On the Continued Economic Decline of the West

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Jon Moynihan, Executive Chairman of PA Consulting Group, made a presentation at the London School of Economics in July 2012 titled The Continued Economic Decline of the West. He dissects the problems we face, taking a deep dive into the stagnating Western world, and proffers some possible solutions.

It is worth noting that Moynihan comes to this from a non-Keynsian perspective. Indeed, I found his characterization of neo-Keynesians as the true inheritors of Fabian Socialism amusing. And he castigates the Western government’s general disregard for running surpluses and their affection for deficits.

This changing economic landscape that we in the West will inhabit must be contemplated by our leaders and citizens. It is sobering to consider the data that he presents.  Yet within the challenges there must be opportunities.

Moynihan outlines a sombre future. A future where young people cannot reasonably expect to get jobs or be well paid; one where xenophobia and discontent may well become the norm.

As Niall Ferguson has argued: “If the young knew what was good for them they’d join the Tea Party”. Thus we can expect to see shifts in political allegiances arising from the social disruptions we can expect from the economic disruption evolving in the West.

As Moynihan sees it some of the issues that loom large for Western nations include:

  • Inability of the West to protect existing IP due to counterfeiting or piracy by the Developing world
  • Inability of the West to innovate and create new IP on large scale due to inadequate capital available
  • China is rapidly increasing their number of patents registered – supported by their 10,000 science PhD graduates per annum
  • Number of adults in West who leave school unable to read – 1 in 5  Western school leavers are functionally illiterate
  • The West has a low propensity to invest new capital into new ventures and infrastructure
  • Western nations have a growing hostility towards high income earners and lack of encouragement for entrepreneurs and VCs
  • Western wages will fall – low paid workers to suffer most and this means that demand will decrease – it will lead to a global equalization of wages
  • Entitled groups – banks, CEOs, public sector, benefit claimants – mean that funds are not available for investment (NB: there is an interesting example of what happens when a government downsizes the public sector happening right now in Queensland)

What is to be done?

According to Moynihan the solution lies in what many would view as fairly radical steps:

  • Reorient government spending away from entitlements and towards new infrastructure (like an NBN)  and education
  • Reform the banks so that they do not make excess profits
  • Move taxation away  from corporate and personal income taxes and towards consumption and property taxes
  • Develop new technologies, support new forms of manufacturing, and support ecosystems that provide job multipliers – he cites the Rational Optimist for ideas
  • Accept immediate cuts in living standards by increasing retirement age and reducing entitlements

It’s worth taking the time to watch the entire presentation, even if you don’t agree with his ideas there are lots of interesting data.

If you don’t have time to watch the entire video then it’s worth viewing the slide deck from Moynihan’s talk on Business Insider. It is food for thought. I hope that our politicians are taking time to get their heads around these issues that we face.

However, I suspect that these issues that we face will not be addressed at a national, regional, or global level. The political cost of doing something will paralyze many governments from taking action until too late.

It is time to think about localized solutions and building resilient communities. It is time to reboot capitalism and find new and sustainable economic approaches.

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Real time, right time – it’s all about ‘me’ – so what about Twitter?

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A recent article The Future of Mobile is Right Time Experiences by Maribel Lopez got me thinking about mobile and the future of the web.

It is an especially important topic to consider now that Twitter is seeking to further control and constrain the way that its users interact. A good outline of the issues at play here is Nick Bilton’s piece: For Twitter-Owned Apps and Sites, a Cacophony of Confusion.

At Web 2.0 Summit 2011 (video) Twitter CEO, Dick Costolo, noted that he is inspired and ‘mentored’ by Apple. Any admiration for Apple and the way it does business is likely to be coupled with a desire to control the user experience.

The interesting thing to note is that control of the end user experience has never been a big part of the Twitter world. Instead their strength, and indeed a reason for their survival to date, has been a willingness to throw open their doors to a broad app ecosystem.  Further, significant innovations that have improved Twitter (e.g. hashtags) have come from the community and have been adopted by the company.

But Twitter is a company that is growing up, emerging from its startup phase and evolving into a ‘real’ business.  ‘Real’ businesses do things like consolidate infrastructure to better manage costs, and they seek to add layers of management control over the business.

This desire to control the user experience is fairly typical of a ‘real’ business.  It signifies the development of an organisation that is developing a command and control structure typical of the late twentieth century.

The problem is that end users of the platform have started to evolve beyond command and control models. We are using many different devices – PCs, tablets, smart phones – and we use them as we need and in different contexts.  We do not necessarily want the same experience across each device we use. Increasingly we are using a mobile rather than a fixed device, even in the home or office.

