The Dogs of War: Apple vs. Google vs. Microsoft

It’s hard to grasp the breathtaking scale of the epic war between Microsoft, Google and Apple. Billions upon billions of dollars. Entire industries at stake. This is the board. These are the pieces.

If you think about it, what’s shocking isn’t the size of Microsoft or Apple, companies that are decades old, established titans of industry (even if they have stumbled in the past) — it’s Google. In just over 10 years, Google’s become arguably the most important company on the web, spreading to anything the internet touches with astonishing speed, almost like a virus: From the web and search to books, video, mobile phones, operating systems, and soon, your TV.


Friends have become enemies, enemies more paranoid. And you know, it’s only a matter of time before Google’s remaining gaps on this map are filled out. (BTW, you can click on the picture to make it bigger.)

Back in the 1990s, “hegemony” was another way to spell “Microsoft.” It was Microsoft that looked to invade everything. It was Microsoft in the Department of Justice’s sights for antitrust issues. Anywhere there was computing, there was Microsoft. But today, it’s Apple that conquered music. Apple that revolutionized mobile phones. Apple that might make tablet computing mainstream. Not Microsoft. As the incumbent, Microsoft’s not going anywhere. But it plays catch up more often than it leads, at least when it comes to the things people care about now, like the web and mobile.

What’s at stake? Nothing less than the future. Microsoft wants computing to continue to be tied to the desktop — three screens and a cloud, as Ballmer is fond of saying. For Apple, it’s all about closed information appliances with lots of third-party apps, computers anybody can use. And for Google, all roads lead to the internet, and the internet is synonymous with Google.

This isn’t a road map. It’s a study guide.

By Gizmodo

If things don’t change, they stay the same

SHUT UP ABOUT ADVERTISING BY PAUL LOOSLEY

 NOW I’ve been rereading a book. (You know, that a small papery thing with words printed on it). It’s one of the very few books about advertising worth reading. It’s called “From those Wonderful Folks who gave you Pearl Harbour”.

The author is one of the legends of American advertising, Jerry Della Femina. The story goes that, in the middle of a brainstorming session to find a new theme line for Panasonic, Jerry, then a copywriter, leapt up and proudly suggested the words that became the slightly, un-politically correct title of the book. It seems only his art-director saw the funny side! Whether there were any Japanese in the room he doesn’t say. The book was written in 1971 and it may be that long ago since I first read it. It was written during the heydays of BBDO, DDB, Ted Bates and early Ogilvy (also legendary people you may be less familiar with like Mary Wells, Carl Ally and George Lois). So, for a change, this month I’d like to share a couple of hopefully interesting observations drawn from this belated reread.

First is that the TV show, Mad Men, is total bollocks. Anyone who has watched those rather effete, supposedly suave actors wandering across your TV screens with their shiny grey suits, clouds of cigarette smoke and dry martinis are viewing, at best a caricature, at worst a total fabrication.

Reading Della Femina’s book you would see that ad people in the 60s were quite tawdry. They didn’t hang around with models, they didn’t eat at the swankiest restaurants and they certainly didn’t regularly schtup the clients’ wives. For instance, Jerry talks about creative teams moving desks into the office stairwells because it gave them the best view of the partially dressed girls in the apartment block opposite. Day and night they perched there until the cops came and arrested them as peeping toms. And the art director who, sick of his constantly ringing telephone stabs it with a pair of scissors. These were (and probably still are) the real creative people.

Della Femina also makes the classic observation that creative people fully realise that no-one is watching the TV or buying a magazine to look at their ads. Most normal people say, on meeting a creative person, “Oh, you put the captions under the pictures”. This means there was, and remains, so much BS that creative people had no way of measuring their self worth. (Today we have, of course, entirely trustworthy creative rankings and creative award shows to help us!)

And this brings me to my second point. Much of what Jerry recounts in the book – the turns of phrase and the incidents, the anecdotes are exactly the same things that still happen in advertising today. It’s an industry that seems never to move on. Over 40 years later the industry is still saying the same dopey things and making the same dopey mistakes. (I intend to talk more about this next month).

But most of all, the thing that remains so completely the same today as then, is the fear. Jerry spends many pages discussing it. He recounts an agency president telling him: “I start worrying about losing an account the minute I get it.”

The fear of losing a piece of business has most account executives perpetually standing in a puddle of pee. And it filters down to the work. He tells a tale of a new piece of business that came in asking for “new, exciting” work. But no-one could bring themselves to show “new, exciting” work to the client; it was just too dangerous, so they showed extremely “safe and comfortable” work. And they lost the business! Naturally “new and exciting” and “safe and comfortable” go together like oil and water. Did then, does now.

