Creative Destruction

Corning develops ultra-flexible fiber optics

2007-08-03T10:38:00.000-05:00

Another leap into our quantum future...

ROCHESTER, N.Y. — Corning is finding its way around very tight corners to help high-speed Internet service reach high-rise apartments and condominiums.

The world's largest maker of optical fiber said Monday it has developed a new fiber that is at least 100 times more bendable than standard fiber, clearing a major hurdle for telecommunications carriers drawing fiber into homes.

"This is a game-changing technology for telecommunications applications," said Corning's president, Peter Volanakis. "We have developed an optical fiber cable that is as rugged as copper cable but with all of the bandwidth benefits of fiber."

Three Corning scientists invented low-loss optical fiber in the early 1970s. The gossamer-thin strands of ultra-pure glass delivering voice, video and data at the speed of light have replaced copper as the backbone of America's telephone and cable television networks and enabled the phenomenal growth of the Internet.

Current optical fiber doesn't carry light well when it is bent around corners and routed through a building, making it difficult and expensive to run fiber all the way to homes and businesses. The ultra-flexible technology allows the fiber to be bent with virtually no signal loss, Corning said.

Corning said the improvements will enable carriers to economically offer high-speed Internet, voice and high-definition TV service to virtually all high-rise buildings.

In standard fiber, the light signal leaks out at bends or turns and "with two 90-degree turns, the signal is lost," Corning spokesman Dan Collins said. "This design relies on nanostructures that serve as a mirror or a guardrail, and as the fiber is turned or bent, the light doesn't leak out. We have wrapped the fiber around a ball point pen and it retains its effectiveness."

Michael Render, a market researcher in Tulsa, said the new product "would be an important breakthrough" in fiber-to-the-home systems.

More than 1% of North American homes are now directly connected to fiber, but many of them are single-family dwellings, Render said.

"There obviously are a large number of people that live in multi-tenant buildings, and improvements in the way to get fiber to those individual living units could be very significant," he said.

Render said the technology would make it easier to bring fiber "all the way to each individual living room, for example, or at least to each floor," instead of taking it only to the basement and then using existing wiring to reach the living unit.

There are more than 25 million high-rise apartment homes in the United States and more than 680 million worldwide. "The high cost of installation and difficulty in delivering fiber to the home made this market unappealing to most providers," Volanakis said in a statement.

Corning formed a working team with New York-based Verizon Communications in February to tackle the problems of installing fiber in multiple-dwelling buildings. Verizon is the only major U.S. phone or cable company to aggressively draw fiber to existing homes.

"This fiber technology will enable us to bring faster Internet speeds, higher-quality high-definition content and more interactive capabilities than any other platform which exists today," said Paul Lacouture, a Verizon Telecom executive.

WiTricity

2007-06-08T13:33:00.000-05:00

An interesting innovation in the wireless energy space...

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A clean-cut vision of a future freed from the rat's nest of cables needed to power today's electronic gadgets has come one step closer to reality.

US researchers have successfully tested an experimental system to deliver power to devices without the need for wires.

The setup, reported in the journal Science, made a 60W light bulb glow from a distance of 2m (7ft).

WiTricity, as it is called, exploits simple physics and could be adapted to charge other devices such as laptops.

"There is nothing in this that would have prevented them inventing this 10 or even 20 years ago," commented Professor Sir John Pendry of Imperial College London who has seen the experiments.

"But I think there is an issue of time. In the last few years we have seen an exponential growth of mobile devices that need power. The power cable is the last wire to be cut in a wireless connection."

Professor Moti Segev of the Israel Institute of Technology described the work as "truly pioneering".

Energy gap

The researchers from the Massachusetts Institute of Technology (MIT) who carried out the work outlined a similar theoretical setup in 2006, but this is the first time that it has been shown to work.

"We had a strong faith in our theory but experiments are the ultimate test," said team member Assistant Professor Marin Soljacic.

"So we went ahead and sure enough we were successful, the experiments behave very much like the theory."

The experimental setup consisted of two 60cm (2ft) diameter copper coils, a transmitter attached to a power source and a receiver placed 2m (7ft) away and attached to a light bulb.

With the power switched on at the transmitter, the bulb would light up despite there being no physical connection between the two.

Measurements showed that the setup could transfer energy with 40% efficiency across the gap.

The bulb was even made to glow when obstructions such as wood, metal and electronic devices were placed between the two coils.

"These results are encouraging. The numbers are not far from where you would want for this to be useful," said Professor Soljacic.

Power cycle

The system exploits "resonance", a phenomenon that causes an object to vibrate when energy of a certain frequency is applied.

When two objects have the same resonance they exchange energy strongly without having an effect on other surrounding objects. There are many examples of resonance.

"If you fill a room with hundreds of identical glasses and you fill each one with a different level of wine each one will have a different acoustic resonance," explained Professor Soljacic.

Each glass would ring with a different tone if knocked with a spoon, for example.

"Then if I enter the room and start singing really loudly one of the glasses may explode if I hit exactly the right tone."

Instead of using acoustic resonance, WiTricity exploits the resonance of low frequency electromagnetic waves.

In the experiment both coils were made to resonate at 10Mhz, allowing them to couple and for "tails" of energy to flow between them.

"With each cycle arriving, more pressure, or voltage in electrical terms, builds up in this coil," explained Professor Pendry.

Over a number of cycles the voltage gathered until there was enough pressure, or energy, at the surface to flow into the light bulb.

This accumulation of energy explains why a wine glass does not smash immediately when a singer hits the right tone.

"The wine glass is gathering energy until it has enough power to break that glass," said Professor Pendry.

Human interference

Using low frequency electromagnetic waves, which are about 30m (100ft) long, also has a safety advantage according to Professor Pendry.

"Ordinarily if you have a transmitter operating like a mobile phone at 2GHz - a much shorter wavelength - then it radiates a mixture of magnetic and electric fields," he said.

This is a characteristic of what is known as the "far field", the field seen more than one wavelength from the device. At a distance of less than one wavelength the field is almost entirely magnetic.

"The body really responds strongly to electric fields, which is why you can cook a chicken in a microwave," said Sir John.

"But it doesn't respond to magnetic fields. As far as we know the body has almost zero response to magnetic fields in terms of the amount of power it absorbs."

As a result, the system should not present any significant health risk to humans, said Professor Soljacic.

Future promise

The team from MIT is not the first group to suggest wireless energy transfer.

Nineteenth-century physicist and engineer Nikola Tesla experimented with long-range wireless energy transfer, but his most ambitious attempt - the 29m high aerial known as Wardenclyffe Tower, in New York - failed when he ran out of money.

Others have worked on highly directional mechanisms of energy transfer such as lasers.

However, unlike the MIT work, these require an uninterrupted line of sight, and are therefore not good for powering objects around the home.

Professor Soljacic and his team are now looking at refining their setup.

"This was a rudimentary system that proves energy transfer is possible. You wouldn't use it to power your laptop.

"The goal now is to shrink the size of these things, go over larger distances and improve the efficiencies," said Professor Soljacic.

The work was done in collaboration with his colleagues Andre Kurs, Aristeidis Karalis, Robert Moffatt, John Joannopoulos and Peter Fisher.

Disney sells 24 million TV shows through iTunes Store

2007-05-11T13:44:00.000-05:00

Walt Disney this week confirmed it continues to enjoy strong sales of its television shows and films through iTunes.

Company CEO Bob Iger confirmed the company to have sold 23.7 million episodes of its television shows and an additional two million films through Apple's media service.

In November 2006, Iger confirmed Disney to have sold 500,000 films and 12 million television show episodes since such content reached iTunes. Disney hit 1.3 million films sold in February.
Top-selling titles include Cars and Pirates of the Caribbean, Iger observed.

“We continue to view the broadband-enabled internet as an important entertainment medium, and our creative and technological investments in Disney, ESPN, ABC.com are designed with that premise in mind.”

Iger also confirmed Disney to be satisfied with iTunes prices – the company makes as much from an online sale as it does from a physical one, he explained.

"There are cost of goods that are factored out of the iTunes sale, which allows them to sell at a lower price. That’s their decision and it allows us to take revenue out that is equal to, in terms of a per-click sale, store sales. So, yes, we’re quite comfortable with iTunes," Iger explained.

Gates sees accelerated decline of traditional media's ad model

2007-05-10T09:11:00.000-05:00

Tech reporter Ben Romano of the Seattle Times on Bill Gates and the evolving advertising business...

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Microsoft thinks the advertising business model for traditional media — those venues where advertisers still channel most of their spending — will fall apart faster in the coming five years as the kind of interactive, targeted advertising that is defining the Web comes to the fore.
Chairman Bill Gates, speaking to an audience of Microsoft's top advertising customers in Seattle this morning, expounded on this theme. It's something that he's talked about before, but today he described the decline in more certain, and biting, terms.
"We're saying newspapers will go online, and there will be massive innovation that comes out of that. We're saying that TV, the biggest ad market in the world, will completely go online and have the kind of targeting interaction that you only get out on the Web today," he said. "As dramatic as things happening on the Web are, that's actually what all advertising ... will be in the future."
Gates painted a grim picture of the transition.
"I have a lot of friends in the newspaper industry and, of course, this is a tough, wrenching change for them because the number of people who actually buy, subscribe to the newspaper and read it has started an inexorable decline," he said.
With that decline, Gates said, advertisers are shifting their budgets to new areas.
Advertisers will spend about $445.5 billion globally in 2007, according to ZenithOptimedia's most recent quarterly forecast. Of that, online is expected to get 7 percent of the pie compared with newspapers' 28.3 percent. By 2009, online is forecast to grow to 8.7 percent, while newspapers' share dips to 27 percent.
Newspapers aren't the only media that will suffer from this transition, Gates said.
The traditional Yellow Pages are doomed as voice-activated Internet searches combined with on-screen interfaces on smart mobile devices get better and proliferate, Gates said. The company's recent acquisition of voice-technology provider TellMe is accelerating the trend.
"When you say something like 'plumber' the presentation you get will be far better than what you get in the Yellow Pages," Gates said. "After all, we know your location and so we can cluster [results] around that. ... Yellow Page usage amongst people in their, say below 50, will drop to near zero over the next five years."
Microsoft showed off IPTV, its underlying software technology for television delivered over the Internet. Gates said it makes traditional broadcasting obsolete, supplanting the model in which one show is delivered to many viewers who may or may not be interested in it.
"The end-user experience and the creativity and the new content that will emerge using the capabilities of this environment will be so much dramatically better that broadcast TV will not be competitive," he said.
The IPTV model presents opportunities for advertisers to present viewers with messages specifically tailored to them.
"In this environment, the ads will be targeted, not just targeted to the neighborhood level ... but we'll actually know who the viewers of that show are," Gates said.
Microsoft's platform for delivering this kind of targeted advertising across the spread of its Web properties, and now these advancing competitors to traditional media, is called adCenter. Competitors Google and Yahoo! have similar platforms.
Gates said Microsoft is committed to making its platform the best, or one of the best, for selling and buying advertising inventory that targets specific audiences.
Microsoft, which still views itself as primarily a software company, is building tools to make and display the new kinds of interactive advertising that will define this new world. The company's Silverlight online video technology, released in a test version last week, is one such example.
Gates said he will focus on online services, search and advertising in his last 15 months of full-time work at Microsoft before moving next summer to full-time work at his charitable foundation.

Comcast CEO shows off super quick modem

2007-05-09T12:19:00.000-05:00

Cool annoucement from the cable boys but I still have my money on the fiber guys. Photons trump electrons in the quantum economy...

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By RYAN NAKASHIMA, AP Business WriterWed May 9, 7:50 AM ET
Comcast Corp. Chief Executive Brian Roberts dazzled a cable industry audience Tuesday, showing off for the first time in public new technology that enabled a data download speed of 150 megabits per second, or roughly 25 times faster than today's standard cable modems.
The cost of modems that would support the technology, called "channel bonding," is "not that dissimilar to modems today," he told The Associated Press after a demonstration at The Cable Show. It could be available "within less than a couple years," he said.
The new cable technology is crucial because the industry is competing with a speedy new offering called FiOS, a TV and Internet service that Verizon Communications Inc. is selling over a new fiber-optic network. The top speed currently available through FiOS is 50 megabits per second, but the network is already capable of providing 100 Mbps and the fiber lines offer nearly unlimited potential.
The technology, called DOCSIS 3.0, was developed by the cable industry's research arm, Cable Television Laboratories. It bonds together four cable lines but is capable of allowing much more capacity. The laboratory said last month it expected manufacturers to begin submitting modems for certification under the standard by the end of the year.
In the presentation, ARRIS Group Inc. chief executive Robert Stanzione downloaded a 30-second, 300-megabyte television commercial in a few seconds and watched it long before a standard modem worked through an estimated download time of 16 minutes.
Stanzione also downloaded the 32-volume Encyclopaedia Britannica 2007 and Merriam-Webster's visual dictionary in under four minutes, when it would have taken a standard modem three hours and 12 minutes.
"If you look at what just happened, 55 million words, 100,000 articles, more than 22,000 pictures, maps and more than 400 video clips," Roberts said. "The same download on dial-up would have taken two weeks."
Other cable industry executives, including Time Warner Inc. Chief Executive Richard Parsons, News Corp. President Peter Chernin and Viacom Inc. Chief Executive Philippe Dauman, cheered the demonstration during a panel afterward.
Brian Dietz, spokesman for the conference host, the National Cable and Telecommunications Association, said the demonstration was the key technological advance showcased at the conference.
"It's an exponential step forward and we're very excited," Roberts said. "What consumers actually do with all this speed is up to the imagination of the entrepreneurs of tomorrow."

Rebel with a Cause: The Optimistic Scientist

2007-04-10T11:49:00.000-05:00

Editor's note: Freeman Dyson is professor emeritus of physics at the Institute for Advanced Study, in Princeton. He is a fellow of the American Physical Society, a member of the US National Academy of Sciences, and a fellow of the Royal Society of London. In 2000 he was awarded the Templeton Prize for progress in Religion. He is the author of a new book, "The Scientist as Rebel." Benny Peiser of Liverpool John Moores University recently interviewed Dyson about his views on science, hope and the future.

Benny Peiser: In your book "Infinite in all Directions" (1988) you discuss eschatological questions surrounding the theoretical issue of the end of the universe. As one of a very small number of optimistic cosmologists, you have developed a scientific theory of infinity. You write: "I have found a universe growing without limit in richness and complexity, a universe of life surviving forever and making itself known to its neighbors across unimaginable gulfs of space and time." This hopeful cosmology contrasts sharply with the apocalyptic Zeitgeist. What would you say are the most important intellectual principles and ideas that have sustained your optimism?

Freeman Dyson: My optimism about the long-term survival of life comes mainly from imagining what will happen when life escapes from this planet and becomes adapted to living in vacuum. There is then no real barrier to stop life from spreading through the universe. Hopping from one world to another will be about as easy as hopping from one island in the Pacific to another. And then life will diversify to fill the infinite variety of ecological niches in the universe, as it has done already on this planet.

If you want an intellectual principle to give this picture a philosophical name, you can call it "The Principle of Maximum Diversity." The principle of maximum diversity says that life evolves to make the universe as interesting as possible. A rain-forest contains a huge number of diverse species because specialization is cost-effective, just as Adam Smith observed in human societies. But I am impressed more by the visible examples of diversity in rain-forests and coral-reefs and human cultures than by any abstract philosophical principles.

Benny Peiser: In the first chapter of your new book, "The Scientist as Rebel," you write that the common element of the scientific vision "is rebellion against the restrictions imposed by the locally prevailing culture," and that scientists "should be artists and rebels, obeying their own instincts rather than social demands or philosophical principles."

Contrary to this liberal if not libertarian concept of scientific open-mindedness, there has been growing pressure on scientists to toe the line and endorse what is nowadays called the 'scientific consensus' - on numerous contentious issues. Dissenting scientists frequently face ostracism and denunciation when they dare to go against the current. Has Western science become more authoritarian in recent years or have rebellious scientists always had to face similar condemnation and resentment? And how can young scientists develop intellectual independence and autonomy in a bureaucratic world of funding dependency?

Freeman Dyson: Certainly the growing rigidity of scientific organizations is a real and serious problem. I like to remind young scientists of examples in the recent past when people without paper qualifications made great contributions. Two of my favorites are: Milton Humason, who drove mules carrying material up the mountain trail to build the Mount Wilson Observatory, and then when the observatory was built got a job as a janitor, and ended up as a staff astronomer second-in-command to Hubble. Bernhardt Schmidt, the inventor of the Schmidt telescope which revolutionized optical astronomy, who worked independently as a lens-grinder and beat the big optical companies at their own game. I tell young people that the new technologies of computing, telecommunication, optical detection and microchemistry actually empower the amateur to do things that only professionals could do before.

Amateurs and small companies will have a growing role in the future of science. This will compensate for the increasing bureaucratization of the big organizations. Bright young people will start their own companies and do their own science.

Benny Peiser: In a Winter Commencement Address at the University of Michigan two years ago you called yourself a heretic on global warming, the most notorious dogma of modern science. You have described global warming anxiety as grossly exaggerated and have openly voiced your doubts about the reliability of climate models. These models, you argue, "do a very poor job of describing the clouds, the dust, the chemistry and the biology of fields, farms and forests. They do not begin to describe the real world that we live in." There seems to be an almost complete endorsement of the world's scientific organisations and elites of these models together with claims that they reliably epitomize reality and can consistently predict future climate change. How do you feel belonging to a tiny minority of scientists who dare to voice their doubts openly?

Freeman Dyson: I am always happy to be in the minority. Concerning the climate models, I know enough of the details to be sure that they are unreliable. They are full of fudge factors that are fitted to the existing climate, so the models more or less agree with the observed data. But there is no reason to believe that the same fudge factors would give the right behavior in a world with different chemistry, for example in a world with increased CO2 in the atmosphere.

Benny Peiser: In a chapter about the scientific revolutions in modern physics and mathematics, you describe the deep intellectual confusion in Weimar Germany in the aftermath of the First World War. You portray a society troubled by a mood of doom and gloom, a milieu that was conducive for scientific revolution as well as political upheaval. Unmistakably, the Great War set off a major shift in German thought, from the idea of progress and technological confidence to cultural pessimism and apocalypticism. As we know, the consequences of this mood of despair was calamitous. Do you see any comparison with the gloomy frame of mind that seems to be on the increase among many Western scientists today?

Freeman Dyson: Yes, the western academic world is very much like Weimar Germany, finding itself in a situation of losing power and influence. Fortunately, the countries that matter now are China and India, and the Chinese and Indian experts do not share the mood of doom and gloom. It is amusing to see China and India take on today the role that America took in the nineteen-thirties, still believing in technology as the key to a better life for everyone.

Benny Peiser: One of your most influential lectures is re-published in your new book. I am talking about your Bernal Lecture which you delivered in London in 1972, one year after Desmond Bernal's death. As you point out, the lecture provided the foundation for much of your writing in later years. What strikes me about your remarkably optimistic lecture is its almost religious tone. It was delivered at a time, similar to the period after World War I, when a new age of techno-pessimism came to the fore, reinforced by Hiroshima and Vietnam.

It is in this atmosphere of entrenched techno-scepticism and environmental anxiety that you advanced biological, genetic and geo-engineering as industrial trappings of social progress and environmental protection. At the height of ecological anxiety, in the same year as the Club of Rome proclaimed the "Limits to Growth," you envisaged endless technological advancement, terrestrial progress and the greening of the galaxy, famously predicting that "we shall learn to grow trees on comets."

At one point towards the end of your lecture, you christen your speech a "sermon." Indeed, your entire lecture reads as if it was written for a tormented audience searching for a glimmer of hope. In his book "The Religion of Technology", David Noble claims that the whole history of technological innovation and advancement has been primarily a religious endeavour. Noble claims that even today your ideas of technological solutions to terrestrial problems constitute in essence a religious conviction. How much of your cosmological view of the world has indeed been shaped by Judeo-Christian traditions? And do you see that there is an inherent link between your religious and your philosophical optimism?

Freeman Dyson: It is true that the tradition of Judeo-Christian religion is strongly coupled with philosophical optimism. Hope is high on the list of virtues. God did not put us here on earth to moan and groan. As my mother used to say, "God helps those who help themselves."

I am generally optimistic because our human heritage seems to have equipped us very well for dealing with challenges, from ice-ages and cave-bears to diseases and over-population. The whole species did cooperate to eliminate small-pox, and the women of Mexico did reduce their average family size from seven to two and a half in fifty years. Science has helped us to understand challenges and also to defeat them.

I am especially optimistic just now because of a seminal discovery that was made recently by comparing genomes of different species. David Haussler and his colleagues at UC Santa Cruz discovered a small patch of DNA which they call HAR1, short for Human Accelerated Region 1. This patch appears to be strictly conserved in the genomes of mouse, rat, chicken and chimpanzee, which means that it must have been performing an essential function that was unchanged for about three hundred million years from the last common ancestor of birds and mammals until today.

But the same patch appears grossly modified with eighteen mutations in the human genome, which means that it must have changed its function in the last six million years from the common ancestor of chimps and humans to modern humans. Somehow, that little patch of DNA expresses an essential difference between humans and other mammals. We know two other significant facts about HAR1. First, it does not code for a protein but codes for RNA. Second, the RNA for which it codes is active in the cortex of the human embryonic brain during the second trimester of pregnancy. It is likely that the rapid evolution of HAR1 has something to do with the rapid evolution of the human brain during the last six million years.

I am optimistic because I see the discovery of HAR1 as a seminal event in the history of science, marking the beginning of a new understanding of human evolution and human nature. I see it as a big step toward the fulfilment of the dream described in 1929 by Desmond Bernal, one of the pioneers of molecular biology, in his little book, "The World, the Flesh and the Devil: An Enquiry into the Future of the Three Enemies of the Rational Soul". Bernal saw science as our best tool for defeating the three enemies. The World means floods and famines and climate changes. The Flesh means diseases and senile infirmities. The Devil means the dark irrational passions that lead otherwise rational beings into strife and destruction. I am optimistic because I see HAR1 as a new tool leading us toward a deep understanding of human nature and toward the ultimate defeat of our last enemy.

Benny Peiser: Britain's leading cosmologists seem to be particularly gloomy about the future of civilisation and humankind. The so-called Doomsday Argument seems to have had a significant influence on many Cambridge-based scientists. It has induced among them a conviction that global catastrophe is almost imminent. Martin Rees, for instance, estimates that there is a 50% chance of human extinction during the next 100 years. How do you explain this apocalyptic mood among leading cosmologists in Britain and the almost desperate tone of their pronouncements?

Freeman Dyson: My view of the prevalence of doom-and-gloom in Cambridge is that it is a result of the English class system. In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status. As a child of the academic middle class, I learned to look on the commercial middle class with loathing and contempt. Then came the triumph of Margaret Thatcher, which was also the revenge of the commercial middle class. The academics lost their power and prestige and the business people took over. The academics never forgave Thatcher and have been gloomy ever since.

Benny Peiser: Finally, let me ask you about your thoughts regarding Britain, the country of your birth, the USA, the country of your choice, and the future of the Western democracies. At the end of your new book you write that "without religion, the life of a country would be greatly impoverished." Perhaps nothing symbolises the glaring differences between Britain and the USA more than the gradual fading of religion in the cultural life of the UK and the profound permeation of religion on public life in the US. Sometimes I wonder whether both extremes may be detrimental to a stable, liberal and open-minded society. In a world of mounting intellectual dogmatism, is there, in your view, a middle way between the Scylla of nihilist despair and the Carybdis of fundamentalist unreasonableness?

Freeman Dyson: I do not agree with your assessment of religion in Britain and the USA. The extremes of religious dogmatism in the USA and of atheistic dogmatism in Britain are greatly exaggerated by the media. In both countries, the average atheist and the average Christian are not dogmatic or unreasonable. So far as I can see, there is about the same variety of beliefs on both sides of the ocean. Certainly we do not need any accurate navigation to find a middle way between the two extremes. Probably ninety percent of the population are somewhere in the middle.

It is also interesting in this connection to observe the similarity, in optimistic mood and rapid material progress, between China and India. Although China is traditionally non-religious and India is traditionally permeated with religion, this does not seem to make much difference. In both countries, rapidly growing wealth and technological progress create a mood of optimism, with or without religion.

Benny Peiser: Thank you.

Freeman Dyson: Thank you.

Editor's note: A longer version of this interview first appeared at CCNet.

Globalisation's offspring

2007-04-09T07:47:00.000-05:00

An interesting article from TheEconomist.com on how the new multinationals are remaking the old.

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FOR as long as multinational companies have existed—and some historians trace them back to banking under the Knights Templar in 1135—they have been derided by their critics as rapacious rich-world beasts. If there was ever any truth to that accusation, it is fast disappearing. While globalisation has opened new markets to rich-world companies, it has also given birth to a pack of fast-moving, sharp-toothed new multinationals that is emerging from the poor world.

Indian and Chinese firms are now starting to give their rich-world rivals a run for their money. So far this year, Indian firms, led by Hindalco and Tata Steel, have bought some 34 foreign companies for a combined $10.7 billion. Indian IT-services companies such as Infosys, Tata Consultancy Services and Wipro are putting the fear of God into the old guard, including Accenture and even mighty IBM (see article). Big Blue sold its personal-computer business to a Chinese multinational, Lenovo, which is now starting to get its act together. PetroChina has become a force in Africa, including, controversially, Sudan. Brazilian and Russian multinationals are also starting to make their mark. The Russians have outdone the Indians this year, splashing $11.4 billion abroad, and are now in the running to buy Alitalia, Italy's state airline (see article).

These are very early days, of course. India's Ranbaxy is still minute compared with a branded-drugs maker like Pfizer; China's Haier, a maker of white goods, is a minnow next to Whirlpool's whale. But the new multinationals are bent on the course taken by their counterparts in Japan in the 1980s and South Korea in the 1990s. Just as Toyota and Samsung eventually obliged western multinationals to rethink how to make cars and consumer electronics, so today's young thrusters threaten the veterans wherever they are complacent.

The newcomers have some big advantages over the old firms. They are unencumbered by the accumulated legacies of their rivals. Infosys rightly sees itself as more agile than IBM, because when it makes a decision it does not have to weigh the opinions of thousands of highly paid careerists in Armonk, New York. That, in turn, can make a difference in the scramble for talent. Western multinationals often find that the best local people leave for a local rival as soon as they have been trained, because the prospects of rising to the top can seem better at the local firm.

First, count your blessings
But the newcomers' advantages are not overwhelming. Take the difference in company ethics, for instance, which worries plenty of rich-world managers. They fear that they will engage in a race to the bottom with rivals unencumbered by the fine feelings of shareholders and domestic customers, and so are bound to lose. Yet the evidence is that companies harmonise up, not down. In developing countries (never mind what the NGOs say) multinationals tend to spread better working practices and environmental conditions; but when emerging-country multinationals operate in rich countries they tend to adopt local mores. So as those companies globalise, the differences are likely to narrow.

Nor is cost as big an advantage to emerging-country multinationals as it might seem. They compete against the old guard on value for money, which depends on both price and quality. A firm like Tata Steel, from low-cost India, would never have bought expensive, Anglo-Dutch Corus were it not for its expertise in making fancy steel.

This points to an enduring source of advantage for the wealthy companies under attack. A world that is not governed by cost alone suits them, because they already possess a formidable array of skills, such as managing relations with customers, polishing brands, building up know-how and fostering innovation.

The world is bumpy
The question is how to make these count. Sam Palmisano, IBM's boss, foresees nothing less than the redesign of the multinational company. In his scheme, multinationals began when 19th-century firms set up sales offices abroad for goods shipped from factories at home. Firms later created smaller “Mini Me” versions of the parent company across the world. Now Mr Palmisano wants to piece together worldwide operations, putting different activities wherever they are done best, paying no heed to arbitrary geographical boundaries. That is why, for example, IBM now has over 50,000 employees in India and ambitious plans for further expansion there. Even as India has become the company's second-biggest operation outside America, it has moved the head of procurement from New York to Shenzen in China.

As Mr Palmisano readily concedes, this will be the work of at least a generation. Furthermore, rich-country multinationals may struggle to shed nationalistic cultures. IBM is even now trying to wash the starch out of its white-shirted management style. But today, General Electric alone seems able to train enough of its recruits to think as GE people first and Indians, Chinese or Americans second. Lenovo's decision to appoint an American, William Amelio, as its Singapore-based chief executive, under a Chinese chairman, is a hint that some newcomers already understand the way things are going.

IBM's approach is possible only because globalisation is flourishing. Many of the barriers that stopped cross-border commerce have fallen. And yet, Mr Palmisano's idea also depends on the fact that the terrain remains decidedly bumpy. Increasingly, success for a multinational will depend on correctly spotting which places best suit which of the firm's activities. Make the wrong bets and the world's bumps will work against you. And now that judgment, rather than tariff barriers, determines location, picking the right place to invest becomes both harder and more important.

Nobody said that coping with a new brood of competitors was going to be easy. Some of today's established multinational companies will not be up to the task. But others will emerge from the encounter stronger than ever. And consumers, wherever they are, will gain from the contest.

Green revolutionary

2007-04-09T07:44:00.000-05:00

Bob Lane's management philosophy at Deere has helped an American firm to reap a record harvest. From TheEconomist.com

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“I AM not one of those neo-Malthusians,” insists Bob Lane. On the contrary, the boss of Deere believes that technological innovation, not least by his agricultural-equipment firm, will continue to increase the productivity of farmland, thereby enabling the world's ever-growing population to be fed. The past few years have seen important breakthroughs, he says, such as the use of global-positioning satellites to automate ploughing and seeding, reducing wasteful double planting. The latest versions of the famous green John Deere tractor are “sophisticated mobile information factories”, says Mr Lane. “They practically drive themselves, while the driver uses the internet to sell corn.”

Technology is one of three reasons why Mr Lane is extremely bullish. (So are his investors who, before recent stockmarket wobbles, lifted Deere's share price to over three times what it was when Mr Lane took charge in 2000—and some 90% above its previous all-time peak.) The second source of his optimism is the global boom in agriculture, which is leading to record demand for Deere's products, including combine harvesters, balers and seeders, as well as tractors. The firm also makes equipment for forestry, construction and even lawn care. Corn plantings in America are expected to be at record levels this spring, due to the growing demand for corn-based ethanol biofuel. Yet ironically for a firm headquartered in Moline, Illinois, at the heart of America's subsidy-addicted, protectionist farming industry, the strongest source of demand is abroad, as agriculture becomes more mechanised in prosperous developing countries. As Mr Lane puts it, “There are 2 billion more people able to afford to eat.”

Not that global demand is new to Deere. The 170-year-old firm has operated in Europe for over 50 years, and its tractors were exported to Stalin's Soviet Union. A previous boss, the last to come from the founding family, was on the second corporate jet allowed into China after Henry Kissinger's icebreaking meeting with Chairman Mao in 1972. But Deere's business really started to blossom overseas in the 1990s, after Mao's successor, Deng Xiaoping, embraced a version of capitalism, India started to liberalise its economy and Mercosur, the Latin American trade agreement, was signed. Today Deere sells its products in 130 countries and makes them in 16. Half of its workforce is based outside America. Indeed, Deere exports the small, durable tractors it makes in India to America.

Mr Lane is particularly optimistic about demand from Brazil, which is picking up again after some lacklustre growth in the past two years, due to the appreciation of the real. Deere will open a new factory in Brazil this year. In the long run Mr Lane thinks that Brazil is best placed of all the big emerging economies to increase the amount of land put to efficient agricultural use—and not, he insists, as a result of deforestation, as the Amazon is well north of the land he has in mind. “Brazilian society allows the wealthy to own and profit from lots of land,” he says, in contrast to China and India, where rules governing land ownership are holding back the move to efficient large-scale farming.

Mr Lane's third reason for optimism comes from the big changes he has made in how Deere is run. These grew out of his own background, in finance, not farming. He grew up in big cities, including Washington, DC, and did his MBA at the University of Chicago. He first seemed destined for a career in banking, and joined First National Bank of Chicago (now part of JPMorgan Chase), which sent him to Germany, where Deere was his main customer. The firm became his employer when it needed someone to improve the financial strength of its dealers, who were suffering badly during the recession of the early 1980s.

