Working class truths, populism and dark futures

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.
We won't pay for their crisis - Mancunian protest sticker
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:
  1. 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
  2. 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
  3. 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
  4. 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
  5. 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.

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.

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.

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 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)
  • 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 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

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.

So what would managed decline 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.

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?

More information
The Current Moment | Poverty, Inequality and Productivity
Manufacturing Jobs Aren’t Coming Back | MIT Technology Review
The American Middle Class Is Losing Ground | Pew Research Center
Toxteth riots: Howe proposed ‘managed decline’ for city | BBC
Detroit’s Least Bad Option | The New Republic

Thoughts on the new Apple MacBook Pro

Having slept a few naps contemplating Apple’s new MacBook Pro. I have been a Mac user since it was the mark of eccentricity. I am writing this post on a 13″ MacBook Pro and have a house of other Macs and peripherals.

Theatre
Apple launched a new range of Apple MacBook Pro’s on October 27, 2016. This was a day after Microsoft’s reinvigoration of its Surface franchise.  Apple ignores timing and tries to plough its own furrow. But comparisons by journalists and market analysts are inevitable.

Microsoft has done a very good job at presenting a device that owes its build quality to the schooling that Apple has given to the Shenzhen eco-system over the past two decades.

The focus on touch computing feels like a step on a roadmap to Minority Report style computing interfaces.  Microsoft has finally mastered the showmanship of Apple at its best.

Apple’s presentation trod a well-worn formula. Tim Cook acts as the ringmaster and provides a business update. Angela Ahrendts sits at a prominent place in the audience and appears on a few cut-in shots. Craig Federighi presented the first product setting a light self-depreciating humour with in-jokes that pull the Apple watchers through the fourth wall and draws them inside ‘Apple’. Eddy Cue plays a similar role for more content related products. In that respect they are interchangeable like pieces of Lego.

Phil Schiller came in to do the heavy lifting on the product. While the design had some points of interest including TouchID and the touchpad the ports on the machine are a major issue.

Given the Pro nature of the computer, Apple couldn’t completely hide behind ‘design’ like it has done with the MacBook. So Phil Schiller was given the job of doing the heavy lifting on the product introduction.

There was the usual Jonny Ive voiceover video on how the product was made with identikit superlatives from previous launches. It could almost be done by a bot with the voice of Jonny Ive, rather than disturbing his creative process.

It all felt like it was dialled in, there wasn’t the sense of occasion that Apple has managed in the past.

User experience
Many people have pointed out that Microsoft’s products looked more innovative and seemed to be actively courting the creatives that have been the core of Apple’s support. In reality much of it was smoke and mirrors. Yes Apple has lost some of the video market because its machines just aren’t powerful, in comparison to other workstations out there.

The touch interface is more of a red herring. Ever since the HP-150 – touch hasn’t played that well with desktop computers because content creators don’t like to take their hands too far from the keyboard when work. It ruins the flow if you can touch type; or have muscle memory for your PhotoShop shortcuts.

Apple didn’t invent the Surface Dial because it already had an equivalent made by Griffin Technology – the PowerMate. In fact the PowerMate had originally been available for Windows Vista and Linux as well, but for some reason the device software didn’t work well with Windows 7 & 8.

I can see why Apple has gravitated towards the touchpad instead. But it needed to do a better job telling the story.

Heat
Regardless of the wrong headedness of Microsoft’s announcements, the company has managed to get much of the heat that Apple used to bring to announcements. By comparison Apple ploughed exactly the same furrow as it has done for the past few years – the products themselves where interchangeable.

The design provided little enthusiasm amongst the creatives that I know, beyond agitation at the pointless port changes and inconvenience that conveyed.

While these people aren’t going to move to Microsoft, the Surface announcements provided them with a compare and contrast experience which agitated the situation further.  To quote one friend

Apple doesn’t know who it is. It doesn’t know its customers and it no longer understands professionals.

