Yesterday, as anticipated, Apple released their tablet product, the Apple iPad, with much fanfare and criticism. Amidst the technologies in the iPad, with the old (lithium-polymer battery technology, multi-touch) and new (iPad OS) was an important one: the Apple A4 chip.

In March 2009, about a year ago, Apple acquired Power Architecture fabless semiconductor chip company P.A. Semi. P.A. Semi aimed to build low-power, efficient, and fairly powerful chips to use in various applications. Then-CEO Dan Dopperpuhl noted that P.A. Semi aimed to develop chips that consumed ten times less power than conventional chips.

Now with their own in-house team to develop chips for them, Apple released the A4 chip, an ARM-based system-on-a-chip based on ARM Cortex A9 with an ARM Mali 5-series GPU. Rivaling other ARM-based SOAC platforms, like Qualcomm’s Snapdragon or Nvidia Tegra 2, it focuses, quite clearly, on mobile performance with very low power usage. P.A. Semi’s last product was the PWRficient chip, which was a dual-core Power Architecture-based chip that ran at 2GHz and consumed 5 watts (25 watts at peak) of energy.

What does the presence of an Apple-designed chip forewarn about the future of Apple products? There are a number of considerations with Apple designing their own chips. Here are some of them.

Approaching compete control of the computing experience

John Gruber of Daring Fireball noted something that Apple COO Tim Cook said in June:

“We believe in the simple, not the complex. We believe that we need to own and control the primary technologies behind the products we make, and participate only in markets where we can make a significant contribution.”
— TIM COOK

Indeed, through developing so much of their products in-house, like the battery, processor, and other key features, they’re finding ways to control the user experience of their products. And it’s working: their revolutionary lithium-polymer batteries coupled with the Apple A4 processor create not only a pretty dazzling graphics experience, but a long-lasting one. The ten-hour high load battery life and the one month standby (!) are indicative of Apple’s ability to take control of the experience—not to mention the presence of what could be an incredible amount of DRM and security built into the processor, moving from software security to hardware security.

Radical innovation has never been a trait that Apple has neglected to execute brilliantly on. But now, Apple is doing so by taking control of the entire computing experience, now even down to the silicon.

Radical differentiation from competition

Few technology companies try to specialize in the finer points in computing, namely the processor. Including Apple, until lately. The iPhone 3GS is powered by the ARM Cortex A8 ARM processor, with PowerVR SGX graphics. We haven’t really seen much that has been developed without ARM-manufactured chips, Intel, Qualcomm, or Nvidia.

Has the new chip scared the chip manufacturers? You bet, and it’s also had an effect on the top manufacturers. While Microsoft and Nintendo try to nonchalantly shrug off the iPad as ‘humorous’ and ‘unimpressive’, it is clear that Apple has something they don’t have: a few steps ahead in product technology. All of the mobile phone manufacturers are behind, and while they’re struggling to catch up in technology, Apple will be moving forward.

Limitless expansion of Apple products

With the Apple A4 processor, Apple set an example: with their in-house semiconductor team from P.A. Semi, they could not only design their own chip, but they could design a damn good one. This would allow for the limitless expansion of Apple products. While competitors are constrained by limitations like processor power and processor energy draw, Apple can get around these limitations. They’ve bought a company that allowed them to design an excellent, efficient processor. There are few things more difficult to design than the very processing center of a technology device.

Whenever the next iPhone comes out, we’ll see something like a 700MHz Apple-designed chip in it with a lithium-polymer battery, and when we find out how fast it is and the battery life, Apple competitors will be quite astounded. Repeat by applying knowledge gained from the A4 to a x86 architecture, with the MacBook, iMac, Xserve, and other future Apple products, and it’s clear that Apple could perhaps become the market leader in an incredibly large gamut of technology.

It’s more than a processor. It’s an indicator of how important Apple might be in the future to technology and to our lives.

