Category: business | 商業 | 상업 | ビジネス

My interest in business or commercial activity first started when a work friend of my Mum visited our family. She brought a book on commerce which is what business studies would have been called decades earlier. I read the book and that piqued my interest.

At the end of your third year in secondary school you are allowed to pick optional classes that you will take exams in. this is supposed to be something that you’re free to chose.

I was interested in business studies (partly because my friend Joe was doing it). But the school decided that they wanted me to do physics and chemistry instead and they did the same for my advanced level exams because I had done well in the normal level ones. School had a lot to answer for, but fortunately I managed to get back on track with college.

Eventually I finally managed to do pass a foundational course at night school whilst working in industry. I used that to then help me go and study for a degree in marketing.

I work in advertising now. And had previously worked in petrochemicals, plastics and optical fibre manfacture. All of which revolve around business. That’s why you find a business section here on my blog.

Business tends to cover a wide range of sectors that catch my eye over time. Business usually covers sectors that I don’t write about that much, but that have an outside impact on wider economics. So real estate would have been on my radar during the 2008 recession.

Technical capability notice
The Washington Post alleged that the British government had served a technical capability notice against Apple in December 2024 to provide backdoor global access into encrypted Apple iCloud services. The BBC’s subsequent report appears to support the Post’s allegations. And begs philosophical question about what it means when the government has a copy of your ‘digital twin’?

What is a technical capability notice

A technical capability notice is a legal document. It is issued by the UK government that compels a telecoms provider or technology company that compels them to maintain the technical ability to assist with surveillance activities like interception of communications, equipment interference, or data acquisition. When applied to telecoms companies and internet service providers, it is usually UK only in scope. What is interesting about the technical capability notice allegedly served against Apple is extra-territorial in nature. The recipient of a technical capability notice, isn’t allowed to disclose that they’ve been served with the notice, let alone the scope of the ask.

Apple outlined a number of concerns to the UK parliament in March 2024:
- Breaks systems
- Lack of accountability in the secrecy
- Extra-territoriality
Tl;DR – what the UK wants with technical capability notices is disproportionate.

Short history of privacy

The expectation of privacy in the UK is a relatively recent one. You can see British spy operations going back to at leas the 16th century with Sir Francis Walsingham. Walsingham had a network that read couriered mail and cracked codes in Elizabethan England.

By Victorian times, you had Special Branch attached to the Metropolitan Police and related units across the British Empire. The Boer War saw Britain found permanent military intelligence units that was the forerunner of the current security services.

By world war one the security services as we now know them were formed. They were responsible to intercept mail, telegraph, radio transmissions and telephone conversations where needed.

Technology lept forward after World War 2.

ECHELON

ECHELON was a cold war era global signals intelligence network ran by Australia, Canada, New Zealand, the UK and the US. It originated in the late 1960s to monitor the military and diplomatic communications of the Soviet Union and its Eastern Bloc allies during the Cold War, the ECHELON project became formally established in 1971.

ECHELON was partly inspired by earlier US projects. Project SHAMROCK had started in 1940 and ran through to the 1970s photographing telegram communications in the US, or transiting through the US. Project MINARET tracked the electronic communications of listed American citizens who travelled abroad. They were helped in this process by British signals intelligence agency GCHQ.

In 2000, the European Commission filed a final report on ECHELON claimed that:
- The US-led electronic intelligence-gathering network existed
- It was used to provide US companies with a competitive advantage vis-à-vis their European peers; rather like US defence contractors have alleged to undergone by Chinese hackers
Capenhurst microwave tower

During the cold war, one of the main ways that Irish international data and voice calls were transmitted was via a microwave land bridge across England and on to the continent.

Dublin Dame Court to Holyhead, Llandudno and on to Heaton Park. Just next to the straight line path between Llandudno and Heaton Park was a 150 foot tower in Capenhurst on the Wirral. This siphoned off a copy of all Irish data into the British intelligence system.

Post-Echelon

After 9/11, there were widespread concerns about the US PATRIOT Act that obligated US internet platforms to provide their data to US government, wherever that data was hosted. After Echelon was exposed, it took Edward Snowden to reveal PRISM that showed how the NSA was hoovering up data from popular internet services such as Yahoo! and Google.

RAMPART-A was a similar operation taking data directly from the world’s major fibre-optic cables.

US programme BULLRUN and UK programme Edgehill were programmes designed to crack encrypted communications.

So privacy is a relatively new concept that relies the inability to process all the data taken in.