Design
Apple’s design of the MacBook Pro shows a good deal of myopia. Yes, Apple saved weight in the laptops; but that doesn’t mean that the consumer saves weight. The move to USB C only has had a huge impact. A raft of new dongles, SD card readers and adaptors required. If like me you present to external parties, you will have a Thunderbolt to VGA dongle.

With the new laptop, you will need a new VGA dongle, and a new HDMI dongle. I have £2,000 of Thunderbolt displays that will need some way of connecting to Apple’s new USB C port. I replace my displays less often than my laptop. We have even earlier displays in the office.

Every so often I transfer files on to a disk for clients with locked down IT systems. Their IT department don’t like file transfer services like WeTransfer or FTP. They don’t like shared drives from Google or Box. I will need a USB C to USB adaptor to make this happen. Even the encrypted USB thumb drive on my ‘real life’ key chain will require an adaptor!

I will be swimming in a sea of extra cables and parts that will weigh more than the 1/2 pound that Apple managed to save. Thank you for nothing, Apple.  Where interfaces have changed before there was a strong industry argument. Apple hit the curve at the right time for standards such as USB and dispensing with optical drives.

The move to USB C seems to be more about having a long thing slot instead of a slightly taller one. Getting rid of the MagSafe power connector has actually made the laptop less safe. MagSafe is a connector that is still superior to anything else on the market.  Apple has moved from an obsession with ‘form and function’ to ‘form over function’.

The problem is one of Apple’s own making: it has obsessed about size zero design since Steve Jobs used to have a Motorola RAZR.

Price versus Value
So despite coming with a half pound less mass and a lot of inconvenience, the devices come in at $200 more expensive than their predecessors. It will be harder for Apple customers to upgrade to this device unless their current machine is at least five years old. I don’t think that this laptop will provide the injection in shipments that Apple believes it will.

A quick word on displays
Apple’s move away from external displays was an interesting one. There can’t be that much engineering difference between building the iMac and the Apple Display? Yet Apple seems to have abandoned the market. It gives some professionals a natural break point to review whether they should stay with Apple. Apple displays aren’t only a product line but a visible ambassador of Apple’s brand where you can see the sea of displays in agencies and know that they are an Apple shop. It is the classic ‘Carol Bartz’ school of technology product management.

More information
Initial thoughts on Windows 8 | renaissance chambara
Size Zero Design | renaissance chambara
Why I am sunsetting Yahoo! | renaissance chambara
Apple just told the world it has no idea who the Mac is for – Charged Tech – Medium
Apple (AAPL) removed MagSafe, its safest, smartest invention ever, from the new MacBook Pros — Quartz
How Apple’s New MacBook Pros Compare To Microsoft’s New Surface Studio | Fast Company | Business + Innovation – a subtly cutting article on the new MacBook Pro
New MacBook Pro touches at why computers still matter for Apple | CNet
Apple’s new MacBook Pro kills off most of the ports you probably need | TechCrunch

Can Brexiters and Remoaners segmentation be part of a marketing strategy?

This chain of thought got fired up when my Facebook filled up with calls to petition British Airways to strop the distribution of the Daily Mail, mainly because of headlines like:
mail headline
There are at least 16 million consumers that would broadly fit within the headline. When one looks at the demographic split of leave versus remain voters you start to see clear segmentation ideal for marketing opportunity.

You already have brands doing this in the U.S. for instance standing up for LGBT rights. Unilever’s Ben & Jerry’s have come out in support of Black Lives Matter.

Now lets look at research done into the demographics of the voters.

Much has been made of the splits in UK society:

Young people who voted tended toward Remain; the older you were the more likely you would be a Brexiter

(73%) of 18 to 24 year-olds voted to remain…

A majority of those aged over 45 voted to leave, rising to 60% of those aged 65 or over

Working class areas outside London and other major cities voted to leave

The AB social group (broadly speaking, professionals and managers) were the only social group among whom a majority voted to remain (57%). C1s divided fairly evenly; nearly two thirds of C2DEs (64%) voted to leave the EU

Labour claimed that a majority of Labour supporters who voted voted remain

Nearly two thirds of Labour and SNP voters (63% and 64%), seven in ten Liberal Democrats and three quarters of Greens, voted to remain

The correlation between class and voting broke down in Scotland and Northern Ireland were working class areas outside major cities narrowly voted to stay.