What we do want is the right experience in the right context.  We are hungry for a kind of ‘just right’ interaction with our favourite platforms. And we also seek to remove friction from our online interactions.  We flinch away from interactions that are scratchy, our friends say ‘come over here, it’s better and easier’, we use the power of our social networks to seek out the newest way to improve our online existence.

This means that the API revolution has arrived at just the right time to meet user needs.  And it means that businesses that resist the desire to exert absolute control over the user experience can harness a vibrant API ecosystem to power their business.

I think that consistency of user experience across multiple platforms is overrated. But I do wholeheartedly encourage consistency in APIs so as to enable rich user experiences that drive engagement on the user’s terms.

Businesses that fail to realise that the command and control world of the late twentieth century is dying risk killing their businesses.  It is already happening with the news media. It can happen with newer businesses too, such as social networks. As Mark Pesce noted we face a business environment that is “fast, frictionless, and on fire“.

Note: I had a brief chat about the recent changes to the Twitter consumer app ecosystem with Stilgherrian, Leslie Nassar, and Henare Degan on the Patch Monday podcast, one imagines it will be up on the ZDnet site in the fulness of time.

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Social media for social good #socent

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I discussed Social Media for Social Good at a City of Sydney Talk on 27th June 2012.

It is an important issue.  There are many decrying social media for increasing isolation and disconnection between people.

Social media can be used as a force for social good and social inclusion. Social media is not just about ephemeral amusement, it is also an important way to harness forces for social change and social innovation. In short, it is an excellent platform for activism.

Many people are using social media to create platforms for change around the world and here in Australia.

Probably the example of this that is closest to me is Social Innovation Sydney. Started by three women about two years ago, we’ve hosted events that have connected hundreds of change makers with each other. Our goal was to use social media to find people who are interested in social innovation, and then to hold events that got the change makers together in real life.

We’re not the only ones doing it.  Some other good local examples of social media for social are listed in my slide deck below.


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There's a fraction too much friction! Customers, service, and staff.

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While trawling around on YouTube recently I came across a 1980s video of Tim Finn’s There’s a Fraction too much Friction and it got me thinking about the things that annoy me  in dealing with businesses. I concluded that the source of my irritation is friction.

I have long observed that business has many things in common with war, and friction is probably the thing that most comes to mind as significant in both business and war.

The problem with friction is nicely put by Clausewitz:

“Everything in war is simple, but the simplest thing is difficult. The difficulties accumulate and end by producing a kind of friction that is inconceivable unless one has experienced war.”

This description of the effects of friction in war are eerily reminiscent of dealing with a large business (say for example, one of our large telecommunications companies).

The huge opportunity that the digital revolution offers is to remove friction between different parts of businesses – between customers and staff, between operational silos within the organisation, between groups who are internal and external to the organisation.

Organisations that see and act on this opportunity are the ones that will triumph in the hyperconnected future.

People who see a dedicated niche that they can service seamlessly and effectively will grow their businesses almost without trying, and customers will flock to them.

In this milieu the one-stop-shops that try to do everything – those who previously leveraged scale and centralization – are likely to suffer.  This is because scale creates and does not reduce friction. Only in the past when the friction in having services and products delivered from many smaller suppliers was so great did the one-stop-shops have an advantage.

But now even small organisations can remove friction and deliver seamlessly to their customers using web and mobile applications.

Now organisations are liberated to serve customers in ways that were impossible before ubiquitous internet connected mobile devices.

Big companies that are not already offering effective online services are the new dinosaurs.  It will take only the slightest change in their terrestrial trading conditions for them to sicken and die. Two examples of this phenomenon  worth keeping an eye on are Harvey Norman and David Jones . It will be very interesting to see if they can evolve their business models sufficiently fast to survive.

Reduced information asymmetry is another opportunity offered by this reduction in friction.  In the past companies, especially retailers, had better information about pricing of the good they sold.  Now this asymmetry in access to pricing information is dying. A recent tweet from my friend Mark Pesce exemplifies this new trend:

And US retailer J.C. Penney recently launched a new pricing model:

“J.C. Penney (JCP) is permanently marking down all of its merchandise by at least 40% so shoppers will no longer have to wait for a sale to get the lowest prices in its stores.

Penney said Wednesday that it is getting rid of the hundreds of sales it offers each year in favor of a simpler approach to pricing. On Feb. 1, the retailer is rolling out a three-tiered strategy that offers “Every Day” low pricing daily, “Monthly Value” discounts on select merchandise each month and clearance deals called “Best Price” during the first and the third Friday of each month when many shoppers get paid.”