Going after the encrypted iCloud services hits different. We are all cyborgs now, smartphones are our machine augmentation and are seldom out of reach. Peering into the cloud ‘twin’ of our device is like peering into our heads. Giving indications of hopes, weaknesses and intent. Which can then be taken and interpreted in many different ways.

What would be the positive reasons to do a technical capability notice?

Crime

Increasing technological sophistication has gone hand in hand with the rise of organised crime groups and new criminal business models such as ‘Klad’. Organised crime is also transnational in nature.

But criminals have already had access to dedicated criminal messaging networks, a couple of which were detailed in Joseph Cox’ Dark Wire . They use the dark web, Telegram and Facebook Marketplace as outlets for their sales.

According to Statista less than six percent of crimes in committed in the UK resulted in a charge or summons in 2023. That compares to just under 16 percent in 2015.

Is going after Apple really going to result in an increased conviction rate, or could the resources be better used elsewhere?

Public disorder

Both the 2011 and 2024 riots caught the government off-guard. Back in 2011, there was concern that the perpetrators were organising over secure BlackBerry messaging. The reality that the bulk of it was being done over social media. It was a similar case with the 2024 public disturbances as well.

So gaining access to iCloud data wouldn’t be that much help. Given the effort to filter through it, given that the signals and evidence were out there in public for everyone to see.

The big challenge for the police was marshalling sufficient resources and the online narrative that took on a momentum of its own.

Paedophiles

One of the politicians strongest cards to justify invasion of privacy is to protect against nonces, paedos and whatever other label you use to describe the distribution of child sexual abuse images. It’s a powerful, emotive subject that hits like a gut punch. The UK government has been trying to explore ways of understanding the size of abuse in the UK.

Most child abuse happens in the home, or by close family members. Child pornography rings are more complex with content being made around the world, repeatedly circulated for years though various media. A significant amount of the content is produced by minors themselves – such as selfies.

The government has a raft of recommendations to implement from the The Independent Inquiry into Child Sexual Abuse. These changes are more urgently needed like getting the police to pay attention to vulnerable working-class children when they come forward.

Terrorism

The UK government puts a lot of work into preventing and combating terrorism. What terrorism is has evolved over time. Historically, cells would mount terrorist attacks.

Eventually, the expectation of the protagonist surviving the attack changed with the advent of suicide tactics. Between 1945 and 1980, these were virtually unheard of. The pioneers seem to have been Hezbollah against UN peacekeepers in Lebanon.

This went on to influence 9/11 and the London bombings. The 9/11 commission found that the security services didn’t suffer from a lack of information, but challenges in processing and acting on the information.

More recently many attacks have been single actors, rather than a larger conspiracy. Much of the signs available was in their online spiral into radicalisation, whether its right-wingers looking to follow the example of The Turner Diaries, or those that look towards groups like ISIS.

Axel Rudakubana’s actions in Southport doesn’t currently fit into the UK government’s definition of terrorism because of his lack of ideology.

I am less sure what the case would be for being able to access every Apple’s cloud twin of their iPhone. The challenge seems to be in the volume of data and meta data to sift through, rather than a lack of data.

Pre-Crime

Mining data on enough smartphones over time may show up patterns that might indicate an intent to do a crime. Essentially the promise of predictive crime solving promised in the Tom Cruise dystopian speculative future film Minority Report.

Currently the UK legal system tends to focus on people having committed a crime, the closest we have to pre-crime was more intelligence led operations during The Troubles that were investigated by the yet to be published Stalker/Sampson Inquiry.

There are so many technical, philosophical and ethical issues with this concept – starting with what it means for free will.

What are the negative reasons for doing a technical capability notice?

There are tensions between the UK government’s stated opinion on encrypted services and the desire to access the data, outlined in Written testimony of Chloe Squires, Director National Security, Home Office.

The UK Government supports strong encryption and understands its importance for a free, open and secure internet and as part of creating a strong digital economy. We believe encryption is a necessary part of protecting our citizens’ data online and billions of people use it every day for a range of services including banking, commerce and communications. We do not want to compromise the wider safety or security of digital products and services for law abiding users or impose solutions on technology companies that may not work within their complex systems.

Extra-territorial reach

Concerns about the US PATRIOT Act and PRISM saw US technology companies lose commercial and government clients across Europe. Microsoft and Alphabet were impacted by losing business from the likes of UK defence contractor BAE Systems and the Swedish government.

