On Apple, Google, Tesla, and Asymmetric Competition: An Interview with Horace Dediu

Horace Dediu (Horace Dediu) is an independent analyst at Apple and the IT industry as a whole, the founder of asymco.com , one of the most inspiring research experiments in the field of IT, moderated by Asymconf , a version of Asymco broadcast live and not less widely known in world, and co-host the podcast The Critical Path .

Horace’s analytical reports, which he publishes on his blog at asymco.com, received wide public acceptance ( Fortune magazine even called him king among Apple analysts), and Horace himself is known for his performances on Bloomberg TV , articles for Business Insider and Harvard Business Review . Horace is also the creator of Asymcar , another experiment to apply the theory of “disruptive” innovations and the jobs-to-be-done concept in the automotive industry.

About a year ago I had the opportunity to meet Horace personally, and not so long ago he agreed to give me an interview in which he spoke about his projects, plans, attitudes towards the accumulation and dissemination of information in the modern world and the theory of "asymmetric competition" using the example of Google, Apple and Tesla.
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So, Horace, I would like to start with your biography, although it is easy to learn about some of its key facts from the materials in your articles on asymco.com, as well as from guest speeches, like the interview you gave to Dan Benjamin (Dan Benjamin ) for the Pipeline podcast in 2011. I find this interesting as I try to understand your story and motivation, your way of thinking, everything that influenced how you lead and direct current projects. As far as I know, you come from a family that was involved in science, got an engineering degree in the States, worked in a research laboratory and among startups, then worked as an analyst for Nokia for eight years. Can you tell us exactly how your approach to research and business theory was shaped during the years preceding the founding of three projects: Asymco, Asymconf and Asymcar?

Yes, it is - my story includes a really long work in the technological sphere, and then in business analysis as an analyst at Nokia, but the main passion that accompanied me for the first 20 years of my career was technology, so I worked in both areas - in research laboratories and in the field of information technology in New York, as well as in a bank; I worked in a startup, in fact, even in two startups that were engaged in software development. I rather late, in the 90s or so, took on this task — I tried to explain the workings of the business mechanisms. It seems to me that my unique ... well, maybe not very unique, but still the contribution is to talk about business from a technological point of view - this is in some way an unusual combination.


Horace not only talks about business from a technological point of view - at his Asymconf conference, he uses three screens at once to show the audience how to visualize his findings.

It seems that this approach you have been using for many years, trying to study as fully as possible every area of ​​interest, for example, the Apple theme, which is interesting to me personally. With this approach, you need to have a share of fearlessness and carefully think about how to work with the concept of asymmetry [in business]. Please tell us more about the concept of asymmetry that you are trying to convey to your readers and followers.

Yes that's right. So, perhaps the main question I tried to answer is this: why some companies are successful, while others are not. Today, according to the generally accepted theory, success or failure in business is directly dependent on the management methodology that was thought out either well or not. The problem is that a company can be successful for quite a long time, and then become unsuccessful without changing management strategies. How does the management turn from good into bad - that is the question to be answered.

All companies go through a stage of ... hunger, if I may say so, then comes the stage of saturation. When they are hungry, they are more successful, but with the onset of saturation, they begin to make mistakes.

Thus, a question arises about other explanations [of success and failure of a business], for example: “companies may just be lucky or not lucky”. Unfortunately, this is not a very reliable theory, but just a matter of chance, so we will have to look for a more reasoned hypothesis. The theories that have been developed on the basis of the work of Clay Christensen (Clay Christensen), boil down to the fact that in the development of the company plays a role and psychology, the psychology of its leadership. However, all companies go through a stage of ... hunger, if I may say so, then comes the stage of saturation. When they are hungry, they are more successful, but with the onset of saturation, they begin to make mistakes. The reason for such changes is not so simple.

According to the theory of asymmetry, "hungry" companies have an advantage over competing companies that have reached saturation. This is something that was embedded in the cultural code of our society hundreds more, if not thousands of years ago. Each of us faced similar moral stories, even in the Bible one can read stories about asymmetry and success, the roots of which lie in the discrepancy between the weak and the strong. I think that this is the real reason for the failure of influential companies that have all the resources and still lose to companies that have very little resources. When you start to think about it, the next step is to think that this causes the disappearance or decline of large corporations, but also opens the way for new companies in the industry, which are actually a positive driving force - they cause changes, they create the so-called “breakthrough” that drives everything. Actually, the presence in the business of such a mechanism of birth and revival indicates progress, and in those branches of business or institutions where there is no such “revival option”, the level of progress is very low.