Some of it was certainly a protest vote, large swathes of the country feel that they have been ignored by a professional city-orientated political class. As the Political Economy Research Centre reflected:

The geography of leave voters reflected the economic crisis of the 1970s, not the 2010s.

Concerns about financial future and family’s well being were stressors rather than root causes. Research attributed it to more deep seated attitudes that shaped world view.

Work by the London School of Economics showed that when  attitudes were mapped against income level; working class status wasn’t as much a deciding factor as pollsters would have had one believe, instead it seemed to correlate close to personality traits.

Closedness and openess

Back in the 1950s American academics sought to answer the question of how Hitler and Mussolini  could have become so popular in what were initially democratic societies? What they and subsequent research found was that a certain amount of  a given population tend to have more of a closedness (or authoritarian dynamic) in their world view.

This can be amplified through:

  • Culture
  • Fear
  • Change
  • Economic insecurity

They look for strong leaders and simple answers. Nostalgia and the past is reassuring. They are less interested in ‘sensation seeking’ and want to fit in.

Liberal values tended to be more orientated towards aspects of openness that embrace newness, sensations, innovation and change.

The Google Trends spike

Much was made of a post-election Google Trends spike on searches such as ‘What is Brexit?’ as a demonstration of a key democracy failing. According to political scientists voters having an understanding of what they are voting for is key in a democracy. If it were true it would cast a shadow on the likelihood of the underlying electorate traits being useful for segmentation. The Google Trends story wasn’t necessarily correct; (but it was great fodder for the news cycle)

  • Google Trends is about the rate of change in searches, so it might be moved dramatically by a relatively small amount of searches
  • Having been working on using Google Trends, we’ve found that there are inconsistencies in data in terms of timing and peaks depending on which IP address it is drawn from and what is the exact mix of terms compared.
  • There is nothing but a hypothesis to associate the peak with people who were eligible to vote.

National versus international businesses

There are a number of British brands on the high street that are geographically focused for whom taking a resolute Brexit stamp would not cause brand harm or investor protest. Examples of this would be Tesco – who have pared back their international footprint and are likely to continue to do so, Wetherspoons, Poundstretcher and payday loans brands like Wonga.com.

For more internationally orientated publicly listed companies, the UK becomes less attractive. Senior government thought leaders such as conservative MP John Redwood have made it clear ‘interference’ including voicing concerns about the Brexit process would be unwelcome.

…companies who did not stay silent on the country’s EU membership would pay a “very dear economic and financial price”.

Chief executives who decide to take a corporate position on the issue could lose their jobs while those campaigning against membership would ensure there were financial consequences…

As the UK becomes a more isolated economy  two steps behind its European peers there could be a temptation to spin off their UK business. This could happen in two ways.

Selling on local gem brands (brands with only significant sales in the local country). Examples could be brands like:

  • Ambrosia
  • Hovis
  • Cabrini sportswear
  • K cider
  • Barclays
  • Wonga.com
  • Royal London

Alternatively disposing of UK subsidiaries would make sense as Brexit represents a permanent reduction reduction in profit margins. For someone like McDonald’s Restaurants, that would likely mean pressing ahead with an ‘all-franchise’ model in a similar approach to what it has taken recently in China.

In order to sell they are likely to require some sort of assets rather than just a sales agreement with the parent company. If they have become only a UK sales organisation, then the viability of this approach depends on the supply chain. One way of adding value into the supply chain would be for these businesses to open up a direct sales channel.

Companies like Unilever already look at how they can integrate into supermarkets supply chain, with ‘buy it now’ buttons on their own site that take you to their online retail partners. They could also open up a direct e-commerce channel; given the Marmitegate debacle with Tesco; expect examination of alternative business models like America’s Dollar Shave Club and Amazon’s Dash.

