Category: economy

China goes on the tech offensive

The meeting between US and Chinese leaders later this month could mark the pivot of China’s economy

The most important economic relationship in today’s economy is that between China and the United States, despite bellicose chest thumping by both sides their wealth and well being of their industries is inextricably linked.

Against the backdrop of that chest thumping and a slowing Chinese economy, the Chinese and US Presidents are due to meet in two weeks time where trade and security relations between the two countries are at the top of the agenda.

China’s leaders though plan to emphasise their nation’s tech prowess and its importance to the US’s sector, something the New York Times reports has irritated the Obama administration.

What would almost further irritate the US leadership is that US tech giants including Apple, Facebook, IBM, Google and Uber have been invited to attend a Chinese tech summit hosted by Microsoft and the PRC President will be dining with Bill Gates before flying to Washington to meet Obama.

Redmond gets on board

Microsoft’s role in the China Forum is interesting, the company is extending the hand of friendship not just to nations but also to companies that were fierce rivals in the past, just last week the company announced a partnership with VMWare despite deep rivalry in recent years and CEO Satya Nadella is due to appear at next week’s Salesforce conference.

Coupled with Microsoft’s battle to keep offshore customers’ email records out of the reach of US legal jurisdiction, it’s clear Microsoft are playing a long global game with their business plans so the support of China’s initiatives isn’t surprising.

Given China’s strength as an emerging tech powerhouse and its administration’s ambition to move the economy up the value chain, it’s also not a surprise that other US technology companies are reluctant to join the politicians’ games.

Choosing Seattle

The choice of Seattle is interesting as well, while the city is a major tech centre with companies like Amazon and Microsoft based there, it’s far more integrated with the Pacific Rim economies than San Francisco and Silicon Valley. Again this is a loud message to the US tech community.

For China, the success of showing off their technological strengths is an important in sending a message to its East Asian neighbours and the US that the nation is diversifying and shouldn’t be underestimated, a process that Chinese Premier Li described as “a painful and treacherous process” at a World Economic Forum event in Dalian today.

The meeting between Xi Jinping and Barack Obama in two weeks time, and the associated events in Seattle, could well prove to be the marker of where China moved into the next phase of its economic development and its relationship with the  United States.

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Looking beyond the bro culture

The mapping of Nairobi’s Matatu minibus network and AirBnB’s Cuban ambitions show how apps could change the developing world

It’s not unfair to call many of the apps disrupting today’s industries as being the result of ‘first world problems’.

Uber was born out of founders Garrett Camp and Travis Kalanick difficulty in hailing Parisian cabs while AirBnB came from Joe Gebbia and Brian Chesky’s struggles with San Francisco rents.

Now as smartphones and mobile internet starts to become available to those in less wealthy parts of the world, we’re seeing how these concepts can be applied to problems more widespread.

A good example of this is the project to map Nairobi’s matatu minibus network where researchers used smartphones to create a picture of the city’s seemingly chaotic system of privately owned vehicles.

With some modifications, the data can be fed into Google’s transit map format that allows the routes to found on Google Maps.

The next logical step for this is for entrepreneurs, possibly even Uber, to entice matatu operators to use Uber like apps to track the location of minibuses and give passengers better payment options. It’s quite possible we’re seeing the start of an evolution into a new type of transit network using independent, privately owned vehicles bound together by an app based platform offering city wide public transport.

Similarly, in Cuba the room sharing service AirBnB is seeing the country’s informal private accommodation market as being an opportunity not only to expand its market but to help the country deal with the massive influx of US tourists now relations with the two countries have been normalised.

While the disruption to established markets from these new services has been huge, it may be the biggest effects are in developing countries where the economy and governments have reached the stage of development where powerful regulators work with incumbents to stymie competition.

In which case, today’s developing nations will see very different structures in their industries to those in the developed west that were built around 19th and 20th century technologies.

