(I am posting this in Korean since it’s about the Korean presidential election.)

선거 끝난 뒤로 왜 문재인이 졌는지, 앞으로 민주당이 이기기 위해서는 어떻게 해야 하는지 등의 이야기를 페이스북에서 하면서 친구들과 내린 결론 중 하나가 경상도는 보수 정당이 아무리 삽질을 해도 보수 정당에 꾸준히 표를 준다는거다. 아무리 민주당이 전라도에서 몰표를 얻어도 경상도 인구가 전라도에 비해 훨씬 많기 때문에 (부산/경북/경남: 1300만, 광주/전북/전남: 500만, 대전/충북/충남: 500만) 보수와 진보가 1대1로 붙었을 때 보수에게 유리한 구조다. 새누리당이 경상도에서 77% 득표하면 민주당은 충청도, 전라도에서 100% 득표해야 같아진다. 따라서 김대중 때처럼 이회창-이인제와 같은 식으로 보수표가 갈라지지 않는 이상 진보가 이기기 힘들다. 이에 대한 얘기는 여기에 어떤 분이 굉장히 잘 설명해놓으셨다.

그렇다면 노무현은 어떻게 이회창과 1대1로 붙어서 당선이 되었을까? 문재인은 노무현에 비해서 어디서 표가 부족해서 떨어지게 된 것일까? 선관위에 득표에 관한 자료는 다 있는데 한 눈에 보기 어렵게 테이블로 되어 있어서 보기 쉽게 그려보고 싶어졌다 (너무 덕후스러운거 같지만-.-).

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그림 1. 지역별로 18대의 문재인과 박근혜 (파랑), 16대의 노무현과 이회창(초록) 의 득표 차이를 표시했다. 막대가 높을수록 문재인, 노무현의 득표가 박근혜, 이회창에 비해 많은거다.

그림 1의 대략적인 추세를 보면 예상대로 두 대선 모두 서울, 경기, 인천은 박빙 (막대가 0에 근접), 경상도는 박근혜, 이회창 우세 (막대가 마이너스), 전라도는 문재인, 노무현 우세 (막대가 플러스), 그리고 충청도는 박빙이다. 파란색과 초록색을 비교해보면 노무현에 비해 문재인이 수도권, 충청권에서 약했고 부산, 경남에서는 좀 더 선전했다. 초록 막대들을 보면 노무현은 이회창에게 경상도에서 잃은 표를 전라도, 수도권에서 모두 찾고도 남아서 약 55만표 차이로 승리했다. 반면, 문재인은 (파랑) 경상도에서 진만큼 수도권에서 회복하지 못했고 충청권에서도 지고 말았다.

좀 더 쉽게 노무현과 문재인을 비교하기 위해서 노무현의 득표 차와 문재인의 득표 차, 즉 (문재인 득표 – 박근혜 득표) – (노무현 득표 – 이회창 득표)를 그림 2에 그려봤다.

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그림 2. 지역별로 18대의 문재인이 16대의 노무현에 비해서 상대를 얼마나 큰 차이로 이겼는지를 그렸다. 막대가 마이너스이면 16대 때 노무현이 이회창 상대로 낸 차이가 18대 때 문재인이 박근혜 상대로 낸 차이에 비해 큰거다.

그림 2를 보면 16대 때의 노무현에 비해 18대 때 문재인이 어느 지역에서 강했고 약했는지를 대략 알 수 있다. 예를 들어 서울의 경우 문재인과 노무현 모두 박근혜와 이회창을 상대로 이겼지만 막대가 마이너스인 이유는 문재인이 노무현에 비해 적은 득표 차로 상대를 이겼기 때문이다. 따라서 막대가 마이너스이면 18대 때 문재인이 16대 때의 노무현보다 약했다고 볼 수 있다. 18대의 문재인은 부산, 경남, 광주에서 강했고 나머지 지역에서는 16대의 노무현에 비해 훨씬 약했음을 알 수 있다. 부산의 경우 노무현이 30% 득표를 한 것에 반해 문재인이 40% 득표를 했다. 문재인의 지역구인 사상에서 박근혜에게 진건 충격이었지만 부산, 경남 전반적으로 고무적인 결과라고 할 수 있다. 하지만 수도권 지역에서, 특히 경기에서 노무현에 비해 상대에게 많은 표를 잃었다. 대구, 경북도 16대의 노무현에 비해 표를 많이 잃었는데 이는 상대가 이회창에서 대구가 텃밭인 박근혜로 바뀌었기 때문이라고 본다. 이외에 충청권에서도 16대 때의 노무현이 18대 문재인에 비해 훨씬 많은 득표를 했음을 볼 수 있다.

아래 그림 3, 4는 그림 1,2를 퍼센티지로 그린 것이다. 이 그림들이 모두 보여주는건 문재인이 부산, 경남에서는 선전했지만 나머지 곳에서는 노무현에 비해 부진한게 패인이라는거다. 다시 그림 2를 보면 부산, 경남에서 얻은 표와 대구, 경북에서 잃은 표가 비슷하니 나머지 지역인 수도권과 충청권에서 막대들이 전부 0에 근접했어야 노무현과 비슷한 55만표 차이로 문재인이 이길 수 있었다.

