Moonwatcher

Which way do you see the world?

Compare this image (click for larger image):

with this one (click for larger image), created by Trey Ratcliff:

Which way do you see the world? There's a powerful lesson there.

What I Tweet About

These days I, uh, tweet a lot more than I, er, blog. Here's what I tweet most about, according to tweet cloud:

The Expected Effects of the Public Option and Mandated Coverage on Health Insurance Premiums and Total Medical Expenditures

This is a paper I wrote for my Health Economics class. I originally shared it on Google Docs, but due to popular demand (well, from one person anyway :) I'm cross-posting it here. Comments welcome.

The Expected Effects of the Public Option and Mandated Coverage on Health Insurance Premiums and Total Medical Expenditures

Charlie Wood
November 30, 2009

On November 7, 2009 the U.S. House of Representatives passed HR 3962, a comprehensive health care reform bill that included among its numerous provisions the creation of a health insurance program to be operated by the federal government, commonly called "the public option", and a mandate that most legal U.S. residents obtain health insurance.¹ This paper examines how the combination of the public option and the individual mandate should, all else equal, be expected to affect health insurance premiums facing both participants and non-participants in the program and total medical expenditures.

What is the Public Option?

In order to analyze the effects of the public option it is important first to define it. The public option as described by HR 3962 is a government-operated health insurance program that will offer coverage to legal U.S. residents who are not covered by existing government programs like Medicare or Medicaid and who do not have insurance through their employers. Reimbursement rates for health care items and services will be negotiated with health care providers by the government. The premiums charged to participants will be required to cover the cost of the program itself, including startup costs, benefits, administrative costs, and a "contingency margin" of at least 90 days of estimated claims. Benefits and premiums for the various levels of coverage available under the public option will be published online. In addition, although participation in the public option itself is voluntary, HR 3962 includes a mandate that most legal U.S. residents obtain health insurance coverage.

Effects on Premiums Faced by Those Not Covered by Group Insurance

People eligible for the public option will see the most immediate, direct effect on the premiums they face for health insurance. Since they are covered by neither employer-provided plans nor government programs like Medicare or Medicaid, those people currently have two options: forgo health insurance altogether or purchase individual coverage, which is typically very expensive.

Four main factors contribute to the high premiums in the market for individual health insurance: adverse selection and a lack of economies of scale, both of which increase the insurer's costs, and the market's oligopoly structure and limited price transparency, both of which allow insurers to set prices above marginal cost. Together the public option and the individual mandate address each of these factors, which should lead to lower premiums.

First, the information asymmetry inherent in the market for health insurance can lead to adverse selection and ever-increasing premiums. People generally know more than their insurer about how much health care they're likely to consume. Relatively healthier people, that is, those who expect their health care expenditures to be less than the premiums they face, can simply opt out and not buy insurance. The remaining pool of people is relatively less healthy and will therefore incur higher average health care costs, driving up actuarially fair premiums (AFP's). Again, the healthiest people in the group opt out of insurance and the cycle repeats, driving premiums ever higher. The individual mandate included in HR 3962 prevents this cycle by requiring most legal residents to carry qualifying health insurance, solving the problem of adverse selection and substantially lowering AFP's.

Second, the cost of insuring individuals is significantly greater than that of insuring groups due in large part to the economies of scale enjoyed by group insurers. Loading fees for individual policies ranges from 60%-80% of benefits, while those of groups of more than 1,000 are only 5%-8% of benefits.² The public option is a group plan expected to cover millions of people, and should therefore enjoy significant economies of scale.

Third, the health insurance industry is not a perfectly competitive market, as evidenced by the fact that insurers are able to generate and sustain profits.³ In fact, individual health insurance markets are typically oligopolies dominated by their top three firms.⁴ As oligopolists, private insurers set prices above marginal cost (P_O in Figure 1) and provide an economically inefficient quantity of insurance (Q_O).


Figure 1. Oligopolistic vs. Competitive Pricing

Since the public option is required to (and presumably, only allowed to) break even, it acts as a competitive firm, setting premiums equal to marginal cost and thereby lowering premiums faced by consumers from P_O to P_C.

Finally, since information about benefits and premiums for the public option will be easily available via an online exchange established by HR 3962, consumers will enjoy increased price transparency, leading to more competition and lower premiums.

