Category: economy

Business in a time of falling technology costs

The fall in computer prices shows no business or manager can assume their markets are safe

Personal Computers cost one thousandth of what they did in 1980 reports Aki Ito in Bloomberg Business.

For the computer industry that’s been both a blessing and curse; cheap systems have allowed computers to become pervasive but at the same time the collapsing prices have destroyed the business models of those who built their companies upon the industry economics on 1980 or 2000.

Software has fallen a similar amount with computer programs now costing 7/1000ths of what they did 35 years ago. Again this has dramatically changed the structure of the industry with Google and Amazon taking over from Microsoft and Adobe.

While the computer industry is the starkest example of the collapse in prices due to technological change, it’s not the only sector being affected – almost every industry is under similar pressures as margins get stripped away.

Anywhere where middlemen are exploiting market inefficiencies are opportunities for new technologies to destroy the existing business models, Uber are a good example of this with the taxi industry.

With technological change accelerating in all industries, no business or its managers can assume they are safe from shifting marketplaces or new, unexpected competitors.

 

Will mobile banking drive the developed world’s economies?

Banks and telcos look to transform Africa with mobile banking and payments

Microsoft founder Bill Gates suggests mobile banking can revolutionise developing nation’s economies says in a guest post for online magazine The Verge.

“People being able to participate on their phone, no matter where they live, even if they’re in a remote rural village in Tanzania or Kenya, they’ll be able to save small micro-payments,” Gates told The Verge during an interview in New York. “They can participate on the economy through their phone, but also in the fall when it’s time to pay the school fees, they’ve saved the money for the year. That’s transformative for their family.”

Gates’ piece appeared at the same time French telco Orange announced a partnership with Ecobank to provide mobile payments in several African countries.

Bringing banking to the masses through mobile phones is one example of how emerging markets can leapfrog the technological and institutional barriers that have given the western world a head start.

For poor and remote communities, a combination of cheap photovoltaic (PV) cells and cellular base stations mean it’s possible to connect into the global economy without the need of massive government or corporate investment.

As Gates points out, this has the potential to dramatically change the economies of many emerging markets.

You can’t wait for government to lead digital change

If you want digital leadership you’re going to have to provide it yourself, waiting for the government is no answer.

Last week’s events in Canberra shows business can’t wait for the government to lead industry change. If you want to keep up with technology, you’re going to have to do it yourself.

In the wake of the Global Financial Crisis many of my business clients were in trouble as banks tightened their lines of credit and consumers slammed their wallets shut. After a decade of running businesses, it was time to get a job.

The job I found was with the small business division of the New South Wales Government’s then Department of State and Regional Development where I quickly discovered how many companies and ‘entrepreneurs’ came looking to the government for money and leadership.

While there were some state government support programs available for exporting, high-tech and biotech businesses almost all of those approaching the Department were hopelessly unqualified for the assistance that was at best only involved marginal amounts of money.

The toughest part of my job was gently turning those people away without upsetting them too much. Often I failed and part of the reason for that was that many of those believed the government would take leadership in a changing digital world and fund ideas that would help the state’s and nation’s competitiveness.

I was reminded of my brief period as a public servant and the futile attempt for  with last week’s disasters for the Australian tech sector; the Prime Minister’s claim that social media is little more than digital graffiti and the still born announcement of a Chief Transformation Officer.

Last week’s announcement of Chief Transformation Officer who happens to have no budget – the UK office the local initiative is based upon received more than a hundred million dollars in the Brits’ last budget –  is probably the best indication of how far behind the ball Australian governments, particularly the Federal level, are in dealing with a changing economy.

A Chief Transformation, or Digital, Officer can be an important catalyst for change but to achieve that they have to have the support of the organisation’s leadership; if the CEO or minister isn’t on board then the CTO or CDO is doomed to irrelevance.

The Prime Minister’s blithe dismissal of social media as being digital graffiti over the weekend shows just how little support an office charged with managing the Australian government’s transition to digital services will get from the executive. The sad thing is none of the likely alternatives – on either side of politics – to the current Prime Minister seem to be any more across the changes facing governments in a connected century.

