Hanjin Shipping collapse may be the beginning of the end for profitable global trade | South China Morning Post – As capacity growth has continued at around 6 per cent a year, with the global container fleet four times larger today than it was in 2000, so it is estimated that we today have a 30 per cent surplus capacity on the world’s main shipping routes. The combination of extra capacity and stagnant cargo growth has led to a ruthless price war that has meant wonderfully cheap freight rates for exporters, but has stripped the shipping lines of all profit. – Hanjin Shipping is a South Korean integrated logistics and container transport company. Prior to liquidation, Hanjin Shipping was South Korea’s largest container line and one of the world’s top ten container carriers in terms of capacity. Hanjin Shipping transported approximately 3.7 million TEU containers a year. This service consisted of 24 container ships. Hanjin Shipping’s downfall was caused in part by overcapacity in the container ship industry.
China first to record 1m patent filings in a year | FT – interesting debate over what this means. Is it really innovation or driven by state targets. In some areas such as telecommunications there is a definite patent land grab and research being done for competitive advantage
疯狂希莉娅-电影-腾讯视频 (Mad Shelia) – a Chinese homage to Mad Max Thunder Road. Awkward product placements for apps and the fact that Thunder Road wasn’t allowed in China make this low budget work more divisive. Admittedly critics ignore the efforts by the likes of The Asylum in the US who are famous for their mock buster films
What the Hell Just Happened? – Medium – “I think that social media has more power than the money they spent, and I think maybe to a certain extent, I proved that.”
Here’s How Facebook Actually Won Trump the Presidency | WIRED – according to President-elect Donald Trump’s digital director Brad Parscale, the social media giant was massively influential—not because it was tipping the scales with fake news, but because it helped generate the bulk of the campaign’s $250 million in online fundraising.
The software was written at the request of an unidentified Chinese manufacturer that wanted the ability to store call logs, text messages and other data, according to the Adups document. Adups said the Chinese company used the data for customer support
Strategy Analytics: Apple Captures Record 91 Percent Share of Global Smartphone Profits in Q3 2016 – which gives you an idea of how thin the margins are. BBK – owners of Vivo and OPPO are killing Huawei by comparison. This implies that Huawei’s premium range isn’t doing as well as its budget Honor range when one takes into account the cost of preparing for production (tooling etc) as well as bill of materials
My initial reaction to Apple’s MacBook Pro wasn’t overwhelmingly positive. Now that I’ve tried one very briefly, I realise that it’s an unpleasant MacBook Pro surprise.
Thin
I didn’t feel that much of a weight different between my current machine and the new model MacBook Pro. Who gives a flying fuck about the laptop being even thinner than the current MacBook Pro? You have to wonder if Apple really believes customers are gagging for a thin incompatible clamshell of mediocrity? I’d be more interested in power density of the battery – more charge and better performance from the laptop. Some connectors that I actually use would be great as well.
Display
If you already have a retina display laptop this is exactly the same. The touchpad display is interesting, but it seems to take no account of finger span in the way the controls work on a couple of the default apps that I tried from the perspective of a touch typer. I suspect that the 11″ MacBook Air was killed because Apple is desperately hoping sales will go to the iPad Pro.
Tactile experience
Apple made a big deal of the keyboard, but the truth of it is that it was wasted. The real effort was not about user experience and more about making things thinner. It isn’t the improvement on the previous MacBook Pro keyboard experience despite the clever engineering involved.
Real world performance
I’m a bit spoiled from a tech point of view. I am working on an early 2015 model MacBook Pro (Retina) 3.1GHz Intel Core i7 with 16GB of RAM and 1TB of solid state storage. I have an attached SuperDrive by USB and two Apple Thunderbolt displays. The graphics performance is adequate with an Intel Iris Graphics 6100.
Having had a quick play with the new MacBook Pro there didn’t seem to be a real world performance difference. You probably would need a machine that is five years old or more to get a speed bump from this unpleasant MacBook Pro surprise.
