Gambling

There's an odd phenomenon you can observe in the UK.  I've noticed it recently a couple of times on the flagship morning news programme "Today" on BBC Radio 4.

When talking to investors or businessmen and trying to disparage their efforts to make money, particularly on the stock market, the interviewer will accuse someone of "gambling".  Gambling, you see, is bad, while investing, presumably, is good.

But is there really any difference?

One of today's (and "Today's") news stories is the apparent suicide of Adolf Merckle after losing a huge amount of money, a large chunk of it apparently "gambling" that Volkswagen shares would fall when, in fact, they rose spectacularly.

Was this a gamble, or an investment that went wrong?

The old proverb claims that you have to "speculate to accumulate".  In the sense that any investment involves risks and that higher returns involve greater risk, this is true.  Putting money in the bank is low risk (we all hope - though even this is not completely certain).

Investing in shares is higher risk - there's usually more chance of a company going bust and wiping out the value of your shares than there is of the bank disappearing - but the return on the investment may be greater.  Note the word "may".  There is no guarantee, of course.  Most equity investments at the start of 2008 will have suffered a pretty painful loss in value during the course of the year.

"Shorting" shares - taking a view that their price is too high and that it will therefore fall - can be riskier still, in the sense that you can lose more money than your initial stake if you get things badly wrong.

Does that mean that an investment in shares is a gamble?  I think so.  I think that much (most?) of what we do in life involves risk and so many activities are, in a sense, a form of gambling. Does an investment magically transform itself into a gamble when it goes wrong?  That would be ridiculous.

So why do BBC interviewers still persist in trying to put their interlocutors on the back foot by accusing them of gambling?  I think it tells you more about the BBC, and perhaps the persistent anti-business streak of much of the British establishment, than it does about the people they interview.

IT management software: don't build something too new

Pick any category of enterprise software and you will probably find a whole slew of products that do much the same thing.  And it isn't necessarily the case that the  most interesting, useful or innovative products thrive.  That certainly seems to be the case in IT management software (IT service management, network management, asset management and the like - these are the areas I know best and what I'm referring to here).

Why is this?

Many new products originate in start-up companies.  Even if the company starts with an idea that is truly novel, there are strong pressures to make it sound familiar, not least because the bulk of potential buyers are unadventurous and buy things that sound familiar.  There are other pressures too, such as marketing and visibility.  If you want your product to appear in something like a Forrester "Wave" or a Gartner "Magic Quadrant" then you need to have the analysts recognise your product as one of a number in a more-or-less established category.

So even if you go to the bother of creating something shiny and new, you may well end up trying to make it look familiar.  You don't want to be in a category of one: it's hard to be visible if there are no direct competitors for you, your prospective customer and everyone else to compare you with.

Think about the exits for a software company.  With little happening on the IPO front, the most lucrative exit may well be a sale to one of the existing players.

There's been a lot of consolidation in the enterprise software market.  In the IT management space, it's easy to come to the conclusion that the big four (IBM, HP, BMC, EMC) do no research of their own and instead just buy start up companies to acquire new technology. Of course this isn't completely true, but if you're running a thriving IT management software start-up, selling your company to one of these vendors may well be your fast track to a yacht, bigger house and all the rest.

Each of these vendors wants to have a product in every category, so they end up doing lots of acquisitions, at least one in each category.  If you are not in a recognised category, then you're less likely to be acquired - and your exit is less likely to be lucrative as a result.

So one lesson of IT management software is to build stuff that isn't too new or too remarkable.

I plan to write some more about how this creates opportunities and challenges for new vendors in a future posting. Any comments?

Torture bad, counterproductive, recruits terrorists

Bruce Schneier's blog has a couple of nice quotes from Matthew Alexander, a former interrogator with the US in Iraq.

Interestingly, it seems to echo what some others with experience of interrogation say.  David Cornwell, the author who writes as John Le Carre worked for British Military Intelligence way back and says much the same in this interview.

No surprises.  Do bad things and right thinking people will get upset and decide you are worth fighting.  That's why it's so sad that we've allowed ourselves to be associated with despicable behaviour in Iraq and elsewhere.  

Gaza and Israel

Israel's invasion of Gaza is the front page news in today's serious British newspapers (the ones that aren't more concerned with the cosmetic surgery of pointless celebrities).

Clearly Israel has to do something about the hundreds of rockets that have been fired into its territory.  I have much more sympathy with Israel's retaliation than with our own (British) involvement in the second Iraq war.  How many Iraqi missiles had been fired at Britain or Britain's allies before our government felt justified in invading Iraq?  None.  The invasion led, directly and indirectly, to the deaths of many tens of thousands of Iraqis.  By that standard, what is happening now in Gaza seems like a minor incident.

It is not a minor incident, of course.  And the deaths of hundreds of Palestinians is unacceptable, as is the completely indiscriminate firing of missiles into Israel by Hamas.

In the lunchtime news ("The World this Weekend") on Radio 4, a Hamas member of parliament was asked why his organisation continued to fire missiles into Israel.

"Because we want peace" was his response.  (I believe those are the words he used - if I have them slightly wrong, I apologise).

Clearly the Hamas policy of firing missiles has failed to bring about the desired end, at least in the short term.

I suspect that Israel's approach may be just as futile in the longer term.  

With a huge effort and significant loss of life (mainly Palestinian lives) Israel may bring about some kind of halt to the firing of missiles in the  short term, but it is hard to see this as anything other than temporary until both sides acknowledge that long term peace will not be realised through force.

Worrying about something different for a change

Having been pondering the economic crisis, global recession or depression, the return of mass unemployment, jobless bankers roaming the streets and all the rest, it almost makes a pleasant change to find something new to worry about.  How about the environment?

I've come across several items recently which have given me pause.

First, an interview with Chris Priest, a researcher with HP Labs. Chris has contributed to a report called Climate Futures, responses to climate change in 2030 (PDF).  It makes interesting reading, though the interview itself, available as a podcast from the Redmonk site, gives a good summary.

The report describes five different possible scenarios for the world in 2030, ranging from the relatively benign, in which technology allows us to continue living our lives in much the same way as we do now, through to a protectionist world in which governments are forced to take drastic action against widespread environmental change and the consequent social disruption.

Next was a report on the plagues of jellyfish which are appearing around the world, one particularly slimy manifestation of environmental change.  I saw this mentioned first in a typically irreverent report in the Register.  You can find more detail at the National Science Foundation.

Finally, the way we have abused the oceans through the dumping of waste, spillage of pollutants and years of massive overfishing are the subject of a special report in this week's Economist (December 30th).  The link is here.  

The report is 16 pages, if not of doom and gloom, then certainly of material that fails to raise a smile. It makes the good point that we are far too late to "save" the oceans, if by saving, we mean the restoration of the seas to their state before industry changed them.  But if we are to prevent much more damage, we need effective international cooperation.  Sounds problematic to me. 

All rather depressing.