Category: government

Irrelevance and the media

Real problems are ignored as the big boys play games

It’s a shame we weren’t around when dinosaurs became extinct. Then again, maybe we are.

News Limited business commentator Terry McCrann writes about the “Bleakest of views from the shopfronts” in his Sunday column describing the problems of retail.

All of the problems Terry cited are from big retailers – Woolworths, Dick Smith, Harvey Norman and JB HiFi. To make it clear he was talking about corporate issues there’s even a reference to General Motors.

Nowhere does Terry talk about smaller businesses or those challenging the big guys, folk like Ruslan Kogan or the Catch of the Day team. It’s all about the big end of town.

Terry’s article illustrates the problem of relying on incumbent mainstream media commentary; that it is Big Media talking about Big Business and Big Government.

“Small”, “ordinary” or “average” has no place in their conversation, if you can call the pronouncement of mainstream media commentators a conversation at all.

We can understand this – for a journalist, it’s good for the ego and career to look like a “heavy hitter” in big business. For the politician, small business and community groups can’t pay the speaking and consulting fees paid by corporations to supplement their meagre retirement benefits.

Increasingly what happens in the corporate board rooms or the once smoke filled rooms of political caucuses is out of touch with the real world.

This has become particularly acute since the responses to the 2008 crash proved to the management classes that their bonuses and perks will be protected by government bailouts regardless of how many billions of shareholder wealth they manage to destroy.

In the United States we see this in political controversies being focused on contraception – an issue settled forty years ago – while the country faces fundamental challenges to its economic base and the basic welfare of its citizens and industries.

While in Australia the media ‘insiders’ rabbit on about pointless internal party politics and soothing articles on how everything else is fine, we just need to be more optimistic. Yet the real questions about how we take advantage of the country’s greatest export boom, position the economy for the next 50 years and the nation’s dependence on the Chinese economy are being ignored.

Terry McCrann’s story is emblematic of just how out of touch Big Media, and their friends in Big Business and Big Government, are with the real world.

All we can do is let them get on with it and not take them too seriously.

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Software’s mini revolutions

How the CIA are driving a business revolution

The CIA’s ‘revolutionary’ announcement of their changes to the way they buy software shows just how the relationship between software vendors and businesses is evolving as cloud computing methods become widely adopted.

For businesses it means more flexibility and efficiency while for software companies the new marketplace is requiring them to be more flexible and responsive. Those changes will challenge some vendors.

What’s driving these changes is ‘big data’ – the explosion of data being collected and stored – and the move to cloud based computer systems.

The CIA, like most businesses or home computer users, used to buy software by the license. For small businesses and homes this was by buying a box of disks from the local computer shop while for big organisations there were volume licenses where they bought the right to use tens of thousands of copies of the one program.

Box licensing was never satisfactory, it was difficult for users to know what exactly they bought and customers were always a year or more behind the trend.

Keeping up with Technology

One of the big pluses with cloud based systems is you don’t have to wait a year or two for a new release incorporating the latest technology. It’s rolled out as it becomes available without any work by the user.

With the old box software model you had to wait for the latest release and even then the features you were waiting for could still be missing.

As technology is moving fast online, organisations like the CIA can’t afford to wait.

Pay as you go

Another problem with the old software model was that big and small organisations found they were buying things they didn’t need.

This is particularly true with licensing agreements where a company might have 100,000 licenses when they only needed 15,000.

Pay as you go billing, which is the standard model for cloud computing services, means a lot more flexibility and a much more efficient way of managing software spend.

Closer relationships

In his speech describing the changes, the CIA’s top technology officer Ira Hunt said the agency is prepared to give vendors a “peek under the covers”.

This sort of closer relationship between suppliers and customers is one of the biggest attractions of the cloud computing model. It means both users and suppliers are more closely aligned.

For software vendors that close alignment is where the opportunities lie; the old days of flogging fat, expensive licenses are over and the successful sellers of computer programs will be quicker and nimbler.

The CIA has been accused of formenting many revolutions around the world, this is one most business owners should be happy about them leading.

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Is the problem in the cockpit?

Who is in control anyway?