Last week, Newsweek (sub. Washington Post/WPO) writer Daniel Lyons published an article entitled A Decade of Destruction, looking at the Internet’s impact on various types of media in the past 10 years. Lyons begins with:

The past decade is the era in which the Internet ruined everything. Just look at the industries that have been damaged by the rise of the Web: Newspapers. Magazines. Books. TV. Movies. Music. Retailers of almost any kind, from cars to real estate. Telecommunications. Airlines and hotels. Wherever companies relied on advertising to make money, wherever companies were profiting by a lack of transparency or a lack of competition, wherever friction could be polished out of the system, those industries suffered.

Ignore the fact that media of all types is meant to catch your eye and—nowadays—your click. Headlines and openers are editorialized for maximum sensationalism. The sad part is that this isn’t even at the highest crux of possible sensationalism: it’s almost true, too.

Lyons, we know that the internet has affected your employer’s business and of Forbes as well (where he served as senior editor previously). If there’s anything that the internet has really killed, it’s print media. Yes, it can be disemminated quicker on the internet. It can be pirated on the internet. It can be much harder to monetize on the internet.

And yes, advertising is hard on the internet. For too long, users have been able to enjoy being able to access information for free, getting used to and ignoring advertising, and condemning more intrustive yet more profitable and novel types of advertising, such as video advertisements and interstitial pages. Indeed, the money that allowed these users to enjoy free and open access to information originally blocked by a paywall leaked from media corporation balance sheets.

This cultured notion of so many things being free on the internet puts pressure on creators and makers of any kind of content or service, whether it be news, technology, data, or any other kind of information service, to go with one of two of the ‘internet consumer-friendly’ options:

  • release your information service for free.
  • release your information service for free and run advertising on it.

And of course, the straightforward but non-internet consumer-friendly option:

  • charge for your product.

Both of these can apply to literally any information product on the web. The former two allow for growth and traction and high losses, while the advertising won’t cover for as much as it did in traditional mediums where there existed one (i.e., print.) The latter allows for big profits.

That isn’t different from the traditional methods of marketing stuff in the real world. But the stigma associated with the dynamic on the internet is completely different: your product is expected to be free and immediately tryable.

Some startups get it. They don’t have a budget that the money could leak from, unless if they were a well-funded venture capital backed business. Profitability and its maximization are key in a top-notch startup environment, and such a leak equates to a startup finding that they had a loophole for everyone to get their product for pennies on the dollar. Devastating.

And that’s the stage that current media companies are starting to face.

Creative Destruction

Lyons brings up an extremely relevant and important point: we “have to endure a period of what economist Joseph Schumpeter called ‘creative destruction,’ as the Internet crashes like a tsunami across entire industries, sweeping away the old and infirm and those who are unwilling or unable to change.” Certainly—the internet, as an abstract entity, is the force that presses older systems to evolve or go away.

Creative destruction, associated with Austrian School economist Joseph Schumpeter, is described in his book Capitalism, Socialism and Democracy.

The technology and entrepreneurship community has its argument against the article, saying that it’s too bad that the companies fail to adjust and that it’s their own fault for taking so damn long to do so. But they have their own bias too: they’re the perpetrators of the creative destruction plaguing these companies. It’s like if radio broadcasting associations told unbudging record companies that they’re being too slow to adjust and are failing as a result. They know. They just don’t know how to coexist.

Entrepreneurs in particular are the largest perpetrators of creative destruction. This is seen in Schumpeter’s work and description of creative destruction, as well as in practice itself. Although the internet wasn’t exactly created by entrepreneurs, the disruptive technology that is being blamed for creating the critical mass needed to create creative destruction was, and still is, created by entrepreneurs.

What are some entrepreneurs doing in the current internet economy? Essentially: arbitrage. Here’s a bit from Lyons.

Newspapers are getting wiped out because the Internet robbed them of their mini-monopolies. For decades they had virtually no competition, and so could charge ridiculous amounts of money for things like tiny classified ads. This, we are told by people who are wringing their hands over the demise of newspapers, was somehow a good thing. Good or no, it’s gone, thanks to Craigslist, which came along and provided the same service at no charge.