어떻게 해야 수도권과 충청권에서 표를 얻을 수 있는지에 대한 방법은 모르겠지만 이번 대선과 16대 대선이 어떤 차이가 있는지 보는게 흥미롭다. 특히 부산, 경남에서 10년 사이에 많은 발전을 보인게 고무적이다. 다음 대선에서는 새누리당에서 그 누가 나와도 박근혜만큼 대구, 경북에서 압도적인 지지를 받기는 힘들거라는 점을 감안하면 대구, 경북도 이번보다는 해볼만 할 것이다.

추가: 페이스북에서 친구들이 좋은 코멘트를 달아줘서 더 추가한다. 뉴욕에 조 군은 문재인이 너무 PK에 올인하느라 그 쪽에서는 성공했지만 수도권과 충청권을 잃은게 아닐까 분석했다. 또 다른 분은 부산이 삼당합당 이전으로 돌아가는 것이라고 지적하셨다. 이 말이 일리가 있는게 노태우, 김영삼, 김대중이 붙어서 노태우가 당선된 13대 대선을 보면 PK는 김영삼, TK는 노태우를 지지했다. 삼당합당 전의 PK는 김영삼의 텃밭이었고 야권 성향이었다는 것.
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그림 3. 그림 1과 같은데 전체 유권자 대비 퍼센티지를 그렸다.

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그림 4. 그림 2와 같은데 전체 유권자 대비 퍼센티지로 그렸다. 예를 들어 서울의 경우, 16대 때 노무현이 이회창을 1.49%차로 이기고 18대 때 문재인이 박근혜를 0.67% 차이로 이겼기 때문에 0.67-1.49 = 0.82%가 되는거다.

http://www.eetimes.com/electronics-news/4391816/Analyst–Apple–Samsung-snagged-over-100–of-Q2-handset-profits

Apple and Samsung took 108% of handset profits in Q2. It’s over 100% because other handset OEMs lost money. Basically it’s (Apple+Samsung’s profit) > (Entire handset industry’s profit). I don’t know how chip makers like DRAM, NAND, PMIC manufacturers can deal with this situation. If they don’t get a design win on Apple or Samsung handsets, it’s very difficult to earn money in the mobile market. Even worse, Samsung uses their own chip for DRAM, NAND and AP, so they don’t really buy much from other vendors. Mobile seems to be the fastest growing and largest market for semiconductor chips, but few chip companies will take advantage of that.

 

Price, cost comparisons between Apple’s A5X versus Intel’s processors

According to Chipworks, the A5X processor in the new iPad measures 12.82 mm x 12.71 mm for an area of 162.94 mm². iSuppli estimates that Apple is paying Samsung $23 to manufacture the chip. It becomes very surprising when you compare this to Intel’s Core i5 processor for laptops with 149mm² die area that sells for $225. Apple gets a 162.94 mm² chip for $23, Intel sells a 149mm² chip for $225. If the cost estimate from iSuppli is true, I think it shows that Intel has a huge margin for its processors and/or Apple might be getting a pretty good deal from Samsung (basically Samsung’s foundry margins are low). Intel’s margin gets even crazier for processors in higher-performing laptops such as the Intel Core i7 2960XM that measures 216mm² and sells for $1096. One thing to note is that the two Intel processors I mentioned here use 32nm, while Apple’s A5X uses 45nm, allowing Intel’s processors to fit in more functionality per unit area and charge higher prices (which is the reason Moore’s law keeps going on. Fit in more functionality per unit area, charge more for the same cost).

Why did iPad use two 512MB DRAM packages for 1GB memory?

Looking at the teardown image from iFixit, you can see that the iPad contains two DRAM packages (in yellow square) for a total of 1GB memory.

Compare this to Samsung’s Galaxy Tab 10.1, that has the same total memory of 1GB, but instead uses a single package (image from TechRepublic). The DRAM package is the black one right above the green Tegra three processor.

Using a single package 1GB DRAM would save PCB area, but I think there might be two problems. First, it might cost more than using two 512MB packages. Second, a 1GB DRAM package might be thicker than a 512MB package if the 1GB stacks larger numbers of DRAM dies in a single package. Maybe Apple had  enough PCB area to fit in two DRAM packages and made the decision based on cost. Maybe Apple was willing to use more PCB area to reduce thickness by placing two thinner 512MB packages side-by-side.

iFixit just posted a teardown analysis of the new iPad today. iFixit’s team flew all the way to Australia, the first country to release the iPad, camped out overnight in front of an Apple Store in Melbourne, and tore down the iPad right after they bought it. This is being professional =) There are several points I wanted to update from the previous post based on what I learned from the iFixit teardown analysis.

How did they fit in the 1.7x larger battery?