Source: Daily Finance, 25 Jan 2012 

The results of this pricing experiment are just starting to flow in.  There has been an initial drop in sales revenue but analysts note:

“We believe our findings demonstrate that the strategies announced to transform (Penney’s) business are the right actions to take and will resonate well with consumers over time” (Source: MSNBC, Penney’s pricing strategy takes a toll on sales, 30 Mar 2012)

Against this backdrop it is amusing to see an Australian retailer’s response to market conditions – “David Jones Outlines Strategic Plan to Cut Costs” along with their very late in the day online shopping initiatives. It is especially amusing when one observes one of their chief competitors, Net-a-Porter – saying:

“It’s very easy to copy the look and feel, which people have helped themselves generously to,” Massenet said. “But we have 12 years of building ahead [of other sites] and we are sending out 5,000 orders a day as opposed to 20 orders a day and I think it’s very difficult for a business to keep up with that operationally.”

Source: Sydney Morning Herald, How to create an e-empire, 29 Mar 2012

Net-a-Porter is an excellent example of an organisation that has nailed servicing a niche, delivering good product, and ensuring a good customer experience supported by excellent customer service.

The bar has well and truly been raised for traditional organisations. And only those who work out how to reduce friction and deliver seamless service will survive.

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Connectedness – it's not just a technology thing, it's a people thing

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For many years now my friends, colleagues and I have been talking and thinking about the hyperconnections made available to us by the growth of the internet, telecommunications devices and networks, and social platforms. For a good background on it check out Mark Pesce and Ross Dawson.

But I think that we have reached a state in our evolution as human where the practices of hyperconnectivity have changed the way we are doing, being, and thinking.

Connectedness is no longer about technology it is about people. Our need for connectedness is beginning to transcend the technology. I believe that, even if the internet disappeared tomorrow, our desire for and expectation of connectedness would continue and that the behaviours engendered by the internet will remain to be expressed.

Ian Shafer summed it up nicely recently:

“I think this whole notion of connectedness is more a state of human evolution than rather a generational thing.”
from: Ian Shafer, in Generation C: A new demographic label for marketers by Kai Ryssdal, 24 Feb 2012

Movements like #Occupy and the Arab Spring around the world show that people connecting is more than just a technology thing, although technology has amplified the ability of people to connect across distance.

Human beings don’t want to just engage and connect with brands, a desire to create a world better suited for the beings that inhabit it (and their progeny) is growing and we see real life communities growing.

A good example of this Social Innovation Sydney. It started online but this community connects in real life meetups and the human network creates connections, relationships, and activities far beyond the initial starting point.

If the internet disappears tomorrow how will you be able to find your tribe?

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The evolving power shift and our hyperconnected society

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As we move away from the power structures and ways of thinking that governed the twentieth century we are seeing a desperate rearguard action from the power elites who ruled that time.

Dying Dinosaur Industries in their Death Throes

A good example of this is the film and music industries, whose centralized model of creation and distribution is breaking down.

The proposed US anti-piracy legislation to protect film, music and other intellectual property from unauthorized distribution – SOPA in the House and PIPA in the Senate – has shown deep divides between modern hyperconnected businesses and old world centralized, command-control industries. And it is now reported that the SOPA bill has been shelved after global protests from Google, Wikipedia and others.

The rearguard action by the old industries is also clear in threats against those who fail to support the old industries:

“Consumer group Public Knowledge on Friday accused the Motion Picture Association of America (MPAA) and its head, former Sen. Chris Dodd, of trying to intimidate lawmakers into supporting a pair of controversial anti-piracy bills.

In recent days, Dodd and other top Hollywood figures have threatened to cut off campaign donations to politicians who do not support their effort to crackdown on online copyright infringement.”

Source: The Hill: Consumer group accuses Hollywood of ‘threatening politicians’, by Brendan Sasso, 01/20/12 04:08 PM ET

We are seeing increased efforts from the old guard to control people and their communication. But the genie of a hyperconnected populace is out of the bottle. And it cannot be put back. Even if they remove the internet as we know it – free flowing and accessible to all – we will invoke Gilmore’s Law and route around that damage

The Economy and the Death of the Western Middle Class

The death of these old industries has important implications for society. These industries enabled the creation of a well-off middle class in the latter half of the twentieth century.

But with the digital revolution many the economic drivers that created the twentieth century middle class have disppeared, as outlined in this article about Apple and US jobs.

And even in Australia we are seeing the gradual shift of middle class jobs overseas, as in this recent example from Westpac, Ultimate insult: Sacked Westpac workers forced to train replacements.