Yes, perhaps it is. I found your statement about the “medieval” state of the economy interesting, I mean your remark from the interview for The Pipeline - you said that when businessmen are not ready to apply the theory in the technology business, it can be called almost a medieval way of thinking.

Yes, that's true - for a long time, everything that we call business, commerce and other profit-making activities was in the “medieval” state ... [With regard to what happened afterwards] I don’t want to use the word “capitalism”, which is often used in In this case, this is not exactly what I mean. Nevertheless, the tool for organizing commercial issues has changed dramatically and has taken the form that we are seeing now, perhaps, less than two hundred years ago, and in some places less than a hundred years ago. This mechanism, or rather the method of organizing its structure, is today a function of the industrial revolution. Before the industrial revolution, until about 1820, the way business was conducted in Britain was built around the skills of individuals, was based on confidentiality, and scientific approaches were almost never used. The shift, after which businessmen began to hire engineers and scientists, allowed the industrial revolution to change everything.

Modern business management training is not a science. There is no theory that could be applied using a scientific approach - it is still an area from the category of mysteries.

So, it is curious to see how the scientific method contributed to changing certain aspects of our world. However, management in the technology business is still largely based on confidentiality and retention of power, which means that we do not know much about how to manage a business. This is a non-scientific approach to management. Yes, there are some knowledge that they are trying to convey, but what is taught in business schools is hopelessly outdated - it's the same as teaching a craftsman to use the tool, without explaining how to do a good thing or another useful tool. There is a gap in teaching business management, since it is not a science, since there is no theory that could be applied using a scientific approach - this is still an area of ​​mystery. Some people are surprised that we do not use a scientific approach to better understand why companies come to success or fail — this is the gap that researchers are trying to fill today.

I think that the key point, or perhaps one of the key points here, is the asymmetry of the exchange of information and knowledge. Do you think that we are entering the era of reviving a business with partially open sources of information, when asymmetry is necessary to create ecosystems and, if possible, dominate them?

Yes, it is interesting. I think that this is actually the basis of Google’s business theory. I believe that Google is trying to use a more scientific approach - of course, not yet within the framework of disseminating the information accumulated within the company - in fact, they share very little of their knowledge, but at the same time they try to approach systematically to carry out their operations, namely the development of ideas , to the development of products, to the acquisition of data ... maybe to the definition of their further actions. This development process is an attempt to use a scientific approach. And this is already much better than what happened before or is happening so far in any other place where making a decision about further actions is reduced, let's say, to the skills or vision of individuals, their instincts. There are some data that influence the decisions of such individuals, but in a large corporation this is, in fact, the usual distribution of resources, which is still mainly directed from the top down.

Google has probably tried to allow information to rise from bottom to top, to allow everyone to more influence decision-making. The result is that now they create a lot of products that run as sources for data collection, then collect information, and then ... either stop working or continue to develop the project. Such a process of launching many products and their “experimental” use is a real thorough scientific process. We can observe its elements. Perhaps Google is going to change this process. Maybe this approach did not work the way they hoped - we cannot know for sure. Nevertheless, the market faces the challenge of applying a more scientific approach. Although there is still an element of personal taste here, a subjective vision of what management should look like - not everything can be conveyed through data.

So the experiment continues, we will observe how Google will continue to work with it. Since this process, in some ways, is a mutual learning, it is still not properly worked out. I think the Asymco pilot study is this: I want to see if we can get a small group of companies to share enough information. I will focus on companies in the IT sector. We also want to know if we can get enough information from them to trigger a discussion on this topic, and then learn enough from them to improve the way other companies do business - that’s my experiment.

Yes, I understand, but I think that in reality we cannot expect frankness from such companies regarding the secrets of their management, scientific processes and other secrets. But I'm sure we saw something similar to the concept of asymmetry, when, for example, Apple created the economy of iTunes and the App Store, providing the market with relatively inexpensive or even free tools for creating and distributing other people's developments. This is slightly different from what is happening now, for example, at Tesla, which opens access to its patents, although some analysts still regard this step as a charity act, and do not see asymmetry here.

