I miss first-gen Google Maps for IOS

This is an oldie, but still relevant: an informative deep dive into the design choices of Google Maps and Apple Maps on iOS.

I wish I had screens from the first version of Google Maps that shipped on the iPhone, a version that was rumored to have been built by Apple for Google. To me, that's still the most usable mapping app ever for iOS, and all subsequent versions, including both of the latest versions of Google Maps and Apple Maps, are more complex. The new maps may do more and offer more functionality, but if you just wanted to quickly get directions to a particular place, nothing beat the first-gen Google Maps for iOS.

Part of this is the result of the new flat design aesthetic, which is sleek but often opaque. In many ways, touchscreen user interfaces seem to have approached a local maximum in which the only innovation is coming up with new icons that users must learn. At some point, we're just substituting new abstractions and not making significant leaps forward in usability. More apps are  better, on average, than the first generation of mobile apps, but the best designed apps today don't feel much better than the best apps from the dawn of the iOS app store.

These days, the great leap forward in interface design feels like it's the complete removal of the abstraction of traditional software design. The interface that feels closest to achieving that in the near future is text, most often found in some sort of messaging interface. Following on its heels, with even greater potential as a democratic UI medium, is voice.

Assembled in China

This study also confirms our earlier finding that trade statistics can mislead as much as inform. Earlier we found that for every $299 iPod sold in the U.S., the U.S. trade deficit with China increased by about $150. For the iPhone and the iPad, the increase is about $229 and $275 respectively. Yet the value captured from these products through assembly in China is around $10. Statistical agencies are developing tools to gain a more accurate breakdown of the origins of traded goods by value added, which will be attributed based on the location of processing, not on the location of ownership. This will eventually provide a clearer picture of who our trading partners really are, but, while this lengthy process unfolds, countries will still be arguing based on misleading data.
 
Those who decry the decline of U.S. manufacturing too often point at the offshoring of assembly for electronics goods like the iPhone. Our analysis here and elsewhere makes clear that there is simply little value in electronics assembly. The gradual concentration of electronics manufacturing in Asia over the past 30 years cannot be reversed in the short- to medium-term without undermining the relatively free flow of goods, capital, and people that provides the basis for the global economy. And even if high-volume assembly expands in North America, this will likely take place in Mexico where there is already a relatively low-cost electronics assembly infrastructure.
 

An interesting piece in AEI about how shifting assembly jobs back to the U.S. might not be the economic boost it's often made out to be.

It’s an important distinction that Apple products (and other electronic goods) are really only “Assembled in China,” and not actually “Made in China.” The value of the final assembly in China is pretty small compared to the value added in the U.S., and yet China gets credit for the majority of the value according to the way trade statistics are calculated.

How Apple Pay innovates on top of the US payments stack

One of the difficulties of building innovative payment services in the US is that we're a nation that loves our credit cards. We may totally overvalue the random rewards and points and other benefits the credit card companies give us, but since the merchants often cover a lot of the cost of those benefits, we'll take all the rewards we can get, as financially irrational as that may be.

[Aside: Some cards have annual fees, and the credit card users that carry a balance each month subsidize other users who pay off their balance in full each month, but many credit card rewards would be acquired more cheaply just by paying for them directly. A free lunch remains a rare thing.]

This presents a cost problem for payment startups: if you build a payment service that leverages your users' credit cards, you have to pay companies like Mastercard, Visa, American Express, and so on their fees. But if you charge merchants an additional markup on top of this fee when one of your users pays with your service, merchants have very little incentive to accept your payment method.

You could just pass through the fee, but then you have to make your profit elsewhere. Or you could be bold and charge less than the credit card fees, but then your entire business is a loss leader. The more you sell, the more you lose. Ask Square how that model has worked out from a cash flow perspective. Paypal was able to reverse the bleeding by making it near impossible for its users to pay with a credit card instead of with an eCheck or any Paypal balance they might be carrying. I know this because I tried to switch to using a credit card when logged into Paypal once and ended up in this strange endless loop where I kept adding a credit card to use and then not being able to find it. I tried several more times in a row until I decided to just take a rock and hit myself in the head repeatedly because it was less painful and frustrating.

