Category: economy

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.

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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?’

 

 

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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.

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An age of falling margins

business in 2015 will be a lot more competitive as technology drives prices down

One forecast about 2015 that’s very easy to make is businesses with high costs are in for a tough time.

As competition steps up, global forces puts pressure on prices and technological change allows new competitors into marketplaces, the companies that aren’t flexible and keeping an eye on where they are spending money are going to find 2015 will not be a happy year.

For the tech industry the predictions for next year are easy – there will be more security beaches, governments will want more powers to access our data while proving they can’t be trusted with what they already have, a new hot social media network will appear, well known brands will collapse, the net will get faster, more devices will be connected to Internet of Things and prices will continue to fall.

It’s the falling prices that will be what defines business in 2015 as we enter deflationary times; not the economists’ nightmare of prices falling in the face of collapsed demand – although that’s not out of the question – but in the more positive sense of business inputs being cheaper.

Things are going to get cheaper

A few weeks ago I wrote of futurist and academic Andrew McAfee speaking about the accelerated rate of change in business at the Gartner Gold Coast Conference. One of the immediate effects of that changing world McAfee describes is that a lot of thing are going to get cheaper.

Part of this is driven by newer cheaper sources of energy and labour, other driving factors are increased automation in fields where wages have historically been the biggest cost and  manufacturing processes are putting pressure on prices for most goods. The commodities prices collapse may also be a key factor in 2015.

For some industries, such as the IT industry, falling prices aren’t a new concept. Any computer superstore or local PC repairer who holds inventory gets a nasty reminder of the sector’s economics every time they do a stocktake. However many businesses operate on the assumption prices will always rise overtime, a not unfair assumption given the inflation we’ve seen over the last fifty years.

Getting costs down

With falling prices, it means businesses have to be more aggressive in cutting costs; whether it’s telephone or power bills through to professional services or banking fees, the onus is now on managers to squeeze as much value for the dollar as they can.

In the technology field the targets are obvious; are your old computer preventing you from using new software? Do cloud services offer a better deal than your old server based systems? Are your service providers charging too much?

For the wider business looking at how newer technologies affect your workflow could well prove rewarding, it may well there’s whole range of areas your company can become more efficient through adopting new systems.

A good candidate for slashing costs and improving flexibility is transport where too many companies are still paying Cabcharge’s overpriced fees when apps like Ingogo or Uber are cheaper and better. Why have company vehicles when car sharing services like GoGet can offer more value. Do you still need an expensive Yellow Pages listing when a free Google My Business entry will get you in front of more potential customers, particularly on the all important mobile platforms?

Then there’s the whole outsourcing question where it’s becoming easier to hire knowledge workers on an as needed basis through the various online platforms like O-Desk and Freelancer.

Over the break, it’s worthwhile reviewing your operations and seeing where you can use technology to cut costs and become more flexible in face of a rapidly changing marketplace. One prediction is certain; those with bloated costs and inflexible management are in for a tough 2015.

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Towards the future mobile network

The 5G mobile communications standard is as much a vision for the society of the future as that of technology standards

What will the next generation of smartphones look like? Earlier this week the GSM Association released their roadmap for the future 5G network standard, the next generation of mobile communications that will start appearing towards the end of this decade.

The GSMA is the peak global telco industry body which includes amongst its membership most of the world’s telephone companies and the vendors who manufacture the network equipment, so the organisation’s view is a good representation of the industry’s long term vision.

Much of the future standard is actually an amalgam of existing technology and concepts such as heterogeneous networks where phones and mobile internet of things devices can switch from the phone network to private WiFi systems without users noticing the handover.

The GSMA sees eight main areas for the 5G standards;

  • data rates of 1Gbps down
  • latency of less than one millisecond
  • network densification in determining base station locations
  • improving coverage
  • making networks more availabile
  • reducing operating costs
  • increasing the field life of devices.

That latter point is particularly pertinent as battery life remains a major concern for smartphone users and getting power to internet of things devices is one of the greatest barriers to adoption.

With the 5G standard not expected before the end of the decade, it’s hard to imagine how much technology may have changed in that time, something the GSMA acknowledges; “Because 5G is at an early stage there may be many use cases that will emerge over the coming years that we cannot anticipate today.”

The report though does try to anticipate some of the applications we may see the 5G standard driving such as autonomous vehicles, cloud based offices and augmented reality technologies. All of these though are advancing rapidly under the existing fixed line, 3G and 4G telco networks.

For the moment rolling out the 4G standard remains the industry’s main game with the existing technology only making up five percent of the world’s mobile connections at present. This is the area the GSMA sees as being the big opportunity over the rest of the decade.

In another report the GSMA claims the 4G rollout in Europe, currently at less than 10% of connections but expected to be over half by 2020, will drive economic growth on the continent.

