Daily Archives: February 12, 2008

Solipsism

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Robert Scoble visited Switzerland and insisted on telling us about it thus:

What was really fun was having raclette cheese dinner with famous author Bruce Sterling. Of course I intruded on the dinner with my cell phone camera. It’s a 40 minute video, where Laurent and Pierre explain raclette. What’s really interesting is that we had people all over the world who were watching us live. At about 9:30 we sit down with Bruce Sterling, famous science fiction author.

It doesn’t get interesting until about 13 minutes when Bruce tells us the difference between a blogger and a novelist.

At 20 minutes in we discover that Yahoo has rejected Microsoft’s bid so you hear our initial opinions…

Wow! “Famous author Bruce Sterling”, eh? What really struck me was the confident way Scoble thinks that his admiring public would be willing to sit through 13 minutes of aimless chat to get to what he regards as a really interesting bit. Who does he think we are? And, more importantly, who does he think he is?

James Cridland wasn’t impressed, either.

What all this reminds me of is what the Nobel laureate, Herbert Simon, said to a journalist who asked him what newspapers he read. “None”, said Herb, before going on to explain that at his age time was precious and he wasn’t going to waste it on reading stuff to which people hadn’t devoted much time or thought.

Why does Microsoft want Yahoo?

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Ed Felten’s been thinking about the question. Here’s his analysis:

Last week Microsoft offered to buy Yahoo at a big premium over Yahoo’s current stock price; and Google complained vehemently that Microsoft’s purchase of Yahoo would reduce competition. There’s been tons of commentary about this. Here’s mine.

The first question to ask is why Microsoft made such a high offer for Yahoo. One possibility is that Microsoft thinks the market had drastically undervalued Yahoo, making it a good investment even at a big markup. This seems unlikely.

A more plausible theory is that Microsoft thinks Yahoo is a lot more valuable when combined with Microsoft than it would be on its own. Why might this be? There are two plausible theories.

The synergy theory says that combining Yahoo’s businesses with Microsoft’s businesses creates lots of extra value, that is that the whole is much more profitable than the parts would be separately.

The market structure theory says that Microsoft benefits from Yahoo’s presence in the market (as a counterweight to Google), that Microsoft worried that Yahoo’s market position was starting to slip, so Microsoft acted to prop up Yahoo by giving Yahoo credible access to capital and strong management. In this theory, Microsoft cares less (or not at all) about actually combining the businesses, and wants mostly to keep Google from capturing Yahoo’s market share.

My guess is that both theories have some merit — that Microsoft’s offer is both offensive (seeking synergies) and defensive (maintaining market structure).