their way to heap upon him.

Is the iPhone cool? Sure. But it wasn’t a radically new idea. The iPad is just a bigger iPhone, or, more accurately, a smaller, less-capable notebook computer. And the iPod, while ubiquitous (indeed, you cannot cross a college campus or ride any public transit system without seeing legions of them), is just a small Walkman. People have had it for decades. I don’t even think the iPod was the first portable MP3 player. None of these products was really shockingly new or revolutionary. Steve Jobs was no Johannes Gutenberg or Thomas Edison. I don’t mean this as a criticism of Mr. Jobs, and, to the best of my knowledge, he never compared himself to those great inventors. My point is merely that some in the media have treated him that way.

Was Steve Jobs a great businessman? Given the apparent success of Apple, I’d say undoubtedly. But far more than technological innovation, I think Jobs’ success with Apple was due to clever and aggressive marketing. And when I say aggressive I mean extremely aggressive. Apple commercials have been, and continue to be, omnipresent. Television commercials, print ads, and billboards for Apple products are everywhere, and these ads have been perfectly crafted to appeal to a certain type of consumer. In one type of commercial, Apple uses a catchy, sing-along-type song that viewers cannot forget. This is a tactic that many companies have used, but Apple did it with remarkably effective simplicity. In another commercial campaign–and one that I hated–Apple took two guys, one representing a Mac, the other representing a Windows-based PC, and made the actor representing the PC appear foolish or stupid. Again, the hipster-quotient was excessively high in these ads. The last campaign I will mention is one I think truly insidious. The “If you don’t have an iPhone…” commercials, which feature shots of the iPhone, while a narrator tells you that, “if you don’t have an iPhone, you don’t have an iPhone”. Obviously. But what the commercial is trying to say is that if you don’t have an iPhone you are not cool; you are not relevant; you are not a good person. That campaign appeals to the basest acquisitive consumer impulses. It’s the ugliest sort of advertising: buy this or you’re nobody. The folks at Conan did a pretty accurate parody of an Apple commercial last April:

The title of one of the many op-eds that appeared following Steve Jobs’ death this week hit on something that reminded me of this comedy bit. “Steve Jobs, Enemy of Nostalgia“—which appeared in the New York Times, a newspaper published in the heart of Apple-country—is about the Apple CEO’s lack of reverence for any technology. “One of the keys to Apple’s success under his leadership”, writes Mike Daisey, “was his ability to see technology with an unsentimental eye and keen scalpel, ready to cut loose whatever might not be essential”. Apple customers who found their iPhones or iPads suddenly usurped by a newer, more-expensive model, must understand the drawback of such an “unsentimental” business model.

Granted, a key requirement for success in business is making people buy something new when they already have something old. Light bulbs burn out, cars break down, and clothes go out of style. But Apple fanatics seem have had to endure this to an absurd degree. And if, as Mike Daisey argues, Steve Jobs was an “enemy of nostalgia”, all the focus on buy-and-replace makes sense. Apple users, then, are not meant to experience long-lasting relationships with any single technology, because the future success of Apple requires that these users embrace a new technology. That may be a smart business strategy in the short term, but what will it mean in years to come?

Whether or not any aged hipster will one day write a “Long May You Run”-style ballad about his old MacAir is probably not important. But the anti-nostalgic mind is capricious and is always searching for the new thing. Apple may have seemingly-faithful users today, but if they are as unnostalgic as Steve Jobs, they will only stay if Apple appears to be the newest. If their products are not unique, and their marketing style is easily imitable, what will happen when someone comes along and out Apples Apple?

Filed under: Current Events, Musings, Technology on October 9th, 2011 | 4 Comments »