Modern international brands are already used to marketing towards the ‘open consumer’ who was likely to vote remain. Products that feel up to date, innovative and socially responsible.  A classic example would be Dove, Innocent smoothies, AirBnB or the average family car.

Marketing to the Brexiter

A local business for local people with brands that appeal to leave voter demographics could be more explicit in courting leave voter’s spend.

Tapping into the ‘authoritarian outlook’ would mean tapping into nostalgia; throw-back branding and possibly rolling back political correctness in the name of common sense.

An extreme outcome could be Robertsons bringing back their original Golly character; though thankfully I suspect that would be step too far – even in post-Brexit Britain.
The Robertson's golly

Rejection of expert is partly down to wanting a reduction in complexity. This has huge implications for a wide range of products, particularly in the financial services sector or mobile tariffs.

Choice is the enemy, a simple product, down-to-earth, unambiguous in its claims. Mobile tariffs without bolt-on features, complex phone upgrade cycles or value-added services. In the case of pensions and insurance, with the assurance that they could help ward off a sinister future full of negative change rather than rich rewards. Perceived good value wouldn’t do any harm either.

In terms of how the product or service fits into the Brexiter’s life it is less about being part of a creative expression of individuality. Instead it is more about the ‘grey man’; blending in. Blending in is a threat coping mechanism, a form of risk reduction (think Dilbert cartoons). It shouldn’t mistaken for being more community-spirited, instead the community is of mutual convenience – a shoal of people.  A consequence of this is that persona creation becomes harder or derivative, the stellar insight from the planner loses its gloss. Agency creatives are likely to struggle with consumer empathy beyond utility.

From the advertisers perspective; blunt simplicity rather than clever creative. Audience reach is still important, but a higher frequency is likely required to achieve a comparable impact. This is to get over the Brexiter’s higher degree of inertia to marketing and making them feel that accepting the brand is part of conforming within society. It is part of the eco-system, traditional brands have an advantage due to their familiarity and heritage. Even if its a new brand it feels as if it has always been part of the consumers fabric.

More information
Ben & Jerry’s came out in support of Black Lives Matter. Naturally, some cops are freaking out | Fusion
Business Leaders Speak Out Against North Carolina’s Transgender Law | Wall Street Journal
These 70 Corporations Want to Block North Carolina’s Transgender Bathroom Law | CBN News (US news outlet for the evangelical christian audience)
How the United Kingdom voted on Thursday… and why | Lord Ashcroft Polls
How Demographics Decided Brexit | The Market Oracle
How has Brexit changed the mindset of a nation? | Bucks New University Business School
How do Britain’s ethnic minorities view the EU referendum? | Kings College London
Making Sense of Brexit – the data you need to analyse | UK Data Service
Who is voting to leave the EU and why? | openDemocracy UK
Thoughts on the sociology of Brexit | Political Economy Research Centre
The 2016 Referendum, Brexit and the Left Behind: An Aggregate-Level Analysis of the Result by Goodwin and Heath – PDF
Businesses that speak out for Britain’s EU membership will be punished, vows John Redwood | The Telegraph
UK voters don’t understand Brexit, Google searches suggest | Ars Technica UK
Marmitegate is ‘just the tip of the iceberg’ as cheese, chocolate and wine all face ‘punishing tariffs’, Nick Clegg claims | The Telegraph
It’s NOT the economy, stupid: Brexit as a story of personal values | British Politics and Policy blog | LSE
Brexiters would rather trust the wisdom of ordinary people than the opinion of experts | Quartz
The One Weird Trait That Predicts Whether You’re a Trump Supporter | Politico
Brexit Voters: NOT the Left Behind | Fabian Society
Authoritarianism and Political Behavior by Janowitz & Marvick | Public Opinion Quarterly (Summer 1953)
Voters’ personality traits in presidential elections by Barbaranelli, Caprara, Vecchione and Fraley | Personality and Individual Differences 42 (2007) – PDF document
Personality Traits, Partisan Attitudes, and Voting Behavior. Evidence from Germany by Schoen | Political Psychology (August 2007) – PDF document
Grey Man Strategies 101: Peeling Away the Thin Veneer of Society | Imminent Threat Solutions
How To: The Modern Grey Man Philosophy | Loaded Pocketz
EU referendum results | The Electoral Commission

