Quick post because I’m really busy today but I’ve been reading the reactions to Steve Jobs’ Flash Letter as I walk from place to place and I wanted to get in on this.  But this post was written in under 10 minutes so please forgive Spelling, Grammar and overall non-sensical-ness that might be therein. 

Andrew Nusca gets why this letter is important…

Jobs’ letter is remarkable not for its argument, which has been elaborated on before by Apple and pundits alike, but in its very existence. It’s highly unusual for the chief executive to respond to criticism in such a public and permanent way.

And then asks the most important question about this…

Still, it’s a wonder that Jobs couldn’t work this out behind the scenes, and that the clamor was so great that he felt compelled to write a public letter on the subject.

Surely the average mainstream consumer Apple user cares little about this B2B problem. So why publish this?

Are Apple’s sales really taking a hit from flash-ready Android devices? If not, why bother addressing the issue?

Who is this letter actually for?

The answer: It’s for consumers. 

Follow me here because it seems like I’m going off topic but I’m not.

People like Cigarettes.  Even if people didn’t the tobacco companies admitted to pumping cigarettes full of drugs to make them more addictive.  Watch any TV show or Movie set in the 50s and you’ll notice everyone has a cigarette hanging out of their mouth.  Because people really do love to smoke. 

So why don’t most people smoke today?  Because they know it’s bad for them.

People tend to go out and buy things they want.  There are only two things that stop that impulse.  The first is they can’t (as in they can’t afford the thing they want) and the second is they acknowledge it’s bad for them (as in the case of cigarettes).

People want Apple products.  Apple is great at creating devices that make people lust after them and they’ve gotten much better at creating products that most people can afford (The iPhone, iPad and Mac Mini really aren’t expensive compared to their competitors at this point).

So the one thing standing in Apple’s way is the perception that buying their products might somehow be bad for you.

That’s where the current string of bad press about Apple comes in.  With developers revolting, Adobe telling everyone Apple is trying to kill them and the Daily Show showing them breaking down journalist’s doors Apple is starting to look like the Gestapo.  That’s bad for Apple.

They can’t afford the perception that they are bad for people or that they’re lessening consumer choice.  Because that’s the one thing that will keep people from buying their products.  So they’re going on the offensive and using their most visible resource (Steve Jobs) to explain that they have good reasons for blocking Flash and that (in their view) this is good for the consumer.

That’s what this letter is about.

I’ve been lucky to know one of the greatest lawyers out there for a good portion of my life.  A man who has literally never lost a case in the time I’ve known him.  Not only is he a great lawyer but he’s been a great teacher to me and has straightened out a lot of misconceptions I had about the law.

I’ve been thinking about that since the case of Apple’s iPhone prototype popped up.  For those unfamiliar the short version is that a drunk Apple employee left a confidential next gen iPhone at a bar.  Someone picked it up and sold it to gadget site Gizmodo for $5,000.  Then yesterday the San Mateo police raided the home of the Gizmodo editor who wrote the story about that prototype (which was returned to Apple by Gizmodo after they took a bunch of pictures for their story).

The question now is whether Gizmodo is guilty of a crime

Before I get into that I’d like to quote an excellent article by CNet’s Decian McCullagh and Greg Sandoval which makes the case against Gizmodo.

(Please note: This is not about morality but about law and I’m in no way justifying what Gizmodo did from a moral stand point)

The Case

The first relevant fact is a lot of unofficial sources claiming Gizmodo is under investigation.  But no one will confirm Gizmodo’s a target.  Quoting the CNet article…

CNET has not been able to confirm whether the felony investigation is targeting Gizmodo staff, the iPhone seller, or someone else. A blog post at NYTimes.com, citing unnamed law enforcement officials, said charges could be filed against the buyer of the phone--meaning Gizmodo employees.

That, to me, is telling.  What it says is “Apple has a lot of clout in the area and they clearly want a pound of flesh from Gizmodo.  But law enforcement can’t see a way to make it work so they’re trying to give Apple what it wants without actually having to pursue a case.” 

So while their (unofficial) words might indicate they could pursue a case against Gizmodo their actions tell a different story.

