Showing posts with label Innovation. Show all posts
Showing posts with label Innovation. Show all posts

Missing US Innovation: Assisted Suicide On Demand

♠ Posted by Emmanuel in ,, at 7/16/2020 06:10:00 PM
Numbers don't lie: There isn't much to live for Stateside. Healthcare is largely misspent there, so how about the opposite?
The United States is perceived as an innovator leading the rest of the world. Sometimes, its innovations are not necessarily ethically or socially edifying. Witness the emergence of its sprawling prison industrial complex. No other country on earth spends as much on incarceration or throws as many of its own people behind bars. Usually those jailed are us colored people, but that's another discussion for some other time. Suffice to say that fortunes have been made in this industry. Profiting off the misfortunes of others--such as with "private" prisons--is a staple of Americana. Facebook's critics deride it as a hate-for-profit outfit. So, why not innovate by combining the "on demand" nature of video on demand like Netflix, Amazon Prime, etc. with just ending the folly of it all?

Now, it's well-known that the United States stands apart from other OECD (i.e., "developed") countries in having a falling life expectancy the past several years. 2018 was an exception--albeit a very marginal one--when it fractionally rose. Still, 2020 promises to more than wipe out any such gains. The reasons for these declines are equally well-known: radical inequality is causing those left behind--many of whom are Trump voters disaffected with American life, by the way--to harm themselves. Suicides, drug overdoses, and other so-called deaths of despair. In a way, voting for Trump was an act of desperation itself. What sensible reason was there to believe that a serial bankrupt would right the United States' financial situation? Faced with epochal health, financial, and social crises, America is reeling from endless self-inflicted blows by electing this fraudster in 2020. So, those desperate enough to vote for Trump find themselves over worse off.

But I digress. Trump is a symptom, rather than a cause of much of what ails America. I'll get more into America's obesity 'n' indebtedness complex soon enough, but suffice to say that Trump is simply exacerbating already-prevalent US pathologies. Wondering aloud, therefore, why doesn't the United States pioneer assisted suicide on demand? Legally speaking, it's in the same line of thought as another fine US invention, no fault divorce. In short, spare everyone the drama and just get it over with. As believers in the free market, Americans should be comfortable with this service: If the market is always right, then let the laws of supply and demand give adult Yanquis the right to top themselves quick ‘n’ easy. Instead of leaving a physical mess of your guts splattered all over the place, why not make ending it all a quick and convenient process--no questions asked?

2019 set a new Stateside record for drug deaths following a slight drop in 2018 fatalities, which were largely attributable to fewer prescription opioid-related deaths. 2020 is continuing 2019's rising trend, with early numbers suggesting the pandemic is boosting drug deaths. Fentanyl figures large:
Drug deaths in America, which fell for the first time in 25 years in 2018, rose to record numbers in 2019 and are continuing to climb, a resurgence that is being complicated and perhaps worsened by the coronavirus pandemic. 

Nearly 72,000 Americans died from drug overdoses last year, according to preliminary data released Wednesday by the Centers for Disease Control and Prevention — an increase of 5 percent from 2018. Deaths from drug overdoses remain higher than the peak yearly death totals ever recorded for car accidents, guns or AIDS, and their acceleration in recent years has pushed down overall life expectancy in the United States. 

It looks as if 2020 will be even worse. Drug deaths have risen an average of 13 percent so far this year over last year, according to mortality data from local and state governments collected by The New York Times, covering 40 percent of the U.S. population. If this trend continues for the rest of the year, it will be the sharpest increase in annual drug deaths since 2016, when a class of synthetic opioids known as fentanyls first made significant inroads in the country’s illicit drug supply. 
Trumpmerica isn't getting any better, and removing the symptom (Trump) certainly won't be the cure for what ails that country. Almost all health, economic and social indicators suggest things are getting worse. Absent any real hope for change, many are turning to self-harm to end it all in increasing numbers. Americans are masters at profiting from other's misfortunes. In the name of liberty--and commerce, it must be said--this industry is long overdue. As I mentioned, not all innovations are edifying, but some are just...necessary. Aside from being illegal, fentanyl and its ilk represent a messy way of suicide. What's required is something convenient and prepackaged--on demand, indeed.

In post-COVID-19 America, there is arguably no innovation more strangely missing than assisted suicide on demand. [Cue Blue Oyster Cult for mood music.]
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Why India Beat China to Homegrown Smartphone OS

♠ Posted by Emmanuel in ,, at 7/31/2016 01:16:00 PM
Indus OS accommodates the hundreds of millions of Indians who do not speak English.
There's an article in Bloomberg that portrays the success of India's homegrown smartphone operating system Indus OS to harnessing market forces instead of heavy-handed government intervention. To be sure, there are advantages to having one's own operating system instead of relying on off-the-shelf offerings from Apple (iOS) or Alphabet (Android). Aside from being to develop software meeting one's needs and desires, the royalties emanating from software and app sales accrue more to a nation's firms instead of the American tech giants.

Whereas India's Indus OS has overtaken iOS to rank second only to Android through market-friendly adaptations, the Chinese equivalents--there have been many--have been hamstrung by government nannyism and anti-market moves:
For more than 15 years, China has unsuccessfully attempted to come up with a homegrown operating system that would be loved by the masses and allow the country to be freed from the shackles of Western technological imperialism. India has achieved that feat in less than two years. Indus OS is now India's second-most popular smartphone platform with a 6.3 percent market share, behind Alphabet's [formerly Google's] Android.

The multilingual system, one of many based on Android itself, reached No. 2 at the end of 2015 and maintained that position in the first two quarters, according to data released this week by Counterpoint Research. It leads iOS and other Android variants including Xiaomi's MIUI and Cyanogen. 
China, on the other hand, has gotten nowhere with its approach in contrast to the adaptable Indus OS:
China's path toward operating system nationalism is littered with the shells of failures including China OS (COS), Kylin, Red Flag and YunOS. They were all unsuccessful in getting traction for varying but similar reasons that include being pushed by the government or by a corporation with skin in the game. It matters little whether they're for desktop or mobile devices, China has failed at both...

With at least 12 major Indian languages supported, Indus OS has tapped into what the market needs, not what a government wants. That's powerful because it means the software is developing and pivoting according to demand. For example, it offers simplified predictive typing and translation between regional languages.
To be fair, Indus OS is not an entirely "new" operating system but an Android offshoot. That said, there are still advantages accruing to Indian tech and telecoms firms from this difference:
Indus OS also offers carrier billing in its App Bazaar, which means users can pay for downloads via their phone bill, for which network providers likely take a cut. This is a big motivator not only for consumers and app publishers but also for the operators themselves, who are less than happy about being left out of a smartphone party where Android and iOS drink more than their fair share of the champagne.

