Part of the problem is that many technology leaders are neurotic. They need to be: nobody really knows what is going to work and your idea will most likely fail. So we favor CEOs who combine unjustifiable confidence, foaming and often justified paranoia, youth, and an engineering degree. Stir in a large quantity of money and you are more likely to breed a predatory peacock than someone with memorable management insights.

The great exception is Andy Grove, the legendary CEO of Intel. Many Silicon Valley CEOs are in awe of Grove – and this is not a group that is easily awed. In the early 1990s, Intel was a successful fast-growing public company that had created and dominated the global market for memory chips. Grove stood up and announced that memory chips had become a lousy business, so Intel would abandon it and start selling microprocessors instead. This was like McDonalds announcing that they were quitting the burger business and would instead become a chain of gourmet espresso cafes. They would still be in the food business, but the skills, the product marketing, the branding, the pricing, the customers, would all need to change radically and quickly. Grove pulled it off and, perhaps as remarkably, wrote two classic management books afterwards: High Output Management and Only the Paranoid Survive.  

If Andy Grove has a doppelganger, it is surely Ben Horowitz. Both are foreign-born: Grove is Hungarian; Horowitz is technically a Brit. Grove graduated from UC Berkeley in the early sixties, while Horowitz grew up in Berkeley in the mid sixties. Both have Jewish ancestors in a valley that seldom acknowledges the leadership contributions of those raised Jewish (a quick count would seem to include current or past leaders of Intel, HP, Google!, Yahoo, 3Com, Oracle, Facebook, and Applied Materials). Horowitz joined Silicon Graphics out of college and followed its CEO Jim Barksdale to Netscape, where he went to work for Mark Andreessen, the wunderkind author of the first practical web browser and popular symbol of technology entrepreneurship. Horowitz became Netscape’s first product manager.

After AOL bought Netscape, Horowitz and Andreessen teamed up to form Loudcloud, one of the first companies to host software as a cloud-based service. Horowitz served as CEO. The company was founded on 9/9/99 and went public in 2001. Shortly thereafter, Horowitz had his Andy Grove moment: like memory chips, cloud hosting was quickly becoming commodity. Horowitz sold the managed services operations to EDS in 2002 and focused instead on selling the software that they had developed to run Loudcloud. Enterprise software was a completely different business than managed services, which at the point Horowitz made the change accounted for 100% of Loudcloud’s revenues. Horowitz renamed the business OpsWare, aquired several companies, grew OpsWare to $100 million in revenue and sold it to HP for $1.6 billion in cash. After a stint as a senior VP at HP, Andresseen and Horowitz formed a venture fund and now dispense wealth and wisdom from a nice suite of offices on Sand Hill Road. (They invest in more than startups; among other things, they own a majority of Skype).

Following his hero Grove, Horowitz has taken to the pen. This being 2010, he publishes blog posts, not books. Most posts are truly insightful, sharply written, and prefaced by an epigram from a rap artist or two (a flourish that somehow escaped Andy Grove).

A sample from Ben’s Blog: 

• Why We Prefer Founding CEOs. 

"The technology business is fundamentally the innovation business. Etymologically, the word technology means “a better way of doing things.” As a result, innovation is the core competency for technology companies. Technology companies are born because they create a better way of doing things. Eventually, someone else will come up with a better way. Therefore, if a technology company ceases to innovate, it will die.

"These innovations are product cycles. Professional CEOs are effective at maximizing, but not finding, product cycles. Conversely, founding CEOs are excellent at finding, but not maximizing, product cycles. Our experience shows—and the data supports—that teaching a founding CEO how to maximize the product cycle is easier than teaching the professional CEO how to find the new product cycle.

• Ron Conway Explained 

"... Ron Conway has invested in a huge percentage of the top technology companies in the world, but entrepreneurs often ask me why Ron would be a good investor for them. When I talk to venture capitalists, they know that Ron is important, but they seldom know why. Gary Rivlin, despite writing an entire book on Ron, completely failed to understand what Ron does (which is why the book is so bad and not worth reading). Speaking as an entrepreneur, if I were to start a firm today and could only have one investor, it would be Ron Conway. This post explains why...

“….we were really in trouble because the customer was signing a long-term contract with our competitor later that week. We had already appealed to the President of the division; the only further escalation points were to the CEO or Chairman. We had already tapped out our VC contacts. If we lost this customer, as Alfred dryly pointed out, it was unlikely we’d be able to get our revenue over our fixed costs in any reasonable timeframe. I asked Alfred what about any of our angel investors, so we went through them and none seemed likely to be able to pull this off.

“Alfred said, “Well there is this one other investor, Ron Conway.” I didn’t know Ron at the time, and his investment was quite small. But we had nothing to lose by reaching out. So sometime after 11pm, I wrote Ron and essentially said: “hello, you don’t know me, I’m an executive at a company you’re an investor in, and we need a meeting—in person—with the CEO himself of this Fortune 50 company—this week—and if you can’t make this happen, hey that’s ok, but we may be going down—sorry.”

Ron wrote back in literally 2 minutes and said, in what I have learned is Ron’s distinctive email style (immediate, short, all caps), “AM ON IT.” The next morning, Ron had done it. Tellme went on to win an eight figure contract that led to a nine figure contract. That’s a lot o’ money from a desperate email from someone he’d never met at 11pm.

• Why is it Hard to Bring Big Company Execs into Little Companies? 

"So you’ve achieved product market fit and you are ready to start building the company. The board encourages you to bring in some “been there done that” executives who will provide the right financial, sales and marketing expertise to help you transition from a world-class product to a world-class business. You see a few candidates that you like, but the VC on the board says: “You are under shooting. This is going to be a huge company. We can attract better talent.” So you aim high and bring in a super accomplished head of sales. This guy has run huge organizations with thousands of employees. He has stellar references and even looks the part. Your VC loves him, because he has an awesome resume.

Six Months Later…

"Fast-forward six months and everyone in the company is wondering why the sales (or marketing or finance or product) guy who has produced nothing got such a monster stock option package. Meanwhile, the people doing all the work have much fewer options. Even worse than not getting your money’s worth, now the company is in trouble, because you’ve been missing the numbers as your super expensive executive sits on his butt. What the frak just happened?

