The recession is undoubtedly a very difficult time for America and the rest of the world. However, during this rough period, its important to realize that things will get better. Here are 7 areas and ideas that will emerge stronger when the economic crisis subsides:

1. Risk will be decentralized and distributed among more, smaller entities. If you were a shareholder of a major investment bank or brokerage, you made phenomenal profits from the late 1990s to around 2007 because all of the “big 5″ – Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley took sizeable proprietary risk on their own books and won as the market was rising and “normal”. However, in the last 18 months, all of those profits and much more have been wiped out because of these same proprietary positions. The problem all along was that few of the proprietary trades were actually generating alpha — that is, excess returns when the investments were adjusted for risk. Instead, they were largely just bets that were 99.9% likely to win, but had a 0.1% (or less) chance of wiping out far more than what they had risked. In the last 2 years, that tiny chance happened, and it took down all the risk takers and decimated models that hadn’t taken into account “tail events”.

   One of the biggest issues was the fact that these 5 brokerages, and others, had grown into financial supermarkets. They traded every product in existence, and the risk between the products was poorly analyzed and managed. Shareholders who bought Merrill Lynch because they thought the private client retail brokerage business was good ended up seeing their money lost to the black hole of CDO writedowns. While there is a definite element of caveat emptor to anyone buying a public company, it is becoming increasingly apparent that nobody fully understands the complex interactions between complex products held by a huge bank. Going forward, investors will be far more careful to separate the risks that they’d like to take. If they want to own a financial trading company because they think there are good returns to be made in facilitating the crossing of trades between hedge funds, they will buy a company that takes very little risk of their own and instead makes money by acting as a broker for low-risk crossing of securities. If they want exposure to a certain market segment or manager, they will invest in ETFs, mutual funds or hedge funds with more structure and oversight to risk taking than the large banks are likely to have. By allocating funds among smaller, more focused entities, investors will be better able to manage and understand the risks in their own portfolios.

2. The financial system will be forced to get rid of large, “too big to fail” behemoths. The other critical concern to the “financial supermarket” model is the impact of the failure of one of these massive firms across the financial system. With leverage, we have seen that one bad area of a company can take down the entire firm. Before derivative contracts were widely used to link risks across the economic system, failure of a firm simply meant that customers needed to find a new brokerage. However, now that hundreds of trillions (conservative estimates put the derivative market notional outstanding at over $280 trillion) of outstanding derivatives contracts link banks together, theoretically a few bad bets by one desk of one bank can then take down that entire bank, which can then fail on derivatives contracts to other banks. The system is far too intertwined in its current incarnation, and needs to be revised.

   The revision will come in part from nationalization and in part from “hiring away” the best members of desks at big trading firms that are subject to the TARP. Since a smaller shop can set up a trading division and not have to worry about restricting incentive compensation, there is huge opportunity for a profitable trading desk to simply leave the large banks and begin trading at smaller places. Before, boutique firms were restrictive because they didn’t have enough capital needed for flow traders to work most effectively; but with capital restrictions affecting desks at even the biggest firms, this is becoming less of an issue. There is definitely still very good money to be made in financial services, so many businesses will remain attractive. The difference will be how they are structured and focused, and that will be the distinguishing factor between the firms of the 2000s and the firms going forward.

3. The reduced allure of Wall Street will encourage the smartest students to start companies or develop new technologies. While I don’t think all the money is gone from finance, I think at least the easy money will vanish for a while. The money remaining for the time being is in hedge funds, and they predominantly hire established traders. For the next few years, it will be difficult to get a great job at either a bank or a fund, so the temptation for engineering students to go into finance will be lessened. Whether this translates into more students opting for engineering careers or simply shifting to another field remains to be seen, but more engineering candidates means more innovation for the country. For more on this, see my earlier post titled Trade Idea: Sell Wall Street, Buy Science
4. Companies that used to be able to survive in a good economy by clinging to old business models will be forced to modernize or perish, and new companies will have a chance to replace the old ones. Traditional newspapers are a prime example. The business model of “deliver newpapers to homes and newstands and make money on advertising and subscriptions” has been showing signs of weakness for over 10 years — since the widespread adoption of the internet. Young people have never grown accustomed to reading their news from a newspaper, and now overwhelmingly get their news almost entirely from the internet.  Since the distribution model no longer works, does this mean that traditional news sources like the New York Times cannot make money and should simply shut their doors? Clearly there is still tremendous value in traditional reporting and the news it produces. However, blogs are stepping in as alternative, often first-hand news accounts that can complement, and in some cases, replace other news outlets. For an example of this, look no further than The Drudge Report, which got its popularity as the first site to break the Monica Lewinsky story years ago. Since then, blogs and other alternative news sources have only gotten more important.