Since it's in their best interests to have more phones on their networks that will bill through their payment systems, operators have an incentive to promote Indus OS devices. And in turn, smartphone makers have a good reason to develop Indus OS models over Android.
Is it the market (stupid)?
Such success shows how market forces can trump government directives, and the outcome also ends up playing out well for Prime Minister Narendra Modi's Make in India campaign...While Beijing has done a lot to try and wean the country off the dominance of American software makers, India shows that all it really takes is a good product and market forces.
I think this ending statement presents a more nuanced picture. Aside from harnessing market forces like the added self-interest of Indian tech and telecoms firms in developing and refining Indus OS, the end result is software that is better suited to usage contexts of India such as having to accommodate several dialects and such.

UPDATE: The Indus OS blurb neatly explains how it differs from others:
Indus OS is addressing one of the developing world’s biggest challenges – to develop technology to cater to the economic, social and regional diversity. In our mission, we are using the smartphone as the medium to connect the digital world with the masses. We are the first to deeply customize a smartphone experience that meets the real needs of the emerging market’s regional language speaking citizens through innovation, simplification and localization.
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e-Frontiers: Germany vs US in the "Industrial Internet"

♠ Posted by Emmanuel in , at 9/18/2015 04:11:00 PM
On the face of it, the "industrial Internet" is something of an oxymoron. Industry implies manufacturing goods, whereas the Internet implies a weightless economy in which transactions are conducted online. However, there is indeed a competition brewing between two powerhouses in the business of making goods. You have Germany, the world's most renowned manufacturer, seeking to digitally enable its manufacturing base by incorporating Internet-based innovations that smooth out the supply chain, automatically prompt repairs and so on. Then, you also have the United States which is keen on bringing such innovations to the factory floor. GE, for instance, has estimated that the "industrial Internet" can add $10-15 trillion to global GDP.

Who will win? Germany has an arguable advantage in the industrial part, while the US has an advantage in the Internet part. Hence fears that US technology concerns may usurp German manufacturing prowess if Germans don't get to the "industrial Internet" ahead of the US:
“There’s great concern that a Google or an Apple might master the manufacturing world,” says Heinz-Jürgen Prokop, head of development at Trumpf, a family-owned maker of metalworking machinery that’s participating in a [German] program called Industrie 4.0. “It’s important that we try to do it ourselves while we still have the opportunity.”

Industrie 4.0’s alliance of companies, academics, and political leaders was launched by the German government two years ago. The idea was to encourage the small enterprises at the heart of the economy—what Germans call the Mittelstand—to embrace new technologies. Then last year, AT&T, Cisco Systems, General Electric, Intel, and IBM set up a similar initiative called the Industrial Internet Consortium, or IIC.
The goal is not to replace manufactures but again to smooth the process of manufacturing through the use of Internet-based technologies:
Both groups aim to make it easier for machines in factories throughout companies’ supply chains to communicate with one another. The goal: to reduce downtime by anticipating when a factory will have spare capacity or need replacement parts, for example. Built-in sensors will collect all manner of data to better allocate resources, helping manufacturers cut energy use by as much as 20 percent and labor costs by 25 percent, according to consultant McKinsey.

At stake is the health of German manufacturing, which employs 15 million people, about a third of the workforce. By 2020, Industrie 4.0-related projects will account for half of capital investment by German manufacturers, or some $45 billion, according to PricewaterhouseCoopers. Globally, investment in the industrial Internet will top $500 billion a year in 2020, up from $20 billion in 2012, researcher Wikibon estimates. To avoid falling behind, the “Mittelstand must maintain contact with the customer and not lose out” to software companies that might end up with valuable market data, says Volker Treier, deputy head of the German Chambers of Commerce & Industry.
Given the size of manufacturing in Germany's economy, it's arguably the party with more to lose. OTOH, the less manufacturing-intensive US has more to gain by devising such technologies ahead of the Germans.
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Dr. Dre's $70M USC Innovation School, Gangstas & Race

♠ Posted by Emmanuel in ,, at 11/08/2014 01:30:00 AM
Dig USC President Max Nikias trying to get down with Dre.
This is an interesting idea for innovation in higher education: is gangsta rap impresario Dr. Dre your idea of a college benefactor? He doesn't have a doctorate as his name would suggest or even a college degree, but then again, nor do Steve Jobs, Bill Gates and Mark Zuckerberg--who nonetheless gained ideas for their companies from attending college. As pop music listeners of a certain age know, the mean streets of Compton, CA were his university of life. Nor is he politically correct since he helped establish the template for gangsta rap which glorifies ostentatious displays of wealth obtained by means fair and foul, maltreatment of women, violence towards police, gang violence, drive-by shootings and the copious consumption of hallucinogenics. What sort of "higher education" does gangsta rap impart, exactly?

And so it was with great interest that I came across a WSJ article discussing the $70 million "Jimmy Iovine and and Andre Young Academy for Arts, Technology and the Business of Innovation," funded by the sale of the Dr. Dre Beats headphone brand to Apple. How gangsta rap culture has moved into the mainstream is an interesting phenomenon. Together with legendary pop producer Jimmy Iovine, they claim to reinvent innovation studies:
Iovine and Dre know about changing the game. For two and a half decades, Iovine, 61, was the head of Interscope Records (later Interscope Geffen A&M), where he helped oversee the careers of U2, Lady Gaga, Gwen Stefani and the Black Eyed Peas. Dr. Dre, 49, is a legendary producer with six Grammys and hundreds of millions in sales to his name, who has helped guide proteges such as Snoop Dogg, 50 Cent and Eminem. Together, they launched their company, Beats Electronics, in 2008, building it from a start-up headphone manufacturer with cool celebrity endorsements into a technology brand so lucrative that Apple recently paid $3 billion for it. Now Dre and Iovine are using $70 million to fund their school.

As Iovine explains it, the school is as much an investment in their own future as it is philanthropy. “We wanted to build a school that we feel is what the entertainment industry needs right now,” he says. “There’s a new kid in town, and he’s brought up on an iPad from one and a half years old. But the problem with some of the companies up north [in Silicon Valley] is that they really are culturally inept. I’ve been shocked at the different species in Northern and Southern California—we don’t even speak the same language. The kid who’s going to have an advantage in the entertainment industry today is the kid who speaks both languages: technology and liberal arts. That’s what this school is about.