Horowitz writes as a guy who has been in enough technology startups and seen them through enough crises and stages of growth that he gets it. He may not have the network of a Ron Conway (although he is in the Conway network, so he automatically does) but he has real pattern recognition when it comes to the aches and pains of growing a technology business. He is worth reading not only for managers in technology companies – but for managers in industries with less competitive pressure as well. He is a huge talent and it is not hard to see why Marc Andreessen chose to go into business with him again. Publishers take note: a business best seller is taking shape before your eyes.

During the last four months, Amazon has finished its run as a device maker, consolidated its position as an e-bookseller, and quietly condemned most brick and mortar bookstores to extinction. Amazon will win the ebook wars running away.

Consider:

• Amazon has succeeded in making its Kindle ebook software truly cross platform. It now runs not only on the Kindle, but on Android and iPad, iPhone and Blackberry, Windows and Mac desktops. It remembers your place even when you change devices and the reading experience on the iPad is outstanding.. 
• Apple's iBook is stuck in neutral. The iBook store still has very few titles, which often cost more than on Amazon, and although these titles are encoded in ePub, they can be downloaded only onto iOS platforms (iPhones, iPod Touches, and iPads). Apple will never allow you to read your iBook on an Android device, so every time you buy an iBook, you lock your library more tightly to Apple. Even Apple gave up that trick when it abandoned DRM in music.
• Now that the show is ending, the jesters have arrived. Borders, Barnes and Noble, and Sony have entered the market -- none with a plan or a prayer of success. It is hard to imagine worse contestants: Borders is bleeding out the last of its cash while Barnes and Noble is desperate to sell greeting cards, coffee, and above all, itself. (BN is clearing out its dead music sections to help it sell more eBooks -- which will quickly do to the rest of the store what the iPod did to the music department.) Sony hopes to sell its device through electronics channels -- like Amazon. All three players have gained an initial media splash, then promptly cut prices.  

Although Google may alter the landscape signficantly when it launches its bookstore later this month, Amazon's near term priorities should be clear:

• Push the title count ever higher -- especially in textbooks. Get electronic versions of the backlist from every publisher in the world, then work the front list. This is not easy, but Amazon can do it and few other companies can. Those of us schooled by Amazon as competitors know that huge selection presents a formidable competitive barrier.  
• Grow publishing. Amazon already acts as a publisher and many writers earn more money publishing electronically on Amazon than they do with big six publishing deals. This will only continue as paper-oriented publishers erode trust with their writers by insisting on prices out of touch with the marginal cost of electronic publishing. Amazon gets this, and their recent decision to sign Andrew Wylie, the industry's most famous agent, to an exclusive publishing deal is evidence that they will seize this opportunity.
• Avoid agency deals. Publishers, led by the estimable John Sargent at McMillan, have insisted on the right to increase the retail price of ebooks, even when it is not in their own long term economic interest to do so. Amazon is right to keep ebooks priced at $9.99 in order to rapidly convert the market. As it does so, publishers will be able to maintain author royalties and their own profitability, so long as they undertake the necessary transition at full speed. As the second major mover in this market, Apple accommodated publishers in order to get initial traction, but publishers will soon realize that an agency deal with Amazon will not translate into sales if  iPad users choose the cross platform Kindle software to iBooks. 
• Milk the device. Amazon was smart to launch a device before Apple did (imagine what the music industry would look like if Amazon had been first to market with a solid MP3 player). But as a device, Kindle is dead and making stuff is not what Amazon is great at anyway. Amazon should continue to lower the price and sell as many Kindles as people want -- but admit that the device is now irrelevant to their eBook strategy.
• Make Kindle software simple and ever more compelling. As good as Kindle software is, it has some amazing deficiencies. To start with, you cannot buy a book. Amazon should integrate the store into the reader ferpete'ssake and go ahead and copy the iBook UI if need be (Apple copied it from Delicious Library for a reason -- the bookshelf that rotates into a bookstore like something out of Sherlock Holmes is pretty cool). Short of that, Amazon could at least let you buy a digital book from their dedicated iPhone or iPad apps. These holes are very worth filling. 

If Amazon enables sharing (and arguably even if it doesn't), eBooks are approaching a tipping point because sales of books in the US are heavily concentrated among avid readers who are shifting decisively away from print. This will kill traditional bookstores as quickly as the iPod killed music stores.

Americans buy about $25 billion of books each year. The census counted $16.6 billion in 2009, but they include greeting cards and other non-book items sold by book retailers and they exclude online sellers like Amazon. So retail store sales of books are probably $15 billion and falling. The rest is sales from mass merchandisers like Walmart and Costco, textbooks, specialty religious books, and professional books sold through nontraditional channels. $25 billion revenues has not grown since 2003 and unit sales have been flat for a lot longer than that. In short, selling printed books from stores is a business that has been fixin' to die, even though printed books themselves will be around for many, many years.

In 2009, eBooks were about two percent of the total book market -- less than $300 million in sales. But sales of readers in the form of tablets, high quality smart phones, and dedicated eBook devices is growing at a rate unprecedented in human history -- faster than the growth of PCs, the web, or games if you believe Morgan Stanley's chart. These devices are driving demand for ebooks. Apple sells 250,000 iPads each week, or a device every 2.5 seconds. This number will grow as they roll out international sales, new models, and lower prices. Apple claims that the iPad grabbed 22% of the eBook market in only two months, which would represent a month with $5 million of eBook sales. Since this would only require that every other iPad buyer download a single $10 book, I believe the claim. 

Nobody would be surprised to see eBooks accounting for a billion dollars, or 5% of trade and textbook sales by the end of 2011. JP Morgan sees eBooks quickly capturing 25% of retail book sales (they do not expect eBooks to actually grow the book market -- although with considerably lower average selling prices, consumers would obviously need to buy more units for industry sales to remain constant).

Ebook sales are concentrated among active readers -- the roughly 60 million book buyers, who buy ten or more books a year. This group, about a quarter of the adult population, is two-thirds female. But, you say, if 60 million people buy ten books a year at, say $25 per book, that is more than half the industry! 

Quite so. This is why active readers are the entire market focus of the publishing industry. But the American Bookseller Association's own research shows that this group is moving rapidly to eBooks and that between a quarter and a half of avid readers are downloading pirated books from the many sites that now make this possible. Not surprisingly, this group accounts disproportionately for the skyrocketing sales of eBook readers, smart phones, and tablets. 