Let’s assume for a moment that Craigslist is a regular dot.com (and not as described in the Wired article about Craigslist). Craigslist, the classifieds site, saw an opportunity to cash in on the growing void of decent classifieds on the internet. As a perfect arbitrage opportunity, they were able to execute and drive money away from newspaper sites and to themselves.1 Low operating cost. Attractive value proposition. High volume. High profits. In a general sense of creative destruction, the perpetrators, mostly entrepreneurs, are arbitrageurs, leaving older systems one question: adapt or be obliterated.

The paywall on some sites like the Wall Street Journal giving you a preview of the article and asking you to subscribe is probably the best conversion from the print world to the online world. Sure, you can read on if you’ve got the print version in your hands. Just pick up the paper and read it. But that’s not socially accepted: you don’t walk into a supermarket, grab a copy of the Times, and start reading.

It’s different on the internet. It’s so much easier to go to Google and search “username password wall street journal” and hit Results within the last 24 hours. Instantly, without the glares of supermarket customers, without the shame of leeching off of the store (everything should be free after all, shouldn’t it?), without the physical paper in your hands that you know doesn’t belong to you—there is that information. Not stolen in the traditional sense, but in a modern piracy sense.

So how do you evolve against these virtual paper-nickers? It’s quite tough, and it’s up to the print world to figure out how to weather the creative destruction and reconstruct. Indeed, it may affect the entire media industry itself. With less profits, less profitable items, and the expectation to keep up the same content quality and volume as before, the media industry is going to find it incredibly difficult to reconstruct to adapt to these new needs.

Lyons, however, does not mention the future much. Lyons talks about what has happened in the past and its impact on the past and present. He does not offer any insight on whether these changes are in the long run positive (dare I say—Realpolitik) in perhaps reconstructing the media industry, or are they indeed completely destructive to the continuation of the media industry as we know it.

There are new technologies that will allow us as consumers to reconsider our addiction to free on the internet by drawing us away from the internet on a computer and rather to the internet as the framework for communication. A familiar example is the Amazon (AMZN) Kindle, which over Amazon Whispernet delivers newspapers like you knew them for a fee.

Both parties need to do some reconsideration on their parts. This, along with Gutenberg’s press, digital cameras and film, radio, and computers themselves, is but another instance of metamorphosis and radical change under creative destruction, and for it to be weathered, the same processes of reconsideration and reconstruction will need to apply.

1 In actuality, Craigslist is not so much taking business away from a certain market, but rather destroying their market entirely, as they make a sliver of the money that used to be in the classifieds market, while owning it. It’s like if a competing coffee shop stole all of Starbucks’ customers as they sold good coffee for $0.01 per cup. Sometimes creative destruction equates to market destruction.

There is a rather new type of venture capital form that is slowly gaining ground. It’s a fusion of angel and venture capital that combines the best of the two creating an excellent middle ground for raising capital.

SiteAdvisor and Hunch co-founder, angel investor, and startup icon Chris Dixon announced the launch of seed-stage venture capital firm Founder Collective today, forming an entrepreneur-backed firm making investments worldwide. Headquartered in New York and Cambridge (MA), it is staffed with a number of serial entrepreneurs. In addition to Chris Dixon, it includes angel investors Eric Paley, David Frankel, Bill Trenchard, Mark Gerson, Micah Rosenbloom, and Zach Klein.

The notable part of Founder Collective is that all of the partners have been founders or co-founders of a startup, and most of them have done angel investments in the past. The pool of the investments that they have done is available on their Companies page, which represents the depth of the angel investments they have collectively done to date.

In Chris Dixon’s blog article, he talks about the new adapted private capital firms.

We think of ourselves as part of a new wave venture firms led by Y Combinator, First Round, Maples, Ron Conway/Baseline, and Betaworks, among others, that have adapted to a world where venture capital is abundant but authentic seed capital and, more importantly, mentorship from experienced entrepreneurs, is scarce.

The Mark Bao Journal drew some insights from Marc Andreessen’s new firm Andreessen Horowitz, a new kind of venture capital firm based on knowledgeable, serious, and supportive investments. Although it only focuses on seed-stage investments while Andreessen Horowitz does seed and more, Founder Collective is in the same vein of this new kind of metamorphosed private capital firm, a modern capital firm.

Adapted capital firms have a number of advantages over older capital firms.