Image “A matatu” by Jociku – Own work. Licensed under CC BY-SA 4.0 via Commons – 

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Paul Krugman and the era of Bad Ideas

We’re in a world of bad ideas, but it’s never been easier to be an informed citizen

We live in a time where lessons of the past have been unlearned and being right about events does not necessarily mean you will be vindicated, said Nobel Laureate and New York Times writer Paul Krugman in a Festival of Dangerous Ideas event at the Sydney Opera House last night.

Krugman’s talk was on how bad ideas in economics have taken hold and are difficult to shake, the reason being in his view because, as the economist John Stuart Mill said to Parliament in 1866, “although it is not true that all conservatives are stupid people, it is true that most stupid people are conservative.”

A refusal to admit errors

One of the notable aspects of today’s age of bad ideas is how those who proven wrong refuse to admit their errors with Krugman citing the 2010 public letter signed by 23 prominent academics, economists and money managers to Federal Reserve chairman Ben Bernanke warning Quantitative Easing would unleash inflation.

They were wrong but when 9 of the 23 signatories were interviewed by Bloomberg Business last year, not one of them would admit they were mistaken.

For Krugman, it seemed hard to hide his exasperation with these people as he explained, “If you took at all seriously what is taught in economic textbooks then where we are is not surprising” and pointed out anyone who had studied the Great Depression and Japan’s lost decades could see how events were going going to transpire.

Defeating half baked ideologies

What Krugman didn’t discuss during the session was how did we get to a state where many of our political, business and community leaders outright reject the lessons of history and established knowledge, preferring instead often half baked ideologies.

A half century ago, things were different. Ayn Rand’s first television interview with Mike Wallace in 1959 illustrates the prevailing mindset among America’s elites. Wallace is taken aback at Ayn Rand’s philosophy of the individual’s desires and needs above all.


For Wallace’s generation that had been through the Great Depression and World War II, the importance of collective effort in an industrial society were well understood. In just over a decade, the US would successfully put a man on the moon and the rise of Silicon Valley and today’s tech industry were results of that effort.

Today it’s hard to see that sort of communal effort in the face of self interest and wilful, if often profitable, ignorance. For Krugman, his advice for those wanting to push back against this prevailing attitude is not to be too polite and keep in mind that satire and sarcasm are necessities in today’s world.

Being an informed citizen

For those pushing back, facts and research are critical, and Krugman advised one of the audience questioners who was despairing about the quality of information available in the media that the ability to be an informed citizen is greater than ever before.

Krugman’s talk covered many of the Bad Ideas that have got our economy and institutions to where they are today, the challenge for today’s generations is to overcome the narrow, half baked ideologies that dominate today’s policymaking.

In a festival that, despite its name, is notable for a lack of truly dangerous ideas, perhaps suggesting those Good Ideas for the next generation would truly be the antidote for the last thirty year’s lazy and shallow thinking.

Paul attended the Festival of Dangerous Ideas as a guest of Intel Australia.

Image of Paul Krugman byEd Ritger/The Commonwealth Club of California via Flickr

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Does broadband really create an innovative economy?

Building a competitive nation is more than just rolling out broadband connections

How much does broadband really matter in developing a competitive and innovative modern economy? A corporate lunch with US software company NetApp last week illustrated that there’s more to creating a successful digital society than just rolling out fibre connections.

Rich Scurfield, NetApp’s Senior Vice President responsible for the Asia-Pacific was outlining the firm’s plans for the Australian market and how it fits into the broader jigsaw puzzle of economies across the region.

Like many companies in the China market NetApp is finding it hard with Scurfield describing the market as “chaotic”. This isn’t unusual for western technology companies and Apple is one of the few to have had substantial success.

Across the rest of East Asia, Scurfield sees them ranging as being mature, stable and settled in the cases of Japan, Singapore, Australia and New Zealand through to India where the opportunities and the challenges of connecting a billion people are immense.

Digital outliers

The interesting outlier is South Korea, one of the most connected nations in the world, where the promise of ubiquitous broadband isn’t delivering the expected economic benefits to the entire community.

In theory, South Korea should be seeing a boom in connected small businesses. As Scurfield says, “from a technology providers’ view this connectivity means you could do more things very differently because of the infrastructure that’s available.”