One good example of the profound changes we’re seeing is in agriculture; this feature on farming robots shows just how technology and automation is changing life on the land. These applications of robotics are going to affect every industry, including government.

As we’ve discussed before, if you want digital leadership then you’re going to have to provide it yourself . If you’re going to wait for the government, then times are going to overtake you. How are you facing the changes to your business and marketplace?

We’re crazy, not stupid

Alibaba’s Jack Ma has a fascinating snapshot of how global trade is going through a radical period of change

“We’re crazy, not stupid” is how Jack Ma describes his Alibaba team in an interview at the World Economic Forum in Davos, Switzerland, yesterday.

Much has been written about Jack Ma and the spectacular success of Alibaba and the WEF session with Charlie Rose is an opportunity for Ma to flesh out the story and destroy some of the myths.

One of the fascinating anecdotes Ma tells is how US cherry growers are preselling their harvests to Chinese customers through Alibaba and cites various other primary producers doing similar campaigns as how American small businesses can sell into the PRC market.

Ma’s interview is a fascinating snapshot of how global trade is going through a radical period of change, the shifting of China’s economy and where the future lies for many industries.

Connecting the village from outside the grid

Cheap solar power and cellular phone base stations promise to change poor and remote communities.

Villages and small towns in Mexico have a rough deal, the privatisations of government monopolies during the 1990s meant most of them were cut off from the telecommunications networks rolled out at the turn of the century.

It’s taken a while for engineers to find a way to figure out an open source alternative to cellular base stations but now they have and it promises to change the model of economic development in poor regions.

Wired describes how community groups are bringing mobile communications to the poorer and more remote parts of Mexico.

The rollout of Open BSC is an example of how small scale operations can compliment the larger commercial networks – while major operators like Telemex can ignore smaller communities that offer little if any return, local groups can setup their own not for profit services which give villages connectivity.

A similar thing is developing with solar power, with PV cells becoming affordable communities which had little chance of being connected to their country’s national grid are now able  electricity.

That poor or remote areas can now be connected to power and communications without massive subsidies or infrastructure investment is a radical change from the Twentieth Century model of economic development, these advantages change the game on many levels.

Imagining a world with fewer cars

How will our society change if cars are no longer important?

Last weekend Uber founder Travis Kalanick told a tech conference in Munich, Germany how his company wants to take 400,000 cars off Europe’s road by the end of the year.

On Monday, the Australian Bureau of Statistics reported the nation’s car sales were at best flat, a trend that’s been apparent for two years and one being repeated around the world as younger adults turn away from automobiles.

The technology that defined the Twentieth Century was the motor car; it reshaped our cities, changed our lifestyles and drove the consumer economy.

Now that economy is changing and the motor car, and consumerism in general, is in decline.

Which leads to the thought of what our communities will look like if the motor car isn’t the defining feature?

A challenge for governments

One obvious answer is we won’t need as many roads and carparks so governments will have to shift their priorities towards public transit and shared car services.

Governments are also faced with voters wanting more services closer to centres as the 1950s model of dad driving an hour to work or the 1970s model of the family driving to the shopping mall are no longer valid. This has serious ramifications for communities were land use has been zoned based upon twentieth century assumptions, not to mention their taxation bases.

That zoning problem has ramifications for property developers as well, it’s possible to argue this is already happening as pressures mount to turn over more inner city areas to high rise buildings.

Redefining retail

For retailers, it means the end of suburban big box stores and more focus on smaller stores with delivery services – a trend we’re already seeing in larger cities.

The finance industry as well is affected by the shift away from personal ownership of cars as automobile loans and leases have been a lucrative business for the last fifty years. If people are no longer fussed about owning a car then then there’s little demand for easy payment plans.

With the motor car not being as important to people, we start to see a society with very different economic underpinnings to that we became used to in the late Twentieth Century. How do you think our communities and businesses will look in a world without cars?

Links of the day – hanging Churchill, resisting Russia and expensive places to live

Charlie Hebdo, Lithuania’s passive aggressive invasion plan and how Winston Churchill was not always Britain’s most admired figure.

Today’s links include a look at the complexities of the Charlie Hebdo discussion, how Lithuania intends a passive aggressive response to a Russian invasion and how Winston Churchill was not always Britain’s most admired figure.