In my previous post, I mentioned that the battery is 1.7x larger compared to iPad 2 and was wondering how they fit that into a tablet that only grew 0.6mm in thickness. It turns out they increased both battery thickness and area, but battery density (capacity per volume) is stil the same. I highly doubt that battery density will change dramatically in the near future. As shown in the image, the iPad’s battery consists of 3 cells.

According to a Ars Technica article, each cell in the new iPad measures 125 x 65 x 4 mm compared to the iPad 2’s 108 x 63 x 2.7mm. Battery thickness increased by 1.3mm (2.7mm -> 4mm) while total tablet thickness increased by 0.6mm. This means that Apple was able to shave off 0.7mm somewhere else (possibly made the display and/or aluminum body thinner). Battery area also increased from 108 x 63mm to 125 x 65mm. You can see the length of the battery did not change much (63->65mm) since the length of the tablet  did not change, leaving no room for the battery to grow. It seems Apple was able to have the battery slightly eat into the area that was originally occupied by the PCB, increasing battery width from 108mm to 125mm. However, the image below shows that PCB area did not change all that much between the iPad 2 (top) and the new iPad (bottom), but the two might have slightly different scales since I copied and pasted two images from different sources and scaled them assuming they have the same length.

How did Apple fit more chips without increasing PCB area?

The new iPad contains several more chip packages than iPad 2.

  • DRAM increased from 0.5GB to 1GB. It seems the DRAM vendors could not fit 1GB in a single package, so the new iPad has two separate DRAM packages (yellow square in image above)
  • A5X is not a package-on-package (PoP): A5 processor in the iPad 2 used a PoP configuration, stacking the DRAM package on top of the A5 package to save PCB area. In the new iPad, there is no package stacked on top of the A5X processor. Instead, there is a spacer and thermal paste between the cover and die (image below). I believe these are for better thermal conduction due to the higher power consumption of the A5X processor. This is interesting because most mobile processor until now was cooled through the PCB, which is the bottom side of the processor package. Due to increasing processor power, cooling through the PCB is not enough and Apple had to take off the DRAM package on the top and replace it with materials to help cool down the processor.

Despite having two more packages (2 DRAM package + 1 A5X vs 1 A5 PoP) than iPad 2, the new iPad has a comparable PCB size because it uses both sides of the PCB. Using both sides increases the thickness of the PCB, but I think it is not a problem because  1) the PCB and battery are placed side-by-side and 2) the battery thickness increased, allowing the PCB to also be thicker without making the tablet thicker.

My ending questions are:

  • Is there any weight imbalance between the left and right side of the tablet due to the battery being on one side and the lighter PCB on the other? I suspect Apple would put a lot of effort into making the tablet not tilt towards one side. Maybe the PCB is too small to cause an imbalance.
  • Why didn’t the DRAM vendors put 1GB in single package? They already stack two DRAM dies for a 0.5GB memory. Why not stack four dies for 1GB? They stack around 8 dies for NAND flash memory chips, so stacking more than two seems definitely possible. Maybe cost and yield is an issue.
  • I wonder if Apple was able to put more battery in the iPad 2 without making it thicker, but simply did not do it. Putting in more battery would have enabled 10< hours battery life in the iPad 2. Maybe they did not want to make the new iPad look bad compared to the iPad 2, so intentionally put in limited battery in the iPad 2 even though they had more space. It’s much better to say “the new iPad has the same 10 hours battery life even with Retina display and 4G” than “the new iPad has 10 hours battery life compared to 16 hours for iPad 2 because of the display and 4G.”

Here are some thoughts on the new iPad based on discussions with my colleagues and advisors.

How did Apple fit in a 1.7x larger battery in the new iPad?

The new iPad’s battery capacity is 42.5Whr, a 1.7x increase compared to 25Whr of the iPad 2. Battery capacity is basically area x battery thickness, so either the area or the thickness has to increase to fit in a 1.7x larger battery. Tablet thickness increased only 0.6mm, from 8.8mm to 9.4mm. For now, let’s assume the battery area is the same and the 0.6mm increase in tablet thickness all came from the battery. Battery thickness in the iPad 2 was 2.5mm, giving the new iPad a 3.1mm thick battery, resulting in a 1.24x increase in battery capacity, far smaller than 1.7x. This means that the battery thickness might have increased by more than 0.6mm. Maybe the new iPad uses a thinner glass for the display, leaving more room to increase battery thickness. If the battery area is the same, battery thickness in the new iPad would be 2.5mm x 1.7 = 4.25mm, meaning that Apple somehow shaved off over 1mm in thickness from other components such as the display, glass, aluminum body etc.

Another possibility is that battery area increased. However, the following teardown photo of the iPad 2 from iFixit shows that there is really not much room to increase the battery area.

The black part is the battery and the top part covered by aluminum shields is the PCB that contains all the chips (processors, DRAM, Flash memory etc). The battery already occupies the majority of the area compared to the small PCB. White space on the top right corner is left for the 3G module that contains chips for 3G communication (the iPad 2 in the picture is a WiFi version, hence no 3G module). Since the PCB and battery are placed side-by-side, the PCB area has to get smaller to increase battery area. However, the image below, a zoom-in on the PCB with the shields taken off, shows that the PCB is already pretty tight on space.