An echeck costs Paypal some negligible amount, I recall it being something like $0.01 from my time at Amazon, and using the Paypal balance costs Paypal nothing, of course. That means whatever Paypal charges the merchant on that transaction becomes profit. It's not easy to get all the way there, though. You have to encourage enough usage for users to want to give you their checking account information so they can withdraw any balances they might have. Once you have that, you can enable money to flow the other direction, as an eCheck, too.

Payments, as a multi-sided market, will always present entrepreneurs with this chicken-egg conundrum. To get merchant adoption, you need a huge number of consumers carrying your payment method, but to get consumers to want to use your payment method over their beloved credit cards, you need a ton of merchants to accept that payment method.

Which brings me to Apple Pay, which launched today. I didn't realize today was the public launch until I was at Whole Foods buying breakfast this morning and saw this at the checkout counter on the payment terminal:

I hadn't downloaded the iOS 8.1 update yet or added any credit cards to Apple Pay on my phone, so I didn't use it just then, but I went back later after I had added a credit card and tried it out, and it was painless. Held my phone up to the terminal, Apple Pay popped up on my screen and asked me to verify with Touch ID, and that was it.

There are many reasons to think Apple Pay might succeed where so many other alternative payment methods have failed.

First, Apple is building off of the existing credit card system rather than fighting customer inertia. As noted above, so many US consumers love their credit cards and the rewards they get from them. Apple Pay doesn't ask them to give that up.

Another thing about credit cards: most consumers find them easy to use, not that much of a hassle to bring out and use. To surpass them, an alternative has to be as easy or easier to use or magnitudes for the consumer or much cheaper for the merchant. Apple Pay fulfills the first of those requirements once you've added the cards to Apple Pay on your phone, something that can be done as easily as snapping a photo of the credit card. Touch ID has finally reached an acceptable level of reliability, so the overall user experience is simple and solid.

Perhaps most importantly, Apple Pay starts on day one with a good whack at both the chicken and the egg. On the merchant side, Apple managed to corral an impressive number of partners, from credit card companies (the big 3 of Visa, Mastercard, and American Express) to banks (all the biggest like Bank of America, Chase, Citi, Wells Fargo). On the merchant front, Apple Pay's marketing page claims over 220,000 stores which actually makes this the weakest link of these three groups but still a decent starting point for day 1. That will be the hardest nut to crack, but more on this point later.

On the consumer side, whether that's the chicken or the egg, Apple has a massive and growing installed base of iOS and iPhone users who can use this system. The only other technology company I can think of who could tackle this space is Amazon given their huge database of consumer credit cards, but they lack the device or app installed base to fulfill on a good user experience for enough users.

Apple Pay offers some additional benefits, like added privacy, something Apple has been touting across the board as one of their key consumer benefits, though I'm still not sold it's a huge selling point for most average consumers. Still, it's worth noting that Apple doesn't keep records of your transactions, and you don't have to hand over your credit card to some waiter or clerk who then has access to the card number, expiration, and security code. Again, I think this is of minor psychological comfort for the vast majority of consumers, but it's at least not a negative.

But more than anything, my excitement for Apple Pay stemmed from this post by Uber:

The beauty of Apple Pay is that it simplifies Uber’s signup process to a single tap. If you have an eligible credit card already added to Apple Pay, you don’t need to enter it again to ride with Uber. Instead, merely place your finger on the Touch ID sensor of your iPhone 6 or iPhone 6 Plus, and your Uber is on its way. No forms, no fuss. We’re calling this new Uber feature Ride Now, and it’s the product of a close collaboration between Uber and Apple over the past few months.

How it works:

  1. Open the Uber app and tap Ride Now.
  2. Tap Set Pickup Location, enter your destination, and confirm your request.
  3. Place your finger on Touch ID to confirm payment, and your Uber is en route!

The rest of the Uber experience remains exactly the same. A receipt for your ride, with the fare breakdown and trip route, is sent to the email you have for Apple Pay; riders rate their drivers at the end of each trip. Existing Uber users are unaffected and can continue using Uber as before.

