Patent War

In the technology industry, where the major players have sued and countersued one another for decades, the battle between Nokia and Apple is nevertheless emblematic of the state of the mobile turf wars, writes WSJ.
“Given the amount of money involved, even a fraction of a percent can make a huge different in licensing revenues. With 1.55 billion phones expected to be sold this year the importance of these negotiations cannot be underestimated,” said Ben Wood, head of research at U.K.-based mobile research firm CCS Insight.
As the focus of competition increasingly turns to software and services, it has shifted to what Nokia CEO Stephen Elop has described as a “war of ecosystems” in which the value of patents has taken on even more importance. “Patents play an important role in this war of ecosystems,” Alexander I. Poltorak, CEO of U.S.-based General Patent Corp, said. Nokia’s portfolio of patents has given it a strong position through patent litigation to capture part of the revenue lost to its market competitors, he said.
While Nokia’s latest patent suit against Apple is strategic, Google’s defensive move to acquire Nortel’s patent portfolio of USD900 million is even more so. Though Google could use some of the technology in the Nortel patents in future research, the company said Monday that it wanted to buy them to defend against patent litigation. IHT writes that Google could also use the Nortel patents to protect its partners, like mobile manufacturers and developers using open-source Android and Chrome software. But, first and foremost, it wants to keep the patents out of the hands of competitors. Google also hopes to dissuade other companies from suing it, either because Google holds patents similar to the ones they might sue over or as deterrence.
HTC said recently it plans to spend USD75 million to purchase dozens of patents that cover 4G-network technology from U.S.-based ADC Telecommunications. (Wall Street Journal, International Herald Tribune)

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Creating Jobs

Creating Jobs

by Steve Lohr • Jan. 12, 1997
Correction Appended

On a soft november day in northern california, steve jobs is guiding his gray Porsche convertible out of San Francisco, and he is talking about Apple Computer Inc. That, of course, is what Jobs is famous for: as a co-founder of Apple in 1976, he was a leader of the computer revolution, until he was ousted in 1985 in a board-room coup. Jobs was 30, and he walked away with $150 million but no small measure of hurt.

As he negotiates the Friday afternoon traffic on Route 101, Jobs keeps insisting that he does not want to talk about Apple. Then he goes on at length about how the company needs to reinvent itself, how it needs to regain its lost mantle as the personal computer industry’s leading innovator. He is intimate but elusive, and undeniably articulate. He recalls his years at Apple fondly, then makes it clear that he is doing nothing more than reminiscing. After all, he has other things to worry about, like running Pixar, the digital-animation studio that created ”Toy Story,” and overseeing Next, the computer-software company he started when he left Apple.

Still, Apple clearly exerts a lingering pull on Jobs. ”It was like the first adult love of your life,” he confesses, ”something that is always special to you, no matter how it turns out.” In less than three weeks, Jobs would be offered the chance to return to his first love. And he jumped, setting off a frenzy of late-night meetings, negotiations and soul-searching throughout Silicon Valley. On Dec. 20, Apple’s C.E.O. and chairman, Gilbert F. Amelio, announced that the company would buy Next Software Inc. for $400 million. For that price, Apple also gets Steven P. Jobs, or at least a piece of him, in a role to be determined. So Jobs becomes the computer era’s prodigal son: his return to Apple after more than a decade in exile is an extraordinary act of corporate reconciliation, a move laden with triumph,
vindication and opportunity. And it is a particularly dramatic finale to an already dramatic second act in Jobs’s life, both personally and professionally.

at 41, jobs looks pretty much as he did at 30, or even 25. he still wears jeans every day, usually with a black turtleneck and running shoes. But Jobs says that he is a different person than he was when he left Apple in 1985, and that Apple is a different company. He insists that he is coming back to lend a hand as a part-time adviser, not to try to be the struggling com-

pany’s savior. What Jobs brings to Apple, he says, is ”a lot of experience and scar tissue.”

The deepest old wound is surely the way he left the company he founded. In 1984, the team he led created the Apple Macintosh, a sleek machine whose unique operating program made the personal computer user-friendly. But the Macintosh took time to attract buyers, and Jobs was forced out before the sales materialized. Apple would make a good living off the Macintosh technology for years, but as an innovator, the company all but stood still. Meanwhile, the Microsoft Corporation began its inexorable march toward domination, modeling its Windows operating software on the Mac’s point-and-click system.