One factor that would make the public option more expensive for some people than it would otherwise be is the requirement that it not vary premiums to reflect differences in enrollees' health. While such a community rating system benefits sicker participants, to cover its costs it does so at the expense of those who are healthier, since they would pay lower premiums if their good health could be taken into account as with experience rating. However, some risk-adjustment mechanisms for the public option are specified and allow premiums for the oldest participants to be twice those of the youngest, helping to mitigate the issue.

By solving the problem of adverse selection with an individual mandate, taking advantage of economies of scale, setting prices equal to marginal cost, and increasing price transparency, the public option is expected to offer premiums that are lower than those currently facing people not covered by group insurance.

Effects on Premiums Faced by Those Covered by Group Insurance

Two other groups will be eligible for the public option in addition to individuals not currently covered by group insurance: employees of small businesses that choose to participate in the public option and workers with employer-based coverage whose existing premiums exceed 12 percent of their income.

Even though the public option will enjoy greater economies of scale than do private plans for small groups, it will still be smaller overall than existing large insurers and will, according to the Congressional Budget Office, "probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees," and will, "typically have premiums that are somewhat higher than the average premiums for the private plans."⁵ Higher premiums will provide no downward pressure on premiums for existing employer-provided plans.

Effects on Total Medical Expenditures

Total medical expenditures are determined by the prices paid for medical care and the quantity of care consumed. The public option's impact on these factors will determine its effect on total expenditures.

While larger insurers are able to negotiate lower rates with providers, the Congressional Budget Office estimates that the administrator of the public option will have limited price negotiating power, and that therefore, "The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers."⁶ In other words, the public option will not have an appreciable effect on prices paid for medical care. Its effect on total medical expenditures will therefore be determined by how it impacts the quantity of care consumed.

Demand for certain types of medical care is elastic, and in such cases the quantity consumed depends not on the prices actually paid to providers for care, but the effective prices facing the consumer. The public plan's limited cost-sharing makes these two prices different. For instance, demand is elastic for both well care and mental health care.⁷ Both are covered by the public option, so program participants will face lower prices for these services (shown as P₁ in Figure 2) than the prices actually paid to providers (P₀). These artificially low prices will lead people to consume more of these services than they would otherwise.⁸


Figure 2. Increasing Medical Expenditures Due to Increased Utilization

Since the prices paid to providers are expected to remain the same but the quantity consumed should increase, total medical expenditures should be expected to increase.

Conclusion: Lower Premiums for Some, Higher Total Medical Expenditures

The public option is only one of many provisions of the health care reforms being debated in the Congress, and will affect more than just health insurance premiums and total medical expenditures. Nevertheless, its expected effects on these two important facets of health economics are clear. Health insurance premiums facing people not currently covered by government- or employer-provided programs should be significantly reduced, while those for others should remain largely unchanged. Prices paid to providers for medical services should remain unchanged, but consumption should increase. As a result, total health care expenditures should be expected to increase.

---

¹ Sweeping Health Care Plan Passes House, The New York Times, 7 November 2009
² Charles E. Phelps, Health Economics, Fourth Edition (New York: Addison-Wesley, 2010), p. 350
³ Fortune 500 2009, Fortune Magazine, 4 May 2009
⁴ Private Health Insurance: Research on Competition in the Insurance Industry, United States Government Accountability Office, 31 July 2009, p.3
⁵ Preliminary Analysis of H.R. 3962, Congressional Budget Office, 29 October 2009, p. 6
⁶ Ibid
⁷ Phelps, pp. 131, 134
⁸ This overconsumption due to artificially low prices, or moral hazard, creates deadweight loss, but welfare issues are beyond the scope of this paper.

Microsoft plays Dodge-ball, loses badly

No longer content merely to drift into irrelevance, Microsoft is now actively trying to sabotage itself—and nary a tear will be shed. Now, go follow @dondodge.

Google Reader refuses to mark this entry as read... Coincidence?

Uncovering Steve Jobs' *Real* Presentation Secrets

BusinessWeek stole the idea, and even the headline, for this blog post. But I thought of it first. And mine's better.

Steve Jobs is the CEO of the Decade. He's a multi-billionaire. And he's the best presentation presenter in the world. So what's his secret? Actually, he has exactly three of them. And by using these secrets, you can be the best presentation presenter in the world too. Here they are:

3. Make the best products in the world

This one is so obvious that most people overlook it. It's hard to present a great presentation without something great to present. So first, create something everybody in the world wants, like a Mac, an iPod, or an iPhone, then give a presentation about it. Once you do, you'll be on your way to being the best presentation presenter in the world.