Innovation in payments in the US has been difficult because of the entrenched incumbent stack, but Apple has just moved up the stack and innovated above it all. What they've done here is abstracted away the credit card number entirely. Extrapolate out into the rosiest future, and perhaps someday the only time you might have to remember your credit card number is when you get it in the mail and input it into Apple Pay. Who really cares what the number, expiration date, and security code are. If you can prove you are who you say you are with Touch ID, that's a more efficient way to prove your identity and grant authorization for the payment.

But we're a long ways away from that day, and for now, 220,000 stores is actually not close to a majority of merchants. The Uber example, though, demonstrates the near-term potential.

I long ago memorized all my credit card numbers and security codes just so I wouldn't have to deal with the hassle of pulling the cards out every time I had to punch the number in for an online transaction. Still, it's a hassle, especially on my phone, to have to either enter my credit card details or to go round trip to 1Password to remember my crazy long, random, difficult-to-memorize iTunes password.

Apple Pay reduces that pain by a lot. A whole lot.

Even if its near term impact is restricted to making payments in apps on my phone, that's a big deal, and perhaps sufficient incentive to me to actually upgrade to one of the new iPads with Touch ID.

When Amazon first received its 1-click patent, one of the first and only companies to license the patent was Apple. It paid off for both sides. For Amazon, Apple's license strengthened the patent, allowing them to enforce it against companies like Barnes & Noble (for the record, I don't believe in software patents like these, but that's a topic for another day). For Apple, the 1-click license allowed them to enable users to purchase songs off of iTunes with 1-click, one part of a superior experience that spanned iPods and the iTunes music store that catapulted them to the digital music throne. Can you imagine the painful it would have been to go through multiple steps to purchase each single?

What Apple has done with Apple Pay is extend 1-click purchasing to the mobile app world and many real world stores as well. Or maybe we should call it 1-touch purchasing.

Years later when we look back on WWDC 2014, I suspect Apple Pay will be the most important announcement by a wide margin.

The economics of priceless transactions

Taken together, you have a simple alternative to trading: the price of anything that affirms shared values is infinite, the price of anything else is zero or negative when the alternative is to debase or reverse a value.

Saint-saint transactions are not uncomputable though. You can order priceless values from greatest to smallest. You can do some simple, low-precision math with the infinities of pricelessness. Lives are priceless, but it is only acceptable for a mother to give her life to save  a young child, not the other way around. Often, one infinity is devalued in proportion to how corrupted it seems relative to another infinity of the same kind. So the adult life has been more corrupted by base trader considerations of adult circumstances. Therefore it must be sacrificed for the child’s life.

In general, the innocent are more priceless than the corrupt, the pure more priceless than the impure, the lofty more priceless than the base, the natural more priceless than the artificial. Some examples are harder to analyze. Soldiers giving their lives for their country are often viewed as superior, purer people giving their lives to protect inferior, more corrupt people.

To resolve this paradox, we agree to pretend that soldiers fight directly for the proclaimed values of a nation, rather than the lived values of its actual people. This is why soldiers’ families in movies are always archetypal, sometimes even cartoonish, models of perfect virtue. They are never the messed-up rolling train-wrecks that are the families of most real people. In theory, we are supposed to honor the lives of the fallen by striving harder to be worthy of their sacrifice. That of course means living more truly by the values they died for.
 

Excerpt from a fascinating post on the economics of priceless transactions. As the author notes, the rise of the internet has put a spotlight on the economics of free, but what of the opposite end of the spectrum?

Three things come to mind. One is that I recall my mother never split any bills when going out to meals with friends and family. Someone always picked up the tab only after a theatrical fight between Asian adults for the check when it landed on the table after a meal, almost a ceremony of sorts. It resembled some notion of what the author terms a saint-saint transaction with a price attached but treated as an afterthought. More important than the equitable division of the tab was affirming the friendship. Since the continuation of the relationship likely meant more meals in the future, the favor would be returned at the next meal in a the next stroke of a lifelong financial volley.

I picked up on this tradition, and after college, once I had enough income to start eating out on a more regular basis, I tried to carry it on when eating out with others. This worked well with some folks who shared that tradition, but I found the vast majority of Americans were more accustomed to splitting the check. This often led to a semi-awkward impedance mismatch after meals.

