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President Obama last night had dinner at John Doerr’s house in Silicon Valley and for some reason I wasn’t invited. I wish I had been. Can you imagine Obama making small talk with Steve Jobs? This is an instance where Steve’s lack of an internal censor probably served the event well, or at least I hope it did, because when it comes to the dinner’s goal of stimulating innovation in America every Administration from any political party needs all the help it can get. I should know, because I’ve been working a bit with those White House would-be innovators, trying to get them in the right groove.

Remember Startup America is the name of the TV series on tech startups I’ve been making for most of the last year. Startup America is also the name of the recently-announced White House initiative on entrepreneurship. Interesting coincidence or brand hijacking?

It was, of course, just an interesting coincidence but I used it as an excuse to accuse them of brand hijacking. Wouldn’t you? So we’re literally moving toward the White House getting an IP license from me. I am not making this up. And it also means they are listening ever so slightly to my advice, because my Startup America is 14 months older than their Startup America and we’ve learned many lessons along the way.

So if you’ve been wondering what’s up with the Startup Tour and Startup America, this is the first of at least three announcements coming this week and next that will explain the next phases for both. Today’s announcement is that I am advising the Obama Administration on this topic. Weird, eh?

Here’s the sort of advice I am giving. There’s a great temptation if you have dinner at John Doerr’s very nice house to buy-in to the Silicon Valley innovation model — to attempt to replicate that in other parts of the country possibly with government assistance. But having visited tech startups in 20 states last year I can say with some conviction that it often won’t work, because the Silicon Valley startup ecosystem isn’t the American startup ecosystem.

This is the Silicon Valley innovation model: 1) get a bunch of really smart people and think up ideas for technology startups; 2) choose a dozen of the best ideas and throw some significant money at them for 6-12 months, and; 3) at the end of a year throw even more money at the two surviving ideas knowing that one of those will also be dead before its second birthday. Brainstorming–seed funding–A-round–success, and of course bloodshed along the way — simple as that.

This model works well in Silicon Valley, where everyone knows people who have worked for eight different companies in the last eight years. But for most of America the model doesn’t work well at all. That’s for three reasons:

1) There often isn’t enough technical talent or if there is, that talent is more risk-averse (or less cocky) than the Silicon Valley crowd.

2) There definitely isn’t enough risk capital outside hotspots like Silicon Valley, Boston or Austin or a few other places that are comfortable with a 90+ percent failure rate. Try that argument down at the bank.

3) The strongest difference between Silicon Valley and real America when it comes to tech startups is how the original idea comes to be. In Silicon Valley you decide to start a company then look for ideas. In real America you have an idea that eventually becomes a company.

That third difference may not sound like much but it is critical. Silicon Valley is a boomtown where everyone is looking for the next vein of gold. In the real America founders more often come up simply with ideas they love that morph over time into products. But since no accelerated, laser-zapped, steroid-boosted in vitro fertilization is involved, these ideas take longer to mature than they would be allowed in Silicon Valley, where success is measured in months, not years.

This doesn’t make provincial ideas any worse than Silicon Valley ideas; in fact they are often better. Nor does it mean those ideas go through more or less evolutionary steps on their way to eventual product maturity. Ideas are ideas. But not all ideas are also dreams, and most startup founders outside Silicon Valley are living the dream that is their technology, not the dream that is their startup.

The result is that companies outside of Silicon Valley start slower and grow both slower and more cheaply. Our Startup America companies were an average of six years old and had gone through in those six years an average of $40,000. Time is money, think about it. To do the same job in one year would have cost $240,000. To do it in six months would have cost $480,000. That’s Silicon Valley kind of money, but six-year, $40,000 money is Uncle Phil money.

So here’s the advice President Obama definitely didn’t get last night at John Doerr’s house. Replicating Silicon Valley in other places usually won’t work. Accelerating innovation isn’t the same as nurturing innovation. Debt financing is close to useless for startups (only ONE Startup America company used debt financing that wasn’t a home equity loan or credit cards). Friends-and-family money is key so find ways to encourage it, though that may not really make a difference. Slow nurturing builds good products, too, so don’t assume that a five year-old startup is a failure or penalize it simply for being five years old.

People who are doing what they love are generally doing good work.