The mobile industry is playing a central role in supporting economic activity and recovery in the region, contributing 3.1 per cent to Europe’s gross domestic product (GDP) in 2013, equivalent to EUR433 billion4, including EUR105 billion generated directly by mobile operators. By 2020, it is estimated that the industry will generate a total economic value of EUR492 billion.

There’s no doubt telecommunications networks are to the 21st Century what the highways were to the Twentieth and the railways to the nineteenth. As with the construction of previous century’s networks one of the big challenges will be raising the capital to build the systems and making wise investment choices.

For the developing world raising the capital required for those networks might be the hardest task of all, however for those countries and regions not making the investments may leave them further behind the western nations than they are today.

Ultimately what eventually is included in the 5G standard will reflect many of the political and economic realities of the next five years; no international standard is free from political or commercial influences during its drafting. The job for the standards bodies is not to get left too far behind market or technological advances.

In describing a vision for the sector’s future the GSMA 5G report lays out many of the opportunities and challenges facing the telecommunications industry over the rest of the decade. With these technologies becoming the centre of our working and home lives, what happens won’t just determine what smartphone we own in 2020 but the shape of our societies.

 

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A need for cultural change

Creating a more resilient economy will take a culture shift and a change in the way all of us think.

On Sunday the Murray Report into the Australian Financial System was handed down with a range of recommendations on ensuring the stability and future of the nation’s banking and finance institutions.

Choosing David Murray, the former CEO of the nation’s biggest bank, was controversial but it turns out he and his team have delivered a sensible overview of the opportunities, risks and challenges facing Australia’s financial sector and economy. Many of the recommendations though require a change in both the culture of banks and that of the country’s population towards investment and savings.

A key part of the review is identifying the lessons learned from the Global Financial Crisis of 2008 in an attempt to reduce the country’s vulnerability to external economic shocks and limit the taxpayers’ exposure to any consequential bank failures.

In proposing ways of strengthening the nation’s banks against similar future shocks The report identifies a cultural problem in the finance industry.

Culture of financial firms

Since the GFC, a persistent theme of international political and regulatory discourse has been the breakdown in financial firms’ behaviour in failing to balance risk and reward appropriately and in treating their customers unfairly. Without a culture supporting appropriate risk-taking and the fair treatment of consumers, financial firms will continue to fall short of community expectations. This may lead to ongoing political pressure for additional financial system regulation and the undermining of confidence and trust in the financial system.

Interestingly, exactly this sentiment is echoed by last week’s World Of Business on BBC Four where host Peter Day reported from the recent Drucker Forum spoke to various economists, bankers and market commentators.

Breaking the debt culture

A key point raised in Day’s story was best expressed by Gary Hamel, Management expert and professor at The London Business School who said; “I think what the global financial crisis revealed — in addition to a lot of mendacious bankers who had lost touch with their social role — was the fact we’d been sustaining living standards through debt. I think that overhang is still there.”

The Global Financial Crisis was a warning the late Twentieth century model of using debt to sustain living standards was coming to an end, of all the western countries Australians had been one of the most enthusiastic nations about using debt to underpin consumption and that debt obsession had allowed the nation to skirt the worst of the GFCs effects.

With personal debt still at astronomically high levels it’s unlikely Australia will be able to avoid the next global financial shock and part of Murray’s recommendations are aimed at making both the economy and the banking sector more resilient to those shocks.

A fall in income

For the bankers this means lending less money and stricter financial controls; it almost certainly will mean their incomes will fall and it will be harder for millions of Australians to borrow money for easy speculation in the property market.

Creating a more resilient economy will take a culture shift in more than just highly paid bank staff, it will require a change in the way all of us think.

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Protecting the world’s soil

How we protect the world’s soil could be the clue to our future prosperity argues National Geographic’s Jim Richardson

One of the speakers at the recent Economist World in 2015 event in Sydney was National Geographic photographer Jim Richardson who described the challenges facing the world’s agriculture industry.

Much of Richardson’s presentation was taken from his series of photographs featuring farmers with their soil and National Geographic’s Feeding Nine Billion People feature.

A striking comment Richardson made in his presentation was how a poor rice farmer in South Asia is actually able to feed from people from their small landholding than a US broadacre farmer. This speaks volumes about how we’ve organised our food supply chains and raises questions on how sustainable our practices are.

In Agriculture, as in many other fields of our life today, we’re looking at major changes to the way we organise production and distribute goods. Richardson’s presentations are well worth considering in how the western world maintains it’s own standards of living while the rest of the planet looks at how it improves their’s.

Despite being essential to our very lives, the quality and availability of arable soil is one of the most neglected aspects of our global development. Jim Richardson’s photos remind us of its importance.

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