There is a certain personal edge to Jobs’s return to Apple and the competition with Microsoft, lopsided as that rivalry appears today. While the personal computer industry has become a global
$150-billion-a-year business, it remains a remarkably tiny community in some respects, ruled by a few hundred people who came of age together. Think of it as a close-knit high-school class brimming with friendship, admiration, envy and resentment, and then add fame and vast wealth to people who are often barely adults. The two most prominent members of this class are Jobs, now seen as a pioneer and pop icon of computing whose fortunes have waned, and Microsoft’s William H. Gates 3d, who has become the nation’s richest man, dubbed the Rockefeller of the information age.

Both are 41, brilliant and driven, but their backgrounds and personalities contrast sharply. Gates is the scion of an old, affluent Seattle family; Jobs is the adopted son of a machinist in Northern California. Gates dropped out of Harvard University to become an entrepreneur; Jobs dropped out of Reed College, the artsy Bennington of the West, to trek around India in search of spiritual enlightenment before starting Apple. If Gates, at least for a time, seemed the classic nerd, Jobs was the enigmatic renegade in a leather jacket.

Jobs bridles at any suggestion that Gates and Microsoft amount to his white whale. But he must wonder how differently things in the computer industry might have turned out had he not been expelled from Apple. He is already talking about his return in ambitious, competitive terms. ”I think we have an opportunity to take the next big technological step, and leapfrog Microsoft and everybody else,” he said two weeks ago. Apple, to Jobs, has suddenly become ”we” again.

the trip back to apple began just before Thanksgiving. It is a textbook study of Steve Jobs in action, part hustling opportunist and part technology visionary.

Apple was known to be casting about for a next-generation operating program, the software that serves as the computer’s master-control panel. Apple’s in-house development effort, code-named Copland, had collapsed. For Apple, shopping for an operating system was a humiliation akin to General Motors’s having to buy engines from another company.

Seeing an opening, Jobs did what he had not done in years: he called Apple. Gilbert Amelio was out of the country, so Jobs left a message for Ellen Hancock, Apple’s chief technology officer. ”I was startled to see Steve Jobs had called,” Hancock says, ”but I returned it immediately.”

During their conversation, Hancock and Jobs discussed operating systems and Apple’s predicament. At the time, Apple was not
considering Next, and Jobs made no sales pitch.

A few days later, on Nov. 27, Jobs was working in his tiny office at Pixar in Point Richmond, north of Berkeley. He made a routine call to Next, whose offices are in Redwood City. What he heard stunned him: two Apple engineers and an Apple manager were at that very mo-ment huddled with a couple of Next mana-gers, who had called Apple on their own.

Jobs arranged to meet with Amelio, Hancock and Doug Solomon, an Apple strategy execu-tive, at Apple’s offices in Cupertino on Dec. 2. ”It was the first time I had set foot on the Apple campus since I left in 1985,” Jobs says.

Jobs and the three executives from Apple gathered in an eighth-floor conference room next to Amelio’s office. Jobs paced the room and scribbled with a black marker on a white board, tracing the evolution of computer operating systems and prescribing their future. This time, Jobs did make his pitch, explaining why Next’s operating system was Apple’s best choice. The Apple executives were impressed — or, as critics of the deal would say later, seduced — by Jobs’s
salesmanship, and agreed to take a close look at Next.

In recent years, Next had become a company with excellent technology but shrunken ambitions. Next had started out manufacturing both hardware and software, with Jobs dreaming it would outdistance Apple and take on Microsoft. But even though computer sophisticates loved Next, it couldn’t break into the mainstream, and the company was scaled back to provide software for computer programmers, especially those building Internet sites. Even as a niche company, Next wasn’t yet profitable.

Last year, Jobs started making plans to take the company public, and he hired Goldman, Sachs & Company to handle the deal. But Wall Street had begun to grow cautious about Internet companies. Besides, a stock sale of Next would hardly be helped when Jobs disclosed, as he would have to in financial documents, that he was planning to spend less time at Next and more at Pixar.

So Jobs also considered simply selling Next. The Apple opportunity, when it surfaced, was ideal, since Apple, seeking a new engine, was attracted to the Next operating system, a technology without a market.

