AT&T + Time Warner:

Good for the people? Or Bad?

By Shlomo Maital


   AT&T has just announced it is acquiring Time Warner for $85 b. The deal must be approved by the FCC Federal Communications Commission and antitrust authorities.

   What is going on here?

   Frank Biondi, former head of media giant Viacom, describes it succinctly. AT&T has 125 cell phone customers and a large number of cable TV customers. It is essentially a US ‘media and communications’ distribution company, one of the biggest. AT&T was once huge, was broken up by an aggressive anti-trust judge, and is now reforming and again becoming a giant player.

   Time Warner, including HBS and CNN, is a ‘content’ company. It creates the content, like the hit series Game of Thrones, that AT&T distributes.

   So, Biondi says, AT&T is buying, for $85 b. (14 times the value of Manchester United, for instance) “access to creative talent”. Because today the value in communications is not in the infrastructure and distribution, but in what you put onto this infrastructure. AT&T is buying a seat at the creativity table.

     Will AT&T favor, like a monopoly, content its own companies create? Probably not. If AT&T customers want to watch something else, and AT&T fails to provide it, they will lose millions of customers in the blink of an eye.

     I think that what is interesting about this mega-deal is this:   Ideas have become hugely valuable and creative talent is now the focus of competitive strategy.   If you are creative, if you have ideas, the AT&T+Time Warner deal says: The future is yours.

Nobel Prizes 2016

By Shlomo Maital


This year’s Nobel Prize winners:

       Medicine/Physiology: Yoshinori Ohsumi, Japanese cell biologist. He discovered how cells recycle their wastes – an amazing and complex process that keeps cells from choking on garbage. Ohsumi asked a question that intrigued him, but that interested few others…

       Economics: Oliver Hart (Harvard) and Bengt Holmstrom (MIT): contract theory. Especially “incomplete contracts”.   See Hart’s American Economic Review 2001 article on financial contracting — enlightening, especially for Venture Capital.

       Physics:   David Thouless, F. Duncan Haldane, J. Michael Kosterlitz.   Their mathematics (based on topology) revealed insights into ‘extreme state’ matter (e.g. very low temperatures, super-cooled, etc.), and may lead to important new products, perhaps in semiconductors and computing.

       Chemistry:   Jean-Pierre Sauvage, J. Fraser Stoddart, Bernard Feringa:   synthesis of molecular machines. These tiny machines, the size of a single molecule, can do actual mechanical work. Also may lead to important innovations one day.

       Note the common denominator: Willingness to ask really good questions, questions others aren’t asking,   ability to take risks in research, tackle very challenging hard problems, and in some cases, defy the establishment by choosing a research direction others think is a dead end.

   And the Peace Prize? To Colombian President Santos, and the peace agreement that ended 50 years of senseless civil war. We learn from Colombia what we already know, from Britain’s Brexit vote – beware of referendums, you cannot be sure what they will yield.   Colombia will revote its peace agreement, narrowly defeated in a referendum, and gain approval. But Britain? Britain will leave the EU, for certain, a result very few expected, with major consequences for Europe and the world.  

Hope for Alzheimer’s Cure?

By Shlomo Maital


Prof. Dan Michaelson

My family physician recently told me that about half of the elderly aged 85 and over have Alzheimer’s.   That should make Alzheimer’s a top priority for research money. But it is far from it.

Today’s Hebrew daily Maariv reports on a major breakthrough. Tel Aviv U. Prof. Dan Michaelson, along with his doctoral student Anat Bam-Cogan, have found a drug that can combat Alzheimer’s in mice. Here is the story:

     There are apparently quite a few ‘varieties’ of Alzheimer’s, just as there are types of cancer. Michaelson notes that 413 clinical trials, that tested 244 anti-Alzheimer’s drugs over the past 13 years, all failed!   Why? Maybe because Alzheimer’s is many diseases, not just one, he reasoned.

     Michaelson decided to tackle one type, related to specific genes ApoE3 and ApoE4.   Lab mice that have this defective gene develop Alzheimer’s. Michaelson tested the theory that the key protein that the defective ApoE4 gene makes fails to attach itself to fat cells properly, leading to the Alzheimer “plaque”. He contacted a biotech company Artery, and got from it a protein (peptide) that helps ‘stick’ fat cells to the protein. And it worked.   The peptide fixed the Alzheimer’s mice’s   cognitive problems and repaired the plaque in their brains.

