Mad Dog 21/21: Pandora’s Pithos
November 10, 2014 Hesh Wiener
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A lot of things are going wrong at IBM. Frustrated investors, disgruntled employees, and anxious customers are trying to figure out why. They share the absurd belief that proper understanding could mitigate Big Blue’s malaise. For an individual, knowledge might cure pain caused by ill-fitting shoes; but not the agony of terminal cancer. For a vast organization like IBM, myriad woes are a concomitant of existence. Why? The myth of Pandora provides an explanation. Tricked by Zeus and trapped by her nature, Pandora unsealed a container and unintentionally beset mankind with perpetual afflictions. IBM can prevail, but not without struggle.
Knowing that existence brings difficulties doesn’t change the nature or severity of the problems. In Greek myths, immortals and mortals alike encounter challenges. If a protagonist overcomes a threat, the tale of that victory is a single case. The general nature of existence remains the same; vicissitudes persist. This is the case with IBM, too. It can meet and overcome specific problems, or fail to do so, but neither a single victory nor any group of victories will change the inhospitable climate of the world in which it competes. But before I explore the possibilities available to IBM, I would like to make sure we all know in a basic way the story of Pandora and how it was erroneously changed by a 15th century Dutchman named Desiderius Erasmus, to the detriment of our appreciation of Hesiod, a poet who lived several hundred years before Christ, and of the engineering skills of the Classic Greeks. Like Eve in the Old Testament, Pandora is a woman who brings the wrath of God down on the human race. Also like Eve, the first woman in the Bible, Pandora is the first woman in Greek mythology. Pandora was created by Hephaestus under the direction of the great god Zeus. She was beautiful and various lesser gods gave her many attractive characteristics plus a couple of flaws, such as the double-barreled gifts for persuasion and mendacity. Unlike Eve, who was created as a gift for Adam, Pandora was devised to punish men. The bride of Epimetheus, dull brother of the sharp Prometheus, she was given as a gift a sealed container and warned not to open it. But Pandora would succumb to curiosity, as Zeus knew she would, and open the vessel, releasing its noxious contents. That act gave Zeus his revenge on mankind for adopting the fire that Prometheus gave to humans, defying the will of Zeus who had wanted fire to belong only to the gods. The container opened by Pandora was not a box but a pithos, which is the Greek term for a very large jar or urn. During the Iron Age the Greeks learned how to make these sturdy containers and used them to store oil, grain, and other things that were kept under a sealed lid. Large ones were a couple meters tall and, when full, could weigh one or two tons. Some stories about the supremely witty philosopher Diogenes say he lived in a pithos, although other accounts of his life have him sleeping in a barrel.
During the 15th or 16th century, the scholar Erasmus translated a vast number of books from ancient Greek to the scholarly language of his time, Latin. Among the works he made available to the Latin literate folk of his era were the writings of Hesiod, which are pillars on which rest all subsequent works of Greek mythology, including those of the great Thomas Bullfinch. As Erasmus translated Hesiod’s version of the Pandora myth, he seems to have mistakenly replaced the Greek word pithos, urn, with pyxis, box. Just how this might have happened is a matter for scholars to squabble over. The only thing the experts seem to agree about in this matter is that Erasmus replaced Pandora’s urn with a box and that subsequently the erroneous words of Erasmus, whose scholarship has always been held in awe, became part of Western culture. Like the many earnest storytellers, painters, and poets who echoed the words of Erasmus, including the pithos flaw, and neglected the myth of Pandora that had been in the cultural heritage of Western civilization for 2,300 years, IBM’s management has echoed some of the strategic principles of its two prior leaders, also including flaws. Lou Gerstner and Sam Palmisano found vast value within IBM where their predecessors had not seen it, or had not made it visible to shareholders. But neither of those executives necessarily thought that their methods could be interminably repeated. The financial engineering conducted by these two corporate potentates helped save IBM from the punishing criticism of Wall Street analysts who had, before Gerstner saved Big Blue, come to believe IBM was doomed. But just as the deathwatch held by investors was proved to be quite wrong by Gerstner and Palmisano, the subsequent era of irrational euphoria is turning out to be similarly unwarranted. IBM has been putting more money into stock buybacks than into invention, acquisition, and organic growth. This boosted the company’s earnings per share. That, in turn, led investors to bid up the price of IBM stock. And, until investors began to realize that Big Blue was slipping, that its revenue was falling even as its EPS was rising, shareholders remained intoxicated by the rising line on a graph of per-share profits.