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When John Sculley forced Steve Jobs out of Apple back in 1985, the former PepsiCo marketing executive very quickly produced dramatic improvements in Apple’s profitability.  Apple wasn’t losing money before, but Sculley improved the bottom line by about $200 million (a lot in those days) simply by cutting all of Steve Jobs’s pet projects that appeared to have poor prospects. Sculley raised profits by cutting expenses not by increasing sales. Expect the same thing at Nokia where, ignoring for the moment the “enormous payments” Microsoft will be making according to Nokia CEO Stephen Elop, the company can probably cut its software development budget to near-zero, saving $1 billion or more and increasing profits by that amount.

It’s one of those moments like when Cortez burned his ships to concentrate his conquistadores fully on their job of subjugating the Yucatan. Elop is burning his software development capability, betting on Microsoft. Sure, Symbian will be around for awhile in Nokia products, but two years from now it should be gone. And in that interim period, between lower development costs and Microsoft subsidies, Nokia will look better to investors even if its smart phone market share continues to fall.

That’s why Nokia did the deal with Microsoft, which will be assuming the burden of all that software development and paying Nokia for the privilege. It’s a short-term play that makes perfect sense in an industry where CEOs last an average of four years. Stephen Elop’s four years are now fairly certain, his golden parachute packed and ready.

Two years ago such a move would have been impossible in Europe simply because of employment laws making it very difficult to dump workers. But the current European financial crisis has changed that somewhat and Nokia’s obligations probably aren’t as onerous as they once would have been. Austerity is the thing these days in Northern Europe and almost everywhere else.

Now you might think I’d be against all this but I am not. Compared to Android and iOS, Symbian was, in a word, crap. We can have geeky arguments about it all day but the market has spoken loudly and I am right. Elop was right to make a platform change and righter still to do it this way, primarily at Microsoft’s expense. Nokia had to get out from under its bad software culture and this was by far the most elegant way to do it.

But having said that, I still don’t think it will work.

Trading Symbian for Windows Phone 7 with a $100 bill attached is still trading the worst smart phone platform for maybe the third best. With Blackberry retooling and coming up fast and HP’s WebOS as a dark horse backed by massive manufacturing capability, it isn’t at all clear that Nokia has selected a winner. Which is why I have some advice for Stephen Elop.

Nokia should put some of that Microsoft money into emulating Google’s Android development, where 25 programmers humbled the 1000+ working on Symbian. Hire a Bob Lee (or heck, hire Bob Lee), set up a small development office somewhere in the USA, and spend $5 million per year aiming at mobile life after Microsoft. By tying hardware and software as Apple has done with the iPhone and iPad (and Google, by definition, can’t do) Nokia can head Apple off at the pass with the equivalent of the iPhone 7, three years from now.

That’s what Nokia should do, but of course by then Elop will already by gone.

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At the Vatican, white smoke coming from a chimney at the Sistine Chapel indicates that a new Pope has been selected by the College of Cardinals. Well despite yesterday’s news of Steve Jobs’s departure again from Apple for medical reasons there is as yet no sign of white smoke in Cupertino where Jobs remains firmly in charge.

Readers expect me to comment on this news and I will, but frankly I’m still trying to figure it out so here are a number of random thoughts.

I sent an e-mail to Steve Jobs early last week and he didn’t respond. That’s not in itself such a big deal because Steve periodically ignores me. But other folks at Apple were copied on the message and they didn’t respond, either. That is telling. What it tells me is that this medical leave was no last-moment thing, that it was well on its way 10 days ago.

Well sure, you say, what’s the big deal with that?

The big deal is that Steve Jobs was supposed to participate with Rupert Murdoch later this week in the announcement of The Daily — News Corp’s electronic newspaper for the iPad. Suddenly that announcement has been pushed-back, supposedly over subscription prices. Yeah, right. It’s pushed back because Jobs was no longer available. But until yesterday Apple was quite happy to have us all thinking Steve would appear in New York later this week.

There’s a lot of slick timing at work here. First the Verizon iPhone then killer earnings followed by the Daily, but then that all went kerblooey so when do you announce the bad news while keeping the damage — both legal and financial — to a minimum? Yesterday was the best they could do. thanks to Martin Luther King.

I have no idea what’s going on with Steve’s health. He could be having a whole-body transplant for all I know. But he’s neither a fool nor a sentimentalist — just a narcissist — so I am sure he’s been giving a lot of thought to the succession at Apple. And it is my guess the next Apple CEO won’t be Tim Cook, not because Tim isn’t a good executive but because he isn’t Steve’s creation.

When the white smoke finally drifts over Cupertino that new CEO is going to be a surprise to everyone.