The second thing that comes to mind is that our online selves are often closer to idealized constructions of our identity than to our actual selves. This, to me, leads to the exhausting cycle of outrage on Twitter and other social networks. In 140 characters, we must express absolute outrage at every moral transgression from any public figures. After all, we live in an age where our online self, our construction of it, often reaches more people than our real selves. This makes our virtual identity critical, and after all, the cost of moral indignation online comes with little cost. Online, we are all saints.

Third is the internal struggle many NFL fans are caught up in right now. On the one hand, football fans love the sport, the cultural touchstone that is the secular religion of NFL Sunday. It is nearly impossible to dispute, however, the gladiatorial destruction the sport wreaks on its participants' bodies and minds. And, thanks to the elevator security footage of Ray Rice knocking his wife out cold with a vicious left hook, all the multitude of domestic violence cases over the years involving NFL players suddenly took on a tangible nature that's not as easy for fans of the sport to ignore.

What makes fans uncomfortable is that even if they elevate their love of the sport to an intangible and priceless stature, perhaps as some touchstone of American spirit, or some cultural bond between generations, they know that in a comparison of priceless values, the health and lives of players and the safety of their spouses and children must rank higher. It's not sacrifice if you aren't letting go of something you genuinely love.

I also loved this bit from the post:

When traders, rather than saints, control the narrative, the narrative logic is baser-than-thou. This is the logic of status-leveling humor rather than the logic of status-preserving solemnity. To understand why, consider the classic joke about prostitution:

Man: will you sleep with me for $1 million?
Woman: Okay
Man: will you sleep with me for $5?
Woman: WHAT! What kind of woman do you take me for?
Man: we’ve already established what kind of woman you are. Now we’re just haggling over the price.

In this joke, the initial offer of $1 million is actually fake-out code for “priceless.” The joke relies on treating it as an actual negotiable number later, instead of sticking to the fiction that it is a symbolic infinity. The trader here has an ulterior motive: exposing the hypocrisy of the woman’s position, thereby up-ending the presumed status relationship at the start.

The reason jokes like this work is that priceless actually is a number less than infinity in many practical situations. For something to be priceless, it is only necessary for it to be priced at a point where it can be compared with something else that is priceless.

In the prostitution example, an offer of $1 million is (if you’ll pardon the joke) big enough to be considered fuck-you money. This has a very specific valuation in the priceless economy: it is the price of liberty for the rest of your life. The woman is willing to do for $1 million what she is not willing to do for $5. Not because she has a rational pricing model in mind, but because at $1 million, she is wrestling with a high-minded internal values conflict (liberty versus purity). At $5, she’s thinking about paying for a sandwich. The joke works because it disrupts the original fiction that purity ought to be the more priceless value of the two. Indecent Proposal works as a tragedy for the opposite reason: the original fiction is ambiguous and the ending affirms values in the “right” order (watch the movie to understand why and at what cost).

This is why earnest discussions in the startup world about what your “number” might be, are deluded. Liberty means different things to different people. For some, it is a dollar and a mindset shift away. Others remain trapped even with hundreds of millions of dollars.
 

And, for those of you who come here just for technology related stories, an excerpt that veers closer:

Marketing represents a net return on investment if the irrationality it induces, via movement of the transaction into saintly regimes, increases margins sufficiently. You could measure the irrationality of a market (or equivalently, the hierarchical rationality of a reputation economy) by the amount spent on marketing, particularly in a saintly mode. A marketing-dominates-sales company is one that has carved out a defensible position: a regime behind a fixed boundary where a favorable values economy of pricelessness prevails.

This is what positioning means: drawing a boundary around a set of values that your customers will accept, that put you on top in most transactions.

As Exhibit A, I give you Apple during the reign of Steve Jobs at the top of the Apple reputation economy. That Apple at the time was primarily a reputation economy, and only secondarily a computing hardware market, is clear from the fact that there is a clear hierarchy in its market, with users at the bottom, genius-bar reps one level up, and an invisible secret church in the background with Jobs at the top. Now that he’s gone, the fate of the company depends on the ability of Tim Cook to play St. Peter well.