Of course, I do not expect companies to take and tell you exactly how they earn money. This is for analysts to take the initiative in their hands and follow such experiments, publish their observations. You see, analysts are watching companies, but they keep all observations with them to share them only with their customers. This is the commercial model of business analysis. The idea is as follows: if I made a forecast for the development of the company, then I will not share them, I will sell it. The problem is that such an analytical picture is not tested by the public, the reaction is not checked by expert colleagues, and so on, even a third party, not the company itself, but an independent person, doing the analysis, does not share his methods, assumptions, does not explain to anyone where came to one or other conclusions.

So, if you viewed business as a phenomenon that is being watched, I hurry to disappoint you - modern analysts cherish information and their observations as very important secrets. It is as if Galileo Galilei was watching the planets, and the results of his observations were sold only to the one who offered the highest price. Then only five people would know about his discoveries, the knowledge would not have spread, and we would not know about his research. The same goes for Newton and all his followers. Business analysis is currently not open enough. I hope to change the work of the analyst - and it must be changed! - from a person who collects data or keeps them with himself, the analyst should become one who actively shares information and seeks to get feedback on this information. This is what should happen.

To some extent, this has already been done by scientists, but scientists still expect to gain access to internal data and achieve a friendly attitude of companies towards themselves. My approach is to use only those sources that are publicly available and try to provoke discussion, a broad discussion. We can talk for a very long time about the difficulties faced by business scholars - let's dwell on what we call this a hybrid approach: half scientific, half business.

I think Tesla’s chances of success are limited. Tesla did not make any innovative decisions in the production process - they exactly copy what everyone around does.

We mentioned iTunes and Apple - there is an element of innovation in its behavior. Tesla also makes its innovative contribution, not caring too much about the preservation of intellectual property, but it all happens as an experiment. iTunes turned out to be a successful project, let's see if Tesla will succeed: I think its chances of “taking off” are limited. For Tesla, the issue of intellectual property is of little interest, since it is not very valuable in the automotive industry. The few knowledge that has been obtained by automobile companies is kept secret or patented, trade in patents is rare, patent pools are not created in this industry, and not many court proceedings are held. Yes, all this was - but only more than a hundred years ago, not now, since the industry was already fully formed.

The most important innovative developments in the automotive industry, which turned it into what we have now, were related to the production process, mass production and large-scale production. The founders of innovative changes in these areas were Henry Ford, and then General Motors, who developed methods of customization or annual changes in the production process, allowing you to change models. Later, Toyota developed a “just-in-time” system: it can be said that the industry went through three phases of innovation.

Tesla did not introduce any innovative solutions. At least in terms of production, they copy exactly what everyone around does. So their innovative solutions in the field of transmission, technologies for designing electric battery charging systems are technical innovations, but ... I'm not sure that anyone in the industry is interested in these specific solutions, so there may not be wide discussion of patents in this area. I believe that the problem of information exchange needs to be investigated locally [within individual industries] - it is necessary to study the problem of innovation and patent issues, what information is shared, and which is not, but within a specific area.

Yes, if we talk about the automotive industry, the problem is not that everything is kept secret, but how to effectively implement these secrets, in building plans, understanding how to organize the production process of cars. And in Tesla's gesture, you can see something out of despair — this is rather an attempt to share secrets that nobody really needs. If we talk, for example, about European manufacturers, then they have so much information about recharging, batteries, electric vehicles, and all the related technologies that they get from Formula 1, for example.

Yes, and here is the paradox of the computer industry [as opposed to the automotive industry]: there are much more realized projects than patents. There are many creative initiatives in this area. It turns out that at first a person creates something, and only then thinks about how to patent it. That is why “patent trolls” cause so many problems - only they are perplexed by comparing a patent and someone else's inventions. In the automotive industry, everything is exactly the opposite - the way of performance has not changed for hundreds of years. So the patents are dead weight. Many unrealized models are being created in this industry, and nobody cares about it, since production capacity lies at the heart of competition in the automotive industry.

And the cost of production here is a pressing issue and the main issue.