  • backed by entrepreneurs, they leverage the same knowledge as older (and prestigious) Sand Hill Road-esque firms like Sequoia Capital, and offer support from the knowledge they have gathered over the years—as entrepreneurs.
  • the firms are usually backed by at least a portion of partner money, which allows the partners to have the same crucial “investing with my own money” approach that angel investors have, while increasing the volume of money that they can invest with, using outside capital.
  • there is greater incentive for success. Not only do partners take their time more with their money (since a portion of it is theirs), there is a higher chance that they will work closely with the company to make it succeed. This comes from the angel side of the metamorphosical Angel-VC fusion.
  • as a result, there is a greater emphasis put into the relationship with the partners of the firm, rather than just having a good place to get money from. There is greater value to applying to a adapted capital firm, since it doesn’t only come with money: it comes with dedication of partners and connections, not completely unlike the Y Combinator or TechStars programs (but definitely not completely similar.) This is what Dixon mentions is part of “authentic seed capital.”
  • seed stage, while done at a more unstable stage of a company, is lucrative in the case of a successful exit. In many instances, a successful company had a lower valuation during seed-stage funding, which generally means a larger multiple of return for a seed-stage funding business (for a successful business.)
  • the partners know what your product does and what’s going on. In many venture capital firms, the senior MPs are quite knowledgeable about the area that they invest in, such as technology. However, the rest of the staff decrease in knowledge about the sector. Zynga CEO Mark Pincus spoke at Startup School 2009 about a junior VC with no knowledge in technology taking over his board at one of his past companies.
  • smaller core staff means more attention by the people that matter.

Founder Collective poses itself as a more accessible firm than Andreessen Horowitz. Founder Collective at least has a website, and one can connect to the partners at the firm; on the other hand, Andreessen Horowitz does not have a website and the only way to truly get to Andreessen or Horowitz is to know somebody to connect them. Although Founder Collective is a larger (in staff, not fund balance) firm than Andreessen Horowitz, they will most likely practice the same thing.

Though there’s one small thing that I’d like to note that is interesting, from Dixon’s blog post:

We try to be respectful. We’ve all sat in countless meetings where VCs show up late, email while you are presenting, and generally act arrogant and dismissive. We try really hard not to be like that.

Part of the venture capital culture is intimidation and a bit of disrespect, to show who really holds the power in the transaction. (Not all venture capitalists do this, but it seems like something that generally is associated with venture capital.) And indeed: part of the disdain associated with venture capital is with the venture capitalists that have this attitude. Take a look at TheFunded.

The new adapted capital firm is a new movement in funding for businesses. Time will tell how well these turn out—but when you put together established, proven startup entrepreneurs, with rigorously tested new startups, it’s surely going to produce industry-changing effects.

Google (GOOG) CEO Eric Schmidt said yesterday on CNN an interesting view on their business:

“Hopefully we won’t repeat the mistakes that Microsoft made 10 years ago that ultimately led to all these things that happened to them.”

Some of these mistakes include a lot of anti-trust and monopolic actions, profit ploys gone awry ending in lawsuits, privacy failures, and refusal to cooperate with competitors. These, along with some instances of not-so-great software (looking in your direction, Vista), have tarnished Microsoft’s (MSFT) business.

Eric Schmidt is trying to portray Google as a Good Business. They’re not going to make the same mistakes as Microsoft: they’re going to be truthful and follow Don’t be Evil. They’re going to aim for transparency. Are they truthful about that, though?

Many businesses in the world, without lies and fraud, would be well out of business. This includes companies like Cash4Gold and MLM scams. So would a lot of financial institutions, if it weren’t for the bailout. I have a personal gripe on the bailout. Why? NASA 2009 budget is 17.2 billion. National Institutes of Health 2010 budget is $6 billion for cancer research. TARP: $700+ billion.

Good Business and Google

Good Business entails transparency. Mad, mad profits more likely than not entails some kind of fraud going on. Google says they’re going to forgo these mad profits—and fraud, for that matter—and focus on the customer. Making the customer the top priority is something that is—surprisingly, as well as irrationally—lost in some modern businesses.

