The banal network

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Travelling over the Christmas break, we had lunch one day in a cheap and cheerful eaterie in the midlands. It’s a good, non-nonsense, inexpensive carvery which, on the day we visited, was thronged with families having lunch. The first thing I noticed on our table was this card. To me, it signifies how far the Internet has come from being something weird and exotic to being positively mundane. When restaurant chains like this take it for granted that many of their (mainly working-class) clientele have a Facebook account, then you know that something’s happened.

I’m reminded of an observation that Andy Grove, then the CEO of Intel, made in 1999. “In five years’ time”, he said, “companies that aren’t Internet companies won’t be companies at all”. He was widely ridiculed for this prediction. Was he really suggesting that every fast-food joint and shoeshop would have to have online offerings? No: what he was trying to convey was the idea that, by 2004, the Internet would have become a utility, like electricity or the telephone or mains water. Most companies do not, for example, generate their own electricity. But if they’re not on the electricity grid (or the telephone network) then they’re at a severe disadvantage. So every company would, Grove thought, have to come to terms with the new reality of Internet-as-utility.

As it happens, he was a bit optimistic about the time it would take. But this Toby Carvery ad shows how perceptive he was.

Apple with Balsamic vinegar

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We went to lunch at one of our favourite restaurants the other day and, before ordering, were given the standard board with bread plus butter and Balsamic vinegar in olive oil. This led us to wonder if the management knew we were slaves of OS X. Purists will argue that it must be coincidence — it lacks the mandatory bite out of the right-hand-side of the image. Still…

What the Google spat reveals about China

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James Fallows — who recently returned to the US after a stint in China, whence he used to send very perceptive dispatches — has an interesting perspective in The Atlantic about the Google decision.

He thinks it represents a significant moment — “Significant for Google; and while only marginally significant for developments inside China potentially very significant for China’s relations with the rest of the world.”

In terms of its impact on Chinese Internet users, Fallows thinks that it’s not such a big deal.

In terms of information flow into China, this decision probably makes no real difference at all. Why? Anybody inside China who really wants to get to Google.com — or BBC or whatever site may be blocked for the moment — can still do so easily, by using a proxy server or buying (for under $1 per week) a VPN service. Details here. For the vast majority of Chinese users, it’s not worth going to that cost or bother, since so much material is still available in Chinese from authorized sites. That has been the genius, so far, of the Chinese “Great Firewall” censorship system: it allows easy loopholes for anyone who might get really upset, but it effectively keeps most Chinese Internet users away from unauthorized material.

The real significance, he argues, is that it may signify that China is entering its own “Bush-Cheney era”.

There are also reasons to think that a difficult and unpleasant stage of China-U.S. and China-world relations lies ahead. This is so on the economic front, as warned about here nearly a year ago with later evidence here. It may prove to be so on the environmental front — that is what the argument over China’s role in Copenhagen is about. It is increasingly so on the political-liberties front, as witness Vaclav Havel’s denunciation of the recent 11-year prison sentence for the man who is in many ways his Chinese counterpart, Liu Xiaobo. And if a major U.S. company — indeed, Google has been ranked the #1 brand in the world — has concluded that, in effect, it must break diplomatic relations with China because its policies are too repressive and intrusive to make peace with, that is a significant judgment.

[…]

In a strange and striking way there is an inversion of recent Chinese and U.S. roles. In the switch from George W. Bush to Barack Obama, the U.S. went from a president much of the world saw as deliberately antagonizing them to a president whose Nobel Prize reflected (perhaps desperate) gratitude at his efforts at conciliation. China, by contrast, seems to be entering its Bush-Cheney era. For Chinese readers, let me emphasize again my argument that China is not a “threat” and that its development is good news for mankind. But its government is on a path at the moment that courts resistance around the world. To me, that is what Google’s decision signifies.

