As of the end of March, 2016, I’ve left Yahoo Finance and hopped over to the tech team at Fortune. Most of my stuff is for the web site, with occasional magazine pieces as well. I’m concentrating on the big four telecom carriers plus a few other companies, such as Intel, Qualcomm and Fitbit. It’s all here from now on.
Hi folks. Sorry for the long hiatus between posts. A few months back, I was hired as senior technology reporter by Yahoo Finance. So now my hobby is my job. You can find pretty much all of my tech-related views and such, in text and video, over at my YF author page from now on. And thanks for your loyal readership over all these past eight years at GravitationalPull.
Tuesday’s hearing on Apple’s tax avoidance schemes made for pretty good Washington, D.C. theater. Apple CEO Tim Cook was friendly and forthcoming and most of the senators went out of their way to proffer their love of Apple products. So I doubt the hearing will help advance the much needed cause of corporate tax reform — probably the opposite. But Cook & Company also left the public with more than a few misconceptions, which I will try to clear up.
MYTH 1: Apple doesn’t owe U.S. taxes on its sales outside of the United States
U.S. tax law is clear. U.S. companies must pay corporate income tax on all profits earned anywhere in the world (here’s a good primer). The same is true for ordinary folk – if you have overseas income, you still owe Uncle Sam. There’s a credit for taxes paid to other countries and, for companies, an option to defer taxation until the money comes home. But the law of the land is U.S. taxation of worldwide income. Of course, the option to defer has long been abused, which leads to the next point.
MYTH 2: Apple is following the spirit of the tax laws
John F. Kennedy must have been rolling over in his grave when Tim Cook uttered this one. When multinational corporations avoided paying income tax by sending profits overseas and using sneaky methods to bring back the cash, President Kennedy pushed Congress to close the loopholes and we ended up with a 1962 law known as “Subpart F.” The very core of the law is to look past corporate shenanigans and tax overseas profits. Sound familiar? That’s exactly what Apple’s various Irish machinations achieved through loopholes that clever lawyers have found in Subpart F and behind-the-scenes lobbying made bigger.
MYTH 3: Apple doesn’t use tax gimmicks
Apple’s testimony on Tuesday claimed the company does not use tax gimmicks and then offered a list of a couple gimmicks it does not use – no Cayman Islands bank account, no revolving loans from foreign subsidiaries and so on. But, surprise, surprise, it’s a limited list that simply left out all of the tax gimmicks Apple does use and even invented, like the so-called Double Irish Dutch sandwich that shifts and shovels products and profits from here to there until deductible expenses end up in places with high tax rates like the United States and much of the profit – $74 billion in four years – ends up where there’s no taxes at all.
Richard Harvey, who worked in Ronald Reagan’s Treasury Department, at a Big 4 accounting firm and then at the IRS, said he nearly fell out of his chair when he read Apple’s no gimmicks claim. Apple’s denial is like notorious bank robbers Bonnie and Clyde saying they never robbed a 7-Eleven or a Safeway. About 4% of Apple’s employees and 1% of it sales are in Ireland but the Emerald Isle somehow ended up with 64% of Apple’s 2011 profits upon which it paid nearly zero tax. No gimmicks?
MYTH 4: Apple pays the least taxes the law allows
As a couple of tax experts noted at Tuesday’s hearing, Apple’s tax maneuvers are aggressive but hardly the most aggressive in corporate America, where 30 large companies paid no taxes at all from 2008 to 2010. Just as an example, Apple has chosen to re-route almost all its profits outside of the Americas through no-tax subsidiaries in Ireland. But profits coming from Canada, Brazil and Mexico come home to be taxed in the U.S.
The whole argument that Apple is just doing what it must doesn’t stand up. Apple and other tech companies regularly make decisions that cost them money, such as to address poor working conditions at factories owned and run by subcontractors or to make their products more environmentally friendly. A variety of short and long term concerns can come into play when Apple decides what to do, not just what maximizes profits in the current financial quarter. With corporations gaming the tax system, contributing near 65-year lows in taxes as a proportion of the economy, society suffers – the very society where Apple must find its employees, customers and shareholders.