Given the margin structure of brick and mortar book retailing, if half of the avid reader market shifts to electronic books, one third of bookstore sales will evaporate and most bookstores outside of college towns and walkable cities will fail. It took less than five years from the introduction of the iPod in 2001 for music stores to vanish from the landscape. Most bookstores have less time left than that. One sign of doom: many of us now check the merchandise in the store before buying it cheaper online. The industry terms this "leakage" and it is was the first sign that local camera, electronic, and music retailers would soon die. Personally, I am a part of the problem -- and I am sorry to see my retailers close. Then I get over it.

Can brick and mortar stores do anything to survive? No -- eBooks are a fundamentally better product at a lower price. Ebooks not only cost less, weigh less, and are searchable, but increasingly they link readers who share interests and contain useful multimedia. They do not carry the cost of printing, shelf space, or returns to publishers -- a serious problem for printed books.

It is probably piling on to point out that most book retailers indulge the avid readers who walk their door and made no effort at all to add new readers to the market. Growing avid readers is not especially hard, for retailers who focus on kids -- especially at risk kids. A recent study showed that giving kids a dozen books to read over the summer had the same impact as summer school. Helping kids develop lifelong reading habits -- and helping parents keep serious books at home -- appears to makes a huge difference. Although the findings reek of endogeniety, a study of kids in 25 countries found that kids who grow up around books stay in school longer and earn more. (David Brooks has a nice reflection on this in the NYT.) 

All of this is, from Amazon's perspective, truly ironic. In fifteen years, they have taken perhaps a 10% share of all US retail book sales at positive, if not wildly attractive, operating margins. They have of course earned the enduring enmity of independent book retailers. eBooks are another story altogether. By focusing on the Kindle as cross platform software, integrating its store with its reader, and enabling book sharing, Amazon can potentially own 75-85% of an exploding market at outstanding operating margins. Because eBooks take advantage of Amazon's technology, not its operations, the operating leverage is enormous. And its competitive advantage is truly gruesome. If Amazon focuses and executes (and they always do), they will wreak more havoc on American booksellers in the next three years than in the past ten. 

To grow and maintain the developer network, both companies  constantly upgrade their devices to reach more consumers with more applications. They will continually improve the tools they provide developers and provide them with specialized training and certification. They may create specialized tools for features like localization or security, for devices like the iPad, or even for big verticals like health care. Apple is either doing these things, or considering doing them, and we can safely presume that Google is too.

But applications deliver diminishing returns. The issue is not simply that most apps fail, sometimes after a brief success. The problem is that the first ten thousand applications make a device like the iPhone incredibly useful. But if the iPhone goes from a quarter million applications to a half million, it matters a lot less. At some point, good filters in the App store are more important than good applications. 

So increasingly, Apple and Google will look at their global network of consumers who trust them to process payments as an even more strategic asset than their developer network. At this point, both companies will look for more payments to process. 

 This is likely to happen in stages.

• Initially both companies process payments for media and online sales. Apple started with songs, books, films, and apps (not coincidentally, the same long-tail products that launched e-commerce in the late nineties) and is moving into payments for time, tokens, or avatars for online games. Google started processing payments and is launching a book, music, and movie store for Android.
• Both Google and Apple can make their payment processing businesses ad-supported. Both Google and Apple have the scale needed to clear payments directly with banks and presumably both can monetize the information contained in the purchase data and offer merchants much lower fees than Visa or Mastercard.
• Finally, both companies will go after Visa and Mastercard by providing merchants with a POS (point of sale) solution based on optical scanners that read a bar code tied to your bank or credit account. Apple is testing this with Starbucks now, as the adjoining screen shots show. Developers will come up with clever ways of showing you your current balance and even budget variances, so that as you pay for a bag of groceries you will know exactly where you stand financially.

Apple could attack this market quickly by  waiving fees for transactions between iPhones. The opportunities to integrate this offering with mobile advertising will not escape Apple -- or Google). The barcode technology is not a challenge: you can already board flights at many airports with a boarding pass sent to your iPhone. Obviously the payment application needs to be PINned, but consumers already access bank balances and pay bills from their phones, so the necessary trust and security are already in place. Last week, Chase introduced an iPhone application that lets consumers deposit a check electronically by submitting a photo of it -- so both banks and consumers are getting comfortable with paperless banking. 

Like PayPal, Apple or Google could avoid the most burdensome of state and federal regulations by not accepting deposits and not becoming a bank. Widely varying country regulations make payment processing a complex business to scale globally however, so Apple might logically acquire a business in this space, possibly including PayPal.

Both Apple and Google will be drawn increasingly deeply into payment processing -- an industry plagued by a low b/c ratio that is ripe for disruption. Consumers and merchants can only hope that they hurry.

The culprit was cheap crap from Africa -- and it made me smile. One of her grad students, back from a stint in Uganda, had given her a very attractive bracelet, which was making its debut on Independence Day. The indigo dye in the blue beads was water soluble, so after a bit of kitchen work, the beads were bleeding like a leaky pen. 

I smiled because I remember disparaging cheap Japanese crap for a decade starting in late 1950s. Cheap Taiwanese crap followed in the 1970s and we joked about at it for perhaps 3-4 years. Korean crap was only cheap for a year or two. Each country industrialized faster, transferred quality standards and management technology more rapidly, and imposed lower per capital environmental costs than its predecessors. Today, nobody laughs at China -- even when it occasionally exports crap.

Finally -- finally, Americans are importing our cheap crap from Africa. Thanks to the World Cup, Africa has been on the world stage for the past two weeks. There are good economic reasons for this. Time Magazine reported that in 2006, foreign investment in Africa exceeded foreign aid for the first time. According to the IMF, "sub-Saharan Africa today resembles Asia in the 1980s. The private sector is the key driver and financial markets are opening up." In March, the African Development Bank forecast 4.5 percent real GDP growth for Africa in 2010 and 5.2 percent in 2011. Growth is broad-based, with more than 15 countries projected to grow by more than 5 percent in 2010. The IMF notes that "War is down. Democracy is up. Inflation and interest rates are in single digits. Terms of trade have improved". As a result, growth is taking off. 

Some of this is growth is due to China's growing need for energy and raw materials. Trade between Africa and China has grown an average of 30% in the past decade and topped $106 billion last year. Chinese engineers help mine copper in Zambia and cobalt in the Democratic Republic of Congo and they help drill for oil in Angola.