After becoming chief financial officer in 1996, Mr Lane became increasingly conscious that the firm was underperforming. It had great products, reflecting the homespun philosophy of its eponymous founder, who declared: “I will never put my name on a product that does not have in it the best that is in me.” But it was not a great business. Its working practices were old and slow, reflecting a workforce dominated by the UAW, the United Auto Workers. It had too much working capital and too much gear sitting unsold in showrooms. It was, says Mr Lane, “asset-heavy and margin-lean”.

Show me the money
As soon as he became chief executive he set about converting Deere to the pursuit of shareholder value, a philosophy he had embraced at the University of Chicago. All of the firm's 48,000 workers were told that they had to deliver “shareholder value-added”, an “easy-to-understand” measure of profitability Mr Lane devised that involved charging each business unit a cost of capital of 1% of assets a month. Each business unit was required to earn a shareholder value-added profit margin of 20% on average over the business cycle. Financial rewards are linked to this measure, even for the unionised part of the workforce: the UAW ultimately proved open to change.

To get so many people involved in this way is “pretty unique”, says Mr Lane. It seems to be working. Productivity is up by 11% since the new contract took effect. There is far less equipment wasting away at dealerships, thanks to new, lean just-in-time production. The pension-fund shortfall has been fixed. Deere's dividend payout has been doubled and its debt rating has been upgraded. But the big test is whether each business unit can maintain strong performance over an entire business cycle, Mr Lane maintains. “If not, it's just a flash in the pan—it doesn't count,” he says. The average target of a 20% margin is supposed to encompass 28% at the peak of the cycle and no worse than 12% at the trough (compared with zero or worse in the past). The first test may come in the construction division, given the trouble in homebuilding in America, says Mr Lane. Still, if things continue to go well, “perhaps, in the year 2014, we could declare ourselves a great business,” he says.

Seven Answers From Michael Crichton

2007-03-28T09:46:00.000-05:00

A little Q&A with Michael Crichton.

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To what extent is climate change happening, to what extent is it anthropogenic, and what should we be doing about it?

There has been so much disinformation about my position that I feel obliged to repeat what I said in my book. Yes, the globe is warming; the greenhouse effect is real; CO2 is a greenhouse gas; it is increasing from human activities; we would expect this increased CO2 to produce warming. All true.

But nothing in this sequence of statements implies that CO2 is the primary driver of the warming we are seeing. Not at all. It is one thing to say that CO2 is a greenhouse gas and is therefore causing warming; it is quite another to say CO2 is causing ALL of the warming that we see. There is good evidence (and good physical theory) for the first statement, and weak evidence, primarily computer models, for the second.

Despite all the huffing and puffing, the truth is no one knows how much of the current warming trend is caused by man. Some of it surely is. And some of that anthropogenic warming is caused by the man-made rise in CO2. But how much is attributable to CO2 is not known. In the absence of that vital knowledge, people speak of a consensus of scientists. That's a way to get around the lack of knowledge and the inability to predict (which is the conventional proof of scientific knowledge, hence the usual emphasis in science on testable hypotheses.) Perhaps people and nations will choose to act on the basis of a claimed consensus. They have done so in the past, sterilizing their poor neighbors in the name of eugenics, gulping milk for their ulcers, downing antioxidants to prevent cancer, and soon. But all those behaviors were ultimately proven to lack a scientific basis — in other words, they are superstitions.

If you take antioxidants, last year you were being sensible about your health. This year, you are engaging in superstitious behavior, wasting your money, and possibly harming your health. So what really matters is knowledge, not consensus.

In the end, the issue in climate is not how many scientists agree that CO2 is the primary driver of current warming. The issue is whether the CO2 mechanisms they have embraced accurately account for the behavior of the planet in the recent past, and can predict its behavior in the near future.

Time will tell. But I believe the planet has many surprises in store.

So, too, does the science. I am quite sure we will see greater scrutiny of the global temperature record, and how it is kept. At least one paper has attacked the notion of global mean temperature as an arbitrary calculation having no physical significance at all.

In the meantime, as you know, my own prediction for warming over the next 100 years is 0.8 degrees C. I arrived at this by a complex formula that I will reveal in future years.

You also ask whether we need to do anything about climate change. I think another question that must be asked first: what are the most pressing environmental problems that wealthy western societies should be addressing right now? Where does global warming stand in that list?

In other words, where does global warming fit in our environmental priority list?

Many people behave as if you dare not ask that question. But it is perfectly reasonable to assign priorities to our environmental problems. In fact, it is highly unreasonable not to do so.

So, should we act now, or not? That is appropriately a complex discussion that depends on economic considerations, an understanding of how fast modern societies can change their infrastructures, and on the question of competing needs — and, yes, on moral considerations as well. But taken seriously.

Readers who are interested in my views on what to do about climate can find them in a speech I gave at the National Press Club in Washington called "Our Environmental Future." It can be found at:

http://www.michaelcrichton.com/speeches/index.html.

How has your public stance on climate change been received?

Any departure from environmental orthodoxy is marked by ad hominem attack, vigorous spread of false information, claims of criminality and mental derangement, and general nastiness. Apparently this is one area where reasonable people cannot disagree.

It's interesting that any entity as complex, changing and difficult to comprehend as the environment should be guarded by organizations that allow no deviation from a single point of view toward what needs to be done. One might have predicted a rather broad range of environmental viewpoints, promoted by an equally broad range of institutions and activist organizations. There is some variation among organizations, of course. But on the subject of global warming, no deviation. That is to say, I am aware of no environmental organization that does not claim global warming is a major threat that must be dealt with now.

I leave it to your readers to explain that puzzle. Complex subject, simplistic response.

Do you really think nanotechnology poses a serious threat, or was Prey just a good story?

I do not understand the reaction the novel evoked in many quarters. People got wound up for no good reason. But that often happens with my books. After Jurassic Park, a Congressman announced he would introduce legislation to ban all research leading to the creation of a dinosaur — until someone whispered in his ear that it couldn't be done.

It's frequently claimed that I am exposing the public to false fears (except when it's claimed I am giving them a false sense of security.) In any case, it's nonsense. I trust my readers. They understand what I am saying. Nobody worried about dinosaurs after Jurassic Park, and nobody worried about nanotechnology after Prey. On the other hand, people worried like hell about cancer and powerlines and other false claims made by the media.

Prey was written as a story about the influence of commerce on science. It was a story about people taking short-cuts to keep to a schedule and meet deadlines. It wasn't really about the emerging field of nanotechnology because the technology described in the novel is entirely fictional. Nanotechnology can't make self-reproducing, evolving nanomachines. Couldn't then, and can't now.

However, the story accurately dealt with certain trends; the novel anticipated a merging of molecular biology and nanotechnology as away to solve certain problems in both fields. And it is true that some Caltech graduate students asked me to visit their lab because "We're doing all the stuff you wrote about." But they weren't, exactly.

I think there is a great need for advanced societies to come to terms with the commercialization of science, which is an enormous social change that has occurred entirely within my lifetime. Science is now a very different game, with very different players, different opportunities, different benefits, and different hazards for the population. But people in general don't understand what has happened.

They will.

Can you paint a brief picture of technological and social development over the next 50 years?

No. I don't think it's possible to predict the future. It's hard enough to predict the past.

GM - boon, threat, or both?

Most of the people I know who are anxious about GM say that their concerns lie with the fact that the technology is of unproven safety. They share their worries with like-minded people by use of their cell phones. When I remind them that cell phones are a technology of unproven safety, and that the construction of all these wireless networks around the world and in our houses is a development of unproven safety, they just shrug. They don't care. Even though most of them are old enough to remember the false fears about cancer and electromagnetic radiation. You'd think that fear could be easily reawakened in them, but no.

From this I conclude fears are a matter of fashion. Worries are like clothing styles, they come and go, rise and fall, based on what the worry fashion leaders tell the herd of independent minds to fear this year. GM is fashionable to fear. But that will change.

What is the most serious threat facing our civilisation?

Loss of classical liberal values in those western societies that embraced them.

England was the first modern state, the first superpower, the first nation to deal with moral issues around the world, and the first nation to install the benefits of what we might now loosely term a liberal society. I mean that in the 19th century sense of liberalism. That notion of liberalism was also present in America, but made it to the Continent only in a pale and limited form. It is a wonderful social conception that must be vigilantly guarded. It is not shared by other nations in the world. Nor is it shared by many citizens in English-speaking countries. Peculiarly, many of our most educated citizens are least sympathetic to classical liberal ideals. Indeed the term 'liberalism' in the modern day has come to imply a constellation of attitudes that John Stuart Mill would not recognize as liberal at all. Nor would, say, John F. Kennedy recognize them as liberal. Kennedy's conception of liberalism was simultaneously more tolerant and more tough-minded: tolerant about varieties of behavior within the society, and tough-minded toward threats to a tolerant society from without.

That's all gone, now. Today there is far too much sensitivity within societies, and too little hard-nosed recognition of threats from without. We are inclined to be intolerant of speech by our friends and neighbors, and tolerant of beheadings, rape, and homophobia in distant lands.

This makes no sense. But here we are.

What are you working on now?

An adventure story like Jurassic Park. I'm enjoying myself.

Newspapers in Decline

2007-03-26T15:51:00.000-05:00

More bleak news for the purveyors of death and destruction in print...

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Drop in Ad Revenue Raises Tough Question for Newspapers
By KATHARINE Q. SEELYE

For newspapers, February was the cruelest month. So far.

Revenue from advertising was in striking decline last month, compared with February a year ago, and were generally weaker than analysts had expected.

And while there was one piece of good news for the industry — ad spending on newspaper Web sites rose — many industry watchers were wondering whether the February declines were part of a short-term slump or whether they signal a deepening systemic problem.

“I’m reluctant to say that a single data point is a trend,” said Barry Parr, a media analyst at Jupiter Research. “But those are scary numbers, especially when we’re not in a recession.”

At USA Today, the nation’s biggest newspaper, ad revenue was down 14 percent this February, compared with February last year. Gannett, which owns USA Today and is the nation’s biggest newspaper company, reported that its overall ad revenue declined 3.8 percent in February from February 2006.

Ad revenue at The New York Times Company fell 6 percent overall, declining 7.5 percent at The New York Times; ad revenue at the company’s New England Media Group, which includes The Boston Globe, was down 4 percent. At The Wall Street Journal, published by Dow Jones, it was off 10 percent.

The Tribune Company, whose papers include The Los Angeles Times, The Chicago Tribune and The Baltimore Sun, reported losses of more than 5 percent. So did McClatchy, whose papers include The Miami Herald, The Sacramento Bee and The Lexington Herald-Leader in Kentucky.

Even papers in smaller markets, which are shielded from some of the forces buffeting some of the bigger metro dailies, saw losses in February. Ad revenue for the publishing division of Media General, which owns The Tampa Tribune, The Richmond Times-Dispatch and The Winston-Salem Journal, were down 5.8 percent.

Most of the numbers were worse than January’s and came after a difficult year in which many newspapers continued to pare costs by laying off employees, shrinking the physical size of their print publications and reducing benefits. Several newspapers also tried raising revenue by accepting advertising in prominent spaces that they had long reserved for news.

And still the numbers were bad. Collectively, the February sales were “the worst group performance to date,” Steven Barlow, an analyst at Prudential Equity Group, wrote to his clients.

The newspaper companies blamed the declines largely on the continuing shift of classified advertisers from print to online, especially to mostly free sites like Craig’s List. In some cases, particularly in Florida and California, they traced the weaknesses to volatile real estate markets.

Tampa, Fla., which is also recovering from a series of hurricanes, was hit particularly hard, with revenue from real estate ads plunging 44 percent compared with last February. Tampa’s overall classified revenue was off 27 percent, with help wanted down 32 percent and automotive off 27 percent, according to Media General.

Lauren Rich Fine, a media analyst for Merrill Lynch, cautioned in her analysis of McClatchy’s February numbers not to “overreact to just one month of poor performance.” Nonetheless, she said, McClatchy’s problems were “just starting.” She cited the stark comparison between California’s hot real estate market last February, when revenue from classified real estate ads was up 48 percent, and its weaker market this February, when that revenue was down 20 percent.

Mark Fratrik, an economist at BIA Financial Network, said the February results were “not a blip on the screen.”

“It’s fundamental, what’s going on with newspapers,” he said. “The younger groups, the most desired demographics, are just not reading them. They aren’t listening to traditional radio either, but I tell radio broadcasters that they’re lucky not to be in newspapers.”

Mirroring the slide in ad revenue is a long slow decline in circulation.

Newspaper circulation nationally reached its peak in 1984, when there were 1,600 morning and afternoon paid dailies with a circulation of 63 million. With the rise of cable television and, later, the Internet, newspaper circulation began to decline. Today there are 1,450 paid dailies with a circulation of 53 million. The losses have accelerated over the last two years.

While many newspapers still have healthy profit margins, their costs are up and ad revenue is down.

On the bright side, says the Newspaper Association of America, ad spending on newspaper Web sites jumped 31.5 percent last year compared with the year before, to $2.7 billion.

The bad news is that online spending accounted for only 5.4 percent of all newspaper ad expenditures in 2006, the association reported. And print revenue fell 3.7 percent in 2006, to $13.2 billion, from the year before.

Online spending is projected to continue to grow, and many newspapers are investing more and more in their Web sites. But so far, the online revenue is too small to begin to compensate for the losses from print advertising.

Mr. Parr, the Jupiter analyst, said that gap was going to force the industry to adapt to survive and that the February results were just a symptom of this larger struggle.

“There is absolutely no question that the next 10 years are going to be really bad for the newspaper business,” he said. “This is a time of wrenching change and chaos. All of our assumptions about newspapers are going to be changed. The format, the business model, the organization of newspapers have outlived their usefulness.”

Creative Destruction in the Music Business

2007-03-21T09:41:00.000-05:00

Speaking of creative destruction...

Sales of Music, Long in Decline, Plunge Sharply
Rise in Downloading Fails to Boost Industry;
A Retailing Shakeout
By ETHAN SMITH
March 21, 2007

In a dramatic acceleration of the seven-year sales decline that has battered the music industry, compact-disc sales for the first three months of this year plunged 20% from a year earlier, the latest sign of the seismic shift in the way consumers acquire music.

The sharp slide in sales of CDs, which still account for more than 85% of music sold, has far eclipsed the growth in sales of digital downloads, which were supposed to have been the industry's salvation.

The slide stems from the confluence of long-simmering factors that are now feeding off each other, including the demise of specialty music retailers like longtime music mecca Tower Records. About 800 music stores, including Tower's 89 locations, closed in 2006 alone.

Apple Inc.'s sale of around 100 million iPods shows that music remains a powerful force in the lives of consumers. But because of the Internet, those consumers have more ways to obtain music now than they did a decade ago, when walking into a store and buying it was the only option.

Today, popular songs and albums -- and countless lesser-known works -- can be easily found online, in either legal or pirated forms. While the music industry hopes that those songs will be purchased through legal services like Apple's iTunes Store, consumers can often listen to them on MySpace pages or download them free from other sources, such as so-called MP3 blogs.

Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. "Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream," says Mr. Rabhan. "It's the vehicle that drives the tour, the merchandise, building the brand, and that's it. There's no money."

The music industry has found itself almost powerless in the face of this shift. Its struggles are hardly unique in the media world. The film, TV and publishing industries are also finding it hard to adapt to the digital age. Though consumers are exposed to more media in more ways than ever before, the challenge for media companies is finding a way to make money from all that exposure. Newspaper publishers, for example, are finding that their Internet advertising isn't growing fast enough to replace the loss of traditional print ads.

In recent weeks, the music industry has posted some of the weakest sales it has ever recorded. This year has already seen the two lowest-selling No. 1 albums since Nielsen SoundScan, which tracks music sales, was launched in 1991.

One week, "American Idol" runner-up Chris Daughtry's rock band sold just 65,000 copies of its chart-topping album; another week, the "Dreamgirls" movie soundtrack sold a mere 60,000. As recently as 2005, there were many weeks when such tallies wouldn't have been enough to crack the top 30 sellers. In prior years, it wasn't uncommon for a No. 1 record to sell 500,000 or 600,000 copies a week.

In general, even today's big titles are stalling out far earlier than they did a few years ago.

The music industry has been banking on the rise of digital music to compensate for inevitable drops in sales of CDs. Apple's 2003 launch of its iTunes Store was greeted as a new day in music retailing, one that would allow fans to conveniently and quickly snap up large amounts of music from limitless virtual shelves.

It hasn't worked out that way -- at least so far. Digital sales of individual songs this year have risen 54% from a year earlier to 173.4 million, according to Nielsen SoundScan. But that's nowhere near enough to offset the 20% decline from a year ago in CD sales to 81.5 million units. Overall, sales of all music -- digital and physical -- are down 10% this year. And even including sales of ringtones, subscription services and other "ancillary" goods, sales are still down 9%, according to one estimate; some recording executives have privately questioned that figure, which was included in a recent report by Pali Research.

Meanwhile, one billion songs a month are traded on illegal file-sharing networks, according to BigChampagne LLC.

Adding to the music industry's misery, CD prices have fallen amid pressure for cheaper prices from big-box retailers like Wal-Mart and others. That pressure is feeding through to record labels' bottom lines. As the market has deteriorated, Warner Music Group Corp., which reported a 74% drop in profits for the fourth quarter of 2006, is expected to report little relief in the first quarter of this year.

Looking at unit sales alone "flatters the situation," says Simon Wright, chief executive of Virgin Entertainment Group International, which runs 14 Virgin Megastores locations in North America and 250 world-wide. "In value terms, the market's down 25%, probably." Virgin's music sales have increased slightly this year, he says, thanks to the demise of chief competitor Tower, and to a mix of fashion and "lifestyle" products designed to attract customers.

Perhaps the biggest factor in the latest chapter of the music industry's struggle is the shakeout among music retailers. As recently as a decade ago, specialty stores like Tower Records were must-shop destinations for fans looking for both big hits and older catalog titles. But retailers like Wal-Mart Stores Inc. and Best Buy Co. took away the hits business by undercutting the chains on price. Today such megaretailers represent about 65% of the retail market, up from 20% a decade ago, music-distribution executives estimate. And digital-music piracy, which has been rife since the rise of the original Napster file-sharing service, has allowed many would-be music buyers to fill their CD racks or digital-music players without ever venturing into a store.

Late last year, Tower Records closed its doors, after filing for bankruptcy-court protection in August. Earlier in 2006, following a bankruptcy filing, Musicland Holding Corp., which owned the Sam Goody chain, closed 500 of its 900 locations. And recently, Trans World Entertainment Corp., which operates the FYE and Coconuts chains, among others, began closing 134 of its 1,087 locations.

But even at the outlets that are still open, business has suffered. Executives at Trans World, based in Albany, N.Y., told analysts earlier this month that sales of music at its stores declined 14% in the last quarter of 2006. For the year, music represented just 44% of the company's sales, down from 54% in 2005. For the final quarter of the year, music represented just 38% of its sales.

Joe Nardone Jr., who owns the independent 10-store Gallery of Sound chain in Pennsylvania, says he is trying to make up for declining sales of new music by emphasizing used CDs, which he calls "a more consistent business." For now, though, he says used discs represent less than 10% of his business -- not nearly enough to offset the declines.

Retailers and others say record labels have failed to deliver big sellers. And even the hits aren't what they used to be. Norah Jones's "Not Too Late" has sold just shy of 1.1 million copies since it was released six weeks ago. Her previous album, "Feels Like Home," sold more than 2.2. million copies in the same period after its 2004 release.

"Even when you have a good release like Norah Jones, maybe the environment is so bad you can't turn it around," says Richard Greenfield, an analyst at Pali Research.

Meanwhile, with music sales sliding for the first time even at some big-box chains, Best Buy has been quietly reducing the floor space it dedicates to music, according to music-distribution executives.

Whether Wal-Mart and others will follow suit isn't clear, but if they do it could spell more trouble for the record companies. The big-box chains already stocked far fewer titles than did the fading specialty retailers. As a result, it is harder for consumers to find and purchase older titles in stores.

Write to Ethan Smith at ethan.smith@wsj.com

DARPA Q&A

2007-03-11T16:00:00.000-05:00

Here's a little Q&A with DARPA Director Tony Tether from WIRED magazine I found interesting:

What future technologies worry you? Quantum computing. If someone else, an enemy, got ahold of that, it would be a real technological surprise.

That concerns you more than biological weapons? The biological is more worrisome because it’s potentially more near-term. But the quantum computer will be really revolutionary.

By working on it, though, aren’t you potentially giving it to them? That’s always a worry, isn’t it? In some cases, when we have a technology that we don’t want to teach the world how to create, we put controls on it.

Start-up demos quantum computer

2007-02-14T17:45:00.000-05:00

Michael Kanellos at CNet.com discusses D-Wave Systems plans to commericalized quantum computing in the months ahead.

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About a year from now, banks, pharmaceutical companies and other large institutions will be able to rent time on a computer that calculates by studying the behavior of a niobium atom, according to D-Wave Systems.

The Canadian company on Tuesday gave a public demonstration of Orion, its quantum computer, at the Computer History Museum in Mountain View, Calif. D-Wave said it is going to try to sell computing services to corporate customers in the first quarter of 2008.

Quantum computers, which researchers have experimented with for years but which haven't yet existed outside of the laboratory, are radically different than today's electronic computers. D-Wave's computer is based around a silicon chip that houses 16 "qubits," the equivalent of a storage bit in a conventional computer, connected to each other. Each qubit consists of dots of the element niobium surrounded by coils of wire.

When electrical current comes down the wire, magnetic fields are generated, which, in turn, causes the change in the state of the qubit. Because scientists understand how niobium will react to magnetic fields and calculate the exact pattern and timing of the magnetic fields created, the pattern of changes exhibited by the niobium can then be translated into an answer that humans can understand.
D-Wave

"The qubits behave according to a certain set of rules," said founder and Chief Technology Officer Geordie Rose, who likened quantum computing to trying to decipher the language of atoms. "Quantum computing is the translation of those laws into a format that we can take."

Ultimately, D-Wave's computer is an analog computer, according to Alexey Andreev, a venture capitalist at Harris & Harris and an investor in D-Wave. Answers to programs run on the computer come in the form of a physical simulation. Answers to problems in digital computers are essentially mathematical solutions.

Because of its inherent properties, D-Wave's computer is optimized for running complex and oftentimes consuming simulations--for example, what happens when different variables are changed in an ornate financial model, or how different proteins interact with various synthetic, simulated pharmaceuticals. The system also could be used for nonscientific research such as searching patent databases for matches and overlap of intellectual property.

"We view these machines as probability distribution generators," Rose said. "We want to build an actual physical embodiment of a hard math problem."

Right now, Orion is a "proof of concept," a demonstration of what the final product could look like. At the demonstration, Rose had the system come up with answers to Sudoku problems and, in another demo, seek out similar molecules to the active ingredient in the drug Prilosec in a chemical database. The computer found several molecules that shared similar structural elements with Prilosec, but the molecule that matched it closest was the active ingredient in another drug called Nexium. Plucking out Nexium demonstrated the system's accuracy, the company said. Nexium is actually a mirror image of the molecule in Prilosec that AstraZeneca invented to extend its patents.

In another example, he ran a seating chart program where each guest had particular seating requirements. (Cleopatra could not sit next to meat eaters. Genghis Khan eats meat, and so on.) The system came up with a seating plan with a minimum number of violations of protocol.

The computer itself--which is cooled down to 4 millikelvin (or nearly minus 273.15 degrees Celsius) with liquid helium--was actually in Canada. Attendees only saw the results on a screen. Still, it was the largest demonstration of a quantum computer ever, Rose said.

By the end of the year, however, D-Wave will have a 32-qubit system. It plans to begin to rent out time on its computers to corporate customers in the first quarter of next year, said CEO Herb Martin. Customer won't have to learn special programming techniques or other tricks to take advantage of the service; sending a problem to D-Wave will be similar to outsourcing it to any other company. Later, D-Wave may lease or sell computers, Martin added.

By the second quarter of 2008, the company plans to have a 512-qubit system, and a 1,024-qubit system is expected by the end of that year.

Quantum computers, Martin emphasized, will not displace digital computers. Instead, they will serve as co-processors for large problems.

But is there a market for renting computing cycles? Sun Microsystems a few years ago opened up a server farm for hire for chemical and pharmaceutical companies. It has found few takers.
D-Wave's appeal differs in that its computer will be able to solve much larger problems than companies are currently able to tackle, said Steve Jurvetson, a partner at Draper Fisher Jurvetson and an investor in D-Wave. Many medical outfits actually limit the scope of their research to fit the existing computational abilities. D-Wave has 100 patent applications filed, and 35 have been granted.

However, how larger systems will behave remains unknown, Rose said. D-Wave has engineered its chip so that the qubits are insulated from noise and other factors, and he has confidence that the number of qubits can be increased, "but we could be wrong," he said.

Another distinct advantage that the computer will have comes in energy consumption. Niobium is a superconductor and, thus, does not radiate heat. The chip itself requires only a few nanowatts.

The refrigeration unit consumes the most power at 20 kilowatts, which is still small compared with most server farms. Expanding the number of qubits on the chip will not require massive increases of refrigeration, Rose added.

Even with the explanations, quantum concepts can be a little tough to digest. Rose reminded the audience that humans consist of atoms that first appeared in a supernova billions of years ago. Trying to understand those atomic interactions that lead up to the present is at the heart of quantum computing.

"When I went to school, they didn't teach quantum mechanics," Martin said. "Newton was my boy."

Another Quantum Leap at IBM

2007-02-14T14:12:00.000-05:00

Here's the lastest from the labs at IBM. Sounds like another quatnum leap to me...

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IBM Pares Speed Gap In Memory Circuitry Design for Data Storage
May Be in Use Next Year;
Performance Could Double
By DON CLARK
February 14, 2007; Page B2

International Business Machines Corp. is claiming a breakthrough in developing circuitry to store data on future microprocessor chips.

The big computer maker said its approach -- based on exploiting the most widely used memory technology in a new way -- could triple the data stored on a typical microprocessor with a resulting doubling of computing performance.

"We think this is the next big thing in getting more system performance," said Lisa Su, IBM's vice president of semiconductor research and development.

Microprocessors, the calculating engines for computers, increasingly come with storage circuitry to minimize the delays associated with fetching data from external memory chips. This "cache memory" typically uses a kind of circuitry used on chips called SRAMs, or static random-access memories.

SRAMs are fast but require six transistors to store a single bit of data. The more widely used chip known as dynamic random-access memories, or DRAMs, only need one transistor and another component, a capacitor, to store a bit. But DRAMs, though they can store more data in a smaller space, have generally been considered too slow for cache memory.

IBM researchers are discussing their progress in closing the speed gap at a conference in San Francisco today.

Exploiting a manufacturing technology called silicon-on-insulator, the company has developed unusually fast DRAM circuitry for use as cache memory. Subramanian Iyer, a director of IBM's manufacturing-process development, estimates it takes 1.5 nanoseconds -- or billionths of a second -- to fetch data from its enhanced DRAM technology, compared with 10 to 12 nanoseconds for conventional DRAMs and 0.8 to 1 nanoseconds for SRAMs. Mr. Iyer said three times more data can be stored in the same amount of space by switching from SRAM to DRAM circuitry; he expects the technology to be incorporated on microprocessors that will be manufactured next year using a new production process.

Such benefits could help IBM's Power microprocessors in a performance race with chips from Intel Corp. and others. But Shekhar Borkar, the director of Intel's microprocessor technology lab, said extra manufacturing costs associated with using DRAM circuitry could outweigh the benefits.

IBM is a technology partner with Advanced Micro Devices Inc., an Intel rival that could benefit from the computer maker's memory research. Meanwhile, other alternatives to SRAM for cache memory are also being studied.

Innovative Silicon Inc., a start-up, has been promoting a technology it calls Z-RAM that stores data using a single transistor. Its licensees include AMD.

An AMD spokesman said it is "evaluating a number of new and emerging technologies" for cache memory.

Takin’ care of business, rather badly

2007-02-14T10:44:00.000-05:00

Kevin Maney discusses the state of the online music business in his weekly USA Today column.

*******************

The online digital music business stinks.

ITunes, Rhapsody, Zune Store, Napster — you name it. They're all failures.

The hype has people believing otherwise. Bloggers, tech writers and your friends who know more about computers than you do shout that iTunes is the best thing to happen to music since the microphone. Or maybe psychedelic drugs.

But it's just not true. Nearly six years after the introduction of iTunes and the iPod, online music has failed to interest the vast majority of the world's music consumers. Which is no doubt why Steve Jobs recently called for an end to copy-protection software on digital songs. Something has to change, or iTunes and its ilk will never break into the mass market.

Jobs admitted that iTunes' penetration has been weak. In his discussed-to-death essay, "Thoughts On Music" — posted a couple of weeks ago on Apple's website — Jobs noted that only about 3% of songs on a typical iPod are bought on iTunes. The rest are either ripped from CDs and transferred into iPods, or illegitimately downloaded for free off file-sharing sites such as Kazaa or eDonkey.

The reality for iTunes might not even be that good.

In a report released in December, Forrester Research said it did a strenuous, independent analysis of iTunes purchases. It found that just 3.2% of all "online households" — homes that have computers and Internet connections, a subset of all homes — made an iTunes purchase over a one-year period.

About 10% of buyers purchased just one track during the entire year. About one-quarter of buyers spent $5 or less for the year. Most iTunes users, Forrester says, own fewer than two CDs' worth of iTunes music.

Really, it's as if tens of millions of people each had a big honkin' refrigerator, and put a quart of milk in it a few times a year.

Worse for Apple, Forrester found that the number of monthly transactions per iTunes household was declining in 2006. "It is too soon to tell if this decline was seasonal or if buyers were reaching their saturation level for digital music," the report says.

Apple rebutted Forrester's report, saying that iTunes sales continue to grow. But Apple did not offer specific numbers to counter Forrester's. Jobs' music manifesto certainly confirmed that consumers — people who already bought iPods, for Pete's sake — are simply not buying many iTunes songs.

It's not just an iTunes problem. In January, the International Federation of the Phonographic Industry — the global bureaucracy guarding music copyrights — said that online music sales in 2006 "nearly doubled." Which sounds amazing. Until you get to the part where the IFPI says that sales had tripled in 2005. So the growth rate had slowed.

"Downloads, as a business model for digital music, has failed," Dave Goldberg, VP of Yahoo Music, told a crowd at Digital Music Forum West late last year. "When you look at people who are buying downloads, it is older people who have money and time, and people who are doing it through gift cards."

How about subscription services, like Rhapsody and Napster? Not much joy there, either. Rhapsody reportedly has about 1 million subscribers. The rest, all together, have about another million. That's an audience share that approaches the 0.7 rating Animal Planet got when it aired Puppy Bowl III before the Super Bowl.

It's certainly not that people don't want to buy stuff on the Internet. Amazon.com's sales soared in 2006. Blue Nile is thriving selling diamond jewelry, and eBay sells millions of cars. Getting people to buy songs ought to be a snap.

And people want music. The Grammy Awards on Sunday were a giant celebration of music's popularity. People listen to more music in more ways than ever.

But for the majority of people, downloading songs is too hard and too frustrating. Some of that problem is the digital rights management (DRM) software that limits where and how songs can be played. It makes iTunes songs playable only on iPods, Rhapsody subscription songs playable only on certain devices, and so on.

The record companies believe DRM keeps people from pirating music, which may or may not be true. But DRM definitely keeps people from buying online music. As Jobs says, if consumers could buy music from any online store and play it on any device, the entire industry would thrive.

"The more you try to control music, the more you limit business opportunities," says Steve Waite, author of the book Quantum Investing and a professional musician.

Or as music artist Moby told me last week, "Personally, I see 2% of DRM as protecting copyright and 98% annoying consumers."