And it’s arguably worse than that specifically for Apple shareholders. As tax guru Ed Kleinbard has pointed out, the kinds of tax games Apple has played can be detrimental to the future prosperity of the company. So much cash has been piled up outside the United States that it cannot be deployed profitably or returned to shareholders through dividends. As a result, Apple is disappointing investors and depressing its stock price (Apple’s recent bond issue was a partial attempt to address this mess).
MYTH 5: Apple was singled out for criticism
Although Tuesday’s hearing was solely about Apple, the same Senate committee had execs from Hewlett-Packard and Microsoft up last September to air their tax avoidance dirty laundry. And two years ago, it was CEOs of the major oil companies under Congressional fire for their most beloved tax breaks. Next time it will probably be some executives from big pharmaceuticals.
(All comments are moderated)
Google is shutting down Google Reader, its RSS feed collector, in July. Google’s bare bones reader web site was never the greatest way to actually read your RSS feeds, automatically updated collections of all your blog post subscriptions. There were plenty of alternatives for that function — I was using Reeder on my iPad and Press on Android, for example. But Google did provide a couple of essential behind-the-scenes functions and it provided them extremely well.
While I’m not going to miss the bland web site, I will miss Google’s ability to quickly and reliably update blog feeds and, maybe most of all, synchronize my reading history across all my devices. Even though I might read a few blog posts in Press on my Galaxy Nexus or with Reeder on my iPad, it was Google that kept track of which articles I had read and where I left off. Quite a few RSS reader apop makers have promised to build their own replacement back-end but there’s still a problem for omnivorous gadghet users like me — most of the app makers stick to one platform. So if Reeder and Press each start offering their own back-end to sync RSS feedss, that won’t help me because Reeder is mac and iOS only and Press in Android only.
That has me searching for a multi-platform reader replacement, much as I switched to Postbox for my email and 1Password for, well, passwords. So far, the only one I’ve found that I like is called Feedly. It works on the web, iOS, Android and Kindle. It’s also beautifully laid out and designed. I have my RSS feeds split into topical folders. As you can see in the picture above, Feedly lets me know there are fresh posts in a folder by showing it with a bright color. Folders with no new posts are grey. I also looked at Newsblur, which covers the web, iOS and Android. But it costs $24 a year if you follow more than 64 feeds and I didn’t think the apps were as good looking. It also has some social sharing features that seem a bit too intrusive to me.
Right now, Feedly is still running using Google’s back end, so I just had to sign in to my Google account and Feedly grabbed all my feeds and kept my whole folder structure intact. Phew. I also changed one setting. By default, Feedly shows you a sort of spread out, magazine-style view of the latest posts in your feeds, much like Flipboard, but I prefer a simpler list view. So I went to the app’s settings, tapped ‘advanced settings’ and changed the default view from Magazine to List.
It remains to be seen if Feedly, Newsblur — or anyone else — will be able to replace Google Reader’s plumbing with as reliable and speedy a service. I have my fingers crossed but I’ll report back as soon as the new services start coming online.
For the past year or so, I’ve been taking pictures with one of the most well-reviewed and highly spec-ed out digital cameras on the market, the Sony NEX-7. It didn’t come cheap and a couple of additional lens added to the bill but this was supposedly one of the great cameras out there. Considerably smaller and lighter than a D-SLR, the mirrorless NEX-7 had a largest-in-class sensor to pick up tons of detail, a real view finder, extensive video capabilities, a built-in flash and a highly customizable array of dials, buttons and other controls.
There was only one problem: I couldn’t seem to get it to take the pictures I wanted. Despite the accolades and endless list of killer specifications, the Sony was a beast to actually use — more like a complicated, poorly thought out computing device than a camera. Too many of the dials and buttons were poorly placed leading to frequent accidental changes in settings. Otherwise, the whole process slowed down as you hit a button to lock our changes, then unlocked the lock out to make changes, then locked out again. The video button was a particular villain in this regard. There were other significant issues too, especially the lack of great, affordable lens. That amazingly detailed sensor cries out for great glass, but Sony was deaf to the need.