The UK would likely experience a similar effect. Given that the UK is looking to biotechnology and technology as key sectors to drive economic growth, this is likely to have negative impact on:
- British businesses looking to sell technology services abroad (DarkTrace, Detica and countless fintech businesses). They will lose existing business and struggle to make new sales.
- Britain’s attractiveness to inbound investments be it software development, regional headquarter functions or infrastructure such as data centres. Having no exposure to the UK market may be more attractive to companies handling sensitive data.
- You have seen a similar patten roll out in Hong Kong as more companies have moved regional headquarters to Singapore instead.
The scope of the technical capability notice, as it is perceived, damages UK arguments around freedom-of-speech. State surveillance is considered to have a chilling effect in civilian discussions and has been criticized in the past, yet the iCloud backdoor access could be considered to do the exactly same thing as the British government opposes in countries like China, Hong Kong and Iran.

Leverage

The UK government has a challenge in terms of the leverage that it can bring to bear on foreign technology multinationals. While the country has a sizeable market and talented workforce, it’s a small part of these companies global revenues and capabilities.

They can dial down services in the UK, or they can withdraw completely from the UK marketplace taking their jobs and infrastructure investment with them. Apple supports 550,000 jobs through direct employment, its supply chain, and the iOS app economy. In 2024, Apple claimed that it had invested over £18 billion over the previous five years.

In terms of the number of people employed through Apple, it’s a big number, let me try to bring it to life for you. Imagine for a moment if every vehicle factory (making cars, tractors,, construction vehicles, race cars and wagons), parts plant, research and development, MOT station, dealership and repair shop in the UK fired half their staff. That is the toll that Apple leaving the UK would have on unemployment.

Now think about how that would ripple through the community. Less goods bought in the supermarket, less pints poured in a pub or less frequent hair cuts given.

Where’s the power in the relationship between the tech sector and the government?

Precedent

Once it is rumoured that Apple has given into one country’s demands. The equivalent of technical capability notices are likely to be employed by governments around the world. Apple would find it hard not to provide similar access to other 5is countries, China, India and the Gulf states.

Even if they weren’t provided with access, it’s a lot easier to break in when you know that a backdoor already exists. A classic example of this in a different area is the shock-and-awe felt when DeepSeek demonstrated a more efficient version of a ChatGPT-like LLM. The team had a good understanding of what was possible and started from there.

The backdoor will be discovered, if not by hackers then by disclosure like the Capenhurst microwave tower that was known about soon after it went up, or by a Edward Snowden-like whistle-blower given the amount of people that would have access to that information in allied security apparatus.

This would leave people vulnerable from around the world to authoritarian regimes. The UK is currently home to thousands of political emigres from Hong Kong who are already under pressure from the organs of the Chinese state.

From a domestic point-of-view while the UK security services are likely to be extremely professional, their political masters can be of a more variable quality. An authoritarian populist leader could put backdoors allowed by a technical capability notice to good use.

Criminal access

The hackers used by intelligence services, especially those attributed to China and Russia have a reputation for double-dipping. Using it for their intelligence masters and then also looking to make a personal profit by nefarious means. Databases of iCloud data would be very tempting to exploit for criminal gain, or sell on to other criminals allowing them to mine bank accounts, credit cards, conduct retail fraud.

It could even be used against a country’s civilians and their economy as a form of hybrid warfare that would be hard to attribute.

In the past intelligence agencies were limited in terms of processing the sea of data that they obtained. But technology moves on, allowing more and more data to be sifted and processed over time.

What can you do?

You’ve got nothing to hide, so why worry? With the best will in the world, you do have things to hide, if not from the UK government then from foreign state actors and criminals – who are often the same people:
- Your bank account and other financial related logins
- Personal details
- Messages that could be taken out of context
- I am presuming that you don’t have your children’s photos on your social media where they can be easily mined and fuel online bullying. Your children’s photos on your phone could be deep faked by paedophiles or scammers.
- Voice memos that can be used to train a voice scammer’s AI to be good enough
- Client and proprietary information
- Digital vehicle key
- Access to academic credentials
- Access to government services
So, what should you do?