There are other reasons downloads are stalled. People who grew up with CDs — or vinyl LPs before that — like the packaging and cover art, and like to get songs deep in an album that are not hits but grow on you over time. At 99 cents a song, digital downloads don't offer enough value to give up the packaged CD niceties.

Especially when pirated music is so easily available for free.

If digital downloads are going to take off, they probably need to be DRM-free, simpler to buy and much cheaper. Then again, that will only happen with the record companies' blessing, and since they get 90% of their revenue from CD sales, maybe they just don't care about taking digital downloads to the mass market.

I guess we'll find that out if record label EMI, as rumored, decides to sell songs with no DRM.

After Jobs released his essay, I asked Apple spokeswoman Natalie Kerris why he chose to do it at that time. She said there was no particular reason. But Jobs never does anything for no particular reason. He manipulates the media and timing better than anyone in tech.

More likely, Jobs realized it was time to save iTunes.

Second Life - The Next Frontier on the Web

2007-02-04T07:46:00.000-05:00

Here's a nice piece from FORTUNE on Second Life, a virtual 3-D world that is emerging on the web. Click on link below for a glipse of the future.

http://money.cnn.com/2007/01/22/magazines/fortune/whatsnext_secondlife.fortune/

Moore's Law Lives!

2007-01-30T16:22:00.000-05:00

I've been hearing for years now that the end of Moore's Law is just around the corner. Think again, folks!

Intel, IBM reveal transistor overhaul

By JORDAN ROBERTSON, AP Technology WriterSun Jan 28, 4:44 AM ET

In dueling announcements, Intel Corp. and International Business Machines Corp. separately say they have solved a puzzle perplexing the semiconductor industry about how to reduce energy loss in microchip transistors as the technology shrinks to the atomic scale.

Each company said it has devised a way to replace problematic but vital materials in the transistors of computer chips that have begun leaking too much electric current as the circuitry on those chips gets smaller.

Technology experts said it's the most dramatic overhaul of transistor technology for computer chips since the 1960s and is crucial in allowing semiconductor companies to continue making ever-smaller devices that are also energy-efficient.

It also ratchets up the competition between Intel and rival chipmaker Advanced Micro Devices Inc., which helped IBM develop the technology along with electronics makers Sony Corp (NYSE:SNE - news). and Toshiba Corp.

Semiconductor experts said Intel and IBM scientists have concocted a clever way to maintain the industry's frenetic development pace.

Companies are feverishly trying to discover new ways to adhere to Moore's Law, the 1965 prediction by Intel co-founder Gordon Moore that the number of transistors on a chip should double about every two years.

So far, chip development has generally advanced according to that schedule, leading to the creation of faster and more powerful processors that also give off less heat and are cheaper to run.

But scientists in recent years have reported serious problems in stopping electric current from leaking out of the tiniest chip parts, threatening to halt the march of Moore's Law.

The problem is that the silicon dioxide used for more than 40 years as an insulator inside transistors has been shaved so thin that an increasing amount of current is seeping through, wasting electricity and generating unnecessary heat.

Intel and IBM said they have discovered a way to replace that material with various metals in parts called the gate, which turns the transistor on and off, and the gate dielectric, an insulating layer, which helps improve transistor performance and retain more energy.

Intel said new materials help provide a 20 percent boost in transistor performance. IBM did not release specifics of its project.

"This gives the entire chip industry a new life in terms of Moore's Law, in all three of the big metrics — performance, power consumption and transistor density," said David Lammers, director of WeSRCH.com, a social networking Web site for semiconductor enthusiasts and part of VLSI Research Inc. "It opens the door to some pretty rapid improvements."

Intel appears the farthest along in bringing a product based on the technology to market.

The Santa Clara-based company said it has created working microprocessors using the new materials that will go into mass production in the second half of 2007.

Intel also said the chips will be built using its new manufacturing process that involves shrinking parts of the chips down to 45 nanometers, or billionths of a meter, from the 65-nanometer process the company uses now.

The advanced manufacturing process allows Intel to shrink the size of the circuitry on its chips and pack more transistors onto a single sliver of silicon at a lower cost.

While IBM won't sell the chips by themselves, the Armonk, N.Y.-based company said it would begin selling servers with chips using the technology in 2008.

"This is a very big deal for the industry," said Richard Doherty, research director at the Envisioneering Group. "Intel will be the first to have this in production, but IBM could potentially have a density advantage compared with Intel's scheme. But both should get gold medals."

Sunnyvale-based AMD said it was not disclosing when it expects to use the technology in its own chips, but said it plans to introduce its own 45-nanometer products in mid-2008.

One Very Cool Cat!

2007-01-25T16:23:00.000-05:00

Here's a little news items from Nature magazine that I thought was very cool:

Photonic Schroedinger cat breaks record

Physicists in China, Austria and Germany claim to have created the
largest ever photonic "Schroedinger cat", a popularized term given to
entangled particles that are in a superposition of two quantum states.
The physicists also claim their apparatus can create a six-photon
"cluster" state, which could bring the physical realization of a quantum
computer one step closer.

Source: Nature Physics

Putting the Brakes on Light Speed

2007-01-19T09:58:00.000-05:00

A very cool quantum development. Watch this space!

********************************

Researchers Slow Waves While Maintaining Their Ability to Carry Information

By Rick Weiss
Washington Post Staff Writer
Friday, January 19, 2007; A08

Scientists said yesterday that they had achieved a long-sought goal of slowing waves of light to a relatively leisurely pace and using those harnessed pulses to store an image.

Physicists said the new approach to taming light could hasten the arrival of a futuristic era in which computers and other devices will process information on optical beams instead of with electricity, which for all its spark is still cumbersome compared with light.

Even the best fiber-optical systems today rely on intervening electrical signal processors, because no one has figured out a practical means of putting the brakes on light at critical junctions.

The new experiments bring scientists closer to that goal.

"We only have to turn a knob and it slows," said John C. Howell, the University of Rochester physicist who led the effort, described in the Jan. 22 online issue of the journal Physical Review Letters.

The achievement is the latest in the fast-paced field of "slow light" -- a discipline that barely existed a decade ago. While other researchers have dragged light to slower speeds than the Rochester scientists, who got it down to one-three-hundredth of its normal velocity, the new method is far simpler. That means the dream of domesticating one of nature's most feral forces for use in computing, image processing and a host of military and homeland security applications could be nigh.

"This is a big step toward bringing slow-light technology into practical usage," said Steve Harris, a professor of electrical engineering and applied physics at Stanford University.

As the fleetest form of energy in the universe, light has the potential to revolutionize a wide range of technologies. Pulses of light can substitute for the digital "ones" and "zeros" that are today conveyed by relatively massive electrons on silicon chips. Light waves can also carry detailed images, encrypted in their complex, self-propagating ripples.

But light's great attractions -- its outlandish speed and general unwillingness to slow down -- also pose a huge challenge. That's because to be useful, bits of information must coordinate their travel with countless other bits -- in some cases yielding to other data streams and in other cases merging to make a splintered message or image whole.

Chipmakers long ago perfected the art of traffic control for electricity, using transistors to halt and release electrons at microscopic gates. But light is not so easily regulated. Moreover, when light is slowed -- by passing through a dense material, for example -- its wave form changes, typically resulting in a loss of whatever information it was carrying.

"It's not enough to slow the light down," said Lt. Col. Jay Lowell, a program manager at the Defense Department's Defense Advanced Research Projects Agency, which has funded much of the latest work. Unless information can survive the ride, he said, "it's just going to be a scientific curiosity."

Howell and his colleagues created a four-inch-long chamber filled with cesium gas heated to about 212 degrees Fahrenheit. When they sent pulses of laser light through that gas, the cesium atoms put the brakes on the leading edge of that wave, creating a photonic traffic jam.

"Essentially, the light just piles up," Howell said.

Once the slowed light exits, it naturally resumes it normal velocity -- 300 million meters per second, or fast enough to circle the Earth seven times in one second.

Most important, the peaks and troughs of Howell's light waves remained in phase as they stacked up, meaning they did not get out of step and cancel one another out. That is key, because phase is one aspect of light that carries information.

To prove that their slowed light did not get scrambled, the team sent their beam through a tiny stencil, less than one-fourth inch on each side, with the block letters "UR" -- the university's initials. Like a shadow-puppet image, that "UR"-shaped beam passed through the chamber, slowed and then emerged with its block letter message intact, as detected by a camera at the end.

Unlike most other systems for slowing light, this one worked at very low light levels. In one experiment, the "UR" image was clear even when a single photon -- the smallest possible quantity of light -- was beamed through the stencil.

The cesium-induced delays were brief, on the order of a few billionths of a second each. Looked at differently, each instance amounted to a two-foot long beam of light being compressed to less than four inches.

But that seemingly small degree of braking is nothing less than a means of storing, or "buffering" waves of light. Moreover, the system is tunable. With the turn of a knob the temperature in the chamber can be changed, which alters how much the incoming light is slowed and stored.

"This is a tremendous boon," said Alan Willner of the University of Southern California, president of the Lasers and Electro-Optics Society of the Institute of Electrical and Electronics Engineers. "Unless you have control over time delays, you can't have the beauty of high-speed optical information processing."

The new work complements previous efforts. A few years ago, scientists at Harvard, Stanford and the Rowland Institute for Science in Cambridge, Mass., created a weird, plasmalike substance called a Bose-Einstein condensate, which is to light what quicksand is to feet. That slowed light to just 38 mph, about one-20-millionth its normal speed. But it required temperatures of about 450 degrees below zero, and the process was not friendly to carrying information.

More recently, researchers at IBM's T.J. Watson Research Center in Yorktown Heights, N.Y., etched a series of tiny "race tracks" -- 100 of them crammed within a tenth of a square millimeter -- on the surface of a silicon chip and forced beams of light to perform more than 50 laps around each track before each was allowed to move on. Those extra laps added up to a delay of about a half a billionth of second -- long enough for about 10 bits of information to pile up.

Optical image processing could allow automated comparisons of facial images from security cameras to images maintained by law enforcement officials. It could also become a valuable tool for scientists studying subtle changes in microbes or other kinds of cells over time.

Optical processing also is likely to ease the storage of holographic images directly on hardware and could lead to breakthroughs in cryptography, the science of making and breaking codes.

A Revolution in the Making?

2007-01-10T11:51:00.000-05:00

Here's a good piece by John Markoff on Apple's new iPhone. Steve Jobs says not to think of the new phone as a computer, but that's really what it is. The iPhone runs OS-X off the iTunes platform. I'm looking forward to seeing how the product evolves in coming years. When I compare the first iPod I purchased (Version 1.0) and the iPod I bought late last year (an 80 gig version), I'm blown away at the progress Apple has made.
I'll bet Steve was bummed after he left the company he started - particularly the way everything went down. But as we all know now, it was truly a blessing. The only important, unresolved issue facing Steve right now is the options backdating issue.
It would be tragic to see Apple lose one of the greatest innovators of all-time over a greedy and mindless activity.

**************************

January 10, 2007
Apple Introduces Innovative Cellphone
By JOHN MARKOFF

SAN FRANCISCO, Jan. 9 — With characteristic showmanship, Steven P. Jobs introduced Apple’s long-awaited entry into the cellphone world Tuesday, pronouncing it an achievement on a par with the Macintosh and the iPod.

The creation, the iPhone, priced at $499 or $599, will not be for everyone. It will be available with a single carrier, Cingular Wireless, at midyear. Its essential functions — music player, camera, Web browser and e-mail tool as well as phone — have become commonplace in hand-held devices.

But it was the ability to fuse those elements with a raft of innovations and Apple’s distinctive design sense that had the crowd here buzzing.

Apple’s goal, Mr. Jobs said, was to translate the Macintosh computer’s ease of operation into the phone realm. “We want to make it so easy to use that everyone can use it,” he said. And he was clearly betting on translating Apple’s success with the iPod music player to a hot category of multifunction devices.

Underscoring the transformation of a quirky computer maker into the dominant force in digital music, and signaling his ambitions to extend that reach, Mr. Jobs also announced that Apple was dropping “computer” from its name and would henceforth be known as Apple Inc.

Investors took quickly to the pitch, sending Apple’s stock price up to a record close, while shares of established cellphone makers slumped.

Still, the phone is a gamble on a new business for Apple. And even with its success with the iPod and a reborn line of computers, it has not been immune to marketplace failures, like the Macintosh Cube introduced in 2000.

But in his two-hour presentation before an audience of reporters, analysts and Apple employees at the Macworld Expo trade show, the parallel he repeatedly drew was between the new phone and the Macintosh personal computer, which had a vast impact on the computer industry when it arrived in 1984.

Noting that there are occasionally new products that change everything, Mr. Jobs said, “Apple has been able to introduce a few of these into the world.”

He said Apple had set the goal of taking 1 percent of the world market for cellphones by the end of 2008. That may seem small, but with a billion handsets sold last year worldwide, that would mean 10 million iPhones — a healthy supplement to the 39 million iPods that Apple sold last year.

“Steve can make the internal combustion engine appear to be something new and cool,” said Reed E. Hundt, the former commissioner of the Federal Communications Commission. “He will provide a certain magic even to the 30-year-old cellphone.”

Mr. Jobs’s product tour de force was even more remarkable for its timing, as questions continue to be raised over the company’s stock options practices and his role in them.

“The truth of the matter is everything is fine,” he said during an interview after his presentation. “We’ve shared it all with the S.E.C.”

He acknowledged the controversy over the timing of some of Apple’s stock option grants, which Apple appears to have fanned recently with a disclosure to the Securities and Exchange Commission that contained a circumspect description of his role in the options award process.

“It’s raised questions,” he said, “but some of the journalism has been so off the mark. But I know the truth. It’s painful to read some of this stuff, but I know it’s kind of ridiculous and will pass.”

If he is in any trouble, Mr. Jobs showed no signs of it either on stage, where he was treated with great warmth by his audience of 4,000, or in an interview afterward in which he showed obvious delight in highlighting subtle industrial design features.

Mr. Jobs showed a series of applications including e-mail, advanced voice mail, photo collections and visually appealing Web searching. He promoted the fact that the new iPhone is powered by the same core OS X operating system that the Macintosh computer is based on, offering power-management features and advanced graphics abilities.

The user interface relies heavily on a high-resolution touch screen that makes it possible to use a finger to control the phone. It has features that are still more subtle, including sensors that track light and movement and proximity, to prompt the phone to control screen brightness and physical orientation and other aspects of its operation. For example, when the phone is placed next to the user’s face, the keyboard is automatically turned off.

Apple chose the name iPhone even though Cisco Systems, the network and consumer wireless company, has recently introduced a Wi-Fi-based phone with the same name. Mr. Jobs had been negotiating with Cisco executives over the trademark in recent days.

The $499 version of the device will have four gigabytes of storage, and the $599 version will offer twice that.

“At $499 and $599, it’s a pretty expensive deal,” said Rob Glaser, chief executive of Real Networks, whose online music store is a rival of Apple’s iTunes Store. “Steve is more focused on not cannibalizing iPod sales than on driving volume of phones. Those are not high-volume prices.”

Mr. Jobs defended the higher price of the new phone in a market where prices of so-called smartphones — those combining voice calling with Internet functions — are rapidly plunging to $200 and below. He contrasted the iPhone, which has only one mechanical button on its surface, with the BlackBerry and smartphones from Motorola and Palm. Rather than what he called “small plastic keyboards,” the iPhone will have a display that becomes both the keyboard and control panel, morphing to suit the current application.

“After today I don’t think anyone is going to look at these phones in the same way,” he said.

Apple’s relationship with Cingular began two years ago when Mr. Jobs phoned Stanley T. Sigman, Cingular’s chief executive, and proposed that they speak about a relationship. The two had an initial meeting in February 2005 in a New York hotel.

Apple spoke with other carriers before committing itself to its exclusive link with Cingular, Mr. Jobs said, but he would not give details.

In addition to the Apple relationship with Cingular, which Mr. Jobs said was forged without offering the wireless carrier even a peek at an early prototype, the iPhone will offer special applications from both Google and Yahoo. Users will be able to use both services’ search and e-mail services as well as a custom version of Google Maps.

Eric E. Schmidt, who is chief executive of Google as well as a member of Apple’s board, and Jerry Yang, co-founder of Yahoo, came on stage to endorse the new hand-held.

“I’m not a board member of Apple, but I would like one of these, too,” Mr. Yang said.

Regis McKenna, the veteran public relations specialist and corporate strategist who tutored Mr. Jobs in the art of high-tech marketing beginning in the late 1970s, said: “This compares favorably with the launch of the Macintosh. The price is high, but it will come down.”

Despite the widespread comment and enthusiasm that the phone generated, there were also many questions about its design and about Apple’s strategy.

Some analysts and industry executives noted that the Apple designers had shunned Cingular’s higher-speed digital cellular network. Mr. Jobs said later models would have additional networking standards.

Others questioned whether the device would be as versatile as other smartphones if it was not truly open — that is, able to accommodate many programs from third parties, as personal computers are.

Mr. Jobs would not say how open the phone would be to other developers, but added: “I don’t want people to think of this as a computer. I think of it as reinventing the phone.”

He also said he was anxious to help protect the Cingular network from the kind of viruses and worms that bedevil the PC world today.

The phones will go on sale in June through Apple and Cingular (online, by phone and in stores). Mr. Jobs said the phone was being announced ahead of its availability to head off disclosure that might have resulted in the course of Federal Communications Commission licensing.

Although it will be a half-year before it is possible to know whether Mr. Jobs has another hit product, there was no shortage of enthusiasm based on the first glimpse today.

“It’s like they read our minds,” said David Myers, executive chef at Sona restaurant in Los Angeles and chief executive of the Food Arts Group, where the employees currently use the Treo smartphone from Palm. “This is the next step in not accepting poor design any longer.”

Before he introduced the phone, Mr. Jobs said Apple TV, the digital video system that he announced as iTV last year, would be available for $299 in February. The device will store up to 50 hours of video and permit wireless streaming of content from a computer to a television.

Laurie J. Flynn and Miguel Helft contributed reporting from San Francisco and Brad Stone from Las Vegas.

iPhone - Yes, Please!

2007-01-09T21:12:00.000-05:00

I can't get over how cool the iPhone is. I've been using a Blackberry for the past 3 years, but not for long! My understanding is that the iPhone will be available in June. Can't wait for summer!

Here's the link to learn more about this revolutionary product:
http://www.apple.com/iphone/

Powered by the Sun

2007-01-04T14:53:00.000-05:00

Here's a story from CNet.com that supports the position of investors that are bullish on alternative energies such as solar power.

Retail giant Wal-Mart Stores is thinking big about solar power.

The company put out an RFP (request for proposal) last month to solar electric suppliers and expects to receive responses early this month, according to a representative. The move is part of a long-term plan to convert to renewable energy sources.

Wal-Mart is keeping the details of the proposal under wraps as the process is still ongoing.

However, one person who saw the proposal said that if completed, it could amount to a significantly large installation--on the order of 100 megawatts of power over the next five years.

"To put that into perspective, the solar system currently being installed at Google headquarters in California--the largest single corporate solar installation in history--is 1.6 MW, about 1/60th the size," wrote Joel Makower, a clean-technology consultant who saw the proposal but is not bidding on it.

Makower said the Wal-Mart proposal called for a system that could be replicated across its stores in five states and make use of available roofing space.

Wal-Mart has set up experimental stores in McKinney, Texas, and Aurora, Colo. These stores are already using renewable power sources, including solar and wind.

"We will continue to use the learnings from those stores to find ways to achieve our renewable energy goals in our other stores across the nation," said spokesman Kory Lundberg.

Corporations take a shine to solar
Although Wal-Mart's bid may not result in any investment, the move is significant as an indicator of growing corporate interest in sustainable practices and technologies.

Installing solar power is a well understood--and potentially visible--way to use renewable energy. Aided by government incentives such as tax breaks, solar electric systems are becoming more cost-effective as solar companies devise new technologies and target specific markets.

Google's installation, for example, is supplied by Energy Innovations, which uses a solar concentrator design to make solar power systems for flat roofs like buildings in office parks.

Microsoft, too, has gotten into the solar game. Last year, it equipped its Silicon Valley headquarters with more than 2,000 solar panels capable of generating 480 kilowatts at peak capacity.

Renewable energy is central to Wal-Mart's environmental efforts as well. The company has a vice president of corporate strategy and sustainability, Andy Ruben, and its corporate policy is to reduce its "carbon footprint" and greenhouse gas emissions.

Its three specific, long-term environmental goals are: using 100 percent renewable energy; creating zero waste and selling products from sustainable resources.

In a speech in October of last year, Wal-Mart president and CEO Lee Scott provided more detail on the company's short-term goals (click for PDF), including a commitment to invest $500 million a year in energy efficiency and technologies to reduce greenhouse gas emissions.

Scott said the company intends to reduce greenhouse gases from its retail locations around the world by 20 percent in the next seven years.

In the next four years, he said the company is working to develop building prototypes that will be 25 to 30 percent more energy efficient and produce up to 30 percent fewer greenhouse gas emissions.

10 Tech Concepts You Need to Know for 2007

2006-12-21T13:36:00.000-05:00

Popular Mechanics writer Alex Hutchinson discusses technologies folks will be talking about next year.

******************

Bendable Concrete
The nickname for Engineered Cementitious Composites (ECC) is self-explanatory: bendable concrete. Specially coated microscopic polymer fibers slide past each other instead of snapping under stress, so ECC bends without breaking. The material has been used to create stretchable expansion joints for a Michigan bridge, and to allow the coupling beams in a 41-story tower in Yokohama to flex during Japan's frequent earthquakes.
SHORT-TERM IMPACT: LOWIt could take years for ECC to be commonly used in construction, unless a major earthquake puts it in the spotlight.

PRAM (Phase-Change Random Access Memory)
Flash memory, with no moving parts to break or wear down, is the data storage technology of choice for devices such as iPods and digital cameras. But phase-change RAM is set to overtake flash entirely—it uses a chemical found in rewritable discs, which is alternately heated and cooled to store data. The result is memory that's 30 times faster than flash, with more than 10 times the life span.
SHORT-TERM IMPACT: HIGHSamsung demonstrated a PRAM prototype in September and expects PRAM-enabled devices to be available in 2008.

Printed Solar Panels
Tomorrow's solar panels may not need to be produced in high-vacuum conditions in billion-dollar fabrication facilities. If California-based Nanosolar has its way, plants will use a nanostructured "ink" to form semiconductors, which would be printed on flexible sheets. Nanosolar is currently building a plant that will print 430 megawatts' worth of solar cells annually—more than triple the current solar output of the entire country.
SHORT-TERM IMPACT: LOWSolar power still isn’t in wide use, so even a tech breakthrough will take time to have an effect. But the long-term outlook is brighter.

Passport Hacking
Starting this year, all new U.S. passports will include a radio-frequency identification (RFID) chip that stores a digital photo of the owner, as well as biographic data (name, date of birth and so on). The goal is to prevent passport counterfeiting, but hackers already have flexed their muscles: A German security researcher publicly cloned an e-passport at a Las Vegas conference last summer. The State Department promises additional encryption, which hackers will no doubt put to the test.
SHORT-TERM IMPACT: LOWMost people won't need a new passport for years. And even if counterfeiters are able to swipe data to make forged documents, these RFID chips won't hold financial information or Social Security numbers.

Vehicle Infrastructure Integration
Your car may have GPS navigation and radar blind-spot monitoring, but it still doesn’t stand a chance against traffic. The Department of Transportation’s Vehicle Infrastructure Integration program, which faces its final testing in 2007, might even the odds. The program involves installing a 5.9-GHz short-range wireless link in your car that can talk with other cars, as well as with control units at intersections and along the side of the road. Pool all the information being beamed from cars—speed, location, whether the wipers are on—and you have a map of traffic and weather conditions, so that drivers can be directed away from trouble spots.
SHORT-TERM IMPACT: LOWThis is only the latest — albeit the smartest — in a long history of federal initiatives to win the war on traffic. Next year, lawmakers will decide whether to wire up hundreds of thousands of intersections and roads, but getting automakers to install standardized transmitters might prove even trickier.

Body Area Network
Picture this: The cellphone in your pocket sends a tiny electrical current—a fraction of an amp—along your skin, so your car door springs open at your touch and your PC logs in when you grab the mouse. That’s what German startup ImCoSys says its new smartphone will be capable of, thanks to body area network (BAN) technology. Of course, proving those claims would require partner companies to build BAN-compatible devices, and no such deals have been announced since the phone was released last summer.
SHORT-TERM IMPACT: LOWUsing your body as a secure network is smarter than sticking finger- print scanners everywhere, but there’s no guarantee that BAN products will ever materialize.

Plasma Arc Gasification
Garbage can be a gold mine—when it's heated to 10,000 F. A plant being built in Florida will use a plasma arc jet (like the one shown at left) to turn 3000 tons of garbage a day into steam for nearby factories, sludge for road construction and 120 megawatts of electricity—all with promise of minimal emissions.
SHORT-TERM IMPACT: LOWThe Florida plant will go on line in 2009, at the earliest.

VoN (Video on the Net)
The first Video on the Net (VoN) conference was in 1998, but the concept of watching videos on your PC is only now reaching maturity. Products like Apple’s iTV video-streaming box, due to launch this year, promise to simplify the sometimes geeky process of finding and playing video files. And Google’s $1.65 billion acquisition of YouTube last fall is evidence that VoN is big business, though exactly what kind of business is anyone's guess.
SHORT-TERM IMPACT: HIGHTiVo, DVRs and iTunes have already changed the way many people watch TV, and VoN is likely to make shows and movies more accessible than ever.

Smart Pills
These swallowable, vitamin-size sensors won’t make you smarter, but anything that lets you avoid an endoscopy is a pretty good idea. The FDA-approved sensor (right), from Buffalo-based SmartPill, transmits data about pressure, acidity and temperature to a 5 x 4-in. receiver that patients carry around with them during the pill’s trip through their gastrointestinal tract. SmartPill already has competition—the Israeli company Given Imaging has developed a similar sensor called PillCam.
SHORT-TERM IMPACT: HIGHWhile you won't be popping them on a daily basis, these sensors — which at press time were on the verge of being shipped—could make a wide range of invasive procedures obsolete.

Data Cloud
Ferrying data from one hard drive to another via e-mail, flash memory thumb drives or rewritable discs is no way to live. What if every one of your files, from skimpy documents to gigabyte-hogging music collections, were accessible from any Internet connection, forming a vast data cloud that follows you wherever you go? A host of products and services let you create a data cloud right now, from Maxtor’s networked hard drives to Google’s rumored Gdrive, with “unlimited” storage on the search giant’s servers. Add a synchronization service such as Microsoft’s FolderShare, which applies a change you’ve made on your PDA to that same file on your laptop and PC, and you’re one step closer to retiring the original data storage device—the one in your head.
SHORT-TERM IMPACT: HIGHFor better or worse, data clouds are here to stay. With improved file sharing as well as new security concerns, they’re already changing the face of computing.

Tech lessons learned from the wisdom of crowds

2006-12-21T13:32:00.000-05:00

Declan McCullagh of CNet.com discusses how Silicon Valley is learning to love prediction markets.

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SUNNYVALE, Calif.--In a 1945 paper, the great Austrian economist F.A. Hayek described how prices set by a free market are really "a mechanism for communicating information" about the probability of future events.

If a war in the Middle East is seen as likely, for instance, oil prices will probably increase. Hayek's insight showed that the results can be surprisingly accurate, as long as enough people are allowed to wager real money on the outcome.
Prediction markets

Now, technology firms are using a modern twist on this idea, called prediction markets, as a way to save money, harness the distributed knowledge of their rank-and-file employees, and even answer questions like: When will this software ship? And what will memory prices be like in a few months?

At a micro-conference that Yahoo convened at its headquarters here on Wednesday evening, representatives from Google, Yahoo, Microsoft and Hewlett-Packard described their experiments with prediction markets. "The really valuable knowledge is in the organization as a whole," said moderator James Surowiecki, author of the book The Wisdom of Crowds.

The companies' experiences went as follows:

Google: It's no secret that Google is using prediction markets internally: Bo Cowgill, a Google project manager, described it in a blog post last year.

Cowgill suggested that companies use reputation systems that encourage employee participation by showing whether someone is scoring better or worse in the prediction realm than his colleagues. "You can have winners in each department," Cowgill said, adding that he'd like Google's employee directory to reveal each person's accuracy.

Google offers cash prizes and T-shirts to employees who score well, and the winners are calculated quarterly, Cowgill said. But he still stressed reputation systems as a better method: "In order to make it attractive in a forward sense you have to spend more and more money or the laws are going to have to change. I don't think either is likely to happen anytime soon."

HP: HP Labs has created betting software called BRAIN that's designed for employees and managers; pharmaceutical giant Pfizer will use it starting next year. The unique feature is that BRAIN assigns people a profile based on how risk-averse they are.

To test BRAIN, HP compared it to existing ways of forecasting memory prices--a key figure since memory represents up to 10 percent of the cost of a computer and HP spends billions of dollars on it a year. Instead of a 4 percent error rate for the existing method of forecasting DDR and DDR2 512MB memory prices, the prediction market had a 2.5 percent error rate, or a 37 percent improvement. A second trial to forecast HP Services operating profits yielded similar results.

"We are able to pay real cash money to people without running afoul" of the Commodity Futures Trading Commission said HP's Leslie Fine, because the betting market gives participants only rewards and does not let them lose money.

Yahoo: David Pennock, a principal research scientist at Yahoo Research, said the company has created a currency called a Yootle. It's described as a "scorekeeping system for favors owed."

Pennock offered as an example a programmer offering to write a piece of code for a few Yootles. Or, when organizing a dinner outing, one employee could use an internal SMS tool to bid 2 Yootles for Italian and 4 Yootles for Mexican. "If you don't get to go to the restaurant you want to, you get compensation" in Yootles, he said.

Related to Yootles is Yahoo Research's experiment with a fantasy prediction market for technology called the Tech Buzz Game. It's a modified version of software licensed from NewsFutures in conjunction with O'Reilly Media and features topics like Atlantic hurricanes and portable media devices. Winners are those who predict how popular a topic will be on Yahoo Search.

Microsoft: When Todd Proebsting, director of Microsoft's Center for Software Excellence, tested a prediction market internally, managers quickly gave it their blessing.

The goal: to have 25 members of a development team predict when a Microsoft product would ship (this was an internal product, not one sold externally). The prediction market was set up in August 2004, and the product that "had been in the works for a long time" was scheduled to ship in November 2004. Each "trader" received $50 in their account to start with, and was told that the more accurate their prediction, the more money they would make. The market opened with an initial price of on-time delivery set to 16 2/3 cents.

"The price of 'before November' dropped to zero right away," Proebsting said. "The price of 'on time' in about two to three minutes dropped to 2.3 cents on the dollar." Translated, that's more than 30-to-1 odds against on-time delivery.

Then the woman who was responsible for scheduling started trying to convince her colleagues who were buying and selling future delivery dates. "She was able to talk (on-time delivery) up to around 3 cents," Proebsting said. "People really enjoyed moving the price...They loved this."

"The next day the director comes into my office and said, 'What have you done?'" Proebsting said. But further investigation showed that the product actually was behind schedule, even though nobody was telling management, and it eventually shipped in February.

Policy analysis markets: Chris Hibbert is an inventor and programmer who's writing open-source software to build a prediction market. It's called Zocalo.

Prediction software should work with play money, real money and an internal corporate currency that might be reputation-based, Hibbert said.

Most existing prediction markets like the Hollywood Stock Exchange and Tradesports.com focus too much on topics like sports and movie success, when policy and political questions can be more interesting, Hibbert said.

Robin Hanson, an associate professor of economics at George Mason University, is the closest that prediction markets have to a founding father. But he became a politically controversial one when his idea of a policy analysis market that could, for instance, help to predict terrorist attacks was savaged by Democratic senators eager to take a swipe at the Republican administration that funded it.

"The example that you provide in your report would let participants gamble on the question, 'Will terrorists attack Israel with bioweapons in the next year?'" Sens. Ron Wyden, D-Ore., and Byron Dorgan, D-N.D., wrote to the Defense Advanced Research Projects Agency in 2003. "Surely, such a threat should be met with intelligence gathering of the highest quality--not by putting the question to individuals betting on an Internet Web site."