Fixing email the Apple way

Despite millennials and social networks email is still the killer app of the web. But all is not good with email. I look at friends home screens and see thousands of unread emails in their inbox. They use search to find what they need.
Email bankruptcy
It gives me heart palpitations just looking at the photo above. It was apparent for years that something needed to be done for email. Identity for e-commerce and social platforms still hinges on email addresses. For networks like Quora and LinkedIn, much of your interaction is driven in response to email prompts.

Email is a mature technology that works across a range of platforms and generally does a good job. It’s searchable, it has a permanence. Alongside the address book app, its a database to many aspects of your life from concert tickets, friend’s news or interaction with the government.

There has been a renaissance in quality email newsletters such as Azeem’s The Exponential View or The Hustle. Email marketing continues to be an effective marketing channel for e-commerce businesses.

Apple’s iOS 10 and MacOS Sierra have tweaked the email experience on their default mail.app.
Ios10
Apple has managed to detect the unsubscribe function in many email newsletters and give users control over their subscription at the top of each email.

Using the beta version of Sierra and iOS10 I found that I unsubscribed from many marketing emails. This seems to hold out in some of the anecdotal feedback I’ve heard from friends as email campaigns have reported a surge in unsubscribes since it rolled out from beta to general availability. This has been the same on both b2b and b2c clients.

However many of these people will be unengaged subscribers who hadn’t gained sufficient momentum to cancel without Apple’s assistance. Google takes a different approach, Gmail masks these emails in a separate folder – out of sight, out of mind.

A second part of this was that I found I was prepared to take a chance on new interesting newsletter subscriptions. The content that I did have, I engaged with more because it was easier to get rid of meh content.

I think this is an exciting development, it is a palette cleanser, an opportunity for email marketers to raise the quality of content and engagement. An opportunity to get direct immediate feedback through subscriptions and cancellations. A confident email reading consumers is a fantastic opportunity for agencies and progressive clients. However this will only happen if they chose to look beyond the dip.

Impressions of Spain

It has been a while since I have travelled and got to spend more than a flying visit. I got to spend some time in Madrid.
Madrid & Toledo
Spain prior to the great recession was a country on the rise. It had invested in modern infrastructure that would shame the UK, from its buses to its high-speed trains. They are all still in place. The trains have airport-style baggage scanners prior to boarding and the buses are curiously devoid of advertising.

All of the transport system provided digital signage and mobile apps to keep passengers informed and on the move.

When you look beyond the processes and systems things start to get more interesting. QRcodes feature on advertising of all sorts. I saw an ‘erotic massage’ service on a traffic light using them on its fly poster and FMCG brands in railway station adverts. Part of the reason might be handsets in the Spanish market.

Looking around by what I saw people use on the street, in public transport and shops, the handset environment was very different to the UK. Well off people had the latest iPhone, everyone else seemed to have a mid-tier Android handset up to four years old. The likely lack of memory in the handset meant that the mobile web is a more viable option than apps.

There seemed to be a corresponding lack of m-payments a la ApplePay. Adverts for the Huawei P9 were amongst the most prominent ads that I saw running in out-of-home placements, but I only saw Huawei phones in use one, running ordering software in a restaurant.

How do I…

Back in May 2010, I put the search term ‘How do I’ into Google to see what the auto-complete options offered where.
How do I
I did it again in April 2016
How do I... 2016
Getting a passport and registering to vote had risen in importance and apps had replaced Facebook and MySpace as our tech hate.

Oprah Time: The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

It’s been nine years since Taleb wrote The Black Swan. Like Francis Fukuyama’s The End of History and the Last Man before it, The Black Swan is widely cited and paid lip service to.

The timing of publication for Taleb was particularly pertinent as the book became popular as the financial system broke down in 2008. Some eight years later, the economy has limped along as financial issues were punted into the future, rather like a child kicking a can down an alley. Like the can, the financial issues are still here to be ran into. I thought it was time to re-read Taleb’s book.