My particular favourite Della Femina fear story is of the time he brought a tape recorder into a creative review board. It filled the board with terror. None of them wanted their comments to be on record, it seems they talked about anything except the creative work. As Jerry says, “it represented truth”. Last thing anyone wants or wanted.

Altogether there are so many things Jerry talks about in the book that apply now.

The people who always agree with the boss or the client – constantly on the lookout for the signals – a twitch, a certain tone of voice, a small gesture – so they can neatly preempt the boss/client before he says “It stinks.”
Ad people who could smell a recession coming as the clients stop spending.

And how keen agencies were to fire expensive older people and hire relatively inexperienced people for salaries up to 75% less. He goes on to speculate that creative people over 40 are all on an island somewhere full of burnt-out writers and art directors.

He supposes that guys who are wigged-out write wigged-out stuff.

He posits that censorship, any kind of censorship, is pure whim and fancy.

And even back in 1971 he said “boutique advertising is the new advertising” because it means you’re going to be dealing with the man who owns the store.

And he ends the book with the greatest (and most debatable) ad quote; possibly of all time. “Advertising is the most fun you can have with your clothes on.”

If you can get a copy take a look. Keep it for another 40 years and see if things have changed in 2050. Even money – nothing will change.

PS: Jerry still has an agency named after him in New York, he runs restaurants, sits on boards and writes for magazines and papers. Clearly no longer wigged-out.

> Paul Loosley is an English person who has been in Asia 30 years, 12 as a creative director, 18 making TV commercials. And, as he still can’t shut up about advertising, he tends to write every month. Any feedback; mail
p.loosley@gmail.com (but only if fully dressed)

The passing of a central banking generation

General Douglas McArthur famously said that old soldiers never die, they just fade away.

Central bankers are the generals of monetary policy, because they fight currency wars, combat inflation and defend financial stability. Retired central bankers do not fade away. Like Greenspan, they can write best selling memoirs and retire very comfortably.

Recently, Federal Reserve vice-chairman Donald Kohn, who has decided to retire, gave one of the most frank analyses of where mistakes were made, in a speech: “Many central bankers and economists, myself included, were a little complacent coming into the crisis. We thought we knew enough about the basic structure of the markets and the economy to achieve economic and price stability with relatively minor perturbations. And we thought we had the tools necessary to deal with liquidity shortages and mal-distributions. The reality is that we didn’t understand the economy as well as we thought we did. Central bankers, along with other policymakers, professional economists and the private sector failed to foresee or prevent a financial crisis that resulted in very serious unemployment and loss of wealth around the world. We must learn from our experience.”

Why did such clever people not see the crisis coming? Why is there a tendency of disaster myopia, when policymakers very often react too little too late? Of course, it is understandable that people are complacent or are too cautious. No one likes to disturb the status quo. Almost all of us would like to wait till the next piece of information comes in to confirm our hypothesis.

Californian Prof Frithof Capra, who is a physics professor and also a systems analyst, wrote a book back in 1982 called the Tao of Physics and another important book called the Turning Point. He felt that the academic profession and government bureaucracies had become so specialised and fragmented that they could not see the wood from the trees. No one is looking at the earth from 30,000 ft up and asking why it does not add up.

A famous Harvard professor of business strategy put it another way. We are used to top-down departments and bureaucracies, where orders and strategies are formulated at the upper echelon, and they are supposed to be executed at the bottom layers. However, we forget that most businesses are coordinated and done horizontally, between different departments and arms of a business or government. Coordination of different parts of government or business, with different agendas and interests, is the most complex task of modern governance.

What most economists and central bankers forget is that markets are all about human behaviour and such behaviour is reflexive. Human beings do not stand still – they observe each other, anticipate or predict their competitors’ behaviour and act accordingly. The market is always watching how the government policy is implemented – they make money from regulatory and tax arbitrage.

Once they can predict how central bankers or policy makers behave, the policies begin to lose their effectiveness. This is why legalist Han Feizu said the ruler must be silent and observant, not allowing the public to predict what he will do. If the policy is predictable, it will be negated.

This is like a tennis player. If your opponent knows that you always like to play backhands to a certain corner, he can read you and exploit this weakness.

The best example of the need for central bankers to understand reflexive action is Goodhart’s Law. London School of Economics Prof Charles Goodhart is one of the best monetary economists, who has trained a whole generation of central bankers and financial regulators. He worked in the Bank of England and was also an adviser to the Hong Kong Government on the establishment of the Hong Kong peg. Goodhart’s Law states that every monetary target loses its efficacy, because the market immediately changes its behaviour to negate that policy target. Goodhart’s Law also can be generalised to regulatory policy.