On Wednesday, Hanson quipped that the flap wasn't the publicity "we would have asked for in starting an industry." A paper he wrote, though, showed that more informed journalists and more recent news articles were more likely to give a positive impression of policy analysis markets.

Hanson said that conditional probabilities were worthy of more experimentation: If a company switched ad agencies, would it increase revenue? If the U.S. provides cash subsidies to Jordan, will that nation have a better economy or a worse one?

"The market is telling you the consequences of your actions," Hanson said. "If you do this, what are the consequences?"

More Than You Know Wins Another Best Book Award

2006-12-08T15:39:00.000-05:00

Congrats again to our good friend Michael Mauboussin and his terrific book "More Than You Know." It was just named by BusinessWeek as one of the "Best Books of 2006."

Here's the link:

http://www.businessweek.com/magazine/content/06_51/b4014099.htm

Disrupter Man goes after TV this time

2006-12-07T18:37:00.000-05:00

A great piece by my friend, Kevin Maney, at USA Today. Enjoy!

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SAN FRANCISCO — Few entrepreneurs have truly disrupted a single industry. Niklas Zennstrom has done it to two — and he has his sights on a third.

Zennstrom and business partner Janus Friis founded file-sharing service Kazaa, which by 2001 became the world's favorite way to steal copyrighted music. Entertainment companies all over the world lined up to sue. Next came Skype, the first globally popular free Internet calling service, which crumbled international telecom company business models. EBay bought Skype last October for $2.6 billion, and Zennstrom is Skype's CEO.

Now Zennstrom and Friis have a side endeavor. They've co-founded a secretive Internet TV venture called The Venice Project, which analysts say could threaten the viability of network television.

"There's never been a secret sauce" to his disruptive success, Zennstrom says with apparent modesty while flashing a grin. He creases his 6-foot-4 frame into a stuffed chair in his hotel room and looks more like a rumpled high-school chemistry teacher than a high-powered executive. "It's just that our timing has always been good."

In part, he's right. Zennstrom and Friis have never been first with a technology: They've followed with the right thing at the right time. Still, Zennstrom has established himself as a man the tech industry watches carefully. Hence the attention paid to The Venice Project, even though hundreds of video sites already crowd the Internet.

"Niklas and Janus … are two of the most extraordinary people I have ever met," says Tim Draper of venture capital firm Draper Fisher Jurvetson, which helped fund Skype. "I think they will succeed again and again."

Zennstrom, who hails from Sweden and lives and works in London, rarely gives interviews. This one is happening on his first trip to the USA in five years. He stayed out of the country to avoid being served in Kazaa lawsuits, which were recently settled.

He is just 40. His take from selling Skype to eBay is estimated at more than $400 million. Investors stand ready to back him. Zennstrom says he pledges himself to Skype and eBay for three to four years, but probably no longer.

"Don't expect to interview me in 20 years and I'm still CEO of Skype," he says.

In other words, Zennstrom could be starting companies for a long time to come — probably with Friis. Zennstrom is 10 years older and more of the leader. Friis is the hacker and tinkerer who gets the technology off the ground.

The biggest question about Zennstrom is whether he's good only at launching disruptive companies, not at building them into substantive businesses. Tech analysts say they still don't understand why eBay paid so much for Skype when similar free Internet calling services are offered by everyone from AOL to start-ups like Jajah.

136 million and growing

In an hour-long interview, Zennstrom does not seem to have an outsized ego — until he talks about his ambitions for Skype. When he started it in 2003, he told Fortune, "There is multibillion dollars in potential in Skype. We're not here to try to make some small business."

"It's the same plan," he says now. "We have 136 million users. There aren't many telephone companies that have more customers. We are still in growth mode. In terms of revenue per user, Verizon gets much more, but they also have much higher costs."

Zennstrom met Friis, a Dane, while working for Swedish telecom company Tele2. They left in 1999 to start an Internet company together to build a fast, easy-to-use technology called FastTrack. It was peer-to-peer (P2P) technology. It had no central data center, borrowing all the users' computers on the network to store and forward files.

It's a technical challenge, but if done well, P2P can be a cheap, fast way to move large amounts of data around the Net.

On top of FastTrack, Zennstrom and Friis built Kazaa, which surfaced just as the music industry shut down Napster in 2001. Millions of Napster users had become addicted to free music and switched to Kazaa because it was easy to use. Zennstrom and Friis became the Recording Industry Association of America's chief target.

After years of cat-and-mouse legal games, Zennstrom, Friis and Kazaa settled with the music industry in July for $100 million. They've rid themselves of Kazaa ownership, selling pieces in a series of legal maneuvers.

Kazaa set the stage for Skype. While considering what to do after Kazaa, Zennstrom says he and Friis thought about how "any digital content should be delivered over the Internet because it's so much more efficient." They then thought about the high cost of international phone calls, which are just another form of digital content.

"I remember us saying (around 2002) that Internet telephony should work by now," Zennstrom says. "We certainly didn't invent Internet telephony, but it wasn't very good and was too hard to use."

They realized that P2P could do for phone calls what it had done for music files. "We learned a lot by doing Kazaa," Zennstrom says. But they had to create a more sophisticated P2P, because calls must reach the right person and work with good quality in real time.

Still, when Zennstrom and Friis started Skype, they were considered pirates and outliers. "It was difficult to hire and raise money," Zennstrom says. But then Draper, who has always had a penchant for funding tech renegades, chipped in $8.5 million. "I recall first meeting Niklas in London," Draper says. "I had set up a meeting for half an hour, and I stayed for two."

Skype became the fastest-growing start-up in history. After 12 months, it was on pace to grow five times faster in numbers of users than eBay did in its first years. Seeing that, in 2005 eBay came calling.

Learning from eBay

"We didn't plan to sell," Zennstrom says. "We started a conversation with (eBay CEO) Meg Whitman because we thought we should work with eBay." He actually thought eBay wouldn't like Skype because a Skype voice connection could be a way for sellers and buyers to cut deals that eBay couldn't track.

Whitman saw something else: a fast-growing business that might also help eBay users talk to each other and close transactions more easily, especially those that involve big-ticket items like cars. "We always seek to remove friction from e-commerce," Whitman told USA TODAY soon after the Skype deal. "It leads to a better experience and an increase of velocity of trades."

She also liked Zennstrom and Friis. "They are impressive entrepreneurs who will be a great cultural fit with eBay," she said.

Zennstrom got thinking, too. He didn't want Skype to do an IPO in the dot-com bust years. Based in Europe, which is not known for Silicon Valley-style start-ups, Skype had trouble hiring executives who had been part of hyper-growth tech companies. And while Skype was growing like mad in Asia and Europe, it had trouble penetrating North America.

"We realized if we partnered with eBay, they could help us," Zennstrom says.

Whitman has been criticized for the deal by analysts and investors. She has not clearly shown how Skype helps the eBay site — though, on the flip side, it's clear that eBay's marketing muscle has helped Skype grow 122% in North America in 2006.

"In general, they're not doing a bad job in the VOIP (voice over Internet protocol) space," says Mirabel Lopez, vice president of research at Forrester Research. She pegs Skype revenue at $200 million in 2006, up from $60 million in 2005. "Since most people use it because it's free, the fact that they're making money at all is a good thing."

Zennstrom insists he's happy with the marriage. "You never know how the chemistry will be, but it's been really great," he says. "Meg did not impose on us to do everything the eBay way." He says he's learning a lot about management from Whitman and other eBay executives. Several attempts to talk to Friis were unsuccessful.

Fixing TV

The Venice Project is the brainchild of Zennstrom and Friis, but they aren't running it. Friis, though, spends significant time working on the new entity. EBay says this is fine and within the boundaries of the eBay-Skype merger.

The service is not yet live, and details are under wraps. It's difficult to say why The Venice Project will be much different from YouTube or AOL TV, except that it will — like Kazaa and Skype — be based on P2P technology. That could make The Venice Project cheaper and more flexible than other Internet video services, which centrally host videos on server farms.

Zennstrom describes it this way: "We're trying to do the full TV experience by taking the good things from television and putting them together with the Internet and video sharing." A blog on theveniceproject.com says, "We're fixing TV, removing artificial limits such as the number of channels that your cable or the airwaves can carry, and then bringing it into the Internet age, adding community features, interactivity, etc."

Significantly, The Venice Project will be a secure, rights-protected service that intends to work with content producers such as film studios and sit-com creators, not against them. This is Zennstrom learning from past mistakes.

And it will be ad supported. Zennstrom insists that The Venice Project will work in ways that are familiar to TV viewers — as simple to use as iTunes or an on-screen TV grid.

Interactive features

So The Venice Project is intended to be a pipeline directly between content producers and consumers, with relevant ads inserted on the fly — the way Google plops ads onto websites. Interactive features will let viewers rate content and form social groups around videos and programs.

If it takes off, The Venice Project could be Zennstrom's third disruptor, because it stands to knock cable TV services like Comcast and network TV affiliates out of their middleman positions. Of course, taking on such powerhouse industries is a tall order, and The Venice Project could get squashed before it makes a dent.

A few years from now, maybe Zennstrom will take charge of The Venice Project, or maybe he'll move on to a new target.

"Three to four years seems like a good time frame to make commitments," he says. "That's what I told Meg. I'm here and committed for some time. I want to build the business and contribute to eBay as well."

But after that, time to tee up the next disruptor.

The Globalization of R&D

2006-12-06T14:58:00.000-05:00

Here's an interesting finding that I came across while reading the current issue of Stratgey & Business:

"More than 75 percent of the new R&D centers that businesses plan to open during the next three years are to be located in China or India, according to a recent study by Booz Allen and INSEAD."

Here's the link to the article:

http://www.strategy-business.com/press/article/06405?gko=a2f1b-1876-20606671-6405

Mr. Future Shock

2006-12-06T10:33:00.000-05:00

Here's a link to an interview with Alvin Toffler from the recent issue of Strategy & Business. I enjoyed Toffler's new book "Reveloutionary Wealth" and find him to be one of the most stimulating deep thinkers on the planet.

http://www.strategy-business.com/media/file/sb45_06408.pdf

The Information Factories

2006-12-06T10:07:00.000-05:00

Here's a link to a provocative piece by George Gilder that was published in WIRED magazine not long ago on how technology is evolving.

http://www.wired.com/wired/archive/14.10/cloudware_pr.html

The Eco Thing

2006-12-06T09:21:00.000-05:00

Here's a comment that caught my eye from a recent piece by my friend Kevin Maney at USA Today. Kevin did a story on Scott McNealy, former CEO of SunMicrosystems.

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Inside Sun, McNealy seems most jazzed about pushing what he calls "the eco thing." He says that by 2012, 40% of tech budgets will be consumed by energy costs. Driving Sun to create low-energy computers is both a moral imperative and business opportunity, McNealy says. Sun even has a vice president of eco-responsibility, David Douglas.

Night and Day

2006-12-05T12:39:00.000-05:00

"I actually think the insanity of the late 1990s is repeating itself."

- Julian Robertson, quoted in Value Investor Insight, 11/30/06

"We reiterate our (wildly) bullish opinion on US stocks. At this stage, owning US equities feels like stealing."

- Steven Vannelli, GaveKal Research, 12/4/06

I came across these two quotes from two highly respected Wall Streeters recently and wonder how is it that two intelligent camps can have such diverse opinions. It's like night and day! Truth be told, I have never understood the way Julian Robertson thought about the macro economy and the overall stock market. If you recall, Mr. Robertson shut down his firm precisely at the time when so-called "value stocks" - his bread and butter - were about to go through the roof on a relative basis. My sense is that the GaveKal guys are closer to the mark.

Apparently, Ken Fisher is in the GaveKal camp, according to a recent blog post by Rich Karlgaard at Forbes. See Rich's notes from a talk Ken gave recently:

Ken Fisher's Bullish Take On 2007

Ken Fisher spoke Sunday and today. Ken, of course, is the longtime Forbes columnist (22 years) who by day runs his $35 billion Fisher Investments firm in California. Some of his thoughts:

-- Markets are discounters of all known information.

-- Forget everything you know about P/E ratios. It is a meaningless figure unless you also know the cost of borrowing.

-- Invert P/E to E/P and you get "earnings yield"--a public company's after-tax cost of raising capital.

-- The S&P earnings yield is 6.8%. The 10-year U.S. Treasury bond is 4.45%. The gap will close. It always closes over time. If the gap closed simply by lowering the S&P earnings yield to match the 10-year U.S. Treasury bond, the market would go up 47%.

-- I am wildly optimistic about 2007.

More reasons why Ken is bullish:

-- Third-year presidential terms are usually big-growth years for the market. We haven't had a negative third-year presidency since 1939.

-- Around the world, companies are buying back their stock. We are globally destroying the supply of equities at a rate of 5% a year. This is mind-boggling.

Thought Leaders

2006-12-05T09:11:00.000-05:00

My good friend Michael Mauboussin at Legg Mason sent me the link to his annual "Thought Leader" conference yesterday. You can check out the agenda and read transcripts at the link below.

enjoy!

http://www.leggmason.com/thoughtleaderforum/2006/conference/index.html

Read It and Weep

2006-12-01T15:12:00.000-05:00

Here's an exchange between Mike Holland and Herb Greenberg from economist Larry Kudlow's TV show that discusses the unintended consequences of government regulation - in this case, the Sarbanes-Oxley Act...

Mike Holland: I'd like to put a fact in here. Before Sarbanes-Oxley, 50 percent of all IPOs around the world listed in the United States. Would anyone, including Herb, like to guess how many since Sarbanes-Oxley have listed in the U.S.?

Herb Greenberg: Give me the number.

Mike Holland: It's 8 percent. And the last 25 largest IPOs, they all listed abroad. I was in Europe a couple weeks ago--they're talking about erecting statues to Sarbanes and Oxley in London's financial center.

Immelt on the Global Economy

2006-12-01T15:02:00.000-05:00

One of my favorite things to do is meet with the folks at the world headquarters of General Electric, which is about 15 minutes away from my office. GE, as I like to say, is a window to the global economy. Here's a recent quote from CEO Jeff Immelt from FORTUNE that I found interesting...

"I don't see a slowdown… I think the U.S. consumer is still in pretty good shape. Unemployment is low, risk positions are healthy, so maybe the economy is growing by 4% and it'll slow down to 3% or something like that, but it's still going to be very good. Europe still is not robust, but it's positive. The developing world continues at a pretty good clip. The odds of China slowing down before the 2008 Olympics are de minimis. Oil at $60 a barrel transfers $300 billion a year to five countries in the Middle East; they're going to spend a lot of money. Latin America is very strong. So the global economy I think is going to be pretty good, pretty good."

- Jeffrey Immelt, CEO, General Electric
Quoted in FORTUNE, Dec 11, 2006

Gilder's Ten Rules For Tech Investors

2006-12-01T14:23:00.000-05:00

Below are what technology strategist George Gilder calls his "Ten Key Rules for Early-Stage Technology Investors to Triumph in This Time." George isn't a professional investor, so I would take his investment recommendations on individual companies with a grain of salt. That said, he is a provocative thinker...

Gilder's 10 Key Rules

1. No one knows less about the fast-growth tech business than the CFO. Early-stage tech is about the future. CFOs deal with past numbers. In effect, CFOs are trying to steer companies by looking in the rearview mirror. Moreover, CFOs tend to focus on internal problems, and early-stage tech companies should not try to solve problems. They instead should pursue opportunities. Solving problems sounds good, but it is a loser. You end up feeding your failures, starving your strengths and achieving costly mediocrity.

2. The elasticity of Moore's Law. In the tech world, Moore's Law ordains that prices routinely drop 50% every 18 months for a given rate of performance. In older businesses, price collapses would be bad. But in the tech world, users multiply when prices drop. You get positive elasticity.

3. Metcalfe's Law. The value of a network rises by the square of the number of compatibly connected users. Obviously not literally true, yet a rough and useful guide.

4. Dumb networks will prevail over smart networks. The future is all-fiber networks that do nothing but transmit bits. Intelligence belongs at the edges and endpoints.

5. Software hardens at the core of a network--hardens into glass--pure fiber. Software softens at the edge.

6. The edge of the network is analog, because that's where humans live, in an analog world. But the analog world is one of shortages, because there is a shortage of great analog engineers in the U.S. and throughout the world. Therefore, great digital-to-analog design will almost always produce great profits.

7. Law of Abundance. Far-seeing entrepreneurs waste what is abundant in order to save what is scarce. Today, processing power is abundant. Bandwidth is becoming abundant. Electricity, on the other hand, is becoming scarce. So invest in chips and computer architectures designed to save electricity.

8. Law of Scarcity. Speed of light is the scarcity that governs networks. Span of life is the scarcity that will govern human interactions and consumer businesses. Consumers hate to have their time wasted. That's why broadcast TV is a failing model--it wastes the consumer's time.

9. The computer is dead--hollowed out by fast networks that move data faster and store data more cheaply. As computers hollow out, value migrates to the search and sort function. This law was put forth by Sun's Eric Schmidt a decade and a half ago. Schmidt, of course, is now the CEO of Google, where search and sort has paid off rather nicely.

10. Every ten years there is a hundredfold drop in the cost of computing, leading to a new paradigm in computing. Google-like server farms are the new computing paradigm. But in five years, something newer and more radical will take its place.

Lab on a Chip

2006-11-30T11:35:00.000-05:00

here's a follow-up to the story I posted yesterday on Pfizer. I think this quote is bang on the money:

"The market for diagnostic equipment is evolving towards fully automated, cost-effective devices usable directly at the point of need."
- Maria Teresa Gatti, Director of Research and Innovation, Advanced System Technology, STMicroelectronics.

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LONDON — STMicroelectronics has demonstrated a prototype device capable of selectively collecting and manipulating biological molecules which the chip group suggests opens the way to cost-effective automated sample preparation for medical and forensic diagnostics.

The system was built using a technology compatible with the MEMS technology that ST uses for its In-Check lab-on-chip devices.

The prototype chip contains a tiny channel, measuring about 1mm in length, 0.1mm in width and 50 microns in height which is filled with a solution containing the molecules of interest. On the bottom of the channel, an array of tiny platinum electrodes (25micron wide, separated by 25 microns) provides precise control over the pattern of the electric field in the channel and therefore the forces applied to the biological molecules.

ST says current biotechnological platforms such as its In-Check devices, work for the diagnosis of specific diseases or the monitoring of food and water for bacterial contaminants by allowing the rapid detection of particular genetic material in liquid biological samples. But the preparation of the samples is still a relatively time-consuming process performed with large samples in laboratories using techniques that require skilled technicians and are difficult and expensive to implement with smaller samples.

It adds the aim of its research program is to explore new methods to automate sample preparation, so that the biological molecules of interest could be rapidly extracted from "raw" specimens such as saliva, blood or biopsy tissues and used as the input to the lab-on-chip diagnostic stage.

"The market for diagnostic equipment is evolving towards fully automated, cost-effective devices usable directly at the point of need," said Maria Teresa Gatti, Director of Research and Innovation, Advanced System Technology, STMicroelectronics.

Details of the research project were unveiled at this week's NANOMEC06 Symposium on Materials Science & Materials Mechanics at the Nanoscale, held at the Politecnico di Bari, Italy in a paper presented by Marco Bianchessi, Sarah Burgarella and Anna Zocco from ST Advanced Systems Technology (AST) organization.

The project builds on a prior joint research project between ST and Evotec Technologies GmbH.

The technique used by the ST researchers is based on dielectrophoresis, where an electric field is used to separate biological particles contained in a conductive solution. The careful setting of physical and electrical factors allows precise control of the movement of target particles and researchers demonstrated that this could be exploited for practical uses.

Potential benefits include the ability to isolate cells that are present in low concentrations, to increase the concentration of cells in a solution and to extract DNA from the cell nucleus, as well as allowing sample preparation to be performed in the field by personnel with minimal training on the use of the devices.

Importantly, the researchers also successfully showed that by precisely controlling the voltage applied to different electrodes, cells could be collected at one specific region and then moved to other regions in either direction.

"Sample preparation technology, integrated with ST In-Check lab-on-chip platform, will allow us to build low-cost, easy-to-use systems that will enable diagnostic analyses to be performed outside specialized laboratories, e.g. directly in hospitals or even in the doctors office," noted Anton Hofmeister, Group VP and General Manager, Microfluidics Division, STMicroelectronics.

End of an Era

2006-11-29T12:46:00.000-05:00

I wasn't suprised at all to see this announcement in today's Wall Street Journal:

"Pfizer Inc. signaled the end of an era in the drug industry by announcing plans to slash its domestic sales force by 20%, or more than 2,000 people. The deep cut by Pfizer, which has fielded the largest sales army for years, could lead to a broader retrenchment across the industry."

As I wrote in my book "Quantum Investing" the future of health care is in quantum-based diagnostics, nanotechnology, and personalized medicine.

Shift to larger TVs favors LCD over plasma

2006-11-28T17:27:00.000-05:00

here's a good summary of what's going on in TV land. I haven't purchased a large flat panel LCD HD TV yet, but it looks like it might be wise to postpone buying one as prices continue to plummet...

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Plasma TV suppliers such as Panasonic maker Matsushita Electric, already outnumbered by the rival LCD camp, are expected to lose further ground as LCD TVs encroach on the 40-inch-class market, a plasma stronghold.

Growing demand for higher-resolution models is also giving a leg up to liquid crystal display (LCD) TVs, promoted by Sony and many others in Taiwan and South Korea, paving the way for consolidation among plasma companies, analysts say.

It is technologically difficult and often costly for plasma makers to give a full high-definition function to models with a screen size of less than 50 inches, while LCD TV makers are aggressively promoting full HD models in that segment although prices are generally higher.

"This Christmas season probably is the last chance for (plasma TV makers) to promote 42-inch models. By this time next year probably there will be no price difference between plasma and LCD TVs," Credit Suisse analyst Wanli Wang said.

With little price difference, most people would choose LCD TVs because of their higher resolution, Wang said.

He expects LCD TV prices to fall 30 percent or more in 2007, compared with a decline of 15 percent to 20 percent for plasma TVs, due to ample LCD panel supplies.

Sharp in August started LCD production at its Kameyama No. 2 plant, the world's first to cut panels from eighth-generation glass substrates, which can yield eight 40-inch-class panels, compared with just three panels from the sixth-generation glass used at its first Kameyama plant.

Size matters
DisplaySearch forecasts that the plasma TV market will start shrinking in 2009 after hitting $24 billion in 2008, while it sees LCD TV demand reaching $75 billion in 2008 and $93 billion in 2010--a trend that will likely make companies offering both LCD and plasma lines think twice about their strategy.

Taiwan's Chunghwa Picture Tubes (CPT) is one such company. It shut down its plasma panel business this year to concentrate on LCDs.

"We cannot focus on two different products because of heavy capex (capital expenditure). That's why we had to choose one," CPT Chief Financial Officer James Wu said.

South Korea's Samsung Electronics and LG Electronics as well as Japan's Hitachi offer both LCD and plasma TVs. Matsushita also sells both products, although it heavily bets on plasma.

"The larger panels become, the more important response speeds for moving images are. In this point, plasma still excels," Matsushita President Fumio Ohtsubo told reporters last month.

CPT's Wu agrees that plasma panels, especially 50-inch and larger ones, do excel LCDs in some aspects of picture quality, but he says the sheer size of the LCD camp will help LCD panels overcome whatever drawbacks they have in a timely manner.

"Globally, so many companies, so many investments, so many people have been working in this area, on this product. So they can improve so quickly," Wu said.

About 80 percent of global flat screen R&D spending is being allocated to LCD panels, and the remaining 20 percent to plasma and some other technologies, Credit Suisse's Wang said.

Getting smaller
In a potential sign of slowing plasma TV demand, Japan's top three plasma TV makers--Matsushita, Hitachi and Pioneer--last month cut their unit sales forecasts by 8 to 20 percent for the year to March.

With the 40-inch-class market gradually taken over by LCD TVs, plasma models need to migrate to the market for 50-inch TVs and above, but demand is not as well developed there, analysts say.

"The United States accounts for more than 70 percent of demand for 50-inch plasma TVs and larger. In other words, there is virtually no 50-inch-class plasma TV market outside the United States," DisplaySearch director Hisakazu Torii said.

Although demand is limited, competition is not necessarily mild. Instead of LCD models, plasma TVs will be pitting themselves against another strong rival, rear-projection TVs.

"If you take a long-term view on the plasma industry, prices are coming down and revenue will not be growing that much. That makes aggressive investments for future growth difficult," iSuppli Japan director Junzo Masuda said.

"The number of players will likely be getting smaller and smaller," he said.

Boomer TV

2006-11-28T15:45:00.000-05:00

As the co-author of the "Boomernomics," I had to smile when I saw an add for the recently launched
"Baby Boomer" TV network in Forbes magazine. Here's the link to the website, which is still under construction:

http://www.babyboomertv.net/

Bernanke on Productivity

2006-11-28T14:04:00.000-05:00

Here's a passage from Fed Chairman Bernanke's speech today that I thought was insightful. Even though U.S. productivity growth - one of the most important economic indicators, if not the most important - has slowed in recent quarters, the longer run trend still looks promising...

That said, longer-run trends in the growth of productivity are very difficult to predict. During the first half of the decade, productivity in the nonfarm business sector increased at an unusually high average annual rate of about 3 percent. However, according to current estimates, productivity growth slowed in the second quarter of this year and came to a halt in the third quarter. Moreover, the strength of recent hiring raises the possibility of subpar productivity growth in the fourth quarter as well. When all is said and done, however, I expect that the latest numbers will turn out to have been a reflection of the typical volatility in the data and some cyclical response to the slowing in economic activity, not a signal of a sea change in the longer-run outlook for productivity growth.

21CN

2006-11-28T13:41:00.000-05:00

Another communications milestone from the folks at British Telecom...

The first stage of a project to build one of the world's most advanced telephone networks has been completed.

The so-called 21st century network (21CN) is being built in the UK using Internet Protocol technology.

The massive upgrade, the first of its kind, will cost British Telecom £10bn and take until 2010 to complete.

It will open the way to new services as well as making existing services quicker and cheaper than before.

1,500 man years

The first person to use the new network was schoolgirl Laura Wess from South Wales.

The eleven-year-old spent a minute and a half chatting to the Right Reverend John Davies, the bishop of St Asaph.

She was chosen for the landmark call as she is one of the residents of Wick, near Cardiff, which is the first village to be upgraded to 21CN.

"Today marks a symbolic and momentous occasion for BT, the communications industry, for Wales and the rest of the UK as 21CN, over three years in the making, starts to become real for customers," said Paul Reynolds, chief executive of BT Wholesale.

BT has so far rebuilt around 10% of its network, laid more than 2,300 kilometres of new fibre optic cable in South Wales and invested more than 1,500 man years in developing the systems to support the new network.

Customers in Cardiff, Bridgend and Pontypridd will be the next to be transferred. The upgrade does not require customers to have a new telephone or number and can be done without an engineer visiting the premises.

Voice, data, broadband and multimedia services will all be carried on the new network. It will allow for faster broadband speeds as well as opening the door for services not yet thought of.

Mind Set

2006-11-28T10:21:00.000-05:00

I've never been a fan of the idea of a "one world government." I came across this review of John Naisbitt's new book "Mind Set" in the Wall Street Journal and was delighted to see that we were kindred spirits on this topic. Here's the excerpt from the WSJ:

John Naisbitt has sold nine million copies of "Megatrends" (1982) and is often asked, as a result: "What is the next big thing?" Here he advises readers to adopt "mindsets" that will allow them to do their own prognosticating. Mindsets, he explains, are "how we receive information." The wife of a philanderer, he notes, filters information in a particular way: Her mindset is both a prism and a prison. Mr. Naisbitt illuminates 11 liberating mindsets -- such as "the future is embedded in the present" -- that may unleash one's inner clairvoyant or at least help one to see the present differently. He weaves his personal story into the advice-giving. Growing up amid the constraints of a Mormon household, Mr. Naisbitt says, he greatly benefited from an early application of thinking outside the box: An uncle treated a painful ear by blowing forbidden tobacco smoke into the raging orifice -- quite different and more effective, Mr. Naisbitt discovered, than the usual laying on of hands. Sensing truth and adventure beyond Utah, he joined the Marines and later worked for JFK, LBJ and IBM; he now teaches at Nanjing University in China. Mr. Naisbitt maintains that "economic domains" are replacing nation-states, and he offers a gloomy forecast for one-worlders: "Why would we add a world government at a time when we have been subtracting power from the hands of national governments through privatization and global communications?" As they may still say in Utah, hallelujah to that.

Hallelujah indeed!

Another Tech Milestone

2006-11-27T21:42:00.000-05:00

A Penny Per MIPS!

The unofficial motto of high tech may be "smaller, cheaper, faster," but it's easy to forget how far we've come and how fast. In a post Sunday, Chris Anderson, of Long Tail fame, took note of a milestone in computing economics -- we have recently reached a consumer price on processing power of a penny per MIPS (million instructions per second). Intel's Core Duo running at 2.13 GHz costs around $200 at retail and can perform about 20,000 MIPS. "I remember my first 6 MHz 286 PC in 1982 that did 0.9 MIPS," Anderson writes. "I have no idea what the CPU cost then, but the PC it came in cost nearly $3,000 so it couldn't have been cheap. Say it was around $1,000/MIPS back then. Now it's $0.01/MIPS. I know I shouldn't be astounded by Moore's Law anymore, but that really is something."

Alec Saunders offers a few more data points:
• In 1977, Digital Equipment’s Vax 11/780 was a 1 MIPS minicomputer, and the Cray-1 supercomputer delivered blindingly fast execution at 150 MIPS.
• A 1999 era Pentium III/500 delivered 800 MIPS of processing power.
• A year later, in 2000, the Playstation 2 pumped out an astounding 6000 MIPS.
• Current embedded processors (like the PXA900 in [the] Blackberry Pearl, or the ARM 1136 in the Nokia N93 ...) are capable of 2000-era desktop processor speeds — in the range of 1000 MIPS, depending on battery consumption.

"It’s 2006 now." Saunders writes. "If the current trend holds true, and we can each carry 20,000 MIPS of processing power in the palms of our hands by 2012, what will we do with that power?"

We'll see!

On Turning Ford Around

2006-11-27T15:46:00.000-05:00

Here's an excerpt of a Q&A with Harvard Business School professor Joseph L. Bower on Ford Motor Company that I think hits the nail right on the head.

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Q: Let me ask you one more question, and that is, putting on your expert strategist hat, Ford Motor Company's in trouble. It's losing a lot of money, in particular in North America. What's the most important thing it has to do to get back in the race, as it were, with a successful company like Toyota?

A: It has to make good cars. Basically, Ford has been holding its position on the basis of SUVs and the pick-up.

Q: Trucks.

A: Trucks, you could say. And really, Toyota, the Camry, just pushed the Mercury and the Taurus right out of the business, and Lexus took Lincoln down. And that takes you back into a decade anyway they've been in bad shape in the car business. They've got to rebuild their position in cars, and to do that they have to make great products. And they haven't done that in a while, and the consumer's on it.

Q: And I assume it's going to take a long—a certain amount of time, for them to start making great products again?

A: I would guess so. I'm not a car person, but yes. I think that's probably what appealed to them about Mulally because everybody was singing the praises of Airbus and then, five years later, Boeing has recaptured its leadership. So I'm sure that's the dream that they have at Ford.

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here's the link to the entire interview:

http://hbswk.hbs.edu/item/5553.html

The Blind Side

2006-11-27T15:18:00.000-05:00

Here's a link to a terrific interview with Michael Lewis, author of the recently published book "The Blind Side." I'm half way through "The Blind Side" and loving it.

http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391798/index.htm

I especially enjoyed this remark from Lewis:

"The truth is that technological change is at the center of American prosperity."

Right on the mark, baby!

Gentlemen, Start Your (Electric) Engines!

