Horace Dediu: what it means to be a professional analyst in the field of smartphones

[Note trans.]: I offer you a translation of the transcript of an interview with one of the most interesting and notable experts, paying particular attention to the analysis of Apple. I am sure that in the light of the upcoming special event of this company, familiarity with such an expert as Horace Dediu ( Horace Dediu ), will make a significant contribution to the understanding of the activities of Apple and its competitors.

This transcript is based on an interview by Horace Dediu, conducted by Dan Benjamin in one of Dan's guest podcast episodes (The Pipeline, issue 52).

Horace Dediu and Dan Benjamin discuss what it means to be a professional smartphone analyst, as Horace founded Asymco.comand gained an audience of half a million readers in just 9 months, and also cover topics such as: conducting research on various market sectors, the language of business, design, asymmetry, courage, the importance of understanding the basics of your business, the era of post-PC and the concept of disruptive innovation.

Dan Benjamin: This is The Pipeline show, which is being interviewed. Its host is Dan Benjamin. It's me. My guest is Horace Dediu, the founder of Asymco.com and the author of market research published on it. He also works as an independent analyst and consultant in the field of telecommunications and mobile platforms. He has rich experience: Horace worked at Nokia and has established himself very well as an analyst. I am incredibly glad that he was able to participate in today's show. Horace, welcome.

Horace Dediu: Thank you.

Dan: Many are familiar with your work under the auspices of the Asymco project. But not everyone knows what kind of person is behind them. A person with outstanding capabilities in the field of analytics and forecasting. Before we dive into the details, please introduce our listeners, some of whom for the first time hear about Asymco.com, to their project.

Horace:It all started with an application development company. Working on materials for a corporate website, the purpose of which was to create an expert image of the company, I started a blog. This interested me much more than the development itself, which, however, I still do. Although I do not advertise this, sometimes I really work with local clients, mainly from Finland.

One way or another, I created the site in order to show my level of competence, and as a result, it turned into a fairly popular place for discussions and disputes regarding the strategic aspect of the development of the mobile industry, the new world of smartphones and the post-PC era. These topics are considered mainly from an analytical and strategic point of view, and technological issues are also addressed. This is not a news site. It is rather directed towards detailed analytics. We try to identify causal relationships, which requires the availability of data and analysis of open sources that tell about the situation on the market.

Being the "guides in the world of business analytics", as noted in the website header, we observe what is happening on the market and try to collect relevant data. Comparing such data with market twists and turns, we are developing a discussion. Including in the comments.

Horace Dediu: “I Always Start with Numbers” (The Pipeline Podcast, Issue 52, 2011).

Dan: You play down and describe your work very modestly. Nevertheless, in order to understand these or other things, you have to look through very large volumes of information. The output is incredibly valuable [material] ... In general, Edward Tufty could be proud of you. You present information graphically incredibly compactly and carefully thought out. Just in the morning I read an article about this in Fortune. It said that you were able to give an equally accurate forecast of iPhone sales, which was compared with the forecast of Mark Moskowitz from JP Morgan, regarding data from Apple itself.

Horace: Well, yes, we have a lot of directions. According to one of them, we ... More precisely, "I". There are no "we", actually. I'm the one doing this. I try to visualize everything. Quoting your Twitteraccount : “I use words to explain what numbers tell us.” In a word, I always start with numbers. I take a pivot table or a blank piece of paper and start to think. As a result, a hypothesis is born, after which I turn to argumentation, but in my thoughts I really start from the data.

Having spent a huge amount of time processing the data and trying to present it to people properly, I, not realizing it, came to the model of data presentation by Edward Tufty. And this despite the fact that I never attended his classes. Just read a book. But I also have extremely high requirements for the visual design of the data. Some people better perceive information visually, while others prefer tables with dry numbers. But as for me, even if there are only three values, it is more convenient to look at them in the form of a diagram. Such an idea helps me interpret their meaning.