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My last prediction laid out a pretty aggressive 2011 computing strategy for Apple.  But it is just that — a computing strategy — not a media strategy, and Steve Jobs is clearly the most important media mogul on the planet right now, and maybe the most fragile.  This latter point is important, because Steve sees himself as having both a unique mission and a frail constitution.  He can’t wait to get things done, which is why the next couple years will be probably the most important in Apple’s history.

Who needs a 1,000,000 square foot data center? That’s big enough, I calculate, to support 800 million simultaneous users.  Who the heck needs a facility like that?  It’s overkill for even the bold Apple plan I laid out in prediction #9.  But go back to the beginning again and think about bufferbloat, which I think will be the defining technical issue for the next couple years.

Bufferbloat stands between Steve Jobs and media domination.

Then remember prediction #4, that your cable ISP probably won’t fix bufferbloat because it protects two current profit centers — TV and IP phone service.  This will limit the success of Netflix and Hulu and other TV competitors.  It will limit Apple’s Carolina strategy, too, unless Steve does something very bold to circumvent the problem.

What do you pay today for cable TV?  Let’s guess that Apple will use that new data center to serve audio and video streams carrying music and TV and movies maybe for a flat subscription fee.  I predict there will be price tiers based on resolution and some content and/or earlier access will go for higher prices.  Apple trailers, for example, come in 480p, 720p, and 1080p, so those tiers become no-brainers ($59.95, $69.95, $79.95 per month possibly — remember this is Apple). And 1080p-60/7.1? That’s $99.95.

And how does Steve introduce this service?  I think he takes some of that $50 billion in cash, buys an existing cable TV company and essentially shuts it down.  He only has to buy one to make the splash he likes — a splash that is also a kick in the face to Google with its metro gigabit networks.  Once the people of North Carolina get the real Apple TV, how long before other cable subscribers simply give up their TV services, forcing their cable companies to become pure bit-schlepping ISPs for Apple?

Apple’s data center is in Maiden, NC, which is served by Comcast. No luck there.  But it isn’t far from Time Warner, which I believe Steve would see as an acceptable purchase costing around $30 billion.

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Christmas is approaching and with it the end of the first fiscal quarter for many computer companies including Apple.  This is the time when these companies make their biggest sales of the year.  It’s also the time when J.D. Power & Associates is finishing-up its PC quality surveys which cover initial quality and overall service and support.  If you are an Apple customer or a prospective Apple customer pay attention, because this could be a very good time to be you.

Apple is proud of its support operation, which is ironic given that back in the early Apple ][ days Steve Jobs wanted to save money by mimeographing user manuals.  I am not making this up. Obviously Steve has changed his point of view because he has been back in charge of Apple now for 12 years and for the last nine of those Apple has been the top PC company for both quality and support according to J.D. Power.

Winning a competition nine years in a row doesn’t come easily, certainly doesn’t come by accident and luck has nothing to do with it.

This month Apple has a chance to clinch a 10th win in a row and the entire company, from Steve Jobs on down, is determined to do just that.  I’m not saying this because of any intuition or simple application of logic.  I’m telling you that Jobs has made it clear in company meetings that Apple will win its 10th J.D. Power award whatever it costs.

So hie thee to an Apple store, my friends.  Take with you any and every Apple product you own that’s still under warranty and attempt to get them to give you a new one, because they’ll probably do it.  Apple is willing right now to spend tens of millions taking back or replacing products they would normally refuse to do — that they’ll probably refuse to do a month from now — just to clinch that darned trophy.

I’m sure they’ll win again, but let’s make them earn it, shall we?

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“The only thing worse than being talked about,” said Oscar Wilde, “is not being talked about.” That has until recently applied in spades to Steve Jobs of Apple, a guy who, when I’ve interviewed him, has always asked what other people have said about him, “especially the bad stuff.”

Steve is a guy who likes being talked about.  He likes it so much, in fact, that he’s adopted a strategy to encourage it.  This strategy involves very carefully doling-out bits of himself to the press not in an effort to discourage coverage, really, but to ENcourage it by limiting the supply.  Like everything else about Steve it is brilliant and cold.

This was the case until Steve Jobs got sick, of course, at which point he went from skillfully managing the press to just as skillfully avoiding it.  I wonder why?  What did he have to fear about the world knowing he’d been ill?  It’s probably just an artifact of his obsessive need to control.

Whatever the reason, ever since his bout with pancreatic cancer in 2004, Steve and his Apple minions have tried valiantly to keep his health condition out of the news, citing it as a “private matter.”