So the other day, I put the NEX-7 up for sale on eBay. And, after a ton of research, I bought a much simpler camera that hardly compares on paper with the Sony, a Fujifilm X-E1. The Sony has a
bigger sensor with way more pixels, higher ISO range, more autofocus points, more video settings, a larger and higher resolution LED screen on the back, weighs less and on and on. But the Fujifilm is one well-designed mother fucker, no two ways around it.
Instead of covering the camera body with a bevy of blank-faced, multi-function, programmable doo-dads like Sony, Fuji chose to have just a few dedicated controls on the X-E1. On top, set the shutter speed and exposure compensation. On the lens, set the F stop. Done. Both dials also have an automatic setting, which means no more messing around with “aperture priority mode” and “exposure priority mode.” And because the dials are labeled, you can see with your own eyes instantaneously how the camera is set for the next picture. I feel like I am taking pictures again, not trying to remember how to work some crazy-complex gizmo. It doesn’t hurt that the camera came with a great prime lens and a fast zoom lens, neither of which were available for the NEX-7 (at least in my price range).
And, as you can see above, now I can take the cool pictures I always wanted to get with no muss and no fuss — and I’m having fun doing it.
“iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone,” Steve Jobs, Jan 9, 2007
From the first version of the iPhone through at least a couple of revisions of its hardware and software, the thing stood so far ahead of any other phone in existence that anyone without one just cried and moaned and if you had the chance to get one you jumped. If your mom or your cousin or the guy three cubicles down asked which phone to buy, you replied without hesitation: get the iPhone.
Starting a few years ago, other phone makers started to catch up and the choice got harder — or at least more interesting. You paused for a few seconds, thought about Android or maybe web OS, but gave the usual advice: get the iPhone.
But finally, in the past year or two, the choice of smart phone got a lot more complicated, especially if you weren’t already deeply invested in Apple’s vast iTunes ecosystem. Among other recent and obvious evidence, check longtime Mac columnist Andy Ihnatko’s column about switching to Android, uber Apple booster Matt Siegler’s positive review of the Google Nexus 4 and Macworld writer Lex Friedman’s general praise of the Nokia Lumia 920 phone running Windows Phone 8. What’s next? Long time Apple blogger John Gruber admits he’s head over heels for Samsung’s Bada-Tizen hybrid phone love child?
Sixth anniversary celebration, anyone?
Personally, I finally got rid of work-mandated Blackberries and got an iPhone 3GS in 2009. But curiosity and a predilection for Google services got the better of me and I switched to a Nexus S running Android in December, 2010. I tried to switch back via the iPhone 4S for a few months in late 2011, but ended up not liking it, mainly for software-related reasons. Lately, I’m quite happy with a Galaxy Nexus and looking forward to trying the Nexus 4 soon.
None of this is to say that the iPhone is about to collapse or immediately decline in popularity. But what’s happened is others have closed the gap and have been able to grab more share in the still fast-expanding global market for smart phones. Eventually, those gains can’t help but eat into Apple’s future sales.
Given how Apple let its early lead in personal computing slip away, but did not let an early lead in iPods evaporate, the company knows what it needs to do, I suspect. Apple slipped in PCs when it ignored where the market was headed and what customers wanted (more recently, its fortunes revived with cheaper models and a broader range of choices). In the case of the iPod, Apple broadened its line by adding offerings at various sizes, colors and price points while still innovating at the cutting edge with the iPod Touch. Competitors were left no empty spaces to get a toe hold.
For a while, the iPhone was so far ahead of the competition that Apple’s simple product line was more than enough to capture huge market share. But as Android phone makers have caught up, the iPhone’s worldwide share peaked and started to slip. Apple so far has left several “open spaces” in the market, allowing competitors like Samsung to thrive by offering phones with larger screen sizes and at lower prices (even the “free” iPhone 4S in the United States costs $450 without a subsidy from a wireless carrier).
At this juncture, I expect the next iPhone will be a 5S-ish upgrade and will do quite well in isolation. But Apple should do what it did with the iPod and hit more price points and physical outlines. The software could use a lot more than that, updating a look that’s grown stale. Otherwise, it could be back to the PC future for Apple.