As Donald Kohn admits, the trouble with the recent generation of central bankers is that they think that they know how the market functions. The fashionable thinking is that they must stick to clear monetary targeting or rules of behaviour, such as Taylor’s Rule, named after Stanford Professor and also former US Treasury Undersecretary John Taylor. If the market can read central bank behaviour, they can adapt and change their behaviour very quickly. For example, if there is too tight regulation, then the market moves more business either offshore where there is less regulation or they move into shadow banking, where regulators cannot see what is going on.

It is also dangerous to compartmentalise between monetary policy and financial regulation, as if the lines between the two can be clearly drawn. Monetary policy has implications on financial regulation and vice versa.

There is, however, an elephant in the room that most central bankers and financial regulators of advanced countries have missed. The elephant in the room is the biggest and most important issue that is before one’s eyes, but we ignore it because we do not know how to handle it. Hence, most people tip toe or move around the elephant rather than confront it.

The biggest item that is common to monetary policy, financial regulation and fiscal policy is land and real estate, including fixed investments. The value of land and fixed assets is directly related to interest rates – the lower the interest rates, the higher the value of real estate. Real estate is the biggest collateral of bank loans and often the biggest asset of most households or firms. Land sales are also the biggest revenue for many local governments. Hence, asset bubbles are most difficult to handle because their deflation can kill banking systems and eventually become fiscal deficits.

Recently, it was revealed that US regulators did not see that real estate-related loans of the US banks accounted for 55% of total loans and asset-backed securities accounted for 74% of their debt securities holdings.

Since real estate is 225% of GDP, it was not surprising that a 20% fall in real estate caused the massive melt down in the financial derivative markets and eventually the solvency of banks.

A new generation of central bankers will have to learn new lessons from the current crisis.

THINK ASIAN BY ANDREW SHENG 

Datuk Seri Panglima Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission, and is currently a member of Malaysia’s National Economic Advisory Council. He is the author of the book “From Asian to Global Financial Crisis”.

Biz School Research Add Value to Student Degrees

Newswise — A four-person team that includes two faculty members at The University of Alabama’s Culverhouse College of Commerce has had an article accepted for publication later this year that will shed some light on the thorny issue of the relevance and value of the research activities of business school faculty.

The paper, “Does Business School Research add Economic Value for Students?” was accepted late last year by a top business journal, Academy of Management Learning and Education, (AMLE) published by the Academy of Management. AMLE's Thomson Reuters Impact Factor is 2.889, ranking it eighth out of the 89 major management journals covered by Thomson Reuters.

The paper’s authors are Paul L. Drnevich, assistant professor of strategic management, and Craig E. Armstrong, assistant professor of entrepreneurship, both in the management and marketing department at The University of Alabama, and Jonathan P. O’Brien, Lally School of Management and Technology, Rensselaer Polytechnic Institute, and T. Russell Crook, College of Business Administration at the University of Tennessee.

The bottom line: Faculty research productivity means a larger post-graduate paycheck for graduate students, but teaching is important too and faculty shouldn’t be excessively pre-occupied with research.
“The scholarly research conducted by business school faculty has long been the subject of intense criticism for lacking relevance and value to practice,” the authors say in the article’s abstract. “In contrast, we theorize that such research is relevant and valuable in that it contributes to what is arguably the most critical metric of relevance for B-school students: the economic value they accrue from their education. We investigate this counter argument on a sample of 658 business schools over an eight-year period. We find that research adds significant value in that it can potentially enhance student salaries by an average of $24,000 per year. However, we also observe that “excessive” research activity can lead to diminishing or even negative returns for students, and a research focus solely on elite journals might rob students of the benefits of exposure to a broader array of new ideas.”

Misconceptions over the lack of relevance and value to practice of business school research have become a thorny enough issue to prompt some universities to de-emphasize or discontinue the research focused tenure process and/or create faculty tracks that focus solely on teaching. These “clinical” professors are hired based on their professional experience and promoted primarily on their teaching and service performance, with a minimum focus on research and/or a touch of grant-raising. Such dual tracks allow “research” faculty to focus on their areas of expertise while non-research faculty spend more time in the classroom, but can short change the student if they take research faculty out of the classroom. Consistent with the study, students benefit the most from faculty who actively create new knowledge (through research and/or practice) and make it available to students in the classroom.

The study focused on 658 major business schools world-wide with a graduate (MBA) program, including several universities in the state of Alabama. The study covered an eight-year time span, using advanced statistical techniques to rule out alternative explanations for the impact of faculty research productivity on student salaries.