Should we hang Mr Churchill?

The New Statesman has delved into its archives to find its articles on Winston Churchill, it’s an interesting article that shows the complexities of the Churchill myth and legend.

Lithuania’s plan of passive resistance

Having the Russians occupy your country is a living memory in Lithuania. With the troubles in the Ukraine, the Lithuanian authorities are planning for a future invasion. Their advice is to be passive aggressive.

The world’s highest cost living

Which countries are the most expensive for a British expat to live in? Switzerland and Norway top Movehub’s list with the UK coming in tenth, New Zealand seventh and Australia sixth.

No, I am not Charlie

A British cartoonist’s view on the Charlie Hebdo murders illustrates the complexities beyond the facile soundbites.

The popping of the tech startup seed bubble

Has the tech startup mania peaked? The funds being invested into startups at seed stage seems to falling away, which may not be a bad thing suggest Alex Wilhelm.

What’s your password?

The Jimmy Kimmel show went onto the streets asking people what their passwords are. The results, sadly, are not surprising.

Daily Links – the poor part of Silicon Valley, Robert Crumb on Charlie Hebdo and life in Managua

The poor part of Silicon Valley, Robert Crumb on Charlie Hebdo and life in Managua

Being a Sunday some long reads; an interview with American cartoonist Robert Crumb on his reaction to the Charlie Hebdo murders, life in the Nicaragua markets and the other side of Silicon Valley.

East of Silicon Valley’s Eden

Silicon Valley is one of the world’s most affluent regions but it has it’s poor areas, across the road from Facebook’s head office sits one of the area’s most disadvantaged neighbourhoods. East of Palo Alto’s Eden tells the story of segregation and disadvantage that has left East Palo Alto behind the rest of Silicon Valley.

Robert Crumb on Charlie Hebdo

‘I thought, I gotta do it. They asked me. I gotta do it…Otherwise, everybody’s going to think: “Where’s Crumb? Why doesn’t he come forward? What the hell’s the matter with him?”’

Legendary US cartoonist Frank Crumb, now resident in France, gives his views on the Charlie Hebdo murders.

How a family survives on $4.50 a day

A good story on the tough life of Nicaraguan market traders who live on half the national minimum wage.

“East Palo Alto PA Airport Moffett Field P1190059” by David.Monniaux – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Links of the day – Terrorism, deflation and London’s rebirth

The terrorist murders in Paris lead today’s links of the day.

Today’s links kick off with the worldwide reaction to the terrorist atrocity in Paris. The other links, which pale in contrast, include why we should really fear deflation, the decline and rise of China and how to understand a food critic.

Cartoonists unite over French terrorist murders

After the terrorist atrocity that saw twelve people murdered in an attack on a magazine office in Paris, cartoonists around the world have shown their reaction.

Why Europeans should fear deflation

Yesterday the main economic news was the Eurozone had re-entered a deflationary period. Irish economist David McWilliams explains why deflation scares governments and banks with some lessons from the Great Depression.

The decline and rise of London

In 1939 London reached its peak population of 8.3 million then saw declines for the next fifty years as war, government policies and economic restructuring saw the city’s attractions wane.

Sometime this week London will pass its 1939 peak and Citymetric magazine looks at the reasons for the decline and why the recovery began.

China’s incredible disappearing former leader

In November 2012 Chinese leader Hu Jintao stepped down from his post. Since then he’s effectively disappeared from public view Foreign Policy magazine reports.

At the same time many of his allies and supporters have been purged from their party positions as part of a major change in direction for the Chinese government. What this means for the parties’ cronies who’ve been propping up property prices across the Pacific and Macau’s lucrative casino business remains to be seen.

What restaurants should know about food critics

First impressions matter warns former restaurant critic for the New York Times and Los Angeles Times, Ruth Reichl, in a terrific interview with Open For Business.

Reichl’s advice is good for pretty well any business; make sure your first impressions are good, don’t rip off your customers or be too pushy with upselling and train your staff. It’s an entertaining insight into a field dominated by egos that’s largely becoming extinct.

Links of the day – dead malls, economics and politics of the future

What will the economy and politics of the future look like?