2. Present them

Once you've made the best products in the world, don't make the common mistake of forgetting to present them to people. Find a stage, go up on it, and turn towards the audience. Then hold up these best products in the world that you've made and smile.

Also, feel free to go ahead and tell people that your products are the best products in the world, just in case they don't understand why you're smiling.

1. Be Steve Jobs

But the most important Steve Jobs presentation secret? Be Steve Jobs. Duh.

Google vs. Microsoft: One Developer's View

This article in the New York Times ponders Microsoft's seeming drift into irrelevance and quotes Google's Dave Girouard as saying, "The big difference in technology here is the pace of innovation." But as a developer using both Microsoft and Google technologies, I can tell you what the difference is.

When I wanted to develop a new service using Google's technology their first question was, "How can we help?" When I wanted to develop using Microsoft's their first question was, "Where's your check for $100,000?"

True story.

Take 30 seconds to help defeat Joe "You Lie!" Wilson

Joe Wilson last night made himself instantly notorious by shouting "You lie!" during President Obama's address to a joint session of Congress. He's up for re-election.

Wilson is being challenged by Rob Miller, a retired Marine who served two tours of duty in Iraq. I just made a donation to Miller's campaign and urge you to as well.

Here's Rob Miller in his own words on why he's running for Congress:

I never thought I would run for Congress -- or feel like I had to. I have always thought of myself as a Marine. I started thinking that way not long after my father died when I was 14 years old. Since I enlisted at the age of 20, the Marine Corps has been my extended family and I couldn't imagine that would ever change.

But it did after my second tour of duty in Iraq -- where I fought to maintain the peace, but also to enable Iraqis to build better schools, improved hospitals, to help create jobs and, where possible, a stable economy and civil society.

When I returned home to my wife and six year old son, I saw that the politicians in Washington were not fighting for these same things at home. Worse, the congressman who represented the second district where I live -- Rep. Joe Wilson -- was part of that elite circle of George Bush loyalists who chose to enact a radical agenda, never mind the lives and wellbeing of the constituents he was pledged to represent.

Since last night, Rob Miller's campaign has raised over $500,000. You can track his progress toward $1 million here.

Last night Joe Wilson showed a shocking lack of respect for the presidency of the United States. He should now be shown the door.

Brad and Angelina--I mean Steve and Eric--Split!

In a post I wrote last February titled End of the Honeymoon for Apple and Google, I said:

Celebrity marriages are hard to maintain and often end in very messy, very public divorces. But for the moment at least, Apple and Google are still together. Eric Schmidt still sits on Apple's board, but now recuses himself from mobile phone discussions at board meetings. Presumably he'll need to start doing the same when the subjects of online productivity applications—or photo applications for that matter—come up.

The news this morning: Dr. Eric Schmidt Resigns from Apple's Board of Directors:

"Unfortunately, as Google enters more of Apple's core businesses, with Android and now Chrome OS, Eric's effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple's Board." —Steve Jobs

This marks a sad turning point in the relationship between the world's two most innovative companies. I'm sure Jennifer Aniston, er, Steve Ballmer is pleased.

How to Auto-Connect Your iPhone to AT&T WiFi Hotspots

From the AT&T site:

iPhone OS 3.0 Software Apple® iPhone™ users, get started with Wi-Fi

If you purchased an iPhone 3G S or updated your original iPhone or iPhone 3G with the latest Apple iPhone OS 3.0 software here's how to access AT&T Wi-Fi Services:

1. Activate Wi-Fi from the settings icon on your iPhone.
2. Once you are in an AT&T Wi-Fi Hot Spot, select "attwifi" from the list of available networks.
3. Every time you enter an AT&T Wi-Fi Hot Spot, you will be automatically and securely logged into the AT&T Wi-Fi network.
4. Enjoy surfing at broadband speeds.

Finally, a reason to go to Starbucks.

And before you ask, Macworld explains why this is a big deal:

Last year, AT&T granted its iPhone-using subscribers free access to what’s now 20,000 McDonald’s, Starbucks, airports, and other locations in AT&T’s U.S. hotspot network. But the process of logging in was tedious. At the hotspot, you had to enter your phone number, receive a free SMS, and then click a link to gain access. (App developer Devicescape made this process much easier via its Easy Wi-Fi apps.) iPhone OS 3.0 automates that process, not just for AT&T but for non-U.S. carriers who include Wi-Fi access in their plans.