What now for the working class? Following president Trump’s election and the British plebiscite on European Union membership there has been lots of hand wringing about workers who traditionally participated in legacy industries being outside society. Here is what we have to deal with:
The ‘traditional’ jobs aren’t coming back
Middle-class roles are already being disrupted
There is a declining return on investment in further education, yet lifelong learning is a compulsory requirement
Globalisation is working at an aggregate level, but isn’t working at a local level
Western society has fractured. It will become more fractious once the realisation takes hold that:
It can’t be resolved by simple measures, populists might listen – but can’t solve anything. Jobs are governed by a multiple factors that affect both cost and demand considerations
It can’t be solved in a relatively short time frame. You can’t build the necessary eco-system and supporting industries to bring the jobs back; even if the economics made sense
Governments don’t have their hands on the levers of control, the best governments can do is actively manage decline. Technological disruption puts the levers of control with a smaller group of people
There is a lack of willingness by those with the money and the power to solve it – primarily due to the pressures that drive their behaviour
Existing social welfare safety nets aren’t sustainable
The realisation that populism doesn’t deliver is likely to cause a further visible outburst of anger. Which should be good news for the private security industry. This could result in civil or international conflict. It has already happened. Factors that contributed to the Arab spring and the Syrian civil war included a large under-employed population living in stagnant economic conditions with no hope in sight. This probably sounds familiar.
I am ruling out some sort of positive ‘black swan’ event which changes the game completely and provides meaningful work with great wages across societal boundaries. If I could reliably predict these, I would be writing this from my private Airbus A380.
Instead I can see four broad categories of outcomes, all of which are ugly:
Carry on – carrying on isn’t likely to be sustainable as societal pressures go to breaking point
Managed decline – from a rational point-of-view the most ‘possible’ solution. Unpalatable from a voter perspective. It begs the question at what point would the UK economy bottom out? Managed decline makes the most sense as an interim measure whilst a country works out what its new place in the world is and charts a path towards it based on careful strategic investments with limited capital
Massive investment – presents a number of challenges that make it nearly impossible for western countries. It would require a long term view – unlikely without consensus driven politics with a high level of comity, huge access to credit – again unlikely with highly indebted economy and a slowly declining credit rating like the UK. Would take too long to satisfy angry voters
Massive disruption – the dice is thrown in the air as society tears itself apart and the strong gain control – think China’s Cultural Revolution. Wages and worker rights may drop to make them more cost competitive for low skilled manufacturing allowing for an employed but disgruntled workforce. Power is unlikely to shift too much, the corresponding upheaval in population numbers may provide some supply side pressure on wages when its all over. In all likelihood, it would just reduce pressure for change, increased willingness to work together on a longer term solution, but not provide much medium term economic benefit
Disruption
Here is a chart of numerous successful business, some of them are over a century old. AT&T and Verizon can trace their history back to 1877 and the Bell Telephone Company set up by Alexander Graham Bell’s father-in-law. General Electric goes back to work by Thomas Edison in 1880. These companies took from 117 – 137 years to become $200 billion businesses. Facebook took ten years requiring only 3% of the people AT&T needed.
It would be reasonable to assume that the future is going to create less jobs with given investments rather than more.
Company
#Employees
Year its market capitalisation became US$200 billion
Facebook
9,199
2014
Microsoft
27,000
1998
Apple
46,600
2010
Alphabet (Google)
46,600
2012
Amazon
165,000
2015
Verizon
176,800
2014
General Electric
239,000
1997
AT&T
302,000
2007
So large private enterprises will:
Employ less people which means less ancillary demand for services in the locale. Less restaurants, shops, artisanal coffee shops, micro breweries, nail bars, car valets, hotels and hair salons
Employ even less unskilled people – what unskilled labour is required will be employed on a flexible basis. Their roles will be competing on ‘total price’ with a global workforce and robotics
This hypothesis is supported by data from the MIT Technology review which showed that modern US manufacturing managed to increase productivity by 250% whilst reducing staff numbers by over 40%.
Win-Win to Winner Takes All
Technological progress and globalisation has resulted in a decline in the middle class in western countries. Pew Research claims that the US middle class declined from 61 per cent of the population in 1970 to 50 per cent by 2015.
Corresponding average ‘real wages’ for US ‘good producing’ workers peaked by the mid-1970s and have been broadly stagnant since. A pattern mirrored in other developed economies. Hong Kong saw a similar peak from 1967 riots through to the early 1990s until factories moved across the border.