You can see that there is not much space to shave off in the PCB. The white space next to the orange square (NAND flash chip) is left for another NAND flash chip for the 32GB version (image shows a 16GB version). It seems it would have been very difficult to increase battery area and thickness, but Apple somehow pulled it off. Hopefully iFixit will soon release teardown images of the new iPad that reveals how Apple could fit in a 1.7x larger battery.

Battery life is the same despite a 1.7x larger battery

According to tech specs on the Apple website, both the new iPad and iPad 2 have up to 10 hours of battery life in WiFi mode. This means that the new iPad consumes 1.7x more power than iPad 2. Where is this additional power consumption coming from? It’s not coming from 4G since the battery life is for WiFi mode. Maybe it is coming from the higher resolution display. Assuming 1.7x more power is entirely coming from additional display power and that display power was ~50% of the total power consumption of the iPad 2, display power would have to be 2.4x larger in the new iPad. Does this make sense? Display power consists of backlight power and TFT switching power. Assuming backlight power does not change based on the display resolution, the power difference is from the TFT switching power that increases proportionally with display resolution. Basically, backlight power stays the same, but TFT switching power increases by 4x in the new iPad. A 2.4x increase in display power is possible if the TFT switching power was ~50% of the total display power in the iPad 2. Another possibility is that the processor power increased due to bigger graphics in the A5X compared to A5.

New package for A5X

The A5X processor in the new iPad seems to use a metal-ish material for the package compared to the A5 chip in the iPad 2. Maybe Apple changed the package material for better thermal conductivity because of higher power consumption in the A5X processor.

No iPad 3

Seems Apple is no longer putting numbers in iPad models. It’s now just a “new iPad” or “iPad 2012”, just like how Apple calls their macbook and iMac models. Maybe they are running out of new things to add to the iPad. Customers tend to expect a significant design overhaul when the model number changes, so Apple might be preparing for the time when there is no significant changes in consecutive iPad models. It could also be related to not wanting to sell prior models at a cheaper price.  Currently, Apple sells older models like the iPhone 3GS, iPhone 4, iPad 2 at a cheaper price. They don’t do this for the Macbook models. The previous models just disappear when new models are released. Maybe Apple wants to expand this to the iPhone and iPad lines.

After acquiring processor design companies PA Semi and Intrinsity, Apple designs their own processors that go into iPhones, iPads, iPods and Apple TV. On the other hand, handset OEMs like HTC, Nokia and Motorola buy processors from chip design companies like Qualcomm, Nvidia, TI and Marvell. Samsung is sort of a mixture of both models. They design processors in-house, but also try to sell their processors to other handset OEMs, albeit to no avail, and sometimes buy processors from other companies for their handsets. This is in contrast to Apple’s model of containing everything in-house — they design processors just for their handsets and their handsets only use processors designed in-house.

A benefit of Apple’s model of designing processors in-house is tighter integration of software and the underlying hardware. Other handset OEMs have to buy a processor and pair it with Android. Because the development cycles of Android and processors are usually not in sync, handset OEMs face tough decisions. Let’s say a state-of-the-art processor from Nvidia is released now, but the next version of Android is due out 6 months later. Should the handset OEM wait 6 months for the latest and greatest version of Android or just use the current version and pair it with the new processor from Nvidia? If they decide to wait for the new version of Android, would the 6-months old Nvidia processor be good enough to handle the new OS? The Nvidia processor would have been optimized for an older Android OS and might be too slow for the new OS. Moreover, given the rapid improvement of handset processors, there might be much better processors in the market 6 months later. Should the OEM use those processors instead? While Apple can co-design and co-optimize their processor and OS, other handset OEMs need to grab whatever processor and Android OS that is currently available and stitch them together. Either the processor or the OS is a version that is several months old, which is a pretty long time-frame in the current mobile market.

Although Apple designs their own processors, they still need to license the cores from ARM. Simliar to the HW/SW problem, Apple’s processor design depends on when ARM releases new cores. ARM’s highest performing core could have been Cortex A9 when Apple first started designing their A6 processor, but now ARM has released A15, a newer and better core than A9. If Apple chooses to switch to Cortex A15, it would delay their A6 design and might even delay new iPhone releases. If Apple sticks to Cortex A9, their A6 processor might be slower than their competitors’ using A15 cores and iPhones might suffer from a slower processor compared to Android handsets equipped with the latest ARM cores. For this reason, I can imagine Apple designing their own cores similar to Qualcomm designing their own Krait cores. Apple has an army of designers from PA Semi that is capable of doing that.

If this is the case, why don’t all handset OEMs design their own processors? It is because the cost of designing processors is pretty high, especially for companies with no chip design experience. The figure below compares the cost of designing a processor in-house (Apple) versus the cost of buying a processor (HTC). This is a figure created not with real data, but using my assumptions, so there might be some errors. Please comment if you think these are bogus numbers!

