I have been spending the past few days with American military forces in the Persian Gulf region. Everywhere I have gone with a group from the Council on Foreign Relations, military briefers have sheepishly prefaced their remarks by saying, “I read that story about PowerPoint, but I have a few PowerPoint slides I’d like to present anyway.” The story they’re referring to is this New York Times article, which suggests that the military is dangerously over reliant on this Microsoft program, which makes it all too easy to substitute glib bullet points for serious thought about pressing issues. Granted, PowerPoint in the right hands can be an efficient way to convey a lot of information, but Brig. Gen. H.R. McMaster makes a good point when he says: “It’s dangerous because it can create the illusion of understanding and the illusion of control. Some problems in the world are not bullet-izable.” Undoubtedly true, but as my experience of the past few days demonstrates, PowerPoint isn’t going away anytime soon.
If only officers devoted as much time to the study of military history and strategy as they do to creating PowerPoint presentations, I suspect our armed forces would be even more formidable than they already are. And this is an addiction that is spreading: Armed forces tutored by Americans, including those of Afghanistan and Iraq, are using PowerPoint too. I’m generally a fan of American imperialism, but this is one habit we might be better off not exporting.
Last week, the two most significant figures to emerge from the technology industry, Bill Gates and Andy Grove, offered views about how capitalism can solve complex social problems. Their thinking could not be more different, and the differences are instructive — and not favorable to Gates.
Gates, the co-founder of Microsoft, was at Davos, where he delivered a much-publicized speech advocating “creative capitalism.” The phrase has a nice ring, and Davos major domo Kurt Schwab endorsed it as an “enlightened” view of capitalism. In fact, it was remarkably unimaginative. Gates argued that business needs to “stretch the reach of market forces,” because there are so many places in the world where capitalism has not yet worked. He said that technology and micro financing can provide solutions for business, health, and social problems in the developing world.
All this is unobjectionable. Indeed, it is precisely what all smart companies have been doing since globalization became a reality. Everyone from soap makers to vaccine manufacturers has been figuring out how to create very inexpensive versions of much-needed products. This is how capitalism adapts to new situations, although not every business learns. Where capitalism is failing in the developing world, it is more often due to the absence of political freedom – a subject apparently too sensitive for the international harmony at Davos.
If you want to take a deeper look at creative capitalism, read the current Forbes article on Andy Grove’s efforts to advance research on Parkinson’s Disease. Grove, the co-founder and former CEO of Intel, has consistently proven to be a much deeper thinker than Gates on social and public issues. When he examined how the National Institutes of Health and leading pharmaceutical companies were dealing with Parkinson’s (he was diagnosed with the disease in 2000), he realized that not enough people were asking why there had been so much failure and why so few new treatments had emerged.
The Forbes article provides an entirely different view of how private wealth can bring fresh thinking to the work of government and corporations. The amount Grove is spending is a fraction of what the Gates Foundation has, but you do get the sense that his “creative capitalism” is far more rigorous than what Gates has in mind. For Grove, the problem isn’t the nature of capitalism, it is the lack of contrarian second-guessing within business and governments that is the real enemy of innovation. This doesn’t go down as well as talking about the limits of capitalism. But it strikes me as a much smarter critique of market failures.
With a market cap of $215 billion, Google has become the second-most valuable technology company after Microsoft. An article in the New York Times provides a fascinating glimpse of how Google has pulled off that feat in less than ten years.
“Conventional software is typically built, tested and shipped in two- or three-year product cycles,” the article notes. “Inside Google, Mr. [Eric] Schmidt [the CEO] says, there are no two-year plans. Its product road maps look ahead only four or five months at most. And, Mr. Schmidt says, the only plans ‘anybody believes in go through the end of this quarter.’”
As an example of how this “quicksilver” culture works in practice, the article offers the story of a new Google product:
Early this month, Google released new cellphone software, with the code-name Grand Prix. A project that took just six weeks to complete, Grand Prix allows for fast and easy access to Google services like search, Gmail, and calendars through a stripped-down mobile phone browser. (For now, it is tailored for iPhone browsers, but the plan is to make it work on other mobile browsers as well.)
Grand Prix was born when a Google engineer, tinkering on his own one weekend, came up with prototype code and e-mailed it to Vic Gundotra, a Google executive who oversees mobile products. Mr. Gundotra then showed the prototype to Mr. Schmidt, who in turn mentioned it to Mr. [Sergey] Brin [Google co-founder]. In about an hour, Mr. Brin came to look at the prototype.