Lately, IBM shares have been under siege. Investors are angry as only fools in search of something to blame for their errors can be. And IBM’s current boss, Ginny Rometty, who has forthrightly pointed out that no tree, particularly the one bearing IBM’s EPS fruit, can grow to the sky, is at the moment the person to bear the blame for investors’ disappointment. She could lose her job over this, but unless her successor was as original a thinker as Lou Gerstner, it doesn’t seem likely that the company, its shareholders and most importantly its customers would come out ahead.
Nevertheless, Rometty and her executive team seem to be missing a key point that has dramatically affected IBM’s customers: IBM’s emphasis on tossing out the old and bringing in the new is upsetting customers who happened to have invested their funds, their computing strategies, and their individual career plans in IBM. They want IBM to embrace emerging technologies just as much as do investors, but they don’t want IBM to treat the past, which includes their installed systems and software, with disdain. IBM has sold off its X86 server business and paid a huge sum to dispose of its semiconductor fabrication facilities. While the company has proclaimed that it will continue to develop improved chips even if it will no longer manufacture them, it has done a poor job of putting its decision into a context that adequately assures its customers. Adding to customers’ uncertainty, IBM has been building up its cloud services by setting up new data centers that are based on server technology that is different from all the machinery it has sold to legacy customers. The X86 systems in its SoftLayer facilities may be what the cloud market wants, but it is quite different from the company’s legacy services business, operations that are getting relabeled as cloud by Big Blue’s marketing people. Just because IBM calls its remote mainframe or Power System services operations cloud computing does not make them part of the emerging market segment Big Blue is chasing with its SoftLayer data centers. That very visible cloud business is the one that includes the services operations of Amazon, Google, Microsoft, Rackspace, and others whose focus is on mobile users, social media, and as much open software as possible. IBM wants to be a major player in that realm, and it looks like it is putting its money and talent behind that ambition. Unfortunately, it is failing to balance its progressive activities with sufficiently strong reinforcement of its legacy hardware, software and above all services. The result is visible in the aggregate results IBM makes public in its quarterly financial reports. IBM’s hardware business is dwindling. Customers seem to be reluctant to add IBM equipment to their glass houses, buying only what is absolutely necessary and building in as little headroom as they dare. And despite a commitment to provide legacy-type facilities in the cloud, IBM’s data centers are not adding enough hardware to offset the decline in sales to end users. Moreover, IBM has not been able to demonstrate that its cloud services can yield the high margins it will take to renew investors’ faith. At the moment it looks like IBM’s cloud efforts are beset by the very same cloud of predicaments that hurt the hardware businesses it has abandoned and the chip business that provided the processors for the proprietary servers Big Blue continues to manufacture. It looks like IBM’s management is suffering in as many ways as civilization itself is plagued. And while there is really nothing new about this, for most of IBM’s history the company was able to endure and prevail. These were exceptional years, to be sure. IBM was hard hit by the Great Depression, but recovered and went on to great growth and glory. Decades later it took quite a pounding during the years it was run by John Opel and John Akers. Again, improved leadership and new ideas brought about revitalization, but not a golden era like the one IBM enjoyed during the 1950s, 1960s, and 1970s. Now its management may feel like the first Greeks did when Pandora opened her pithos, releasing all the woes that afflicted civilization and its institutions. Those who believe that IBM still has the potential for greatness may choose this moment to recall the one thing that remained in Pandora’s pithos after all the evils had escaped: hope, the personification of which the Greeks called Elpis. It may be all IBM has left right now, but it might be enough.
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