In this regard, I am very concerned about the question of how the issue is solved in the automotive industry with access to new markets. Yes, China has become the largest car manufacturer. Their automobile factories are being built in new countries all the time, however they operate according to the same formulas that were used 40 years ago. Japanese innovative manufacturing process decisions are now copying everything, so any car company today can use Toyota's methods ... though not as well as Toyota itself. A similar scheme worked, of course, before that: at first, each company used a technological process developed by General Motors, and before that, everyone used what Ford invented. So is the spread of [knowledge].

A guest came to my show, who pointed out that when Toyota actually conducted joint activities with General Motors, she shared for free with General Motors, their main competitors, all their innovations, to show: look, we are trying to work together. So, in the automotive industry, the problem of companies is not to preserve intellectual property, but whether they can get access to a foreign market, whether politicians of any country can allow a car manufacturer from another country to produce cars on their territory and sell them to the local population. . That is why China, Japan, Korea, USA, Europe, all are involved in political discussions about automobile production, discussing, for example, who and what markets will be admitted to which countries. It all comes down to production. You build a factory that cost you two billion dollars, and then you are looking for confirmation that it will not be closed, because if it is closed, you will lose all the money invested.

And besides, we have to contend with all the regulatory requirements put forward by the government.

That's exactly what happens with innovations like Tesla: there are very few new auto companies, except for those that are “national”, right? There are some in Korea, some in China. They are created under the control of the state, so to speak, with its support and patronage. Tesla, on the other hand, functions more like a start-up, they barely made it self-sustaining - and produce only 30,000 cars a year. Perhaps, if, due to large ambitions, they will increase production volumes tenfold and will produce 300,000 cars per year, they will be equal in terms of output to a single British factory that produces niche cars under the Mini brand. Compare what Tesla production capacity is today, and how much Mini machines are produced. So, even if Tesla will increase production by 10 times, it will be equal only to the BMW subsidiary, which in itself is a small brand. While this business can not be compared with major automakers.

For contrast, let's take a look at the computer business. In the computer business, such a player in the market as Apple, which eight years ago did not produce a single phone, today produces about 50 million units per quarter. A year later, we can expect them to increase production volumes in the range from 150 to 200 million devices, for example, to 170 million phones. And these are 170 million devices, which themselves are extremely complex and which are currently used by about 800 million people. To feel the contrast with the Tesla indicator of 30,000 cars, I’ll add that Tesla makes cars as old as Apple makes phones. This scaling occurs in the technology business, even if we take into account the hardware; You can not remember about software at all - it is the prerogative of WhatsApp, Facebook ...

Software companies are, in essence, service providers. They attracted a billion users over several years of work. They develop at much higher rates. But if you look at the hardware, at Apple and Samsung - they are able to grow their audience to hundreds of millions of users, and the volume of annual shipments to hundreds of millions of devices in just a few years. Samsung, by the way, sells more than 18 million smartphones per quarter, while in 2010 it did not produce smartphones at all. It turns out, it took them four years to reach a figure of 18 million units. This is an incredible scale of production, logistics, distribution, but in the automotive industry nothing like this is observed.

If you [like Tesla] want to start producing [cars] from scratch, you will not be able to dramatically exceed production figures of several tens of thousands of units, otherwise you have to spend billions of dollars on this. Further, you will not be able to deal with distribution, because your dealer networks or protectionism will impede your penetration of individual markets. And besides, you will not be able to build logistic chains - [for example] at the moment Tesla is facing the problem of finding a supplier for its batteries, they are already thinking about building their own plant, which will take years of time, several billion dollars, and, in addition, they will have to look for raw materials, namely, lithium, which is actually under the jurisdiction of either China or the countries of South America - the states that have its deposits, and this is the problem.

Despite the fact that modern technologies directly affect consumer goods, and in the clothing industry over the past 30 years there has been no significant progress, the production of clothing, footwear and accessories remains more cost-effective than the production of phones or cars.

If you pay attention to the company, the business sector, you can notice the discrepancy: why in one industry, everything is arranged in one way, and in another, otherwise? And after all, both of these industries can potentially lay the foundation for the future of technological progress, as new technologies change these industries for the better. Although these issues are characteristic of individual business sectors, I again tried to broaden my point of view - to take some kind of industry related exclusively to the production of consumer goods, for example, things - clothes, shoes, bags, everything we wear. You study this industry and ask yourself the same question - is it improving with the advent of new technologies? At the very beginning, hundreds of years ago, it was the main means of achieving competitiveness. It was [then] about industrial technology, but very soon the development of technology began to directly affect final consumer products - the situation has not changed for a good hundred years, and the production of clothes, shoes and accessories remains more cost-effective than the production of telephones.