At an Apple board meeting on Dec. 4, Hancock reviewed the handful of companies in the running, including Next and Be Inc., a start-up headed by Jean-Louis Gassee, another Apple alumnus. On Dec. 9 and 10, teams from Next and Be met separately at the Garden Court Hotel in Palo Alto with eight of Apple’s senior managers, including Amelio. Since the Garden Court and Il Fornaio, an adjacent restaurant, are favored gathering places of the computer elite, word began to spread that Jobs was talking to Apple.

In a small conference room ringed by Apple executives, Jobs himself gave the Next demonstration and proved that he was still a
spellbinding salesman of technology. On a desktop computer, he showed four video clips simultaneously, including Apple advertisements. His message: Next’s orphaned operating system was still five to seven years ahead of its time. It would especially appeal to Internet and applications programmers, a vital constituency if Apple were to prosper, for consumers will only buy computers for which software is plentiful.

After the demonstration, as a good faith gesture, Jobs handed over to Apple the financial disclosure documents Next had been preparing for its stock sale. And Jobs invited Amelio to his home to get acquainted and discuss strategy. ”My advice,” Jobs recalls, ”was that if Apple was going to go with our technology, they should buy the company instead of licensing the software. You need the people for something as vital as an operating system.”

After much testing, Apple’s engineers chose Next’s technology over the other companies’. Then Apple executives decided they could also use Jobs’s help. From early in the merger talks, Hancock says: ”We always talked about him being on the inside. We’re hoping he can show us where to go from here in emerging markets and technologies.”

For Jobs, the Apple deal provides a fresh start for Next and a sense of personal vindication. He sees business as a passion, the pursuit of something worthy; his friends talk of his ”need to do something big.” Suddenly, with an Apple deal, Next might indeed do something big. ”Joining Apple,” Jobs says, ”fulfills the spiritual reasons for starting Next.”

Just how much Jobs and Next can do for Apple probably cannot be fairly judged for a year or two. Apple’s new operating system, based on Next technology, is due in late 1997, but software products are chronically late. For now, Apple seems intent on keeping Jobs focused on helping Apple, and prevailed upon him to appear at its Macworld trade show on Jan. 7. The $200 million he received for Next includes 1.5 million Apple shares, which he cannot sell for at least a year. In the meantime, much of Wall Street and Silicon Valley will be watching closely, and without a trace of nostalgia. ”It’s very romantic going back to your first love,” observes the industry analyst Esther Dyson, ”but it rarely works out.”

just over a year ago, jobs pondered a very different kind of return to Apple. In December 1995, Jobs and his family were vacationing in Hawaii with his close friend Lawrence J. Ellison, the billionaire software entrepreneur who is chairman of the Oracle Corporation. Jobs and Ellison strolled the beach and weighed making a takeover bid for Apple.

At the time, just a few months before Amelio took over as chief executive, Apple was being battered by product problems and management turmoil. The takeover plan, Ellison recently revealed, was nearly complete. A handful of corporate investors, including Oracle, had arranged financing of nearly $3 billion. Their plan called for Jobs to play an executive role. ”We came very, very close to doing it,” Ellison says. ”Steve is the one who decided against it.”

Jobs now says he balked partly because trying to rehabilitate Apple would have meant so much time away from his family and Pixar, which has become a consuming interest. But mostly, ”I decided I’m not a hostile-takeover kind of guy,” Jobs says. ”If they had asked me to come back, it might have been different.” Now that they have asked, he is looking anew at Apple’s problems. Not long ago, Jobs agreed with analysts who said that Apple was doomed. ”That’s over,” he said. ”Apple lost.” Not surprisingly, he has since turned optimistic. ”A lot of people have written Apple off,” he says now. ”I was discouraged in the past as well. But Apple is still relevant. It has a base of 25 million users. Next to Microsoft, Apple is the only one that still matters.” Jobs insists that an improved operating system could well enable Apple to challenge Microsoft, much as the Macintosh challenged I.B.M. technology 10 years ago. ”If anything,” he says, ”I.B.M. was more powerful than Microsoft is today.”

Today, more than 85 percent of all personal computers run on Microsoft Windows; the Mac is next, with 10 percent or less. Still, those millions of users give Apple a base to build from that Next never had. And Next has a devoted following among computer programmers. (Tim Berners-Lee, a British programmer, created the World Wide Web on the Next system.)

Apple couldn’t hope for a better pitchman than Jobs, whose genius for infecting others with his enthusiasm is known, by critics and admirers alike, as the ”reality distortion field.” ”Steve Jobs is passionate about technology, and he can convey that sense of excitement to people who are inherently excitable about technology — and Silicon Valley is full of them,” says Richard Shaffer, a principal of Technologic Partners, a research firm. ”If Jobs can help instill in developers a sense that Apple will rise again, then it can rise again.”