But China is not simply another neo-colonial power. In exchange for access to raw materials, China has built roads, railways, hospitals and schools across Africa. Nonetheless, McKinsey reports that a recent study of 24 countries conducted by the African Development Bank estimated that the total cost of bridging Africa’s infrastructure gap over the next decade will be about $93 billion a year, with about 40 percent of this in the power sector alone.

These sums are no longer unthinkable. Almost alone among world economies, Africa has not suffered a recession during the current economic crisis. Fortunately, African financial institutions were too "primitive" to speculate in collateralized debt obligations built on dicey US mortgages. Poor savages.

Africa, of course, is not a simple story or even a single one. 

• Africa is not a culture any more than Asia is. It is home to 14 percent of the world’s population, to more than 1,000 languages and to 53 countries (54 if you accept my eighth grader's count of teenie Mayotte as separate from tiny Comoros -- which I do). About 20 percent of all land on the planet is in Africa (much still unexplored), along with about 30 percent of all mineral reserves.
• Africa remains a continent of commodities — with its forests, oil fields and mines. Commodity prices have fallen since the 90s (as they tend to over the long run in any case). The McKinsey Global Institute just completed a massive study of African economic development and rates commodities well behind consumer goods and near agriculture as an investment opportunity.
• Parts of Africa remain a basket case. Darfur, Somalia, Congo, and Zimbabwe are, along with North Korea, the worst places on earth and run by the worst leaders on earth. But in many other countries, independent courts enforce contracts and property rights, governments are not utterly kleptocratic, and a basic social and physical infrastructure permits rapid and sustained economic growth. 
• African countries can improve. Twenty five years ago, Mozambique, Angola, and Namibia were being torn apart by war. Ghana was lurching from coup to coup. Today the capital of Angola is so short of housing that some surveys declare it the most expensive city on earth -- ahead of Tokyo and Dubai.
• Growth affects demographics, which affects growth. The growth economies of Africa are starting to develop an educated middle class. True to form, this group prefers to raise two educated children, not a dozen illiterate ones. A big question for the continent is how long it will take Africa to grow its way to a balanced population. For a perspective on the revolution in first vs third world demographics, consider that in 1950, there were two Europeans for every African. Today, there are two Africans for every European. 

Africa benefits not only from Chinese investment; they also benefit from growing Chinese affluence. With per capita GDP in China already above the world average, China's days as the low-wage factory of the world are limited. Indeed, China has been shedding manufacturing jobs for the past 3-4 years (and still does not add as much value through manufacturing as the US does, even though we have a third as many people as China). 

But without China, where will our crap come from? Fear not, Africa will soon be the last major low-wage region on the planet. It has an enormous coastline and is actually closer to markets in Europe and North America than China. Just as labor-intensive manufacturing moved from OECD countries to Asia over the past three decades, it will begin to move from Asia to Africa over the next decade. In February, Oxford University economist Paul Collier and Obama Africa adviser Witney Schneidman noted that Africa now offers the world's highest rate of return on investment. They concluded that: 

Africa, usually the poorest performing region in the world economy, is now likely to be among the best-performing"

But wait. Isn't this just another example of global capital ruthlessly exploiting cheap third world labor? Yep. Remember: the only thing worse for Africa than being exploited by the developing world is not to be exploited by the developing world. Think of it as Zen economics: a sweatshop can be reprehensible (especially if it keeps a child out of school) and it can simultaneously represent extraordinary economic progress. 

As Stephen Hayes, president and CEO of the Corporate Council on Africa asserts that "Africa offers more opportunity than any place in the world."  He is paid to say that, but all signs are that Africa can replace China as the world center for low cost production. That day is being hastened by the return from Paris and London of many educated members of the African diaspora. Industrialization may not be pretty, but for Africans, it cannot come soon enough.

Apple's iPad has been subject to two prevailing narratives: one sycophantic ("a magical and revolutionary device"), the other scornful ("an overgrown iPod Touch"). Here is a fast first reaction that reconciles the two and argues that for many if not most people, a tablet is in your future. 

1. Well, it is revolutionary. And as close to magical as a computer gets.

• As a media device, the iPad is simply amazing. I have read nine books, watched three downloaded movies and several more on Netflix, used it daily for news feeds, music, games, and photos. It is much more intimate for these things than a laptop. Indeed, many people find that they like movies in bed on their iPad better than on the huge flat screen downstairs.

• As a business device, it is surprisingly capable. Email rocks. I scan and delete mail at very high speed on the tablet. Surfing is great -- it is very fast and you never want to touch another mouse. Skype works well and 3G AT&T on the iPad does not suck. I have yet to exceed $15/month (250MB) of 3G data. With some attention to apps and accessories (below), it is much better than a laptop for airplanes and road work. It also works surprisingly well for small group presentations. 