This echoes something that Mark Anderson has been saying for ages — now reprinted on his blog:

Too often, today, sloppy thinkers and Western optimists assume that China is just a Big America, or a Big Vietnam, or a Fast India – or their Next Big Business Partner.

Wrong. At a time when the world thinks the communist model has been proved obsolete, China remains a communist country. In fact, under the current leader, Hu Jintao, human rights in China have recently suffered and are now in serious decline, according to Amnesty International-USA, the Committee to Protect Journalists, Human Rights Watch, and others.

China has tens of thousands, perhaps hundreds of thousands, of human censors monitoring citizen clicks and comments on the China government–controlled Internet. When my friend’s teenage daughter (a U.S. citizen) taught English there last year, police came to her apartment and grilled her about specific computer entries she had made. When one of Australia’s top mining firms, Rio Tinto, refused to allow China’s Chinalco to double its ownership interest last year (to 18%), China arrested local CEO (and Australian citizen) Stern Hu and three managers, who remain in jail today, under espionage charges. China denies any connection. In politics, thought, and business, China remains a police state.

We all refer to China as “China” now, as though it’s just One of the Gang, like “Ohio” or “Denmark”; after all, it’s a member of the G7, right? Just another market economy finding its way in the global river of events —

No, it’s not. And it isn’t in the G7. In fact, it isn’t even part of the G8, which includes Russia.

So now ask yourself: When is the last time you called Communist China, Communist China?

You’d better get used to it. There is no indication that the Chinese Communist Party has any intention of giving up any power at all, or of changing its power structure. In fact, discussion of anything political is basically off limits inside China; it is not done. Ah, you heard that there were some small moves toward shadow property rights in China? Sorry, that move has recently been reversed.

Mark goes on to itemise what he sees as the main tenets of Chinese policy. In his (bleak) view, they are:

1. Steal Intellectual Property.

2. Use Slave Labor Rates to Become the Low-Cost Producer of All Goods and Services.

3. Sell Stolen IP Back As Global Exports.

4. Industrial Policy: Subsidize Key Industries.

5. Prevent (or Restrict) Unwanted Imports.

6. Use Currency Manipulation to provide artificial aid to your export companies.

7. Price for Export, Suppress Domestic Consumption, and use domestic savings to drive the above policies.

8. Create the Appearance of Free and Fair Trade, Without the Fact.

9. Encourage Foreign Direct Investment – But Don’t Allow Controlling Ownership.

These are just the headlines — you need to read the full post to get the detail.

Google, China and staying on message

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Just before 6pm yesterday I had a phone call from the Comment Desk of the (London) Times. Would I be interested in writing an OpEd piece about the Google business and how it shows that attempts to censor the Internet are doomed? I replied that I wished that were true, but that, sadly, it isn’t, and that the moral of the Google furore is that determined governments can effectively censor the Net. I’d be happy to write a piece explaining this, I said. “Oh”, replied my caller, “that’s very interesting. I need to go back to my editor to discuss it. I’ll phone back later.”

Needless to say, he didn’t. But this morning the paper ran a rather good piece by George Walden arguing that Google was right to do the original deal, and is right to threaten to quit now, and expressing the hope that the Chinese will reach an accommodation with the company. Somehow, that seems like a faint hope. And if the Chinese do decide to talk to Google, then we will know that something has really changed in the Middle Kingdom.

LATER: Just to underscore the point I was trying to make to the Times guy, the New York Times this morning reports that:

Google’s declaration that it would stop cooperating with Chinese Internet censorship and consider shutting down its operations in China ricocheted around the world on Wednesday. But in China itself, the news was heavily censored.

Some big Chinese news portals initially carried a short dispatch on Google’s announcement, but that account soon tumbled from the headlines, and later reports omitted Google’s references to “free speech” and “surveillance.”

The only government response came later in the day from Xinhua, the official news agency, which ran a brief item quoting an anonymous official who was “seeking more information on Google’s statement that it could quit China.”