And we’re seeing a lot of great strides from Google to this effect: Google Dashboard, a tool that allows Google Account users to see what kind of information is associated with their Google Account, was introduced on the Google Blog in an article called Transparency, choice and control — now complete with a Dashboard!

“Over the past 11 years, Google has focused on building innovative products for our users. Today, with hundreds of millions of people using those products around the world, we are very aware of the trust that you have placed in us, and our responsibility to protect your privacy and data.”

Or—Google’s Data Liberation Front: their homepage states their mission: “Users should be able to control the data they store in any of Google’s products. Our team’s goal is to make it easier to move data in and out.”

The risk is huge, too. It’s not just that Google participates in far fewer fraud than most businesses of similar influence. They take the risk of losing customers that realize how wide the gamut of knowledge Google knows about them. One notable example is Google Dashboard: many users responded with “wow—Google knows a lot about me. Should I be concerned?” And if they are—Google is making it that easy to check out of itself.

Others said that among the privacy issues and information issues Google has, the Google Dashboard is like British Prime Minister Neville Chamberlain’s 1937 appeasement towards Nazi Germany: Google gives us a bit of what we want to see to make us think that they’re serious about their responsibility of protecting privacy and transparency, but in the long run they really, really want the data.

The great part about Google and Good Business? Customers get it. Customers appreciate the transparency, which makes it hurt just a bit less for Google on their balance sheet. In the long run, hopefully Good Business drives the following profit inequality: Bad Business < Business < Good Business.

Fantastic. One of the most important technology businesses is promoting Good Business through transparency and not being Evil. Google has its problems, and many, many instances that they have acted in an evil way. And whether this will hold for the next ten years is still up in the air. However, they’re taking a positive direction, and for a 10-year-old technology company with massive market share and massive influence, and massive profits and market capitalization, it’s pretty damn impressive.

Gist: Android 2.0 SDK released, Motorola Droid and HTC Droid Eris to launch on Verizon on Nov 6, as rumored by Boy Genius Report. Hardware has always been the bottleneck on Android, among other problems. The marketing by Verizon making Droid a serious mobile device for the alternative iPhone market as well as the excellent hardware on the Motorola Droid, and the polished Android 2.0 Eclair OS, will allow Android to become more mainstream.

Google (GOOG) has made official the new Android 2.0 SDK, which allows the new 2.0 “Eclair” APIs to be used in Android applications, including improved bluetooth, multitouch, sync, account management, and, of course, support for new Android 2.0 devices such as the Motorola Droid. The new SDK update is downloadable immediately. Android 2.0 official video is at the bottom of this article.

Leading mobile industry news and insider source Boy Genius Report reports that the Motorola Droid (MOT) and HTC Droid Eris (2498.TW), two new Android 2.0 Eclair devices, will hit the stores on November 6 on the Verizon Wireless (VZ) network.

The Droid devices, highly hyped by Verizon as the iPhone killer, has been the subject of quite a bit viral marketing and noise in the mobile industry. Earlier this month, Verizon launched a mysterious marketing page for the Motorola Droid at DroidDoes.com, a direct attack against the Apple (AAPL) iPhone device’s shortcomings.

I’ve recently moved from bearish to bullish on the Android platform. The first T-Mobile Android G1 device wasn’t polished and didn’t at the time seem like a viable competitor to the iPhone.

However, the Motorola Droid could be a huge development in the Android environment. Droid represents a serious advance in promoting Android as a serious device, built and supported by two serious mobile companies. The specs of the device (the same processor as the iPhone 3GS and the Palm Pre, large screen, full of memory, ready for backgrounding applications, and more delicious specs) will hold its claim to fame as the premier Android hardware.

The bottleneck to the proliferation of Android has partly been the hardware that it runs on. The G1′s hardware didn’t cut it, especially since Android and all Android applications operate on Java, which is a notoriously slow platform. (EDIT: No, it isn’t, I’m wrong; I had neglected to mention that the Android platform has a custom build of Java called Dalvik.) The other bottleneck is the App Store, which, although it will improve over time, the derivative of available applications needs to start getting better. And with the new SDK and excellent new Android 2.0 Eclair, we may be seeing real changes soon.