It is widely agreed that Jobs still stirs commitment and enthusiasm from his employees, but in a less frenetic style than he did years ago. In the past few years, he has spent most of his time at Pixar, which occupies a nondescript low brick building near the waterfront in Point Richmond.

The atmosphere at Pixar is loose and playful, but the computer scientists, animators and artists there work long hours and talk about being on the frontier of a new kind of film making. Jobs bought Pixar from the director George Lucas in 1986 for less than $10 million. At the time, Pixar was little more than a small collection of
adventuresome computer scientists and a gifted young animator, John Lasseter, formerly of Disney. Jobs proceeded to invest $50 million of his own money in Pixar. It began to pay off when Pixar signed a deal to make three computer-animated films with Disney, the first being ”Toy Story,” which was the No. 1 box-office film of 1995. (Pixar’s next film, an adventure story about insects called ”Bugs,” isn’t scheduled for release until Thanksgiving 1998.)

”Toy Story” took four years to make, during which time Pixar struggled. Jobs never let up on his colleagues. ”You need a lot more than vision — you need a stubbornness, tenacity, belief and patience to stay the course,” says Edwin Catmull, a 51-year-old computer scientist and a co-founder of Pixar. ”In Steve’s case, he pushes right to the edge, to try to make the next big step forward. It’s built into him.”

In the old days at Apple, some people found Jobs’s prodding style inspiring and others found it maddening, with Jobs meddling in the tiniest corporate details. His early days at Pixar were much the same. Pamela Kerwin, who joined the company in 1989 and is now a vice president, recalls how Jobs would run a meeting: ”After the first three words out of your mouth, he’d interrupt you and say, ‘O.K., here’s how I see things.’ It isn’t like that anymore. He listens a lot more, and he’s more relaxed, more mature.”

Even Jobs acknowledges the change, and offers a simple explanation: ”I trust people more.”

as remarkable as his return to apple may be, it is no more so than some of the quiet steps of reconciliation and discovery Steve Jobs has made in his personal life, most of them having to do with his family.

During his Apple years, Jobs says he spent ”150 percent” of his time and energy on the company. His oldest daughter, Lisa, was born when Jobs was 23 and totally immersed in starting the computer revolution. She lived with her mother, whom Jobs never married. When Lisa was about 7, Jobs gradually began to build a relationship with her, and she lived with him during her teen-age years. Now 18, she is a freshman at an East Coast university.

On a recent sunny Friday afternoon, Jobs’s house in Palo Alto was teeming with family and children. His young son was climbing a tree in the backyard, overseen by a watchful nanny; a couple of neighborhood children arrived, accompanied by baby sitters. In the kitchen, Jobs was sitting in a favorite rocking chair with his toddler daughter bouncing on his lap. His wife, Laurene, returned from errands and a jog. She and Jobs met about seven years ago, when Laurene was doing graduate work at Stanford’s business school. Jobs came to speak to a class and sat next to her. They exchanged telephone numbers, but he had a business dinner scheduled for that evening.

After the class, Jobs recalls, ”I was in the parking lot, with the key in the car, and I thought to myself, If this is my last night on earth, would I rather spend it at a business meeting or with this woman? I ran across the parking lot, asked her if she’d have dinner with me. She said yes, we walked into town and we’ve been together ever since.”

Several years before he met Laurene, Jobs made another deep family connection, this one a good bit more dramatic. Adopted as a baby, Jobs was reared in a middle-class household in Los Altos by Clara, an accountant, and Paul Jobs, a machinist for a company that made lasers. (Both of them are deceased.) Steve remembers Paul as a ”genius with his hands.” He bought junkyard cars for $50, fixed them up and sold them to students for a profit. ”That was my college fund,” Jobs says. He was clearly close to his adoptive father. Asked what he wants to pass onto his children, Jobs answers: ”Just to try to be as good a father to them as my father was to me. I think about that every day of my life.”

But, Jobs says, since he was a teen-ager he had tried to locate his biological family. He had nearly given up when he discovered, at the age of 27, that his biological parents had another child later whom they had kept, his younger sister. For reasons of privacy, Jobs explains, he won’t discuss his biological parents or how he ultimately tracked down his sister.