Here’s some starting suggestions:
- Get rid of your kids photos off your phone. Get a digital camera, have prints made to put in your wallet, a photo album book, use an electronic picture frame that can take an SD card of images and doesn’t connect to the web or use a cloud service.
- Set up multi-factor authentication on passwords if you can. It won’t protect you against a government, but it will make life a bit more difficult for criminals who may move on to hacking someone else’s account instead – given that there is a criminal eco-system to sell data en-masse.
- Use the Apple password app to generate passwords, but keep the record off them offline in a notebook. If you are writing them down, have two copies and use legible handwriting.
- You could delete ‘important’ contacts from your address book and use an old school filofax or Rolodex frame for them instead. You’re not likely to be able to do this with all your contacts, it wouldn’t be practical. If you are writing them down, have two copies and use legible handwriting.
- Have a code word with loved ones. Given that a dump of your iCloud service may include enough training data for a good voice AI, having a code word to use with your loved ones could prevent them from getting scammed. I put this in place ages ago as there is enough video out there on the internet of me in a public speaking scenario to train a passable voice generative AI tool.
- Use Signal for messaging with family and commercially sensitive conversations.
- My friend and former Mac journalist Ian Betteridge recommended using an alternative service like Swiss-based Proton Cloud. He points out that they are out of the legal jurisdiction of both the US and UK. However, one has to consider history – Crypto AG was a Swiss-based cryptography company actually owned by the CIA. It gave the intelligence agency access to secure communications of 120 countries including India, Pakistan and the Holy See. Numerous intelligence services including the Swiss benefited from the intelligence gained. So consider carefully what you save to the cloud.
- if you are not resident in the UK, consider using ‘burn devices’ with separate cloud services. When I worked abroad, we had to do client visits in an authoritarian country. I took a different cellphone and laptop to protect commercially sensitive information. When I returned these were both hard reset by the IT guy and were ready for future visits. Both devices only used a subset of my data and didn’t connect to my normal cloud services, reducing the risk of infiltration and contamination. The mindset of wanting to access cloud services around the world may be just the thin end of the wedge. Countries generally don’t put down industrial and political espionage as justifications for their intelligence services powers.
What can criminals do?

Criminals already have experience procuring dedicated secure messaging services.

While both dark web services and messaging platforms have been shut down, there is an opportunity to move the infrastructure into geographies that are less accessible to western law enforcement: China, Hong Kong, Macau or Russia for instance. A technical capability notice is of no use. The security services have two options to catch criminals out:
- Obtain end devices on the criminal:
  - While they are unlocked and put them in a faraday cage to prevent the device from being wiped remotely.
  - Have an informant give you access to their device.
- Crack the platform:
  - Through hacking
  - Setting the platform up as a sting in the first place.
If the two criminals are known to each other a second option is to go old school using a one-time pad. This might be both having the same edition of a book with each letter or word advancing through the book .

So if you used the word ‘cat’ as the fourth word on line 3 of page 2 in a book you might get something like 4.3.2, which will mean nothing if you don’t have the same book and if the person who wrote the message or their correspondent don’t use 4.3.2 to signify cat again. Instead they would move onwards through the book to find the next ‘cat’ word. A sleuthing cryptographer may be able to guess your method of encryption by the increasing numbers, but unless they know the book your feline secret is secure from their efforts.

Above is two pages from an old one-time pad issued by the NSA called DIANA.

The point is, those criminals that really want to evade security service understanding their business can do. Many criminals in the UK are more likely to rely on a certain amount of basic tactics (gloves, concealing their face, threatening witnesses) and the low crime clearance rate in the UK.

Instead of a technical capability notice, these criminals are usually caught by things like meta analysis (who is calling who, who is messaging who, who is transferring money etc.), investigative police work including stings, surveillance and informers.

Why?

Which begs the questions:
- Why Apple and why did they choose to serve it in December 2024?
- What trade-offs have the UK government factored in considering the potiential impact on its economic growth agenda and political ramifications?
- The who-and-why of the leak itself? Finally, the timing of the leak was interesting, in the early days of the Trump administration.
I don’t know how I feel about the alleged technical capability notice and have more questions than answers.

More information

European Commission Final Report on Echelon and coverage that appeared at the time of the report’s release: EU releases Echelon spying report • The Register

Patriot Act und Cloud Computing | iX – German technology press on the risks posed by the Patriot Act

US surveillance revelations deepen European fears | Reuters – PRISM negatively impacted US technology companies

NSA’s Prism surveillance program: how it works and what it can do | guardian.co.uk

The strange similarities in Google, Facebook, and Apple’s PRISM denials | VentureBeat

Tech Giants Built Segregated Systems For NSA Instead Of Firehoses To Protect Innocent Users From PRISM | TechCrunch

Computer Network Exploitation vs. Computer Network Attack | Schneier on Security

EXPLANATORY MEMORANDUM TO THE INVESTIGATORY POWERS (TECHNICAL CAPABILITY) REGULATIONS 2018
February 11, 2025
1000 Yen Ramen wall
Increased Japanese inflation is crushing restaurants due to the 1000 Yen Ramen wall. Ramen traditionally has been a working class food in Japan. It’s hearty, nourishing and flavoursome. Some ramen restaurants have even been listed in Michelin restaurant guides.