Ask yourself: If law enforcement was after Gizmodo or Gawker Media wouldn’t they have also raided the Gawker offices?  Wouldn’t they have subpoenaed the company’s financials?  Wouldn’t they have done everything they could to get any available evidence before the company could destroy it? 

They would…but they didn’t. 

Moving on.  One of the great things the CNet article does is to go to an actual lawyer in the area and ask their opinion…

"If I were prosecuting, I'd go after (any blogger who bought the phone) vigorously," said Michael Cardoza, a prominent San Francisco defense attorney and former prosecutor. "I'd fight them tooth and nail to see that they wouldn't get protection under the shield law. I'd play hardball in this case. They didn't find the phone as part of their reporting but instead bought property that they knew or should have known wasn't the property of the seller."

Cardoza, who has represented high-profile clients including the partner of a woman mauled to death by two of her neighbor's dogs in 2001, said that Gawker Media and Gizmodo have a moral obligation to reveal the seller. "Why wouldn't you reveal the name?" Cardoza said. "Unless you're planning on receiving stolen goods in the future and want to make sure anyone who comes to you with stolen property knows that you will protect their identity, why wouldn't you identify them?"

The problem here: Notice the link to Mr. Cardoza’s web site.  That's called self-promotion and it's how "high profile" lawyers make their money.

You see, “there’s no case here” isn’t a quote that gets you mentioned in a news article.  Because “Gizmodo might be charged with a crime” is a good story and that’s what any reporter would be after.  What Mr. Cardoza doesn’t mention above is that Gizmodo paid for the property and then promptly returned it to the rightful owner.  That’s relevant  (not from a moral sense since they took a bunch of pictures and then plastered them all over the web but from a legal sense).

Speaking of the morality you can tell Mr. Cardoza is reaching for justification when he starts quoting “moral obligations” as opposed to legal justification.  For the record, Gizmodo’s reason not to identify their source is the same reason that every reporter on the face of the earth refuses to identify their sources: Because no source would ever come to them in the future if they did.  Not just those sources with stolen property. 

Finally, and again to their credit, CNet quotes the California law under which they believe Gizmodo might be guilty of theft…

Under a California law dating back to 1872, any person who finds lost property and knows who the owner is likely to be--but "appropriates such property to his own use"--is guilty of theft. There are no exceptions for journalists. In addition, a second state law says that any person who knowingly receives property that has been obtained illegally can be imprisoned for up to one year.

The problem here is they don’t quote the whole law.  The whole quote reads “appropriates such property to his own use, or to the use of another person not entitled thereto, without first making reasonable and just efforts to find the owner and to restore the property to him.” 

So the question is not whether Gizmodo used the phone for their own gain (they most certainly did) it’s whether they made a “reasonable effort” to return the phone (which they claim they did).  Notable is the fact that the phone was returned to Apple within days of Gizmodo taking possession of it.   

Legal Misconceptions

The relevant legal teachings I spoke about at the beginning of this post came in the form of two simple points. 

Point #1: Law is not a numbers game

People, including many lawyers, think you win cases by having the most on-point legal arguments.  But in criminal law you’re dealing with a jury and a jury is made up of 12 ordinary people.  Ordinary people like to help those whom they personally like.  So a good lawyer realizes the trick to winning a case isn’t having the most law on your side but getting the jury to like you and giving them just enough law to give you what you want.  Even if “just enough” amounts to vague terms like reasonable effort and claims of journalistic integrity.

Point #2: Law is about odds not who is right and who is wrong

Trials are expensive and there’s a lot of crime in the world.  A District Attorney, when deciding whether to file charges, is not asking themselves whether the offending party was wrong when deciding.  They’re asking themselves whether they can win a trial, how much political up side there is to the case and how severe the crime was. 

Taking a murderer or rapist off the street is worth way more than going after a wayward journalist.   

So the question now becomes “Does Apple have the clout to force the DA to file charges?”  San Mateo’s DA, James P. Fox, has been in office for 28 years.  So I don’t think Apple can pressure him into taking a case if there’s no upside.  In this case he’d have to go after a journalist in a trial where the odds of winning aren’t that great. 