Taleb’s work is philosophical rather than scientific in its method. Although he avoids the talk show friendly cliches of Malcolm Gladwell or Seth Godin. Much of our world is based around the normal distribution, it is used by insurance companies and pension funds to access risk and longevity. Taleb points out that the really big changes that rock the boat often don’t fit neatly within these models.

Taleb’s solution boils down to two things

  1. A defensive skepticism that would encourage the average person to question common wisdom and ask ‘what if’
  2. For those that can afford it, an offensive posture that asks ‘what if’ and has a mix of savings or investments most of which is put in very safe vehicles and 15 per cent or so on high risk speculative investments to take advantage of change

Taleb’s work doesn’t seem to have had the impact that one would have expected just five years ago when it was quoted as a touchstone to modern life.

Much of the excess and risk that had happened previously is happening again, despite a plethora of disruptive forces laid out in the media.

Audiences are paying too much attention to listicles that go something along the line of ‘5 habits you need have to be like Bill Gates’. Where is the critical filter?

More information
McMansions Are Back And Are Bigger Than Ever – There was a small ray of hope just after the Lehman collapse that one of the most lamentable characteristics of US society – the relentless urge to build massive McMansions (funding questions aside) would have subsided
The market’s most crowded trades could be causing dangerous bubbles – Business Insider
Many Middle-Class Americans Are Living Paycheck to Paycheck – The Atlantic
Economic Conditions Snapshot, March 2016: McKinsey Global Survey results | McKinsey & Company
Andy Grove’s Warning to Silicon Valley – The New York Times – Mr. Grove contrasted the start-up phase of a business, when uses for new technologies are identified, with the scale-up phase, when technology goes from prototype to mass production. Both are important. But only scale-up is an engine for job growth — and scale-up, in general, no longer occurs in the United States. “Without scaling,” he wrote, “we don’t just lose jobs — we lose our hold on new technologies” and “ultimately damage our capacity to innovate.
Crap IT means stats crew don’t really know how UK economy’s doing • The Register – and people make accusations about Chinese economic data…
Return of ‘100% mortgages’ ease burden on Bank of Mum and Dad | FT

June 2016 online marketing and technology research slides

Here is a copy of the slides that I pull together (when I have the time) each month of publicly available data that would be of use.

This month I have some new data around search which came from disclosures at Google I/O in terms of search volumes. We talk about social as if search has gone out of style but its growth is still staggering, driven by mobile device penetration.
Google global search volume
Looking at global search revenue over time, Google’s monopoly position becomes immediately apparent.
Global Search Revenues
More details about me here.
Slide20
Full presentation available for download as a PDF on Slideshare

The New Nokia

Microsoft finally let go of its licence for the Nokia license on May 19, 2016.
Slide03
There is a lot of logic to this move:

  • Microsoft has already written down the full value of the business acquisition
  • It has got the most valuable technical savvy out of the team and moved it into the Surface business
  • It removes problematic factories and legacy products

For the businesses that have acquired the rights to use the Nokia name and the factories the upsides are harder to see.

The factories may be of use, however there is over supply in the Shenzhen eco-system and bottlenecks aren’t usually at final manufacture, but in the component supply chain.

There is still some brand equity left in the Nokia phone brand. I analysed Nokia along with a number of other international Greater China smartphone eco-system brands using Google Trend data.
Slide06
There has been a decline in brand interest over the past 12 months for Nokia of 37%
Slide07
Nokia still has comparable brand equity to other legacy mobile brands such as BlackBerry and Motorola
Slide08
The brand equity is comparable to other value mobile brands. Honor; Huawei’s value brand has had a lot of money and effort pumped into it to achieve its current position.
Slide09
But it’s brand equity doesn’t stack up well against premium handset brands from Greater China. The reason for this is that smartphone marketing and fast moving consumer goods marketing now have similar dynamics – both are in mature little differentiated markets. Brands need to have deep pockets  and invest in regular advertising to remain top-of-mind across as large an audience as possible. Reach and frequency are more important than social media metrics like engagement.

