Investors and software patents

Talking to possible investors, smart people with a lot of business experience, is a reminder of how critical patents are to innovative small business. Every new idea bottled waterattracts imitators and worse, and small companies, by definition, do not have the market inertia that allows giants to sell bottled tap water at premium prices.

SCADA system security in the internet era

This Washinton Post article on a SCADA failure at a US nuclear power plant was noted in Slashdot, but not much elsewhere.

Specifically, experts worry that vulnerabilities were introduced into the systems that regulate the electrical grid as power companies transferred control of generation and distribution equipment from internal networks to supervisory control and data acquisition, or SCADA, systems that can be accessed through the Internet or by phone lines, according to consultants and government reports.

The article also discusses an earlier nuclear power plant software failure caused by message overload when two pumps failed.  The fundamental problem is that SCADA software is being written to two very different but completely inadequate standards: standards coming from the embedded software business where software is still an afterthought and standards coming from the PC/Server world where functionality is king and security/time-guarantees/robustness etc. are competing for a distant second place.

As we move into an era where there are many distributed power sources connected to the grid, and where machinery that uses power does so under ever more sophisticated software control, the potential for cascading failures is quite real and unanticipated interactions between business software and control software is one good source of failure injection.

Cleantech and history of software

I’m on my way to Linz, Austria to participate in a panel at  an event called Cleantech Venture Forum. We’ve spent a lot of the last two years looking at ways to save power in data centers and mini-data centers (which may be a term nobody else uses).  If we look at the history of software, the key thing to optimize changes over time:

  1. Alan Turing Era – minimize processor time and memory use (machines are few and very expensive)
  2. Gene Amdahl/Seymour Cray Era – maximize throughput (big batch jobs in expensive machines)
  3. Gordon Bell Era – maximize responsiveness (suddenly we have terminals and impatient people screaming at them.)
  4. Bill Gates Era (client server era) – minimize programmer time and maximize functionality.  This is the era marked by three inspiring principles:

    1. Can’t we get these 4000 poorly educated, poorly treated code  monkeys to produce something valuable?
    2. No matter how crappy this is, it will work better after more memory and more processors.
    3. Get it out the door and let the customers debug it (or “Ready, Fire, Aim” as a former boss used to put it before our company went bankrupt!).
  5. The Al Gore Era -  power use/functionality becomes important.

Something like that.

Patent trolling and guilty knowledge

Mr. Myhrvold: All of this fear is from people who have guilty knowledge of their own actions. There are lots of major tech companies that grew from zero to gigantically successful in a very short period of time without investing in their own inventions. They got there by using other people’s inventions.


No kidding.

US Elections and startup/small-business economics

I’m surprised that John McCain’s proposal to make health insurance benefits taxable has not received more notice. For a startup, cash is expensive and hard to find and it is a tremendous handicap for US startups that we have to  pay a huge amount for insurance for employees. But under current US tax law, the  benefit is not taxable – the company gets to deduct the costs as an expense and the employee just gets the benefit (such as it is). The McCain plan as described by its proponents works like this

Consider a married taxpayer whose employer now pays $10,000 for a health-insurance policy. Ending the exclusion will raise that individual’s taxable income by $10,000 — but the $5,000 tax credit will exceed the extra tax liability whether the marginal tax rate that individual pays is 10% or 35% or anywhere in between. Indeed, the lower the taxpayer’s income, the more of the credit that will be available to pay for health care that’s not reimbursed by insurance.[cite]

My first thought on reading this was “we’re overpaying for health insurance” since $10K/year is not anywhere near what insuring a family costs us. Some research on insurance costs, however, shows that the problem is that their numbers are false.   Studies generally say an average insurance policy costs $12K/year, but of course, at a technology company we are paying benefits in the top tier, not buying some Discount Bring Your Own Needle if You Need Stitches Insurance. The break even point for a family in a state like CA where there is going to be a state tax penalty as well is around $13K and prices are increasing at a very rapid pace while the credit is limited to increasing about 2%/year. For a single person, break even is around $7K.

Furthermore, the average is skewed by the advantage big companies have – one that gets much stronger under this bill. Suppose that you are trying to hire a brilliant engineer who also has an offer from IBM.  Your costs to insure her family will be $19K/year and theirs will be, perhaps, $14K year because they can negotiate discounts. That’s a problem we have now. But under the McCain plan she has to also factor in a $5K increase in tax liability from you for the same level of policy – reducing her net salary however the credit works.  If she’s at the 28% level, then that’s a $1400/year penalty for her on federal taxes not to mention an additional nearly $500 in state taxes in places like California.

I wonder about the reporting mechanics of this plan and how it interacts with other costs. Do we have to produce more paperwork for this non-wage benefit? Does it go onto W2 forms? How does it interact with state taxes or HRA accounts or … ?  The sense you get from reading McCain’s proposal is that he wants to get rid of employer paid health plans:

While still having the option of employer-based coverage, every family will receive a direct refundable tax credit – effectively cash – of $2,500 for individuals and $5,000 for families to offset the cost of insurance. Families will be able to choose the insurance provider that suits them best and the money would be sent directly to the insurance provider. Those obtaining innovative insurance that costs less than the credit can deposit the remainder in expanded Health Savings Accounts.[cite]

That “sent directly to the insurance provider” is not confidence inspiring. I’m imagining trying to hire someone under these conditions.

The Obama proposal is simpler.

The Obama Small Business Health Tax Credit will provide a refundable credit of up to 50 percent on premiums paid by small businesses on behalf of their employees.[cite]

Don’t know what the “up to” means in detail, but the idea is easy to understand.

more security databases

“I was pulled aside in a room … and you have to wait your turn to finally be released,” Labbé said. “An hour, an hour and a half, two hours, whatever it is after. Once I was caught in Miami like that for six hours.

“It’s always the same questions, about if I’ve lost my passport, if I’ve been to Japan — I don’t know why Japan, but in their file it was something to do with Japan.”

The U.S. Department of Homeland Security wrote a letter to Labbé in 2004, saying he had been placed on their watch list after falling victim to identity theft. At the time, the department said there was no way for his name to be removed

There is no process for getting off the list – except

Although Labbé wrote letters to the U.S. department, his efforts were in vain, prompting him to legally change his name.

“So now, my official name is François Mario Labbé,” he said.

“Then you have to change everything: driver’s license, social insurance, medicare, credit card — everything.”

Although it’s not a big change from Mario Labbé, he said it’s been enough to foil the U.S. customs computers.[cite]

Some things are beyond comment.