Working with a lot of data, I try to make my creative contribution to their most visual representation, so that, looking at them, people immediately understand what I'm trying to say. Words serve only to emphasize certain points. This is necessary to form a certain “foundation” of the discussion, on which the subsequent comments of readers will be based. True, sometimes I just publish a chart with the words: “After the amount of time I had to spend preparing this chart, I’m not even going to think about writing any comments on it.”

Dan: [laughing] No wonder.

Horace:I could say that “the diagram speaks for itself,” but then my readers would start asking me to explain exactly what was happening. This is obviously a false path. The numbers are enough for me, but I use the words to emphasize the [meaning of the numbers] and to draw the attention of readers to certain aspects.

Horace Dediu: “Despite the fact that I understand how business works, I still look at the world more from the perspective of an engineer than from the perspective of a professional analyst” (The Pipeline podcast, issue 52, 2011).

An example of one of the Horace diagrams: Depressive sentiment among a number of mobile device manufacturers

Dan: I am impressed that you really think so. It seems that you really are mentally operating images. Could you tell us more about this? What formed the basis of your approach to work?

Horace:In my family, everything was somehow connected with science, or rather, with mathematics. My father has a doctorate in mathematics, and his mother has a master's degree. They both taught. Therefore, I grew up surrounded by numbers and a scientific approach to thinking, and then graduated from a university in the USA. By the way, I'm not a native American. I come from Romania. My family emigrated to the United States, where most of my life went. I am an expat living in Finland. He married in Finland, my son was also born in Finland, but I am a US citizen.

One way or another, I went to a college of technology in the USA. I was far over 20 years old when I first thought about my business. At that time, I worked in a research laboratory and decided to concentrate on the IT field in order to gain relevant experience and knowledge in practice. Then I decided to get a business education, and I was lucky - I was able to go to Harvard. There I mastered the language of business.

True, I really did not study anything else. Despite the fact that I understand how a business works, I still look at the world more from the point of view of an engineer than from the position of a professional analyst. In my understanding, a professional analyst is a person who has experience in doing business and has received an economic but not technical education. There is nothing wrong with that, but I grew up in an atmosphere that welcomed the scientific approach to things around me.

I try to convey this on my website as well. Despite the fact that while we can not conduct research in this area in their canonical sense, I propose a very similar approach in the framework of information exchange, expert assessment, citation and openness. All this applies to discussions in the field of business analytics.

In my opinion, the business itself can be compared with the "Middle Ages", more precisely with the era of the Proto-Renaissance. During the Renaissance, people saw a benefit in sharing information, rather than protecting it. This can be seen in science, and in architecture, etc. Newton’s activity falls precisely on this period of “openness,” which so far does not find support in the minds of businessmen. I am not naive about this and I understand that there are good reasons for this state of things. But ideally, I would like to make the process that we call business analytics more scientific. As for my audience, if I can talk about it here ...

Dan: Yes, please.

Horace:The fact is that I know my audience only from the biographies of subscribers on Twitter, that is, only what they considered it necessary to tell about themselves. However, judging by the description, they seem to be very technically savvy people. I was the same in my 20. Technical education pushed me to search for patterns in business - I wanted to understand how the world works. At the same time, knowledge in various fields of science and engineering did not help me much to understand the reasons for the unfortunate state of affairs in the company in which I worked.

In general, once again, if we talk about my goal, I try to convey information to the audience without moralizing or mentoring. I simply unobtrusively put a kind of theory into discussion (I call it “business theory”) so that people can get distracted for a moment and say: “Wait a minute. Do you want to say that there is a certain theory, like theories in physics? There are a huge number of areas in science and still there is nothing like this in business? Maybe it does exist? ” I have to hint that such a direction really exists, and we can think of it in that vein.

This is my dream. In this regard, I am not alone. I mean people who spin in the scientific circles of business schools, but at the same time are far from the modern world of technology, which just today needs a business theory. Perhaps the success of Asymco is precisely due to the presence of such interest and the intersection of these two areas.