“One of our main goals at The Culverhouse College of Commerce is to combine research and teaching to provide the best education experience possible,” said J. Barry Mason, dean of the business school. “We are constantly striving to recruit and retain top researchers, but we are also always looking for top teachers as well. Sometimes the answer can be found though adjunct faculty and people who bring several years of real world experience to the classroom.”

The paper notes that “faculty who are actively engaged in research can likely provide value for their students by transferring to them new knowledge gleaned from their own research. In addition, even if an individual faculty member’s own research has little relevance to practice, being actively engaged in research helps faculty keep abreast of, and involved with, ‘cutting edge’ knowledge developments in the field.”

Source: http://newscri.be/link/1074901

US says China has rare-earth materials monopoly

The U.S. Government Accountability Office (GAO) warned about China's power over supplies of rare-earth materials on April 14, 2010.

According to the GAO, China controls 97 percent of the rare-earth materials vital to the military, mobile phone and clean-energy technology sectors – a situation that could put the United States in a perilous strategic position if it is not remedied.

GAO also said the United States previously handled all stages of the rare-earth material supply chain, but now most rare-earth processing is performed in China, giving it a dominant position that could affect worldwide supply and prices. On top of that, rebuilding a U.S .rare-earth supply chain could take up to 15 years.

Rare-earth materials are used in many applications for their magnetic and other distinctive properties and include 17 elements with names such as lanthanum, lutetium, neodymium, yttrium and scandium.

Some U.S. government and rare-earth industry officials think China increased export taxes on all rare-earth materials to a range of 15 percent to 25 percent and in the future China will only export finished rare-earth material products with higher value, according to the GAO.

A company called Molycorp Minerals, owned by Chevron Corp (CVX), has a large deposit of rare-earth elements at its Mountain Pass Mine in California. But the mine lacks manufacturing assets to process the ore into finished components. Also, it doesn't have 'heavy' rare-earth elements necessary for many types of industrial and military hardware.

Other deposits exist in the United States and elsewhere, but it could take nearly 10 years just to get production online.

By People's Daily Online

Do you have anything to say

Prospective U.S. Cyber Commander Talks Terms of Digital Warfare

For years, the military has worried about the vulnerability of the United States to cyberattack — and how and when to return fire in digital warfare. Now, the issue is taking center stage, as the Senate considers the nomination of an Army general to head the military’s first four-star Cyber Command.

In a hearing this morning, the Senate Armed Services Committee will review the nomination of Army Lt. Gen. Keith Alexander to be the head of the Pentagon’s new Cyber Command. It’s a chance to get a closer look at the kind of capabilities for waging network warfare the Pentagon thinks it needs. But it’s also likely to raise questions about just how far the military is willing to go in attacking foreign networks.

Last year, Secretary of Defense Robert Gates ordered the creation of U.S. Cyber Command to coordinate all of the military’s online activities. Alexander is in many ways a logical pick. He comes from the world of electronic intelligence: He is director of the National Security Agency (NSA), the super-secretive military and intelligence outfit at Fort Meade, Maryland, that is charged with code-cracking and foreign communications interception. And he will head an organization that, in large part, will be an important line of defense against cyberspying. (He’s a classmate of Gen. David Petraeus, West Point class of ‘74.)

But Alexander will also have to answer questions about how the United States might retaliate if it comes under online attack. Military planners are mindful of incidents like the massive cyberassaults against Georgia in 2008 and Estonia in 2007. In both cases, fingers pointed to Russia, but experts questioned whether the Russian government had a direct hand in events, and pointed instead to the role played by patriotic volunteers (or “cybermilitias”) who orchestrated the online assaults.

In both of those cases, cyberattacks threatened civilian networks and the financial system. It’s unclear if the military could retaliate in kind. In a series of written answers to questions from senators (.pdf), Alexander said, “It is difficult for me to conceive of an instance where it would be appropriate to attack a bank or a financial institution, unless perhaps it was being used solely to support enemy military operations.”

And the scope of responsibility for the new commander is also quite sweeping (Alexander will also be “dual-hatted,” staying on as head of the NSA). In written answers, Alexander said the organization’s new missions would include “integrating cyberspace operations and synchronizing warfighting effects across the global-security environment; providing support to civil authorities and international partners; directing global-information grid operations and defense; executing full-spectrum military cyberspace operations; serving as the focal point for deconfliction of DOD offensive cyberspace operations; providing improved shared situational awareness of cyberspace operations, including indications and warning.”

In other words, everything but the kitchen sink. We’ll be watching the hearing, and will hope to get more answers on Alexander’s vision for the new command

• By Nathan Hodge
• http://newscri.be/link/1073631

The Return of Industrial Policy

Dani Rodrik, Professor of Political Economy at Harvard University’s John F. Kennedy School of Government, is the first recipient of the Social Science Research Council’s Albert O. Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.