In addition to advertising spend needs to be put into training and incentivising channel partners including carriers.

They are entering a hyper-competitive market and it isn’t clear what their point of advantage will be. Given the lock down that Google puts on Android and commoditised version of handset manufacture, the best option would be to look for manufacturing and supply chain efficiencies  – like Dell did in the PC industry. But that’s easier said than done.

Garnering the kind of investment required to seriously support an international phone brand is a hard sell to the finance director or potential external investors.

Slide13
Growth is tapering out.
Slide14
The average selling price is in steady decline
Slide16
This is partly because the emerging markets are making the majority new phone purchases.
Slide15
Consumers in developed markets are likely holding on to the their phones for longer due to a mix economic conditions and a lack of compelling reason to upgrade.
Slide12
All of the consumers that likely want and can afford a phone in developed markets have one. Sales are likely to be on a replacement cycle as they wear out. Manufacturers have done a lot to improve quality and reliability of devices.

Even the old household insurance fraud standby of dropping a phone that the consumer was bored with down the toilet doesn’t work on the latest premium Android handsets due to water-proofing.
Slide20

More information

The answer to the question you’ve all been asking | Nokia – Nokia’s official announcement
Gartner highlights a more challenging smartphone sector for Nokia than when it “quit” in 2013 | TelecomTV
Nokia is coming back to phones and tablets | The Verge
So the Nokia brand returns.. with a Vengeance | Communities Dominate Brands

Supporting data slides in full

Millennials are people too

Smart funny video by Adam Conover on the marketing obsession of millennials as a form of segmentation.

Show this to as many marketers as you can.

What about the work desk phone?

I was in touch with a former colleague of mine the other day and they sent me a picture of my old desk phone, still logged into my account and with a divert through to my mobile phone.
Untitled
The office had hot desking because there wasn’t enough space for everyone to be in at the same time.  We had email account size restrictions and people walked around with secondary hard drives plugged into their laptops as local and network storage wasn’t adequate enough to schlep all the documents on to a real or cloud based (someone else’s computers) file server.

Yet the desk phone remained logged in because no one was bothering to use it. So they have a surplus of desk telephones, when there was a shortage of pretty much every other resource the knowledge worker needed.

Often times, people still used the land line number which followed them due to the Cisco VoIP PBX, but they diverted it to their mobile handset. The culture was very much based around conference calls, international teams would dial into a bridge number and be connected. You would see people pacing the common spaces such as corridors or reception and participating in conference calls on headsets wired into their smartphone.

At the point of my project finishing they were just starting to roll out Skype for business. I suspect that this wasn’t going to change dramatically the use of mobile handsets, just the nature of how the call got to the recipient.

Mobile infrastructure manufacturers have been expecting this for years, they rolled out pico-cell products aimed at enterprises to deal with reception dead spots in metal framed office buildings. What really seemed to have spurred things into action is the rise of all-you-can-eat voice tariffs.

Online advertising and technology data points – focus on China

I have been pulling together slides for me that were useful for the work that I have been doing. I thought it would be worthwhile sharing these slides with a wider audience.

This month, I have selected a few slides that shed a light on advertising and consumer behaviour in China.
May online marketing
Looking at platforms it is hard to over play the importance of Tencent in the Chinese internet. Looking at mobile behaviour Tencent is responsible for at least four of the top ten properties: WeChat, QQ, QQ Browser and Tencent Video.
May online marketing
If we look at two Chinese internet companies Tencent and Netease we can see how the companies have massively increased the number of non-game apps that they provide to keep consumers in their eco-system for their digital lives.
May online marketing
(Microsoft’s high number is driven by a number experimental project apps and enterprise apps). What this means is that the mobile OS becomes less important, which is one of the reasons why western brands from Samsung to Apple have been hit in the market. Their platforms give them less leverage.