Google and China: business ethics, or ethics as business?

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Google’s threat to close its operations in China has been treated as big news in the mainstream media. (As a technology columnist I’ve grown accustomed to the fact that Google is one of the triggers of senior editorial interest in technology!) Here’s how the NYT, for example, reported it:

BEIJING — Google said Tuesday that it would stop cooperating with Chinese Internet censorship and consider shutting down its operations in the country altogether, citing assaults from hackers on its computer systems and China’s attempts to “limit free speech on the Web.”

The move, if followed through, would be a highly unusual rebuke of China by one of the largest and most admired technology companies, which had for years coveted China’s 300 million Web users.

The more I think about it, though, the more puzzled I become. First of all, it only makes sense if Google knows that the cyberattack that is one of the alleged grounds for its threat was actually orchestrated or conducted by the Chinese government. But the company spokesman on Radio 4 this morning declined to comment on that. Secondly, it’s puzzling because Google must have known what it was getting into four years ago when it agreed to the Chinese regime’s conditions for operating in that country: that was the moment when we saw the transition from Google-the-religion to Google-the-corporation. I wasn’t particularly surprised when the company agreed to bend the knee to the Chinese. Corporations obey the law, and are as ethical or unethical as they can get away with. Expecting a shareholder-owned entity to do more than obey the law is a bit like expecting my cats to obey my injunctions to be kind towards birds and small rodents. It goes against their natures.

Thirdly (and following on from that), there’s the business angle. If I were a shareholder in Google, would I be pleased to see the company turning its back on the most important emerging market in the world? (Well, I might: but I’m not running a pension fund.) Looked at through the prism of pure corporate strategy, it seems like an unwise step.

And then, finally, there’s a whiff of hubris about it. Google is big and powerful, but it’s a flea compared to the authoritarian regime that runs the world’s next superpower. I’m reminded of the story about Stalin’s alleged retort to news that the Pope was opposed to something he was planning: “And how many divisions has the Pope?”

So what is one to make of it? One interpretation is that it’s a business decision dressed up in ethical garb.

The company has been constantly losing market share against its rival Baidu in the last few months and is currently left with only about 17% of the Chinese search market.

In other words, Google has decided that the Chinese search market is a lost cause and has made a strategic decision to cut its losses and pull out.

Another slant on it concerns the way the company has gone about this. Here’s a Chinese perspective on it:

With its bold statement towards the Chinese government, Google basically closed their doors in China. Business tactics that may work in countries like the US do not work in China. In China there is a strong feeling about building relationships. There is a strong feeling about “saving face”. There is a strong culture and history that the people are very proud of.

Sure there are problems. And yes there are problems that need to be fixed. But the question that arises is what is the best way to go about it.

I wrote a blog post about how to do business in Asia. In this post I summarized the lessons that could be learned from President Bill Clinton’s visit to North Korea to release the US reporters. Bill did not prove that he was right and North Korea was wrong. Instead, he approached the government with respect and he approached them in a way that was aligned with their culture. Bill gave them a path to change their position without losing face. By doing this, Bill achieved a result that many thought was impossible. North Korea released the US reporters to the US.

Unfortunately, Google did just the opposite today. They brought US tactics to the Chinese government. Not any US tactics, but US tactics that are against the grain of Chinese culture. They did not show respect. They did not allow a path for “saving face”. They did not build the relationship.

Funnily enough, even thought I disapproved of Google’s 2006 decision to filter search results, I thought that the company was approaching it sensibly by arguing that it was at least letting Chinese searchers know when they’d been banned from seeing something. And that was better than nothing.

Anyway, we’re left with an enigma. There’s more to this than meets the eye. Wish I knew what.