2006-11-27T11:03:00.000-05:00

Paul Boutin took the high tech Telsa for a spin recently and had this to say:

A week ago, I went for a spin in the fastest, most fun car I've ever ridden in—and that includes the Aston Martin I tried to buy once. I was so excited, in fact, that I decided to take a few days to calm down before writing about it. Well, my waiting period is over, I'm thinking rationally, and I'm still unbelievably stoked about the Tesla.

I've always marveled at how long the antique internal-combustion engine has survived. By 2006 standards, my car's power plant is a noisy, heat-blasting, poison-spewing monster with way too many moving parts. One spin in a Tesla made me realize that the gas engine might finally be on its last legs—and not because electric cars will help wean us from Saudi oil and save us from global warming. Rather, the Tesla Roadster is a rolling demo that proves electric cars now outperform their gas-guzzling counterparts in comfort, convenience, and, best of all, speed.

Here, here!

Kudos to "More Than You Know"

2006-11-21T08:34:00.000-05:00

Kudos to our good friend Michael Mauboussin and his book "More Than You Know" for being selected by Strategy & Business as "The Best Business Book in Economics for 2006."

If you haven't read Michael's book yet, we highly recommend it. You can pick up a copy at link below:

http://www.amazon.com/More-Than-You-Know-Unconventional/dp/0231138709/sr=8-1/qid=1164115863/ref=pd_bbs_sr_1/002-4603730-3176851?ie=UTF8&s=books

Like the Air We Breathe

2006-11-20T14:31:00.000-05:00

Here's an interesting quote from futurist Bruce Sterling:

"Reading the Pew [Internet & American Life Project] study, it becomes clear that we're entering a new era, the post-Internet age, a world in which the Net will be everywhere, like the air we breathe, and we'll take it for granted. It will be neither the glossy nirvana of technophillic dreams nor the dystopia of traditionalist nightmares. It will look a lot like today - but with higher contrast, sharper focus, and a wide-angle lens."

WIRED, 12/2006

Green Dreams

2006-11-20T10:13:00.000-05:00

Here's are two quotes from an article published in The Economist recently. I'm not 100% sure about the first quote but I believe the second one is right on the money!

Clean energy now gobbles up almost a tenth of America's venture capital. After years of wondering what would be the next big thing after the dotcom boom, America's technology industry is betting on alternative energy.

Society should rejoice that greenery is in vogue. Markets too will over the long term come to value the technologies in which the clean-energy business is investing... Some investors are sure to see their shirts blown away in the wind.

The Greatest Money Manager of Our Time

2006-11-15T15:32:00.000-05:00

FORTUNE recently published an article on my friends Bill Miller and Michael Mauboussin of Legg Mason Capital Management. It's a good read! Click on the link below to read it.

http://money.cnn.com/2006/11/14/magazines/fortune/Bill_miller.fortune/index.htm?postversion=2006111507

35 years of Intel chip design

2006-11-14T13:14:00.000-05:00

The folks at ZNet have put together a nice piece showing how Intel's chip designs have evolved over the past three and one half decades.

35 years ago we had: The 4004 Microprocessor
This was Intel's first microprocessor. It sparked a technological revolution because it was the first product to fuse the essential elements of a programmable computer into a single chip.

The 4004 was designed to be a calculator component for a Japanese manufacturer, which initially owned all rights to the chip. At the time, most Intel executives saw little promise in the product. Since then, processors have allowed manufacturers to embed intelligence into PCs, elevators, air bags, cameras, cell phones, beepers, key chains and farm equipment, among other devices.

And tomorrow we will have:
A chip with 80 processing cores. The chip will be able to perform 1 trillion floating-point calculations per second, or 1 teraflop.

Check out the fascinating slideshow at link below.

http://content.zdnet.com/2346-9595_22-37087-1.html

The Evolving Web

2006-11-14T09:35:00.000-05:00

Here's an interesting piece by John Markoff on how the web might evolve in coming years.

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Entrepreneurs See a Web Guided by Common Sense
By JOHN MARKOFF

SAN FRANCISCO, Nov. 11 — From the billions of documents that form the World Wide Web and the links that weave them together, computer scientists and a growing collection of start-up companies are finding new ways to mine human intelligence.

Their goal is to add a layer of meaning on top of the existing Web that would make it less of a catalog and more of a guide — and even provide the foundation for systems that can reason in a human fashion. That level of artificial intelligence, with machines doing the thinking instead of simply following commands, has eluded researchers for more than half a century.

Referred to as Web 3.0, the effort is in its infancy, and the very idea has given rise to skeptics who have called it an unobtainable vision. But the underlying technologies are rapidly gaining adherents, at big companies like I.B.M. and Google as well as small ones. Their projects often center on simple, practical uses, from producing vacation recommendations to predicting the next hit song.

But in the future, more powerful systems could act as personal advisers in areas as diverse as financial planning, with an intelligent system mapping out a retirement plan for a couple, for instance, or educational consulting, with the Web helping a high school student identify the right college.

The projects aimed at creating Web 3.0 all take advantage of increasingly powerful computers that can quickly and completely scour the Web.

“I call it the World Wide Database,” said Nova Spivack, the founder of a start-up firm whose technology detects relationships between nuggets of information by mining the World Wide Web. “We are going from a Web of connected documents to a Web of connected data.”

Web 2.0, which describes the ability to seamlessly connect applications (like geographic mapping) and services (like photo-sharing) over the Internet, has in recent months become the focus of dot-com-style hype in Silicon Valley. But commercial interest in Web 3.0 — or the “semantic Web,” for the idea of adding meaning — is only now emerging.

The classic example of the Web 2.0 era is the “mash-up” — for example, connecting a rental-housing Web site with Google Maps to create a new, more useful service that automatically shows the location of each rental listing.

In contrast, the Holy Grail for developers of the semantic Web is to build a system that can give a reasonable and complete response to a simple question like: “I’m looking for a warm place to vacation and I have a budget of $3,000. Oh, and I have an 11-year-old child.”

Under today’s system, such a query can lead to hours of sifting — through lists of flights, hotel, car rentals — and the options are often at odds with one another. Under Web 3.0, the same search would ideally call up a complete vacation package that was planned as meticulously as if it had been assembled by a human travel agent.

How such systems will be built, and how soon they will begin providing meaningful answers, is now a matter of vigorous debate both among academic researchers and commercial technologists. Some are focused on creating a vast new structure to supplant the existing Web; others are developing pragmatic tools that extract meaning from the existing Web.

But all agree that if such systems emerge, they will instantly become more commercially valuable than today’s search engines, which return thousands or even millions of documents but as a rule do not answer questions directly.

Underscoring the potential of mining human knowledge is an extraordinarily profitable example: the basic technology that made Google possible, known as “Page Rank,” systematically exploits human knowledge and decisions about what is significant to order search results. (It interprets a link from one page to another as a “vote,” but votes cast by pages considered popular are weighted more heavily.)

Today researchers are pushing further. Mr. Spivack’s company, Radar Networks, for example, is one of several working to exploit the content of social computing sites, which allow users to collaborate in gathering and adding their thoughts to a wide array of content, from travel to movies.

Radar’s technology is based on a next-generation database system that stores associations, such as one person’s relationship to another (colleague, friend, brother), rather than specific items like text or numbers.

One example that hints at the potential of such systems is KnowItAll, a project by a group of University of Washington faculty members and students that has been financed by Google. One sample system created using the technology is Opine, which is designed to extract and aggregate user-posted information from product and review sites.

One demonstration project focusing on hotels “understands” concepts like room temperature, bed comfort and hotel price, and can distinguish between concepts like “great,” “almost great” and “mostly O.K.” to provide useful direct answers. Whereas today’s travel recommendation sites force people to weed through long lists of comments and observations left by others, the Web. 3.0 system would weigh and rank all of the comments and find, by cognitive deduction, just the right hotel for a particular user.

“The system will know that spotless is better than clean,” said Oren Etzioni, an artificial-intelligence researcher at the University of Washington who is a leader of the project. “There is the growing realization that text on the Web is a tremendous resource.”

In its current state, the Web is often described as being in the Lego phase, with all of its different parts capable of connecting to one another. Those who envision the next phase, Web 3.0, see it as an era when machines will start to do seemingly intelligent things.

Researchers and entrepreneurs say that while it is unlikely that there will be complete artificial-intelligence systems any time soon, if ever, the content of the Web is already growing more intelligent. Smart Webcams watch for intruders, while Web-based e-mail programs recognize dates and locations. Such programs, the researchers say, may signal the impending birth of Web 3.0.

“It’s a hot topic, and people haven’t realized this spooky thing about how much they are depending on A.I.,” said W. Daniel Hillis, a veteran artificial-intelligence researcher who founded Metaweb Technologies here last year.

Like Radar Networks, Metaweb is still not publicly describing what its service or product will be, though the company’s Web site states that Metaweb intends to “build a better infrastructure for the Web.”

“It is pretty clear that human knowledge is out there and more exposed to machines than it ever was before,” Mr. Hillis said.

Both Radar Networks and Metaweb have their roots in part in technology development done originally for the military and intelligence agencies. Early research financed by the National Security Agency, the Central Intelligence Agency and the Defense Advanced Research Projects Agency predated a pioneering call for a semantic Web made in 1999 by Tim Berners-Lee, the creator of the World Wide Web a decade earlier.

Intelligence agencies also helped underwrite the work of Doug Lenat, a computer scientist whose company, Cycorp of Austin, Tex., sells systems and services to the government and large corporations. For the last quarter-century Mr. Lenat has labored on an artificial-intelligence system named Cyc that he claimed would some day be able to answer questions posed in spoken or written language — and to reason.

Cyc was originally built by entering millions of common-sense facts that the computer system would “learn.” But in a lecture given at Google earlier this year, Mr. Lenat said, Cyc is now learning by mining the World Wide Web — a process that is part of how Web 3.0 is being built.

During his talk, he implied that Cyc is now capable of answering a sophisticated natural-language query like: “Which American city would be most vulnerable to an anthrax attack during summer?”

Separately, I.B.M. researchers say they are now routinely using a digital snapshot of the six billion documents that make up the non-pornographic World Wide Web to do survey research and answer questions for corporate customers on diverse topics, such as market research and corporate branding.

Daniel Gruhl, a staff scientist at I.B.M.’s Almaden Research Center in San Jose, Calif., said the data mining system, known as Web Fountain, has been used to determine the attitudes of young people on death for a insurance company and was able to choose between the terms “utility computing” and “grid computing,” for an I.B.M. branding effort.

“It turned out that only geeks liked the term ‘grid computing,’ ” he said.

I.B.M. has used the system to do market research for television networks on the popularity of shows by mining a popular online community site, he said. Additionally, by mining the “buzz” on college music Web sites, the researchers were able to predict songs that would hit the top of the pop charts in the next two weeks — a capability more impressive than today’s market research predictions.

There is debate over whether systems like Cyc will be the driving force behind Web 3.0 or whether intelligence will emerge in a more organic fashion, from technologies that systematically extract meaning from the existing Web. Those in the latter camp say they see early examples in services like del.icio.us and Flickr, the bookmarking and photo-sharing systems acquired by Yahoo, and Digg, a news service that relies on aggregating the opinions of readers to find stories of interest.

In Flickr, for example, users “tag” photos, making it simple to identify images in ways that have eluded scientists in the past.

“With Flickr you can find images that a computer could never find,” said Prabhakar Raghavan, head of research at Yahoo. “Something that defied us for 50 years suddenly became trivial. It wouldn’t have become trivial without the Web.”

Intel eyes nanotubes for future chip designs

2006-11-10T18:28:00.000-05:00

Michael Kanellos at CNet.com notes that Intel has their eyes on carbon nanotubes.
Anyone that has read Quantum Investing will not be surprised at this story. :)

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Intel is eyeing carbon nanotubes as a possible replacement for copper wires inside semiconductors, a switch that one day could eliminate some big problems for chipmakers.

The chip giant has managed to create prototype interconnects--microscopic metallic wires inside of chips that link transistors--out of carbon nanotubes and measure how well the interconnects perform. In essence, the experiments are a way to test whether the theories about the properties of carbon nanotubes are accurate.

Mike Mayberry, director of components research at Intel's labs in Oregon, will discuss the research at the International Symposium for the American Vacuum Society next week in San Francisco. Intel worked with California Institute of Technology, Columbia University, University of Illinois at Urbana-Champaign, and Portland State University on the project.

Chip interconnects have become a looming headache for chipmakers. Under Moore's Law, chipmakers shrink the components inside semiconductors every two years. Shrinking interconnects, however, increases electrical resistance, which in turn reduces performance. Chipmakers switched from aluminum to copper interconnects in the late 1990s to get around the problem. Unfortunately for Intel and other companies, the resistance will start to become a significant problem in smaller copper interconnects in the coming years.

"With metals, as you reduce the diameter of the interconnect, the resistance can go way up," said Dave Lammers, a director at VLSI Research, a semiconductor analysis firm. "The electrons carom off the metal atoms. That is going to slow things down."

Lammers first wrote about the experimental interconnects in The Chip Insider, VLSI's newsletter.

Carbon nanotubes, the reigning celebrity of the nanotechnology world, conduct electricity far better than metals. In fact, nanotubes exhibit what's called ballistic conductivity, which means that electrons are not scattered or impeded by obstacles.

Nanotubes, which measure only a few billionths of a meter thick, are also far thinner than metal interconnects can be made. Potentially, this eliminates the problem with shrinking interconnects. IBM and others have made transistors out of carbon nanotubes.

In its experiment, Intel aligned bundles of nanotubes by means of an electric field and then measured their frequency with fairly standard equipment.

There is, of course, a catch. Although they exhibit unusual and beneficial properties, carbon nanotubes are difficult to mass manufacture. Some nanotubes are semiconductors, meaning the transmission of electrons can be controlled, while others are pure conductors, depending on the arrangement of the atoms. Some are long; others are short. Nanotubes produced in the same batch will contain a dizzying array of characteristics.

Since each chip would require thousands of nanotubes for interconnects, researchers are going to have to figure out a way to produce uniform ones, or quickly separate the good ones from the chaff.

"With (contemporary) interconnects, you dig a trench and fill it up with metal," Lammers said.

As a result, carbon nanotube interconnects won't likely appear in a commercial chip for several years at best.

Whether carbon nanotubes make it into chips or not, the basic structures and materials inside semiconductors will change radically in the next two decades. Around 2010 or 2012, researchers will begin to narrow down what changes will have to occur and then chips that combine silicon elements with newer nano elements will likely begin to creep in toward the middle of that decade. In the 2020s, the ability to shrink silicon chips will likely end and necessitate a shift to very different materials.

Economic Realities

2006-11-10T12:08:00.000-05:00

Anatole Kaletsky, who is a partner at GaveKal, hits on a very important point in a recent editorial printed in the London Times:

Particularly relevant to the contrast between Japan and Britain are two. First, manufactured goods, whose production is readily transferable to low-cost economies such as China, are falling relentlessly in price. Secondly, this process of outsourcing has created a new type of business, called “the platform company” by Charles Gave, the French economist (and my partner in an economic consulting business).

Platform companies sell everywhere but produce nowhere — businesses such as Dell, Nokia, Ikea, Glaxo, Apple or L’Oréal. Where, for example, are the factories owned by Ikea or Dell? They do not exist, because these companies subcontract almost all their manufacturing to other businesses, mostly in developing countries. Any business process can be divided into three stages — design, production and marketing — and platform companies have perceived that the relative value of these stages has fundamentally changed. In the 20th century, control over production was the key to business success. Today the other two stages add most value, because production can be shifted to subcontractors in developing countries that compete intensely to reduce costs.

This outsourcing is familiar enough, but its macroeconomic implications are less well understood. Because the manufacture of physical goods is the most volatile and capital-intensive part of the business process, outsourcing does not just transfer jobs and factories — platform companies also outsource to China and other developing countries much of the economic volatility that goes with capital investment, inventory cycles and the unionised factory employment.

At the macroeconomic level, therefore, the platform company model has produced several unexpected results. Large trade surpluses and high levels of investment, which used to be indicators of economic dynamism, may now be symptomatic of a country’s reluctance to integrate fully with the world economy and capitalise on the opportunities presented by free trade.

Schumpeter and Machiavelli

2006-11-08T12:58:00.000-05:00

I came across this passage while re-reading Howard Rheingold's book "Smart Mobs." It's right on the money.

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"New technologies have a history of destroying the dominance of prior technologies or making them obsolete. Joseph Schumpeter claimed, “This process of Creative Destruction is the essential fact about capitalism.” Lawrence Lessig reminded me of Machiavelli’s counterpoint to Schumpeter: “Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new.” Those who created an infrastructure in which the devices (telephones, televisions, and radios) are inexpensive and dumb, the network that connects the devices is highly specialized and expensive to install, and the service is sold on a metered basis (telephony, cable TV, and wired Internet access) are challenged by new enterprises in which cheap devices are the network, and no private enterprise owns the medium that carries their messages. The old telecommunications regime, if it is to survive, must either block challenging innovations politically, acquire the companies that challenge them, or change into different kinds of enterprises themselves. The market and the consumer have no obligation to remain loyal to obsolete technologies when something better comes along; just because Western Union had a large investment in telegraphy doesn’t mean that telephony should have been prevented through regulation or legislation.”

Powered by the Sun

2006-11-06T14:33:00.000-05:00

I came across this story on WIRED.com's website. It's a good illustration of what happens when prices (in this case, energy prices) rise.

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In a world where sun-powered garden lights seem like a nifty idea, new technologies touted by solar energy startups sound very far out.

Entrepreneurs promise that soon solar-energized "power plastic" will radically extend the battery life of laptops and cell phones. Ultra-cheap printed solar cells will enable construction of huge power-generating facilities at a fraction of today's costs. And technologies to integrate solar power-generation capability into building materials will herald a new era of energy-efficient construction.

Those are ambitious goals for a technology famous for powering pocket calculators, but investors are paying heed. This year, solar startups have snapped up more than $100 million in venture capital to develop printable materials capable of converting sunlight into electrical power. Soaring energy demand, as well as short supplies of polysilicon, a key ingredient in most solar cells, is fueling interest in alternative materials.

"These technologies look incredibly more real than they did five years ago," said Dan Kammen, founding director of the Renewable and Appropriate Energy Laboratory at the University of California at Berkeley. Kammen predicts solar sources, which today produce less than 1 percent of power consumed nationwide, could eventually meet one-fifth of U.S. energy demand.

Printed solar cells, produced with conductive metals and organic polymers in place of silicon, could help. As early as next year, startups plan to begin manufacturing printed solar products for use in power-generating facilities, rooftop installations and portable gadgets. While industry experts don't expect manufacturing on a massive scale to be viable for years, production capability is ramping up quickly.

Executives at Nanosolar, based in Palo Alto, California, plan to finish building a factory next year to churn out thin-film solar cells using copper-based semiconductors instead of silicon.

"Silicon models are too expensive in the first place," said Martin Roscheisen, Nanosolar's CEO, who expects the company will be able to build a 400-megawatt plant for about $100 million. Providing equivalent capacity using silicon technology, Roscheisen estimated, would cost close to $1 billion.

When Nanosolar's products become commercially available, Roscheisen plans to warranty the cells for 25 years -- similar to silicon solar products.

MiasolÃ©, in neighboring Santa Clara, California, has developed a competing thin-film photovoltaic cell using a layer of photoactive material containing a compound called CIGS. The company plans to incorporate the technology into building materials and rooftop solar installations.

On the shorter end of the power-generation life cycle, Konarka, a startup in Lowell, Massachusetts, has agreements in place with manufacturers to produce a printed "power plastic" to supply solar energy for portable devices.

"When people think of solar, they think of rooftop, grid-connected. We're trying to change that mindset," said Daniel Patrick McGahn, Konarka's chief marketing officer. Unlike silicon-based solar cells used on rooftops today, Konarka's specialized plastics typically last years, but not decades. The company is marketing its technology for use in products with similar life spans.

While research into printed photovoltaic technologies dates back decades, progress on non-silicon applications has accelerated in recent years due to the shortage of polysilicon, said Travis Bradford, president of the Prometheus Institute for Sustainable Development in Cambridge, Massachusetts. Today, nearly 95 percent of solar cells use semiconductor-grade silicon, he estimates, but that should drop to around 80 percent over the next few years.

To compete against silicon solar manufacturers, Bradford says developers of new technologies will need to show that they can be cost-effective. They'll also have to prove supplies of core materials are adequate for mass production and demonstrate that their products don't degrade too quickly. While he's optimistic about the prospects, he's not convinced any technology is meeting all the criteria today.

"It takes a lot longer and a lot more money to commercialize technology than people think ... which is why crystalline silicon has been around for so long," he said.

Still, printed photovoltaics could soon be ready for commercial use, said Raghu Das, CEO of research firm IDTechEx. The key hurdle remaining is to make materials resilient enough to last for years. Das expects manufacturers to resolve those concerns and produce viable printed photovoltaics in 2009 or 2010. He envisions large-scale deployment around 2012.

In the meantime, solar startups entice investors with visions of clean, low-cost, energy-generating capability bundled into a range of products, from building materials to cell phones. While that vision may eventually prove realistic, says Das, it's still quite futuristic.

"As plastics are used to make this and not silicon, it will be incredibly low-cost -- you could compare it to the cost of printing ink on paper," he said. "However, if it was ready today, everybody would be doing it."

Our Brave New World

2006-11-06T14:25:00.000-05:00

Here's a quote I came across while reading a book titled "Our Brave New World" by my friends at GaveKal Research. It hits the nail right on the head!

"When the process of creative destruction is allowed to work, we get both income disparity and the ability of people to 'move up.' When income disparity is constrained, the ability of people to climb the social ladder disappears." This is why, in large parts of Europe, 'l'ascenceur social est en panne.'

Getting the LED Out

2006-11-06T14:10:00.000-05:00

Here's a story from Michael Kanellos at CNet.com on how LED's could start replacing lightbulbs soon.

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SAN JOSE, Calif.--Light-emitting diodes will become economically attractive as replacements for conventional lightbulbs in about two years, a shift that could pave the way for massive electricity conservation, according to a researcher.

Right now, consumers and businesses can buy a light-emitting diode, or LED, that provides about the same level of illumination as an energy-hogging conventional 60-watt lightbulb, Steven DenBaars, a professor of material science at the University of California Santa Barbara, said at the SEMI NanoForum, taking place here this week. A principal advantage of the LED: It lasts about 100,000 hours, far longer than the conventional filament bulb
Lumileds' LED tech

Unfortunately, the LEDs that can perform this task cost about $60, he said. (Prices vary on the Internet.) But prices have been declining by 50 percent a year, so two years from now the same LED should cost around $20.

"At $20 the payback in energy occurs in about a year," DenBaars said. The rapid return on investment will occur in places such as stores and warehouses, where the light is on through much of the day. A year after that, LEDs will be even more economical for more places as costs continue to decline.

Approximately 22 percent of the electricity consumed in the United States goes toward lighting, according to the U.S. Department of Energy.

To make matters worse, traditional lightbulbs are incredibly inefficient. Only about 5 percent of the energy that goes into them turns into light. The majority gets dissipated as heat.

If 25 percent of the lightbulbs in the U.S. were converted to LEDs putting out 150 lumens per watt (higher than the commercial standard now), the U.S. as a whole could save $115 billion in utility costs, cumulatively, by 2025, said DenBaars, and it would alleviate the need to build 133 new coal-burning power stations.

In turn, carbon emissions in the atmosphere would go down by 258 million metric tons.

"Multiply that by three and you get the worldwide savings," he stated. DenBaars then showed a picture of the globe at night. The landmass of the U.S. could easily be picked out by nighttime lights.

"We shoot a lot of light into space that doesn't need to be there," he noted.

Rising prices of electricity, combined with the antiquated nature of lightbulb technology, has prompted several start-ups and large industrial concerns to get into lighting.

Fiberstars, for instance, has come up with a way to replace hot fluorescent tube lights with light-emitting optical fiber in freezer cases in grocery stores. Hewlett-Packard spinoff Lumileds is also producing LEDs for a variety of applications.

LED technology is improving as well. UCSB has created an experimental LED that can put out 117 lumens per watt, while a Japanese company has developed one that can put out 130 lumens per watt.

Getting LEDs to produce white light that is tolerable to humans has also greatly improved. Manufacturers can do it two ways. One is to package red, green and blue LEDs in a way that the combined light shines white to the human eye. The other way is to make blue LEDs and coat them with a phosphor--a luminescent substance commonly used on fluorescent lamps.

We All Have Tough Years, Folks!

2006-11-03T12:45:00.000-05:00

Here's an article from Morningstar.com on Bill Miller that arrived in my inbox today. For those folks out there that are invested in Bill's funds, here's a little advice for you:

Don't do anything foolish with your money. Bill is a much better investor than you will ever be.

sw

Bill Miller's Streak Might End. Horrors!
By Greg Carlson | 10-31-06 | 06:00 AM
Morningstar.com

After beating the S&P 500 Index for a remarkable 15 consecutive years, Bill Miller of Legg Mason Value LMVTX is lagging the benchmark by nearly 11 percentage points for the year to date through Oct. 26, 2006. The extent to which the fund trails the S&P--which in turn has taken a toll on its longer-term comparisons with the benchmark--has some investors spooked. For example, after my colleague Russ Kinnel wrote a recent column that placed Miller among the 10 best current mutual fund managers, he received an e-mail from a reader who wrote that Miller, due to his bout of severe underperformance, is no longer among the industry's elite.

We beg to differ, of course. True, it does look increasingly likely that Miller's streak of beating the S&P will end this year, for although the fund has had strong fourth-quarter returns at times (due to holdings that thrive during the holidays, such as Amazon.com AMZN ), the current gap will be difficult to overcome in just two months. But we don't think the end of the streak would diminish the fund's attractiveness in the least.

In a way, it might be something of a positive if it helps investors better understand the fund's volatile nature (which the streak has masked). Miller runs a concentrated portfolio, takes big stakes in both racy fare such as Google GOOG and turnaround situations such as Eastman Kodak EK , and is willing to hang on to his picks through sharp downturns, so the fund's returns have long been among the most turbulent in the large-blend category. Earlier this year, Miller himself called his winning streak an "accident of the calendar," and it's easy to see why. Since the streak began in 1991, the fund has lagged the S&P in 47 of 178 rolling 12-month periods--more than 26% of the time (and by double-digit percentage points at times in the past). Furthermore, prior to the fund's recent struggles--and despite its consistency during calendar years--it trailed the index over several three-year rolling periods.

Putting The Streak In Perspective
The potential end of Miller's streak brings up a larger point. Even the very best managers tend to underperform, often for extended stretches. For example, two large-blend funds have outpaced or matched Legg Mason Value's return since the start of 1991 with the same lead manager at the helm: Longleaf Partners LLPFX and Vanguard Primecap VPMCX . The former lagged the S&P 500 in seven of the past 15 calendar years, including five in a row in the late 1990s' bull market. And Vanguard Primecap trailed the index in five of those 15 years. The cause of this underperformance is clear. In order to beat the benchmark decisively, a manager has to be willing to build a portfolio that looks significantly different than the index and stick to his or her guns when that style is out of favor. (It's no coincidence that all three funds have had consistently low portfolio turnover.) The Longleaf fund typically owns just 20 stocks and will let cash build when appealing ideas are scarce, while the Primecap team tends to hold big stakes in its favorite sectors, particularly tech.

For his part, Miller certainly isn't shy about deviating from the benchmark. Of Legg Mason Value's 44 holdings, 36 are constituents of the S&P, but they comprise less than a fifth of that capitalization-weighted index. Five of the fund's top 10 holdings-- Sprint Nextel S , utility concern AES AES , telecom provider Qwest Communications International Q , Sears Holdings SHLD , and Amazon--consume nearly a fourth of the fund's assets but less than 1% of the index. Furthermore, the fund has no holdings within the surging energy sector, a big reason why it merely squeaked by the index in 2004 and 2005. As a result of all these characteristics, the fund's returns are less correlated with those of the index than the vast majority of its category peers'.

Looking Ahead
Given the fund's atypical look and the generally uneven return profile of the best-performing funds, this fund could very well underperform the index beyond 2006; Miller's picks can sometimes take years to work out. But although his approach should normally lead to significant dry spells, it lends this fund tremendous appeal. Miller and his analyst team meticulously research each firm before purchase, ignoring most short-term metrics and focusing on long-term value. Miller is a fearless contrarian; if one of the fund's holdings gets hammered but the fundamental case for it hasn't changed much (if at all), he'll eagerly scoop up more shares. That tack has often resulted in bursts of superb performance. For all the hand-wringing about the fund's wide performance gap versus the index this year, it's worth noting that the fund beat the S&P by an even larger margin in 1996, 1998, and 2003. Ultimately, the best thing the fund's shareholders can do is ignore its short-term gyrations. They're better off worrying about how they're going to eat or dispose of all that leftover Halloween candy.

Nantero on the Move

2006-11-03T12:17:00.000-05:00

Looks like the researchers at Nantero Inc. are on to something potentially very big.

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Nantero announces routine use of nanotubes in production CMOS fabs

Nov. 3. 2006 -- Nantero Inc., a Woburn, Mass., company using carbon nanotubes for the development of next-generation semiconductor devices, announced it has resolved the major obstacles that had been preventing carbon nanotubes from being used in mass production in semiconductor fabs.

Nanotubes are widely acknowledged to hold great promise for the future of semiconductors, but most experts had predicted it would take a decade or two before they would become a viable material. This was due to several historic obstacles that prevented their use, including a previous inability to position them reliably across entire silicon wafers and contamination previously mixed with the nanotubes that made the nanotube material incompatible with semiconductor fabs.

Nantero announced it has developed a method for positioning carbon nanotubes reliably on a large scale by treating them as a fabric which can be deposited using methods such as spincoating, and then patterned using lithography and etching. The company said it has been issued patents on all the steps in the process, as well as on the article of the carbon nanotube fabric itself, US Patent No. 6,706,402, "Nanotube Films and Articles," by the U.S. Patent and Trademark Office.

The patent relates to the article of a carbon nanotube film comprised of a conductive fabric of carbon nanotubes deposited on a surface. Nantero has also developed a method for purifying carbon nanotubes to the standards required for use in a production semiconductor fab, which means consistently containing less than 25 parts per billion of any metal contamination.

With these innovations, Nantero has become the first company in the world to introduce and use carbon nanotubes in mass production semiconductor fabs.

The company is developing NRAM -- a high-density nonvolatile random access memory device intended for use as a universal memory. The company says it can be manufactured both as standalone devices and as embedded memory in application- specific devices such as ASICs and microcontrollers.

The Secret to Investing Success

2006-11-01T13:59:00.000-05:00

I came across this passage in an article by business strategist Nikos Mourkogiannis and had to laugh.

"Warren Buffett wanted to be an excellent investor - which meant being a rational investor. He knew that the best way to achieve this was by staying as far away as possible from Wall Street."

Indeed!

Here's the link to Nikos' article:

http://www.strategy-business.com/press/enewsarticle/enews102606?pg=0

Bill Miller's Investment Commentary

2006-10-27T10:20:00.000-05:00

One of my favorite money managers and friend - Bill Miller, Chairman & Chief Investment Officer, Legg Mason Capital Management - just published his 3Q 2006 commentary. Bill's pieces are required reading in my view.

You can find Bill's latest thinking at the link below:

http://www.leggmasoncapmgmt.com/pdf/Bill%20Quarterly%20Commentary%203Q%2020061.pdf

Quantum entanglement demonstrated

2006-10-19T11:27:00.000-05:00

Another milestone in our quantum history...

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PORTLAND, Ore. — The National Institute of Standards and Technology (NIST) said it has demonstrated what it claims is the world's first entangled atoms that could be used to communicate information nondestructively.

By creating multiple pairings of entangled atoms, NIST scientist Dietrich Leibfried was able to transmit quantum data and verify its reception from one pair without destroying the information in the other pair.

"The distance between the pairs is about a micron, but we are the first group to demonstrate high success rates in an ion trap design that we think can scaled up to build a quantum computer," Liebfried claimed.