   Without a doubt, some newspapers will go out of business because they are unable to transition their business model to effectively make money on the internet. Other papers, on the other hand, will successfully make the transition and become even more successful because of it. The internet is an amazing thing, and if you’re the best news source on the web, you can make far more money than if you’re the best source in New York City. The increased competition and a greatly leveled playing field will cause the best businesses to naturally rise to the top while the worse performers are filtered out.

5. Internet ad-based revenue models will begin to give way, leading to new models based on hard revenue. Since the beginning of the internet, much of it has been free, supported by only ads, because there was no effective way of collecting tiny payments from visitors in return for content. The processing costs to charge someone, say, $0.01 or even $0.001 for reading an article on a blog was prohibitively expensive, so advertisements became the only source of revenue that a site could rely on. As advertisers reduce the rates they are willing to pay for “clickthroughs”, the advertising model begins to deteriorate, and content providers must begin to seriously look at alternatives.

   On the surface, the end of the completely “free” internet seems like a bad thing, since we have come to expect everything online to be free. However, done effectively, micropayments have the potential to be a game-changing development. Imagine if you could, at the beginning of each month, buy $10 worth of micropayment “credits” that you could use to pay for sites in increments from $0.001 to $0.20. Popular sites could charge a penny or less, and make plenty of money to hire the best staff and provide the best material. Using the newspaper example from above, a premier news provider like the New York Times could charge a tiny amount per user and still make enough money to be a viable company. Sites that were able to thrive on advertising alone could remain free, of course, but the ability to charge small token amounts for content would likely create entirely new and interesting sites and business models that are currently unavailable for the price of free.

6. Companies will look deeper into their operations for ways to reduce costs, which will give an opportunity for new technology products and players to break into the corporate landscape. During the last few months at my previous employer, the company made a concerted effort to identify and cut wasteful spending in areas that were overlooked during earlier bull market times. As we move deeper into a tough economy, more and more companies will scrutinize their existing operations for areas where they can save money and optimize procedures. This process will create an opening for new players in the corporate game that can enter with the promise of lowering costs and simplifying maintenance.

   When times are good, companies are more willing to stick with their current setups that may be old, outdated and expensive, simply because they lack the impetus to really delve deep and cut costs. One very extreme example of this is Microsoft Office. Nearly every corporate employee has Word, Powerpoint, Excel and Outlook on their desktop. However, for almost all of them, these programs are overkill — for their basic word processing or presentation needs, there are several software packages costing little or nothing that could easily suffice for all but the most advanced users. Take, for instance, OpenOffice or Google Docs — both allow you to create Word-format documents and easily share them among co-workers. In a pinch, a company could switch to one of these alternatives and save hundreds per user per year in licensing fees. Perhaps an exaggerated example, since Microsoft Office is ubiquitious on the enterprise scene, but I am confident that any office has dozens of examples of software and other licensed services where they could find alternatives that retain 95% of the capabilities for 20% or less of the price. Companies don’t look for these types of opportunities in good markets, since the profits of the business far overshadow the expensive support costs, but in times where every dollar counts, this is a great area for new businesses to step in and gain a foothold in the corporate market.

7. With less “free money” going around, people will have to genuinely innovate if they want to “get rich”. People can be roughly categorized into two camps — those who create value and those who maintain value. Those who create value — like Bill Gates, Steve Jobs and Warren Buffett — ultimately provide the jobs and incomes from the next tier who maintain that value. Bill Gates started Microsoft and made billions of dollars doing it — but the billions that he took home was only a small fraction of the value that he created, since thousands or hundreds of thousands of other people made money either directly or indirectly as a result of Microsoft. When the economy is great, those that maintain value can make a very good living for themselves as a result of being onboard a profitable company or having a position in a lucrative niche. In a poor economy, however, the ability to make outsized personal wealth by being a maintainer of value is less certain. Poor economies force people to be more creative if they wish to carve out wealth of their own.