2. It is an overgrown Touch -- but you can hack what it lacks. For example:

• The iPad has no built in file structure or file replication. An astonishing ommission. Our content lives in files, but you cannot create file folder hierarchies, rename, send, delete files, etc. and although you can always email yourself a file, version control becomes a big problem if you are active. The solution is Quickoffice and DropBox  -- by a considerable distance the two most important business programs for the iPad. 
• There is no MS Office. A computer that cannot write, add, or present? Apple created an iPad version of its Pages word processor, Numbers spreadsheet, and Keystone presentation applications, but these are not set up well for most business users. They are pretty, but they are not fully file compatible and they are absurdly oriented towards graphics. If you stick giraffe photos in your memos or embed slick graphs in your styled tables, you will love the Appleware. Others should ignore the Apple programs and use the killer word processor and spreadsheet built into Quickoffice. These are completely file compatible with Word and Excel and a PowerPoint editor is promised for later this year. 
• There is no keyboard. Like a Touch or an iPhone, the iPad contains a screen keyboard. It feels very unnatural -- one writer compared using it to playing with her food. For most people, the solution is not a bluetooth keyboard unless you write massively and constantly -- a student with a long term paper or a professional writer. For business users, give it a bit of time. After 5 weeks, I type nearly as fast on the iPad as with a regular keyboard -- but it is a new skill and feels very different. 
• There is no Ethernet port. This is lame. In Europe last week, hotels had free and easy Ethernet connections but flaky or expensive wifi. But you cannot plug an iPad into an Ethernet port (and if you tried to do it with the camera USB adapter, the OS would not recognize the connection). The solution turns out to be 3G, which works fine everywhere at moderate prices, or Airport Express. Plug AX into the wall, connect the hotel Ethernet cable to it and (if you have done a bit of configuring before you left home) you have a secure and usable a local wifi connection. A kludge, but it works.
• There is no USB port or SD slot. Competitors will force Apple to rescind this dumb decision like they did Firewire on MacBooks. For some but not all applications, the camera or projector adapters will work, but this is silly. People want to connect and share. Leaving out small, easy, battery-efficient ports is just dumb -- and Apple has a history of doing this with version one products.
• There is no way to use standard 3G SIM cards when you travel overseas. The authorized iPhone carriers (T-Mobile, Orange, O2, NTT docomo, or H3G) are not yet set up to sell microsims to travelers. Note that the AT&T overseas 3G plan is not a silly solution for brief business trips if you combine it with hotel wifi. A 3G plan that solves the problem in almost every country costs $30-50/week. For those determined to buy cheap, prepaid 3G SIM cards in the local Tabac, newsstand, or vending machine, go to CutMySIM for the tool you need to turn an ordinary SIM chip into a microsim (it turns out the pins in the new micosims are identical, so trimming a big SIM gives you a perfectly usable microsim).
• There is no video camera -- yet. Once is clearly planned and it might be cool to use Facetime on an iPad. But I have a hard time seeing how you you would hold the tablet during a conversation so that your face stays visible to the camera. On a desktop, laptop, or even an iPhone this is not an issue but on a freestanding tablet it may be. So, I don't care about the video camera yet (then again, I have not yet tried Facetime, which looks very sweet). 

3. The iPad creates unforseen disruptions and second order effects. 

• Surfing alone. iPads are intimate, absorbing, addictive, hypnotizing, and fundamentally antisocial. You don't share your iPad -- even less than your phone. If you are working on one in a meeting, you are not in the meeting even if you look up like you are only taking notes. You can use it to share media in person or online and to maintain friendships of course, but often the iPad is another way to spend time alone. Sociologist Robert Putnam famously wrote about Americans bowling alone. His next metaphor may be surfing. 
• Simplicity sells. As desktop software became needlessly complicated and bulky, we turned to desktop web applications, which were often slow and too often tried to prove their manhood by copying their feature bloated predecessors. In contrast, whether they are native apps or built as websites, mobile apps are as simple as WordStar under CPM but with even less code and much better graphics. Apps on the iPad install in seconds and update regularly and painlessly. Most run well and look great. None have manuals and very few have help buttons.
• Vertical integration is viable again. Vertical integration never completely disappeared from Silicon Valley, as a close look at Apple or Cisco reveals. But what used to be a weakness is now a strength. Apple's control over iPhone and iPad components creates both powerful benefit and a powerful check on the tendency of components to add features and capabilities just in case customers want them. Apple's vertical integration allows it to enforce focus and simplicity because its components have only one customer. This may may slow down the pace of innovation for Apple (not a ton of evidence of this, BTW) but it also reduces down needless complexity.
• Man your purses. I am getting to know my second murse, having dumped a cheap little bit of north-south nylon trash for a solid east-west leather man bag that I snagged in Shanghai a couple of years back. (Amazingly, it has the word "Apple" tattooed on it in a spot you can hardly see. We may have been meant for each other). I have begun to use it for my sunglasses but have not yet granted it my keys. I doubt that I could ever go so far as trust it with my wallet (although local hero and author Michael Chabon, makes a hysterical case for doing so in his recent essay "I Feel Good About My Murse").
• HP is back. Final oddball prediction: the iPad will help resurrect HP. HP has just purchased Palm and with it the powerful PalmOs, which should make the forthcoming Slate into a dandy tablet. If HP addresses the weaknesses of the iPad listed above, drives hard for the corporate market with solid business features and security, HP could end up a strong #3 in what will surely be a global tablet market worth  tens of billions of dollars (and hundreds of billions if you count apps and advertising). We used to joke that had HP invented sushi, they would have gone to market with RDF (Raw Dead Fish). They are engineers with absolutely no feel for creating and selling a compelling user experience instead of gee-whiz tech specs. If you hear the Slate advertising its megapixels and CPU speed, you can safely sell HP short.

For me, this is not a theological or moral question, although I always loved the suggestion attributed to Mark Twain to "love your enemies -- it'll drive 'em crazy". It is a purely practical matter related to economic embargoes. Can we accomplish our goals more easily by trading aggressively with our enemies than by boycotting them? The answer appears to be that embargoes are politically satisfying but economically counterproductive.

Consider Cuba. Does anyone seriously believe that the embargo imposed by the US on Cuba and in place since February of1962 has served US interests? It is perhaps the longest economic embargo in recorded history. it remains in place not because it works but because of the Florida primary. Any politician, from Reagan to Obama, who wishes to be president must first swear fealty to the misnomered "el bloqueo" (the blockade) or forsake the Cuban vote in Florida, the state of Florida, and usually, the election.

Imagine that the US were to end the embargo (a blockade is not an embargo. We conducted a naval blockade of Cuba briefly during the Cuban missile crisis. A blockade is almost universally regarded as an act of war). Does anyone seriously argue that either Castro would still be in power had the US restored full commercial ties with Cuba? With investment pouring into Cuban resorts and an economy dependent once again on western tourism, sugar, and light manufacturing, Castro would have been forced to liberalize and Cubans today would be far, far better off. instead, the US embargo drove Cuba further into the Soviet hands. How, precisely, did this serve our interests?

Embargoes almost never work. One of history's first comprehensive embargoes took place during the Napoleonic Wars. In an attempt to cripple Great Britain, the French created the Continental System, which prohibited European nations from trading with the UK. The result? The embargo was very hard to enforce and did more harm to Europe than it did to the British. But, one imagines, everyone felt much better turning up their noses at each other. A secondary embargo during this same time was enacted by Jefferson to prohibit US trade with either France or England, even though the US had no active dispute with either one. 

But even though most embargoes fail, one famous embargo appeared to work: the oil embargo imposed by the United Nations on South Africa in November of 1987 with the support of 130 countries. The UN embargo reinforced several longshoremen union embargoes on loading or unloading freight bound to or from South Africa. The action appears to have hastened the end of apartheid. It also created the impression among a generation of politicians that embargoes have a place in the diplomat's tool kit. They don't, and South Africa is the exception that proves the rule. 