Entanglement—referred to by Albert Einstein as "spooky action at a distance"—is a quantum phenomenon in which two particles—atoms or photons in close proximity—take on identical internal states. The synchronization, if conditions are right, can persist even if the particles are separated so that information processed by one pair is simultaneously processed by the other.

Researchers believe the phenomenon could serve as the basis for enabling quantum computing capabilities.

Still, almost any operation performed to determine the state of an entangled particle also destroys the synchronization, meaning that information read-out at any step in a computation destroys the synchronization of the quantum information, halting computations. Conversely, not reading out information makes the computation useless.

So far, schemes to sidestep the quantum entanglement Catch-22—which involve making more than one entangled pair, performing the same operations on each, then destructively reading out only from one pair—has only been demonstrated by pairs or entangled photons. NIST claims it has demonstrated a method that works for atoms too, opening the possibility of building future quantum computers using its approach.

The process, called data "purification," used two pairs of beryllium ions held in electromagnetic traps on a chip surface. The complex procedure enable the entanglement of two pairs which perform a quantum processing step, then read out the results from one pair while maintaining the integrity of original information in the first pair.

The purification procedure, which worked in one out of three attempts, compared to once in a million attempts in previous experiments with photons, employed special error-correction procedures that enabled information to become more secure at each iteration, perhaps enabling long multi-step quantum computationsin future quantum computers.

NIST researchers will next seek to apply the purification procedure to quantum computer development using other subsystems already designed, including ion traps. They will also demonstrate working algorithms for uncrackable data encryption or quantum teleportation of information.

A Nobel Quote

2006-10-12T10:08:00.000-05:00

Here's a very insightful quote from Edmund Phelps, who was awarded the 2006 Nobel Prize for economics:

"A tremendous confusion is created by associating "capitalism" with entrenched wealth and power. The textbook capitalism of Schumpeter and Hayek means opening up the economy to new industries, opening industries to start-up companies, and opening existing companies to new owners and new managers. It is inseparable from an adequate degree of competition. Monopolies like Microsoft are a deviation from the model."

Source: "Dynamic Capitalism," Wall Street Journal, October 10, 2006.

Interview with W. Brian Arthur

2006-09-26T13:09:00.000-05:00

My good friend Michael Mauboussin, Chief Investment Strategist at Legg Mason Capital Management and author of the great book "More Than You Know," recently published an interesting interview with Santa Fe Institute economic guru W. Brian Arthur. I highly recommend reading the interview. You can download the piece at this this link:

http://www.leggmason.com/funds/knowledge/mauboussin/Arthur_Interview.pdf

Enjoy!

The Cheap Revolution

2006-09-19T08:34:00.000-05:00

"We are going into a period of unbelievable distruption. We're about to see a huge tectonic shift, more dramatic than anything in the past. This is the next boom, the next big storm. Things are going to get really wild."

- Bill Coleman
Silicon Valley Serial Entreprenuer

For a glimpse of the coming wave of creative destruction in tech land, check out Daniel Lyons article "The Cheap Revolution" in the September 18, 2006 issue of Forbes magazine.

ps: My advice to investors is simple: Don't look in the rear view mirror.

The difference between wise crowds and wise guys

2006-09-14T08:38:00.000-05:00

My friend Kevin Maney - USA Today tech journalist extraordinare - wrote a excelent article this week on the wisdom of crowds or what I call "hive intelligence."

enjoy!
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Internet types love sweeping ideas that come in the form of book titles that morph into catchphrases that can be dropped like little bombs into conversations to show how smart they are.

"Well, you know, his company was vulnerable to The Innovator's Dilemma, especially because he didn't have a World Is Flat strategy, although he could've seen it coming if he'd tapped into a Wisdom of Crowds approach."

This is at its most grating when said with a Thurston Howell III accent.

Anyway, the concept of "the wisdom of crowds" — the title of a popular 2004 book by James Surowiecki — is particularly hot among tech companies right now. Yet in the past week, the concept has run into a couple of potholes. One is a rhubarb at Internet darling Digg.com; the other, the U.K. government's case of the hijacked wiki.

Both have people wondering if crowds are really all that wise, and what conditions have to exist to make them wise. Why is it that some crowds seem smart, while others turn into ugly mobs?

At its most basic level, the wisdom of crowds — let's call it WOC, so I don't have to type as much — means that the aggregated thought and knowledge of thousands or millions of people can be smarter than trained individual experts.

The WOC has been around forever — it's what democratic elections try to tap into. But the Net takes it to a whole new level. "The Internet provides a mechanism to get lots of diverse opinions and aggregate it in a quick and cost-effective way," Surowiecki tells me.

So if a company can use the Net to tap the collected intelligence of its employees, the employees will make better decisions than the CEO. IBM, Google and others have tried this. Wikipedia, written and edited by tens of thousands of unpaid contributors, should be better than an encyclopedia written and edited by specialists. News sites such as Digg, which lets users vote stories to the front page, should surface the best stuff more effectively than professional editors.

Except it doesn't always work that way. Pointing specifically at Wikipedia, Lauren Weinstein of the People for Internet Responsibility says that the Net has propagated a "basic fallacy that a wisdom-of-crowds approach could ever work, even theoretically."

Which might be extreme. But clearly some of the WOC mechanisms in use today have shortcomings.

Take Digg. Founder Kevin Rose set it up with a simple premise: If you like a news item or blog post, you can "digg" it by voting for it. Items with the most votes move to the front of the home page. But cabals of users started working together to boost certain items. Digg became less about the WOC and more about the ambitions of 1,000 or so savvy members.

So last week, Rose changed the formula. Digg will use computer programs to try to devalue bloc voting and give more value to what appears to be independent thinking. Digg's regulars revolted, causing a big Web stink. But Surowiecki thinks the site will now be better.

"The thing that makes the wisdom of crowds work is lots of diverse opinions and independent judgments," Surowiecki says. "Digg acknowledged it wanted more diversity of input."

So WOC needs the right structure to work, something the U.K.'s Department of Environment Food and Rural Affairs (DEFRA) found out the hard way.

DEFRA decided to let the public help it write environmental contracts, so it posted one on the Net as a wiki. The idea of a wiki — such as Wikipedia — is that anyone can log on and add or change something. In the case of DEFRA's wiki, the public mutilated it. In one of the more printable alterations, someone changed "Who are the parties to the environmental contract" to "Where is the party for the environmental contract? Can I come? Will there be cake? Hooray!"

"These sorts of issues have permeated the Net," Weinstein says. "Part of the problem is ... it doesn't take a lot of people to cause such disruptions."

Wikis, as it turns out, are not so much tapping the WOC as they are works in constant progress. Depending on who last wrote something, at any one time the wiki might be good, or bad.

Despite hiccups, though, there's still a lot of enthusiasm for WOC.

Google, in its own way, is a WOC device. It analyzes links that millions of people put on websites to come up with the most relevant search results. The reputation system on eBay uses WOC to self-police its users.

One of the more intriguing WOC sites is Hollywood Stock Exchange, aka HSX.com. It has about 700,000 members who use pretend money to buy and sell the "stocks" of movies and stars. (Most widely held star stock: Johnny Depp.) These are basically bets on how well a movie will do or how a star's career will go. HSX now sells its results to movie studios because its forecasts are more accurate than the studios' internal forecasts.

There are other prediction market sites aimed at politics, sports and other sectors. And in 2003, if you remember, the Pentagon experimented with a prediction market for terrorist attacks. Actually, it was a market for world events, including where and how future terrorism would take place. If hundreds of thousands of people were in the market, betting on the likelihood of such events, the WOC would probably wind up making pretty accurate predictions.

But when word got out, people just heard "betting on terrorism" and had an emotional reaction. Senators denounced it. "This is just wrong!" barked then-senator Tom Daschle, a South Dakota Democrat. And the program was canned.

The thing is, it was a sound, smart WOC idea. "It went down in flames for reasons I don't think were good," Surowiecki says.

In other words, it ironically was shot down by a crowd acting unwisely. In this WOC arena, there still seems to be much to learn.

Who Killed The Newspaper?

2006-09-01T12:11:00.000-05:00

Speaking of creative destruction, The Economist magazine ran a cover story recently about the impending death of newspapers. As the magazine noted in its lead article:

Newspapers have not yet started to shut down in large numbers, but it is only a matter of time. Over the next few decades, half the rich world's general papers may fold.

Video killed the radio, or so the song said. The Internet/Web killed the newspaper.

Maybe there is another hit song to write...

Perspectives on Wealth

2006-08-24T10:56:00.000-05:00

I'm reading Eric Beinhocker's recently published book "The Origin of Wealth" and came across this little tidbit:

"Over 97 percent of humanity's wealth was created in just the last 0.01 percent of our history."

It's stunning when you think about it. We are truly blessed today...

Researchers develop new 3D nanomaterial

2006-08-23T09:16:00.000-05:00

University of Arkansas chemists announced on Tuesday that they have made nanomaterials accessible as three-dimensional forms by making paper out of titanium oxide nanowires.

The nanopaper can be used as a filter and can withstand heat up to 700 degrees Celsius. It can also be folded by hand, cut with scissors and formed into 3D objects.

While two-dimensional freestanding membranes of nanowires have been available, the scientists said their 3D rendering of thermally stable nanomaterial is a chemistry breakthrough. It will open up the field of nanotechnology to more applications, they added.
nanopaper

The ability to cast the nanopaper into 3D forms will allow the nanomaterial to be used in protective masks and armor, flame-retardant fabric, drug release capsules and regenerating tissue, the researchers said. The nanopaper could eventually be used to filter bacteria and prevent the spread of pathogens. The application would be similar to the nanowire bar code system for detecting anthrax.

The researchers also proved the material's use as a low-cost nontoxic photocatalyst--a substance that can regenerate its chemical composition after exposure to light. They did this by comparing the paper's write-erase capability against regular printing paper. A 15-minute exposure to UV irradiation made the water-based ink "disappear."

The nanopaper, while obviously more sophisticated in chemical nature, is actually made from pulp, as is wood-based paper. The scientists figured out a way to make the nanomaterial less brittle and more pliable by playing with "the ratio of water to nanowires in the pulp and the time for drying the nanowire pulp," according to their research paper. The pulp they refer to is made of long nanowires created out of titanium oxide using a hydrothermal heating process.

Details of the nanopaper's development and potential applications appear in a Journal of Physical Chemistry B August article, as well as in an abstract on the University of Arkansas Web site.

The university has applied for a patent on the process and is hoping to license the technology to the commercial industry, according to a University of Arkansas statement.

Molecular Storage Device

2006-08-10T15:56:00.000-05:00

IBM researchers in Switzerland have demonstrated a device capable of storing and retrieving data with a single molecule. And you thought that iPod Nano couldn't get any smaller...

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IBM researchers in Zurich, Switzerland, have demonstrated a single-molecule device capable of repeatedly storing and retrieving data.

Described in the Aug. 4 issue of nanotech journal Small Times, the device is a surprisingly simple organic compound that can be set to high or low resistance through electrical pulses. In the lab, it reliably retained its ability to change states over many hours and more than 500 tests, which the researchers described in the paper as "a remarkable result for a single-molecule system."

"Right now, we are concentrating on understanding the relationship between the design of the molecular system and the electrical properties measured," researcher Heike Riel told ZDNet UK. "Our next steps are to investigate the mechanism responsible for switching."

The molecule at the heart of the system, BPDN-DT, was designed by professor James Tour and co-workers at Rice University in Houston and is one of a class of compounds called Tour wires. Although it was specifically synthesized to operate in this and other devices--it has also been used in a single molecule transistor--there is still considerable debate as to how it works and what characteristics any potential commercial application may have.
In other news:

* Israel's water wizards of the desert
* Pumping power onto the grid from home
* Intel's 3D boost for open source
* News.com Extra: In the drug war, technology is key
* Video: Pigeons take flight with GPS

"The maximum switching speed depends very much on the mechanism which is used for switching," Riel said. "The switching time is at least faster than 640 microseconds. However, we cannot give an upper limit yet." She said this would depend on future investigations into how it worked and that tests done on a similar molecule conclusively narrow the active area of the device down to a very specific area.

The experiment itself mounted the molecule between two gold electrodes that could be adjusted to subpicometer accuracy. Although most of the testing took place under extremely cold conditions, some results showed that the molecule continued to switch states at room temperature--though, as the gold was then much softer, it flowed and short-circuited after a few cycles.

At about 1.5 nanometers long, the molecule is less than a hundredth of the size of current silicon memory elements. It is widely accepted in the industry that current progress in silicon will become economically more difficult below 20nm, with fundamental physical limits being reached below 10nm. IBM says it sees molecular computing as one way of pushing past this barrier, as well as semiconducting wires, carbon nanotubes and spintronics.

New method of growing carbon nanotubes to revolutionise electronics

2006-08-10T14:26:00.000-05:00

Growing carbon nanotubes has been a dream of nanotech researchers ... until now.
Keep on eye on this space, folks!

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A new method of growing carbon nanotubes is predicted to revolutionise the implementation of nanotechnology and the future of electronics. Researchers at the University of Cambridge have successfully grown nanotubes at a temperature which permits their full integration into present complementary metal-oxide semiconductor (CMOS) technology (350 ºC).

Carbon nanotubes are the driving force for current advances in nanotechnology; they have excellent mechanical and electronic properties, the latter making them extremely attractive for new-generation electronics.

Increasing efficiency through smaller components is the key towards miniaturisation of technology. The use of carbon nanotubes could find successful use from sophisticated, niche applications to everyday electronics (mobile phones, computers).

Thus far the growth of nanotubes has been carried out at very high temperatures, and growth below 500 °C was believed impossible. This made the direct implementation of nanotubes into electronic devices unthinkable. Trying to integrate nanotubes above 400–450 °C would in fact damage the inter-metal dielectrics commonly employed in CMOS device fabrication.

A group of researchers at the Department of Engineering at the University of Cambridge, led by Mirco Cantoro, Stephan Hofmann, Andrea Ferrari and John Robertson, in collaboration with colleagues at the Cambridge Hitachi Laboratory and the Department of Materials Science, University of Cambridge, succeeded in growing single-wall carbon nanotubes at temperatures as low as 350 ºC.

These nanotubes, grown by thermal Chemical Vapour Deposition (a chemical process often used in the semiconductor industry), are promising candidates for integration into existing nanoelectronic devices.

This result also sheds new light on the possible mechanisms that occur during carbon nanotube growth. Previously, the assumption that the catalyst has to be liquid often dominated carbon nanotube growth model considerations, but at these lower temperatures evidence has been found of a solid catalyst. These findings extend to the catalytic growth of other nanostructures in general.

This work has been recently published in Nano Letters. M. Cantoro et al. “Catalytic chemical vapor deposition of single-wall carbon nanotubes at low temperatures”, Nano Letters 6, 1107 (2006).

Source: University of Cambridge

Batteries Included

2006-08-04T13:27:00.000-05:00

The world's first lithium-ion supercar is here. Zero emissions never looked so hot.

By Joshua Davis

Martin Eberhard holds the brake down with his left foot and presses on the accelerator with his right. The motor revs, the car strains against the brake. I hear … almost nothing. Just a quiet whine like the sound of a jet preparing for takeoff 5 miles away. We’re belted into a shimmering black sports car on a quiet, tree-lined street in San Carlos, California, 23 miles south of San Francisco. It has taken Eberhard three years to get this proto-type ready for mass production, but with the backing of PayPal cofounder Elon Musk, Google’s Larry Page and Sergey Brin, and ex-eBay chief Jeff Skoll, he has created Silicon Valley’s first real auto company.

“You see any cops?” Eberhard asks, shooting me a mischievous look. The car is vibrating, ready to launch. I’m the first journalist to get a ride.

He releases the brake and my head snaps back. One-one-thousand: I get a floating feeling, like going over the falls in a roller coaster. Two-one-thousand: The world tunnels, the trees blur. Three-one-thousand: We hit 60 miles per hour. Eberhard brakes. We’re at a standstill again – elapsed time, nine seconds. When potential buyers get a look at the vehicle this summer, it will be among the quickest production cars in the world. And, compared to other supercars like the Bugatti Veyron, Ferrari Enzo, and Lamborghini Diablo, it’s a bargain. More intriguing: It has no combustion engine.

The trick? The Tesla Roadster is powered by 6,831 rechargeable lithium-ion batteries – the same cells that run a laptop computer. Range: 250 miles. Fuel efficiency: 1 to 2 cents per mile. Top speed: more than 130 mph. The first cars will be built at a factory in England and are slated to hit the market next summer. And Tesla Motors, Eberhard’s company, is already gearing up for a four-door battery-powered sedan.

In an age when a car’s electronics are worth more than its steel, it seems only natural that the tech sector would have its own car company. The question is, can Eberhard turn the digital era into horsepower, torque, and rpm?

Eberhard has never designed a car and has no experience building one. He created the Rocket eBook, a handheld digital book reader that came to market in the late ’90s. But he insists his eBook background is relevant to starting a car company. The device used a rechargeable battery, and Eberhard – an electrical engineer – devoted himself to maximizing run time and minimizing weight. In 2000, his venture, NuvoMedia, was bought by TV Guide’s parent company, which quickly abandoned the product.

But Eberhard was flush with cash and decided to buy himself a new sports car. He wanted something that was fast but still got good mileage. He quickly learned that high performance and fuel efficiency are mutually exclusive, at least when it comes to internal combustion engines. So he started researching alternative technologies and soon realized it was actually possible for an electric car to combine zip and efficiency. The problem: Nobody was making one. The EV1, General Motors’ electric car, had failed, in part because it was expensive and poorly marketed. Most crippling, though, was the underperformance of the original lead-acid batteries and even the second-gen nickel metal hydride cells. Consumers wanted a vehicle that had a range greater than the EV1’s (at best) 130 miles. The common wisdom was that batteries just weren’t there yet.

But what did Detroit know about batteries? Eberhard had squeezed 20 hours of run time out of the little power pack on his eBook. Battery efficiency was an obsession among computer engineers, who were extracting more power from ever-smaller cells with each generation of laptops. GM seemed oblivious to the lessons emerging from the electronics industry. Eberhard began to think that if anybody was going to build a viable electric car, it would be a Silicon Valley engineer. Then, after reading biographies of John DeLorean and Preston Tucker, and reminding himself that launching a car company was a crazy idea, he did just that.

The central concept of Tesla Motors, founded in July 2003, is that there is no need to reinvent the battery, particularly for a product with a small initial market. Eberhard simply adopted the lithium-ion technology used in laptops and harnessed the momentum of the computer industry. Let Dell, HP, and the rest of the sprawling PC business, with their billions of R&D dollars, do the hard work of extending battery life and driving down prices. He’d piggyback on their innovations.

Meanwhile, automakers had been dis-mantling some of the biggest barriers to entering the business. To lower production costs, the Big Three had outsourced much of their parts manufacturing over the past 25 years. An upstart could buy just about everything it needed to mass-produce a car from independent suppliers. A fledgling electric car company had other advantages, too: Tighter emissions standards have raised the cost of developing gas-powered cars, and buyers of low-emission vehicles are lured by big tax breaks.

In the spring of 2004, Eberhard embarked on a series of meetings with venture capital firms along Sand Hill Road in Menlo Park. He argued that a combustion engine is an antiquated technology and that electric vehicles are dramatically more energy-efficient than their gas-guzzling counter-parts. “If you took the energy in a gallon of gas and used it to spin a turbine, you’d get enough electricity to drive an electric car 110 miles,” he says in a characteristically enthusiastic rush, trying to squeeze in too many words between breaths.

More important, Eberhard says, the electric cars of the past – slow, cramped, spartan – looked like they were designed by people who thought you shouldn’t be driving to begin with. Eberhard calls them “punishment cars.” What he wanted to build, he told his potential investors, was a classic sports car. He wanted to have his ecofriendly ride and race it, too. Initially, the Sand Hill VCs weren’t interested. Eberhard got his first bite from Elon Musk, cofounder of PayPal, who – over the course of two years – put in nearly $30 million of his own money and also corralled some of his wealthy entrepreneur friends to chip in. By May 2006, Tesla Motors had raised $60 million. Now Eberhard had to get the car into production.

Just before Christmas 2004, 30 employees and board members from Tesla came to Eberhard’s Woodside, California, house to decide what the car would look like. He had commissioned four top automotive designers to draw sketches, which he taped to his living room wall. He gave everyone three red stickers and three green and told them to flag what they liked and didn’t like. By the time the eggnog was gone, the green dots had coalesced around a drawing by Barney Hatt of Lotus Design in England. This is how a Silicon Valley startup does car design.

Lotus had manufactured cars for GM, in addition to its own lightweight aluminum sports car, the Elise. So Eberhard contracted the company to assemble his new vehicle, codenamed Dark Star (after a classic low-budget sci-fi movie). The electric motor would be built in Taiwan, and engineering and R&D would be conducted in a San Carlos warehouse. The space had offices in the front, and Eberhard began to fill the cubicles with dotcom veterans. Mike Harrigan, the man in charge of setting up a nationwide network of auto maintenance centers, had previously founded two communications equipment makers. Gretchen Joyce, vice president in charge of sales, had spent the previous four years at eBay. There was no doubt that this was going to be a different kind of car company.

What Eberhard didn’t know about car manufacturing – which was just about everything – he got by hiring engineers and executives away from Lotus. Eventually, he lured so many Lotus employees that the British company insisted he sign a no-poaching agreement or it wouldn’t build the car.

For three years, Tesla Motors ran in stealth mode. Because electric cars had failed so visibly in the late ’90s, the company knew it faced a tough marketing challenge, and Eberhard didn’t want to show the world something half-baked. If Tesla was to succeed, it would need to present a fully realized, radically different approach. Luckily, there was little threat of car spies ruining the surprise. “Silicon Valley is a great place to run a secret car company,” Eberhard says. “Nobody expected something to sprout up in Northern California, so no one came looking.”

Eberhard owes his radically different approach to Nikola Tesla, the iconic Serbian engineer who built the first AC induction motor in the 1880s. Eberhard’s supercharged update of that motor is powered by a copper and steel rotor that is spun by a magnetic field. There are no moving parts besides the rotor. Step on the accelerator and the motor delivers instantaneously. An onboard computer provides traction control, keeping the car from burning rubber. The result: 0 to 60 in about four seconds. And, since the motor is not limited by the complexity of pistons moving up and down, it can spin much faster. Porsche’s top-of-the-line model – the $440,000 Carrera GT – maxes out at 8,400 rpm; the Tesla Roadster has a ceiling of 13,500, enabling it to go 70 mph in first gear. (It has two gears, plus reverse.)

The Roadster’s sporty styling allowed Eberhard to maximize the car’s range and still win a drag race. With its two-person capacity and aerodynamic contours, the lightweight machine can go 250 miles on a single charge. (When connected to a special 220-volt, 70-amp outlet, recharging takes about three and a half hours.) Plus, the sports car class lets Eberhard price it on the high end – in the range of a Porsche 911 Carrera S, roughly $80,000.

Of course, an expensive two-seater isn’t going to have much effect on an industry that sells 17 million automobiles in the US each year. Sure, every VC will have to get one, and George Clooney will probably be seen piloting one down Sunset Boulevard. But selling a few thousand cars won’t help Eberhard build a dominant 21st-century car company. That’s why he’s already preparing a sedan, codenamed White Star, which could hit streets as early as 2008. Of course, the sedan won’t be as lightweight or aerodynamic as the Roadster, so its range is likely to drop significantly. Eberhard’s response: maybe with today’s tech. But battery power is improving steadily, and several companies say they may soon double battery life. By the time the sedan comes out, he says, batteries will be ready to deliver: “We’re going to ride that technology curve all the way home.”

A cop drives by, and Eberhard smiles benignly as the Roadster edges forward silently from a stop sign. It’s an eerie, disconcerting feeling. There’s no engine hum – nothing to make you think that this car should be sold with a neck brace. Most high-performance cars telegraph their power. That’s part of the allure of a seriously fast car – you can hear it coming. The Roadster seems like a sneak attack. As with everything about this car, Eberhard has a fast answer. “Some people are going to miss the sound of a roaring engine,” he says, “just like people used to miss the sound of horse hooves clippity-clopping down the street.”

Eberhard suggests it would be easy enough to pump MP3s of prerecorded engine roar into the car’s Blaupunkt stereo. And for those with even older tastes, the sound of horse hooves could be substituted. But damn if that horse isn’t going to sound strange at 13,500 rpm.

One Small Step for Molecular Computing

2006-08-04T09:48:00.000-05:00

Scientists at the IBM Zurich Research Laboratory have demonstrated how a single molecule can be switched between two distinct conductive states, which allows it to store data.

As published in SMALL, these experiments show that certain types of molecules reveal intrinsic molecular functionalities that are comparable to devices used in today's semiconductor technology. This finding is yet another promising result to emerge from IBM's research labs in their efforts to explore and develop novel technologies for the post-CMOS era.

In the August 4 issue of SMALL, IBM researchers Heike Riel and Emanuel Lörtscher report on a single-molecule switch and memory element. Using a sophisticated mechanical method, they were able to establish electrical contact with an individual molecule to demonstrate reversible and controllable switching between two distinct conductive states. This investigation is part of their work to explore and characterize molecules to become possible building blocks for future memory and logic applications. With dimensions of a single molecule on the order of one nanometer (one millionth of a millimeter), molecular electronics redefines the ultimate limit of miniaturization far beyond that of today's silicon-based technology.

The results show that these molecules exhibit properties that can be utilized to perform the same logic operations as used in today's information technology. Namely, by applying voltage pulses to the molecule, it can be controllably switched between two distinct "on" and "off" states. These correspond to the "0" and "1" states on which data storage is based. Moreover, both conductive states are stable and enable non-destructive read-out of the bit state—a prerequisite for nonvolatile memory operation—which the IBM researchers demonstrated by performing repeated write-read-erase-read cycles. With this single-molecule memory element, Riel and Lörtscher have documented more than 500 switching cycles and switching times in the microsecond range.

Crucial for investigating the inherent properties of molecules is the ability to deal with them individually. To do this, Riel and Lörtscher extended a method called the mechanically controllable break-junction (MCBJ). With this technique, a metallic bridge on an insulating substrate is carefully stretched by mechanical bending. Ultimately the bridge breaks, creating two separate electrodes that possess atomic-sized tips. The gap between the electrodes can be controlled with picometer (one thousandth of a nanometer) accuracy due to the very high transmission ratio of the bending mechanism. In a next step, a solution of the organic molecules is deposited on top of the electrodes. As the junction closes, a molecule capable of chemically bonding to both metallic electrodes can bridge the gap. In this way, an individual molecule is "caught" between the electrodes, and measurements can be performed.

The molecules investigated are specially designed organic molecules measuring only about 1.5 nanometers in length, approximately one hundredth of a state-of-the-art CMOS element. The molecule was designed and synthesized by Professor James M. Tour and co-workers of Rice University, Houston, USA.

"The main advantage of exploiting transport capabilities at the molecular scale is that the fundamental building blocks are much smaller than today's CMOS elements," explains lead researcher Heike Riel of the IBM Zurich Lab. "Furthermore, chemical synthesis produces completely identical molecules, which, in principle, are building blocks with no variability. This allows us to avoid a known problem that CMOS devices face as they are scaled to ever smaller dimensions. In addition, we hope to discover possibly novel, yet unknown properties that silicon and related materials do not have."

Promising nanotechnologies for the post-CMOS era

The single-molecule switch is the most recent success in a series of groundbreaking results achieved by IBM researchers in their efforts to explore and develop novel technologies that will surpass conventional CMOS technology. Miniaturizing the basic building blocks of microprocessors, thereby achieving more functionality on the same area, is also referred to as scaling, which is the main principle driving the semiconductor industry. Known as "Moore's Law", which states that the transistor density of semiconductor chips will double roughly every 18 months, this principle has governed the chip industry for the past 40 years. The result has been the most dramatic and unequaled increase in performance ever known.

However, CMOS technology will reach its ultimate limits in 10 to 15 years. As chip structures, which currently have dimensions of about 40 nm, continue to shrink below the 20 nm mark, ever more complex challenges arise and scaling appears not to be economically feasible any more. And below 10 nm, the fundamental physical limits of CMOS technology will be reached. Therefore, novel concepts are needed.

In order to enhance computing performance beyond that of CMOS, fundamentally different device concepts and architectures are being investigated at IBM. Among the technologies closest to realization are carbon nanotubes and semiconducting nanowires. Further research is also being conducted in the field of spintronics. By introducing this single-molecule memory element, IBM researchers have demonstrated that molecular electronics is also a valid post-CMOS candidate and made another big leap toward reaching the ultimate limits in miniaturization.

The scientific paper entitled "Reversible and Controllable Switching of a Single-Molecule Junction" by E. Lörtscher, J. W. Ciszek, J. Tour, and H. Riel, was published in Small, Volume 2, Issue 8-9 , pp. 973-977 (04 August 2006).

Source: IBM

More Comes From Knowing More

2006-08-02T11:31:00.000-05:00

Nick Schulz reviews one of the books on my summer reading list in today's Wall Street Journal. For those folks that don't have the time to read Warsh's book, I would recommend reading Mr. Schulz's review.

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More Comes From Knowing More
By NICK SCHULZ
August 2, 2006; Page D10

For a long time, economists believed that much of their job was to analyze a world of scarcity, the grim business of harvesting limited resources and distributing too few goods to too many people. And then there was the matter of decreasing returns to additional investment. Such returns were once "a familiar topic in economics," David Warsh tells us in "Knowledge and the Wealth of Nations." After all, "even the richest coal vein plays out."

Decreasing returns and scarcity animated the doomster wing of economics, of which Thomas Malthus was the principal architect. It was he who lamented overpopulation so famously, even ahead of Paul Ehrlich, and predicted bouts of "periodical misery" to adjust human numbers downward, putting them, at least now and then, in equilibrium with the world's limited riches.

Mr. Warsh, a former economics reporter for the Boston Globe, does not intend to mock earlier theories of political economy but to tell the story of their gradual refinement over time -- especially as "one system of thought replaces another." He notes, for instance, that anti-Malthusian concepts central to the understanding of modern economic growth -- abundance and the notion of "increasing returns" -- came to compete with the scarcity school of thought. It is axiomatic to us, not least because of technology's marvelous effects, that "the same amount of work or sacrifice produces an increasing quantity of goods." But it was an idea that required special attention when it was first considered plausible.

The worry at first was that, in theory, increasing returns -- where they proved possible -- would create monopoly power. In Adam Smith's famous pin factory, division of labor and specialization yielded increasing returns. But why wouldn't the pin factory, or any other enterprise generating increasing returns, increase itself (so to speak) at the expense of every other enterprise of lesser aptitude and slower growth? Monopoly power would then undermine the competition that, in Smith's view, put markets on their virtuous path.

It remained a worry -- and a conceptual conundrum -- for a long time to come. Fifty years ago, the economist George Stigler framed the problem this way: "Either the division of labor is limited by the extent of the market, and, characteristically, industries are monopolized; or, industries are characteristically competitive." If they are indeed characteristically competitive, then the monopoly-threatening aspect of Adam Smith's view is, as Mr. Stigler noted, either "false or of little significance." Like many modern economists, he sided with the reliably competitive nature of industrial growth, and the fate of modern economies has borne him out.
DETAILS

[The Wealth of Nations]
KNOWLEDGE AND THE WEALTH OF NATIONS
By David Warsh
(W.W. Norton & Co., 426 pages, $27.95)

But what about growth itself -- especially the sustained economic growth that we now take for granted (however sluggish it may be at times)? At an informal academic conference in Buffalo, N.Y., in 1988 -- assembled by Jack Kemp, then a member of the House -- the Stanford economist Paul Romer presented a paper that ultimately turned the economic thinking on its ear. In Mr. Romer's work, as Mr. Warsh puts it, "the concept of intellectual property was, if not exactly 'discovered,' then formally characterized for the first time in the context of growth." Mr. Romer saw that knowledge was "both an input and output of production."