   The creators of value undoubtedly have a more difficult time in a recession as well, but they are more in control of their situation and can more easily adapt than those that have “safe” jobs maintaining value that has already been created. Furthermore, since a steady paycheck is less certain than ever, the opportunity cost of leaving a job and starting up a business is much lower than its been in the last 5-10 years. Therefore, the ambitious people that want to “strike it rich” will be more likely to take risks at creating value, since the path of maintaining value is now less certain and more difficult than ever. Funding and startup capital remains a difficulty, but even that is not insurmountable, and the rewards in the end have the potential to be great. By starting something in a time where estabilished companies are being challenged, a lean newcomer has a rare opportunity to truly shake things up.

I graduated in 2007 from MIT with dual degrees in Electrical Engineering and Management. During college, Wall Street was hitting its post-9/11 stride, with CDOs and structured financial products driving firms to record earnings and bonuses to record levels. I took an internship at a major Wall Street bank in the summer of 2006, and then signed on for a job as an equity derivatives trader for full-time. After 3 months of training, I started up in convertible bond trading in September 2007, shortly before Bear Stearns became the first big Wall Street collapse.

Like any shock of that magnitude, people didn’t know what to make of the effective failure of one of the top 5 brokerage firms. Was it the beginning of the end? Or had we hit a bottom? Other firms hadn’t taken any writedowns yet, so everyone had a different opinion of what this meant for Wall Street, for finance, and for themselves.

A year and a half later, it has gotten much worse. Lehman Brothers and Merrill Lynch suffered similar fates as Bear, and no investment banks remain after Morgan Stanley and Goldman Sachs opted to become bank holding companies. The future now looks bleak, with the once oversized bonuses now subject to congressional and societal scrutiny more than ever, and leverage looking more and more difficult to get each day.

Clearly, the last year and half was a unique time in the industry, and frankly, in the history of the United States. A few days ago, my involvement with my company came to an end. The decision was not mine, but it was also not wholly unwelcomed. Rather than be bitter about what was or what could have been, I’d rather spend time focusing on what I learned while I was there and how it will help me in the future.

Most central to my experience was my boss. This was my first job, so he defined the working world, Wall Street, trading, and professionalism for me. Let’s start with his lesser qualities — he was very demanding of his employees, tended to micromanage a bit and was generally pretty inflexible to his people taking time off. From time to time, working there felt very confining, because it was difficult to take a day off for an appointment or a long weekend.

Despite these drawbacks, as my first manager, I would rate him an 8.5/10. What does one want in a first job? While it’s great to have a flexible schedule and a boss that is more inclined to let things slide, it’s ultimately not the ideal way to learn anything. The single most valuable thing I learned from my boss is single-minded dedication. Every single one of his bad qualities comes not from laziness or apathy, but from, if anything, too much dedication to the job. At the end of the day, how can you fault someone for being too careful with their business or too involved in the components that make the business run? He was always demanding, but never once anything but completely respectful. For time off, he didn’t take much (aside from the standard week in the summer and week around Christmas), so he expected the same. From a micromanagement perspective, there are worse qualities than knowing whats going on in all parts of your businesses — like not knowing.

While I think the happy medium of dedication is a touch less than his level, it’s nonetheless good to learn from a strong case. For younger employees, working with a boss like this is certainly a challenge, but a challenge in the same way that motivates someone to choose the most difficult university or decide to run a marathon — not something you will enjoy 100% of the time, but ultimately something that will make you stronger as a person.

To a degree, this sort of dedication motivates (or used to motivate) a lot of Wall Street. The end goal — the reason why everyone got up in the morning — is to make money. If you go out every day and give 70%, you may as well be doing something else, because the pure capitalism that permeates the floor means that someone else will work harder and win the money away from you. It’s greed in the ultimate Gordon Gekko sense, and in some areas (the ones that don’t involve taking risks that could wipe out the firm and millions of shareholders) that greed is, in fact, good.

The next important lesson I learned relates to the value of personal connections. I entered with a class of about 40 people who landed in roles across nearly every area of the firm. What this meant for me was that as a new employee, I had a better network than some people who had been at the firm for years! If I needed advice on interest rates, I was never more than an instant message (or Instant Bloomberg) away from someone on the rates desk. Here, Wall Street is a microcosm of life — it’s not as in-your-face apparent in most cases how someone might help you down the road, but you never know how your freshman-year roommate might be able to help you out in the future. Connections, however, are a funny thing — without maintenance, they degrade over time. So be sure to reach out to those that you want to stay in touch with, because you can’t ignore someone for 10 years and then ask them for a job. Services like LinkedIn and Xobni have formal mechanisms for those who want some structure to their goals of keeping in touch.