How Apple deploys its cash

It's often said that Apple is sitting on too large a horde of cash, that if it can't come up with ways to deploy that cash that exceed its own internal rates of return or other such hurdles (to use finance speak), it should return that cash to shareholders.

On Quora, an anonymous account posted an interesting take on why Apple accumulates so much cash and how it deploys that as a strategic weapon.

When new component technologies (touchscreens, chips, LED displays) first come out, they are very expensive to produce, and building a factory that can produce them in mass quantities is even more expensive.  Oftentimes, the upfront capital expenditure can be so huge and the margins are small enough (and shrink over time as the component is rapidly commoditized) that the companies who would build these factories cannot raise sufficient investment capital to cover the costs.

What Apple does is use its cash hoard to pay for the construction cost (or a significant fraction of it) of the factory in exchange for exclusive rights to the output production of the factory for a set period of time (maybe 6 - 36 months), and then for a discounted rate afterwards.  This yields two advantages:

  1. Apple has access to new component technology months or years before its rivals.  This allows it to release groundbreaking products that are actually impossible to duplicate.  Remember how for up to a year or so after the introduction of the iPhone, none of the would-be iPhone clones could even get a capacitive touchscreen to work as well as the iPhone's?  It wasn't just the software - Apple simply has access to new components earlier, before anyone else in the world can gain access to it in mass quantities to make a consumer device.  One extraordinary example of this is the aluminum machining technology used to make Apple's laptops - this remains a trade secret that Apple continues to have exclusive access to and allows them to make laptops with (for now) unsurpassed strength and lightness.
  2. Eventually its competitors catch up in component production technology, but by then Apple has their arrangement in place whereby it can source those parts at a lower cost due to the discounted rate they have negotiated with the (now) most-experienced and skilled provider of those parts - who has probably also brought his production costs down too.  This discount is also potentially subsidized by its competitors buying those same parts from that provider - the part is now commoditized so the factory is allowed to produce them for all buyers, but Apple gets special pricing.

For me this recalls sushi restaurants. When I first graduated college and finally had enough money to eat sushi regularly, I'd sit at the bar at a sushi restaurant and watch the sushi chef cutting the fish and wonder what was so difficult about what they were doing. After watching a few of them, I felt like I could climb over the counter and assemble a reasonably good piece of sushi myself.

After watching Jiro Dreams of Sushi, I realized that watching a chef prepare a piece of sushi was just the tip of the iceberg, that much of what set one sushi restaurant apart from another was the supply chain, the relationships with the right buyers and suppliers and fishmongers that helped secure the best ingredients.

This strikes me as the same way most people underestimate Apple. They see the aesthetics of the final product, the software or hardware design of an iPhone or a MacBook air, and they don't see any sustainable competitive advantage. All of that can be copied, they think.

Leaving aside the fact that in hardware design if you have to copy someone else in technology you're already one generation behind, what people often fail to see (or can't, given Apple's secrecy) is the massive supply chain edifice below the water's surface. Scaling in software may be less of a problem for David than it once was, but in hardware it pays to be Goliath. 

Apple strategy and disruption

The Businessweek interview with Tim Cook is fascinating because it's not often you get to hear the tech titans talking about each other.  CEO's of most tech companies are fairly guarded when speaking to the press, and most won't address the competition head on, but Cook didn't shirk those subjects.

I think if I bought [an Android tablet] and used it, and I thought that was a tablet experience, I’m not sure I would ever buy another tablet. The responsiveness isn’t there. The basic touch is really off. The app experience is a stretched-out smartphone kind of experience. It’s not an optimized experience. However, that said, I have always said that the tablet market was going to surpass the PC market. I was saying that well before it was viewed to be sane to say that. It’s clear that we’re 24 months away from that.

On Android's market share: 

Has Android’s rise in market share surprised you in the time that it’s happened?

I don’t think of Android as one thing. Most people do. I mean, from a consumer point of view, if you look at what Amazon (AMZN) does with Android, forget the name Android for a minute. If you’re coming down from a different planet and you were going to name it, you wouldn’t name it the same thing as what another company does. If you compared that to what Samsung (005930:KS) does, I’m not sure you would name that the same thing either.