Today’s interesting links revolve around economics – those of shopping malls, the future and how politics might react to a world where the majority’s incomes are lower and far more precarious than we’re used to.

The economics of dead malls

Shopping malls were the town square of the late Twentieth Century consumerist society. Now in many parts of the US the shopping mall is dying as economics and culture turns against them.

The New York Times looks at the economics of shopping malls and how they are affected by changes to society, particularly the decline of working class incomes and the middle class squeeze. In the meantime high end malls seem to be doing extremely well.

Having opened in 1986 with a renovation in 1998, Owings Mills is young for a dying mall. And while its locale may have contributed to its demise, other forces played a crucial role, too, like changing shopping habits and demographics, experts say.

A number of factors are working against old fashioned shopping malls including growing wealth disparity, falling middle and working class incomes along with fundamental changes to the economy which mean retail businesses, along with other industries, are going to have to adapt to a very different future.

Journey through the landscape of the future

Some of those changes to the global economy are described in Deloitte’s Centre For The Edge’s The hero’s journey through the landscape of the future, first published in July last year.

The Deloitte think tank describes a world where the workforce is more casualised – dare one say more precarious – and the barriers to business far lower than today.

Democracy in the 21st Century

Changes like those described by Deloitte don’t happen without consequences and economist Joseph Stiglitz suggests this will change our democratic institutions.

Sadly Stiglitz doesn’t suggest the changes that might happen apart from observing the current system that seems to be baking in inequality probably isn’t sustainable.

In a world where incomes are less stable and economic standards of livings are falling for the majority of people, the current beliefs that underpin the philosophies of political parties and government agencies become redundant. How today’s governments react to these changes will be an important question for how our societies look in the 21st Century.

Where will the next Silicon Valley come from?

As US research and development spending declines, where will the next Silicon Valley be?

In the development of any global industrial hub, there’s always a series of factors that attracted talent, capital and resources to that location. It’s true whether we’re talking about fifteen century Venice or the English Midlands of the eighteen century.

Silicon Valley is today’s equivalent of those historical powerhouses and what drove California’s Bay Area to be the technological centre of the world was the massive government research spending of World War II, the Cold War and the Space Race.

Which means declining research and development spending by the United States is going to hurt the region’s position in the medium to long term, a warning made by Fareed Zakaria in The Washington Post.

So the question is ‘if Silicon Valley and the US are in decline, which will be hub of the next business and technology revolutions?’

 

 

Work in an age of abundance

Our society is changing as we enter an age of abundant information and automation

We aren’t prepared for the changes technology is bringing our society warns Vivek Wadhwa in Our future of abundance—and joblessness.

Vivek makes the important point that in the near future many of the jobs we take for granted today will be replaced by machines, this is similar to the warning from Andrew McAfee that a wave of innovation is going to overrun businesses over the next two years.

That innovation is going to cause massive disruption; as Vivek notes we’re going to see the loss of jobs in occupations as diverse as taxi drivers, farmers and – probably the most underestimated of all affected occupations – managers.

Of course this is not first time we’ve seen massive changes to our economy and over the last century farming has gone from one of the most labour intensive industries to one of the most automated.

The automation that changed farming though created millions of new jobs; today’s retail and food industries employ far more people than agriculture did a century ago and most of those jobs were made possible by the same technologies that reduces the need for farm workers.

Vivek acknowledges this in quoting Ray Kurzweil in that jobs are lost only if we look narrowly at  the industries and communities affected.

Automation always eliminates more jobs than it creates if you only look at the circumstances narrowly surrounding the automation.  That’s what the Luddites saw in the early nineteenth century in the textile industry in England.  The new jobs came from increased prosperity and new industries that were not seen.

What we have to acknowledge though is the transition to a new economy won’t be painless and that millions of people will be dislocated and some communities will cease to exist – just as the bulk of the developed world’s populations moved from rural villages to industrial cities during the Twentieth Century.

The truth is we don’t know how that process is going to evolve; then again, neither did our forebears a hundred years ago.

A hundred years ago we were at the beginning of an age of abundant energy and that changed society beyond recognition in the course of the century, at the end of this century of abundance our society will be very different again.