As soon as you’re in range of an AT&T hotspot, the iPhone logs in and switches to the network. AT&T was so excited about dumping its terrible old method of logging in that it even issued a press release. The carrier says that there were 4 million smartphone connections at its hotspots in the first quarter of 2009—and I’d bet that most of those were iPhones. (Here’s AT&T’s motivation in making it easy to use its Wi-Fi network: Every byte of data that moves from the cellular network to Wi-Fi reduces cell network congestion, making the overloaded cell network function better for everyone else.)

Happy Flag Day!

From Wikipedia:

In the United States, Flag Day is celebrated on June 14. It commemorates the adoption of the flag of the United States, which happened that day by resolution of the Second Continental Congress in 1777.

In 1916, President Woodrow Wilson issued a proclamation that officially established June 14 as Flag Day; in August 1949, National Flag Day was established by an Act of Congress.

Define: Pent-Up Demand

How Many Googlers Does It Take...

Here's a Fermi question for you: How many Googlers does it take to run Google?

More specifically, what's the minimum number of people required to run Google's money-making operations? Anyone care to hazard a guess?

(My estimate: the AdWords sales team, a few of these guys at each data center, and an accountant. Oh, and the Google Apps group. :)

How Important is iPhone Tethering Anyway?

According to published rumors the next iPhone OS supports tethering. But how important is this feature?

Initially I thought, "Awesome! Now my Mac can access the Internet even when there's no Wifi! I'll use this all the time!" But when I tried to think of how often that happens I came up empty.

The only places I find myself without Wifi are actually places that do have it but charge for it: usually Starbuck's, airports, and hotels. And at a rumored $15/month for tethering, it would be cheaper just to pay for the WiFi.

At our cabin in Colorado we have great Wifi but no cell coverage. Same with most convention centers. (Have you ever tried to make a call from the bowels of Moscone South?)

So while Apple and AT&T have been figuring out the details of tethering, WiFi has become more ubiquitous than cell coverage—at least for me.

Another Huge Step Away from the Phone in iPhone

Steps Toward a Phoneless iPhone

The iPhone is great, revolutionary, amazing. But it's a compromise device and only a stepping stone between plain old cell phones and the real revolution: the iPod touch.

And with Skype that real revolution just got one big step closer.

The "Great Recession" as an Economic Stress Test

It occurs to me that this "Great Recession" (and to paraphrase Axl Rose, what's so great about recessions anyway?) might wind up serving as a fascinating experiment: a no-holds-barred stress test of the economies of countries around the world, and of the global economy itself.

Last week I read Daniel Suarez's Daemon, a techno-thriller in which an artificial intelligence threatens to take over the world. (Ha!) In the book, companies and governments are motivated to comply with the AI's demands by the threat of an unthinkable economic apocalypse. Well, since Mr. Suarez wrote Daemon, that apocalypse has become not only thinkable but, according to the news, actual. And although we may not have seen the worst yet, life goes on.

When we come out of this thing on the other side, will we as a country and a world be forever weakened? I doubt it. We may come out not only stronger but also, having passed a serious stress test, more aware of our strength than ever before.

Google Graphing "Real" Social Networks?

Facebook is great, if that's how you happen to communicate with your friends. I don't. I suppose it's due to my age, but I tend to connect with my friends and acquaintances mostly in email and on the phone. Interestingly, Google seems to be building social networking infrastructure not only for the web (with OpenSocial) but also for these more traditional communications channels—with Gmail and Grand Central Google Voice.

From the Grand Central Address Book page:

Use the "Recent" link to see contacts that you have talked with lately

So Google knows whom you've talked to recently. Interesting.

Gmail doesn't currently expose a list of recently-emailed contacts, but it goes provide a "most contacted" list. It's not clear what information is being stored beyond the number of emails sent to each contact, but the "updated" field of the contact record itself—accessable via the Google Contacts Data API—is touched, and it's entirely reasonable to assume that a complete history of emails sent and received is being maintained.

Google's phone-and-email approach is slower and more difficult than Facebook's (Gmail has somewhere north of 51 million users compared to Facebook's 175 million, and Google Voice is just getting off the ground) but it's potentially much farther-reaching. There are roughly 1 billion email users in businesses alone, and over 4 billion mobile and fixed-line phone subscribers.

In the long run, graphing real social networks by watching traditional communications channels—and integrating that data with online networks outlined by OpenSocial—could allow Google to assemble much more useful information than Facebook's walled-garden approach.

It will be interesting to watch this over the next few years.

Making Better Teams by Supporting Remote Members

My post last week spurred some very interesting conversations in the comments, on the Enterprise Irregulars mailing list, and (gasp!) in person.