     This is still a very long way from a drug that will help, or even cure, Alzheimer’s in humans. But it is a big step in the right direction.   We await more news from Dr. Michaelson, with hope.

Govt. Pays Taxes to Corporations: Why??

By Shlomo Maital


     Once corporations paid taxes to governments. It made sense. Companies benefit from services and infrastructure, so they should pay taxes, like everyone.

       But then, countries discovered they could play a win-lose game by offering corporations tax breaks (like Ireland’s 12.5% corporation tax) to lure them to come. We win, you (other countries, e.g. U.S.) lose.   Soon many countries were offering such tax breaks. And corporations grabbed every one. Legally. It is almost true that governments now pay taxes to corporations.

       Writing in the Oct. 5 New York Times (“Dealbook”), Russ Sorkin cites a study just released, that found that “73 per cent of Fortune 500 companies” (that is, 365 of them!) maintained “subsidiaries in offshore tax havens”. Apple alone holds $214.9 billion abroad and would owe $65.4 billion in taxes if it brought that money back to the U.S.

       The study shows how companies set up small subsidiaries, small enough to avoid reporting offshore profits; “27 companies reported 16,389 total subsidiaries (!) and 2,836 tax haven subsidiaries to the Federal Reserve – but only a small fraction of those were reported to the Securities Exchange Commission”.

         A furor arose over Donald Trump’s failure to pay income tax. But compared to the legal tax avoidance of companies sending money offshore, it’s a drop in the bucket.

         America could use a big dose of capital investment. But the money that could pay for it is sheltered abroad. How much? 58 Fortune 500 companies alone would owe $212 b. in federal taxes, if they were taxed properly.

         My questions: Who created these loopholes in America’s tax law? And why can’t legislators fix them?   Are Republicans so enamored by wealth that they approve this? Are Democrats so helpless they can’t take on tax reform?

             The Europe Union is trying to collect $14.5 b. in taxes from Apple. Apple CEO Tim Cook calls this effort “total political crap”.  

             The place to start is simply to require transparency. Nobody really knows how much money is sheltered abroad. Start by making companies report offshore holdings. And then – figure out how to make them pay taxes on them, no matter where they are.    


Quantum Computer: Breakthrough?

By Shlomo Maital


       After my blog declaring the repeal of Moore’s Law, and as semiconductor technology ‘hits the wall’, here comes a breakthrough, “the next big thing”. It’s very esoteric based on quantum physics. Here is the very well-written report by Ido Efrati from the Israeli daily Haaretz:

   Four experts at the Technion devise a step toward production of a quantum computer, in research recently published in the prestigious journal, Science. Their recent article, entitled, “Deterministic Generation of a Cluster State of Entangled Photons,” already praised by fellow physicists, represents a scientific breakthrough in quantum theory. The innovation was developed in the laboratory of Prof. David Gershoni of the Technion’s Faculty of Physics, in cooperation with doctoral students Ido Schwartz and Dan Cogan, and Prof. Nathaniel Lindner   and has the potential to influence the future of communications, encryption and computerization.

   Gershoni and his colleagues have tackled a major problem in attempts to develop quantum computers, coming closer to resolving the issue of how to create qubit units in an initiated and controlled manner to enable construction of such a computer.

Physicists and technology firms have pursued the idea of producing a quantum computer for about three decades, in hopes of transporting the world of information and computers to entirely different worlds. The idea goes back to physicist Richard Feynman who proposed the idea of quantum computerization in the 1980s. In effect such a machine would process data but in contrast to a classical computer, it would utilize the characteristics of quantum mechanics.    

   The difference is that whereas in the classical computer the basic unit of information is a bit,  (zero or one);  a quantum computer uses a quantum bit known as a “qubit.” The difference between the two units is enormous. (See Diagram above).

A quantum computer can more quickly calculate what could take the fastest conventional computers millions of years, if not more, to resolve. It can potentially contribute greatly to the fields of medical research, advanced artificial intelligence, securing information and developing codes, “and in effect any field where calculating power is of significance,” Gershoni said.

Life After Silicon:

The Age of the Cup-holder

By Shlomo Maital


   Most of us are blithely unaware of how much we owe to a law – Moore’s Law, named after Intel co-founder Gordon Moore, which says in simple language that every 12 months or so, the number of transistors in a given area doubles. In a 1965 paper, Moore used 4 or 5 data points to show that this had happened up to 1965, and he said it would continue for the foreseeable future.