How does it happen that a shining success fades into failure, that a popular series falls out of favor, that a great product line drops off into obscurity? Those are the questions I’ve pondered for the past few years after my favorite video game series, Sid Meier’s Civilization, went completely off the rails at version five. Ultimately, I think it comes down to losing touch with customers.
Although I’ve never been a big video game player, I’ve somehow been a fan of the Civilization series since it first appeared back in about 1991. Game designer Sid Meier knew how to appeal to my pattern-seeking tendencies and lure me in with his strategically-oriented creations. “Just one more turn, just one more turn,” became a mantra which kept you up deep into the night. Civ begat Civ II which led to Civ III and, by 2005, the pinnacle of the form in Civ IV.
Then came Civ V, a radical departure from all that. Many, many beloved features were watered down, simplified beyond recognition and even tossed aside. Entirely new concepts and metaphors were added, some of which didn’t fit with the rest of the game. Much of the refresh was said to get rid of the boring, micro-managing bits of the game. But in the end, it left a game with too few choices, too few options and too weak a connection to all that came before. My overall opinion of Civ V? YUCK!
The other day, the lead designer of Civ V, Jon Shafer, posted a long retrospective on the game’s development process. One of Shafer’s worst sins appears to have been that he designed the game for the style he liked to play, or perhaps thought was the best way to play, when in fact Civ’s great strength had always been the multiplicity of strategy and tactics that could lead to a fun gaming session.
Take Shafer’s decision to eliminate players’ ability to allocate resources between scientific research, cultural expansion and commercial development. He thought it was “boring busywork” but, of course, it was also one of the most important ways to change tactics, to prepare your empire for war or try to leap ahead in science.
I’ve always found fiddling with sliders in strategy games to be boring busywork, and in that sense I don’t miss them. But the sliders also had a hidden value that I didn’t realize until later – they gave players the ability to shift directions at any time. I’ve written at length about the importance of adaptation in strategy games. Unfortunately, once the sliders were gone players were basically permanently locked into their past economic choices. There was no way to sacrifice research in order to upgrade your army, for example. Rewarding long-term planning is certainly a worthy endeavor, but you still need to provide tools to allow players to change course when necessary.
Following another of his personal preferences, a lot of Shafer’s changes made it all but impossible to build a vast, overarching empire – surely one of the most popular ways to play. Now, he seems to realize that was a mistake, too:
It was virtually impossible to build the large, sprawling empires which had always been a feature in the series and served as the entire point playing for many people. I still believe that there are ways to make smaller empires viable, but it shouldn’t come at the expense of those who enjoy expanding. Penalties should be challenges to overcome, not an insurmountable wall to be frustrated by.
In the post-Steve Jobs era, it’s quite popular to affirm the brilliant visionary view of the world – Shafer caught the attention of Civ’s makers initially with his brilliant game mods for earlier editions. Jobs famously claimed that Apple did no customer research and made products he and his team wanted to use. But I think that ethos takes you only so far. Sometimes it’s better to listen.
Just back from a short family vacation to San Francisco where much fun was had. We traveled light, or at least light-ish, for this wired day and age. We took smart phones, digital cameras and iPads but we didn’t bring a laptop. For the most part, everything went well. The iPad makes a great travel companion, whether it’s providing maps for driving around the city, instant web searching for cool spots to eat or an ebook or movie for entertainment during down time at the hotel.
Apple has thankfully worked to make the process of using an iOS device the iPad without a computer easier and easier. We downloaded apps and music right to our iPads and never needed to sync anything to anything. Email is all “in the cloud,” so we could access important messages with our travel confirmations from any of our devices. It was all very smooth.
On our first day tooling around the Bay Area in our throwback, sky blue Crown Victoria, we wanted to find Bette’s Ocean View Diner in Berkeley. An iPad 3 with built-in LTE and GPS proved a trusty navigational aid taking us over the Bay Bridge and right onto 4th Street, Berkeley’s more swich shopping district away from the UCal campus. My wife, Whitney Connaughton, is an expert at parking honking large vehicles so we nimble-y parallel parked despite crowded conditions. Unfortunately, by 9 o’clock on a Saturday morning, the wait at Bette’s (which really does have the world’s best pancakes) was over an hour. So we had to make due with the excellent Mexican style Cafe M around the corner. I was snapping photos mainly with my Samsung NX200, a relatively pocketable mirrorless digital camera that takes very fine shots. Later, we checked out the college campus, grabbed some amazing doughnuts in Oakland and headed back to San Fran for a burger and shake dinner.