As Atlassian CEO Jeffrey Walker pointed out, "Humans create wonderful things as physically connected teams. Things that are very hard to do virtually. ... I welcome competitors who think otherwise." I appreciate the sentiment, and agree that interpersonal bonds between team members can have a big influence on their output, but I'd argue that it's possible to create and maintain those bonds at a distance, and that doing so is increasingly easy with tools like Twitter, FriendFeed, and Facebook.

As someone on the EI list put it so well, "We may be distant. We may have never met face to face. We may be simply using a strange new medium to connect. But it all works, and the humans behind the bits are what matters."

Others pointed out that some job functions lend themselves to remote work better than others, which is surely true. Customer-facing roles are probably the easiest to single out as appropriate for online work, at least in the case where that's where the customers are.

For instance, as a developer I like to get my information online. I may actually get on a plane to attend a conference once every now and then, but for for the most part I prefer the higher bandwidth (and higher signal-to-noise ratio) of online resources. If you want to connect with me, you better be prepared to do it online.

Finally, I had a great conversation with Clay Spinuzzi, an associate professor at UT who's writing a book on modern working arrangements. We talked about the awkward dynamic of a team comprised mostly of people working in the same physical space but with one or two members working remotely. We agreed that such an arrangement is problematic, and that the remote workers would no doubt become marginalized. But then it struck me: maybe the fact that a team can't support remote members effectively is an indication of a problem with the design of the team.

In the same way that an on-premise system that uses proprietary protocols and can't connect to cloud-based systems is severely limited, so is a team that relies on in-person communications among its members.

The good news here is that technologies (dare I call them "social"?) like Twitter and its more business-oriented knockoffs make it possible to translate much of the casual, interpersonal communication that has traditionally happened over the cubicle walls in an office to online, asynchronous, geographically-distributed teams. In other words, Twitter is the new water cooler—which comes as absolutely no surprise to anyone who uses it.

When two machines sit next to each other in a server room it doesn't really matter what networking technology they use to communicate: AppleTalk, NetBIOS, and Banyan VINES will all get the job done. In fact, so will a serial cable—and one might argue that this is in fact the best solution since it requires the least overhead. But TCP/IP will work too, and with the added benefit that if you move one of the machines across the world it will still "just work" thanks to the vast infrastructure of the Internet. I suggest that the same is true for intra-team communications.

Teams built to rely on electronic, and more specifically Internet-based, communication channels can include remote members transparently, and can therefore be comprised of not only the best people in town but the best people period.

Google and Salesforce: Compute in the Cloud but Work On-Premise

There's no small irony in the fact that Google and Salesforce.com, two of the biggest cheerleaders for on-demand applications, want their employees to be on-premise. At least that's where they both wanted me to be when they talked to me about working for them.

On-demand—or more currently "cloud computing"—vendors have painted a picture of IT managers who insist that their IT infrastructure remain in the building as backward and retrograde. "Control is an illusion," they say. "Our servers are more secure than yours anyway, and more efficient." And I agree. But I think the same is true for people.

At Spanning Sync, we're essentially all remote workers. I have an office, but Larry and Byron don't work there. In fact, I'm not sure where they work, and I don't care. Likewise, they don't care, and usually don't know, where I am. Sometimes I work from home, sometimes from my office, sometimes from campus, and sometimes from a hotel room or an Admiral's Club. All we care about is that the work gets done—and it does. I would have guessed the same to be true at Salesforce.com and Google, but I would have been wrong.

A couple of years ago Adam Gross at Salesforce approached me about working for him as a developer evangelist. I said I was very interested (Salesforce was and is one of my favorite companies, and that's a role I enjoy) but that I was settled in Austin and wouldn't consider moving back to San Francisco. He said that wouldn't be a problem, since my "territory" would be "online" as opposed to a specific geographic region.

So I flew out to San Francisco, interviewed with a bunch of smart people at One Market Street, and a few days later received an offer. We negotiated the terms and agreed on a start date. But a few days after that I got a call from Adam. Marc Benioff wanted the position to be based in San Francisco, so that was the end of that. It was a huge disappointment.

Last year I had a similar (but slightly more complicated) conversation with some people at Google, another one of my favorite companies. It unfolded in much the same way: I flew out to Mountain View and interviewed with a bunch of smart people at 1600 Amphitheatre Parkway. They call the role "developer advocate" to avoid the religious overtones of "evangelist", but it's the same idea. For me the position would have been a dream job. But to get it, I was told I'd need to move back to the Bay Area. This time the disappointment was even bigger.