   And it did..and how!  We now carry more computer power in a chip barely 3 sq. mm. than the 1976 room-size supercomputer designed and built by a genius, Seymour Cray.

     But what if Moore’s Law is about to be repealed? What if the future ends? As Francis Fukuyama wrote, in 1992, we are at “the end of history”;    are we at the end of the history of silicon?

     Yesterday I heard a brilliant lecture on this subject by Prof. Mark Horowitz, on Innovation in a Post-Moore’s Law World. Horowitz is a former Chair of Electrical Engineering at Stanford and is visiting my university, Technion. He delivered the annual Hershel Rich Lecture.

     Here are some of his key points:

* As we move down from IBM’s path-breaking one micron chip in 1974, to today’s 20 nanometer chips, 50 times smaller, we have reached the limit of Moore’s Law, mainly because the heat generated by these tiny powerful microprocessors is very hard to dissipate. Cooling limits further transistor doublings.   Mathematically:   “computing power” = energy per operation   x     operations per second. If we want to boost ‘operations per second’, we need to lower ‘energy per operation’..and we’re reaching the limit on that one.

* Result?   “In future, success will no longer be about technology development. It will be about finding the right applications of the existing technology”.  

     In other words: We have loads of computing power. Now we need to find ways to adapt it to create value.   The so-called Internet of Things is misleading. There is no “internet of things”.   It is in fact a broad collection of devices, and each device needs its own application, its own software, its own microprocessors, to enhance its value.  

   Horowitz noted that ITRS (International Technology Roadmap for Semiconductors) has for years done roadmap predictions of future technology, based on Moore’s Law. They have now stopped. No more roadmaps.   The end of history.

     What does this mean for entrepreneurs and innovators?   In future, there will be a huge premium for IT engineers who understand the technology, but who also have deep sensitive knowledge of business, customers, preferences and markets. Only this will enable us to have life after silicon. I think every engineering school should have a required course on Startup Entrepreneurship.   Silicon will no longer be a rapid-growth industry, it will become like steel and plastics, notes Prof. Horowitz — big, but stable.

     Sure, there may be a huge technological breakthrough. But Horowitz notes, it is unlikely, because developing it will take enormous resources, more than governments can afford, and more than private investors are willing to risk.  

     Prof. Horowitz has a powerful metaphor. In future, he noted, successful products will include many “cup-holders”.   A cup-holder is a place to put your coffee or soda, in a minivan or car. German carmakers started the idea. Today some vans have 16 or 17 such cup-holders. They are low-cost, and are highly appreciated, because they show the car-maker is aware of, concerned about, the lifestyle of drivers.

     Innovator: Can you use existing computer power, to create small low-cost add-ons (incremental innovation) that create great value?   Apparently, this will be our innovation lives – after Moore’s Law expires.

Middle Class Blues: A Different Narrative

By Shlomo Maital


   We are hearing endlessly about the struggling blue collar workers and the oppressed middle class, sinking into debt, losing jobs, struggling to stay afloat. We hear Donald Trump play on their fears and grudges.

     There is another narrative, one given in today’s New York Times by David Brooks. It is about resilient workers and middle class people, who adapt, shift jobs, lose one and gain another, learn new skills – and stay afloat, endure and even prevail. And there are lot of them.

     Here is how Brooks describes one such case:

   A few weeks ago I met a guy in Kentucky who’d lived through every trend of deindustrializing America.   He grew up about 65 years ago on a tobacco and cattle farm, but he always liked engines, so even while in high school he worked 40 hours a week in a garage. Then he went to work in a series of factories — making airplane parts, car seats, sheet metal and casings for those big air-conditioning fans you see on the top of buildings.   Every few years as the economy would shift, or jobs would go to Mexico, he’d get hit with a layoff. But the periods of unemployment were never longer than six months and he pieced together a career.

So, how did he piece together a career?

   His best job came in the middle of his career, when he was a supervisor at the sheet metal plant. But when the technology changed, he was no longer qualified to supervise the new workers, so they let him go.   He thought he’d just come in quietly on his final day, clean out his desk and sneak away.   But word got out, and when he emerged from his office, box in hand, there was a double line of guys stretching all the way from his office in back, across the factory floor and out to his car in the lot. He walked down that whole double line with tears flowing, with the guys clapping and cheering as he went.   We hear a lot about angry white men, but there is an honorable dignity to this guy.   Some of that dignity comes from the fact that he knows how to fix things. One of the undermining conditions of the modern factory is that the workers no longer directly build the products, they just service the machines and software that do. The bakers now no longer actually know how to bake bread.” But this guy in Kentucky can take care of himself — redo the plumbing at home or replace the brake pads.