Global Innovation Rankings

Korea’s underperformance is illustrated by last year’s Global Innovation Index that saw South Korea coming in at 16th, just ahead of both Australia and New Zealand whose broadband rollouts are nowhere near as advanced as the ROK’s.

Making a close comparison of Australia and the Republic of Korea’s strengths in the WIPO innovation index, it’s clear the technology and engineering aspects are just part of a far more complex set of factors such as confidence in institutions, the ease of doing business and even freedom of the press.

Putting those factors together makes a country far more likely to encourage its population to start new innovative businesses that can compete globally. When you have a small group of chaebol dominating the private sector then it’s much harder for new entrants to enter the market – interestingly a private sector dominated by big conglomerates is a problem Australia shares.

Small business laggards

NetApp’s Scurfield flagged exactly this problem, “Korea is an interesting market in there’s about six companies that matter and from a competitive view those companies are extremely advanced, they have great technology and great people.”

“However what’s not happening across the rest of the country is this adoption isn’t bleeding into the broader community,” said Scurfield “Because of that I don’t see broadband connectivity as having a wide impact.”

That Korean small and medium businesses aren’t using broadband technologies to develop innovative new products and service in one of the most connected economies on earth raises a question about just how effective investment in infrastructure is when it’s faced with cultural barriers.

Certainly we should be keeping in mind that economic development, global competitiveness and the creation of industry hubs is as much a matter of people, national institutions and culture as it is of technology.

We shouldn’t lose sight of the importance of our people and institutions when evaluating the strengths and weaknesses of a nation in today’s connected world.

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Are small businesses too old and slow?

Does an aging small business population pose a risk to the economy?

Yesterday I hosted the second day of the CPA Australia Technology, Accounting and Finance Forum that looked at how the accounting profession is being affected by the changing technology landscape.

There’s plenty to write about from the day and how the accounting profession is facing technological change which I’ll write up shortly but one theme from the day was striking – that older small businesses owners are struggling to deal with adopting new tech.

Gavan Ord, the CPA’s policy advisor warns older practitioners are opening themselves to disruption and  the Australian business community is in general is at risk as older proprietors aren’t investing or embracing technology at a rate comparable to their overseas competitors.

Older small business owners

That older skew in small business operators is clear, in 2012 The Australian Bureau of Statistics found 57% of the nation’s proprietors are aged over 45 as opposed to 35% of the general population.

Even more concerning is many of those small business owners expect to retire with a 2009 survey finding 81% were intending to retire within ten years – it would be interesting to see how those ambitions changed as the global financial crisis evolved.

A risk to the broader economy

This blog has flagged the risks of an aging small businesses community previously, but Gavan Ord’s point flags another risk – that older proprietors being reluctant to invest in new technology means a key segment of the Australian economy is unprepared for today’s wave of technological change.

A key message from the CPA forum was that the shift to cloud computing is radically changing the business world as sophisticated data management, analytic and automation tools become easily available. Companies, and nations, that don’t take advantage of modern business tools risk being left behind in the 21st Century.

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Learning from the workforce of the past

A Deloitte study of past workforce changes gives us clues, but not answers on how the future of work will look

One of the constant questions posed to anyone reporting on the technologies changing the workforce is “where are the jobs coming from?”

A paper by Deloitte UK economists Ian Stewart, Debapratim De and Alex Cole titled Technology and people: The great job-creating machine looks at how technological change has affected the British workforce over the past 170 years.

While the study itself seems somewhat hard to get hold of, The Guardian earlier this week reported on what the economists found when they examined employment patterns through the rapidly changing economy of the last 150 years.

One clear shift the collapse in manual jobs, particularly farm labourers whose numbers fell from a peak of 950,000 in 1881 – 7% of the workforce – to less than 50,000 or 0.02% in 2012.

UK-agriculture-labour-employment

The decline in the employment of farm labourers shouldn’t be surprising – in 1871 the proportion of the British workforce employed in agriculture was 15% while today it is less than 1%. A graph from the UK Census office illustrates that shift.