“The problem with the school system is that a lot of it’s cookie-cutter,” he adds, “so what we’re trying to do is disrupt it a bit.” In other words: They’ve revolutionized hip-hop. They’ve revolutionized headphones. Now can they revolutionize college?
I. In a celebrity-obsessed age, I doubt that being a gangsta rap star is a useful credential for teaching "innovation." After all, what is so innovative about being misanthropic and misogynistic? Such attitudes have been around since the time of the cavemen. Then there are Dr. Dre Beats headphones themselves. While their bottom-heavy sound is popular with the rap crowd, they are strictly speaking not "high fidelity" electronics that advance the state of consumer electronics but marketing-heavy gimmicks. They are exactly like those boomy subwoofers on annoying cars that go to 120 dB. They are certainly L-O-U-D but quite inaccurate. If Dr. Dre is "innovative" because of something you and I can easily do by turning the "bass" knob all the way, what's next, Justin Bieber teaching marriage and family therapy at USC? He has even better credentials since he has more Twitter followers and has pics with Floyd Mayweather Jr. in them, right?

II. There is also the thorny matter of the host institution itself, the University of Southern California. The neighborhood of USC is a rough-and-tumble sort which has gained recent attention for the fatal beating of a Chinese student. (Compton is also nearby.) In response, the USC campus is being highly securitized to guard against precisely the sorts of downtrodden gangstas Dre used to rap about before "going legit." It's one thing to act white, but it's another thing to give millions to those who represent an establishment more interested in isolating USC from gangstas instead of promoting community outreach. After all, Dre's bio proudly proclaims on this school's website:
Born Andre Young in Compton, Calif., artist, producer and entrepreneur Dr. Dre began his career as a member of the World Class Wreckin’ Cru. In 1986, he co-founded N.W.A. [Niggaz Wit Attitude] and won critical and commercial acclaim with the group’s 1988 landmark rap album Straight Outta Compton. In 1992, Dre released his solo debut, the G-Funk masterpiece The Chronic, which Rolling Stone hailed as one of the greatest albums ever made. In 1993, Dre produced the solo debut of rapper Snoop Dogg, which spawned the worldwide hip-hop hit, “Gin and Juice.”
How things change when the guy who co-penned "F--k the Police" about shooting cops is now helping fund the same cops who do their best to keep brothers from the 'hood away from the USC campus. If rapping about killing law enforcers is a laudable item on the CV, why is he showering money on USC of all places which symbolizes racial divides in Los Angeles?
The questions become even more poignant in light of complaints from USC students about racial profiling occurring on campus.   During a recent campus party, the LAPD sent nearly 80 police officers in riot gear with a helicopter to break up an event that was full of African Americans.  The police were responding to noise complaints and are not known to have ever responded with this much force to a white party on campus.  Even the white students at a similar party across the street were stunned to see their fellow students in handcuffs.
The African-American community did not receive this news so well, either. What sort of precedent Dr. Dre sets is unclear. Despite his faults, Barack Obama set a positive role model in staying away from drugs and crime while working and studying hard to reach the pinnacle of American society. Dr. Dre, on the other hand, glorifies black-on-black crime, the murder of police, physical abuse of women, drug use and so forth. By taking so much of Dre's money, does USC condone the actions Dre raps about? Conversely, has Dr. Dre "sold out" to the white establishment? Having come from an academic institution that has had its name sullied by money taken from dubious sources, all I can say is that they've both been warned. As one of the rapper's most popular numbers went:

A young nigga on the warpath
And when I'm finished, it's gonna be a bloodbath
Of cops dying in LA
Yo Dre I got something to say

BTW: those interested in accurate-sounding music playback do not take Dr. Dre Beats with their boompa-boompa sound any more seriously than gangsta rap lyrics.
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Watch Out, Evita: Imelda Marcos, the Musical

♠ Posted by Emmanuel in ,, at 10/20/2014 01:30:00 AM
Sometimes 2000 shoes just ain't enough.
David Byrne should be familiar to 80s music fans as the Talking Heads frontman of "Burning Down the House" fame. Together with Fatboy Slim, they have turned their 2010 double concept album Here Lies Love loosely based on the life story of Imelda Marcos into a London musical. (I've listened to the album and it's far from an audio biography of the Imeldific one's life story.) Never far away from the headlines, Mrs. Marcos recently returned to the limelight when the Philippine government seized artworks allegedly by Picasso, Gaugin and others. (She recently denied they were purchased using money looted from government coffers.)

Fortunately, the musical makes itself clear on being about Imelda Marcos by adding a number of biographical details which plot her rise from obscurity to global icon and the downfall which came. To be sure, some details do not quite ring true as you'd expect from two rich white guys envisioning what happens in a poor country, but they're close enough. I've been following the development of this musical for some time, including the casting call in Manila for additional actors. Even musicals, however, are subject to innovation: Melding Mrs. Marcos' love for disco dancing and Filipinos' penchant for Catholic religiosity was bound to have interesting consequences, and the musical seems to deliver on this front. Imagine, then, Philippine history as dancefloor extravaganza:
It takes Imelda and Ferdinand Marcos – for a while, the Asian Kennedys, then more akin to the Ceaucescus in their tyrannic corruption – from Imelda's 1950s rise from the humiliatingly poor side of a family of consequence through to the moment in 1986 when – after 14 years of Martial Law and a short entirely peaceful People Power Revolution – the couple were airlifted out of the country by US marines.  The rescue is realised here in a juddering frenzy of white light: Close Encounters crossed with a berserk parody of Pentecost. Imelda's epic partiality to shoes was only discovered subsequently (1060 is the attested number found) and it's typical of the strange, admirable rigour of the piece that its makers have forborne to make capital of the phenomenon.  
As for the political economy of it all, how does Here Lies Love compare to the benchmark for these things, Andrew Lloyd Webber's Evita? At this point there is no real standout number like "Don't Cry for Me Argentina," but the newer production may benefit from being more attuned to historical circumstance and observation of power dynamics in the rise and fall of Imelda. (Perhaps "Rose of Tacloban" gains resonance after the devastation wrought on Imelda's hometown during Typhoon Haiyan.)
The inescapable comparison is with Evita.  Here Lies Love is, to my mind, politically cannier and sharper about the queasy, telling  overlap between manipulative-diva worship on the musical and on the political stage.

And it moves to its devastating conclusion through the artfully deployed metaphor of disco – one of Imelda's passions in her spendthrift sojourns in the Big Apple.  Overhung by a vast glitterball (she had one in her New York townhouse), the Dorfman [Theatre] has been transformed into a churning, thumping miniature Studio 54.

The packed punters on the ground level are chivvied and manouevred by a live DJ and his helpers around adaptable acting areas: among them, a squatly cruciform central platform, handy for preening photo-ops
I've attended a fair number of musicals. In none of them have they asked you to, well, get up and dance. As a production in a capitalist economy, audiences are in constant need of novelty. Why not be part of a live disco act about Imelda Marcos replete with DJs in full Studio 54-style pomp? It's an intriguing concept that may herald more musicals eliciting more active audience participation.