Except of course it isn’t a private matter at all.  Steve is the CEO of Apple, Apple is an enormous publicly-held company, and many Apple investors are onboard (or remain onboard) specifically because of their confidence in Steve as a sort of high tech rainmaker.  This is a concept that over time Jobs and Apple have done absolutely nothing to discourage or dispel.  And so now I (and the SEC from what I hear) believe Steve and Apple have to live with it.

Steve Jobs’ health is material to Apple and to Apple shareholders.  To say that having taken a six-month leave of absence changes that would be wrong.  What WOULD change that would be Jobs’ resignation, which he hasn’t yet given to the Apple board.  As long as Steve is still intending to return to Apple, his health is material to the company and should be disclosed.

Whatever Apple claims about privacy and however much whining and threatening Steve does to reporters by e-mail and phone, his condition remains squarely on the table, hot and steaming and ready to be served-up, as it should be.

Maybe he wants it that way.  Maybe this is just more of the same limiting supply to increase demand.  It’s possible but I simply don’t know.

Now look, we’re nine paragraphs into this story and I’m finally getting to the lead, which should have been in the first graf.  But by now you understand why I have to do it this way, because you don’t give out unseemly news (at least I don’t give out unseemly news) without putting it in some proper context.  The eight grafs above explain why I feel it is important to say that Steve Jobs has stopped using his computer.

Huh?

Steve Jobs has stopped using his computer.  He’s off curing himself of something he won’t name and in some manner we can’t know but I CAN tell you right now it doesn’t involve using his computer.

A friend of mine has for years been one of Steve Jobs’ Internet chat buddies.  And as such his chat client has – again for years – shown as Steve came online each day and remained there for hours and hours as you’d expect a Silicon Valley mogul to do.  And it’s a trend that continued well past Jobs’ announcement that he was taking a six-month leave of absence to get well.  But then Steve started logging-on less and less.  And several weeks ago he stopped logging-on at all. 

Silence.

No big deal, right?  He’s off the clock; Cook and Schiller are fighting for the tiller; Apple’s in good hands; who cares?

Anyone cares who actually expects Steve Jobs to return to Apple.  

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I knew things were bad when Steve Jobs didn’t make even a token video appearance at Macworld.  He would have done it, I’m sure, had he been well enough.  Maybe someone at Apple, weeks before, thought of suggesting such a video, but of course to do so then would have been committing career suicide even if in retrospect it would have been a good idea.  So now Steve is off on his six month (or longer) medical leave, readjusting those hormones, and the press is abuzz with what the heck Apple will do without Steve.

Apple will be fine.

Steve Jobs is an amazing chief executive, clearly the best of his era, but that doesn’t make him irreplaceable.  True, he saved Apple, but now Apple is saved.  The company is rich, has growing market share and a mindshare dominance envied throughout the computer AND music AND video AND mobile phone industries.  Steve could die tomorrow and Apple would be fine for years to come.  Apple might even be better.

Steve, for all his design insight and high standards is also a pain in the ass, but it is his narcissism – keeping the whole company on edge and terrified, will he or won’t he? – that has to have taken a toll and may well land the company in court.  Twenty thousand people are sitting around wondering whether their jobs are endangered because he is ill and that’s just crazy.

For a time Apple will be run with everyone asking, “What would Steve say?”  And because he’s been such a huge factor in the lives of his direct reports for so long, they’ll have that voice of Steve in their heads and will do the right thing automatically.  And eventually, if Steve for some reason doesn’t return to Apple, new Steves will emerge.  If that happens I’m guaranteeing right here that Apple will gain a new CEO and it won’t be Tom Cook OR Phil Schiller because neither man can replace Steve Jobs and they know it.

In the long run the goal won’t be to replace Steve, anyway, but to transcend him, because Steve was far from the perfect leader.

The last time Steve Jobs left Apple, back in 1985, the entire company breathed a sigh of relief.  Steve back then was an undisciplined brat.  John Sculley was able to dramatically improve Apple’s balance sheet through one simple technique – eliminating all the wacky projects Steve was spending $200 million per year running at Apple – projects that were generally never going to hit the market anyway.  Alas, that’s where Sculley ran out of gas as a leader because he lacked technical vision where that’s all Steve had in those days.

It took learning to run NeXT on a budget and almost losing the company to teach Steve how to be a leader.  It took learning to leave Pixar alone to teach Steve that there were some things – many things – best left to others more talented than he.  Those two experiences, added to his fall from grace in 1985, made Steve Jobs the leader he is today.  Still all elbows and shoulder blades, he somehow makes it work.