I think that the importance of that is overplayed. The truth is that there are more people using iOS 6 than there is any version of Android. And in days from now, iOS 7 will be the most popular mobile operating system. And so what does it really mean at the end of the day to show these share numbers and combine all of these disparate things as if they’re one thing? I’m not so sure it has a great meaning to it at the end of the day.

So your question, does it surprise me? I don’t look at it in the same way as you might. I think the way a consumer looks at this is different. Does a consumer that’s buying a Kindle think about it being an Android? Probably not. And so I think that’s a bit different than where Microsoft (MSFT) and Windows was.

On Android's OS fragmentation:

What’s your take on Android’s many versions? The “fragmentation” issue.

It’s a growing problem.

From a functional level?

Yes. And it’s just not growing in the—it’s not like a baby that becomes an infant. It’s not like that. It’s an exponential. It’s a compounding problem. And think about all these people that they’re leaving behind from a customer point of view. People do hold on. Most people hold on to their phones a couple of years. They enter a contract and honor that contract and then upgrade after that two-year period. So in essence, by the time they buy the phone, many of these operating systems are old. They’re not the latest ones by the time people buy. And so by the time they exit, they’re using an operating system that’s three or four years old. That would be like me right now having in my pocket iOS 3. I can’t imagine it.

It’s not because it was bad. It’s just because the world has changed and there is so much more. And so anyway, I think it is a growing issue. It will show up in developers. It will show up for people that no longer have access to certain apps. It will show up in security issues, because if you’re not moving your customer base to the latest version, then you have to go back and plug holes in all of this old stuff, and people don’t really do that to a great degree. So they are more susceptible to issues.

It just shows up in—I mean, name it. And that issue grows, and because the population is growing, it becomes bigger and bigger and bigger. So we’ll see.

On market share generally:

While these phones represent the high end of the industry, there’s another part of the industry that’s racing toward the bottom. Chinese manufacturers, Indian manufacturers, $100 phones, $150 phones. What do you think about that? What does that mean for Apple?

I think it’s important that we grow, but I don’t measure our success in unit market share. So if there are a lot of $69 tablets sold that you’re just pounding on to get something to work and get some responsiveness, and it’s thick and fat and just a terrible experience, I don’t really weigh that unit of share like I do a different unit of share. I don’t weigh them to be equivalent.

So I think in most markets in consumer electronics, there’s always a large junk part of the market. We’re not in the junk business. We don’t want to make something for that. What we want to do is make a really great product and provide a great experience. And I’m sure we’ll get enough customers that want to buy that. We want to please them.

That other business, it’s not something—we don’t spend our time obsessed of how to make a product for that because that’s just not who we are and what we’re focused on.

The most common questions about Apple: why don't they come out with a lower price iPhone for non-subsidized markets? Why do they leave a price umbrella in phones and tablets? Is Android's growing market share concerning? Cook took them all head on and seems, at least to me, very candid. The next time someone poses these questions again they can just reference this interview.

The Cook interview pairs nicely with the Ben Thompson post What Clayton Christensen Got Wrong. Christensen is the intellectual of the moment in technology the past several years with his theories of disruption from his classic text The Innovator's Dilemma. Disruption has proven to have great explanatory power in many sectors of the technology industry. But Christensen has been wrong, repeatedly, about Apple's susceptibility to disruption. Many a time he has predicted Apple will be bitten at the heels, and time after time they've been fine.

Thompson believes he knows why. 

In the case of low-end disruption, the rational buyer considers the superior integrated offering and the inferior (but still good) modular offering, decides the latter is “good enough,” and buys it because it is cheaper. The buyer knows the integrated offering is better, but the buyer is unwilling to pay a premium for features the buyer does not need.

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EVERY ATTRIBUTE THAT MATTERS CAN NOT BE DOCUMENTED AND MEASURED

The attribute most valued by consumers, assuming a product is at least in the general vicinity of a need, is ease-of-use. It’s not the only one – again, doing a job-that-needs-done is most important – but all things being equal, consumers prefer a superior user experience.

What is interesting about this attribute is that it is impossible to overshoot.

Given how often the tech industry rushes to apply Christensen's theories of disruption (as in most walks of life, disruption is the hammer through which the tech industry sees an infinity of naials), Thompson's article is a must read.