In the Daily Reckoning newsletter editor Callum Newman uses Malcolm Gladwell’s description of power relationships to draw a parallel between Korean pilots crashing planes into mountains and the economy, pointing out our politicians are like distracted, doomed aviators ignoring the obvious features they about to collide with.

Is that fair though? In a plane the passengers are strapped in their seats and have to take their the pilots in trust, in real life we have control — all of our actions affect the vehicle that is our economy.

Unlike a plane we can jump out and do our own thing, we can refuse to buy one good or service and we can set up a business for ourselves when we see a market that isn’t being serviced.

Where the analogy does work though is our politicians – and many business leaders – aren’t paying attention to major demographic and economic shifts.

The question is “why?” Most of these people aren’t stupid and they have access to better information than most of us, which is one of the reasons they are in power.

Perhaps it’s because we don’t want to hear the truth; that our assumptions about what the state will provide and how our economy is developing are flawed.

In many ways, particularly in a modern Western democracy, our politician are mirrors of ourselves. They tell is what they think we’d like to hear.

The problem isn’t in the cockpit, it’s back at the boarding gate where we’re more worried whether we’ll get a packet of nuts than whether we should agree to embark on a rough journey to a destination we don’t expect.

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Knowledge and power

Can we use the data revolution effectively and well?

In the 16th Century English courtier Sir Francis Bacon declared “Knowledge is Power”, something certainly true during the conspiracy prone reign of Elizabeth I.

Today the data available about ourselves and our communities is exploding along with the computer power to process that information to turn it into knowledge.

We see that knowledge being used in interesting ways – US shopping chain Target recently described how they used data mining to determine, with 87% accuracy, to figure out if a shopper is pregnant.

That 87% is important, it says the algorithm isn’t perfect and bombarding a false positive with baby wear advertising could prove embarrassing, or in some families and societies even fatal.

A good example of data misuse are the two unfortunate Brummies (alright, one’s from Coventry) who were deported from the US for tweeting they were “going to destroy America and dig up Marilyn Monroe”

For the US immigration and homeland security agents, they ready the jokey tweets by the Birmingham bar manager through their own filter and came to the wrong conclusion, although it’s likely their performance indicators rewarded them for doing this.
This is the Achilles heel in big data – used selectively, information can be used to confirm our own prejudices, ideologies and biases.
In 2003 we saw this in the run up to the US invasion of Iraq with cherry picking of information used to build the false case that the ruling regime had weapons of mass destruction that could attack Europe in 45 minutes.
For businesses, we can be sure data showing the CEO is wrong or the big advisory firm has made the wrong recommendations will be overlooked in most cases.

Despite the Pollyanna view of a world of transparency and openness driven by social media and online publishing tools, the information is asymmetric; governments and big business know more about individuals or those without power than the other way round.

In a world where politicians, business people and journalists trade on their insider knowledge rather than competing in the open, free market we have to understand that filtering this data is essential to retaining  powers and privileges.

Usually when the data threatens the existing power structures it is repressed in the same way a dissenting taxpayer, citizen, employee or shareholder is discredited and isolated.

At present there’s lots of data threatening existing commercial duopolies, political parties and cosy ways of doing business.

The fact many of those in power don’t want to see what their own systems are telling them is where the real opportunities lie.

Entrepreneurs, community groups and activists have access to much of this data being ignored by incumbents, it will be interesting to see how it’s used.

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Finance by the masses

Can crowdfunding work for business?

“Crowd” is one of the hot terms of the moment – the idea that groups of connected, motivated people with the right incentives can deliver great value when their skills and talents are bought together.

One of application of this idea is crowdfunding where businesses, artists, writer and movie producers can call  on the community to donate or invest small sums into a project in return for a benefit like a copy of the book or being an extra in the movie.

The biggest success in this space is the New York based Kickstarter which was founded in 2008. Pozible, an Australian equivalent, that provides local creatives with the opportunity to raise funds without dealing with the hassles of US bank accounts or social security numbers.

Both of these services make money from taking a commission on the money raised, for Pozible users this fee ranges from 5 to 7.5%.

While the focus of Pozible and Kickstarter is on creative projects like books, music and movies, it’s interesting to consider how this model can work for other businesses.