As it turns out, his sister is the novelist Mona Simpson, whose new book, ”A Regular Guy,” is about a Silicon Valley entrepreneur who bears a striking resemblance to Steve Jobs. After they met, Jobs forged a relationship with her, often visiting her in Manhattan, where she lived and still maintains an apartment. Theirs is a connection that, to this day, neither Jobs nor Simpson have discussed in the press, and now do so sparingly. ”My brother and I are very close,” Simpson says. ”I admire him enormously.”

Jobs says only: ”We’re family. She’s one of my best friends in the world. I call her and talk to her every couple of days.”

For years, the two kept their relationship to themselves. Then, in 1986, George Plimpton, for whom Simpson had worked at The Paris Review, gave a party for her first novel, ”Anywhere but Here.” Simpson arrived with her mother, Joanne, and Steve Jobs. ”I had known Mona for quite a while,” recalls Amanda Urban, Simpson’s literary agent. ”She had said she had a brother who worked in the computer industry. But that party was the first time I learned that her brother was Steve Jobs.”

Simpson and Jobs decline to discuss the circumstances that led their biological parents to put Steve up for adoption. When he was born, his parents were unmarried; they had married by the time Mona was born, two and a half years later. She grew up in Green Bay, Wis.; according to a biographical blurb in a literary magazine, her father was a political science professor and her mother was a speech therapist. Simpson’s novels tend to be populated by eccentric mothers and absent fathers (her second book was ”The Lost Father”); her parents separated when she was 10, and she moved to Los Angeles with her mother as a teen-ager.

Jobs will say nothing about his biological father, but says that he does keep in touch with Joanne Simpson and invites her to some of his family gatherings. (She declined to comment for this article.) He seems grateful for her long-ago decision to have him and put him up for adoption. Yet, biological roots aside, Jobs holds a firm belief that Paul and Clara Jobs were his true parents. A mention of his ”adoptive parents” is quickly cut off. ”They were my parents,” he says emphatically.

Whatever it may say about the question of nature versus nurture, Simpson has also had considerable professional success. ”Anywhere but Here” was applauded by critics and sold remarkably well for a literary novel by an unknown writer; when ”The Lost Father” was published in 1992, Michiko Kakutani of The New York Times wrote that it ”should galvanize Mona Simpson’s reputation as one of the most accomplished writers of her generation.”

”A Regular Guy,” published in the fall by Knopf, has received mixed reviews. It is about a Silicon Valley biotech entrepreneur named Tom Owens who becomes wealthy and famous and then loses control of his company to more practical business types. But the novel is primarily a dissection of relationships, the central one being the uncertainly developing bond between Owens and Jane, his out-of-wedlock daughter, who shows up at his doorstep, unbidden, at the age of 10. Owens is an eccentric egotist: he’s too busy to flush toilets, doesn’t believe in deodorant and lives in a couple rooms of a sprawling mansion. He treats people, including Jane, with an emotional coolness that borders on cruelty. Eventually, though, Owens slows down, marries and embraces family life. ”It’s a lot more important than work,” he says.

Given the similarities between Tom Owens and Steve Jobs, most of the book’s reviewers have mentioned the Simpson-Jobs family tie. (Though rarely written about, the relationship has been well known in publishing circles.) It would be hard not to notice: Owens is a vegetarian, blue-jeans-wearing iconoclast who believes in the virtues of market competition in business, education and elsewhere; ditto Jobs.

How much of himself does Jobs see in Tom Owens? ”About 25 percent of it is totally me, right down to the mannerisms,” he says. ”And I’m certainly not telling you which 25 percent.” Simpson must have known that people would make the comparison, often to Jobs’s detriment; does he feel she exploited or betrayed him? ”Of course not,” he says with a dismissive wave. ”It’s a novel.”

His adulthood discovery of his sister forced Jobs to rethink why people’s lives turn out as they do. For years, he considered himself ”an environmentalist,” believing that a person’s success or failure is largely governed by circumstance, upbringing, timing and luck. As a world view, it seemed logical enough to the young Steve Jobs. He happened to grow up in Silicon Valley at a time when the ingredients of the personal computer industry came together. As a 12-year-old, on a whim — and with an early display of characteristic chutzpah — Jobs called William Hewlett, then president of Hewlett-Packard, at his home in Palo Alto. Jobs was building a frequency counter and needed some parts. Hewlett chatted with Jobs for 20 minutes, agreed to send him the parts and gave him a summer job at Hewlett-Packard, the company regarded as the birthplace of Silicon Valley. About the same time, Jobs met Stephen Wozniak, a gifted young engineer, and a decade later they started Apple in the Jobs family garage.