Manufacturing productivity had grown steadily over that time. You can argue over the data points but the overall trend seems to hold true.
Owners of capital have enjoyed increased returns versus the providers of labour. Knowledge work, a key part of middle class roles could be easier to export than production lines. A classic example is the bank back office roles that have been exported to India.
Supply chain
At the moment UK manufacturing jobs operate as part of a complex supply chain that primarily addresses the European Union as a market. The supply chain is built around a number of factors:
The value of the product
The weight of the product
The volume of the product
The cost of shipping versus the cost of production
How well the product travels
Distribution of product demand
Proximity to suppliers
Proximity to talent
This is why companies may package a product in one country and manufacturer in others. Washing powder is a classic example of this. Chocolate travels well, so Cadbury could move production lines of internationally popular products to Poland. There is a greater incentive to move low skilled work out of areas that aren’t geographically central to a given supply chain. European freedom of movement may have kept jobs in the UK by allowing low and semi-skilled workers to move rather than the factories. This would be of little consolation to UK workers, but would benefit UK tax coffers.
This complex formula is the reason why jobs move in and out of the UK.
Cutting the UK out of this supply chain with a hard Brexit ensures that suppliers have to make complex choices. BMW will probably be wondering what UK presence it needs to maintain in order to keep the Mini brand values. It may decide its easier to evolve the quirky Britishness out of the brand over time and just keep it quirky. The Audi TT hasn’t been harmed by actually being assembled in Hungary.
The majority of components in the supply chain for the Mini production line is based in Germany.
A post-Brexit UK could be in the position of importing more rather than less products once companies take into account the bigger picture of the supply chains and the EU single market. This will lead to a net loss of working class livelihoods.
Role of eco-systems
Richard Florida is a Canadian professor who has spent much of his time looking at urban studies from the perspective of prosperity. He is known for is work around the creative class and urban regeneration (or gentrification). His work is controversial. One key concept he has of relevance to working-class communities is one of ‘clusters’ where eco-systems exist. When you apply it to traditional working class industries one can see how the jobs aren’t just going to come back. The UK has a series of traditional clusters that are in overall decline, this is best illustrated by the state of chemical, oil refinery and coal sectors which underpin a wide range of manufacturing industries.
Where new clusters spring up (Silicon Roundabout and the FinTech businesses within the Square Mile) they create employment that much of the UK population is ill-equipped to fulfil.
Let’s look in greater depth at traditional manufacturing industries that have provided the working class with good playing jobs.
Factories build on suppliers, who build on raw materials processors, who build on utilities and extractive industries. Take for example industrial revolution era Stoke-on-Trent which was close to high quality clay pits and coal that could be cheaply shipped in from mines in Lancashire or South Yorkshire. All of which required semi-skilled and unskilled jobs that gave the working class their livelihoods.
Unfortunately for Stoke-on-Trent; clay is readily available around the world, opening up the possibility of production in areas with cheap labour. Automation raised the quality of production and fashion can quickly dictate whether an ‘area’ brand is in demand.
If we look at the industrial landscape of the United Kingdom, the manufacturing industry has been hollowed away during the 1980s and 1990s. The UK lost 18% of its manufacturing capacity in the space of 18 months during the conservative government of Margaret Thatcher.
There has been a corresponding (likely terminal) decline in the necessary facilities to support an industrial economy. Now let’s look in-depth at three essential types of facilities that underpin manufacturing:
Oil refineries
Coal mines
Chemical plants
This base of the UK industrial eco-system is running on ‘life support’ in critical areas.
I was fortunate to have a great science teacher at school, he once said to me that you could measure the size and health of an industrial economy by the amount of sulphuric and hydrochloric acid it manufactured and consumed. In order to manufacture hydrochloric acid you need a chlorine gas plant – neither chemical is something you want to transport over long distances. The side effects of a leak would be catastrophic.
The UK currently has one plant to make chlorine gas that is government subsidised because there isn’t a sufficiently large industrial base to support continued profitable production. What industrial capacity is in the UK is perilously close to being snuffed out.