The final lesson that I took away is the importance of doing something productive with every day of your life. At the peak (or was it the valley?) of my employment, I worked from 5:45am to about 7:30pm — just shy of 14 hours per day. The fewest hours I worked was about 11 per day, from 6:30 to 5:30 or so. The problem working such a hectic schedule is that it leaves little time for anything else in your life. When you get home after 7 and need to be in bed by 9:30, you have little time to devote to any other pursuits. Most days, I just wanted to sit on the couch for an hour, eat a takeout dinner, and then go to bed. It’s a horrible work-life balance and a degenerative cycle: if you do it for 5 years, you will find that you are forced to continue it, because you no longer have anything in your life outside of work. You don’t decide one day that you no longer have outside interests or hobbies — you decide it every night when you watch TV instead of reading or cooking, or pursuing a hobby.

Without a doubt, it’s a struggle — after a long day of staring at a computer screen the last thing that seems appealing is working on a personal blog or reading a few pages out of a book. However, after repeating that routine for a month or two straight, I realized that there are far too many people that fall into that cycle and wake up one day and realize that they are 40 or 50 years old and have little to show for their lives except the money that they earned at their jobs. The hobbies that they used to enjoy or the cultural knowledge that they used to pride themselves on has given way to short-term market knowledge and the info that can be gleaned from browsing the front page of the Wall Street Journal.

In the end, although there were often times where I felt like my job on Wall Street was worthless and even destructive, I feel that what I learned along the way will prove to help me in my future endeavors. It was undoubtedly a rough time to learn with all that was going on in the markets and in the company. However, what my poor timing lacked in terms of the progression of my career was more than made up for with the general lessons that it taught me instead.

However, times have changed, and they have changed quickly. Only four months ago, the Wall Street dream was still alive, albeit somewhat muffled by a poor economy. Things were bad, but everyone “knew” that we were simply in a cyclical recession that would be over in a few quarters. The landscape changed with the bankruptcy of Lehman Brothers and the near failure of other major financial firms. Today, even the most golden of Wall Street firms are borrowing billions of dollars from the government to stay afloat and keep themselves from suffering a similar fate at the hands of short sellers and ratings downgrades. Mighty Wall Street, who once all-but-dictated fiscal policy for the US, is now beholden to Uncle Sam for hundreds of billions of dollars.

What does this mean? The most immediate impact that will be felt by bankers over the next few years is the evaporation of bonuses. At the end of 2007, the average employee at a major Wall Street investment bank received a bonus of $175,000, according to the New York Times. Considering that this number includes everyone from the assistants to the CEO, the payout is simply staggering. Up to that point, the firms had generated the returns to justify such compensation. However, in the last 12 months, decades of profits have been wiped out, and the government now has a hand in every bank. What this means, as news outlets have covered ad nauseum, is that bonuses are no longer being paid out of profits — instead, they come out of government subsidies. Needless to say, taxpayers will not fund such compensation. It will take years to repay the billions borrowed, and even then, regulations will undoubtedly be put in place to remedy the compensation asymmetries that led to this situation. Therefore, the days of easy money on Wall Street have passed, at least for the foreseeable future.

Contrast this with careers in the sciences and technology. Several billion worth of TARP funding is going towards research in areas like battery technology, fuel cell research and alternative energy. While all of these areas are extremely important and have a very bright future, alternative energy in particular is poised to become the next billion-dollar industry. Although the plunge in gas prices has taken the market-driven component out of ideas like fuel cell cars and biodiesel engines, the push from the government for technologies like this is bringing them closer and closer each day to the cost-effective level needed to supplant oil for much of our energy. Bloomberg News had an article yesterday titled Obama’s Billions for Energy Fuel Stanford, MIT Research Dreams where it highlighted the research labs that will benefit from TARP funding. The paragraph I found perhaps most interesting:

Balsara, a chemical engineer, has assembled a team of 15 scientists that applied for $25 million over five years from the U.S. Department of Energy to improve batteries by modifying their materials. Money for energy projects is part of an $819 billion stimulus, passed by the U.S. House of Representatives, that Obama says is critical to saving the economy.