And what was his ‘narrative’, his story, told to himself? One of betrayal, exploitation, deprival, social inequality?   None of that.

   It’s more of a reactive, coping narrative: A lot of the big forces were outside my control, but I adjusted, made the best of what was possible within my constraints and lived up to my responsibilities. ….

I adjusted. Made the best of what was possible. Lived up to my responsibilities.   This is a narrative that I believe is far far more representative of the working middle class, than the Trump “I’m-a-victim” narrative: “Washington screwed me, so I will vote for a scoundrel, because he expressed my anger, even though he hasn’t a clue about what middle class life is about.”  

People are basically resilient. They bounce back. And the ones with integrity do not cast ballots for those who cynically exploit the worst qualities among us – avoiding personal responsibility for our own fate.


Putin: Great Leader? Or Huge Failure?

By Shlomo Maital


U.S. Presidential candidate Donald Trump has expressed admiration for the Russian President Vladimir Putin, comparing him favorably with Barak Obama and calling him a great leader. In today’s New York Times, Paul Krugman adds up Putin’s achievements since he came to power in Russia in 1999.

   He has destroyed Russian democracy, creating a handful of billionaire oligarchs who support him while destroying others who did not. He has utterly failed to diversify Russia’s economy out of oil and gas, even though the old Soviet Union left behind superbly educated people, including many thousands of engineers and scientists who emigrated to Israel beginning in 1990, and who fueled Israel’s high-tech boom. (Many, of course, did not emigrate, but their skills were not made use of – except for Putin’s global hacking operations).

       According to New York Times columnist Paul Krugman, writing in today’s Opinion section,   Putin has shaped a massive Russian military —   which he used for grabbing part of the Ukraine and the Crimea. Crimea, once a tourist haven, has lost most of its tourist business, so it has become a drag on Russia’s economy.

       Why then is he so popular? Putin’s aggressive nationalism appeals to Russians, who seem to recall Stalin fondly and who are not at all fond of democracy, which brought them raging inflation and little else.   One can perhaps understand, partly, Putin’s popularity in Russia. But his popularity among Trump supporters?  

     Utter folly.

When to Trust Your Gut

By Shlomo Maital


Daniel Kahneman

Daniel Kahneman, a psychologist, won the Nobel Prize for Economics in 2002, for his pioneering contribution to how people make decisions under uncertainty.

In 2009 Kahneman debated Gary Klein, a senior scientist at MacroCognition,  about a crucial question: When should people trust their intuition, and when should they suspect it? The debate was published in the American Psychologist. Here is a brief summary, thanks to McKinsey Quarterly and their interview of the two following the original article:

   McKinsey Quarterly:  In your recent American Psychology article, you asked a question that should be interesting to just about all executives: “Under what conditions are the intuitions of professionals worthy of trust?” What’s your answer? When can executives trust their guts?”

         Gary Klein: It depends on what you mean by “trust.” If you mean, “My gut feeling is telling me this; therefore I can act on it and I don’t have to worry,” we say you should never trust your gut. You need to take your gut feeling as an important data point, but then you have to consciously and deliberately evaluate it, to see if it makes sense in this context. You need strategies that help rule things out. That’s the opposite of saying, “This is what my gut is telling me; let me gather information to confirm it.”

     Daniel Kahneman: There are some conditions where you have to trust your intuition. When you are under time pressure for a decision, you need to follow intuition. My general view, though, would be that you should not take your intuitions at face value. Overconfidence is a powerful source of illusions, primarily determined by the quality and coherence of the story that you can construct, not by its validity. If people can construct a simple and coherent story, they will feel confident regardless of how well grounded it is in reality.

McKinsey Quarterly: Is intuition more reliable under certain conditions?

   Gary Klein: We identified two.  First, there needs to be a certain structure to a situation, a certain predictability that allows you to have a basis for the intuition. If a situation is very, very turbulent, we say it has low validity, and there’s no basis for intuition. For example, you shouldn’t trust the judgments of stock brokers picking indivi dual stocks. The second factor is whether decision makers have a chance to get feedback on their judgments, so that they can strengthen them and gain expertise. If those criteria aren’t met, then intuitions aren’t going to be trustworthy.