Interesting stuff. When Mrs Marcos' days on earth come to and end, her tombstone will read, "Here Lies Love."
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Bitcoin Crashed, But Will Apple Pay Take Off?

♠ Posted by Emmanuel in , at 9/16/2014 01:30:00 AM
You're showing your age if you remember "master charge" (all small caps).
I'm kind of surprised Apple didn't name its payments service "iPay." It could have eased the terminological transition to lending, "iOwe," and the unfortunately common American phenomenon of being unable to pay debt on time, "iDefault"--which, in direr circumstances, leads to the state of being "i(M)Bankrupt." All kidding aside, "Apple Pay" is an expected development that nevertheless holds much promise, the first emanating from it being an Apple service and the expectations people have that it will have a higher chance of success in the company's Reality Distortion Field. 

Apple's fearsome reputation aside, Apple Pay also deals with many of the obstacles which render Bitcoin a non-starter. To wit, I enumerated the following not so long ago:
  1. Has this payments service addressed legal impediments to payments handling such as (a) occupying a grey area questionable by monetary authorities, and (b) meeting anti-money laundering / counter-terrorist financing legislation worldwide or AML-CTF?
  2. Would mainstream banks course their transactions through this payments service?
  3. Would mainstream retailers accept its payments?
  4. Would consumers use this currency secure in the knowledge that (1)-(3) are met?
Apple is usually quite comprehensive in ticking the boxes, and its relatively late entry into the payments arena is largely attributable to performing due diligence on these four factors in a way the upstart outsider Bitcoin hasn't. In other words, it meets the three necessary characteristics of money as a store of value, medium of exchange, and unit of account--especially the first two. Given how Apple's fashionably late entries into the music and mobile telephony spaces have revolutionized those categories, the FT is predicting the same for payments. At the outset, all the major players all already lined up:
But such is the sway of the tech company that JPMorgan, Visa and the other banks and payments networks sent senior executives to Mr Cook’s presentation on Tuesday to pay homage. Bank chief executives fawned about the “exceptional customer experience” and the “exciting move”.

They are also paying hard cash for the privilege of being involved: 15 cents of a $100 purchase will go to the iPhone maker, according to two people familiar with the terms of the agreement, which are not public. That is an unprecedented deal, giving Apple a share of the payments’ economics that rivals such as Google do not get for their services.
How about this for a star-studded lineup of the Who's Who of American finance:
The list of early Apple Pay partners is impressive, including the 11 biggest US card issuers, representing 83 per cent of the market, and retailers such as McDonald’s and Walgreens which together have 220,000 US stores ready to receive iPhone payments. While it lacks retailers such as Walmart and Best Buy, which in 2012 teamed up to develop a mobile wallet of their own, Apple’s ability to wrangle representatives from three big groups of the payments world – banks, credit card companies and merchants – is no mean feat. 

Part of the reason the 50-year-old credit card system remains “antiquated” is because it relies on a complex ecosystem of players that rarely agree on how best to change their industry. However the chief executive of one payment technology company, who asked not to be named, said he was surprised that the banks were so willing to concede to Apple after what happened to the record labels.
Actually, the FT article is useful in understanding how this situation will unfold if Apple Pay is successful, which is by no means guaranteed. There have been, after all, several Apple flops over the years. Let's begin with the head of the credit chain: Banks, strictly speaking, are not endangered unless Apple decides to go into the business of providing credit, which I doubt. Ditto for mass and specialist retail. So, they are relatively safe since Apple has little reason to go into their lines of business.

However, there is a case to be made that the existing payments handling services--Visa and MasterCard--are likely to feel the squeeze. What they do is facilitate payments--on credit or debit--from existing bank accounts. In effect, Apple Pay fulfills the very same service as Visa and MasterCard do. Since terms are undisclosed, what will determine whether Apple Pay supplants Visa & MC are the following:

1. Swipe fees per transaction being lower for retailers via Apple Pay than Visa/MC;
2. Royalties per transaction paid by banks to Apple Pay being lower than Visa/MC; and the hard part:
3. Apple Pay handling transactions outside of Apple-branded consumer devices.

Mind you, (3) has already happened with iTunes for Microsoft Windows being a notable example, so I'd be very uncomfortable if I were Visa/MC right about now. Sure Apple is playing nice, but cutting Visa/MC out will become a more realistic proposition as more payments are coursed through Apple Pay and reach critical mass. If Apple is already the middleman, there is certainly no need for another to pile on more fees for banks and consumers alike.

At present Apple will not charge retailers anything, only banks:

Apple declined to talk with Digital Transactions News about Apple Pay’s pricing or operational aspects. But clues can be found in the Web site it created for software developers working on applications for Apple Pay. The “Getting Started” section poses some common questions, including, “How much does it cost to accept Apple Pay?”

Here is how Apple answered its own question: “Apple does not charge users, merchants or developers to use Apple Pay for payments. Your credit and debit transactions will continue to be handled by the payment networks.”
Translation: Apple will not upset the Visa/MC gravy train just yet, but in time, what's there to stop it from approaching retailers offering to do (1) and banks offering to do (2) and cutting the existing payments services altogether? What they currently enjoy is brand recognition: both Visa and MasterCard are global top 100 brands. But guess what? Apple eclipses them both by a huge margin in valuation. Remember Nokia? It too used to appear on this list with regularity--until iPhone came around.

MasterCard, in other words, may soon be joining "master charge" in the Great Cash Register in the Sky.
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Social Media is a Wasteland, Corporate Edition