Assuming HTC uses a Nvidia Tegra 2 processor, Apple A5 costs $10 to manufacture compared to Tegra 2’s $5 because the A5 uses twice as much die area. After TSMC manufactures the chips, they sell them to Apple and Nvidia with a 50% gross margin shown in green (TSMC’s 50% margin is the highest among foundries). Apple pays $20 to TSMC, Nvidia pays $10 to TSMC. Here’s where it starts to get different for Apple and HTC. HTC needs to buy the processor from Nvidia. Based on Nvidia’s 50% gross margin in yellow (50% margin is for the entire company. I couldn’t find the margin just for the Tegra business unit), HTC needs to pay Nvidia $20. On the other hand, Apple has a non-recurring engineering (NRE) cost, shown in red, that includes all the R&D cost of designing a processor. I chose $1, but I am not sure how much this number would be because it depends on the total volume of the processor. If it costs $100M in R&D to design a processor and Apple sells 100M handsets containing that processor, the NRE cost per unit is $1. However, if Apple fails miserably in the market and sells only 10M handsets, the NRE cost per unit becomes $10. The reason that Apple can design their own processor, a processor twice as large as Tegra 2 with more performance, is because they have a huge volume that can amortize the NRE cost. If their volume nosedives for some reason, they would be left with the burden of feeding an army of processor designers that increases their per-unit cost of handsets, hurting the huge margin on handsets they are enjoying now. An important thing to note is that the total cost is similar even though Apple’s processor is twice as large as Tegra 2. If Apple had chosen to sacrifice performance to reduce die area, they would have had a significant cost advantage over HTC.

Because of the NRE cost, it’s always preferable to use a single design in as many products as possible, but some products need custom designs to maximize performance or minimize power. Another way to reduce NRE cost is to automate as much of the design process as possible and save money on paying design engineers, but this has its own challenges. EDA software has come a long way in automating chip design, but they are not improving fast enough to automate the complex designs in 22nm and beyond.

Although Apple has not officially confirmed, there are news that Apple has just bought Anobit, a Israeli company designing SSD controller chips. SSDs go into iPhones, iPads, iPods and even Macbook Airs, so the volume for SSD controllers are even higher than processors (unless Apple designs processors for Macbook Airs). As a chip designer, I am very happy to see a company like Apple buying semiconductor startups.

I really enjoy reading books about startups. They keep me energized even when many people tell me my dream of starting a company after finishing grad school is extremely difficult and therefore I should opt for working for a larger company and try to get more experience. When everyone says “no you are not going to make it”, startup books and blog posts by ex-entrepreneurs make me stand up again.

I’ve always wanted to find more books like this, but it proved to be pretty difficult even in the US where there are so many successful startups. I liked both Betting It All and Founders at Work, but they cover so many companies that they lack details on how each one formed. Pour Your Heart Into It and Delivering Happiness are my favorites, and I was craving for more books like these two.

Luckily, my college friend, Minjoo Yoo, wrote a fantastic book about Ticket Monster (TMon), one of the fastest growing social commerce startups in Korea that was just acquired by LivingSocial several months ago. I had heard about TMon since it was founded because two of the founders were close friends of mine at KAIST, but I didn’t know any of the details of how they really pulled it off since I was away in the US. Minjoo was the perfect person to write a book on TMon since he had introduced the 5 founders, three from UPenn and two from KAIST, and watched how they grew TMon from nothing to a No. 1 social commerce company in Korea with 700 employees in just 1.5 years (They even acquired a Malaysian company!).

I believe anyone interested in starting a company will read this book and feel the urge to jump out and start something right away. Although Minjoo is not a startup management expert, his story-telling taught me so much about running a startup and reminded me of a lot of things I read in VC blogs. Here are the reasons I think this book is a must-read for anyone dreaming to do something.

You can relate to the founders

This isn’t a book about Bill Gates saying anyone can be like him if they work hard enough (I’m not sure if Bill Gates really said that). It’s not about Steve Jobs, a genius that appears every 50 years or so. It’s about 5 very normal guys all in their mid-twenties determined to start a company, but at the same time was afraid about the uncertainties. After TMon grows to hundreds of employees, the founders struggle to adjust their roles in this completely new setting. They have a hard time since none of them had experience managing a big organization. The reader can closely relate to the founders’ agony and joy, laughing and crying as the story goes on. The reader can imagine himself in the founders’ shoes and gain confidence that he can also pull off another ‘TMon’ with hard work and strong determination.

No BSing, just clear facts

Since the book was mainly written by Minjoo, not the founders, there is no sugar-coating about how wonderful the company is and how talented the founders are (a good example of such book gets two stars in Amazon). In fact, the book elaborates in great detail how disorganized TMon was in its early days. The founders are depicted as normal Korean kids who didn’t know how to spell “Tommy” in English. At the same time, the author is close enough to the founders to fill the book with interesting details (I was actually surprised how Minjoo remembered everything in so much detail). There are so many startup/tech books written by people who didn’t even have a chance to interview the founder of the company. I think half of those books contain the authors’ imagination, not hard facts.