   Daniel Kahneman: This is an area of difference between Gary and me. I would be wary of experts’ intuition, except when they deal with something that they have dealt with a lot in the past. Surgeons, for example, do many operations of a given kind, and they learn what problems they’re going to encounter. But when problems are unique, or fairly unique, then I would be less trusting of intuition than Gary is. One of the problems with expertise is that people have it in some domains and not in others. So experts don’t know exactly where the boundaries of their expertise are.

   McKinsey Quarterly: Yet senior executives want to make good decisions. Do you have any final words of wisdom for them in that quest?

     Daniel Kahneman: My single piece of advice would be to improve the quality of meetings—that seems pretty strategic to improving the quality of decision making. People spend a lot of time in meetings. You want meetings to be short. People should have a lot of information, and you want to decorrelate errors.

   Gary Klein: What concerns me is the tendency to marginalize people who disagree with you at meetings. There’s too much intolerance for challenge. As a leader, you can say the right things—for instance, everybody should share their opinions. But people are too smart to do that, because it’s risky. So when people raise an idea that doesn’t make sense to you as a leader, rather than ask what’s wrong with them, you should be curious about why they’re taking the position. Curiosity is a counterforce for contempt when people are making unpopular statements.    

How to be Passionate..and Compassionate

By Shlomo Maital


I once surveyed a group of 50 Israeli chip designers, gave them a list of key qualities that were important for innovators – and asked them to rank them.   To my surprise, “resilience” came up first, by far. Resilience is the ability to bounce back from failure, adversity, disasters, and continue on to your goal. It requires a great deal of mental toughness.

   Today’s New York Times column by David Brooks (Aug. 30) has many useful insights into this subject. “Making Modern Toughness” begins by quoting a common perception: “Today’s students are more accomplished than past generations, but they are also more emotionally fragile.”   Kids in earlier days were tougher, many of us in the older generation say.

     Brooks has second thoughts. “….let’s not be too nostalgic for the past. A lot of what we take to be the toughness of the past was really just callousness. There was a greater tendency in years gone by to wall off emotions, to put on a thick skin — for some men to be stone-like and uncommunicative and for some women to be brittle, brassy and untouchable.” The result, Brooks claims, was in some cases alcoholism or depression.

     So, if we rethink toughness, for the modern age, for the Fourth Industrial Revolution, what do we get? What does Brooks suggest?

     “The people we admire for being resilient are not hard; they are ardent. They have a fervent commitment to some cause, some ideal or some relationship. That higher yearning enables them to withstand setbacks, pain and betrayal.   Such people are, as they say in the martial arts world, strong like water. A blow might sink into them, and when it does they are profoundly affected by it. But they can absorb the blow because it’s short term while their natural shape is long term.   There are moments when they feel swallowed up by fear. They feel and live in the pain. But they work through it and their ardent yearning is still there, and they return to an altered wholeness.”

   In short: “True mental toughness that entrepreneurs and innovators need desperately come from the passion of believing fervently in a goal or mission. That that passion, too, is driven by compassion, by caring for others, and by the desire to change the world for them. In this way of thinking, grit, resilience and toughness are not traits that people possess intrinsically. They are not tools you can possess independently for the sake of themselves. They are means inspired by an end.   …. We are all fragile when we don’t know what our purpose is, when we haven’t thrown ourselves with abandon into a social role, when we haven’t committed ourselves to certain people, when we feel like a swimmer in an ocean with no edge.”

   I begin all my classes by asking students what their true passion in life is. Many do not know. They have not been asked that question, nor have they tried many different things to find out experientially. But often parents push their kids to ‘get on with it’, rather than try things.

        When are people really tough?   Brooks writes, “People are really tough only after they have taken a leap of faith for some truth or mission or love. Once they’ve done that they can withstand a lot.”

         Have you taken that leap of faith?   Changed your job, your profession, your destiny?

       “We live in an age when it’s considered sophisticated to be disenchanted,” Brooks notes.   “But people who are enchanted are the real tough cookies.”

           Innovator! Be enchanted. Find your enchantment. If you do you will be able to undergo an almost unlimited amount of adversity. That’s toughness, of the right kind.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
October 2016
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