Keep in mind Gizmodo consulted an Attorney before publishing their story.  That might not make them honest but it makes them look like they were trying to follow the law and that will make it hard to convince a jury otherwise.

Conclusion

I suspect the San Mateo DA is looking for a way to save face right now.  If I were them I’d be looking to throw the book at the person who sold the phone to Gizmodo and maybe try to convince Gizmodo to pay a small fine to appease Apple. 

But don’t let journalists chasing a good story fool you.  There’s no real case here against Gizmodo and I think everyone knows it. 

Maybe it’s just the growing anticipation I have for my own iPad but at this moment I think this is my favorite YouTube video ever.

Quick Note: I have a rule on this blog about not taking political positions if I can avoid it.  So while the topic of this post is a political figure I’ve tried not to take a side on the actual politics.

I don’t even think Conservatives saw this coming…

Americans are now pretty evenly divided about whether they would rather have Barack Obama or George W. Bush in the White House. 48% prefer Obama while 46% say they would rather have the old President back.

Bush had atrocious approval ratings for his final few years in office, particularly because he lost a lot of support from Republicans and conservative leaning independents. Those folks may not have liked him but they now say they would rather have him back than Obama. 87% of GOP voters now say they would prefer Bush, a number a good deal higher than Bush's approval rating within his party toward the tail end of his Presidency. Democrats predictably go for Obama by an 86/10 margin, and independents lean toward him as well by a 49/37 spread.

Important to note is that this is not from a right-wing source.  It’s from Public Policy Polling which is a research firm that caters almost exclusively to Democrats.  To quote Wikipedia…

The neutrality of PPP's surveys has been questioned since the firm's clients are exclusively Democratic-affiliated organizations…

At this point you might be wondering “Why is this on a tech blog?” 

There’s this mentality in the online world that you need to jump out and defend yourself against all enemies.  That you need to have a blog, twitter account, etc. and use them to constantly bombard people with your side of the story.

But in truth that isn’t always the right strategy.

I wasn’t a fan of the Bush presidency but objectively it wasn’t as bad as people made it out to be (for example they may have been wrong to go into Iraq but I’ve never been able to find proof of anyone lying and I’ve looked). Former President Bush would have been justified in defending himself against certain claims that have been made since he left office.  But he didn’t.  Even as his predecessor was attacking him.

In fact he steadfastly refused to comment or criticize his predecessor and was rewarded for it.

The public tends to get agitated by those who constantly defend themselves.  There’s nothing wrong with stating your case once but if you keep pushing your defense into people’s faces they’ll usually reject it.  In fact they’ll often suspect you more because of your obsessive need to defend yourself.

Just because you can scream from every mountain top doesn’t mean you should.  Sometimes you should just keep quiet and trust in people to treat you fairly in the end.

TechCrunch’s Erick Schonfeld lays out an argument that is becoming common place after the Flash Kerfuffle I spoke about yesterday.  His basic point is that Steve Jobs is making the same mistake that caused the Mac to lose out to the PC in the '90s and should instead be more open. 

Here’s a quote from the article…

The iPhone faces a growing threat from Google’s Android phones, which are the PCs of the mobile world. Only Apple makes the iPhone, but many phone manufacturers make Android phones just like many PC makers produce Windows PCs. Slowly but surely, those Android phones are getting better. And already Android sales are collectively catching up to iPhone sales.

Of all people, surely he sees what is coming. Is he ignoring his own history, or does he know it so well that this time he is going to try to rewrite it by changing the outcome? As long as the iPhone remains the leading smartphone, he can try to lock out Google’s ads and lock in developers with their apps (and, by extension, customers who want those apps).

Still, it seems like history could repeat itself, with the rest of the industry closing the innovation gap with Apple fast. With Google subsidizing the mobile OS, other phone manufacturers have an economic advantage as well.

A few corrections to the above quote before I make my point…

1.  The PC never fully “closed the innovation gap” with the Mac (as far as some are concerned). 

Mac’s are still simpler BECAUSE Apple maintains such control of them.  That’s what Mac users like about them.  They want their computers to “just work” and they believe Apple has done that for them (and they’ve rewarded the company with consistently high customer satisfaction ratings in return).