Why it happens?This is a very interesting question: if we compare the car manufacturing, clothing production and IT business, we get the following: over the past 30 years, the IT business has grown rapidly, there has been almost no development in the automotive industry, there has been no significant thing in the clothing industry progress, and at the same time they have completely different ways of making money and very different profitability. It is not necessary that one region is better than another. This is of interest. We will have to assess the situation as a whole, as well as examine the situation in many individual industries in order to understand why some things are so differently structured.

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Yes, that's why I left [from Nokia] and founded Asymco, a company that primarily studies information technology, and I think [that our] audience expects this, but [besides the main tasks] I wanted to do a hobby such as, for example , cars. Let's take a look at them as another lens to study business. So, in Asymco, I use Apple’s “prism” to take this company as a starting point to monitor IT technologies, but you can take cars and try to understand the state of technology through the prism of the automotive industry. By studying and comparing the automotive and IT industries, we can find out if there is a common pattern in these areas that helps us understand how a business works at all. Perhaps it makes sense to expand [the sphere of professional interests] even further, maybeI will do this with existing blogs or podcasts. I would like to take up the clothing and accessories industry to see how they make money there, why manufacturers of clothing and accessories work with 60% profitability, while selling things that are not protected by intellectual property rights.

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This is another oddity - there is no intellectual property other than a brand. You can not patent your design bag, you can not patent the color of the shirt, clothing can not be protected by copyright. The only protection in the clothing industry is the name on the label. That is, someone can completely copy the object that you just created, except for, perhaps, your name, since the name is the only factor that can influence the formation of price differences. This is an interesting idea, I think, it is based on the reasons why a person is willing to pay, the reasons why a person, choosing between the same objects from different manufacturers with different names, is willing to pay more for one of them. The objects are identical, but the names of the manufacturers are different, and one of them becomes more valuable. I do not think,that it is paradoxical, it is a very important lesson, thanks to which one can learn to understand the psychology of the buyer, to understand what the product he buys is.

If objects differ only in the names of manufacturers, it turns out that you pay for the value of the name itself? Then why is one name valued above another? That is the key question, and if you find an answer to it, considering the clothing industry, then perhaps this answer will be applicable to the automotive, computer, technology business sectors. Because in fact, consumer psychology is the same everywhere — the buyer who buys all these items thinks the same, his thinking remains the same, so the question is why buyers are willing to pay big money for a very fashionable thing and pay half the price for it a cheap copy ... well, or a good copy, I'm not saying that cheap is necessarily bad, I mean, this is a copy, but much cheaper.

Thus, a situation is quite possible in which the same people will choose between two cars of different brands and will pay a large amount for a car that costs more. But these same people, facing the mobile device industry, can say: I don’t want to overpay for the brand of my phone, I just want to buy the cheapest phone in the world - I’m sure that in terms of functionality, all mobile phones are the same. This means that in the first two industries, the brand determines the value of the product. That is, the formation of the significance of the brand determines the degree of customer confidence in it. And in the computer business, no one cares about the creation of a brand, its value, the formation of trust, and this was the reason for turning technology into a product and changed people's attitude to the choice of product at the time of purchase.

This is partly due to Microsoft and Intel. They "commoditized" the computer, made it so that we no longer worry about what kind of computer we buy as long as they all support the same software. Maybe in the new era of post-PC this will change, the brand will become important again, because now we have to trust such things more, now they serve as a means of self-expression. I have not yet met a person who would choose between Android and iPhone and, say, choose Android, but at the same time would declare: “I don’t pay attention to the clothes I wear” ... you may not be concerned with the device, which one you choose, but, apparently, about the clothes you wear and the car you drive, you still care more. I want to note that even the Chinese,who are the creators of lower priced products ... even they don’t wear three-dollar T-shirts. In the same way, they prefer to buy clothes of more expensive and high-quality brands.

This is really interesting, and this is a very curious insight - thank you for sharing your future plans and topics that you are going to tackle ... and I have to thank you for giving me an interview, Horace, I really appreciate the time you have given me .

Thank you very much, Dmitri, and thank you for inviting me.