Lessons to learn

There are so many lessons to learn in this book. First, the book iterates the well-known lesson that execution, not the idea, is most important to a startup. Some people might think TMon was lucky to be the first to copy Groupon and became successful without much work. The book basically argues that this is not true by presenting a lot of challenges the company faced and how the team made critical decisions that helped the company stay afloat. In the early days of TMon, the quality of one restaurant had degraded so badly that a bunch of TMon customers were demanding to get their money back (Yes..Koreans are the best at demanding stuff). It wasn’t really TMon’s fault that the restaurant accepted more coupons than they could manage. Nonetheless, TMon agreed to refund all the customers of that deal. The total cost was 20% of their entire capital, which is really significant for an early-stage startup struggling to raise funding. Without this hard decision, TMon could have earned a bad reputation and lost all its customers. A single misstep could have blown away the tiny startup. It is the series of these critical decisions, not mere ideas, that allow a startup to stay afloat and grow to be a great company.

Fun!

Last but not least, the book is so much fun to read. I think the fact that the author is not a professional writer helped in that sense. He doesn’t use any fancy sentence to describe something. He just lists fact after fact after fact and includes a lot of conversations among the founders that makes me feel I’m just sitting there listening to them talk (Actually I could totally tell that the conversations were toned-down to avoid publishing a rated-R book). I felt like I was watching a movie showing what it’s like to work in a fast-growing startup. For example, a new guy is hired to take care of HR-related work only to find that only a few employees have insurance and benefits, and many don’t even know how much their salary is. He couldn’t find himself a desk, but realized that many people were scattered here and there just sitting on anything, working with their laptops.

I strongly recommend this book to anyone interested in not only startups, but also any kind of challenging work. The book shows how much a group of people can accomplish if you have the right team and determination. I would even say that if you don’t feel excited and pumped up after reading this book, you better change the way you live because otherwise you are not going to do much with your life.

Many people, including myself, were pretty disappointed when iPhone 4S was announced, saying that it’s such an incremental change compared to the iPhone 4. Again, Apple used some of their secret magic to stun all the pundits, announcing that they sold 4M iPhones 4Ss over the first weekend.

To get a sense of how large this number is, take a look at the bar chart above that shows unit sales of iPhones (all models combined). They basically sold as many iPhones in a single weekend as the entire first quarter of 2009! FYI, one quarter is 3 months, 90 days. This is just incredible, especially given that so many pundits, again including myself, expressed disappointment right after the new release.

The bar chart above shows other interesting trends a well.

4th quarter (red bar) has the strongest sales
This is mainly because of the holiday season. There’s a reason that all companies involved in the consumer electronics market works like crazy to get their products out before the holiday season. If they miss that deadline, it’s not just a couple months they lose, but a huge chunk of the annual sales. Q4 sales in 2009 seems weaker than other years, possibly due to the recession.

Unit sales rising 2x every year
There’s no data for Q4 of 2011, but you can tell that the other quarters have risen 2x compared to 2010. This is surprising especially because 2011 is the year when Android started to release well designed phones that could compete well with the iPhone. Samsung Galaxy S, HTC EVO were all released in 2011, but Apple was able to continue growing 2x per year with the iPhone 4. Who knows how large the Q4 2011 sales would be with the new iPhone 4S selling 4M in the first weekend? The holiday shopping season hasn’t even started yet!

Potential for more growth: mobile market


An optimistic guess for 2011 iPhone sales would be 100M. Compare that to the plot above showing total sales of “smart” devices. Smartphones sales in 2011 is projected to be 450M, and expected to grow to 1.1B in 2015! There’s a lot of room for growth, but given the competition from Android handsets, it would be interesting to see how iPhone sales grow in the future.

Potential for more growth: Asia-Pacific market

The pie chart above clearly shows that the Asia-Pacific market is going to be the main source of growth for Apple in the future. Note that it’s not sales data just for the iPhone, but the entire sales of Apple. 25% of net sales might look like a small number, but given that there’s only 5 Apple stores in China (compared to 245 in US), this is very impressive. This means that Apple hasn’t even started to focus on the huge Chinese market yet. Once they start to put their energy into the Asian market, that 25% pie is going to grow much more.

After totally getting it wrong with the iPhone 4S, I dare not predict how iPhones are going to sell in the future. One thing that Apple teaches us is that “selling” is totally different from improving the technology. People say they buy iPhones because of better user experience, but I’m not really sure if that explains the whole story of the iPhone buying frenzy. iPhones do have a bit smoother interface than Androids, but Android has their benefits too, such as the Swype function that lets you slide your finger across multiple letters on the keyboard instead of typing one by one.

I think the main recipe for iPhone’s success is making the buyer feel good. This is why Apple made Apple stores when everyone else thought that was a terrible idea. They wanted to optimize the entire process of buying Apple products. They can make the buyers feel good about themselves for buying Apple products! It’s really hard to make people feel good after charging them $200-300, but Apple somehow makes that happen.