$25 million, over five years is what it takes to get research for improved batteries on track at some of the top research institutions in the world! Why not triple it and fast-track these technologies. How much will a battery that lasts twice as long as current models contribute in revenues to our economy? I guarantee that you’ll be hard pressed to find a better way to spend that money. This is one project — there are a dozen more that all are starved for cash but once funded would be tremendously valuable to our economy if we got them moving.

Ultimately, the great thing about technology is that it is by nature accretive and self-catalyzing. Discoveries that you make today are the basis for new developments tomorrow. The best example of this is microprocessors, which are created with sophisticated algorithms to lay out the circuits on the chips. More complex algorithms can create faster chips. But faster chips can run more complex algorithms! So the processor that you create today will run better software than last years model, and as a result you can keep ratching up your production because what you produce becomes an input to the system. Because of this positive-feedback, technology grows exponentially with time. Contrast this with investment banking or trading, where the deals or trades you did last year only contribute in a minor way to the trades or deals you do this year. Finance, therefore, grows linearly.

In many ways, the doldrums of Wall Street will help to put our nation back on the same playing field with our competitors. If the events of the last six months had never happened, and our brightest minds continued to choose Wall Street over careers in technology, nations like India and China would quickly outpace us because the linear growth rate of finance would soon fall behind the exponential growth rate of technology.

Therefore, although it will create much short-term pain, the current economic situation will ultimately help the USA by encouraging the smartest minds to seek out a variety of careers. By removing the short-term incentive of massive paychecks in favor of longer-term goals of progress and value creation, the recession will end up spurring a new generation of entrepreneurs who will develop the science and technologies vital to keeping the USA at the forefront of progress.

As I’m sitting here, I’m thinking about my other options to Chicago if the flight were to be cancelled. Flight-wise, there isn’t much. A bus takes about 18 hours, so thats not really feasible. A train isn’t much better — it takes around 12 or so when you factor in all the stops. So really, its fly or nothing.

In Japan and parts of Europe, people have another viable option for quick and efficient medium-distance travel. The high-speed trains in these areas can travel 300km/hr (186mph), which would get me from NY to Chicago in under 4 hours. A flight is 2.5 hours in the air plus another 2 hours or so of security and delays, so 4 hours by train certainly gives air travel a run for its money. There are other advantages too — a train can take far more people at at time, so on really high-traffic routes (like NYC to Chicago), plenty of seats are available and they can [conceivably] be sold for a lower price. Weather isn’t nearly as much of a concern, and congestion during crowded times can be solved by simply adding more cars to the train, instead of trying to pack more planes into a finite amount of runway and airspace.

Energy efficiency is a huge upside as well. When oil was above $140/barrel, the airlines couldn’t raise fairs and cut costs enough to make money. Trains don’t have nearly the same voracious energy demands — to put it in perspective, a freight train move 1 ton of cargo 423 miles on 1 gallon of diesel fuel. Admittedly, there is a definite difference between a diesel freight train and a electric magnelev train, but the scope is similar. A story on inhabitant.com (linked below) says that these trains use 1/3 of the energy of planes and 1/5 of the energy of cars. The greenhouse gases that a network of trains would save is huge, and the benefits would go beyond just environmental.

Obviously the main concern with building such a system is the huge cost of creating such an infrastructure. The solution? Start small. California recently approved 800 miles of high-speed rail that will connect every major city in the state. How about a similar system for the east coast? Connect very high-traffic routes between DC, NY and Boston. These routes are heavily trafficked by business travelers, and airline routes such as the Delta Shuttle between New York and Boston are consistently among the most profitable routes in the industry. Replacing a 1hr plane ride subject to delays and security hassles with a 1.5 hour train ride that is essentially “hop on, hop off” will certainly be attractive to many or most of these travelers. Once these routes are established and profitable, build out capacity to other cities.

Air travel ultimately is an inefficient means of transportation for short distances. Allowing a plane to use an airport slot for a 500 mile trip is a very poor use of resources, and certainly something that could be improved upon. As the government looks for the best possible ways to productively spend money to stimulate the economy, rail improvements should be near the top of the list.

1. XM/Sirius
2. Blockbuster
3. Microsoft

Lets go down the list and discuss why each of these is marked for death.