♠ Posted by Emmanuel in , at 7/03/2014 11:07:00 AM
Will Facebook and Twitter "save" America? you must be joking.
You may say it's rich for someone with an online-only presence to say that "the Internet doesn't matter," but even the somewhat more qualified "...but social media does" doesn't say much. To demonstrate the futility of the Internet in generating economic growth, much less any sustained prosperity, we can always resort to that poster country for downward mobility, the United States. Having gone nowhere since the turn of the millennium, it's easy to debunk triumphalist claims that the Internet "changed everything." Ever-so-delusional Americans seem to gradually grasp the obvious that future generations will be worse off than they are as median household incomes fall year in and year out. Isn't the new economy reviving America? We can now use its laughable ineptitude to disprove the even hoarier idea that social media matters. Hype aside, how do Yanks really view it?
When many companies joined Facebook in the late 2000s, they used it as another brand website where they provided links, contact information and monitored consumer gripes. Then, they got caught up in the numbers game, trying to rack up raw masses of fans and followers, believing they were building a solid marketing channel. But that often wasn't the case. Social media are not the powerful and persuasive marketing force many companies hoped they would be," concludes Gallup Inc., which on Monday is releasing a report that examines the subject. 
How lame is social media? In their poll, Gallup [summary here] found that nearly two-thirds of consumers didn't consult social media while making purchases.
Gallup says 62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions. Another 30% said it had some influence. U.S. companies spent $5.1 billion on social-media advertising in 2013, but Gallup says "consumers are highly adept at tuning out brand-related Facebook and Twitter content." (Gallup's survey was conducted via the Web and mail from December 2012 to January 2013. The survey has a margin of error of plus or minus 1 percentage point.)
The story is largely the same worldwide. Facebook, Twitter, blogs, QR codes...pretty much useless and not taken seriously:
In a study last year, Nielsen Holdings NV found that global consumers trusted ads on television, print, radio, billboards and movie trailers more than social-media ads. Gallup says brands assumed incorrectly that consumers would welcome them into their social lives. Then they delivered a hard sell that turned off many people.
To have spent so much on social media to discover that, gee, people put more stock in old media is pretty pathetic. Social media reflects its inventors, the Americans--much hype, little substance. (No wonder the  Obama likes it so much.) Don't get me wrong: the Internet in general and social media in particular is great for wasting time and writing about how globalization is subprime--which it really is. But for more serious endeavors--like raising productivity--it is seriously lacking.
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From Where Does Silicon Valley Import Its Brains?

♠ Posted by Emmanuel in , at 6/20/2014 02:00:00 AM
There's an excellent infographic over at Businessweek on where its workforce comes from both inside the United States and outside of it. There are some highly interesting results: First, Mexico more than any other country or state provides the most human capital to Silicon Valley. Second, the Philippines is, after Mexico, the second-largest provider of human capital to the area. However, why is it that you rarely hear of startups from folks from those countries? Odd. By contrast, India ranks only ninth in terms of headcount, but it matters rather more in the overall picture since a third of all startups there are headed by Indian entrepreneurs.

When viewing the infographic, I am reminded of the excellent research of AnnaLee Saxenian on the link between migration and technological innovation. Her pioneering work in this area remains Silicon Valley's New Immigrant Entrepreneurs that established the case that anti-immigrant xenophobia ultimately harms the United States' future economic prospects. #7 China and #50 Taiwan are also important in the sense that many Chinese who gain experience working in Silicon Valley often apply their skills once they return. Together with the Indians, they form the backbone of another study of hers on transnational communities and the evolution of global production networks.

Good stuff.
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(Labor) Terminator: (Coming) Rise of Drone Ships

♠ Posted by Emmanuel in , at 4/13/2014 10:14:00 AM
Where's the 'bridge'? Getouttahere!
The shipping industry's importance to global trade cannot be overstated. Depending on your source, 80-90% of all traded goods are exchanged via shipborne transportation. Hence the only slightly inaccurate title of Rose George's recent book on shipping being an "invisible industry," Ninety Percent of Everything. (Obviously, not all goods are traded.) In the quest to bring us ever lower-priced goods, shipping lines have done a lot to circumvent developed world regulations. The advent of flags of convenience or registering vessels not in the countries of the ships' ownership is a case in point. Flying a Panamanian or Liberian flag skirts all sorts of developed world regulations concerning environmental and labor standards. To illustrate the latter, somewhere between a quarter to a third of all seafarers come from the Philippines. They earn rather less than their Greek or Cypriot counterparts.

That said, labor still constitutes the largest expense for shipping firms. I suppose, then, that it would only be a matter of time before drone cargo ships enter service. Heck, if murderous Yanquis rain death from the skies the world over without any regret, what's the particular difficulty in manning ships remotely? Rolls-Royce--the engine maker, not the car brand which has been sold to BMW--has the latest in this line of innovation:
Rolls-Royce’s Blue Ocean development team has set up a virtual-reality prototype at its office in Alesund, Norway, that simulates 360-degree views from a vessel’s bridge. Eventually, the London-based manufacturer of engines and turbines says, captains on dry land will use similar control centers to command hundreds of crewless ships. Drone ships would be safer, cheaper and less polluting for the $375 billion shipping industry that carries 90 percent of world trade, Rolls-Royce says.

They might be deployed in regions such as the Baltic Sea within a decade, while regulatory hurdles and industry and union skepticism about cost and safety will slow global adoption, said Oskar Levander, the company’s vice president of innovation in marine engineering and technology. “Now the technology is at the level where we can make this happen, and society is moving in this direction,” Levander said by phone last month. “If we want marine to do this, now is the time to move.” 
Big money is behind this project as cost considerations come into play:
The European Union is funding a 3.5 million-euro ($4.8 million) study called the Maritime Unmanned Navigation through Intelligence in Networks project. The researchers are preparing the prototype for simulated sea trials to assess the costs and benefits, which will finish next year, said Hans-Christoph Burmeister at the Fraunhofer Center for Maritime Logistics and Services CML in Hamburg... 

Crew costs of $3,299 a day account for about 44 percent of total operating expenses for a large container ship, according to Moore Stephens LLP, an industry accountant and consultant. 
The article goes on to discuss the safety concerns--hacking, terrorism and so on--but I do not believe them to be insurmountable. In time, our grandchildren will probably not be pondering about what to do with drunken sailors in song but rather hacked drone cargo ships!
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PRC & IP: Imitation, Flattery, Copycat Culture

♠ Posted by Emmanuel in , at 2/16/2014 09:32:00 AM
There's an interesting article from the Commonwealth publication Global: The International Briefing which goes into that age-old question of why the Chinese are not especially innovative despite having the world's second-largest economy. In short, why are there no globally-recognized Chinese brands? Also, why are many indigenous Chinese products and services me-too efforts without any real distinction from what everyone else makes?

These two questions have spawned alarm about Chinese development. First, there is little value-added in churning out commodities, possibly ensuring that Western concerns will continue to dominate in terms of where the real money is made--branding, design, and marketing. Second, China may be making itself vulnerable to legal challenges on the intellectual property front. Anyway, to the oft-cited socio-cultural roots of imitation:
China’s existence is premised on these calculated approaches to life. To succeed in public life in the past, the state originated a civil society exam-based system conducted at every level of the Chinese administrative hierarchy – after all, the highest civil status below the emperor was often the ‘grand tutor’ – and if these rigid examinations were passed at a series of levels, then the student was qualified to rise up the imperial chain. Most of these tests – just like the Chinese language itself – are premised on memorising, uniformity and repetition. With such foundation stones laid to honour the art of duplication, it is hardly surprising that it has been hardwired into the social system.