When he found Mona Simpson, who had grown up in entirely different circumstances, Jobs felt as if they had been part of some genetics experiment. He was struck by the similarity in their intensity, traits and appearance. As he was growing close to Simpson, he was also getting to know his daughter Lisa, whose early years were spent apart from Jobs, and watching his two younger children grow up. ”I used to be way over on the nurture side, but I’ve swung way over to the nature side,” he says. ”And it’s because of Mona and having kids. My daughter is 14 months old, and it’s already pretty clear what her personality is.”

The effect of all this on Jobs seems to be a certain sense of calming fatalism — less urgency to control his immediate environment and a greater trust that life’s outcomes are, to a certain degree, wired in the genes.

today, jobs lives in a red-brick house built in the 1930’s. It is uncluttered but comfortable, with exposed-brick walls and furniture that is mostly wood. In November, the living-room chairs were still arranged as they had been for a dinner in August that Jobs gave for President Clinton and Silicon Valley executives. ”We don’t entertain much,” he says about the undisturbed chairs.

The house is large and the yard is spacious; it would probably go for $3 million to $5 million. But for a man worth an estimated $700 million, the house seems a statement of restraint. Esthetically, Jobs is a modernist, a believer in simple elegance. Over the years, he has applied his taste in design to his products as well: Jobs once rejected a proposed Macintosh circuit board because it looked ugly, even though only service technicians would ever see the innards.

The notion of ”taste” — he uses the word frequently — looms large in Jobs’s business philosophy. His is a very specific sensibility, honed by a breadth of experience and by his constant immersion in the popular culture of the time. When he graduated from high school in Los Altos in 1972, he says, ”the very strong scent of the 1960’s was still there.” In his 20’s, he dated Joan Baez; Ella Fitzgerald sang at his 30th-birthday party. When discussing the Silicon Valley’s lasting contributions to humanity, he mentions the invention of the microchip and ”The Whole Earth Catalog” in the same breath.

Great products, according to Jobs, are a triumph of taste, of ”trying to expose yourself to the best things humans have done and then trying to bring those things into what you are doing.” The Macintosh, he has said, turned out so well because the people working on it

were musicians, artists, poets and historians

who also happened to be excellent computer scientists.

And so Jobs’s return to Apple marks an opportunity to reintroduce certain standards into an industry that, in his eyes, has grown

ugly. Jobs has never hidden his longstanding objection to Microsoft — not, he says, because of its dominance, or even Bill Gates’s billions. ”The only problem with Microsoft is they just have no taste,” he said last year in ”Triumph of the Nerds,” a television documentary about the history of the computer industry. ”I don’t mean that in a small way. I mean that in a big way, in the sense that they don’t think of original ideas and they don’t bring much culture into their products. I have no problem with their success — they’ve earned their success for the most part. I have a problem

with the fact that they

just make really third-rate products.”

The statement was quin-tessential Jobs: arrogant, frank, insightful and perhaps more than half right, though brutally overstated. Those same traits were both his strength and his weakness at Apple.

After the documentary was televised, Jobs called Gates to apologize, sort of. ”I told him I believed every word of what I’d said but that I never should have said it in public,” Jobs says. ”I wish him the best, I really do. I just think he and Microsoft are a bit narrow. He’d be a broader guy if he had dropped acid once or gone off to an ashram when he was younger.”

Even in apology mode, Jobs can be cutting, perhaps too much so for what the corporate computer culture has become. Apple Computer Inc., after 11 years without him, is a vastly different company, with an entirely new set of needs and goals. The question is whether Steve Jobs has become a different Steve Jobs than the one who created it.

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MBA- What is it worth?

by Koon Mei Ching

A valid question, don’t you think? A typical cost of a good to excellent MBA in the USA, UK or even Australia would cost you two years of your life and about USD100,000 of your life savings (assuming you didn’t manage to swing your company to foot the bill). This, on top of the two years’ worth of income you would forgo pursuing the pinnacle of education, as some might view the MBA. It might serve one well to look into whether this is all worth it.