Beyond that there’s an argument to be made that Microsoft wouldn’t have gotten as far as it did with Windows if Apple hadn’t become so backwards after Jobs left.  The Classic Mac OS didn’t really grow between 1985 and 1995 (see Copland for more details) 

2.  Did Apple “lose” the PC wars?

Look at the actual numbers.  Microsoft’s making somewhere in the area of $20 to $40 off each copy of Windows (depending on the edition).   Dell makes less off every PC.  While Apple’s cheapest model, the Mac Mini, makes the company $213 per sale (at least when it’s bought directly from Apple which is most of the time). 

If they’re making that much off their low end model just imagine what a Macbook Pro brings in.  Given that who cares if Apple only controls 6% of the market?   If they’re making 10 times more than their competitors what does it matter?

3.  Apple doesn't need to dominate the mobile market to keep people building Apps. 

Let’s keep things in perspective here.  If Apple could capture as much of the mobile market (roughly 6%) as it does the PC market they’d have no problems.  Worldwide Cell Phone use is flirting with 5 billion while Apple has sold a mere 50 million iPhones so far. 

So they have a long, long way to go before they need to worry about anything close to market domination.  All Apple has to do is keep growing and they’ll be fine.

With those points laid out let’s look at the Smartphone industry. 

When you look at the iPhone remember every cent of profit coming out of that device is going to Apple.  The 3GS has an estimated cost of $178 and that’s almost certainly high (given bulk discounts on parts).  While the the device itself is not only subsidized by AT&T(actually costing around $599) but they actually get AT&T to give them a kick back on each subscriber (and people wonder why they stay exclusive). 

While Google can’t figure out how to make a profit off Android itself and admits it’s not making money off the Android Marketplace

Finally keep in mind that it’s probably impossible for Apple to dominate the mobile market completely.  It’s simply too big and too lucrative for any one company to control.  So the smart strategy is to make as much money off your piece of the market as you can.  That is exactly what Apple is poised to do.

Addendum: For the record, Google's goal with Android is to extend their lucrative ad business to the mobile market.  So if they never make money off Android directly but manage to get it on a lot of phones I suspect they'll be perfectly happy. 

Today Apple announced the next generation of it’s iPhone OS and, to be honest, there’s some pretty neat stuff on the way.  But the story that’s caught my attention comes from Daring Fireball and has to do with the iPhone developer tools.  Specifically this section of the iPhone Developer Program License which was changed to be more restrictive (bold added by me)…

3.3.1 — Applications may only use Documented APIs in the manner prescribed by Apple and must not use or call any private APIs. Applications must be originally written in Objective-C, C, C++, or JavaScript as executed by the iPhone OS WebKit engine, and only code written in C, C++, and Objective-C may compile and directly link against the Documented APIs (e.g., Applications that link to Documented APIs through an intermediary translation or compatibility layer or tool are prohibited).

Essentially this means Apple can force developers to use the tools they specify and as a result force alternate tools like Adobe’s Flash,  MonoTouch and Unity3D out of business.

A lot of developers are livid about this. 

I’m going to take what I suspect will be a very unpopular stance but please hear me out.  Understanding Apple means coming to terms with a philosophy that is opposed to what most technology people believe.  Apple ascribes to the following principles...

Apple is not Open, they believe in Closed environments.

Apple does not believe in Choice, they believe in rigid adherence to their Vision.

Apple does not rule by Consensus, they run the show and you Follow.

These aren't new.  When Steve Jobs came back to Apple 14 YEARS AGO his first steps were to throw out nearly everything and replace it with what he’d built at NeXT. 

Why is Objective-C the primary development language for OS X?  Because it was the primary development language for NeXTstep.  Why did Apple abandon the Apple menu for the Dock?  Because NeXT had a dock. 

Apple does things Steve’s way and if you want to develop for Apple you have to follow suit.

So for developers to be up in arms over this is a bit disingenuous because this is what Apple has always been like and that’s what Apple’s users expect from it.  Look on your average Mac and what you’ll find is almost nothing that wasn’t made by Apple.  Apple browser, Apple photo program, Apple video program, Apple Office Suite and so on.  They probably even bought it in an Apple store! 

