Push Me, Pull You

From my conversation with the Westside Proggers last night, I deduced that Twitter is not just being used for useless trivia (I'm eating a ham sandwich right not. With mustard.) but is also being used for something useful. Just what that might be I have not discovered, but at least with this group it seems to be true.

This got me thinking about a similar phenomena that I have noticed about other mass-market products and services: they provide a very useful, sometimes essential service for a small segment of the population, but because these same products and services are used by the vast majority of people, they have become commodities and so the cost is now very low. Cell phones, personal computers and the internet are prime examples. What percentage of calls that are made do you think are actually essential business calls? One in ten maybe? And how many are just people chatting?

Which reminds me of another related phenomena. Intel had a factory here that made PC's and the motherboards that went inside. Some of their orders were really big for companies like Dell and Gateway, and the margins on those orders were slim to non-existent. Of course, they made a bundle on every Pentium processor they sold, so the chip division was doing fine. But the systems division would also like to show a profit and they made it by also doing smaller orders for other PC vendors. Smaller orders (how small? 100? 1000? 10,000? I have no idea.) didn't get the same discount as the big orders, so Intel was able to make a little money building PC's for these smaller vendors. However, it was only because they had the facilities in place to build the PC's for the big orders, that they were able to make a profit on these smaller orders. That's the story I heard anyway.

While I am on the subject of Intel, let me relate a couple of other "insights". Back in the early 1990's, Intel was comprised of two divisions: the chip division and the systems division. The chip division made integrated circuits, like processors. The systems division made boards that used these chips, packaged them in boxes and sold the whole package as a microcomputer system. One of Intel's goals at the time was to grow the systems division to the point where it was as big and important as the chip division. But then the Pentium came along, chip sales skyrocketed and the systems division became a marketing arm of the chip division. It was no longer a matter of whether what you were doing was good business, it was a matter of how much you were contributing to chip sales, and that was a matter of perception. Politics triumphed and the systems division became a hell-hole.

You could say that the systems division did it to itself. They got started building boards for the industrial market (Multibus I & II). They were building boards that had approximately the same functionality of a PC motherboard, but they were selling them for $1000 where the PC motherboard was going for $100. The overhead for designing and manufacturing either kind of board is about the same, but when your volume can be counted in the hundreds of boards, you kind of need the large margins.