When I wanted to review my pictures for the day, I grabbed the iPad and attached the SD card adapter from Apple’s Camera Connection Kit. You may be familiar with this trick — you can import photos directly into the iOS photo gallery off your camera’s memory card. Once I had the pictures aboard, however, things were not quite so great. You can only do a few, limited things with pictures like upload to Facebook or post to Twitter. Upload to Flickr or post to App.net? See you later. With my laptop and Adobe’s fabulous Lightroom program, I have plug-ins to send my pictures to all the services I choose. I tried using some of my other services’ iOS apps, like Zenfolio, but it choked and crashed without uploading my pictures.
The next day, we traveled down to Big Basin Redwoods State Park, an amazing place-out-of-time wilderness area with huge stands of Redwood trees, many more than a thousand years old. On the way, we discovered a limitation of navigation by iPad. Driving up into the mountains where cell phone signals are sketchy at best, the iPad’s maps app lost track of where we were, couldn’t download maps and generally left us blind. We thought we’d be okay since we’d asked the app to get the directions list while we still had a good signal. But we stopped for lunch and let the iPad screen go blank. Logging back in, we discovered that the directions hadn’t been saved, even though no other app had run. Luckily, we were near the park at that point and a few helpful road signs were all it took. Inside the park, iPads stayed in the trunk of the car and we enjoying the gorgeous and lush Redwood forest unwired. If we’d gotten our directions the old-fashioned way (from Google maps on a laptop web browser), we’d probably have printed them out back at the hotel, avoiding the out of service issue.
As far as keeping in touch with friends and family, the iPads and phones were plenty suitable for reading and writing emails, Facebook posts and future blog entries. I kept up with the sports news back home via BostonGloble.com, checked out restaurants on the SF bulletin boards of Chowhound.com and almost finished the latest ebook in Hugh Howey’s “Wool” series.
At night, back at our hotel, everybody wound down with a little technology. Watching video on the go can be an a problem with our 3G and LTE-enabled iPads, however, and we had to be very careful. Sitting in your hotel watching a couple of episodes of the “House of Cards” series on Netflix, for example, can burn through more than half of your entire month’s broadband usage allowance. And downloading a movie for rent from the iTunes store will actually use up the whole pie and send you into the land of overage charges. Hotel wifi was expensive, slow and limited us to one connected device per room per 24 hours. Ugh. I keep a gazillion movies on my laptop and an accompanying external drive but we didn’t have access to that bounty on this trip.
No one among us took any pictures with their iPads, thankfully. Casual snapshots were all iPhone and Galaxy Nexus and I used my Samsung camera for the important stuff. As I mentioned, it’s quite light and — with its pancake 30mm lens — even pocketable in my jacket. It does suffer from a lack of truly great lens, a problem for almost all sub-DSLR size camera systems. That meant some of my low light shots didn’t come out as well as I’d hoped and I didn’t get the kind of mind-blowing semi-focused photos a great DSLR can take when paired with a great (yet still affordable) lens. I used to rely on a combination of a relatively tiny Canon S-100 and a bulky, full size Canon DSLR. Sometimes the tiny camera let you down, but as long as you didn’t mind carrying around the bigger camera, amazing photos were easy. After this trip, I’m rethinking my switch the middle ground and its lack of upper-end greatness.
The iPads also served ably on the airplane trips out and back. No need to worry about power. Unlike a laptop, an iPad easily lasts for a full cross-continental flight, even showing videos the whole time. That’s a big relief when JetBlue’s multi-channel video system is showing reruns of Seinfeld and movies you don’t want to see.
In the end, I’d call our Post-PC vacation a success with just a few minor hassles. No need to lug that laptop around the world with you anymore. An iPad can set you free.