I had kicked around with the idea of an MBA years ago, fresh out of university and getting "jaded" with my one year of work experience. I looked through a mountain of material from all the top universities around the world. I sat for the GMAT test. I looked into scholarships. I wrote bogus essays. I chatted on online MBA forums. You name it; I did it. But in the end, I didn’t go. Why? Firstly, I discovered that I didn’t really want an education, more than a chance to get overseas to do something else than work. Secondly, I got a job offer that allowed me to explore what I really wanted to do … only, I’d get paid for it and gain some valuable real-life experience.

There have been many debates on the merits of doing an MBA. Certain studies have shown that the MBA is at risk of becoming irrelevant. Most potential MBA-ites view it as an instant recipe to a high-flying career and a fat paycheck. There are definitely questions that are worth exploring before you make this leap.

The first graduate business degree was instituted by Amos Tuck School of Administration and Finance back in 1900. Over the next 50 years, the modern version of the MBA developed. Yet, in those early days, the focus was more vocational rather than professional. Former businessmen constituted the faculty, and their classes were more about learning from their war stories rather than scientific theories. As the economy grew more complex and the demands on business corporations increased, there was a push towards gearing MBAs with more "science" believed locked in theories and models. Conversely today, there is criticism that professors teaching MBA courses lack real-world experience in their field of teaching – that their theorems and scientific hypotheses fail to reflect what’s demanded in today’s hiring market. Evidence of this was during the dot com peak – no one without an MBA was hired – yet, there was no marked increase in the level of business wisdom as revealed during the era’s implosion.

MBA schools are also being chastened from within the B-school establishment. In this day and age where students choose which school they will go to (and which bank account their parents’ money goes into) based upon national and global rankings, B-schools are displaying a scary obsession on where they place, instead of focusing on updating their curriculum and keeping themselves aligned to the IT curve of development.

Some MBA programmes are being amended to move with the times. Others are remaining very still. Knowing which is doing what would be a good idea for any potential enrollee.

Obviously, this is a key concern to those planning to or undertaking an MBA at the moment. History shows that there have been many highly successful business owners who have achieved their lofty goals sans MBA. Think Michael Dell or even Bill Gates. Says George, a senior consultant: "During my decade as a consultant, I met numerous freshly minted MBA’s who hadn’t been introduced to organisational and operational strategies developed over 30 years ago. Many reported that they learned more in four days with me than in the years it took to complete their MBA." Another MBA taker, Lisa, is in agreement. "Like others who analysed the cost/benefit of an MBA, I have concluded that it is not worth it,” she says. “I already had a Master’s degree and after spending a term in one of the leading business schools I decided that the value of the degree is exaggerated. Maybe it is the wrong values being taught where the ultimate goal is getting a high salary. Entrepreneurship involves risk-taking, timing and a feel for the market. You learn these by doing, not by analysing. You can have all the analytical tools in the world but the key ingredients of decision-making and commitment to act on issues are still missing. Some get bogged down with detail while others get stuck with lofty strategies that cannot be implemented."

It is clear that it is not the intimate knowledge of capital asset pricing that guarantees career success. Rather, the true value an individual can deliver lies in his or her ability to apply such knowledge in real life situations. We might be too ready to praise professors should we think they would be able to teach us this.

As Karen, a 48-year old in a fast-track MBA programme, observes philosophically: "A square-dance fiddler has no need of a Stradivarius. Students enrolling in a top-tier programme need to be prepared, both in terms of academics, and in their personal approach to life and learning. The tool doesn’t make an apprentice an artisan, but an artisan can utilise the most rudimentary tools to produce works of art."

Spending a lifetime’s worth of savings on an MBA would seem rational to people who believe that their post-MBA career will reap them the glorious rewards propounded by B-schools. So, can an MBA holder really expect to earn a ludicrous salary that will pay off their initial investment (unless they are lucky enough to be company-sponsored)? In the current scenario, there is a horde of people attending B-school for an MBA. But with drum-tight hiring budgets and a tanking economy, there will likely be a global MBA glut. Many of the graduates will find themselves jobless upon graduation burdened by debt. The real problem is that the majority of MBAs (although not all by any means) want to go into strategy consulting or investment banking. There simply isn’t enough of that kind of work being done to support the crowds of MBAs that are clamouring to get in. Long term, it’s probably much better for the economy as a whole that all these trained managers find their way into real industry. It’s up to MBAs and MBA students to adopt a more pragmatic, realistic worldview.