I think people doing business, especially engineers willing to do business should learn from Apple and stop whining about technology not affecting the product. This includes myself. Business is all about selling more products to customers. It’s not about whether the product has a breakthrough technology. If the technology can help attract more customers, it is important to the company, but if that’s not the case, there’s no reason to be dictated by developing that new technology. In the end, all that matters is attracting more customers, whether through building fancier stores or giving fancy keynote speeches.

I just finished reading two books on private equity and hedge funds, respectively. The first was “King of Capital”, a book about how Steve Schwarzman founded Blackstone and grew it to be one of the largest private equity firms in the world. In case it’s the first time you heard about private equity firms, they are professional money managers similar to venture capital firms (this is why people often time lump those two together and call them VCPE), but different in the types of companies they invest in. While VCs invest in high-tech startups, PEs invest primarily in industries that have established business models that makes it easier to predict future cash-flows.

PEs usually target companies that seem under-valued, buy them at a cheap price, manage them for several years, and re-sell them at a higher price. Safeway, one of the major grocery stores in the west coast, is a huge success case for Blackstone. Safeway was a family-owned business that had the potential to be much bigger and better managed, but the family owners were interested in merely maintaining the status-quo. Blackstone offered them a sweet price, turned them private and later went public again to rack in a huge profit. This kind of buying activity is called “leveraged buyout (LBO)”. The reason is that PE firms leverage heavily (basically borrow a lot of money) to cover the cost of buying an entire company. This leveraging is the key ingredient behind astronomic profits of these PE firms. For example, let’s say company A is worth $1B and a PE firm is trying to buy 100% of the company. Let’s say they put in $100M out of their pocket and leverage the rest, $900M. Let’s say the PE firm does a great job turning the company around and a year later company A is sold at $2B. Assuming the interest on the $900M was 10%, the PE firm needs to pay $90M to the banks, and the rest of the gain, $1B – $90M = $910M, goes to the PE firm. Basically they get a 910M/100M = 910% return with heavy leveraging compared to 200% return without leveraging.

Blackstone was very successful in these deals until the 2008 financial meltdown. Schwarzman would rack in over $300M in salary and compensation in a good year (but in a bad year get just over $300K). Most PE firms have very few employees (Blackstone has 1400), allowing even the lower ranking people to enjoy good compensations. No wonder a ton of MBA graduates line up for VCPE firms.

The second book was “Money Mavericks”, written by a ex-hedge-fund manager about how he founded and grew his first company, Holte Capital. He is not as famous as Steve Schwarzman and his company was also much smaller than Blackstone, managing about $500M-1B (Blackstone has $150B asset under management, AUM, as of 2010). What attracts me to hedge-funds, although I have no intention of joining one after my PhD, is that they seem like a no bull-shit industry. They don’t care about where you went to school, whether you have a PhD or not, whether you have a network of influential friends. They just care about your quarterly performances (or maybe monthly). If you earn a lot of money through trading, you can be a multi-millionaire at a young age with little to no experience. I got the same impression reading other books about the hedge-fund industry such as the “The big short” by Michael Lewis. It’s a place where your success is entirely based on how you perform. No bull-shit, meritocracy rules.

These two books are primarily about professional money managers, but also contains strong messages about entrepreneurship. I have read a few finance related books (More money than god, The big short, Too big to fail, Wall street meat, Running Money and the two books in this post), and the reason I keep reading them is because I can feel the entrepreneurial energy and the adrenaline of running your own company. I am basically relying on books to feel this before I can actually have the chance to feel it in the real world =) The initial days after starting financial firms seem very similar to those of high-tech startups. Lars Kroijer founded Holte Capital when he was 29 years old, after working at Lazard (a PE firm) for two years, studying at HBS for two years and working three years at another hedge fund. Having no track record of running his own fund, he and his buddy from Harvard had so much trouble raising the $5M to take his company off. Even after they somehow raised that money, the management fee they could get from $5M (2% x 5M = 100k) was too small to cover even their basic expenses like office rent and Bloomberg terminal fees. They were in the brink of shutting down their fund. All the major investors would say they were interested, but wanted to join once another major firms committed. After hundreds of meetings with potential investors, getting embarrassed and humiliated, hard work (and a little bit of luck) paid off. They were finally able to secure a >$10M investment and the rest was history. Sounds a lot like a high-tech startup scrambling for funding. I’ve heard a lot of stories about VCs investing in groups to reduce risk, waiting for their friends in other VC firms to commit to the funding round. Moreover, the spirits of the founders are remarkably similar. They have a strong will to run their own show even though their firm might have a name that no one recognizes.