What is left of the UK chemical industry has consolidated in the North East of England Process Industry Cluster (NEEPIC). Some of the products created are intermediary chemicals for use elsewhere in the European Union. Brexit is likely to have a disruptive effect on some of these manufacturers. The cluster is a key reason why Nissan decided to build a manufacturing plant in Sunderland. NEEPIC is dependent on oil refining capacity for key chemical building blocks (feedstock).
Oil refineries
Oil refineries are considered by the public as providers of petrol (gasoline), diesel and jet fuel. The reality is that they provide feedstock (chemical building blocks) for most things in everyday life:
Foods
Medicines (or we can go back to leeches and blood letting)
Paints (containers, large manufactured goods, civil engineering)
Dyes to colour fabrics, plastics and other materials
Plastics (the modern world as we know it) – structural plastics, coatings, fibres including clothing textiles
As I write this is, it is easier to look around my desk and count the products that don’t have an oil-derived input – one item, the desk itself which is unpainted. Though I would put good money on it that the trees it was made from were felled with petrol chain saw and transported on a diesel-powered lorry to the saw mill.
Yet the UK has lost a huge amount of oil refining capacity. From 1974 – 2012 refining capacity almost halved from 148 million tonnes to 77 million tonnes (Energy Institute). This decline happened despite start of UK North sea oil production in 1975.
Peak production on North Sea oil occurring in 1985 and 1999 (two peaks due to technological innovation). There were 22 active oil refineries in 1974, at the time of writing there are now seven.
Part of this was driven by changing energy consumption such as the decline of home heating oil and more fuel efficient cars. But a good deal would be due to reduced ability to compete against foreign petro-chemical feedstocks and reduced industrial capacity.
Oil refining capacity has moved to closer to where the industry is.
Belgium and the Netherlands have oil refining capacity beyond their internal needs because of their ease of access to continental European markets. Germany as Europe’s industrial powerhouse has the largest refining capacity in the European Union – which matches its industrial economy.
Much of the capacity to provide chemical feedstocks for industrial use has moved to the Far East; notably Singapore, Japan, Korea, Jamnagar in India and China. Overall industrial production has moved to East and Southeast Asia.
Coal production
The working class found coal production as a source of working class jobs. Even coal production in the UK is roughly 10 percent of what it was in 1980. There are no deep coal mines active in the UK, only a handful of open cast mines. Coal is not only useful as a fuel but also a alternative supplier of feedstock for a diverse range of products including fertilisers, plastics and medicines. Even if coal comes back to prominence as oil reserves run out it would take a lot of effort to get UK production going again – perhaps too much effort.
Managed decline of traditional working class areas
The purpose of managed decline would be to concentrate efforts where they can make the most impact. London would draw in more people from the hinterlands. Cities like Liverpool would continue to decline in population. Low quality housing (think trailer parks or shanty towns) would cater for the internally displaced workers and there would be a likely increase in casual or gig economy roles in place of many working class roles.
So what would managed decline of working class areas look like? We have a clue from government discussions after the 1981 Toxteth riots. Lord Geoffrey Howe wrote a letter which was considered too controversial at the time
“I fear that Merseyside is going to be much the hardest nut to crack,”
“We do not want to find ourselves concentrating all the limited cash that may have to be made available into Liverpool and having nothing left for possibly more promising areas such as the West Midlands or, even, the North East.
“It would be even more regrettable if some of the brighter ideas for renewing economic activity were to be sown only on relatively stony ground on the banks of the Mersey.”
“I cannot help feeling that the option of managed decline is one which we should not forget altogether. We must not expend all our limited resources in trying to make water flow uphill.”
Howe realised that even discussing the concept at the time would be explosive.
Retrenchment to focus economically
In practical terms, it would mean:
Re-centralising government departments
Not spending on infrastructure beyond critical maintenance
Rationalising government support infrastructure: police, hospitals, social services
Re-zoning areas from a planning perspective to encourage development only in future clusters
Allowing local government to go into bankruptcy protection and under go US-style emergency management
Once population decline hits a critical mass, turning off the last services, rather like the city of Detroit has done
Focus infrastructure investment on ‘clusters’
Connecting benefits to re-location
This process would then give time for western countries; in particular the UK, to re-invent themselves and think about their economic purpose in the world beyond consumption.