Horace Dediu: “I do a great job and try to bring out as much material as possible for general discussion and criticism, getting instead indications of mistakes” (The Pipeline podcast, issue 52, 2011).

Dan: Your knowledge of engineering probably gives you ... I don’t know if the word “advantage” is appropriate, but let it be. Advantage over, say, JP Morgan employees. And you manage to better understand what is happening thanks to this. What do you think?

Horace:Knowledge helps, but it's not about them. The point is the approach to the problem. I also learned a lot from my blogging experiment ... In my last year at Nokia, or so (I worked there for 8 years), I also updated my blog occasionally. When you write, you learn a lot, and when people comment, you learn even more. Most teachers will tell you that teaching is one way of teaching. My vision of this is due to the fact that I openly share my approach to thinking and what I do. I try to share everything I can. For example, I’ve somehow thought about this: on an airplane, many of those who work in the corporate sector use special protective screens that do not allow outsiders to see what they are doing.

Dan: To the point.

Horace:If during the flight one of the people sitting next to me looks at my computer and asks what I am doing, I will only be glad to share information with him. This is the essence of asymmetry in Asymco. It consists in the fact that I am doing a great job and trying to bring out as much material as possible for general discussion and criticism, getting instead indications of mistakes.

So I learn from the audience. Frankly, this is how I get smarter. The key point is precisely in the openness of the process itself, rather than in stating the fact that I know more than the others (even if it is true on some issues). Take an analyst from JP Morgan. He is severely limited to a small number of people from whom he can receive the necessary criticism - his colleagues. But even they, probably out of "political" considerations, sometimes do not enter into discussion. In other words, the analyst works without assistance, while about 13,000 people help me. I am happy to rely on them and the more I do this, the more I learn. And this, in turn, is reflected in the rest.

Dan:Based on your words, there is something bold in this approach. The desire to be open suggests that you are not afraid of criticism or error.

Horace: This is not entirely true. In fact, we only learn when someone points out a mistake. I don’t want to wake up in the middle of the night just for someone to tell me that I was right. Otherwise, I am ready to jump out of bed to fix the mistake. This will teach me something ...

Today I published a post in which I criticized myself for my mistakes in previous earnings forecasts. They dealt with some aspects related to the iPad that I did not know about. In the process of all this, I learned one very important thing: no one knew what ultimately came out of the iPad. Even those who assured that they had information from secret anonymous sources in the field of supplies turned out to be wrong. No one knew, and even if he did, then at least one of the fifty analysts would not be mistaken in their forecast. This was a kind of lesson for me. There are a huge number of similar, subtle subtleties that take place when you write, publish and listen to criticism of your work.

As another example, I can cite my assumption that I do not fully understand what I'm going to. In fact, no one fully understands this. I remember there was such an engineer: Werner von Braun (he developed the Saturn 5 rocket, which was able to raise us to the moon). His famous phrase: "When I do not know what needs to be done, I do research." I really don’t know what exactly needs to be done, and there is nothing like that. This makes me constantly improve and, possibly, makes my forecasts somewhat more accurate in relation to the rest.


An example of one of the episodes of parsing mistakes made by Horace in his predictions

Dan:One of the side effects of creating such unique content is focusing on certain things. Your publications concern not so much the mobile industry itself as the smartphone market. Specifically, iPad and other large-screen mobile devices fall into this category. Can you talk about this? Why smartphones? Undoubtedly, this topic is quite popular now, but this is not the only point.

Horace: Actually, I have been interested in this topic for 10 years. I started using my smartphone in 1999. It was a Nokia Communicator that looked like a small brick. In the literal sense of the word. Its processor was built on the basis of the 386th architecture. This smartphone had a large enough screen, and it worked under OS controlGEOS , which no longer exists. But it was really a real computer with a real keyboard. At that time there was nothing like it. Still, it was 1999.