Lars Korijer was 29 when he started Holte Capital, and was 37 when he quit, by which time he earned enough money to send his twin daughters to private schools while never worrying about money again. About to become 27 this coming November, I was wondering what I have accomplished compared to this guy who had 5 years of experience and financial firms (with >$200K salaries) and a Harvard MBA under his belt at my age. I’m not saying my PhD was not worth my time. This book gave me a chance to look back and think whether I did what I could to make the best of my time. Maybe I could have tried harder to become more professional about what I’m doing instead of acting more like a student. Reading these books make my desire to go out to the real world stronger than ever. I can’t wait to use my skills that I learned from my time at Harvard to run my own show. I need to first work hard to graduate next year =)

One last thing. Although hedge funds like Holte Capital seemed to have an academic working atmosphere, Blackstone had a completely different one. An impressive part in the book was about the conversation between Schwarzman and Callahan after Callahan had mis-managed a telecom company deal, leading to a huge loss. “Where’s my fucking money, you dumb shit?” were the first words out of Schwarzman’s mouth. I wonder what it would be like to work in such a competitive environment =)

I was talking with my wife about her internship at Xerox Palo Alto Research Center the other day. She was talking about how much she likes the atmosphere there, working on a wide variety of research topics. When we started talking about the history of Xerox, I got interested in the history of Xerox’s stock price. I also found Eastman Kodak, which is another old-name company. I’m sure most people have heard of these two companies.

(click to enlarge)

Yellow line is Eastman Kodak, blue is Xerox and red is Dow Index from 1978 to present. Xerox and Kodak both dropped compared to 30 years ago, while the Dow Index rose close to 1300%. This means if you bought $1000 worth of Xerox and Kodak stock back in 1978, you would have less than $1000 left, even without considering inflation. You would have been much better off investing in a Dow Index fund, where they distribute their investments in a wide variety of companies to roughly track the Dow Index.

My first reaction was, “How can a company fawk up so much?”. At least they survived for 100 years, so they are better than the bunch of companies that went bust during that long time period. But Xerox and Kodak were not just “some company”. They had highly superior technologies compared to their competitors, was a market leader and had a bunch of cash to invest in their futures. Heck, “xerox” became a common noun replacing “photocopy”. What did they do with all that money? Across those 30 long years, how come there was no CEO who had the guts to use the cash to turn around the company and expand into different areas? I heard that Xerox has been trying to transform into a document services company, whatever that means. Getting rid of hardware and just including “services” does not guarantee high margins. Not everyone can pull off an IBM (wonder if HP can do it).

Even worse, there are news floating around that Kodak is going to have an auction for its huge pile of patents. Analysts are saying Kodak is sitting on a gold mine. This makes me wonder even more “How can they fawk up so much when sitting on a gold mine?”. Basically they are admitting they are too stupid to monetize superior technology, so they are letting other companies do that with their patents. Actually, most companies that are interested in Kodak’s patents already have the technology developed. It’s not like they would study the patents and build upon them to develop new technologies. They just want to buy the patents to protect themselves from future infringement.

One could argue that a successful patent auction would foster technology innovation because it rewards inventors. Basically, the auction would show that inventors can get financially rewarded without finding a way to develop a business with their technology. This could motivate people to concentrate on technology innovation without worrying too much about creating a business out of it.

I think this argument is flawed. I believe inventors and technology innovators can be two separate groups. Rewarding inventors might motivate people to write patents, but not lead to technology innovation. Since you can write a patent just with an idea without really demonstrating anything, one could just jot down ideas while others are putting in days, weeks and years into actually developing that idea into a valuable technology. When the hard-working guy finally get something working and starts to build a huge business around the technology, the guy jotting down ideas can come with a bunch of black-suited guys and say “I would hate to see this company burn down…”. Okay it won’t be exactly like that, but they could sue the company or ask for licensing fees. Basically, the patent system could be rewarding the wrong people. I wonder if it is possible to give patents only to ideas that have some amount of demonstration. It might be very hard to define “demonstartion” and how much demonstration you need.

I should stop rambling about patents and start working on documents for my new patent haha. Before I do, here’s a stock chart of Apple across 1980 – present. The Dow Index looks like a midget compared to Apple (almost 10,000% growth over 30 years). Note that the red line here is the same red line in the chart above.

(Update) My wife, an expert in OLED, says that Kodak first invented OLED, before all the academics and Samsung jumped in. If this is the case, I agree that they should be rewarded for their discoveries. It wasn’t like they merely scribbled some ideas (as in certain software and UI patents). Kodak created an entire field through extensive R&D efforts across many years. Academics built upon their initial works and Samsung invested heavily to make OLED manufacturing possible in large volumes. How to distinguish this kind of case from merely jotting down ideas without demonstrating might be one of the key elements of  patent reform.

Another question is why patents need to be written in a way that’s so hard to understand. I heard that the US government created patents to have inventors disclose their inventions in exchange for exclusive rights. The government wanted to encourage public disclosure of patents thinking it would allow other people to build upon inventions and stur innovation. I think the intention was good, but the problem is that no one (except for lawyers) nowadays reads patents. That’s because it’s almost impossible to get any valuable information out of patents. Had Kodak merely patented their OLED technologies, innovation in that field might have been much slower. Because they published research papers with significant details on the technology, academics and other companies were able to build upon their findings. I think patents can serve their initial purpose much better if they are written in a way that conveys more information in a more effective way. I wonder if the government could require people to include details in patents as in research papers and use the claims sections for all the incomprehensible legal phrases.

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