I feel for the guy.  It’s not his health scare, but his lack of true friends that worries me.  When your best friend is Larry Ellison you know you are in trouble. But that may be the best that either man can do. 

Steve is the critic of everyone around him. Yet the image I prefer to keep in mind was from an InfoWorld meeting years ago – back in his NeXT days – when Bob Metcalfe got Steve to show up and he brought with him his little baby.  In that short time I saw a doting and concerned father — a side of Steve I would have sworn could not exist.  Cynically I attributed it at the time to the baby being pre-verbal: how do you criticize someone who can’t understand what you are saying?  But Steve went on to have more kids, apparently with equal success, and I give him credit for that.  It’s not easy to be a good Dad.

So here’s to Steve Jobs, may he return in six months or go off and do anything else he likes.  But don’t worry about Apple. 

Apple’s on a roll.

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What an irony if the “relatively simple and straightforward” treatment for Steve Jobs’ hormone imbalance revealed this week is for the lifelong vegetarian to eat meat. I have no way of knowing that’s his treatment, of course – the idea just sprang into my head.

But given the press and stock market reaction to details of Jobs’ health problems, I’d say he’ll make a cameo appearance at Macworld a few hours from now even if he has to send his good twin to do so.

I further predict that Apple will make a substantial product announcement or two. This won’t be the minimalist Macworld that people had feared. If Jobs won’t be doing the heavy lifting this time he’ll at least leave Phil Schiller with a product or two to announce.

And speaking of products to announce, readers have been wondering whatever happened to the disk drive I was working on with stainless foil media? It’s still coming along nicely, thanks, but startups without money tend to take longer to succeed OR fail than startups with money.

The recording media is more or less perfected, which was harder to achieve than any of us expected, and we should see prototype drives within the next couple months. They’ll be comparable in capacity to similar size conventional drives but less expensive to make, more shock-resistant, and require vastly less energy to run.

For an example of how much energy savings is possible with Metal Foil Drives, consider the duty cycle of a traditional glass platter drive inside a media player like an iPod. The way such media players work is they read data from the hard drive into buffer memory then play from that buffer. First the drive spins-up, which takes about five seconds. Then the data is read from the drive, which takes about a tenth of a second. Finally the drive is turned-off until the buffer memory is depleted and the cycle starts all over again. Each cycle, then, involves powering the drive for 5.1 seconds.

The Metal Foil Drive (MFD), however, has a LOT less mass to spin up than the heavy glass platter it replaces. Hard drives moved a few years ago from primarily aluminum to glass platters because glass can be polished smoother allowing lower flying height for the read-write heads and resulting higher arreal densities. But glass platters are also more expensive than aluminum and heavier. They are a LOT more expensive and heavier than metal foil. As a result, an MFD of comparable capacity spins-up in a tenth of a second and reads the data in another tenth of a second. Not only is 0.2 seconds a lot less time (and energy) than 5.1 seconds, but the lower mass of the MFD platter allows the use of a smaller, cheaper, and lower-power motor to do the work – yet another win.

But why even bother with hard drives with flash memory prices dropping so quickly? Because the more storage capacity we have available the more stuff we’ll want to store. I see MFD’s carrying HD movies around for years to come.  Maybe your Nano doesn’t need one, but video will keep us buying drive-based media players, too.

There will always be people who don’t want to carry all their movies around with them, of course, and to keep those folks happy Netflix seems determined to stream its B movies to as many consumer electronic devices as possible. This week we hear about Netflix streaming direct to certain LG HDTVs, which is cool. But a financial analysis of the product as it will be initially offered is cool only for LG – certainly not for LG customers.

The Netflix-capable LG TV’s, we’re told, will cost about $300 more than LG sets that can’t do such streaming. The difference between the two TV families is that the streamers have a System-On-Chip to run a minimal operating system and handle H.264 decoding, an Ethernet adapter chip to connect to your home network, and some buffer memory. That’s three extra chips costing at most $20 extra plus a little software, giving LG a gross profit margin of around 1500 percent for this particular improvement!

If consumers will actually pay $300 more for a TV with Netflix streaming built-in then I predict that EVERY HDTV manufacturer will install Netflix on every set by the end of this year. They won’t even care if people actually watch Netflix content as long as they just buy the more expensive sets.

The jury is still out, I’d say, on whether people will actually pay this price difference when, for $99, they can simply plug in a cheap media streaming box like the one from Roku and achieve the same result.  Still it’s worth a shot, the folks at LG must be thinking.

It’s what Steve Jobs would do.