Palm also worked at this time. Her handheld computers at that time were quite popular for several years, but they were not communicators. They were isolated, i.e. tied to a computer ... like an iPad today [ i.e. in 2011 - approx. perev.]. When I used this product, the thought occurred to me: "This is how all computers will look in the future." I just did not know when, how it would happen, and who would turn it into reality. Partly on a subconscious level, I decided to find out. At that time, I thought that for this I would need to learn a lot. I had many questions: from whom can I get the information I need? From a startup? From an existing PC company that will one day make them so tiny? Or from a phone company that turns them into a PC? In the end, I went to the telephone company, because they got the closest to this issue.

It was a Nokia. A promising company that was engaged in the production of such devices. Honestly, I got there partly on the basis of these considerations, and partly due to the fact that the dotcom bubble burst, and I needed work. There were many reasons, but by and large, I really thought that such an innovation would come from the world of telecommunications, that a player from this sphere would come and destroy the PC world. In fact, for many years it really looked like that. Nokia has successfully launched a wide range of smartphones. They were sold by tens of millions until the moment when representatives of the computer world of the “old school” turned their attention to them. And the PC world didn’t give up so quickly.

For the second half of the last decade, amazing things have happened, centered on Apple. Microsoft also took part, although it failed ... then Google pulled itself up. The guys from the west coast of the United States caused such a storm in this industry that they demolished everything that was used stably in Europe and Asia. Frankly, this was a lesson to me. I was wrong about the fact that telecommunications companies will prevail. Since then, I have been scrolling through the head over and over again: the disruption of the telecommunications sphere was carried out by computer companies, which laid the foundation for the outflow of capital from this sphere. And it continues to this day. Many may argue with this statement, but I am convinced that this is so and that the trend will continue in the future. Only today [ i.e. in 2011 - approx. perev.] we came across the information that Apple was ahead of Nokia in the number of phone sales in the world market.

Dan: Amazing.

Horace Dediu: “Now imagine how different from today's 2004 is. Then there was no Google. ” (The Pipeline Podcast, Issue 52, 2011).

Horace: In principle, Apple was already the most profitable company before. Back in 2008. But now they will get even more benefits without becoming a leader in the number of devices sold. As I said, we are witnessing a shift in cash flows from telecommunications companies to pioneers from the PC world. In fact, Google is striving for the same thing, although they do not have such a high profit at the moment. They only move towards the intended goal.

One way or another, the process of my self-training, which lasted a decade, was very impressive. At this time, I worked as an analyst at Nokia and I must admit that trying to figure it all out I earned quite a few cones. In 2004, as far as I remember, I was engaged in forecasts of the smartphone market, i.e. tried to understand which competing platforms will remain, to understand ...

Dan: Did you do this at Nokia?

Horace: Exactly. In 2004, my job responsibilities included forecasting, similar to what IDC and Gartner do. Today, such documents consist mainly of forecasts on the division of market shares by mobile platforms. Now imagine how different from today's 2004 is. Then there was no Google.

Dan: Yeah.

Horace: I mean, at that time there was neither Android on the market, nor ... There was mainly Windows Mobile, although there were quite a lot of other players. Among the competing platforms, one could find Windows Mobile, Palm OS, Symbian by Nokia, and even BREW and JAVA-compatible solutions.

For me it was like deja vu, because this has already happened in the past, albeit with other companies. Today, many will tell you that they can predict the situation, because they finally know what is happening. But then they were far behind. Employees of Gartner and IDC did not even try to analyze the smartphone market in 2005, because for them the very concept of “smartphone” did not exist. They did not have clients willing to conduct research on this market. They did not even analyze the phone market. Their work was focused on the CCP.

Dan: Yes, you're right.

