OS/2, Microsoft and Open Source

There seem to me to be important parallels between IBM’s OS/2 and open source. To explain why I want to start by recounting my take on the history of OS/2.

In the early 1980s engineers at IBM realized that the DOS memory addressing architecture would need more than band-aids like HIMEM.SYS and the idea for OS/2 was born. OS2 was to be a new desktop operating system designed from the ground up. I remember going to the OS/2 announcement meeting in 1987; although some applications (Lotus 123 for example) were written with an API graphical interface, and IBM had announced that OS/2 would have a API GUI, OS/2 would remain command line driven until October 1988.

The delay in providing the GUI is in part attributable to a difference of opinion as to what mattered most in a desktop OS. OS/2 was a joint project between IBM and Microsoft. IBM’s relationship with Microsoft dates back to 1980 and the first IBM PC; IBM needed and OS and Bill Gates promised to provide one - which he did and we had MS-DOS and IBM-DOS (which was effectively MS-DOS with an IBM logo and a nice linen-covered beige box).

The OS/2 project ran into difficulties in the late 80s as differences in design philosophy and conceptions of the most appropriate business model for a desktop OS began to surface. IBM has staffed the OS/2 project with developers from the MVS labs. MVS was IBM’s flagship mainframe OS and was built on two central pillars: reliability and recoverability. IBM’s engineers took this notion of what a good operating system should do to the OS/2 project. Because IBM saw the PC as a tool for small businesses rather than consumers or end users, reliability and recoverability were seen as key to productivity and to the marketing of the PS/2 and OS/2 products.

Microsoft had a different view. Gates had a vision of a PC on every desk. He saw the consumer and end user market as his top priority. Consequently, Microsoft focused its resources on developing a simple graphical user interface. Two projects were underway at Microsoft; the GUI for OS/2 and Microsoft’s own GUI, called Windows. These differences in approach led to a parting of the ways; Microsoft left the development of OS/2’s GUI to IBM, concentrating its efforts on Windows. When Windows 3.1 was released in 1990, it was in many ways more user-friendly than OS/2; it was easier to set up and peripherals were easier to attach. However it was far less stable and had zero recoverability.

With the parting of the ways, IBM and Microsoft each followed their own strategies. Although IBM worked hard to make OS/2 easier to setup and Microsoft to make Windows more reliable, the foundations had already been laid and the rest, as they say, is history. Gate’s business model turned out to be more appropriate (if profitability is any measure). IBM’s last release of OS/2 (Warp 4) was announced in 1996 and support for OS/2 was discontinued on December 31, 2006, just as Windows Vista was being rolled out towards general release in January 2007.

So what has all this got to do with open source?

Open source developers choose what they work on. There is high status attached to contributing to the OS kernel, so we have in GNU/Linux a very robust OS. However, I still have a hard time getting Firefox browser plug-ins to load under Linux and as a consequence, there is a fair amount of web media content for which I have to resort to Firefox for Windows ( I’m running Fedora 8, Fedora 9 and Windows 2000 under VMWare workstation on Fedora 8 ).

I’m worried that if an open source OS like GNU/Linux is going to move out of the technical user market and into the non-technical desktop market, more work needs to be done on these rather mundane kinds of things that are important to the technical illiterati but not so much for coders and the like. Otherwise, just as Windows beat out OS/2 because it was easier for non-technical users to set up, maintain and enhance with add-on software, so Vista will maintain it’s lead over both desktop distributions of GNU/Linux and OSX (which is hamstrung by Apple’s insistence on tying it to its own hardware, a policy that nearly sank the company in the late 90s). And that, in my view, would be a shame.

A Great Day for America

Barak Obama’s victory last night seems to send two messages; first that race is no longer the impediment to equal opportunity and success it was only a few decades ago, and second that ordinary folk are less sure about the wisdom of unregulated markets than Chicago economists think they ought to be.

While his victory is monumental, any euphoria should be short lived, tempered by the realization that the country faces serious problems that will require bipartisanship and strong leadership to surmount: an economic recession; an underfunded social security; lack of access to health care; terrorism and religious fundamentalism; nuclear weapons in Iran, North Korea, and Pakistan. And those are just the issues that confront us today.

John McCain, in a gracious concession speech, called for all Americans to support the president elect; let’s hope that those whose candidate didn’t make it to the Oval Office will head his call.

Normal accidents

Perrow (1984, “Normal Accidents: Living with High-Risk Technologies”) noted that tightly coupled systems are more prone to accidents.

Population ecologists (Hannan, M. T. and J. Freeman, 1977, “The Population Ecology of Organizations” ) tell us that specialization is a response to the demands for efficiency. Specialization leads to increasing interconnectedness and interdependency; in other words tight coupling.

The near collapse of the world financial system this fall, a crisis brought about by a very small perturbation (only 2% of mortgages are in foreclosure), seems to be a good example of a normal accident.

As firms increasingly outsource and reduce buffers between system elements in the quest for efficiency, are we going to see similar accidents in other sectors I wonder?