Apple customers go to Apple because they buy into the Apple vision and if you want to develop for them Apple’s going to force you to do the same.

I’m not saying I agree with Apple.  I, like most tech people, like open solutions.  But I understand the value of an alternative vision and that’s what Apple holds.  More to the point I have to grudgingly admit I love my iPhone more than any phone I’ve ever had and the reason is largely that Apple created it with their unique vision.

Today is a rough day for me.  As someone who ordered the 3G version of the iPad I still have a few weeks before I receive mine.  Which makes all the excited tech journalists reviewing the device now more of an annoyance than anything else.  That in mind I thought I’d go in a different direction and address what I think Apple’s competitors can do to combat the iPad.

Microsoft

Bottom Line: Microsoft needs to create a touch centric interface for PC based “Slates” if they’re ever going to compete and they need to get all the manufacturers on board.

Microsoft is in the worst place here because the iPad could represent a danger to their Windows franchise and I don’t think they realize it yet.  The iPad could easily become a person’s personal computer.  Think about a world where you carry your desktop around like a tablet and then just hook it into a docking station when you get home.  It’s not that hard to imagine.

(I’m not saying this will happen tomorrow but it could some day happen)

So Microsoft needs to fight this much harder than they are right now.  That means getting the various manufacturers to agree to a common interface that lays on top of Windows 7.  One that is designed around touch but which allows the user to run desktop applications as a secondary.  Then they need to work on blending those two worlds in a way that makes SlatePCs usable. 

There’s a lot more to this (enough for another post someday) but the lesson, IMHO, is that Microsoft’s on the wrong track with their current “just slap Windows 7 onto a Tablet” strategy.

HP, Asus and Others…

Bottom Line: Apple’s weaknesses is it’s rigidness and hardware manufacturers need to realize that and exploit it to their own ends.

Apple values it’s view of perfection over everything else.  This is the root of their success but it’s also a weakness.  Because companies with a singular goal don’t realize that most of their customers would prefer a compromise.

Example: I think most people wouldn’t care if a device was .25” thicker if it meant they could get USB ports to plug in peripherals.  This is something that PC companies can exploit (and is something PC manufacturers have been using against the Mac for years). 

On the software side Apple’s rigid rules give the manufacturers an opportunity.  Again I’ll give an example: Apple restricts input interfaces to the ones they provide.  If SlatePC manufacturers decided to embrace companies like Nuance (makers of Dragon NaturallySpeaking) they could make a tablet that’s a lot more usable.

(yes there’s a Dragon App on the iPad but you have to open it, record your message, copy it to the clipboard, go to the app you want to paste it into and paste it.  Kind of tedious)

These are just a few examples but there are many more and that’s what hardware manufacturers need to look at when taking on Apple

Amazon (and to a lesser extent Barnes and Noble)

Bottom Line: The Kindle is a “single use device” and in that single use it’s better than the iPad.  Amazon needs to focus on that single use and forget the rest

The most important thing for Amazon to remember is the deck is stacked against them.  They have the more refined solution to reading books.  The e-ink display really is easier on the eyes.

But reviewers are short sighted and, let’s be honest, most of these tech site reviewers don’t read that much.  So while the Kindle might be perfect for those who love to read the iPad is going to be declared the better machine in almost every comparison. 

Given that I think Amazon needs to take a couple actions…

1.  Significantly drop the price:  The time when they could charge a premium is long since over.

2.  Screw the API: The Kindle is not an interesting device.  Developers aren’t lining up to work on it nor will they.  The beauty of the Kindle is that it’s great at one thing.  Try to make it an all purpose device and it will just pale in comparison to the other all purpose devices (it is inferior to the iPad when looked at in that light)

In the end Amazon needs to create the best device for readers regardless of what Apple is doing.  There’s still an argument to be made for single use devices and that should be where Amazon’s focus is.

Conclusion

For all the press the iPad actually has a lot of weaknesses.  If competitors can ride the increased awareness the iPad brings and provide more they’ll both beat Apple and create a whole new revenue source for themselves.