Perhaps an IT business can offer a free year of support or food delivery service free shipping in return for a donation. The possibilities are endless.

It’s not without risks – there’s no doubt the regulators will at best be suspicious of fund raising through these services and anyone participating has to accept the risk of not getting any sort of return.

Since the 2008 banking crisis, funding for small business has dried up around the world. Many viable enterprises found their lines of credit being withdrawn and some even went under as a result.

With banks rationing small business credit, there’s a need – we could even argue an economic necessity – for alternative sources of capital. Crowdsourcing could be an option.

Now the days of easy credit are over; businesses, banks, investors and governments have to adapt. Believing models and regulations that were designed when capital was cheap and abundant won’t work in a very changed economy.

Crowdsourcing will be one of the issues confronting regulators, it’s going to be interesting to see how they deal with it.

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ABC Nightlife: Explaining the National Broadband Network

What does the NBN mean for Australian households and businesses?

For the February 2012 Nightlife technology spot Tony and Paul looked at Australia’s National Broadband Network, exploring the pros and cons of the project designed to connect all Australians to high speed broadband.

So what is the NBN and what does it do? Here’s some of the points we discussed along with some of the answers to listeners’ questions.

What is the NBN?

The National Broadband Network is intended replace the existing copper wire telephone network that was rolled out across the nation over the Twentieth century.

Eventually the network will provide fast data access across the country replacing the older network that was designed for telephone calls rather than computer communications.

Most of the country will be connected to fibre optic cables and areas where this is too expensive then wireless or satellite services will be used.

Why do we need a government run national network?

The NBN is the culmination of three decades of bad policy out of Canberra. We should remember that the Howard government struggled with how to provide high speed broadband access to the bush.

For coalition things became particularly bad once they privatised Telstra and no longer had any power over the company’s policies.

We’ve had a mix of ideological beliefs and rubbery figures from both sides of politics which have left Australia in the situation where the core telecoms network has had to be re-nationalised.

What are these different ways of connecting up?

The biggest part of the network will be fibre optic cable where the connection will run along the street like the existing telephone wires and will connect to a box outside your home or office.

This box – know as an NTD (Network Terminating Device) is then connected into either the existing household telephone system or into a computer network.

In areas receiving wireless and satellite subscribers will get dishes or receivers that plug into their existing home telephone or computer network.

There are different types of wireless

The different types of wireless networks cause confusion. The NBN is going to use 4G or LTE telephone wireless, which is what Telstra have started to roll out and Optus will be starting in the Hunter Valley around Easter 2012.

Most of us are using 3G networks on our phones which is what the bulk of the mobile phone networks are.

Another type of wireless is the Wireless Local Area Network. These are what we connect our home or office computers to. These plug into the existing services like the existing ADSL internet connections or the NBN’s fibre network.

We shouldn’t confuse Wireless LANs with the mobile phone technologies being used by the NBN or phone companies.

Who is running the NBN?

The organisation set up to build the NBN is NBNCo. They are setting the standards, negotiating access to existing infrastructure and building the network. Their head office is in North Sydney but major operations are also based in Melbourne.

In turn they are hiring contractors around the country to build the network, run the cables and connect buildings to the new services. Most of us will deal with those contractors and the companies selling NBNCo’s services.

How is National Broadband Network going to work?

We won’t talk to NBNCo directly, instead companies like Telstra, Optus, Vodafone and iiNet will buy services from them and then onsell them to us.

Telstra are playing an interesting game on competing. They are already offering 4G services in regional areas where NBNCo hasn’t announced rollouts and they are planning to upgrade their cable TV network to the DOCSIS 3.0 standard that can sometimes deliver speeds similar to the NBNs proposed service.

What happens if you don’t let them connect you

If you don’t let NBNCo’s contractors connect you to the new network then you’ll have a problem a year or so later.

The copper telephone network is going to be turned off in areas where fibre optic cables are installed so if you aren’t connected to the new system, you won’t have access.

Anyone who’s done some building or landscaping work knows it isn’t cheap and that’s what building owners who don’t allow access will have to pay for access later.