A question answered

A few weeks ago, I posed a question: how will the bailout plan simultaneously unfreeze the credit market and ensure that taxpayers are not left with the bill. I think I now have an answer. Nationalizing the banks (taking share in exchange for cash) fixes the weak balance sheets in a way that buying troubled assets at fair market value did not. And it appears that the terms are not that shabby; a guaranteed 5% return with greater upside potential if the banks' shares do well.

In other words, the plan, in its original form was never likely to work without the taxpayer taking a bath. This new approach looks a lot better.

A passing thought

Sometime early next year I imagine, AIG will hold its annual shareholder meeting. Someone will walk into that meeting holding a certificate for 80% of AIG’s shares. Will the name on the share certificate read “Secretary of the Treasury Henry Paulson”? If so, how will he cast his vote? Just a passing thought…

The Market for Lemons

Akerlof (1970) pointed out that when there is asymmetric information with the seller knowing more about the true quality of the product than the buyer, the only items up for sale will be lemons. The Treasury is likely to be in just this position when it offers to buy toxic assets from over-extended banks. Talk of ‘eventually making a profit’ from the purchase of such lemon-flavored assets thus seems, at best, overly optimistic.

Identification

Identification: a feeling of belonging to something larger than oneself.

When one group is treated differently from other groups, people might be forgiven for adjusting their frame of reference. The larger group to which they once thought they belonged - and owed some allegiance - may be replaced by a smaller more proximate group. The Wall Street bail-out risks creating such a shift. Small business owners may wonder why it is acceptable for them to fail but not for large Wall Street firms. Home owners struggling to pay mortgages, other who have lost their homes.

Arguments about vital interests and the like, while intellectually comprehensible, are hard to swallow in a culture that holds dear the notion that everyone has an equal shot - but by the same token faces the same risks. If care is not taken in how the Emergency Economic Stabilization Act is implemented, fissures may appear in the rather delicate fabric of our society (sorry Lady Thatcher - there is such a thing as society).

Moral Hazard

Allowing those investment banks that found themselves unable to meet their obligations to creditors not to fail creates a moral hazard problem that will haunt not only the financial services industry but all businesses in the US for a generation.

• We have signalled to outside directors that they need not exercise due diligence in oversight of the companies on whose boards they sit.


• We have signalled to managers agents that their risky behaviour has no downside and thus that there is not cost to risky behaviour in the future.


• And we have signalled to owners - shareholders - that they need pay no heed to the actions of those working on their behalf. Their investment is guaranteed.

Everyone - owners and managers alike - how has an incentive to take ever larger risks. If they win fine; if they loose, not a problem, someone will come to their aid. The problem is that those who are being asked to provide that aid is all of us, the US taxpayer. We have created an expectation, not just in the banking sector, but thought the business community that if you are large enough, no harm will be allowed to come to you, if you’re big enough. Small business owners may create half the wealth in this country but they are not equal recipients when it comes to a transfer of wealth from Main Street to Wall Street and beyond.

Help wanted…

Something I do not understand about the TARP: suppose the Treasury buys the troubled assets for what the market thinks they’re worth. How this is to be achieved is still not clear though the Chairman Bernanke mentioned a reverse auction in his testimony to Congress on Wednesday.

But assuming some price discovery is possible, then we acquire them for the market’s best guess as to what they are really worth. The price reflects all the available information about future development in economy and the housing market in particular. In other words, at these prices, the best estimate of their net present value is zero; we will be paying as much for them as the markets expects we will get back. In other words, everyone’s best guess as to their worth means that the taxpayer should expect to neither make nor loose money on the deal.

However, if we pay the market price, the banks still have under-capitalized balance sheets; this, as far as I understand it, is what is preventing other banks from lending them money. So buying the assets at the market price makes no difference to the lack of credit, the problem that is making the impact so much more wide-spread than a problem for just the banks; their balance sheet are still too weak.

If, however, the plan was to buy the assets at their book value, which would certainly shore up the banks’ balance sheets and fix the liquidity problem, the taxpayer is almost guaranteed to loose. Paying anything above the market price for the ‘toxic assets’ represent an expected subsidy to the banks and an expected loss to the taxpayer.

So my question is this: is the above logic wrong? If not how do we avoid getting stuck will the bill if the bail-out works? (Two questions actually).

A poor man’s Letter from America

Many years ago - I think in the 1940s - Alister Cook, an Englishman by origin, but an American by adopted home, began writing and delivering a series of weekly radio broadcasts called Letter From America. Cook was a remarkable journalist with an ability to find interest in the seemingly mundane and to show how mundane things that we had though were interesting really were. Remarkably, that capacity remained undiminished despite his having lived in the US for over 60 years.

I make no claims to have Cook's, wit, insight or eloquence, (or for that matter, his wonderfully calm, gravely and gravitas-laden radio voice that I still hear clearly in my head as I write, though it is probably 10 years since I heard one of his broadcasts). Nevertheless, the one thing we do share, is that like Cook, I came to this country in my 30s - well late 30s; 39 to be precise. Having grown up in England, with a different cultural heritage, the move has been a times slightly bewildering, but at the same time interestingly revealing. Culture, the set of symbols, myths and things that we take for granted, is obviously something to which one pays almost no attention as one grows up - it becomes an almost invisible and indivisible part of who one is. But when ones is transplanted, that terra firma disappears and the ability to fall back on almost instinctive understanding of “the way things are done around here” evaporates. That’s the hard part.