Tencent’s WeChat is one of the most popular methods of payment in China
May online marketing

If we look at advertising spend in the Chinese market we can see that digital and radio advertising spend over-indexes. In some ways this is surprising. Online content is huge and historically the government controlled traditional media much more tightly than online media – to the detriment of watchable content on the television. More recently, government regulation has tightened across platforms.
May online marketing
Print advertising only slightly over-indexes in comparison to digital or radio. On the face of it there looks to be a massive opportunity in television advertising.

If we look at the media market consumption habits two things immediately stand out. Television and radio are largely holding their own in the face of rapidly growing digital consumption. The rapid growth in digital consumption is being driven by non-PC devices.
May online marketing

If you want to know why Huawei has partnered with Leica to boost the perception of its smartphone camera function, one of the factors involved is the massive growth of photography in Chinese mobile behaviour. This is especially interesting when one compares it to messaging and social – WeChat the largest mobile social platform is all encompassing in its functionality and place in modern Chinese life. A second factor is the way manufacturers are trying redefine the premium smartphone sector, at a time when innovation and experiential difference have become incremental.
May online marketing
May online marketing


You can see the full presentation here

Jargon Watch: context collapse

Years ago I wrote a series of posts with the link-baiting titles of ‘Facebook is a dead man walking’; the first post written in 2008. I say this so you can form an opinion up  front about my interpretation  around the idea of context collapse.
Facebook page
According to The Information, Facebook is worried about a drop in users sharing their own content.

As of mid-2015, total sharing had declined by about 5.5% year over year while “original broadcast sharing” was down 21% year over year, the confidential data show.

This loss is especially acute with under 30 year old users. This loss in sharing according to Bloomberg company staff have branded context collapse.

What are the likely causes? Here my are my hypotheses.

Negative network effects. Just five years ago ZDNet published research were respondents admitted that they were drunk in 75 per cent of their photos on Facebook. In 2016, when ‘friends’ means colleagues, superiors, clients, teachers or parents there will be a lot more self-censorship going on.  A more subtle form of self censorship will be also brought about in terms of societal norming.

When Facebook initially arrived the volume of content that people shared was larger, now it isn’t only the nature of the content that people will consider but the volume of the content. Are they too noisy, do they overshare?

Facebook lost a lot of trust with consumers with things likes Beacon. Consumers didn’t necessarily understand the nuances, they were told that it wasn’t good and their privacy settings are a major hassle to tweak – when you’re on edge about privacy, you are more likely to put a filter on your content.

Just over five years ago, Netbase had released brand research that showed consumers had a stronger, negative feeling towards Facebook than brands like Microsoft, Google or Twitter. That left room for other services to creep in for self-expression, messaging and sharing to small groups. Facebook bought some of the major players Instagram and WhatsApp, but doesn’t own all the pieces.

More information
Facebook Struggles to Stop Decline in ‘Original’ Sharing | The Information (paywall)
British Facebook users are drunk in 76% of their photos | ZDNet
Facebook Wants You to Post More About Yourself – Bloomberg
Why Facebook is a dead man walking | renaissance chambara
Why Facebook is a dead man walking part II? | renaissance chambara
Why Facebook is a dead man walking part 2.5? | 技术品牌的情绪 | renaissance chambara
Facebook and advertising or why Facebook is a dead man walking part III? | renaissance chambara

How the #PanamaPapers story broke online

The Panama Papers are 2.6 TB worth of documents provided to German paper Sueddeutsche Zeitung by an anonymous source in August 2015. The documents cover 40 years of work by a Panamanian corporate law firm Mossack Fonseca on behalf of clients around the world.

The documents detail corporate services provided to the rich and powerful around the world. The first stories from the data trove were published on April 3, 2016 with more expected by early May 2016.
Mentions by medium
Looking at social media listening services we can see how the story rolled out online.
Forums gave an early ‘canary in the coal mine’ for the story, but Twitter was a massive accelerant.
Mentions over time
Mentions over time
A secondary effect was the way the story cemented Edward Snowden’s place as a media brand specialising in privacy and transparency – he was the most retweeted commentator in the first 24 hours of the story being out there.
The story in one tweet
Understanding the retweeters
About me
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