In the end it all worked out for the best. Running Spanning Sync is the most thrilling professional experience I've ever had, and I wouldn't be able to do this if I were working anywhere else. But I hope that the way my little company works becomes more the rule than the exception in our industry. The natural place for that to happen next is at the companies that best understand the value of on-demand resources.

$500 Referral Fee for the Person Who Finds My Sister Her Next Job

I'm currently working on adding an economics major to my computer science degree, so when I learned that my sister Martha had just been laid off from her tech writer/editor position at Freescale here in Austin, I saw her job search as an opportunity cost problem.

She's already begun her search for a similar position here in town and will undoubtedly find something suitable. But there's an opportunity cost for the time she spends searching (and not earning).

It occurred to me that she would come out ahead if she could pay to reduce that amount of time as long as her out-of-pocket cost was less than the opportunity cost of the time saved. (Dr. Hickenbottom, do I get extra credit for this?)

This is also an interesting opportunity to crowdsource a job hunt, something I've never done before.

So I called her up and asked if I could offer a $500 bounty to the person who finds her her next job. She agreed (and will be paying the $500 herself), so that's the offer:

The first person to lead her to the job she winds up taking gets $500.

Specifically, she's looking for a full-time technical writer or editor job in the Austin area. She's held similar roles at companies as diverse as ichat, HP, and Freescale, and is exceptionally smart and very professional.

Please don't bother sending in every listing on Monster.com. You're guaranteed not to be the first person to send any of those in. This is for people who personally know of an open position and can make the connection.

Please email your job leads to martha.wood.jobs@gmail.com. And as always, you can reach me directly at charlie.wood@gmail.com.

This should be interesting!

Update: In the week since I posted this, several people have sent in job leads that Martha is pursuing. But she hasn't decided on one yet, so there's still time to submit yours.

Is Your Company About to Become a Victim of Its Own Success?

The good news: your company is growing, which in this economy is a testament to your hard work and foresight. The bad news: you're about to become a victim of your own success because your customer service is reactive, and therefore always a step behind. What do you do?

You know they need to get ahead of the power curve in service before it becomes a serious drag on your business, but your can't just call a time out while you figure out how to do that. You certainly aren't going to call some big consulting company to help—after all, you need results now, not a 250-page analysis six months from now. And although you'd like to hire an ace service expert, that's expensive in both money and time.

To help companies in exactly this situation, my good friend Jay Grady and his co-founder Lester Thornsberry have just launched Bootstrap Service. Between the two of them, Jay and Lester have an excellent track record of building proactive service organizations, including those at Motion Computing, Vignette, Fujitsu, and Wyse, and others. Now they're providing their services to SMB's that recognize the strategic role of service. They can help with tool selection and implementation, strategy, vendor management, organizational development, and everything else you need to improve and scale your service.

They're blogging so you can get a feel for their philosophy, which spans John Madden, plumbers, and fruit.

End of the Honeymoon for Apple and Google

Apple and Google used to be the Brad Pitt and Angelina Jolie of the tech world: beautiful beyond reason, wealthy beyond measure, and totally in love. So how did it come to this?

In 2006 Google CEO Eric Schmidt was named to Apple's board of directors. In 2007 Apple and Google took the top two spots in BusinessWeek's ranking of the World's Most Innovative Companies. Apple built Google search into Safari and the iPhone, and incorporated Google Maps into many of its applications. Google took pains to make their applications work for Mac users. They both hated Microsoft. It seemed like a match made in heaven. But little by little, things changed.

In mid-2007, there was a rumor spreading around the valley that Google and Apple would team up on a cloud computing initiative, possibly by replacing Apple's neglected .Mac service with a branded version of Google Apps. Eric Schmidt seemed to favor such an arrangement when he told Wired News, "We're a perfect back end to the problems that they're trying to solve." But he went further—probably too far. "They have very good judgment on user interface and people. But they don't have this supercomputer [that Google has], which is the data centers. What they have is a manufacturing business that's doing quite well."

Telling Steve Jobs that Apple is "a manufacturing business that's doing quite well" is like telling Bill Gates that Windows is a "poorly-debugged set of device drivers". One year later, Apple responded by launching MobileMe, a set of applications that includes online email, contacts, and calendars. Like Google Apps, but with over-the-air iPhone syncing. But the sparring wasn't over.