The interesting part comes because finding things are not what one is used to, brings into sharp relief questions about the way we organize ourselves and assumptions we make, for example about government, the rule of law, the political process, indeed institutions more generally.
In this present observation - I hesitate to say the first of many, since I have no illusions about my ability to be either disciplined or creative in the endeavor - I am struck by materialism. Some take the position, which I do not, that materialism is intrinsically evil; that lusting after the things money can buy is somehow bad in and of itself. A desire to earn money has its good points; it promotes effort and industry. In the right context, it fosters innovation and entrepreneurship. These are good things, things that have made America an exciting as well as wealthy country.

However, the downside of materialism, may come from our overwhelming preoccupation with both the acquisition of money and almost incessant bombardment of enticements for things that money allows us to buy. We are at once fascinated by the lives of those with extraordinary wealth, people who receive more in a week than I can realistically expect to in the rest of my working life. Potentially, a preoccupation with money, and the lives of those who have a lot of it, drives out of our thinking, for no other reason than we have a limited amount of time to think about things, the willingness and subsequently the ability to consider more abstract issues in a nuanced way. Issues such as justice, rights and equity. In turn we are enticed by easy, often overly simplistic solutions to complex problems. A simple solution means we need to spend less time worrying about a problem.

Compounding this, we increasingly delegate to others, usually our elected representatives, the task of considering these questions, but then fail to exercise serious oversight. This creates a fertile ground for corruption to set in. Perhaps this is what is meant by the phrase “a decadent society”.

Tim Russert - in memoriam

Tim Russert, anchor of NBC’s Meet the Press, an influential Sunday morning political talk show, died suddenly on Friday, while taping a segment for today’s broadcast. He was only 58. With his passing, the country has lost a great asset - one of the very few journalists who held politicians accountable for their earlier commitments. Unlike Bill O’Rielley’s truly dreadful program, Meet the Press really was a “no spin zone”. Russert combined searching questions with hawk-like attention to his guests’ replies. He followed up relentlessly if he thought they were pulling the wool. Yet he did so with a seemingly endless reservoir of good humor that made even the toughest questions seem completely matter of fact and eminently reasonable (which they usually were). His insight, professionalism and tenacity are a model of television journalism, which has lost perhaps its greatest exemplar of recent years. And we have lost the benefit of his quest for truth in political advertising. Sunday mornings will seem strangely empty; he will be greatly missed.

Not something you see every day…

Image (c) Bill Johnson, www.mymotherload.com

Numerology

My favorite number is 5; has been since…, well for as long as I can remember, and for no particular reason that I can recall. 25 is also a nice number, being 5 squared. I quite like 49 too, being just shy of the half century (and one vote short of a tie in the Senate). It’s also 7 squared. I sometimes feel sorry for seven. It’s almost a big number like 8 and 9 but just not quite there yet. That being said, I don’t let this rule my life; or even influence it that I know of. I was worried, as most of us were, when oil passed $49 a barrel, and will be unhappier still when petrol reaches $5 a gallon. I doubt that my 50th birthday is going to be a life changing watershed any more than my 5th was, though the latter definitely seems further away. And I doubt it will come with a chocolate cake in the shape of a train.

Content vs. process: what do you know, what might you conclude?

One of the recurring questions seems how much should we be emphasizing content versus process. It seems to me that the more we focus on content, the more immediately useful the university experience will be to our student. They will leave with their heads full of useful knowledge that will make them valuable to any employer. They will know what the law says about X or what is the formula for calculating Y. And for this they may expect to be rewarded with higher salaries.

It is also easier to measure. We can set exams for which there are easily identifiable right and wrong answers and there may come a time when we might even agree on what those important sets of facts are that we require students to memorize.

If on the other hand, we focus on processes and activities (for example, identification of relevant facts, logical reasoning, articulation of an argument, choice of relevant theory, and using theory to make predictions) we may make it harder for students in the short term. It may be more difficult for them to impress a potential employer without having a vast array of facts and figures at their fingertips.

However, I do believe that process skills are ultimately more fundamental and more important aspects of what we should be facilitating and nurturing in our students. Facts, even theories, like diets, come and go. What the law says about something today may be overturned tomorrow. Being able to see further, for example reasoning that such a change might suggest a changing trend in public thinking, what might this mean for other tings the company does, are at least as important. The ability to apply one, to abstract away from messy confusing detail into the parsimony of a theoretical generalization, is a skill students will value for a lifetime.

It’s not a question of either or, but rather about not loosing sight of the fact that we need a balance. As we move to increasing the amount of measurement and assessment we do, we need to keep this in mind, because measuring content is generally easier that measuring thinking and reasoning, and as Peter Blau noted, ‘what gets measured tends to get done’.