Oddly, the US actually understands this. US law prohibits any US company from participating in a secondary embargo. These occur not when we have a dispute, but when an ally does and asks us to join them in embargoing trade with their adversary. Not only are American businesses prohibited from participating in a secondary embargo, a company is required to report any attempt to organize one! This law was enacted following attempts by Arab countries to prevent American companies from doing business with Israel. But why would America forgoe the weapon of secondary embargoes if we believed that embargoes worked? We wouldn't, but we prohibit secondary embargoes because they are not only economically futile, they are useless politically.   

Which brings us to Gaza. Does Israel have reason to impose a blockade against Gaza? Absolutely. Hamas has fired tens of thousand of rockets into Israel from Gaza and Israel wants to keep Gazans from acquiring more of them. Is a blockade or a trade embargo the right tactic? No -- it backfires by strengthening Hamas and weakening forces likely to work towards peace.

Consider: the Israeli blockade has crushed Gaza's business sector, which is essential if Gaza wants to end its dependence on foreign aid. Merchants in Gaza are an important source of jobs and one of the few sectors that promoted trade with Israel, one of the few constructive forms of contact Gazans had. Since the blockade, more than 3,000 factories and small businesses have closed, contributing to an unemployment rate of 44%, according to the United Nations Relief and Works Agency in Gaza. Who benefits? Hamas, not Israel. 

The embargo has been a godsend for Hamas, which controls the tunnels in and out of Egypt -- now Gaza's lifeline. The blockade has enabled Hamas to expand its own payroll, become the source of new jobs in a wide variety of sectors. Gaza is poorer because of the embargo. Hamas is richer. 

But do we really expect Israel to embrace people who fire missiles at it? No, but the blockade should be turned over to the EU and it should consist of searches for weapons and military parts that can be used to harm Israel. Several EU countries have offered to do the job, and Israel should accept the offer not out of altruism, but because it is a better way to weaken their enemy. 

So to with Iran. Every speech that Obama gives threatening the moronic, nihilistic regime in Tehran serves to confirm the suspicions of Iran's most paranoid clerics. Better that we trade with them -- and trade heavily. The US and Iran have a lot more strategic and economic interests in common than separate. Trade is not "appeasement", although political adversaries will use the word. We can and should be very tough-minded militarily with respect to Iran. But we should not fool ourselves into thinking that boycotts, embargoes, or blockades have any role to play in weakening the Iranian regime. History shows that more often than not, exactly the opposite happens. 

Yunus is in all respects an amazing pioneer who earned his Nobel Prize. I first heard of him when Bill Clinton would scold anyone in earshot that "this guy deserves the Peace Prize". What I had not understood until today was that as Governor of Arkansas in the 1980's, Clinton had persuaded Yunus to help him set up microlending programs in Arkansas. 

Like most Nobel Peace Prize winners, Yunus has plenty of critics and detractors, but what he has done is astonishing. Having earned a doctorate in economics from Vanderbilt University as a Fulbright Scholar, Yunus decided to loan 42 families $27 during the terrible Bangladesh famine. While many of us were paying roughly this price for George Harrison's three-disk Concert for Bangladesh album, Yunus helped women to create small businesses by underpricing the local loan sharks. As a well-trained economist, he believed that the availability of reasonably priced credit would enable women to lead their families out of the pervasive poverty of rural Bangladesh. The loans were part of a research project that Yunus was conducting for the central Bangladesh Bank. 

When the experiment worked, Yunus founded the Grameen ("Village") Bank, which specialized in microcredit loans to rural women to create small scale enterprises. The loans were informal, unsecured, and undocumented. Interest was about 25%, which reflected both the cost of administering small loans and the underlying credit risk. Grameen provided many other services, including higher education loans for the families of borrowers. 

To date, the Grameen Bank has made nearly $10 billion in loans. Most of their capital has come not from deposits but from outside organizations. Early on donor agencies provided most of the capital at very cheap rates. In the mid-1990s, the central Bank of Bangladesh provided funding. Today, part of Grameen is publicly traded and the company sells bonds at above the bank rate. Overseas deposits also provide capital; Grameen now has operations in 43 countries including China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen, Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda, and the USA. Grameen has opened three branches in New York and one in Omaha, Nebraska. Yunus announced that they will open a branch in San Francisco and Washington, D.C. soon. (To be sure, the bank extends microcredit to poor American families as well and Yunus denounced pawn shops and payday lenders as "a scar on the face of your nation").

Grameen vigorously promotes a Bengali version of the Protestant ethic with "16 Decisions" that each borrower learns to recite:

1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work – in all walks of our lives.
2. Prosperity we shall bring to our families.
3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
5. During the plantation seasons, we shall plant as many seedlings as possible.
6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
7. We shall educate our children and ensure that they can earn to pay for their education.
8. We shall always keep our children and the environment clean.
9. We shall build and use pit-latrines.
10. We shall drink water from tubewells. If it is not available, we shall boil water or use alum.
11. We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughter's wedding. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.
12. We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.
13. We shall collectively undertake bigger investments for higher incomes.
14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
15. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.
16. We shall take part in all social activities collectively.

It would be interesting to hear how these decisions evolve in different countries, but you have to imagine that the recent financial crisis might have been reduced had our bankers practiced "solidarity lending" backed by a borrowers' pledge to "minimize expenditures and collectively undertake bigger investments for higher incomes". 

Grameen requires each borrower to not only recite the 16 decisions regularly, but to belong to a five-member borrower's group. Neither the group nor its members have joint liability --  they don't guarantee each other's loans. Grameen insists that each loan is an individual member's responsibility. But group members often help out those at risk of default because Grameen has a policy of not extending new credit to anyone in a group with a member in default. The groups also create emergency reserve funds, not unlike the tradition of tanomoshi in some Japanese and Okinawan families or Mujin in Korea (it is no accident that Grameen is absent from both of these countries). 

Yunus did not discuss these principals or anything else about solidarity lending even though both are at the core of his approach to microcredit (but hey, he is crowding 70 and this was his eighth city in ten days). One can only imagine being in a borrowing group with someone earning $20/hour who announces his intention to borrow $700,000 for a new home (as happened more than once during the housing credit bubble). When banks are sworn to responsibility along with their borrowers, nobody should be surprised that things work a lot better (Grameen appears not to have felt the financial crisis). I would love to have heard Yunus speak candidly to the question of whether groups of poor women are better credit risks than groups of poor men, but his life testifies to the answer.