Horace:Their customers were from IT. I think it’s too early to talk about long-term prospects, because everything is changing rapidly. This is one of the most dynamic areas, from the development point of view, of those that I have seen. We are witnessing both an incredible upsurge in this industry and its high instability. The smartphone market has not yet covered the needs of billions of potential consumers, but I am convinced that this day will someday come. Phones reached 5 billion users, while smartphones today use less than a billion. I think that this figure can grow up to 4 or even 5 billion, but the form that these businesses can take cannot be foreseen.

Dan:Many describe the time period from 2011 (maybe a little earlier a couple of years) and beyond, as the era of Post-PC. Despite the fact that I met this term before, with the release of the iPad and positioning it as a Post-PC device, it really came into use. But what does he mean? More precisely, what significance does it have for you, as a person working in this field, and for the entire PC industry as a whole?

Horace:This is really a too long term, and many do not understand it. People are very cold towards him because they grew up on a PC, and this world is very dear to them. I understand them. I would like to clarify. Firstly, the wording of this term is incorrect. Correctly say Post-microcomputer era, not Post-PC. Unfortunately, such a term looks too bulky and not memorable, but a PC is not the best option. Many people associate a PC with Windows, and they have the impression that this term means abandoning Windows or Microsoft. However, this is not quite true. The term Post-PC does not mean giving up anything, because ...

For the sake of analogy, I will quote the following phrase: “The Stone Age did not end due to the fact that we refused to use stones.” The same goes for the Iron Age. We still use different technologies from previous eras. Steve Jobs compared PCs to trucks. It is not right. From my point of view, this is a bit of a harsh criticism. The important thing here is that we simply transfer some data processing tasks to new contexts (devices).

Therefore, for example, the iPad does not completely replace your desktop computer, but at the same time you can use it in cases where you would not use a computer, laptop or even a netbook. You will use it at a specific time or place that is not yet occupied by computers. We are talking about increasing the number of scenarios for the use of computer technology.

In my understanding, the term “Post-PC era” is to create new scenarios for using computers, increase the computing capabilities of new classes of devices and partially replace devices from the old era with new ones. As was the case with PCs and minicomputers , when the latter took over part of the mainframe tasks . However, they exist today. Servers took the place of minicomputers, mainframes became the “cloud”, but the idea of ​​centralized and distributed computing remained unchanged. Today, the trend in the development of microcomputer computing is as follows: first, a branch of truly mobile computing is formed, then they will become portable and later become more stationary.

Unfortunately, we got accustomed to such old concepts as PCs, which have many meanings. In the case of PCs, this is an association with Windows, and all the advantages that this technology gives people (why they protect it that way). I still think of this term as something developing and new.

Dan: It’s very interesting to consider everything from this point of view, because when I hear you talking about such topics, everything seems very simple and understandable. In this, in my opinion, the uniqueness of your approach. Do you also approach the analysis of numbers and various factors? Just simplifying, simplifying and simplifying again?

Horace:Yes, just telling a story. It may sound hackneyed and it may seem strange to give someone such advice, but it is really simple. You need to present everything from your point of view, look at how people ... In general, there is no need to try to complicate everything.

I admit, I was very lucky with the opportunity to receive comments on my work. Not everyone has this opportunity (for example, John Gruber does not), and I appreciate it. However, I was not completely sure that it was necessary to be able to comment on something, because I was afraid to receive a large amount of unreasonable negativity in return. But that did not happen.

In my opinion, the reason is that I did not just express my opinion, but tried to convey carefully developed material (at least I hope so). People, at the same time, respond accordingly. I follow comments and delete offensive ones. Out of about 13,000 comments, I only have to remove about a dozen. It really means a lot to me and is an indicator that I'm on the right track in terms of presentation. To be a good author, you need to make sure that your material is good enough. Moreover, the quality of the material only benefits from quality comments. I got an amazing experience and I hope that everything will remain in the same vein.

Dan: Well, Horace, thank you so much for being able to participate in today's show. I appreciate it.

Horace:Thanks for the opportunity. I really enjoyed it.