UK-employment-infographic

It’s notable comparing the UK to the US in this respect; at the beginning of the Twentieth Century nearly half the US workforce was still working in agriculture while the Britain had been a predominantly service economy for nearly fifty years.

Even today nearly 3% of American workers are employed on farms, a number not seen in Britain since the mid 1930s.

In both countries, the late Twentieth Century saw a shift to a service economy, something illustrated in the Deloitte survey by the rise of the British barman where the proportion of workers in the liquor industry tripled from 0.2% of the workforce between 1961 and today.

UK-barstaff-workforce-proportion

That British bar employment tripled in the post World War II years probably illustrates best the rise of the consumerist culture during the late 20th Century.

What should be flagged is those transitions away from agriculture to consumerism weren’t painless, much of Britain’s economy was racked by recessions through the Twentieth Century and many of the nation’s regions were devastated by the shift away from manufacturing in the 1970s and 80s.

In the US, the transition away from an agricultural economy in the 1920s was particularly painful, Steinbeck’s book the Grapes of Wrath tells of the human costs to families displaced from their mid-west farms during that time.

That technological and economic factors have driven massive changes over the centuries isn’t new, but the fact the vast majority of today’s workforce are in jobs which couldn’t have been imagined a hundred years ago should encourage us about the prospects for the future workforce.

However, assuming the future will look like today and that employment will be largely in consumer service industries may be as mistaken of the beliefs among 1960s policy makers that manufacturing would be the future.

Even more pressing for today’s policy makers and leaders is to prepare for the pain of transition. If we are seeing a workforce shifting to new business models then there will be high community and personal costs. We need to be preparing for the pain of the shift as much as we anticipate the benefits.

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Diversifying South East Queensland

Is being designated a ‘smart region’ enough to diversify South East Queensland’s economy?

Australia is one of the world’s most urbanised countries with the bulk of the nation’s population clustering in half a dozen centres mainly strung along the east coast of the continent.

The northernmost of Australia’s population centres is South East Queensland, a sprawling collection of suburbs extending from the upper class enclave of Noosa Heads down to the Gold Coast and the New South Wales state border.

Cisco believe this sprawling region of three million people can become a ‘Smart Region’ with the use of technologies such as intelligent lighting and parking, citizen applications, and smart power metering could add up to 30,000 jobs and $10 billion of value to the community over coming years.

“The residents of South East Queensland told us they want to experience greater convenience and integration of public transport, greater digital engagement and intimacy in their cities, more reliable local government services, and new digital ways to further reduce the cost of red tape,” said Cisco Australia & New Zealand Vice President Ken Boal in releasing the South East Queensland: A Smart Region report.

Local civic leaders in the cities making up the South East Queensland conurbation see this as an opportunity to grow their economies.  “The future of cities and regions and their ability to create enduring employment opportunities are entirely linked to their digital capabilities,” says Sunshine Coast Mayor Cr Mark Jamieson while Ipswich Mayor Paul Pisasale said Ipswich was already preparing for a strong future as a digital city.

“We have recognized that building and taking advantage of digital highways now will set Ipswich on a secure and successful path to capitalise on the ballooning digital economy,” said Cr Pisasale.

For South East Queensland, the challenge in creating new industries and jobs is becoming acute. The Australian miracle economy has left the region – like most of the nation – hopelessly uncompetitive and the bulk of employment is in domestically facing service industries underpinned by property prices.

In fact, the residential construction industry has been the mainstay of the SE Queensland economy and the region remains probably the most economically volatile of the Australian conurbations given its high dependence upon the building sector.

The digital economy does hold out hope for diversifying South East Queensland’s economy from building and domestic tourism, but the work is just beginning. Cisco’s smart region initiative is a first step, but there’s much more work to be done by business and civic leaders.

Brisbane image, “Brisbane CBDandSB” by Stuart Edwards. – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons – https://commons.wikimedia.org/wiki/File:Brisbane_CBDandSB.jpg#/media/File:Brisbane_CBDandSB.jpg

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