Yunus also avoided discussion of microlending default rates (maybe this was his polite payback for the Commonwealth Club twice asserting that he had received the Nobel Prize in Economics instead of the Peace Prize). In truth, lending to poor people is risky (hell, lending to rich bankers is risky -- just ask the Federal Reserve). Grameen says that its payback rates are over 98 percent, but in 2001 the Wall Street Journal claims that a fifth of Grameen's loans were more than a year overdue (both statements are unlikely to be true unless Yunus insists that the old loans will eventually be repaid -- as US banks do when they wish to avoid marking down their toxic assets). Besides, if default rates are really only 2%, how does Grameen justify 25% interest rates? Another mystery: Grameen Bank is 94% owned by its poor borrowers, most of whom are women. Why aren't the depositors the owners? They are bearing the risk. Or does the 25% interest rate include an implied warrant?). 

Grameen has expanded well beyond banking. They initiated a hugely popular Village Phone Program, through which women entrepreneurs can start a business providing wireless phone services in rural areas of Bangladesh. By serving as the local payphone, thousands of women have built businesses that not only raised their families from poverty but improved the ability of small farmers to discover price information and other critical market news that was previously not available. The Bank now sponsors more than twenty additional enterprises in energy, telecom, education, fisheries, software, internet access, knitwear, and fashion. Then there is the Grameen Struggling Members Program, which targets desparate, homeless beggars (not a priority segment in traditional commercial banking, I assure you). Basically, the bank turns beggars into sellers of trinkets, which is a step up in both livlihood and self respect. These loans are tiny ($10) and about half default, but still... 

I dislike the potential social impact of Apple's vertically integrated, closed system business strategy (details here, here, and here), but I bought a 3G iPad the day it came out. It rocks. 

The iPad is not your father's tablet computer -- it is fast, lightweight, touch-based and runs applets. More like a taplet. You will own and use one very soon. Apple is selling 200,000 iPads each week and, to judge from the Google IO conference this week, there will soon be many worthy alternatives to the iPad. 

Google is already activating 100,000 Android handsets each day and Android web traffic now exceeds the iPhone. As Android morphs slowly into Chrome OS, apps will go from being native downloads to more like browser extensions that are operable without a connection. Not since the late seventies have we seen this kind of ferment and innovation in personal computing. I already do much more work on the  iPad than a PC -- it is fast, easy, and killer handy. 

Taplets will change the way you work, play, and learn. And there will be some surprising winners and losers. For example:

1. Briefcases are out. You need a new purse. Women will need different purses for taplet computers and men are going to carry purses. We will call them man-bags, day bags, travel bags, or messenger bags to preserve our dignity of course. But it will be a purse: just big enough for our taplet computer, keys, phone, and a small pad of paper (because typing on a computer in a meeting or while talking to someone still seems distracting to me -- but this is changing). 

Robert Downey illustrates the future of fashion. Mandatory murse -- plaid hat optional.  

2. Velcro will soon be ubiquitous. I am not sure why tablets don't just come with Velcro backing. This video illustrates the opportunity (HT: Dalby). Note that if you are viewing this on an iPad, you can't see it because Vimeo uses Flash. Imagine a funny video....

iPad + Velcro from Jesse Rosten on Vimeo.

3. Covers and wipes. Touch screens get gooey fast. The iPhone came with a nice soft cleaning cloth for the screen. The iPad, with a screen eight times larger but just as glossy, managed to omit this crucial detail. Since touch is the new interface, screen wipes are the new necessity. I keep a soft glasses cleaner tucked behind the case, which is also a necessity. Unlike the iPhone, Apple makes a case -- and a very good one. Or you can order a case from the skin of an exotic creature that costs you more than the hardware it protects and even more in karma.

4. That Syncing Feeling. You are going to need your files up to date and available on your desktop at home and at work, on your tablet, your phone, and for a few people, your laptop. Except that you don't want every file on every device, and you want your passwords and bookmarks synced as well. Until connections are ubiquitous, cloud storage is not enough. In my tests, Dropbox beat Windows Live, XMarks, and SugarSync but each has a ways to go until they have nailed this problem completely. Also, a file system for the iPad, coming with OS 4 this fall, will help a lot.

Who loses? Makers of netbooks, briefcases, and laptops need to think hard about their future. Taplet computers are a great way to consume books, movies, games, and movies, so brick and mortar media retailing is very, very dead (and online retailing very, very consolidated -- another story). Packaged software for both consumers and the enterprise is truly toast. And once again, Microsoft could use a plan: they missed the internet, missed search, missed mobile, were early but off on tablets, mostly missed TV, and have so far missed the cloud. They are living off of operating systems and desktop apps. Your taplet uses a lot less of both.

Who will win the epic battle between Apple and Google? The battle of the titans now extends to devices (iPhone vs Android), tablets (iPad vs Adroid/ChromeOS), developers and their applications (iTunes Ap Store vs Android Aps), animation standards (no Flash vs Flash), retail strategy (Apple stores vs everyone else), media sales (iTunes and iBooks vs. newly acquired Simplify Media), television (Apple TV vs. the newly revealed Google TV) and above all, advertising (iAds vs AdMob). Apple has the advantage of integration: they coordinate this mess within their company. Google has the advantage of an ecosystem: a much messier coordination challenge but a much more powerful force with the right standards and incentives are in place. Consumers will win (so hands off, FTC). We can now see what the $100 computer will look like: it is a taplet computer. 

Banks, insurance companies, and pension funds buy government bonds because they are a very safe investment. Suppose they have to choose between the bonds of:

a) Mexico. The world's newest narco-state, so beloved by its citizens that they are fleeing north in record numbers.

b) Kazakhstan, the country made famous by Sacha Baron Cohen's outrageous satire, Borat ("our main form of entertainment is the running of the Jew").

c) California, home to Silicon Valley and Hollywood. The place where the future begins. 37 million people and the world's eighth largest economy.

Trick question, of course. Mexico and Kazakhstan are the safer bets. California, like a lot of state governments, is not only in over its head -- we have fallen into a deep hole and responded by digging deeper. 