XM/Sirius
First on the chopping block is satellite radio. But wait, you say…GM is including satellite radio in all its cars! I know, I know…with GM’s market power (they probably should be on this list as well, but I suppose the optimist in me will hold off for now) it seems like satellite radio is bound to replace traditional terrestrial radio. It will…but then the good-old radio-from-towers-on-the-ground model will spring right back up, and knock the satellites right out of orbit [I couldn't resist the pun]

It won’t be AM/FM this time though…the thing that will kill XM/Sirius is ubiquitous broadband internet. XM/Sirius has maybe 200 channels tops, and to a given listener, 90% of those channels are garbage. Honestly, although it makes great advertising to be able to say you have a station devoted to Aborigine tribal music, I’m never going to listen to it on my way home. Thats the case for most of the junk on right now.

Broadband to your car brings internet radio to your car. Already I can get Pandora on my phone, which gives me a personalized station based on a few recommendations I make. Imagine if you can just go on the internet at home, make a few recommendations, drag and drop a few stations into the bucket, and have 50 stations that you actually like on your dial instead of 190 that you have to scroll through to get to the 10 you care about? Want to learn spanish? Stream a learn spanish podcast right to your car. Want to hear classic jazz? Add that station to your car. Don’t like the current song? Hit ‘next’ on your receiver to skip the song as well as send a downvote to the server so you don’t hear songs like that again. Those that take the time to create a sweet deck of channels could then share that deck with others, so that if you don’t want to spend the time mixing and matching your own music, you could find someone that has already created a set of stations that looks appealing and just use theirs. Maybe some arrangement could even be made to share ad revenue with the most popular of the virtual DJs.

Blockbuster
The idea of going to a video store is rapidly becoming as antiquated as going to a CD store like Virgin or Sam Goody to buy music. The advantage, in theory, to a place like Blockbuster over Netflix is the ability to browse a physical selection and have the ability to explore the titles and potentially come across something that looks interesting that you didn’t think of. In theory that is. I was at Blockbuster today — we made one trip around the store, didn’t see anything we liked, and asked for a list of most-popular movies. Once you go down this road, the “physical selection” argument is all but gone — if you’re reading down a list at the counter anyways, why not just see a list online, which is probably personalized for you anyways? I whipped out the iPhone as we were reading this, and found a great list on Amazon — The 25 Best Movies Ever Made which was particularly good because its focused on a lot of newer movies instead of the oldies like Casablanca which are great in theory but in reality not something that I’d likely watch.

Anyways, back to what is really going to kill Blockbuster — streaming Netflix. Just recently, Netflix and TiVo added the ability to stream to set-top devices like the Roku Netflix Player and the TiVo. Combine this with movie rentals on iTunes Store, and you have a lethal combination that all-but-eliminates Blockbuster from the equation. Why go to the store when you can get personalized recommendations right from your browser, download them or stream them over your high-speed connection, and watch them right in your living room?

DVDs are going the way of CDs. Blockbuster is going under, and Netflix is the one pushing them there (as they have been doing since the start, when all they were was a DVD-by-mail company).

Microsoft
Vista was a flop. Can Microsoft survive another, especially with Apple gaining market share and Linux for Mom on the horizon?

I truly believe that the operating system is becoming irrelevant, especially as a revenue model. There was a time (circa early 2000s) when I considered myself a devoted Windows user. That was all I knew, and thats where all of the cool apps were. When computers were first getting mainstream, a good knowledge of how to use Windows was essential, since Windows was the basic springboard for all of your applications, so anything you wanted to do began with figuring out how to make Windows do it.

Fast forward to 2008… at this point, I don’t have a primary operating system. A favorite? Of course — I love Linux because I like to tinker and I like the flexibility that it provides me. Right now I’m sitting at home writing this post from a Windows laptop, but it could just as easily be the Macbook sitting in the bag in the next room. I’m a computer geek…but heres the kicker — although I’m equally comfortable with any of the 3 major OSes, so is the most inexperienced user out there. Why? Open up Firefox on Linux, OSX or Windows, and its the same. Gmail is there, as are their websites. So whats the difference if there is a start bar, a dock, or anything else.

This key theme is what will eventually drive Microsoft out of business. Why pay $200 for an operating system on your new PC when you can just get a basic box that runs Firefox for $200 total? What does it matter what the icon is when you first press the button? The reason I suspect that most people never got around to upgrading to Vista is that XP was working just fine in the internet department. Windows 98 was instable and crashed frequently, so XP solved that problem. But people don’t “use” the OS anymore, they use the browser. With a stable platform to run a stable browser, what impetus is there to get the latest and greatest operating system?