“Sergey was really supportive,” recalls Mr. Gundotra, saying that Mr. Brin was most intrigued by the “engineering tricks” employed. After that, Mr. Gundotra posted a message on Google’s internal network, asking employees who owned iPhones to test the prototype. Such peer review is common at Google, which has an engineering culture in which a favorite mantra is “nothing speaks louder than code.”
As co-workers dug in, testing Grand Prix’s performance speed, memory use and other features, “the feedback started pouring in,” Mr. Gundotra recalls. The comments amounted to a thumbs-up, and after a few weeks of fine-tuning and fixing bugs, Grand Prix was released. In the brief development, there were no formal product reviews or formal approval processes.
Over at contentions, Max Boot has written skeptically about the fact that I have written skeptically about a new Defense Science Board study, which raises alarms about the Department of Defense’s vulnerability to cyber-attacks.
I had wondered, “if our adversaries are as good as we are saying they are at exploiting vulnerabilities in our technology, why are their brilliant programmers not going off on freelance missions to tap in, say, to the electronic systems of a Goldman Sachs and transferring its assets to themselves?
Max says that “the short answer is they are doing precisely that. It’s just that the public doesn’t hear much about it because the targeted institutions want to keep as quiet as possible for obvious reasons, so as not to encourage copycats and not to endanger the confidence of their clients, investors, and counterparties.”
This I very much doubt. Major financial institutions operate in a highly regulated environment and are simply not permitted to conceal massive thefts. The big investment houses that do business in the United States are required to turn over immense reams of data every quarter to the Fed; they are also under intense scrutiny by the Securities and Exchange Commission. Most of them are publicly held. It is inconceivable that some hackers could siphon a couple of hundred millions bucks from, say, Lehman Brothers, without shareholders learning of it. Even if the banks had the legal right to conceal massive thefts, I doubt they could. These kinds of institutions may not be quite as colander-like as the CIA, but if millions have been stolen from their coffers via a hacker’s keystroke, such juicy information would surely leak.
Like Max, I believe in protecting ourselves from all sorts of emerging threats, from nano-robots armed with lethal bacteria to Iranian ICBMs tipped with ayatollahs. But I don’t believe in developing a military policy based upon gropes in the dark.
This morning, the New York Times reported that Chinese authorities, working with the FBI, seized more than $500 million of counterfeit Microsoft and Symantec software and arrested 25 people involved in the counterfeiting operation. “This is a real milestone,” said David Finn, Microsoft associate general counsel. Finn is right. The Chinese deserve great credit for busting a ring that looks as if it were responsible for at least $2 billion of pirated software sales. (As Gao Feng, Deputy Director General of China’s Ministry of Public Security, has said, profit margins for software piracy exceed those for drug trafficking.)
Unfortunately, with those enormous profits, counterfeiters have been able to buy off the political system maintained by the Communist Party. Officials at the lowest rungs of that organization personally profit from protecting counterfeiters and often own part of the counterfeiting factories. The officials then buy protection for themselves from their superiors in the Party’s entrenched patronage system. The upshot of all this? Piracy in China is not going away anytime soon.
So what can foreign owners of intellectual property do? For one thing, they can publicly demand that Beijing protect their rights as vigorously as it has protected the five Fuwa, the cutesy mascots for the 2008 Summer Olympics. China has stopped counterfeiters from knocking off Beibei the fish, Jingjing the panda, Huanhuan the Olympic flame, Yingying the Tibetan antelope, and Nini the swallow. Yes, the latest raid reported by the Times is good news indeed, but there’s a lot more the Chinese government can—and should—do.
Yesterday, China announced that it is investing $3 billion of its foreign exchange reserves in the Blackstone Group, a New York private equity firm. The investment gives Beijing a potentially higher return on its $1.2 trillion of reserves, which are currently invested mostly in low-yielding debt instruments.
There are few coincidences involving China, and the timing of the announcement comes at a crucial time in Sino-American relations. A large Chinese delegation arrives in Washington this week for the second round of the Strategic Economic Dialogue. It will have limited flexibility and, as I explained in an earlier post, will not be able to make many concessions to the United States. This is also a politically sensitive moment within China, on account of the 17th Communist Party Congress, which will be held later this year.