This is reinforced by the traditional master-student relationship within schools and universities where, all too often, copying is the default position. Students at university will regularly copy out essays from the internet and present them, uncited, in all innocence. In their view, there is nothing wrong with plagiarising the ‘correct answer’ from a respected expert, instead of spending time trying to give their interpretation of the answer that could be wrong. Seen through Chinese eyes, copying is not only sensible, but it is a symbol of respect for authority and, importantly, it is a way of passing the test.
There is thus an innate conservatism in how the young are taught. Take, for instance, architecture:
China’s social structures, policies and perceptions are engineered, as far as possible, so that new ideas do not rock the boat – at least, that they do not undermine the leadership position of the party. Unsurprisingly, the education industry lays the ground rules by rigidly teaching children to copy, to repeat, to trace.

School students, for example, learn an impressive set of artistic skills, but after years of study each student has merely learned to draw the same object for days and weeks until they ‘succeed’ in the acceptable portrayal of the object. They have been taught to draw particular objects – and only these objects – in a ‘correct’ way. For them, the aim is to ‘get it right’ rather than ‘have a go’. As a result, the system is designed to reinforce a process of engaging people to hone visual memory and regurgitation: it is but a short step to architects copying alluring Western projects.
It's a spin on the idea that imitation is the sincerest form of flattery, but IP laws unfortunately mean that those being copied do not necessarily see this as a compliment.There is hope, though: since the state is omnipresent in Chinese life, there is probably no better way to begin recognizing innovation than through administrative fiat:
It was fewer than ten years ago that China changed the country’s constitution to enshrine private property rights. Nowadays, the China Daily newspaper even has an IP channel that provides comprehensive reports on current and future trends in IP development in China. As part of this professionalised approach to patent rights, for instance, anyone – from a foreign company or an individual – who contributes to a patented invention that is made or completed in China is eligible for the Chinese government inventor reward and remuneration for abuse of these property rights. There has been a spate of legal cases recently, such as the defendant in Suzhou who was sentenced to a year in prison and a US$12,000 fine for counterfeiting Louis Vuitton and Gucci trademarks. But nobody is stealing too many Chinese design secrets… yet. 
There are promising signs in other sectors. For instance, Chinese smartphone brands are doing well at home even against the likes of Apple and Samsung, and it is probably a matter of time that they will tackle foreign markets too with designs that are value precisely because they are Chinese-designed.
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Why Eastern Europe Spanks US in Software Development

♠ Posted by Emmanuel in ,, at 6/01/2013 02:31:00 PM
Last Thursday our home computer running Windows XP was infected by a fairly old autorun.inf virus. For, we accidentally brought home an infected USB thumb drive from the workplace, which has computers running unpatched versions of XP. Unfortunately for us, we were also running copies of Microsoft Security Essentials for our antivirus, which I belatedly found out to be a pincushion for viruses that detects next to no threats. It took me hours to find a solution to cleaning up our infected home computers, and one of the programmes I found most useful was Bitdefender's USB Immunizer. Seeing how well it worked, I became curious about their antivirus software and discovered that it was very highly rated. (I guess that shows you how much I knew about antivirus programmes...)

So Bitdefender Free is now our antivirus programme of choice for an XP and a Vista machine we still find useful despite their age. Though I did not know it at the time, it turns out that Bitdefender is a Romanian firm. By coincidence, I too am playing a video game from a Hungarian developer right now, The Incredible Adventures of Van Helsing. While rather derivative, it boasts offbeat humour of its own along with class-leading graphics. As with most things, it is no accident that Eastern Europe is becoming a hotbed of software development since these are not isolated examples. Avast! antivirus from the Czech Republic has literally topped Download.com's charts for years and years. Video game enthusiasts should also be familiar with Polish CD Projekt's Witcher 2 from a year and a half ago that won a lot of "Game of the Year" plaudits from critics.

To be sure, Eastern Europe' emergence as a hotbed of software development has been a long time coming. The educational systems there are strong in science, engineering, technology and math (STEM )subjects--partly as a reflection of the Warsaw Pact era (go ask Google's Sergey Brin). As early as 2007, Eastern Europe was already being touted as the next India. As far as Western Europe is concerned, instead of outsourcing to India, some have found it more convenient to "nearshore" to Eastern Europe where both physical and cultural distance are not as great. Indeed,  2013 may be the year Eastern Europe gains the attention it deserves with such outstanding software titles becoming evident to the global community of computer users.
  
In the past, I've written about the challenges Asians have--China and India especially--in creating homemade brands with global recognition. With all due respect to our Indian colleagues, they haven't developed antivirus software or games of their own recognized in global markets unlike the Eastern Europeans. By contrast, the latter have the chops in incorporating their culture into their products and they know how to market these worldwide. Just as the Chinese are very good at manufacturing goods to others' specifications, the Indians are obviously talented when it comes to programming software tailored to specified needs. However, when it comes to incorporating folk tales into cutting-edge video games alike Witcher 2--or devising tongue-in-cheek Diablo knock-offs like The Incredible Adventures of Van Helsing--let's just say us Asians aren't quite there yet in terms of branding and marketing. Nor are we in the running for most downloaded (Avast!) or outright best-performing antivirus software programmes in the world (Bitdefender).

The post title also said something about Eastern Europeans spanking the Yanks in software development. I have already alluded to the incredibly poor performance of Microsoft Software Essentials, but as it turns out, it is the absolute worst at virus detection, bar none. (Yeah, go America!) As for video games, the US er, "boasts" of having the world's largest game publisher, Electronic Arts. For two years in a row, though, it's been named not just America's worst video game company but its absolute worst company, period. Microsoft and Electronic Arts are miniatures of modern-day America: having been innovative firms in the past, they've since grown fat, dumb and happy. Meanwhile, there are dozens of lithe, hungry, and infinitely more deserving software labs in Eastern Europe literally waiting to spank these moribund American giants.

They say competition improves the breed, and I'm certainly glad that our choices are not limited to US crapware. Hopefully, these Eastern European upstarts can show the Americans how fat, dumb and happy they've become before it's too late.

Just imagine how much better Windows 8 would have been if the task of developing it were left to the Eastern Europeans...we can only hope for a better world of computing.

UPDATE: Other antivirus test results are of similar opinion in that Bitdefender is tops, while Microsoft Security Essentials is deemed (gasp!) non-competitive.
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Apple & Samsung: Who's Got Whom by the Balls?

♠ Posted by Emmanuel in ,,,, at 1/17/2012 01:08:00 PM
[NOTE: For those who don't get the title, play this AC/DC song.] There are two broad debates going on regarding the current dominance of Samsung in the consumer electronics space. First we have the perennial question about the role of industrial policy for its success. Widely lauded for being a source of South Korea's competitive advantage during its rise to "Asian tiger" status, industrial policy was subsequently derided as a mechanism for harmful corruption during the Asian financial crisis. Surely there are those who criticize the continued state favoritism shown towards chaebol and its effective stifling of the emergence of smaller, nimbler Korean startups.
Me? I say the results speak for themselves.