At the end of 2007, only five months after Apple's spectacular release of the original iPhone, Google announced Android, a competitive mobile platform. Steve Jobs responded by telling the New York Times that Android would "divide [Google] and people who want to be their partners." Like all celebrity feuds, the one between Apple and Google had moved into public view and was now taking place in the press.

In early 2009, Google announced that it had ported Picasa, its iPhoto replacement, to the Mac. Apple announced iWork.com, which is similar to but not the same as Google Docs. By this time no one was surprised by the passive aggression.

Yesterday Google launched Google Sync for iPhone, which adds the over-the-air sync functionality (perversely, using a Microsoft protocol both companies had to license) to Google Apps that has until now been the defining feature of MobileMe. Suddenly Cupertino and Mountain View seem a lot farther apart.

Celebrity marriages are hard to maintain and often end in very messy, very public divorces. But for the moment at least, Apple and Google are still together. Eric Schmidt still sits on Apple's board, but now recuses himself from mobile phone discussions at board meetings. Presumably he'll need to start doing the same when the subjects of online productivity applications—or photo applications for that matter—come up.

Apple and Google are two of my favorite companies. I hope they find a way to stay together. (And if they don't, as my friend Chris Selland points out, who gets custody of Al Gore?)

Google Starts Publishing a Changelog for the Calendar API

When I was at Google in Mountain View last year I met with several of the people on the developer advocacy team. Each of them asked me what improvements they could make to better serve the developer community. My immediate answer was, "Version your services and publish a changelog for them." And lo and behold, they're now doing just that!

Thanks, Google! And more specifically, thanks to Ryan, Trevor, Lane, Michael, Dick, Dion, Vic, Sebastian, Jarek, Tomek, Sergey, and the dozens of other individuals I've dealt with who actually make the changes that better serve the developer community.

Just kidding about Sergey.

President Obama

I remember watching President Bush's address to the nation after the attacks of September 11 and thinking, "I sure am glad that man, and not Al Gore, is President now."

Yesterday, watching President Obama's inauguration I had a similar thought: "I sure am glad that man, and not George Bush, is President now."

I can only hope my faith in our President is better-placed this time.

Google Starts 2009 by Rationalizing Their Business

A long time ago (well, OK, two weeks ago) Fred Wilson wrote out a list of things he was hopeful for in 2009. One of those things was that Google would start "rationalizing their business":

Google can do almost anything they put their mind to because they have the engineering resources, the infrastructure, the balance sheet, and the huge revenue stream to support it. But that doesn't mean they should try to do everything. As a shareholder, as a VC active in the internet market sector, and as a fan of the company, I think Google needs to "rationalize" their business in 2009. I don't know how much cost they could cut if they really tried to get serious about a Jack Welch/GE style business unit analysis, but I know it would be significant. I wish they'd pick five to ten businesses they want to be number one or two in and invest heavily in them and forget about everything else.

This morning the news is out that Google is doing exactly that by scaling back or outright closing Google Video, Notebook, Catalog Search, Jaiku, and Dodgeball. The company is also laying off 100 recruiters and consolidating its engineering offices, including the one in Austin which opened to much fanfare just three months ago.

All of this might presage disappointing Q4 earnings (which will be announced next week). But to me as a GOOG shareholder, it all comes as good news. Google spends a ton of money on projects that are neither revenue-generating nor obviously strategic. Shortly after he joined Google as the company's new CFO Patrick Pichette said that his top priorities include "pushing to make sure all the resources are used efficiently, that you feed the winners, starve the losers".

It looks like Google is doing just that, which gives me even more confidence that they'll continue to succeed, even in the lean years.

[Chain Letter] 7 Things About Myself

OK, I'm game. I've been tagged in an Internet chain letter thingamajig and am expected to follow these rules:

• Link your original tagger(s), and list these rules on your blog.
• Share seven facts about yourself in the post - some random, some weird.
• Tag seven people at the end of your post by leaving their names and the links to their blogs.
• Let them know they’ve been tagged by leaving a comment on their blogs and/or Twitter.

Here goes:

1. I can count to 15 on four fingers pretty fast
2. I can sleep any time, anywhere
3. I see the number 1101, or 11:01, or 13, or D a lot
4. I've lost more money than I'll ever make again
5. I enjoy the perspiration as much as the inspiration
6. I get nervous talking to even marginally famous people
7. I'm lying about one of these things

I tag:

1. Jevon MacDonald
2. Thomas Otter
3. Steve Mann
4. David Chartier
5. Jason Wood
6. Clay Spinuzzi
7. Susan Scrupski

Man, that was a pain! :-)

My (One) Prediction for 2009

Austin American-Statesman tech reporter and blogger Lori Hawkins asked several local entrepreneurs for their predictions for 2009. She didn't ask me, but here's my answer anyway:

Companies that can use the economic crisis to their advantage will annihilate their competitors that can't.