Thus instead of land, labor and capital -- the traditional inputs of economic theory -- it was "people, ideas and things" that mattered, driving technological change and entrepreneurial creativity. "No longer were the advantages of technical superiority to be understood as a case of 'market failure,'" Mr. Warsh writes. "They were part of the rules of the game." Such superiority was by its nature temporary -- i.e., nonmonopolistic. New knowledge constantly trumped old, and the law (rightly) gave ideas only limited property-protection.

More and more, economists came to see that it was knowledge that made the difference in modern societies -- e.g., in software, drugs, industrial processes, biotechnology and other parts of the economy where the upfront costs were large, the payoffs enormous and the benefits widespread. Economists inevitably turned their attention to the institutions or invisible structures -- constitutions, customs, property rights, cultural sentiments (like trust) -- that help to generate knowledge and sustain its effects.

In his admirably compelling account of economic thinking over time -- from Adam Smith to the present day -- Mr. Warsh shows a certain partiality to abstract mathematical theory. He might have given more credit to the thinkers such as Friedrich Hayek, the great philosopher of freedom and opponent of central planning; or to historians such as Joel Mokyr, who has chronicled the effects (as the subtitle of one of his books has it) of "technological creativity and economic progress"; or to popularizers such as George Gilder, who has documented (and celebrated) the role of knowledge in economic growth, especially in our computer age.

Mr. Warsh does, though, quote the great British economist Alfred Marshall, who observed as early as 1890 that "knowledge is our most powerful engine of production; it enables us to subdue nature and force her to satisfy our wants." More than a century later, knowledge is still the true wealth of nations.

Mr. Schulz is editor of TCS Daily.

Powered by Nanotechnology

2006-07-31T09:07:00.000-05:00

Here's a quote for all those folks out there worried about global warming and energy shortages:

"None of the global warming discussions mention the world 'nanotechnology.' Yet nanotechnology will eliminate the need for fossil fuels within 20 years."

Ray Kurzweil
(quoted in a recent Washington Post online discussion)

HP develops grain-size wireless chip

2006-07-17T12:11:00.000-05:00

EE Times reporter Spencer Chin on the latest technology breakthrough from researchers at Hewlett-Packard Co - a wireless data chip with a built in antenna the size of a grain of rice.

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MANHASSET, N.Y. — Hewlett-Packard Co. has developed a miniature wireless data chip the company said could broaden access to digital content in the physical world.

Measuring 2 to 4 millimeters—the size of a grain of rice—and could be attached or embedded in almost any object to make available information and content now found mostly on Web devices.

The chip, developed by the Memory Spot research team at HP Labs, is a CMOS memory device with a built-in antenna. According to the company, the chip could be embedded in a sheet of paper or attached to surfaces. It could eventually be available in a booklet as self-adhesive dots.

Potential applications include storing medical records on a hospital patient's wristband, providing audio-visual supplements to postcards and photos, preventing counterfeiting in the pharmaceutical industry, adding security to identity cards and passports and supplying additional information for printed documents.

"The Memory Spot chip frees digital content from the electronic world of the PC and the Internet and arranges it all around us in our physical world," Ed McDonnell, Memory Spot project manager, HP Labs, said in a statement.

The chip has a 10 megabits-per-second data transfer rate—10 times faster than Bluetooth wireless technology and comparable to Wi-Fi speeds— with a storage capacity ranging from 256 kilobits to 4 megabits in working prototypes. It could store a very short video clip, several images or dozens of pages of text. Future versions could have larger capacities.

The chip incorporates a built-in antenna and is self-contained, with no need for a battery or external electronics. It receives power through inductive coupling from a special read-write device, which can then extract content from the memory on the chip. Inductive coupling is the transfer of energy from one circuit component to another through a shared electromagnetic field. A change in current flow through one device induces current flow in the other device.

HP researchers envision the read-write device being incorporated into a cell phone, PDA, camera, printer or other implement. To access information, the read-write device is positioned closely over the chip, which is then powered so that the stored data is transferred instantly to the display of the phone, camera or PDA or printed out by the printer.

"We are actively exploring a range of exciting new applications for Memory Spot chips and believe the technology could have a significant impact on our consumer businesses, from printing to imaging, as well as providing solutions in a number of vertical markets," Howard Taub, HP vice president and associate director, HP Labs, said in a statement.

The Wit and Wisdom of Charlie Munger

2006-07-14T13:44:00.000-05:00

Here's a nice little piece by Eric Savitz on one of my investing heroes, Charlie Munger. Notice what CM has to say about corporate executive compensation, the accounting profession and hedge funds. Ouch!

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The Wit and Wisdom of Charlie Munger
Posted by Eric Savitz

Between blog posts this morning, I ran over to Stanford to listen to Berkshire Hathaway (BRKA) Vice Chairman Charlie Munger speak at Stanford Law School’s Directors’ College, an annual event designed to educate corporate directors. Still sharp as a tack at age 82, Munger held court under a large tent just outside the Law School, seated in a large over-stuffed chair on a raised platform. With notes in hand, he proceeded to dispense wisdom on what’s wrong with corporate governance today - CEO’s are overpaid, accountants have failed us, and the hogs are overeating the hogwash. Here are a few tidbits from his talk, which would have made a fine addition to Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger.

Munger started by saying he would speak in the spirit of one of his law professors, who said “Let me know what your problem is, and I will try to make it more difficult for you.” He framed his talk as a series of questions and answers – he supplied both. For starters, he asked how the influence of directors at large public companies has changed since the 1950s and 1960s. To illustrate how things have changed, he told a story of a man who was asked to be a director of the telephone company, who related that after agreeing to take the seat, “it was the last thing they ever asked me.”

Despite the joke, Munger made the case that the old corporate director system, with “WASP-y white males in a club like atmosphere” actually worked better than what he have now. “The old culture had come out of poverty, out of English customs,” he said. “People did not have the vast sense of entitlement, that they were entitled to be rich. People were damned glad to have a decent job where they might advance.” And he says, it was a time when there was “practically no trading of publicly owned securities, when trading “rarely got to a million shares a day.”

What has happened since? “The system has deteriorated, and the reputation of the system has deteriorated even more than the system,” he said, noting that “a lot of people are mad at corporate governance,” including the kind of white-bread Republicans who should be the system’s biggest supporters. “When even they are mad at Corporate America,” Munger said, “Corporate America has a serious problem.”

Munger blames the excesses of corporate behavior and compensation on several factors, including the human tendency to be self-serving. But he also notes that “old restraints lessened, and new temptations presented.” So no one should really be surprised that excesses emerged. Or as Munger put it: “Expect hogs to eat a lot more in the presence of a lot of hog wash.”

Munger noted that enormous prosperity brought with it a lot of opportunity for “wretched excess.” He blames many of the problems on the failures of the accounting profession. “They really failed the surrounding civilization,” he said. “People started looking at accounting the way they look at the Internal Revenue Service, as a system to be gamed. This was a major failure, a combination of the failure of accounting, the stupidity of regulators and the natural incentives for greed.” And the level of outrage has risen, he said, to the point where it has finally reached “the porch where the country club Republicans sit.”

Munger made a plea to the directors to change the way CEOs are compensated. “CEOs have a duty…to dampen envy and resentment by behaving way more nobly than other people, and way more generously. People should take way less than they are worthy when they are favored by life. People are willing to pay tens of millions of dollars to be U.S. senators. Most of these people would pay to be CEOs….There is a lot to be said for backing off and taking less than their worth.”

He specifically criticized the $400 million compensation package for recently retired Exxon (XOM) CEO Lee Raymond. While he said Exxon might be “the best managed big company that has ever existed,” he says it “damn stupid” to walk away with a “$400 million bonanza.” Said Munger: “It would have been better behavior to take less. ”

One other interesting topic Munger discussed was the concentration of power in the hands of big company CEOs. “We want very good leaders who have a lot of power,” he said, “and we want to delegate a lot of power to those leaders….It’s crazy not to distribute power to people with the most capacity and diligence…Every time I see an opportunity to choose somebody, the second best guy is just awful compared to the guy we hire. Usually the decision is a no-brainer. We have to give power to the people who can wield it efficiently in serious game of survival.”

But he had a caveat to offer. Munger says there will be times in the course of running a company that you have to offend some people to get the job done, but he says you should try “not to offend people needlessly And corporate compensation in America is offending a lot of people needlessly.” One ironic example he offers is the idea that CEOs ought to pay more for using corporate aircraft. “Warren doesn’t like when I talk about corporate aircraft,” referring to the Berkshire ownership in the corporate jet leasing company NetJets, “but there is a lot to be said for charging CEOs more for using the corporate aircraft. There is no reason that we can’t all pay a little more.”

Finally he had some smart answers to questions from the audience.
# On the role played by lawyers versus accountants in recent corporate scandals: “Accounting incomes were reduced by miscreancy,” he notes, but “the net amount paid by lawyers for lawyerly miscreancy is close to zippo. In this case, the goddess of justice was blind.”
# On Berkshire Hathaway Chairman Warren Buffett’s decision to donate most of his fortune to the Bill and Melinda Gates foundation: “Is anyone really surprised that Warren, who is the ultimate embodiment of concentrated decision-making power, picked somebody who he thinks is like him in many important ways? It was a noble and sensible decision.”
# On reforming the SEC: “The SEC does way more good than harm – the last thing I would do is get rid of the SEC…if accounting were thoroughly fixed, a lot of other sins would go away. We’re paying a huge price for deterioration of accounting.”
# On the interaction between government and business: “We’re here at an institution [Stanford] founded by a man [Leland Stanford] who bribed Congress to get his railroad franchises…I’m not constantly bewailing the failures of government – it’s not our main problem at all.”
# On the influence of hedge funds: You ask a heard hedge fund operator why the charge 2 and 20, and they say because I can’t get 3 and 30, he says. “[For hedge funds], it’s not about thinking what is fair and right – but merely how much can I get. It’s a ghastly culture…there will be terrible scandal in due course”

GE Gets Small

2006-07-14T10:23:00.000-05:00

Another timely reminder of why nanotechnology should be on investor's radar screens.
srw

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General Electric Team Shines Light On Nanotechnology's Huge Potential

BY J. BONASIA

INVESTOR'S BUSINESS DAILY

Posted 7/12/2006

One of the biggest of the big, General Electric, (GE) is making a big bet on the science of the remarkably small — nanotechnology.

Margaret Blohm manages 50 people in GE's advanced technology program for nanotech. The corporate research center serves all of GE's business units, with a special focus on high-risk, long-term research.

GE has a long history of being on the leading edge of technology, says Blohm, who joined the company in 1987.

"Pretty much our whole business is differentiated by materials, either to make better scanners, appliances or aircraft engines," she said. "There's no way to lead the way without the best technology."

One nanometer equals one billionth of a meter. Matter and energy display unusual properties at that super tiny scale. Scientists are exploiting nanotech to create new materials that are much lighter yet stronger than standard metals or ceramics.

Nanotech already is used in such consumer products as tennis rackets, sunscreens and auto body parts. Manufacturers, chemical makers, agribusinesses and the military are pursuing a slew of other nanotech applications.

Health care firms say nanotech research could unlock new drug therapies and cancer treatments. At the same time, inventors — and investors — hope to create clean nanotech fuel cells to curtail the use of fossil fuel.

Blohm holds more than 10 U.S. patents, with a specialty in the chemistry of polymers. She recently spoke with IBD about GE's ambitions in nanotech.

IBD: How do you explain nanotechnology to nonscientists?

Blohm: Nanotech involves anything at the length scale of a billionth of a meter. The technology is based on that size because you see a lot of surprising behavior at that length scale.

We have to re-examine the laws of physics to understand what's going on. When scientists find something so unexpected, it's like a gold mine because of the opportunities to do new things that were never imagined before.

IBD: Why is GE so interested in nanotech?

Blohm: We view nano as the ultimate materials science. It allows us to do new things we couldn't have done before. We know that nanotech is going to be disruptive across all parts of our business, so we have to be in nano.

IBD: What are your top research priorities?

Blohm: The biggest areas for us are in health care and energy. In terms of health care, we have a whole spectrum of work around diagnostics and hardware. We're trying to build better instruments for CT scanners and MRI equipment.

In chemistry, we're in what we call the wetware diagnostic area. This involves imaging agents that are used in conjunction with that equipment. Diagnostic imaging agents look at nanoparticles that are less than 10 nanometers in size.

The goal is to make diagnostic imaging that can demonstrate a disease at an earlier state. We might be able to look at a tumor earlier to determine if it is malignant. We want to improve the ability and speed of disease diagnosis, without doing invasive surgery.

IBD: Have you made any breakthroughs?

Blohm: Yes. We do lots of in-vitro studies to look at what types of particles work in imaging. We want to see if they're compatible with different types of disease cells.

One day this guy came into my lab with a picture showing the uptake of our nano particles into the diseased cells, and not anywhere else. That is, the particles went into diseased cells specifically, not the healthy ones. This could help doctors spot problems much earlier.

On that day we immediately knew we could make this work, and it was very exciting. It's still research with plenty of ups and downs. But it's great when you can really make a difference in people's lives.

IBD: What are the most promising areas in nanotech for clean energy?

Blohm: We're looking at making our equipment run more efficiently, with better lightweight materials. We're also looking at alternative energy, mostly around solar power, but also wind power. We're using nanotech to improve solar power. With nano structures in photovoltaic cells, we can improve the efficiency and lower the cost.

IBD: How might nanotech be used for materials science — say, to make lighter GE turbines or stronger jet engine parts?

Blohm: We're re-engineering common bulk materials such as metal alloys. Steel, for instance, is a natural nano composite. When its particles cool, they give it strength, but they're not thoroughly stable.

That's why we want to create new nano structures for alloys. This will allow for improved strength at higher temperatures. It means you can run an engine hotter and still make it stronger and lighter.

IBD: Is GE applying nanotech for any security or military purposes?

Blohm: We're doing some work in sensing, but it's relatively small compared to our efforts in health care and energy.

We're doing detection for biological and chemical agents, with a variety of nanomaterials and particles. Nano sensing is enabled by having such a small size with a high surface area. There's a lot of nanotech work being done around the world now on bio sensing for germ warfare.

IBD: Should we be concerned about the relative lack of regulatory oversight — or even public awareness — as nanotech spreads into many consumer and industrial goods?

Blohm: We're doing all that we can to help the EPA (Environmental Protection Agency) and other government agencies to effectively and appropriately regulate the field to ensure the safe use of nanotech.

One point to make, though, is that nanotech is not new. We've been using nano safely for decades. Car tires have nanoparticles of carbon that make them appear black. GE has also used nanotech for several products in hard coatings, but we just never called it nano.

Of course, now we have more different materials coming out at a much greater volume. So we need to continue safe practices and extend them and be aware of the many risks.

Reprogramming Biology

2006-07-13T08:48:00.000-05:00

Here's an interesting piece by futurist Ray Kurzweil on how tinkering with our genetic programs will extend longevity.
Enjoy!

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Biology is now in the early stages of an historic transition to an information science, while also gaining the tools to reprogram the ancient information systems of life. Few of us go more than a few months without changing the software programs we use in our electronic devices, yet the 23,000 software programs inside our cells called genes have not changed appreciably in thousands of years (although recent research suggests that a few have changed as recently as a few hundred years ago).

Medicine used to be hit or miss. We would find something through "drug discovery" that performed an apparently useful function such as lowering blood pressure, but lacking effective models of how these interventions worked, many of these drugs turned out to be crude tools with unanticipated side effects. We are now beginning to understand biology as a set of information processes, and we're developing realistic models and simulations of how the processes involved in disease and aging progress. Moreover, we are developing the tools to reprogram them.

RNA interference (RNAi), which science learned about only in the past several years, can turn specific genes off by blocking the messenger RNA those genes produce. Because viral diseases, cancer and many other types of illness depend on gene expression at some crucial point, RNAi heralds a breakthrough technology. One example of a gene that we would like to turn off is the fat insulin receptor gene, which tells fat cells to hold on to every calorie. When that gene was blocked in the fat cells of mice during a study at the Joslin Diabetes Center, those mice ate a lot but remained thin and healthy. They lived almost 20 percent longer, obtaining the benefit of caloric restriction without the food restriction.1

Innovative means of adding beneficial genes to patients' bodies are starting to overcome the hurdles for gene therapy, which have often involved difficulties with placing the modified genetic information precisely within the genome. United Therapeutics, a company I advise, has developed a technique that modifies cells in vitro, verifies that the new genetic information has been properly inserted, replicates the modified cell millions of times and then injects the modified cells back into the bloodstream, where they embed themselves into the right tissues. In animals, this method has cured pulmonary hypertension, a fatal disease; it is now entering human trials.

We also have new means of activating and deactivating enzymes, the workhorses of biology. Pfizer's compound Torcetrapib, for example, inhibits the enzyme that destroys high-density lipoprotein (HDL), the good cholesterol, and thereby allows HDL levels to soar. Phase II FDA trials showed that the drug was effective in halting atherosclerosis, the cause of most heart attacks. Pfizer is spending a record $1 billion on phase III trials.

Another important line of attack is to regrow our own cells, tissues and even whole organs, and to introduce them into our bodies without surgery. One major benefit of this "therapeutic cloning" technique will be the ability to create tissues and organs from versions of our own cells that have been made "younger" by correcting DNA errors and senescence-related changes (such as the shrinkage of the telomeres at the ends of chromosomes). Such capacities constitute the emerging field of rejuvenation medicine. For example, we will be able to create new heart cells from your skin-derived stem cells and introduce them into your system through the bloodstream. Over time, the new cells will replace your old ones, resulting in a rejuvenated heart that has your own (corrected) DNA.

Rational drug design has been around for 20 years, but it is only recently that we have had the requisite genetic data, information models and reprogramming tools to accomplish it. While almost all drugs on the market today were created by way of traditional drug discovery, most new drug development is applying these increasingly intelligent targeted therapies.

Implants being developed at the University of Rochester and Boston-based StemCapture, Inc., imitate the mechanisms used by stem cells in trolling the vascular endothelium for damage signals, which indicate a need for repair. Molecules key to this trolling mechanism are coated onto the device to capture stem cells out of the bloodstream. DNA or RNAi molecules can also be sprinkled on this molecular coating to correct genetic errors and senescence-related changes in the captured stem cells.2

Nanotechnology can go beyond the limitations of biology. Harvard University and Massachusetts Institute of Technology researchers have designed nanoparticles with aptamers, genetic chunks that recognize the surface molecules on cancer cells. These nanoparticles can latch onto a cancer cell, burrow inside and release toxins to destroy it.3

Another scientist cured type I diabetes in rats with a nanoengineered device containing seven-nanometer pores that controllably release insulin while blocking antibodies. There are hundreds of other such examples.

Our ability to understand and even reprogram the brain, although in early stages, is also accelerating. We are doubling the spatial resolution of voxels (3D volumes) in brain scanning each year. The latest generation of in-vivo scanners can image individual interneuronal connections firing in real time. Effective simulations of about two dozen brain regions have been demonstrated, and IBM has begun an ambitious effort to simulate a substantial portion of the cerebral cortex at a detailed level.4

Rising numbers of artificial neural implants can replace diseased tissue, such as an FDA- approved implant for Parkinson's patients, the latest generation of which allows the patient to download software updates from outside the body.5,6

Now that biology is becoming an information technology, it is subject to what I call the "law of accelerating returns." Information technologies, including biological ones, double their price performance and capacity in less than a year. Sequencing DNA, for example, has come down in price by half annually, from $10 per base pair in 1990 to under a penny today.7 The amount of genetic data we have sequenced has more than doubled every year. It took us 15 years to sequence HIV, but we sequenced the SARS virus in only 31 days. This rate of doubling means that we will increase the capability of these technologies by a factor of 1,000 in less than a decade and by a billion in 25 years.

Human life expectancy was only 37 years in 1800.8 Such technologies as sanitation, antibiotics, and other medical advances have more than doubled it in 200 years. Our ability to reprogram the information processes of biology will dramatically increase it again, but this progression will be much faster because of the inherent acceleration of information technology. I expect that within 15 years, we'll be adding more than a year each year to remaining life expectancy. So my advice is: take care of yourself the old- fashioned way for a while longer and you may get to experience the remarkable century ahead.

1Flier SN, Kulkarni RN & Kahn CR. 2001. Proc. Nat. Acad. Sci. USA., 98:7475-7480.

2King, M.R., and Hammer, D.A. 2001. Multiparticle Adhesive Dynamics. Interactions between stably rolling cells. Biophys. J. 81:799-813.

3Farokhzad, O.C. et al. 2006. Targeted nanoparticle-aptamer bioconjugates for cancer chemotherapy in vivo. Proc. Nat. Acad. Sci. 103: 6315-6320 http://www.pnas.org/cgi/content/abstract/103/16/6315.

4Graham-Rowe, D. Mission to build a simulated brain begins. 2005. NewScientist.com News Service. http://www.newscientist.com/article.ns?id=dn7470.

5Berger TW, et at. 2005. Restoring lost cognitive function. IEEE Eng Med Biol Mag. 24(5):30-44. http://cogsci.ucsd.edu/~desa/200/2005_09_EMBS.pdf.

6Abbott, A. 2002. Brain Implants Show Promise Against Obsessive Disorder. Nature. 419: 658.

7Carlson, R. The Pace and Proliferation of Biological Technologies. 2003. Biosecurity and Bioterrorism: Biodefense Strategy, Practice, and Science Volume 1 Number 3. http://www.kurzweilai.net/meme/frame.html?main=/articles/art0614.html.

7Oeppen, J and Vaupel, J.W. 2002. Broken Limits to Life Expectancy. Science 296.5570,1029-3.

The Long Tail Defined

2006-07-12T15:37:00.000-05:00

Here is a great defintion of what the Long Tail is according to author Chris Anderson:

"A Long Tail is just culture unfiltered by economic scarcity."

indeed!

Of head-butts and terabytes

2006-07-12T15:34:00.000-05:00

Here's a cool piece on trends in storage from my buddy Kevin Maney, who covers technology for USA Today. Enjoy!

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So you're on an airliner over Butte, Mont., which, without the "e" would be Butt, which in turn suddenly makes you think of Zinedine Zidane's World Cup head-butt and wonder whether head-butts are common in soccer because maybe soccer players don't use their hands even when fighting.
You'd like to search the Internet to find out. Except there's no Wi-Fi on your domestic flight and there's not likely to be airborne Wi-Fi in the near future even though JetBlue says it's going to try. You just have to go on wondering about soccer head-butts, leaving a maddening hole in your life.

How to avoid this kind of situation in coming years? Well, you probably will be able to download the entire Internet to a laptop before you get on a plane.

It seems preposterous. It sounds like saying you might eat a refrigerator full of food before a trip so you don't have to stop at restaurants for a couple of days.

But this week, Freescale introduced the first commercial memory chip based on a new technology called magnetic random access memory, or MRAM. It's a big step toward putting unimaginable amounts of data on something smaller than an Advil tablet.

Storage capacity is improving at a phenomenal 60% to 70% every year, and other amazing new technologies, such as holographic storage, will bring yet greater leaps in the next decade.

As a result, entrepreneurs are thinking about how they might use almost limitless storage to solve real-world problems. And this is how I came to be sitting across from Rakesh Mathur as he suggested that we could download the whole Internet and then search it — instead of searching the Internet and then downloading what we find. He is launching a company, Webaroo, to eventually help people do that.

Mathur, who in the 1990s co-founded recommendation-engine Junglee and then sold it to Amazon.com, had gone to Alaska to photograph the aurora borealis. He was in his car, freezing, bored, miles from the nearest Wi-Fi, and wishing he had the Internet.

He thought about the trends in storage — the kind of thing a tech entrepreneur does while waiting in a car near the Arctic Circle. IBM made the first commercial hard drive in 1956 — 50 disks, each 24 inches wide, that held a total of 5 megabytes. By 1980, one 5.25-inch disk held 5 megabytes. In 1991, a 2.5-inch disk held 100 megabytes.

Fast-forward to this year, and Seagate introduced a hard drive that holds 750 gigabytes and costs about $500. No technology in history has seen that kind of price-performance improvement in so short a time.

And the pace is picking up. MRAM inventor Stuart Parkin of IBM Research once told me that by early next decade, an MRAM-based iPod might hold 10,000 movies instead of 10,000 songs. In June, Israeli start-up Matteris unveiled a 5.25-inch storage disk with a holographic coating that can hold a terabyte of data. The entire Library of Congress is about 20 terabytes. You could put it all on 20 disks that could fit in a shoebox.

Mathur told me that he was thinking about these trends, and about The Hitchhiker's Guide to the Galaxy, author Douglas Adams' fictional reference device that holds all the universe's knowledge and does not rely on searching the Internet because Adams never imagined Wi-Fi in space. Why, Mathur thought, couldn't laptops or Treos work that way?

"We could use storage and memory to solve the problem of connectivity," he says.

Now, nobody knows how big the Web is — maybe 1,000 terabytes, which is a petabyte. No device will be able to hold that much for a long time, and by then, the Web will be bigger. But Mathur designed Webaroo to grab and store the most useful slices of the Web.

As storage increases, the slices can get bigger. You might never store all of the Web but enough to almost always find what you want. If you search Google for "head-butt red card," you get 211,000 results. Pretty much anything you'd need to know is in the first 20.

A service like Webaroo is only a subset of what the storage boom means to everyday life. We've already seen some really cool benefits, such as the iPod and TiVo. Fifteen years ago, nobody would've imagined that we'd store all our music and hours of video on hard disks and memory chips.

Technologists such as Gordon Bell of Microsoft Research believe we'll use storage gadgets to record video and audio of every moment of our lives. Why would you want to? Most people never even look at most of the digital photos they take, much less review video of all their waking hours. (And then would you have video of you reviewing the video? That's weird.)

One possibility is you'd use that information for personal data mining. If you get hives, you might have software sort your personal life file to look for patterns that suggest what food or activity seems to bring the hives on.

Then again, imagine the privacy issues if someone hacks your personal-life recorder. It would make the incident with Paris Hilton's T-Mobile Sidekick seem quaint.

But, who knows. The trends in storage are so mind-blowing, any predictions of how it will affect life will probably be as off-base as the 1970s idea that home computers would be used by housewives to store recipes.

Mathur's idea, though, sounds plausible. And if you could store the Web and look up head-butts while in the air over Montana, you'd find that two Roma players were sent off for head-butting in a famous 1960s soccer game in Europe. And Ariel Ortega of Argentina got thrown out for head-butting the Dutch goalie in a 1998 World Cup game. So this does seem to be a rather nasty habit of soccer players.

The Economics of Abundance

2006-07-06T12:23:00.000-05:00

Started my summer reading by cracking open "The Long Tail." Came across this passage, which resonated strongly with me:

"Hit-driven economics... is a creation of an age in which there just wasn't enough room to carry everything for everybody: not enough shelf space for all the CDs, DVDs, and video games produced; not enough screens to show all the available movies; not enough channels to broadcast all the TV programs; not enough radio waves to pay all the music created; and nowhere near enough hours in the day to squeeze everything through any of these slots.

This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. The differences are profound."

Summer Reading

2006-06-29T13:46:00.000-05:00

Here's a list of books I'm planning to read this summer. Each book is hyperlinked to Amazon.com if you are interested in checking any of them out.

The Long Tail

The God Effect

The Origins of Wealth

Revolutionary Wealth

Knowledge and The Wealth of Nations

Confessions of a Philosopher

Have a great summer!

A Road Map to Smart Money

2006-06-14T10:14:00.000-05:00

Burton Malkiel's review of Michael Mauboussin's book today in the Wall Street Journal (page D12) is bang on - a road map to smart money, indeed!!

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A Road Map to Smart Money
By BURTON G. MALKIEL
June 14, 2006; Page D12

In a world in which today's investment books provide magic formulas for success or simple nostrums ("buy best in breed"), Michael Mauboussin's "More Than You Know" is a refreshingly intelligent antidote. This collection of essays, written when the author was the chief U.S. investment strategist at Crédit Suisse (he is currently chief investment strategist at Legg Mason), portrays the stock market as a complex adaptive system that does not lend itself to easy solutions or simple rules.

The thesis of the book is that an understanding of many disciplines -- including physics, psychology, biology and behavioral economics -- can shed light on the movement of stock prices and perhaps even protect investors from systematic error. The goal is to make the reader a better investor -- and, even more broadly, a better thinker and decision-maker.
[More Than You Know]
How to invest? Consider fruit flies, Babe Ruth, Tupperware and the race track.

Mr. Mauboussin is especially good at explaining difficult concepts and showing the links between various fields of activity and the practical world of investing. His explanation of the statistical logic of "expected value" is a case in point. To describe the distinction between the frequency of correct decisions (am I correct more than 50% of the time?) and the magnitude of the payoffs when you have made a correct decision, he makes analogies to baseball and race-track betting. "Ruth struck out a lot," he notes, "but he was one of baseball's greatest hitters." At the race track, he advises not to pick the horse with the greatest probability of winning but rather the horse offering odds that exceed its probability of winning. In the stock market, he advises investors not simply to buy the stocks promising the greatest growth (of cash flow) but rather to compare defensible growth estimates with the growth implicit in the valuation of the shares and then buy those stocks where future growth is not yet incorporated into the stock price.

Delightful examples follow from a variety of disciplines. The short period over which the average company can sustain a competitive advantage is likened to the lifespan of a fruit fly. The fatal risks of imitation by money managers are illustrated by ants who tend to follow one another in an endless circle, marching on and on until death. Mr. Mauboussin explains how Tupperware parties, where people buy lots more stuff than they need, provide important lessons for stock-market investors; how Tiger Woods's decision to change his golf swing even when he was winning reflects the "fitness landscapes" concept in evolutionary biology; and why gambling legend Puggy Pearson can help you be a better investor ("Ain't only three things to gambling: Knowin' the 60-40 end of a proposition, money management, and knowin' yourself").

"Psychology," Mr. Mauboussin writes, "may be the most underappreciated, undertaught and undercontemplated facet of investing." But he also recognizes that the misuse of behavioral finance -- investing based on predicting herd behavior -- "can lead to bad thinking." While many individuals in the stock market may be irrational, the market itself can be remarkably efficient. Certainly markets are prone to periods of excess, but they are the exception, not the rule.

MORE THAN YOU KNOW
By Michael J. Mauboussin
(Columbia University Press, 268 pages, $27.95)

Most of the time there is a wisdom in collective decision making. Only rarely does the crowd go mad in herds. The stock market, he says, is very adept in its "information-aggregation ability." Recognizing how hard it is for individuals to beat the market, Mr. Mauboussin observes that most money managers are turning over their portfolios (switching from stock to stock) at much too high a rate, thereby generating transaction costs and market-impact costs, as well as unnecessary tax burdens. Mr. Mauboussin emphasizes "the value of inactivity," showing that, even before considering taxes, low-turnover mutual funds have outperformed high-turnover funds.

I wish that Mr. Mauboussin had added the evidence that mutual funds with lower expense ratios outperform those with higher expenses. The equity mutual fund is an investment product where you get what you don't pay for. Higher fees do not generate better investment performance. Every extra dollar of management fees is a dollar less in your pocket. If we combine this lesson with Mr. Mauboussin's correct advice to buy low-turnover funds, an even better rule could have been provided for investors. The surest route to top-quartile performance is to buy funds with bottom-quartile turnover and expense ratios.

While there is some disjointedness and overlap in "More Than You Know," Mr. Mauboussin's essays are always highly readable. The book engagingly shows how a multidisciplinary perspective can deepen your sense of how financial markets work. While Mr. Mauboussin's advice is unlikely to make you rich, it could very well help you avoid some common investment errors.

Mr. Malkiel is the author of "A Random Walk Down Wall Street" (eighth edition, Norton 2004) and a professor of economics at Princeton University.

More Than You Know

2006-05-03T09:13:00.000-05:00

My good friend Michael Mauboussin's new book "More Than You Know: Finding Financial Wisdom in Unconventional Places" is out. I highly recommend picking up a copy. It's destined to become an investing classic.