Second and more interesting to me at the moment is the ongoing legal battle being waged by Apple against Samsung. At the same time that the Korean firm manufactures a number of the components used in the Apple iPhone, it makes its own line of smartphones. Samsung has been very successful in this regard, overhauling Apple as the world's largest seller of such devices in Q3 2011. Samsung's explanation for this strategy is that being a parts maker and a branded seller helps achieve economies of scale which it otherwise would not have had if it did not spread development costs to other customers. On the other hand, Apple is very much in line with the modern vision of an American "knowledge economy" firm that does not concentrate on manufacturing (the gritty stuff whose value-added tends to fall over time) but on branding and design (the glamorous stuff whose value-added tends not to fall). That is, who wants to be stuck with plant, property & equipment when they eventually become obsolete--isn't it worth a lot more "up there" in your head?

In many ways it's a next-generation debate between those who see the "knowledge economy" or a broader shift towards services as a source of comparative advantage (especially Americans) and those who perceive that industrial policy is still viable in the 21st century with tweaks here and there (especially Asians). Yet to paraphrase an ad slogan from long ago, Korea no longer practices its grandfather's reverse engineering but one wherein it sets the pace in new industries ahead of its Western competitors. It has certainly done well in this regard during the 21st century with bets that have paid off:
In 2000 Samsung started making batteries for digital gadgets. Ten years later it sold more of them than any other company in the world. In 2001 it threw resources into flat-panel televisions. Within four years it was the market leader. In 2002 the firm bet heavily on “flash” memory. The technology it delivered made the iPhone and iPad a reality, and made Samsung Apple’s biggest supplier—and now its biggest hardware competitor.
Or so the Koreans would like to think. As you know, Apple has taken Samsung to court over, indeed, copying the look and feel of its products (imitation is the sincerest form of flattery and all that):
Competitors also balk at the way that Samsung scales up quickly to supply parts to other firms as well as to price its own gadgets keenly. Supplying the rest of industry drives down Samsung’s costs yet further, with its rivals in effect financing its success. This strategy can create problems. Samsung is Apple’s most important supplier in the smartphone and tablet-computer markets. Samsung components, which include all the product’s application processors, account for 16% of the value of an iPhone. It is also Apple’s greatest competitor in those markets. Apple is now suing the socks off the company for copying the look and feel of its products. At the same time it is urgently seeking new ways to diversify its supply chain.
There may thus be limits to the symbiosis said to be going on between these firms. Apple may want to broaden its component supplier base in case Samsung tries to get back at it for legal contretemps. Meanwhile, Samsung may want to devote more attention to the software side as the hardware side of the consumer electronics equation. That is, an amount of overlap in expertise is perhaps inevitable for each to maintain competitiveness vis-a-vis each other. While the Economist views this relationship as rather unique, B-school professors Brandenburger and Nalebuff already noticed how widespread the phenomenon of "co-opetition" was back in 1997 when Steve Jobs had yet to sell a single iProduct (having just rejoined Apple). Been there, done that, saw the movie, bought the T-shirt.

Returning to the post's title, who has whom by the balls? In the short term it's to an extent mutually assured electro-destruction if either backs out in a significant way. In the long term it's probably not a question we will be asking as Apple seeks to broaden its supplier base and Samsung does what it's done many times before and moves on to other industries it deems more promising--which are not necessarily those in the consumer electronics space. Remember, Samsung was not originally a consumer electronics company. Tis but a momentary convergence of interests.

That said, the broader debate on the prospects for the "knowledge economy" which America has in large part bet its economic future on compared to those for the reworked conception of industrial policy which Asian nations have staked a claim to should be interesting to watch. Who says both cannot work--and purchase stocks of both firms to diversify one's portfolio? More importantly from a political economy perspective, which specific strategy will be most beneficial to their home nations? I've already criticized the Apple model for not doing much that is good for America, for instance.
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Why Aren't There Famous Chinese, Indian Brands?

♠ Posted by Emmanuel in ,,,, at 11/02/2010 12:01:00 AM
A very fair criticism I do understand as an undergraduate and masters level business major is the non-emergence of internationally recognized Chinese and Indian brands. While there is no shortage of world-renowned German (think automakers) and Japanese (think automakers and consumer electronics) makes, there are no real Chinese brands with similar name recognition, let alone one amongst Interbrand's Best 100 Global Brands in terms of valuation. It is very odd, don't you think, that the world top merchandise exporter which surpassed Japan and Germany in fairly quick succession during the past couple of years has singularly failed to develop recognizable brands. To no small extent, the South Koreans have managed this feat with Samsung (#19--my favourite brand and that of the computer I'm pecking away at right now BTW) and Hyundai (#65). Taiwan is no slouch either. While not on the list just yet, the likes of Acer and Asus do ring a bell among the electronic hardware cognoscenti. While India's rise has not been as rapid as that of China, something it shares with the PRC is a lack of recognizable brands.

A reply I've used in the past is that it is very expensive and time-consuming to build brands. Hence, firms from both countries may have thought it better to buy established brands. So if you can't build 'em, buy 'em! A few years back now--my blog is becoming "venerable"--I discussed the phenomenon of "reverse colonization" wherein Indian concerns were buying up British marques at a rapid clip. Think of the Tata Group which I like to think of as "ICME": Indian Company Making Everything for those of you weaned on a steady diet of Road Runner cartoons. Especially for Anglophiles, don't the names Tetley Tea, Jaguar, and Land Rover ring a bell? The same holds for China to some extent with the example of Lenovo buying the rights to use the IBM name together with its ThinkPad line of laptops.

However, these examples should not obscure the broader fact that a lack of recognizable brands is truly a handicap with IPE implications. Most of the value-added in the global supply chain emanates from higher-level, intellectual property-heavy concepts such as branding. Indeed, many global corporations like Apple are little more than a logo stamped on products largely manufactured elsewhere to their spec. With labour and other manufacturing costs in China not bound to stay at a permanently low level forever, there is certainly pressure to move towards these value-added upper echelons of the supply chain instead of being stuck with the grunt work. Despite much criticism about China's efforts to promote national champions to the exclusion of foreign competitors, it remains true that the Chinese haven't managed the feat which Germany, Japan, and South Korea have. Ditto for India with a somewhat longer time frame in mind.