Actually, she didn't ask the group for their predictions so much as "their biggest hope for the new year and their biggest fear". Here are mine:

My greatest hope for 2009 is that we can continue to find ways to use the economic climate to help our business while it hinders that of our competitors. My greatest fear is that things will get so bad I'll have to get a real job.

Here's to a prosperous new year. Now go figure it out!

DFCE: Macworld Expo 2.0?

So Apple is pulling out of Macworld Expo, which if history is any guide will likely doom the event. But that's perfectly OK—and probably even good.

Macworld is a relic of a bygone era where vendors actually needed to pay $15,000 for a small booth in order to get noticed. The modern equivalent is a simple website, which is not only effectively free but also requires a lot less standing. But there is something you get at a big show that you don't get on the web: facetime.

When I attended WWDC last June, I didn't even register for the show. I knew I'd be able to get all of the content from the sessions on the web later in the comfort of my own office. I went for the parties. It's one thing to exchange emails with someone, and something else entirely to have a beer with him. In-person events evoke a true sense of community and camaraderie that's hard to express and experience online. Plus, I learned more during my dinner with the Sync Services team than I had in a year of reading syncservices-dev@lists.apple.com.

So I absolutely support Wil Shipley's suggestion:

Here's an idea if MacWorld Expo wants to survive: fire GES, let developer community come for cheap, hire whoever. Indies, like the old days.

Better yet, I'd like to see a community-driven event like John Gruber's (tongue-in-cheek?) suggestion of a Daring Fireball Conference and Expo.

So, when are where will DFCE be held? I'll be there.

Now is a Great Time to Minimize Risk

Note: When I decided to republish this email as a blog post I was in a foul mood and suffering from an intestinal bug, and titled it "Now is a Terrible Time to Join or Found a Startup". I'm feeling much better, and in retrospect think the headline should be something along the lines of "Now is a Great Time to Minimize Risk". So I've changed it.

This morning fellow Enterprise Irregular Bob Warfield wrote a post titled Now is a Great Time to Join or Found a Startup. I respectfully disagree. We've been having a discussion of this on our private mailing list, but I'd like to offer up my thoughts in a more public forum and ask you what you think.

The original question posed was:

One could make a good argument that now would be the ideal time to go to a start up. Thoughts?

Here's the answer I sent to the group this morning:

The question I would ask myself is "How am I going to get paid while I start this thing up?"

Ideally you can work a "real job" while you get your startup to profitability on the side. (That may sound crazy, but it's what I did. You'll need an accommodating IP agreement with your employer, and an understanding boss.) Otherwise you're going to need to simply go without a paycheck for some amount of time and live off of your savings, which in this environment is just irresponsible.

I don't think it's very viable to think about trying to raise any kind of investment in this climate. Even if you're able to, the terms you get are going to suck. Plus the whole process of trying to raise money is a job in itself, and one that absolutely sucks. Try telling your boss you need the day off to go talk to some VC's who are never going to call you back. Rock on.

That being said, it's a great time to be working for yourself, for one very important reason: what Scott Adams calls "boss diversification". When you work for a company, your employer is your customer and you have only one customer for your services. Lose that customer and you're screwed. When you work for yourself, each of your customers/clients is your boss. Lose any one of them and it's not the end of the world. The more customers, the more diversified you are. So consulting is good, but high-volume products are better. In this economic climate, the chances of losing any one customer/boss is higher than normal. Therefore if you only have one, the risk is higher than normal that you could wake up tomorrow with none, and that's not what you want.

Now that I re-read the original question, it might have been about going to work at an existing startup, not starting one yourself. If so, I would say that doing that would be the worst of both worlds: you still have only one customer for your services, so your livelihood hangs by a thread. And since they're a startup, presumably they have less wherewithal to withstand the financial storm than does an established company. Worse yet, they may have VC's on their board telling them to "do the right thing for the company" and lay people off as a knee-jerk response to any bad news. And the news these days is mostly bad.

So go dig out your Proprietary Inventions Agreement and see what it says about stuff you create on your own time using your own resources. If you own it, go for it. But don't quit your day job.

Obviously Bob and I are of different minds on this. What do you think?