In Tasmania a few property owners who were just outside the NBN area asked about getting connected up and apparently the costs were prohibitive.

One of the things to watch out for is uncooperative building managers preventing NBN contractors from accessing their premises leaving all the residents disconnected when the phone network is turned off.

Will it really cost $14,000 to wire up your house?

No but there will be a cost to connect the building’s existing phone lines and power supply to the NBN’s Network Terminal Device (NTD) that will be bolted to the outside of the building.

The NTDs are designed to plug into existing phone systems and data networks so it shouldn’t be necessary to spend a fortune on connections or upgrades.

One area where there might be problems is in buildings that have substandard wiring. Licensed electricians and cablers will refuse to work on systems that don’t comply with standards so building owners may find they are faced with big bills to bring their systems up to standard.

Does the system work if the power goes out?

Yes, the basic cabling doesn’t need power, although the repeaters and local exchanges will – just like the phone network. Where the system does need power is at the NTDs which will come with a battery providing two to three hours power.

If the NBN gets hit by lightning, does it stop working?

Lightning is an incredibly powerful force. It doesn’t matter whether we’re talking about telephones, power or fibre optic networks – anything that is hit by lightning is going to be damaged.

We should keep in mind that the wireless alternative to fibre is more prone to lightening strikes as base stations are at high points.

Electrical storms, and other natural forces, are a fact of life that we have to work around. The existing systems are just as prone to interruptions.

Is it running behind schedule?

Yes, as of the beginning of 2012 the project seems to be about six months behind. With only 4,000 connections at the end of last year instead of the 30,000 expected by the middle of last year.

NBNCo are putting this down to delays in finalising negotiations with Telstra and other existing fibre providers.

How much is it really going to cost?

There’s still the $43 billion dollar number on the table, which comes from a KPMG study in 2010 although the government claims their investment is going to $27 billion.

Of that 27 billion, the government expects to recoup it by 2034 based on a 7% return.

In contrast the opposition are claiming the real cost is $50 billion as they are including the cost of buying Telstra’s infrastructure back.

The real number is anyone’s guess. The track record of both political parties and Canberra’s bureaucrats on estimating costs on projects like this is less than impressive.

Is it really worth the money?

We should keep in mind a lot of this money was going to be spent by Telstra or the other providers anyway over the next two decades as the copper telephone reached the end of its life.

The risk was we would see something like the cable TV rollout where the big players fought over the most lucrative parts of the country and ignored the rest. The NBN avoids that.

There are real concerns though as the NBN is running behind schedule, the procurement processes – particularly the construction contracts – appear to have been poorly handled and there has been little discussion about the technology options.

Overall though, this is an opportunity to get the 21st Century infrastructure right. Where Australia failed with the roads in the 20th Century and the trains in the 19th, we can get this one right.

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The battle between the old and the new

What side of history do we want to be on?

“We will build an America where ‘hope’ is a new job with a paycheck, not a faded word on an old bumper sticker” – Mitt Romney, US Republican Presidential candidate

“What immediate measures can be taken to protect jobs?” – French President Nicolas Sarkozy

“We want to be countries that made cars” – Kim Carr, Australian Minister for Manufacturing

Around the world the forces of protectionism are stirring to shield fading industries, businesses and fortunes from economic reality.

The most immediate target in this battle are the new industries that threaten the old.

It’s no coincidence US lawmakers want to introduce laws that will cripple the Internet in order to favour music distributors, that the US and New Zealand governments work together to shut down a cloud sharing service or that failing Australian retailers call on their government to change tax rules in order to prop up their fading sales.

The old industries appear to have the advantage; they are rich, they have political power and – most importantly for politicians – they employ lots of voters.

We shouldn’t under estimate just how far the managers and owners of the challenged industries will go to protect their failing business models, unwanted product lines and outdated work methods, which isn’t surprising as their wealth and status is built upon them.

Eventually they will lose, just as the luddites fighting the loom mills and the lords fighting the railway lines did.

The question for society and individuals is do we want to be part of yesterday’s fading industries or part of tomorrow’s economy.

We need to let our political leaders know where we’d our societies to go before they make the wrong choices.

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