While perusing a recent Business Horizons issue in which I myself have a contribution (more on this later), I came upon an interesting article by marketing bigwig Jagdish Sheth and folks at Interbrand and the National University of Singapore discussing this very conundrum: How can we speak of the rise of China or India if they are still stuck in the second division at building recognized brands? Make no mistake; this erstwhile "marketing" issue may have important social and environmental consequences insofar as China may hold on too long to labour and environmental arbitrage when it's in its best interests to move up the value chain. Here is the abstract:
During the past quarter of a century, Asia has risen to become the world's factory. This trend has, however, coincided with the relative decline in value of manufacturing compared to other value adding activities, including R&D, design, and branding. This significant “value shift” has eroded the margins of manufacturing firms and sparked considerable interest among executives in Asia to design, brand, and market their own products. To date, though, this transition from being manufacturing oriented to becoming brand owners has largely only been accomplished by Japanese and Korean firms. In the rest of Asia—including in the rising giants of China and India—there are very few valuable brands. In fact, there is not a single Asian brand from a country other than Japan and Korea in Interbrand's 2008 valuation of the world's top 100 brands. Our article discusses, in depth, the challenges that Asian manufacturing firms encounter as they try to become “branders” and how these challenges can be overcome. Based on our collaboration spanning academia and consulting, we have been able to tap a wealth of information made available through research, case studies, and Interbrand's database of completed brand related assignments across Asia.
Why does branding matter more than manufacturing nowadays? Here's a brief history:
During the past few decades, we have seen a significant shift in value away from manufacturing toward design, marketing, and customer service. This is in sharp contrast to the Industrial Age, when manufacturing contributed the most to value creation of all activities undertaken by firms. The Industrial Revolution was largely a revolution in manufacturing that led to a mobilization of resources and an increase in productivity beyond anything previously achieved throughout millennia of human civilization. The industrialization recipe also proved highly replicable, spreading across countries in Europe and North America before arriving in Asia. In just a few decades, industrialization catapulted Japan from an isolated feudal state to a modern industrial nation capable of defeating Russia, a major European power, in war. Industrialization subsequently spread across Asia in what was often labeled the “flying geese” pattern during the 1980s. This initially transformed the “tiger economies” of Hong Kong, Singapore, South Korea, and Taiwan. Industrialization subsequently spread to other Asian countries including China, India, Malaysia, Thailand, and Vietnam.

However, during the past 25 years the rules of the game have changed significantly. In the post-industrial world, manufacturing is no longer the same engine of value creation that it was during the Industrial Age. As high quality products can now be produced anywhere, manufacturing has increasingly been re-located to emerging markets with low labor costs. As a result of these changes, manufacturing has largely become a commoditized capability characterized by substantial competition and declining margins. Those capturing the most value in the post-industrial economy now are firms which control critical capabilities relating to design, marketing, distribution, and service. The actual manufacturing of products is increasingly outsourced to manufacturing specialists. In this new world of outsourcing, companies no longer necessarily compete based on the manufacturing assets they own.
And here is what I believe is a key takeaway concerning the need for increased customer-centric focus as opposed to building "national champions" and similar nation-centric notions that have so far failed to achieve what they aimed for:
Defining the offering becomes the next key priority. This includes specifying the products and services that the company seeks to offer its target segments based on the key hooks identified in the market research. For many firms, this seems to be the end of the process to define the offering. We argue that it is equally important to look at the customer journey across all touch points; this includes marketing communications, sales, payment, installation, ongoing usage, and customer service. In short, it takes the perspective of the prospective customer, and follows how the customer will interact with the company at all stages. Only by aligning all touch points will the customer undergo a consistent brand experience. This means tilting the company away from traditional functional silos toward an end-to-end process thinking, with the customer at the center. Many firms we have worked with lack strong cross-functional teams that are empowered to operate transversally across the organization. Such teams are critical to conduct comprehensive feasibility studies and specifications of what it takes to deliver the offering. As previously discussed, it is important that the underlying quality and performance of a company's products and services are sufficiently high in order for the emerging brand to become successful. Achieving this usually requires a high degree of cross-functional collaboration.
It's a rite of passage that China has yet to make, but the authors do provide some thought-provoking ideas on how to get this task done. Needless to say, it's better accomplished through clever marketing than through protectionism. Proton, anyone?

And no, I will not spend good money on something called a "Chery Tiggo." More focus group work on naming products, pretty please.
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China's 'Indigenous Innovation' as Protectionism

♠ Posted by Emmanuel in , at 10/13/2010 11:59:00 PM
This post is a neat continuation of the one below. And, it offers a contrasting perspective on the increasing belligerence of China towards Western multinationals. While I think it's an offshoot of the "obsolescing bargain," Adam Segal of the CFR presents a more conventional argument.

It's certainly a tempting proposition if you have 1.3 billion people--perhaps not a captive market, but not really quite a true market economy as Chinese officials like to portray it, either. Broadly speaking, the idea behind the article from Foreign Affairs which follows is that since a lot of the value-added activities in global supply chains are still not provided by China--intellectual property, branding (more on this later), and so forth--it will be increasingly difficult to capture value-added if all you can offer are labour and environmental arbitrage opportunities. Not only are the prices of commodities going up worldwide, but wages are too in the PRC.

Chinese officials do recognize that, sooner or later, an increasingly affluent middle class will demand a move towards less labour- and energy-intensive forms of production. Or, a greater deployment of "knowledge economy" inputs to create more from less (and, it goes without saying, more profitably). There comes a time when LDCs need to move up the value-added ladder. However, it is certainly an open question if the Chinese can manage this feat with a lot of what I can only describe as "semi-enlightened central planning." For instance, they are keen on choosing national champions and requiring foreign firms support knowledge transfer more explicitly. Here is a snippet from the introduction; the rest is well worth reading even if I don't entirely agree with the conclusions:
If you want to get to the bottom of indigenous innovation, the Chinese policy so deeply aggravating Western businesses and governments, look at the bottom of your DVD player. Most likely, the machine was made in China. For Beijing’s leaders, that is part of the problem: for every Chinese-made DVD player sold, the Chinese manufacturer must pay a large royalty fee to the European or Japanese companies that patented various components of the unit, such as its optical reader. These foreign firms reap substantial profits, but the Chinese take is extremely small -- and is shrinking further as energy, labor, and commodity prices rise. Policymakers in Beijing, looking to strengthen China’s economy, are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break China’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”

The Chinese phrase for indigenous innovation, zizhu chuangxin, was introduced in a 2006 state-issued report, “Guidelines on National Medium- and Long-Term Program for Science and Technology Development.” The paper contained a curious mix of top-down, state-directed policies alongside bottom-up efforts meant to foster technological innovation. The top-down measures echo China’s old state planning system. They include 20 state-driven megaprojects, including initiatives to develop nanotechnology, biotechnology and new drugs, high-end generic microchips, and aircraft. The bottom-up efforts seem to follow a Silicon Valley model and are centered on university-industry collaboration, small start-ups, and venture capital.
Well, they can always try. Ha-Joon Chang will most likely be supportive of the PRC's efforts.
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