It is becoming apparent that even new businesses no longer guarantee jobs like they used to. For example: ‘No new jobs, dollars’ in bulk stores.

The truth about job creation is only now beginning to dawn on us, and we are seeing the inevitable social and economic consequences of transferring work from high cost to low cost economies.

People are even starting to ponder which jobs will disappear next – for example Will these 10 jobs disappear in 2012?

The old industries employed sufficient numbers of the western populace to keep them in comfortable consumerist peace. Their children could afford an education and thus improve their lot in life. The idea that each generation would be materially better off than the previous seemed unassailable.

But now it seems that truth might no longer hold. The #Occupy movement is seeking to bring attention to the economic bifurcation of society between the the very well-to-do and the strugglers.

Embracing the Future

Those who are not trapped in the old model are embracing the evolving world that is fuelled by the digital revolution. They are accepting the dispersed, decentralized, and peer-to-peer future.  The old intermediaries are dying (or are in their death throes), and in their place new ones are arising.

The future is about human beings  connecting with each other. It is about collaboration and cooperation. It is about sustainable growth. And it is about making space for people to create new possibilities unconstrained by the behemoths of centralized command and control.

Author Paulo Coelho summed it up nicely on his blog recently:

“As an author, I should be defending ‘intellectual property’, but I’m not.

Pirates of the world, unite and pirate everything I’ve ever written!

The good old days, when each idea had an owner, are gone forever.

First, because all anyone ever does is recycle the same four themes: a love story between two people, a love triangle, the struggle for power, and the story of a journey.

Second, because all writers want what they write to be read, whether in a newspaper, blog, pamphlet, or on a wall.

The more often we hear a song on the radio, the keener we are to buy the CD. It’s the same with literature.

The more people ‘pirate’ a book, the better. If they like the beginning, they’ll buy the whole book the next day, because there’s nothing more tiring than reading long screeds of text on a computer screen.”

Source: My thoughts on S.O.P.A. by Paulo Coelho on January 20, 2012

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2012: Not the end of the world, but perhaps the end of the world as we know it

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As we come up to the year 2012 many prognosticators are predicting the end of the world. I suspect that this will not come to pass.

But I do think that we are seeing the end of the world as we’ve come to know it during the latter years of the twentieth century and the early years of the twenty-first century. Many of the verities upon which we’ve relied will be falter or disappear.

Doomsayers talk about the Mayan calendar ending in 2012. However, The Guardian kindly reassures us that an “expert” says: Mayan tablet does not predict end of the world in 2012.

No matter what one thinks of these predictions of doom it is clear that we are moving into a new world next year on several fronts, mainly due to the global economic situation.

The economy

The global economy is not looking well – the British, European and US economies are mired in problems that seem insurmountable.  Austerity measures are starting to bite in the UK and Eurozone. We are starting to see the breakdown of normal social bonds. For example, in Greece, there are even stories of parents giving up their children to the state because they can’t feed them: Greek economic crisis turns tragic for children abandoned by their families.

The US is coming up to a Presidential election and the deadlocks between Republicans and Democrats are likely to continue thus blocking any possibility for change. The economic situation in the US does not seem to be improving, in spite of the ‘green shoots’ some speak of.  Instead the charts tell a sobering story (source: Financial Armageddon) for the US:

Australia has been sheltered from all of this by the strength of China, and it remains to be seen if this continues into the coming year.

What can we do?

It seems that there is not a lot we can do as individuals to address these larger global problems.  However, what we can do is adjust our own lifestyle and mindset to better suit these challenging times. Since we are moving into a different kind of world it seems prudent to prepare proactively rather than sit and wait.

We are moving into a world where the rule of law is shifting, where the rights we’ve assumed were ours are being stripped away, where the social contract between the government and the governed is dissolving.

In this kind of environment the only source of solace is individuals who join together to create positive change in the world. We must join together to create a new kind of polity that rejects control and inequity. We must join together to create tribes and communities that embrace peace and reject anger.

Here are some of my thoughts about how we can approach this challenge:

Mindset?

Kindness. Compassion. Love. Community. Dignity. Composure. Peace. Grace. Flow.

Lifestyle?

Find our tribes. Build communities.

Sustainability. Grow a garden.  Simplicity.

Walk with a friend. Slow down. Eat fresh food. Share a meal. Breathe.

Business?

New models. Innovation. Doing good. Creativity. Collaboration. Consensus.

Profit with honour. Nurture people and the environment.

And?

It is good to remember that there is strength in the people when they join together for the common good…

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Worth thinking about: Seven social sins (not about social media) | via M. Gandhi

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No, I’m not talking about social media. This is about real life. And I think that Gandhi summed up a lot of what the #Occupy movement is on about in his note on the Seven social sins.