LATER: One answer might be that it’s a move that resonates with official thinking within the Obama Administration. For example, this source reports that:

Google’s decision Tuesday to risk walking away from the world’s largest Internet market may have come as a shock, but security experts see it as the most public admission of a top IT problem for U.S. companies: ongoing corporate espionage originating from China.
It’s a problem that the U.S. lawmakers have complained about loudly. In the corporate world, online attacks that appear to come from China have been an ongoing problem for years, but big companies haven’t said much about this, eager to remain in the good graces of the world’s powerhouse economy.

Google, by implying that Beijing had sponsored the attack, has placed itself in the center of an international controversy, exposing what appears to be a state-sponsored corporate espionage campaign that compromised more than 30 technology, financial and media companies, most of them global Fortune 500 enterprises.

The U.S. government is taking the attack seriously. Late Tuesday, U.S. Secretary of State Hillary Clinton released a statement asking the Chinese government to explain itself, saying that Google’s allegations “raise very serious concerns and questions.”

“The ability to operate with confidence in cyberspace is critical in a modern society and economy,” she said.

STILL LATER: Tech Review has a piece about the attack which allegedly triggered Google’s announcement:

Though Google has not disclosed the exact nature of the attacks, [David] Drummond [Google’s chief legal officer] wrote: “In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google.” He added that the company has gathered evidence that 20 other large Internet, finance, technology, media, and chemical companies were also attacked.

In Google’s case, the attackers tried to get into Gmail accounts belonging to Chinese human-rights activists, Drummond said. The company believes that the efforts were not successful, but that hackers have been targeting human-rights activists based in other parts of the world through a range of hacking techniques.

Amichai Shulman, CTO of Imperva, a data-security company based in Redwood Shores, CA, says Google probably called the attack “highly sophisticated” because the hackers got into the heart of its database and password list. “The intellect and resources required to pull off such a surgical attack are staggering considering the defenses Google has put in place to protect digital assets,” he says.

Why it’s called hard-ware

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When a company becomes as dominant and successful as Google (or Microsoft, for that matter), there’s a tendency in the mass media (and indeed in the investment community) to assume that when it decides to throw its weight behind a product or service then it’s bound to succeed. Sadly, it ain’t true — as Microsoft has discovered with media players, home media centres and mobile phones. Now it’s Google’s turn to discover that getting into a business where you have no previous experience is a tough proposition — as this dispatch from Good Morning Silicon Valley suggests.

The Nexus One may be made by HTC and its primary carrier may be T-Mobile, but Google’s name is on the phone and Google’s site is the point of purchase, so Google is getting a heaping helping of the customer questions and complaints. But mobile phone users are used to turning to a carrier’s call center for round-the-clock assistance (albeit of varying quality), and Google doesn’t have one of those. Instead, the company’s support services rely on FAQs, forums and e-mail. And that process, it seems, is not straightforward or timely enough for some Nexus One buyers. First came a wave of questions about service plans, upgrade eligibility, shipping, network compatibility and the like — normal for any new phone, and certainly one sold in this unfamiliar style. There were also tech questions, particularly regarding an issue with flaky 3G connections that HTC, Google and T-Mobile are all now trying to figure out. Again, not unusual for a new phone. But the next wave of forum posts started to bring other complaints — about slow responses to questions; vague or partial answers; advice that sent users ping-ponging among maker, vendor and carrier; and accusations that Google was unprepared to offer proper customer care, or worse, that it was trying to make minimally assisted self-help the new normal.

And this morning, there’s another headache brewing — some folks are just discovering that when Google said calling-plan customers who got the $180 discounted price on the phone and then canceled within 120 days would have to pay the $350 balance of the unsubsidized price, that would be in addition to the carrier’s own early termination fee. You do have the option of returning the phone.

LATER: More in the same vein from the New York Times.

Nexus vs iPhone is a skirmish, not the real war

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This morning’s Observer column.

Despite their tender years, the boys who run Google have consistently shown a good grasp of military strategy, the first law of which is always to decline combat on territory dominated by your enemy and fight only on ground where you have the advantage. That’s why for years Google avoided getting into the PC operating system market – Microsoft’s fiefdom – and concentrated instead on search and networked services, where it was overwhelmingly dominant.