How do we know? Well, you can buy insurance against the risk that a government whose bonds you own will default and not pay you back. Investors buy and sell credit default swaps to insure against this risk (the same contracts which, when untraded and used to bet on the likelihood that convoluted synthetic mortgage derivatives would default, contributed in big way to the demise of AIG and Bear Stearns, a story told elsewhere). The CDS market for sovereign risk reveals the market's view of the odds that a country or a state within the US will go bankrupt. Currently the government in the world considered most likely to default is Hugo Chavez's Venezuela, with 49% odds, followed by Argentina, Greece, Pakistan, Ukraine, Dubai, and the state of California. Investors judge Iraq to be a slight safer bet than the Golden State. Mexico and Kazakhstan are much safer bets.

How can this be? California, a $1.85 trillion economy, has borrowed $85 billion -- about 4.5% of the state's GDP. Kazakhstan, a $133 billion economy, has borrowed $100 billion. Are the markets crazy? Should we all sell overpriced California credit default swaps and make some real money? California government officials seem to think so.

Markets might be wrong of course, but we might want to look a little deeper. As Spencer Jakab of the FT reports, Kazakhstan is sitting on the world's 11th largest oil reserves. It grew by more than 8 per cent annually from 2002 through 2007 and runs a nearly balanced budget. Unemployment is 6.7%, they maintain a rainy day fund equal to almost 20% of GDP and they manage their own currency. California, by contrast, has a jobless rate of 12.4%  per cent and sent me my tax refund as an IOU last year. California does not manage its own currency, so when it raises taxes or trashes the public infrastructure, people relocate to states that are better managed. 

Still, debt of 4.5% of state GDP doesn't seem like that big of a hole. Or is it? The problem that spooks investors turns out to be the obligations that California has not recorded -- especially pension obligations. This is a huge problem and not just for California. According to the Pew Center for the States, America's states have collectively failed to fund a trillion dollars of pension obligations. This is if you believe the state's own math. If you rely on private sector actuarial assumptions, you get even bigger numbers. A former administrator of the Social Security system, Andrew Biggs, calculated that with private sector accounting, the states would be short $3.5 trillion. To which you can add another trillion for unfunded health benefits. When puffy conservative white guys on TV go red in the face about exploding debt, this is what they are ranting about. 

California's core problem is governance and creditworthiness, not wealth. That any state should have credit issues is from one viewpoint bizarre, since state bonds are tax deductible, meaning that California's borrowing costs are incredibly low, since the federal government provides a nontrivial subsidy. 

Is California the next Greek tragedy? So far, finance officials have dealt with the hole with a combination of deferral and denial. Deferral is understandable -- if the economy improves and tax receipts rebound, the state can reduce its borrowing. But deferral represents a tiny part of the solution and the politically easy part. Mostly California has been in denial. We have denied the true cost of pension and health care promises made to retirees. We have refused to do math in public because if we did, it would be clear that we will never honor those commitments. California's public employee unions make the math politically challenging to confront. Without them, this problem would be far more manageable because health and pension benefits would be lower. 

But the rush to pile all of the blame on unions alone is misplaced: every labor contract has two signatures on it. The problem is that both public managers and organized labor responded perfectly to the incentives that we gave them. Managers continually increased union pension and health benefits because, unlike wage costs, long term retiree costs were not in their budget. Indeed, they were not even costs -- they were future obligations often recorded off the books. And when the cost of future benefits was calculated, it was often minimized by a generous assumption about retirement age here and a favorable guess about interest rates there. Soon the costs don't look so bad. Managers promised to deliver tomorrow what they could not afford to pay for today (and frankly, they were out bargained. Not only did public employee benefits skyrocket, wages did as well). 

Everybody was happy until tomorrow finally arrived. Now California is very likely to elect a governor who promises to cut the budget and reduce retiree benefits. Unions will revolt. Taxes will increase in a state that already features very high tax rates and mediocre public services. The cable shouters will have their day. And large numbers of people will choose to create opportunities elsewhere. Californians have learned from earthquakes how to dig out and rebuild on solid footing. Our first step is to stop digging a deeper hole.

He is right -- Facebook just launched the social operating system for the Internet. Like the desktop operating system it both makes everything better for everyone and it grants Facebook an incredible amount of power. While you were not looking, a 23 year old took over the Internet. Deal with it.

The Open Graph republishes the tiny "Like" button. "Like" (or "Recommend", which does the same thing). "Like" is a text link that turns into a little "thumb's up" button with a Twitter-sized comment box like the one on the left. It now can and will be embedded everywhere. Every item on every shopping site, forum, game, and news site will feature a LIke button. Today CNN and ESPN, and IMDb all launched spiffy new "Like" or "Recommend" buttons tied to Facebook.

What is wrong with letting everyone vote on everything? Your "Like" is added to your profile and to the profile of whatever it is you like. Click enough times and Facebook learns a lot about what is popular with whom and in particular they learn a lot about you. Suppose you want to serve up advertisements for your new line of summer sandals targeted at 16 year old girls. Would you rather serve ads based on keywords from Google or to people you know "like" sandals, Lindsay Lohan, and Mylie Cyrus? You will gladly pay more for the latter.

How important is this? Well, it turns out that Facebook serves up one billion "Like" impressions every day. Let that marinate for a moment. Facebook is just shy of a half billion members, so FB users see an average of two Likes every single day. 

Open Graph is Facebook's effort to add a social layer to every single website and to personalize every page based on your interests and likes. It is the tip of an enormous and potentially very invasive iceberg. It is the basis of a web-wide personal identification and login system based on Facebook IDs. If you are on Facebook, you are on the Internet. Instead of a walled garden, Facebook is offering an invisible foundation -- to which they control access. The Open Graph is open for business. It is not open meaning reciprocal, open source, or community-minded. Open Graph is at best pernicious and is arguably evil.

On top of Open Graph, FB also announced that it is creating a new currency. A job traditionally reserved for central bankers can now be performed by websites (and PayPal's announcement today that it once again carried eBay across the earnings finish line last quarter makes clear just how powerful control of online payment systems can be). Facebook credits can be used to buy stuff, inside a game or out here in meatspace. FB creates credit as well -- a job that we used to reserve for these quaint places called banks. Now sites like Plastic Jungle have APIs with Facebook and will create credit to go with the currency. It will work like a virtual casino -- if you are a big roller, the house will happily spot you a tray of chips.