Politics without principles
Wealth without work
Pleasure without conscience
Knowledge without character
Commerce without morality
Science without humanity
Worship without sacrifice

Naturally, the friend does not want the readers to know these things merely through the intellect but to know them through the heart so as to avoid them.”

Source: Young India, 22-10-1925, p.135 (opens pdf)

For those interested in protest and the #Occupy movement it is really worth reading the writings of Gandhi. He grappled with many similar problems with regards to protest and resistance to civil authority.

This is worth thinking about given the situation we find ourselves in today in the world. At this festive season for many of us it is an interesting question to consider how can we shift away from these seven social sins?

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A tech revolution that changes the way we organize work & the danger of digital serfdom

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The old style company, that is the company circa 1880-2000, had firm boundaries and fixed hierarchies in order to function efficiently. But with the advent of digital technology and the consumer social computing revolution there is a seismic shift in how technology is used within companies. There are also significant changes in worker expectations and, as a corollary, companies are changing their demands upon workers. Huge power shifts are underway and it is important that we start analyzing them now.

The Past

The technology that enabled communication and control of large and dispersed groups of workers was inefficient and required supplementation by human resources in the form a supervisory and managerial hierarchy. Computer resources were initially tightly held by a few individuals within an organisation due to their high capital cost to acquire. And companies had access to much better technology resources than the average individual could ever hope to acquire.

For example, in 1956 a 5MB hard drive from IBM cost US$50,000, and in 1981 a 5MB Apple hard drive cost US$3,500. At prices like these the average person had little opportunity to acquire such technology.

It was this technology asymmetry that also contributed to the non-porous boundaries of the firm. Information stayed inside the firm and was not easy to share. Instead companies were in charge of their information and shared it only on their own terms. And usually that sharing of information occurred through bought or earned media and through ‘official’ news media channels.

The Present and Near Future

Today companies are grappling with the huge shifts in communications. Newspapers and other news media no longer hold the preeminent position they once held. Corporate communications are no longer about faxing out a press release.  Companies are developing their owned media resources and learning to use the diverse earned media opportunities available now via the internet.

Increasingly companies are requiring workers to develop their own social media and social networking personas on behalf of the company.   Also workers are being required to manage corporate social media channels as part of their jobs.  One challenge with this shift in work to social media channels is that they often need tending 24×7. Thus other workers are beginning to feel the operational demands of 24x7x365 operations that those of us in the IT department have felt for many years now.

Another shift is the control over technology within an organisation. In the past centralized control of technology resources was easy due to high cost and complexity to implement. But now with cloud computing as a commoditized service we see the real risk that other departments can go around centralized procurement and IT to implement whatever takes their fancy.

Gartner has just released their vision for 2012 and note that in 2012 we can expect more cloud and consumerization, less IT control.

Increasingly we are seeing workers bringing their own technology into the workplace – smart phones, tablets, and social computing. And articles directed at CIOs are saying: IT’s future: Bring your own PC-tablet-phone to work.

Thus we are at the beginning of a technology revolution in the office that will see the centralized control that was necessary to achieve economies of scale in the last century wane.

Instead we will see the growth of decentralization driven by cost and user demand pressures.  We will also see increased attempts to control behaviour through data and  monitoring due to the growth in the panopticon as I’ve discussed previously.

The Dangers of Digital Serfdom

My buddy Ray Wang posted recently on the right to be offline. We are facing a world of hyperconnectedness in which we can evolve into digital serfs tethered by our digital devices and an un-free as a slave in ancient times.

The risk is that the boundaries between work and personal time become so blurred that they cease to exist. The risk is that employers consider that, with a wage, they have bought our time as and when they choose to consume it any time of the day or night.

The moves to remove penalty rates for IT workers and others also support this trend. Once the unit cost of a worker is standardized an employer does not care what time of day or night they work.

I cannot articulate the concern we should have for retaining this right to be offline any better than Ray:

“There is one thing that I am very worried about actually, is I think it is of the uttermost importance that we preserve the right to be offline. If we don’t preserve that we’ll loose all our freedoms. It starts with ability to be able to escape … of being offline. And so we can be punished for not being offline. For not being online we cannot be punished. It’s happening right now. We are recreating Skynet, we are recreating Matrix, we are recreating all the things that we would fear on our own. And if we can’t protect that basic right of being able to be offline, and being able to conduct a life offline, we’re in trouble. We are in big trouble.”

I commend Ray’s thoughts to you, check out his video:

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