Here's the link to the book on Amazon.com:

http://www.amazon.com/gp/product/0231138709/ref=pd_kar_gw_1/103-7052706-2570229?%5Fencoding=UTF8&v=glance&n=283155

Making Quantum Practical

2006-04-13T09:00:00.000-05:00

Kate Greene writes in the latest issue of MIT Technology Review about researchers who have succeeded in combining quantum signals with classical optical signals in a conventional fiber-optic line.

Coursing through the fiber-optic veins of the Internet are photons of light that carry the fundamental bits of information. Depending on their intensity, these photons represent bits as 1s and 0s. This on-and-off representation of information is part of what physicists call "classical" phenomena.

But photons of light have "quantum" properties as well, which, when exploited, provide more than simply a 1 or 0; these properties allow photons to represent 1s and 0s simultaneously. When information is approached from a quantum perspective, say scientists, encryption can be perfectly secure and enormous amounts of information can be processed at once.

This field of quantum information –- the transmission and processing of data governed by quantum mechanics –- is rapidly moving beyond the lab and into the real world. Increasingly, researchers are conducting experiments within the same commercial fiber that transmits information in the classical way. For the most part, though, the two types of information have not intermingled: quantum information has been sent only over dedicated fiber.

Now researchers at Northwestern University have shown that quantum information, in the form of "entangled photons," can travel over the same fiber as classical signals. Additionally, the researchers have sent the combination signal through 100 kilometers of fiber -- a record distance for entangled photons even without the classical signal.

This marriage of quantum and classical optics shows that traditional optical tools can be used to send quantum encryption keys, based on entangled photons (some other schemes rely on single photons). In the future, this new technique might also enable long-distance networking between quantum computers, says Carl Williams, coordinator of the Quantum Information Program at the National Institute of Standards and Technology in Gaithersburg, MD.

At the heart of the Northwestern experiment are the entangled photons: pairs of photons with interconnected properties. That is, looking at one photon in an entangled pair will reveal what the result of looking at the other photon would be -- no matter how far apart the photons are. Entangled photons can be used in encryption by encoding information about a key in the photons. Then if an eavesdropper intercepts one photon of the entangled pair, the entire transmission is altered, alerting the code makers.

Furthermore, entangled photons used for quantum computing could be split up and shared across a network of many quantum computers. Such photon pairs are "important whether the application is cryptography or anything else," says Prem Kumar, professor of electrical and computer engineering and physics at Northwestern and lead scientist on the project.

The first step in the experiment, then, was for the researchers to create entangled photons. Traditionally, shining laser light into a type of crystal has produced entangled photons. But it's been difficult to use entangled photons made from crystals, because in transferring them into a fiber, you "lose the quality of the entanglement," says Williams.

Instead, Kumar's team created their photon pairs by exploiting a similar, recently developed process that can occur within long lengths of standard fiber. The photons start in fiber and remain in it for the duration of the experiment, retaining their entanglement properties.

The researchers pulsed polarized laser light through 300 meters of coiled fiber. It is this property of polarization (the orientation of the photons) that allows it to become entangled when the pairs of photons are created: if the polarization of one photon is measured, the polarization of the other photon is instantly known. Within the fiber, about one pair of polarization-entangled photons is created every microsecond, Kumar says, and the rate can be increased 100-fold by pulsing the light faster, he adds.

Next, the entangled photons are split apart and each is directed into 50 kilometers of fiber (for a total of 100 kilometers), where they join a classical signal. At the opposite ends of the fibers, the photons are separated from the communication signals, and shoot towards two different photon detectors, built to see one photon at a time. Kumar says he knows he's successfully sent entangled photons when both detectors see certain types of polarized photons at the same time.

There are still challenges to using traditional fiber-optic cable and sending entangled photons 100 kilometers. Even the best quality commercial fiber has very small geometric inconsistencies, Kumar says, which can alter the polarization of the photon pairs slightly, decreasing the quality of entanglement -- and rendering the quantum information useless.

These slight changes in polarization can usually be adjusted for by sending the photons through special polarization devices right before they hit the detector, but it is difficult to know exactly how to adjust these devices to best compensate for the change in polarization. Interestingly, Kumar adds, the classical signal traveling with the quantum signal, as in the experiment, can help. It can track imperfections in the fiber encountered by the entangled photon, and relay this information so the polarization control device can be set to compensate appropriately.

Right now, Kumar's team is working on testing the distance limits of entangled photon transport and determining how many more classical signals they can add to the line and still retrieve the quantum information stored in the entangled photons. Because in real-world fiber optics, multiple signals pass through at once, it would be useful to know how many classical signals can share the fiber with a quantum signal.

According to other scientists working in the field of quantum information, the fact that Kumar's team has combined fiber-generated entangled photons with classical information, and sent the total signal over a record distance in a traditional fiber line is an exciting advance. "Pieces have been shown, but this puts it all together," says Williams, who calls it "a remarkable demonstration."

Jeffrey Shapiro, professor of electrical engineering at MIT, says it is "great work...Prem [Kumar] works both on classical and quantum communication, and is one of the people who's well suited to address both sides."

Ultimately, as quantum information matures, it will become more integrated into traditional fiber technology, says Kumar. "My goal is to make quantum optics applicable," he notes. "Fiber-based quantum optics can piggyback on billions of dollars in optical communications technology. We want to ride that wave."

The researchers pulsed polarized laser light through 300 meters of coiled fiber. It is this property of polarization (the orientation of the photons) that allows it to become entangled when the pairs of photons are created: if the polarization of one photon is measured, the polarization of the other photon is instantly known. Within the fiber, about one pair of polarization-entangled photons is created every microsecond, Kumar says, and the rate can be increased 100-fold by pulsing the light faster, he adds.

Next, the entangled photons are split apart and each is directed into 50 kilometers of fiber (for a total of 100 kilometers), where they join a classical signal. At the opposite ends of the fibers, the photons are separated from the communication signals, and shoot towards two different photon detectors, built to see one photon at a time. Kumar says he knows he's successfully sent entangled photons when both detectors see certain types of polarized photons at the same time.

There are still challenges to using traditional fiber-optic cable and sending entangled photons 100 kilometers. Even the best quality commercial fiber has very small geometric inconsistencies, Kumar says, which can alter the polarization of the photon pairs slightly, decreasing the quality of entanglement -- and rendering the quantum information useless.

These slight changes in polarization can usually be adjusted for by sending the photons through special polarization devices right before they hit the detector, but it is difficult to know exactly how to adjust these devices to best compensate for the change in polarization. Interestingly, Kumar adds, the classical signal traveling with the quantum signal, as in the experiment, can help. It can track imperfections in the fiber encountered by the entangled photon, and relay this information so the polarization control device can be set to compensate appropriately.

Right now, Kumar's team is working on testing the distance limits of entangled photon transport and determining how many more classical signals they can add to the line and still retrieve the quantum information stored in the entangled photons. Because in real-world fiber optics, multiple signals pass through at once, it would be useful to know how many classical signals can share the fiber with a quantum signal.

According to other scientists working in the field of quantum information, the fact that Kumar's team has combined fiber-generated entangled photons with classical information, and sent the total signal over a record distance in a traditional fiber line is an exciting advance. "Pieces have been shown, but this puts it all together," says Williams, who calls it "a remarkable demonstration."

Jeffrey Shapiro, professor of electrical engineering at MIT, says it is "great work...Prem [Kumar] works both on classical and quantum communication, and is one of the people who's well suited to address both sides."

Ultimately, as quantum information matures, it will become more integrated into traditional fiber technology, says Kumar. "My goal is to make quantum optics applicable," he notes. "Fiber-based quantum optics can piggyback on billions of dollars in optical communications technology. We want to ride that wave."

Cure for cancer worth $50 trillion

2006-04-12T10:04:00.000-05:00

Finding a cure for cancer would be worth about $50 trillion, according to a study by University of Chicago Graduate School of Business economists.

The social value of improved health and longevity is the amount in dollars that additional life years or other health improvements are worth to people, the study report said. The value of improved longevity is based on what individuals gain from the enjoyment of consumption and time during an additional year of life, rather than how much they earn.

"Since the benefits of cancer research are large, substantially greater research expenditures would be worthwhile," authors Kevin Murphy and Robert Topel wrote. "A war on cancer that would spend an additional $100 billion on research and treatment may be worthwhile even if it had a one-in-five chance of reducing mortality by just one percent," they said.

During the 20th century, average life expectancy of Americans increased by 30 years, due in large part to medical advances against major diseases, according to the new study titled "The Value of Health and Longevity," to be published in the Journal of Political Economy.

The authors estimate that this increase in life expectancy is worth more than $1.2 million for each American alive today.

From 1970 to 2000, gains in life expectancy added about $3.2 trillion per year to national wealth, the study found.

Increased spending on medical research and cost containment are complementary goals, the report said. "If there is effective cost-containment via cost-effective research spending, then the value of research rises dramatically.

"Ideally, enhanced research funding would be combined with a delivery system that keeps an eye of cost effectiveness.

"The lesson of the last 50 years is the need to address the issue of medical research that will continue to extend longevity without breaking the bank," they said. "A system that better prices medical care may involve people paying a larger percentage of the cost of their own treatment, or enhanced insurance arrangements that allow us to have more effective cost containment."

Light Speed Computers

2006-04-04T10:53:00.000-05:00

Laser chips could power petaflop computers

Laser communications chips capable of pumping data through the veins of gargantuan "petaflop" supercomputers have been demonstrated by NEC in Japan.

The communications chips can transfer information through optical fibres at a blistering 25 gigabits per second (a gigabit is a billion bits). This is a record for such components, according to NEC, and is many times faster that the purely electronic interconnects used in today's supercomputers.

Communications chips can convert electronic signals into optical ones. Using optical fibres to relay data between the chips is what may give this type of supercomputer the edge over previous ones using processors connected electronically.

NEC used a type of semiconducting laser diode called a Vertical-Cavity Surface Emitting Laser (VCSEL) which generates laser pulses in response to an electrical current. Researchers at the company created more efficient VCSEL devices by making the diodes from a blend of gallium arsenide and indium gallium arsenide - they used indium instead of the more conventional aluminium. This made it possible to transfer laser pulses more rapidly through optical fibre.

The new VCSEL chips could be used to make supercomputers of unprecedented power by routing data more efficiently between thousands of individual computer processors. NEC believes the chips could prove crucial to the development of the first petaflop class supercomputer - a machine capable of carrying out a thousand trillion mathematical calculations every second.

"Petaflop-class performance can be achieved in the next-generation supercomputer installed with the new VCSEL, in about 2010," Takahiro Nakamura from NEC's System Devices Research Laboratories told New Scientist.
Off-the-shelf

Such an achievement might enable NEC to regain the supercomputing crown that it held between 2002 and 2004 with the Earth Simulator - a supercomputer installed at the Japanese Agency for Marine-Earth Science and Technology in Yokohama, Japan. This is because efficiency with which purely electronic chips share data is a crucial bottleneck in supercomputer design. Most of today's supercomputers operate at a maximum speed of few teraflops (trillions of operations per second).

Many supercomputers are essentially made by linking up thousands of off-the-shelf computer processors. However, the current number one, an IBM machine called BlueGene at Lawrence Livermore National Laboratory in California, US, is made from customised components and is capable of a fearsome 360 teraflops.

While external experts agree that VCSEL chips could be used to construct formidable supercomputers, they say the cost of such components will also be crucial. "Raw bandwidth alone is not necessarily the most pressing issue for petascale computing," says John Shalf at Lawrence Berkeley National Laboratory in California, US. "The question is whether we can afford such components."

Furthermore, although VCSEL chips promise to be cheaper than comparable optical technologies - such as indium phosphide lasers - Shalf says a cheaper solution could be to combine several electronic connection channels in a single data "pipe". Another approach may be to send several optical signals through the same cable, a technique known as wavelength division multiplexing.
Unprecedented complexity

"The ability to go to 25 gigabits per second using VCSELs provides some opportunities for more cost-effective components, but that remains to be seen," Shalf told New Scientist. "You can be assured the market will provide the answer when these things become real products."

Horst Simon, another supercomputing expert at Lawrence Berkeley, adds that other issues will affect the development of the next generation of supercomputers. "Building a petascale system with a useful amount of memory - say at least 200 terabytes - and then powering and cooling this system will be the bigger challenges," he says.

Regardless of the challenges ahead, NEC is confident that petaflop supercomputers will be able to carry out experiments of unprecedented complexity. "It will be able to carry out entire simulation of the human body from genes and cell level to the organs and even the entire body," Nakamura adds. "Complex and detailed simulation of the behaviour of nano materials, from elementary particle to device level, is planned."

A Quantum Encryption Breakthrough

2006-03-03T10:52:00.000-05:00

MIT Technology Review journalist Kate Green discusses a recent breakthough in quantum encryption...

**********************

Researchers at the University of Toronto have shown, in a study published in the February 24 issue of Physical Review Letters, that one of the present liabilities of quantum cryptography can be turned into an advantage. Using "quantum decoys," Professor Hoi-Kwong Lo and his team are increasing the distance that quantum-encrypted data can be sent over fiber-optic cable.

Quantum cryptography uses particles of light called photons to create and send keys used for coding and decoding messages. A photon can transmit bits of a key by representing a 1 or 0, depending on a property called polarization. The sender of this key (physicists call her "Alice") transmits a string of randomly polarized single photons to the recipient ("Bob"), who collects each photon, one at a time.

The reason this technique is so secure is that photons possess a safeguard inherent in quantum mechanics. For an eavesdropper to listen in, he or she must tap the fiber-optic line and measure the polarization of the photons with a detector as the photons arrive. But quantum mechanics dictates that any measurement, such as the one taken by the eavesdropper, unavoidably modifies the polarization. This means that Bob would notice if a transmission had been intercepted -- as soon as he and Alice compared notes (over a channel that doesn't need to be secure) about the polarization of photons sent and received. Any inconsistency in the sent and received photons would alert them to the fact that the key had been stolen.

A problem arises, however, when more than a single photon is inadvertently sent at a time -– a common occurrence since no perfect single photon emitter exists. This happens, says Jonathan Habif, quantum information research scientist at BBN Technologies, because scientists send pulses of laser light through a series of filters until only one photon squeezes through; but the filtering process isn't perfect, and sometimes more than one photon per pulse gets through.

When two photons of the same polarization are sent, one of them can be picked off by the eavesdropper, while the other one will go through unchanged, as if nothing is amiss. Additionally, Habif says, in order to send a quantum-encrypted key farther, the initial light from the laser must be more intense, which means there must be more photons to begin with, thus increasing the likelihood that more than one photon will squeak through the filters.

Professor Lo, lead scientist on the Toronto study, has cleverly used these problematic extra photons to dupe eavesdroppers. The light in his experiment is prepared in such a way that a small percentage of photons are decoys that contain no information at all about the key. "The eavesdropper has no idea which is the signal or which is the decoy," Lo says. "In the end, Alice and Bob can compare, and Alice will announce [in a separate message that doesn't need to be encrypted] which ones are the signals and which are the decoys." The signal photons contain information about the key, but the eavesdropper doesn't know which photons she measured.

The concept of using decoys in quantum cryptography was first proposed in 2003 by Won-Young Hwang, then at Northwestern University in Evanston, IL. In 2005, Lo says, his team mathematically proved that the technique could enhance security. In their most recent announcement, Lo and his team have shown for the first time that the decoy method can actually work in a real-world environment, using a modified off-the-shelf quantum cryptographic system and commercial fiber optics.

The major implication of their findings is that quantum cryptography should now be usable over greater distances. "Prior to decoy states, you couldn't ramp up the signal to increase the distance," says Jim Harrington, a researcher at Los Alamos National Laboratory, "because you would send out more than one photon."

Lo and his team claim that the new technique can guarantee security over 15 kilometers of commercial fiber-optic lines. While this isn't a distance record, Lo says small modifications to the setup could allow extremely secure transactions over 120 kilometers -– roughly the current upper limit claimed for commercial quantum encryption systems, such as those from id Quantique of Geneva, Switzerland, and MagiQ Technologies of New York City.

Light and Atoms Get Entangled

2006-02-15T13:08:00.000-05:00

All I can say about this development is "WOW!!!"

31 January 2006

Physicists have for the first time entangled two atomic quantum bits, or "qubits", that are separated by long distances. Alex Kuzmich, Brian Kennedy and colleagues at the Georgia Institute of Technology in the US did this by entangling an atomic qubit with a photon, sending the photon down an optical fibre to a neighbouring lab, and then converting the photon into another atomic qubit. Meanwhile, Harald Weinfurter and co-workers at the Max-Planck Institute for Quantum Optics in Garching and the Ludwig-Maximilians University in Munich have entangled an atom with a photon at a wavelength suitable for low-loss communication over long distances.

Entanglement allows particles to have a much closer relationship than is possible in classical physics: if two particles are entangled, we can know the state of one particle by measuring the state of the other. For example, two particles can be entangled such that the polarization of one particle is always "horizontal" when the spin of the other is "vertical", and vice versa; or that the spin of one particle is "up" when the other is "down", and vice versa. An additional feature of quantum mechanics is that the particle can exist in a superposition of both these states at the same time. By taking advantage of such quantum phenomena, a quantum computer could, in principle, outperform a classical computer for certain tasks.

Although physicists can now routinely entangle photons and send them over long distances down optical fibres, these particles are difficult to store for long periods and so are not ideal as qubits for real quantum information systems. In contrast, qubits based on ground-state atoms have long lifetimes and so can be stored. Kuzmich and colleagues have now succeeded in remotely entangling two such atomic qubits using a photon (Phys. Rev. Lett. 96 030405).

The Georgia Tech team made each long-lived qubit using "collective" spin states of a cold cloud of about 100,000 rubidium-85 atoms. Only a single spin is "flipped" in these collective states but the flip is distributed over all of the atoms involved in the qubit. The physicists began by preparing an entangled state of one of these atomic qubits and a single photon in a magneto-optical trap in their laboratory.

Next, the scientists transmitted the photon down an optical fibre to a magneto-optical trap in another lab located 5.5 metres away. Finally, they converted the photon into another atomic qubit, also consisting of rubidium-85 atoms. The team then measured the resulting entanglement of the two atomic qubits by "transferring" their quantum states onto photons and then measuring the polarization correlations of the photons.

"It should now be possible to teleport quantum states of matter over long distances," says Kuzmich. "The breakthrough also indicates that atoms and photons can be used for larger quantum networks -- though further work on practical issues is still necessary."

Meanwhile, in a separate experiment, Weinfurter and colleagues have entangled a single trapped atom with a single photon at a wavelength of 0.78 microns, which is suitable for low-loss communication over long distances, using similar experimental techniques to the Georgia Tech group (Phys. Rev. Lett. 96 030404). The entanglement is between the polarization of the photon and the internal site of a rubidium-87 atom stored in an optical trap. Kuzmich and colleagues have also demonstrated atom-photon entanglement at "telecommunications" wavelengths of 1.5 microns.

Peering More Deeply into the Quantum World

2006-02-15T12:47:00.000-05:00

Another big step in the evolution of metrology tools from researchers at Georgia Tech.

New Device Revolutionizes Nano Imaging
Much faster technology allows AFM to capture nano movies, create material properties images

ATLANTA (February 9, 2006) — While a microphone is useful for many things, you probably wouldn’t guess that it could help make movies of molecules or measure physical and chemical properties of a material at the nanoscale with just one poke.

Georgia Tech researchers have created a highly sensitive atomic force microscopy (AFM) technology capable of high-speed imaging 100 times faster than current AFM. This technology could prove invaluable for many types of nano-research, in particular for measuring microelectronic devices and observing fast biological interactions on the molecular scale, even translating into movies of molecular interactions in real time. The research, funded by the National Science Foundation and the National Institutes of Health, appears in the February issue of Review of Scientific Instruments.

Not only is FIRAT™ (Force sensing Integrated Readout and Active Tip) much faster than AFM (the current workhorse of nanotech), it can capture other measurements never before possible with AFM, including material property imaging and parallel molecular assays for drug screening and discovery. FIRAT could also speed up semiconductor metrology and even enable fabrication of smaller devices. It can be added with little effort to existing AFM systems for certain applications.

“I think this technology will eventually replace the current AFM,” said Dr. Levent Degertekin, head of the project and an asscoiate professor in the Woodruff School of Mechanical Engineering at Georgia Tech. “We’ve multiplied each of the old capabilities by at least 10, and it has lots of new applications.”

FIRAT solves two of AFM’s chief disadvantages as a tool for examining nanostructures — AFM doesn’t record movies and it can’t reveal information on the physical characteristics of a surface, said Dr. Calvin Quate, one of the inventors of AFM and a professor at Stanford University.

“It is possible that this device provides us with the ‘ubiquitous’ tool for examining nanostructures,” Quate added.

And what’s the key to this dramatic increase in speed and capabilities? A completely new microphone-inspired probe.

Current AFM scans surfaces with a thin cantilever with a sharp tip at the end. An optical beam is bounced off the cantilever tip to measure the deflection of the cantilever as the sharp tip moves over the surface and interacts with the material being analyzed.

FIRAT works a bit like a cross between a pogo stick and a microphone. In one version of the probe, the membrane with a sharp tip moves toward the sample and just before it touches, it is pulled by attractive forces. Much like a microphone diaphragm picks up sound vibrations, the FIRAT membrane starts taking sensory readings well before it touches the sample.

And when the tip hits the surface, the elasticity and stiffness of the surface determines how hard the material pushes back against the tip. So rather than just capturing a topography scan of the sample, FIRAT can pick up a wide variety of other material properties.

“From just one scan, we can get topography, adhesion, stiffness, elasticity, viscosity — pretty much everything,” Degertekin said.

For a regular AFM to detect the features of the object, the actuator must be large enough to move the cantilever up and down. The inertia of this large actuator limits the scanning speed of the current AFM. But FIRAT solves this problem by combining the actuator and the probe in a structure smaller than the size of a head of a pin. With this improvement, FIRAT can move over sample topography in a fraction of the time it takes AFM to scan the same area.

Georgia Tech researchers have been able to use FIRAT with a commercial AFM system to produce clear scans of nanoscale features at speeds as high as 60 Hertz (or 60 lines per second). The same system was used to image the topography as well as elastic and adhesive properties of carbon nanotubes simultaneously, which is another first.

FIRAT’s new speed and added features may open up many new applications for AFM.

For instance, FIRAT is capable of scanning integrated circuits for mechanical and material defects. And in biomolecular measurement applications, FIRAT can scan the surface quickly enough for a researcher to observe molecular interactions in real time.

“The potential is huge. AFM started as a topography tool and has exploded to many more uses since. I’m sure people will find all sorts of uses for FIRAT that I haven’t imagined,” Degertekin said.

FIRAT will be available for certain applications immediately, while others may take a few years, Degertekin said.

Remembering Hunt Taylor

2006-02-07T21:07:00.000-05:00

For as he thinks in his heart, so is he.
(Proverbs 23:7, NKJV)

My dear friend and business partner, Hunt Taylor, passed away last Sunday in a tragic motorcycle accident in Arizona. He was 54 years young. All those that knew Hunt are mourning the devastating loss of a great man. I remember the first time I met Hunt. It was as if I had known him my entire life. Whenever you meet people like that, you know you are blessed.

Hunt was a terrific partner. He loved to think deeply about many things -- often unconventionally. He was, in that respect, Mungarian (I'm referring to Charlie Munger's "Lattice of Models" approach to investing). There was very little, in fact, that you couldn't discuss with Hunt. He was always open to new ideas.

Over the past several years, we discussed and debated (sometimes heatedly!) the emerging science of complexity, the mystery and beauty of quantum mechanics, the differences between risk and uncertainty, the future of the investment management business, the supply and demand for commodities, diamonds, oil, the prospects for nanotechnology and alternative forms of energy, the evolution of the music business and much more. I loved talking to Hunt. It always seemed as if we never had enough time together. I'm sure it was the same for many people in Hunt's life.

But what I loved most about Hunt was his heart. In my nearly two decades on Wall Street, I've learned that the heart is the most underappreciated and undervalued intangible asset. There's an old saying on Wall Street that if you want a friend, buy a dog. I didn't need to buy a dog. I had Hunt Taylor in my life, and I was blessed.

We will all deeply miss Hunt. But if you are like me, the love, laughter, and wisdom he shared will always live in your heart.

Quantum Processor Developed

2006-01-24T10:49:00.000-05:00

Researchers Develop Quantum Processor

A computer chip based on the esoteric science of quantum mechanics has been created by researchers at the University of Michigan. The chip might well pave the way for a new generation of supercomputers.

Employing the same semiconductor-fabrication techniques used to create common computer chips, the Michigan team was able to trap a single atom within an integrated chip and control it using electrical signals.

Two Places at Once

As of yet, the technology is not applicable to typical desktop PCs or servers, but quantum computers are said to be promising because they can solve complicated problems using massively parallel computing.

That is accomplished by the quirky nature of quantum mechanics, said Christopher Monroe, a physics professor and the principal investigator and co-author of the paper "Ion Trap in a Semiconductor Chip." He explained that that chips can process multiple inputs at the same time in the same device.

"With quantum mechanics, an object can be in two places at the same time, as long as you don't look at it," he said. The quantum computer architecture can store quantum bits (qubits) of information, where each qubit can hold the numbers one or zero, or even both digits simultaneously.

When a qubit is added to a quantum system, the computing power doubles. Thus, the quantum machine can crunch numbers at a rate that is exponentially faster than conventional processors, said Monroe.

New Spin on Semiconductors

Electrically charged atoms (ions) for such quantum computers are stored in traps in order to isolate the qubits, a process that is essential for the system to work.

The challenge is that current ion traps can hold only a few atoms, or qubits, and are not easily scaled, making it difficult to create a quantum chip that can store thousands or more atomic ions. A string of such atoms, in theory, could store thousands of bits of information.

In the chip created at Michigan, which is the size of a postage stamp, the ion is confined in a trap while electric fields are applied. Laser light puts a spin on the ion's free electron, enabling it to flip it between the one or zero quantum states.

The spin of the electron dictates the value of the qubit. For example, an up-spin can represent a one, or a down-spin can represent a zero -- or the qubit can occupy both states simultaneously.

Applications for Cryptography

The quantum processor is made of gallium arsenide in a layered structure and etched with electrodes using the same type of lithography process as those used to create today's computer chips. Each electrode is connected to a separate voltage supply, and these various electrical voltages control the ion by moving as it hovers in a space carved out of the chip.

The next step is to build a bigger chip with many more electrodes, so that it can store more ions. There still is a lot of work to be done to learn how to control lots of ions in one of these chips. It won't be nearly as easy as it was with conventional computer chips, but at least we know what to do in principle, Monroe said.

"This type of integrated chip structure is significant because it demonstrates a way to scale the quantum computer to bigger systems," Monroe said. "It has applications for processing very large [data sets] such as in cryptography, for example, and there is a lot of interest in this by the government."

Greenblatt's Magic Formula

2005-11-22T11:07:00.000-05:00

I just finished reading Joel Greenblatt's recently published book "The Little Book That Beats the Market." The essential idea behind Greenblatt's investment process is simple: own companies that have high earnings yields and high returns on capital. He calls this his "magic formula." In fact, there is nothing magical about his formula. It simply instructs investors to buy attractive businesses (i.e., those with high returns) at great prices. That is, of course,what all great investors do, including Warren Buffett and Charlie Munger.

While many professional investors may view Greenblatt's process as too quantitative and mechanical, I like the fact that it is disciplined and based on sound fundamental financial concepts (e.g., returns on capital and earnings yields).

If you are a day trader and you are reading this blog, you might want to do yourself a favor and pick up Greenblatt's book. You'll make a heck of a lot more money following Greenblatt's advice than you will watching CNBC and trying to trade every little wiggle in the market. Furthermore, you'll have lots of free time on your hands to read great books and acquire worldy wisdom.

Nothing But Net!

2005-11-16T16:04:00.000-05:00

Larry Kudlow comments on the good news we received today regarding "control" of the Internet. Notice how people are characterizing the importance of the Internet/World Wide Web. I remember saying similar things back in 1994 to executives at Merrill Lynch who responded with blank faces and geniune disinterest.

Control of Internet Remains Safe in American Hands
By Larry Kudlow

Negotiators from around the globe threw in the towel and agreed late Tuesday to leave the United States in charge of the Internet's addressing system known as ICANN, averting an international showdown at this week's U.N. technology summit.

The deal means the United States will continue its day-to-day control of the quasi-independent body responsible for the main computers that control traffic on the Internet. An international forum will be created to address concerns. It will have no binding authority on the U.S.

The outcome was never really in doubt. The U.S. government did the right thing and made it clear all along that it would not go along with any major change to the Internet’s status quo.

Sounds good to me. After all, it was American sweat and ingenuity that created the Internet in the first place. It’s our baby. And a quick glance around the globe at anti-democratic, totalitarian countries like China and Iran, where repressive governments do anything and everything within their power to suppress ideas makes the idea of turning over ICANN appear ridiculous.

As media mogul Rupert Murdoch said earlier this week: “[T]he Internet has been the most fundamental change during my lifetime and for hundreds of years. Someone the other day said, ‘It's the biggest thing since Gutenberg,’ and then someone else said, ‘No, it's the biggest thing since the invention of writing.’

Whatever the case is, there’s nothing to be gained and everything to lose by giving up Internet governance and helping countries like China in their doomed efforts to put the cat back in the bag.

Peter Drucker: 1909 -2005

2005-11-14T12:23:00.000-05:00

Peter Drucker passed away last Friday, November 11, 2005. He was 95 years young. I've been a Drucker fan since my college days, when I discovered his books at the library. I have read many of his books and always enjoyed reading his essays and articles published in the Harvard Business Review, the Wall Street Journal and elsewhere. Although I never got a chance to meet the man, one of the pieces he published in the Wall Street Journal back in 1984 changed my life. In the editorial, Peter noted that if you wanted to be successful in the business world, you should always strive to surround yourself with excellence. This simple insight became the foundation of my business career.

I'll miss Peter Drucker's wise counsel. He was one of the best in the business.

May he rest in peace.

Tech Maneya

2005-11-10T19:07:00.000-05:00

My friend Kevin Maney, one of the best tech writers in the business and a fellow musician, just launched a blog. You can check it out at the link below:

http://blogs.usatoday.com/maney/

Make sure to visit often!

Waiting for Broadband Communications

2005-11-07T15:48:00.000-05:00

Many folks here in the U.S. have heard about Broadband Communications (BC). I've been talking about BC for years now, and I'm still waiting for my broadband communications link to arrive to my home. My cable modem is nice, but it isn't BC. As my long-time tech friend Mark Anderson stated recently in one of his Strategic News Service newsletters, true BC penetration in U.S. homes -- measured as the ability to carry one video stream, or about 1.5 Mbps -- is currently close to zero. ZERO!!!

Think about it. We are still surfing the Web at home in the communications-equivalent of a Model T.

Mark and I both believe that the BC revolution is at hand in America. The investment implications of going from zero BC to somewhere north of 60% BC over the next several years are staggering. Indeed, as BC penetration rises sharply, expect to see a massive wave of creative destruction across many industries and sectors.

New Day Dawning

2005-11-02T12:52:00.000-05:00

John Markoff's recent article "The Time Is Now: Bust Up the Box!" made some interesting observations that I suspect many investors aren't thinking deeply about yet. Here is some food for thought:

"This is new computational science," said Edward Lazowska, a computer scientist at the University of Washington in Seattle. In the future, he said, science will be based on data flowing across computer networks that can then be visualized and mined."

Sounds like a paradigm shift to me.

"People have spoken about how computer networks have flattened the world, said Larry Smarr, an astrophysicist who is director of the California Institute for Telecommunications and Information Technology. But it's more than that, disctance is vanishing and the world is now shrinking to a single point."

Sounds like a singularity event to me.

"A new computing era is clearly dawning. So far, the new epoch of computing has been described as grid computing, on-demand computing, utility computing, the planetary computer and Web 2.0. Although the titles are different, they are all efforts to describe an age that will be a fundamental break from earlier computing generations."

Sounds like Mr. Markoff is on to something big!

"Can you blow up the computer machine room and spread it over the surface of the planet?" Mr. Smarr said. "This is really happening."

You got that right!