PLAY NOW: RODRIK: The Return of Industrial Policy

CAMBRIDGE – British Prime Minister Gordon Brown promotes it as a vehicle for creating high-skill jobs. French President Nicolas Sarkozy talks about using it to keep industrial jobs in France. The World Bank’s chief economist, Justin Lin, openly supports it to speed up structural change in developing nations. McKinsey is advising governments on how to do it right.

Industrial policy is back.

In fact, industrial policy never went out of fashion. Economists enamored of the neo-liberal Washington Consensus may have written it off, but successful economies have always relied on government policies that promote growth by accelerating structural transformation.

China is a case in point. Its phenomenal manufacturing prowess rests in large part on public assistance to new industries. State-owned enterprises have acted as incubators for technical skills and managerial talent. Local-content requirements have spawned productive supplier industries in automotive and electronics products. Generous export incentives have helped firms break into competitive global markets.

Chile, which is often portrayed as a free-market paradise, is another example. The government has played a crucial role in developing every significant new export that the country produces. Chilean grapes broke into world markets thanks to publicly financed R&D. Forest products were heavily subsidized by none other than General Augusto Pinochet. And the highly successful salmon industry is the creation of Fundación Chile, a quasi-public venture fund.

But when it comes to industrial policy, it is the United States that takes the cake. This is ironic, because the term “industrial policy” is anathema in American political discourse.  It is used almost exclusively to browbeat political opponents with accusations of Stalinist economic designs.

Yet the US owes much of its innovative prowess to government support. As Harvard Business School professor Josh Lerner explains in his book Boulevard of Broken Dreams, US Department of Defense contracts played a crucial role in accelerating the early growth of Silicon Valley. The Internet, possibly the most significant innovation of our time, grew out of a Defense Department project initiated in 1969.

Nor is America’s embrace of industrial policy a matter of historical interest only. Today the US federal government is the world’s biggest venture capitalist by far. According to The Wall Street Journal, the US Department of Energy (DOE) alone is planning to spend more than $40 billion in loans and grants to encourage private firms to develop green technologies, such as electric cars, new batteries, wind turbines, and solar panels. During the first three quarters on 2009, private venture capital firms invested less than $3 billion combined in this sector. The DOE invested $13 billion.

The shift toward embracing industrial policy is therefore a welcome acknowledgement of what sensible analysts of economic growth have always known: developing new industries often requires a nudge from government. The nudge can take the form of subsidies, loans, infrastructure, and other kinds of support. But scratch the surface of any new successful industry anywhere, and more likely than not you will find government assistance lurking beneath.

The real question about industrial policy is not whether it should be practiced, but how. Here are three important principles to keep in mind.

First, industrial policy is a state of mind rather than a list of specific policies. Its successful practitioners understand that it is more important to create a climate of collaboration between government and the private sector than to provide financial incentives.

Through deliberation councils, supplier development forums, investment advisory councils, sectoral round-tables, or private-public venture funds, collaboration aims to elicit information about investment opportunities and bottlenecks. This requires a government that is “embedded” in the private sector, but not in bed with it.

Second, industrial policy needs to rely on both carrots and sticks. Given its risks and the gap between its social and private benefits, innovation requires rents – returns above what competitive markets provide. That is why all countries have a patent system.

But open-ended incentives have their own costs: they can raise consumer prices and bottle up resources in unproductive activities. That is why patents expire. The same principle needs to apply to all government efforts to spawn new industries. Government incentives need to be temporary and based on performance.

Third, industrial policy’s practitioners need to bear in mind that it aims to serve society at large, not the bureaucrats who administer it or the businesses that receive the incentives. To guard against abuse and capture, industrial policy needs be carried out in a transparent and accountable manner, and its processes must be open to new entrants as well as incumbents.

The standard rap against industrial policy is that governments cannot pick winners. Of course they can’t, but that is largely irrelevant. What determines success in industrial policy is not the ability to pick winners, but the capacity to let the losers go – a much less demanding requirement.

Uncertainty ensures that even optimal policies will lead to mistakes. The trick is for governments to recognize those mistakes and withdraw support before they become too costly.

Thomas Watson, the founder of IBM, once said, “If you want to succeed, raise your error rate.” A government that makes no mistakes when promoting industry is one that makes the bigger mistake of not trying hard enough.

Copyright: Project Syndicate, 2010.
www.project-syndicate.org

Republished with kind permission.
Source: http://www.project-syndicate.org/commentary/rodrik42/English