Should you be lucky enough to get hired overseas by a consultancy or banking firm fresh out of a top 10 ranked MBA programme, starting pay packages can average about USD $120,000-$160,000, depending on the MBA school (e.g. $80K base salary + $20K signing bonus + $20K 1st year bonus). Some of these jobs (eg, finance) balloon to $200-$300k+ within 2-3 years out of school. The potential, however slim, seem enough to compel many to take the chance. But one must be aware of how reality can bite too. John, a 2000 MBA graduate from University of San Francisco, has been lumbered by MBA debt and been living off unemployment since he was laid off in August 2001. For him and others like him, it has been a real eye-opener. "We never thought we’d be in this situation. When things got bad, the degree didn’t seem to matter."

Yet many are aiming to attend expensive top 20 schools. Adrian, a 28 year-old MBA holder says this in support of the MBA investment, "An MBA is an investment like any other investment. When it’s within budget (or the cost of getting the money is acceptable), you look at the risk you run and the run you can expect. If MBA’s are still a highly attractive path for so many people, it’s simply because they can afford it (with payments deferred), their risk is minimal (because no-one goes down after his MBA), and return is positive. The extent of the investment shouldn’t bother you. It’s a timely risk-return ratio assessment that matters. For me, it makes sense."

And so the debate rages on. Consensus seems to indicate that a top MBA programme does matter is you are intending to launch into a management consulting or investment banking career, where the competition for MBA’s is most heated. To be frank, the main reason to go to a top ranked school isn’t necessarily the strength of the curriculum. Funny that. While I’m sure that the top 10 programs are arguably tougher than say the 50 – 60 ranked programs, I’d venture to say not by a whole lot. So what’s all the fuss?

The true value is brand name and connections.

The social and business networks you gain from these top schools are easily worth the tuition. After two years of shared project angst and coffee-filled all-nighters, it’s often easy to reconnect with good friends or even acquaintances from your MBA days with a simple email or phone call. The bond created through an alumnus is a strange, mystical thing, especially at top tier schools where the sense of belonging to an elite group is strong.

Employers these days do give more weight to your experience than to your degree, but they’re still more likely to favour people they know. Sorry, folks. The Harvard MBA network is a very impressive example of how productive a branded network can be for graduates. Come resume screening time, it proves to be a huge leg up if the recruiter recognises you as an alumnus. Employers assume, with some justification, that someone who managed to get into an elite school (and pay the tuition, to boot) is ambitious, intelligent, and motivated. Further to this, many of your old buddies would probably be at senior positions in major companies 10-15 years post graduation. Now, you are both in the situation to "scratch my back, and I’ll scratch yours."

It tends to be situational.

Some of you may not even know that the MBA was designed to help engineers to move out of technical positions and into management positions. People with business or finance backgrounds may find the programme redundant to a degree as it merely reinforces (and enhances, no doubt) their current knowledge. For them, the question is whether sacrificing two years of relevant experience is worth more than achieving an MBA. It is the group of individuals with more technical backgrounds that tend to benefit more by this broadening experience. This credential gives them the option to learn a vast amount of new concepts and make that career switch into the business or management arena.

Another point, if you are already destined for greatness on a good job trajectory, the experience gained in the real world may be far more valuable to you than pursuing an MBA.

Apart from social and business networks, you can also gain adept group communication skills from the MBA experience. At most business schools, the case method and class participation make up an important part of the curriculum. In a business school setting, you learn when to interject, when to keep silent and listen, when to be serious, and when to use humor to break the ice. This same group power dynamic exists in many business situations, from board meetings to team projects. Mastering the art of communicating in a group setting is one of the things that distinguish successful people from the rest, and it is learned very powerfully in B-school.

One should examine the pros and cons of attending an MBA programme against his/her longer-term goals and the relevance of the MBA in achieving those goals. Often, many lose sight of the real intent of higher education – racing more towards the finish line (and the purported dollar signs) and forget to maximise the experience right in front of them. It is an opportunity to grow professionally and personally. You will likely be tested in ways you never imagined undergoing a tough MBA programme. The MBA is worth it if you know what you can gain out of it. It is not an automatic passport to success; it won’t bring you instant fame and fortune. For that, my friend, you’re going to have to use the grey matter in between your ears. You’ll just have some MBA leverage to help you along, that’s all.

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Hello world!

Welcome to This is your first post. Edit or delete it and start blogging!

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