The Chinese government have already started on this process whilst their economy is still in a high state of growth – looking to move up the manufacturing value chain, moving into the professional and financial services sectors that the west currently occupy. On the flip side they have not flinched from closing down excess capacity in the steel industry and low value industries. This is causing economic hardship amongst unskilled workers in Guongzhou and the steel towns of Hubei province.
Former clothing factories are being bulldozed to make way for corporate campuses. Small electronics factories in Shenzhen are making way for a financial services centre including a stock exchange.
If one thinks about the Chinese experience and their migration to higher value work, where would the UK go next and what does mean for the future of the British working class?
LeEco’s CEO Jia Yueting Says Company Overstretched, Now Running Out of Cash – Slashdot – possible acquisition target for Huawei? Jia Yueting is the epitome of a Chinese success story. LeEco was a sprawling technology conglomerate, he owns billions in assets and has an actress trophy wife. LeEco started off as an online video platform, Netflix would be a good western analogue. The LeEco service is on Chinese smart TVs. From there Jia Yueting expanded LeEco into smartphones including a share in Coolpad and mobile apps. Jia Yueting spearheaded a move into Chinese real estate, sports and even electric cars through Faraday Future. All of this expansion has been funded by listings and a mountain of debt that financed the Jia Yueting expansion efforts.
Trawling eBay gives access to a cottage industry of predominantly China-based suppliers of the iPod SSD. They take iPod Classics and remanufacture them. They get new cases and new batteries and a new drive.
SSD
The real trick is in the new component put in the device. Out goes the Toshiba micro-hard drive of 120GB or 160GB and in goes a 256GB SSD. Apple had abandoned production of the iPod Classic because it couldn’t get the right parts any more. Technology had moved on and flash memory had replaced micro hard drive’s as storage technology of choice for portable consumer devices. Swapping out the hard drive for an SSD provides an iPod with a number of advantages:
The iPod SSD is a third lighter than Apple’s version of the iPod Classic. This changes dynamics in usage. It no longer has the same heft, you feel less conscious of it in a pocket or jacket
The battery lasts longer. I now get about 30 hours of listening from the iPod SSD. By comparison I get 18 hours out of my smartphone. If I used the smartphone as a music player as well, that battery time would drop further. If I used a streaming service, that would sound worse, hammer the battery life and mobile phone bill even further
It holds more music. At 256GB up from 160GB in the last model of iPod Classic it makes the difference between being able to hold all of my music library with me or not. You don’t have Spotify when you have 15,000+ tracks to choose from
The same great iPod experience. iTunes still syncs with the device. It has a good quality DAC (digital-to-analogue convertor) chip. With the right headphones and a sufficiently high sample rate it is indistinguishable from CDs. Under normal circumstances it sounds better your typical smartphone – which is trying to do lots of job well
It is quieter than the original iPod Classic. There is no longer the noise of a hard drive spinning up and reading the music data from the disk
Vigorous movement is not a problem. Apple had done a good job with the original iPod Classic songs were cached in RAM to iron out temporary stoppages due to movement affecting the hard disk. An SSD had no moving parts so it isn’t an issue any more
What becomes apparent is that Apple wouldn’t have had to make that much effort to make the product itself, but for no known reason it didn’t want to.
I suspect that part of this is down to:
The law of big numbers. The iPod Classic revamped in this way would be a decent business for most companies, but just isn’t as big as Apple is used to
A modified iPod probably too simple a design solution. Apple likes to take a big step forward (even when it doesn’t) – there are no plaudits or design awards in an iPod Classic with a solid state drive
The reimagined iPod is a development in sharp contrast to Apple’s new product developments:
Loved products bought by key Apple advocates have not been updated or ignored: the Mac Pro and the Apple Display (which Apple has abandoned)
Moving out of entry level products. With the MacBook Pro and MacBook line-ups, the entry device is now a secondhand laptop rather than the 11″ MacBook Air or the non-Retina MacBook Pro
Big bets that aren’t resonating with the marketplace: the Apple Watch has been a best selling smart watch; but is in a category which lacks a compelling reason to purchase. The iPad is a passive content consumption device for most consumers. It has a replacement cycle that would be more familiar to television manufacturers than a computer company