This also explains its mobile phone strategy. They recognise that the functional elegance of the iPhone comes from having total control of both the hardware and its software. This kind of integrated mastery, which is Apple’s stock-in-trade, would be difficult to acquire quickly, even for a company as smart as Google…

LATER: I was pondering writing a post expanding the claim in my column about why the iPhone is currently the superior, but I find that Dave Winer has done a much better job than I could. As usual.

iPhotography

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Well, if David Hockney can use his iPhone to produce serious art (along with the guys who do the covers for the ‘New Yorker’), why shouldn’t photographers do the same? That’s the basis for the iPhone Photo Project, an interesting experiment just launched by one of my sons.

This blog is an experiment – to see if I can create artistically worthwhile photographs every day on my iPhone. The idea was inspired by Chase Jarvis’s ‘The Best Camera’ project, which champions the use of the cameras we carry with us all the time as opposed to the ones we don’t. The best camera is the one you have with you, stupid. That strikes me as a powerful and democratising idea and has caused me to ask myself the question “what can I produce on my iPhone?”

It’s a neat idea. I don’t have an iPhone, but I always carry a camera — in my case a Canon IXUS which is actually quite a serious piece of kit. It’s technically much better than the iPhone camera, but of course it doesn’t have any onboard communications (or editing facilities, come to that). So it’s not much use for photoblogging.

And then there are the implications of the new Omnivision image sensor. As the New York Times puts it:

OmniVision, a company specializing in the image sensors for mobile phones, cameras and laptops, announced a new image sensor chip capable of recording 14.6 megapixel single images or full 60 frames per second 1080p high definition video. This is the same quality, or better, than most high-end cameras on the market today. The new chip also captures much higher light levels, creating a clearer picture and increasing image stabilization while shooting HD video.

If you’ve purchased a modern cell phone in the past three years, chances are you’re already walking around with a three to five megapixel camera built into your phone. But due to amount of light these sensors need to capture, the images can be very poor. If consumers want to take higher quality images, or video, you need to carry a separate dedicated camera.

It won’t be long before the images on mobile phones become equal quality to handheld cameras, said Devang Patel, senior marketing manager at OmniVision. He said, “Obviously the hand-held camera will have extra features, like better zoom, but you’ll start to see similar performance between cameras and camera-phones.”

Next stage in the Celtic Tiger’s downhill spiral: sovereign default?

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Professor Morgan Kelly of University College Dublin has written a terrific analysis of the banking crisis which still threatens the economic viability of my homeland. His conclusion:

By pushing itself close to, and quite possibly beyond, the limits of its fiscal capacity,the Irish state has succeeded in rescuing Irish banks from their losses on developer loans. Despite this, these banks remain as zombies entirely reliant on continued Irish government guarantees and ECB forbearance, and committed solely to reducing their own debts. While bank capital levels are, probably, adequate for the markedly smaller scale of their future lending, … even fairly modest losses on their mortgage portfolios will be sufficient to wipe out most or all of that capital. Having exhausted its resources in rescuing the Irish banks from the first wave of developer losses, the Irish state can do nothing but watch as the second wave of mortgage defaults sweeps in and drowns them.

In other words, it is starting to appear that the Irish banking system is too big to save. As mortgage losses crystallise, the Irish government’s ill conceived project of insulating bank bond-holders from any losses on their investments is sliding beyond the means of its taxpayers. The mounting losses of its banking system are facing the Irish state with a stark choice. It can attempt a NAMA II for mortgage losses that will end in a bond market strike or a sovereign default. Or it can, probably with the assistance of the IMF and EU, organise a resolution that shares property losses with bank creditors through a partial debt for equity swap.

Thanks to Gavin Sheridan and the unmissable The Story for the link.