Category: economy

Dangerous Game

Associated Press have warned they will start taking action against news aggregrators like Google. Rupert Murdoch made similar noises last week.

As Fred Wilson has pointed out, the problem for AP and News is the web is now the newstand and taking publications off the shelves is not good business sense.

We see that with the Australian Financial Review. Its position as an Australian journal of record has been diminished by Fairfax’s incompetent obsession with protecting content.

As result, other channels such as The Australian, Business Spectator and blogs have stepped into the vaccuum and eroded the AFR’s online authority.

Following the RIAA path and suing Google, the Huffington Post and any blog that dares link to their sites will backfire on the news industry just as it did on the record industry.

In many ways newspapers are even more vulnerable as journalists employed by organisations like News and AP are quick to rip stories off from blogs, web forums or MySpace and Facebook pages with little regard for permission or attribution.

I suspect it’s one legal quagmire Associated Press or Rupert Murdoch might rue becoming bogged down in at the very time their business models are challenged by both economic and technological change.

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Focused growth

I woke to a BBC program discussing economic growth and if the growth rates we’ve seen in the last 50 years are sustainable.

The real question is what sort of growth.

Much of that growth, particularly in the last fifteen or so years, has been a debt fueled binge on household goods and speculative assets.

Perhaps what we’re returning to is sustainable growth, where the economic engine is provided by things like improved health care, business productivity and real innovation.

Do we really need three thousand mile Caesar salads, three cars and a DVD in each bedroom to be the drivers of our economy?

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Motivation

I was listening to a speaker yesterday describing the difference between public sector and private employees.

An interesting point was that the motivations are different; public sector staff are more motivated by a work/life balance while private sector workers are more motivated by money.

This started me thinking about recent blogs I’ve read by Valerie Khoo and Seth Godin regarding the motivation of Wall Street bankers and entreprenuers.

The question of money motivating people is vexed and I suspect overstated. As Seth says in his column, once you’ve an income over a million or so dollars money really isn’t that important; it’s all about status.

A point made by yesterday’s speaker was when he managed scientists he found most researches care about about peer approval. Money matters far less to them than appearing at conferences, presenting papers and being recognised for their hard work and discoveries.

In a strange way, that’s the real explanation for the financial industry’s massive salaries and bonus. The dollar amount is simply a yardstick to measure one’s status. The bigger the yacht, house and birthday party you can afford, the more recognition you have among your peers.

Which brings me to entreprenuers. Unlike Valerie, I don’t think business builders are interested soley in amassing banker like piles of cash. The cash is nice, but they are more interested in doing great things with their businesses or invention.

Cash is a useful measure and it’s nice to have some spare, but that’s as far as it goes. Far more important for most people is the recognition of their peers, security of their families and the satisfaction of a job well done.

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Why small business will be the winner from this recession

An interesting post by Peter Bregman on the Harvard Business Review;

http://blogs.harvardbusiness.org/bregman/2009/03/why-small-companies-will-win-i.html

While I agree with the sentiment and Peter’s conclusion, I think there’s a more compelling, fundamental reason why small to medium businesses will be stronger when the world economy recovers.

Responsibility.

The notable thing about the current collapse is the total absense of repsonsibility from those who created the problems. From the overpaid villains of AIG through to the politicians and regulators who, at best, stood on the sidelines and allowed the excesses to happen.

The main cause of this is because managers have become isolated from the consequences. They take their pay packet, and their fat bonuses, home regardless of the shareholder wealth they destroy.

With small to medium business the owners and managers have to deliver the service they are paid to do. Otherwise the business goes quickly broke along with the proprietors.

Big business grew big because they had the technology to do so. They only big because they had the market and political power to protect their position.

Technology levelled the playing field between small business long ago, the current market turmoil and the political changes that will follow will strip most of big businesses’ advantages.

Which will leave the well motivated, well managed and responsible companies to succeed.

Only a few of these will be big businesses.

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The echo chamber

cave-mouthNobel Prize winner and New York Times columnist Paul Krugman worries about the insularity of America’s economic leaders.

He’s right to worry.  The economic downturn is going to be longer and deeper than it otherwise would have been because our business, political and economic leaders steadfastly refused to acknowledge the levels of debt our societies were being burdened with and now they refuse to deal with the fact that debt is being unwound.

The challenge for business owners now is not to fall for the orthodoxies and slogans but to take a realistic view of what’s happening in the world and the effects on customers, staff and suppliers.

Just listening to your mates repeating your own beliefs is not good enough. The politicians have their pensions, the executives their golden parachutes and the economists tenured positions. You probably don’t.

Read widely, listen and be sceptical of those with special interests to protect. Most of all don’t act on the advice of those who think it will be business as usual next year.

Business as usual is going to be very different from today onwards to what it was two, ten or twenty years ago. It’s time to reinvent and look for the opportunities those too deep in the echo chamber are unable to see.

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Does IT kill competition?

Andrew Mcafee’s article of the effects of IT on competition and businesses raises some interesting points .

http://blog.hbs.edu/faculty/amcafee/index.php/faculty_amcafee_v3/curiouser_and_curiouser/

His conclusion is technology isn’t a leveller between businesses – instead it creats a greater concentration of market power.

I wonder if those results Andrew cites are biased because of the economic boom and easy credit we recently been through; start ups were bought out by cashed up bigger players and that’s why we saw a concentration of businesses.

Regardless of the reasons, there’s a caveat for the bigger players; Andrew’s view is this because “good ideas and good execution separate winners from losers” and technology is what allows these good ideas to spread in a well run company.

This week’s collapse of Wedgwood is a good example of when a company’s culture stifles ideas and innovation. The New York Times has an excellent description of what went wrong and Seth Godin has some wise comments on the NYT strory.

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IT for the future

CNET’s Matt Asay looks at a Goldman Sachs report forcasting IT spending for 2009. To say the predictions are dire is an understatement. 

Mark’s comments are interesting. He takes issue with Goldman’s view that open source and Software As A Service (SAAS) spending will fall as corporates focus on known vendors such as Microsoft and Symantec.

I tend to agree with Goldman’s analysts that the big corporates will turn conservative for the next few years as they focus on their core operations. As long as their IT infrastructure is good enough, that’s where they will stay.

The real action for open source and SAAS will be in the SME sector. Small businesses will be under more competitive and cash pressures as the global depression bites. The who survive the next three to five years will be the ones who do things smarter, quicker and cheaper than their opposition.

This is where open source, and more important, SAAS come into their own as they give smaller enterprises flexibility and cost advantages.

Some of today’s small businesses will the giants of the next economic boom and many of them will be giants because they embraced the new tools and technology available to them.

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