(Updated to include a way to unhide files and add them to a “library” for backup)
Basically, this post is a warning to anyone using the new File History backup program in Windows 8. The program is severely limited because it will only back up files in a few preset locations that can’t be expanded. If you have almost any third-party program that saves its own data, File History is leaving you exposed. There is a fix, but it takes a little mucking around.
In my case, for example, I have gazillions of email messages stored by the program Postbox. The mail is kept in a huge folder in my personal Windows user folder under PostBox’s own folder in the application data area. None of the stuff that your applications have saved here is backed up by File History — none.
And you can’t add it, either.
Update: As several commenters have noted, there is a way to get this data added to the backup set. In the Windows File Explorer, navigate to your personal directory and under the View section of the ribbon bar, click for a check in the box called “hidden files.” Then a folder in your directory called AppData should be exposed. Right click on the folder and choose “Include in library…” and add the folder to one of the libraries which is backed up by File History. Phew!
All that File History will save by default are “files that are in your libraries, contacts, favorites, Microsoft SkyDrive and on your desktop,” according to Microsoft. That is a huge hole, especially if you don’t rely on the My Documents, My Pictures and other “library” folders set up in Windows. Even if you do, third-party programs that store their data exactly where they are supposed to will not benefit from File History unless you use the trick above to add them.
That’s a shame because File History is supposed to be Microsoft’s version of the drop-dead easy to use Apple backup program Time Machine. Both work behind the scenes to back stuff up on an automatic schedule without the user having to remember. And both give quick access to old versions of files within the File Explorer/Finder program. But you can set Time Machine to backup anything from just a few files to your entire disk.
When Tim Cook took over as permanent CEO of Apple in 2011, he brought his unmatched, incredible decade-long track record as the Mozart of supply chain management. Under Jobs II, Apple got rid of its factories and outsourced all its manufacturing to quicker, cheaper Asian builders. Overhead was slashed, flexibility enhanced. As the iPod business grew into a titan, Cook was striking better deals, setting up faster supply chains, keeping the trains moving on time and frying it up in a pan.
And so when Cook took over as CEO, the fears and warnings were about everything else — how would Apple’s sense of style and design survive without Jobs? What would happen to innovation and creativity? Would there ever be another massively market disruptive product like the iPhone or the iPad again? No one — NO ONE — said wow, I wonder if Cook is up to the task of scaling Apple’s manufacturing and supply chain to deal with its tremendous rate of growth.
And then came the fourth quarter of 2012. Apple had an amazing, record breaking three months but it was not as big as it could have been and not as big as some Apple shareholders wanted. Listen to Cook on the company’s call with stock analysts today¹. What happened with iPhone sales? Supply constraints hampered sales, even of the older models. What about iPads? Couldn’t make enough iPads to satisfy demand. And even the lowly iMac? Took too long to bake ’em.
Cook emphasized the pent up demand. He wants you to think that all those unsatisfied customers are waiting, sitting on their hands (and credit cards) until Apple catches up. And I’m sure that’s true in some cases. But this was the holiday quarter, the quarter with Black Friday so named for as the day when the frenzy of sales pushes retailers into profits for the whole year. A lot of those iPads, iMacs and iPhones that were going under the tree (or the menorah), got replaced with something else, be it a Galaxy Tab, Coach briefcase or North Face winter running outfit.
For what it’s worth, I buy the explanation. I don’t think that the Apple gloom and doomers have it right, at all. This wasn’t the beginning of the end for Apple, not by a long shot. But irony of ironies, Cook aced the innovation, offered much sought after new products (maybe too many, introduced too close to the holidays, though) and then flunked the execution worse than Tom Brady’s fourth quarter comeback attempt against the Ravens last week. Ugly.
¹”We did have significant shortages due to robust demand on both iPad mini and both models of the iMac that persisted the entire quarter. And we are still short of both of those today as the matter of fact. Additionally, supply of iPhone 5 which short to demand until late in the quarter and iPhone 4 was short for the entire quarter, we believe that we can achieve a supply demand balance on iPad mini during this quarter and on iPhone 4 during this quarter. On iMac, we are confident that we are going to significantly increase the supply, but the demand here is very strong and we are not certain that we will achieve a supply demand balance during the quarter.” -Tim Cook, Jan 23, 2013 conference call