The 1000 Yen note is the smallest denomination of note in Japanese country, rather like the 5 pound note in the UK or the 5 euro note in the EU. It’s about worth about £5.20 at the time of writing.

Japan went through decades of deflation that flattened prices and made workers poorer. So being able to get a cheap nutritious meal during lunch time at work or after work was invaluable. It also meant that a bowl of ramen had cost 1000 Yen for a long time.

Post-COVID supply chain driven inflation pushed the price above 1000 Yen. That’s when things get strange from a marketing perspective. Consumers who were used to paying 1000 Yen for their ramen couldn’t or wouldn’t pay more. Which is when ramen restaurants hit what the owners describe as the 1000 Yen ramen wall.

In marketing terms this wall is known as a marketing pricing dead zone. Dead zones revolve around three key factors:
- Customer segmentation: Understanding customer segments and their price sensitivity is key to avoid pricing dead zones. In this case the price sensitivity seems to be unusually rigid.
- Perception of value: A key consideration in a dead zone is how customers perceive the value of a product at a specific price point. If a product is priced too cheap, customers can assume it’s inferior quality. If a price too high the customers feel they aren’t getting enough value for money. What’s interesting about ramen is that customers aren’t willing to budge on quality or perceived value.
- Market competition: The presence of competitors with well-positioned prices within a category can create dead zones. Ramen restaurants tend to be small businesses rather than chains, so they don’t have a lot of market power. They do have competition in terms of substitution for that 1000 Yen note – onigiri, instant noodles and sandwiches from the local combini (convenience store).
What’s fascinating about this situation is that ramen restaurants or an outsider haven’t managed to innovate around the wall. Instead the poor substitute of a sandwich or onigiri from a refrigerator is their option.

It’s more than business being lost, ramen restaurants are neighbourhood staples and an intangible part of Japan’s culinary culture. To give a UK specific example, without the humble ramen shop we wouldn’t have had the Wagamama chain of restaurants.

More Japan related content can be found here.

More information

Try the Michelin-star ramen that’s only 1,000 yen in an unassuming location in central Tokyo | Stars and Stripes

‘Ramen fast pass’ starves lineups, feeds the busy first at popular Tokyo shop – The Mainichi

Record number of Japan ramen eateries went bankrupt in 2024 | Kyodo News

Japan election 2024: How ramen prices have become a top issue for voters – Firstpost

Japan Runs on Vending Machines. It’s About to Break Millions of Them. – The New York Times

Japanese ramen shops must raise prices, or shut, to cope with inflation – The Washington Post

Record Number of Ramen Shops Go Bankrupt in Japan in 2024 – Unseen Japan

Japan runs on vending machines. It’s about to break millions of them. – The Japan Times
February 2, 2025
Foreign workers + more stuff

Foreign workers

Foreign workers in Singapore parlance are people who come from around Southeast Asia and South Asia to do blue collar and pink collar jobs in the city state.

In a number of Asian countries including Hong Kong and Singapore; Filipino and Indonesian workers came to care for old people at home, look after children and conduct household tasks.

This group of foreign workers freed up middle class married women in Singapore and other countries to participate more to their economy, capitalising on their education and ability to earn more in fast-growing economies. They had higher levels of workforce participation than their female counterparts in Japan and South Korea.

The Philippines relies almost five-fold more on remittances for its GDP than similar countries like Indonesia.

What’s less reflected upon is the social upheaval and challenges that these foreign workers face in their new homes. They are in a different culture, away from friends and family as a support network. They have tremendous pressure to remit as much money as possible home.

They only have each other to rely upon. This skate team is just one of the activities that foreign workers do. From informal gatherings with friends to sophisticated beauty pageants, volleyball and basketball leagues. More Singapore related content can be found here.

Beauty

China’s beauty market is a sight for sore eyes | FT – The brand keeps prices of its products, from face powders to creams, closer to those of premium international brands, in line with L’Oréal’s Lancôme and Shiseido’s Nars. The rise of a domestic premium brand points to a significant shift in mainland shoppers’ buying habits as well as highlighting improvements in the quality of domestic products

Business

Business execs just said the quiet part out loud on RTO mandates — A quarter admit forcing staff back into the office was meant to make them quit | ITPro

China

Impatient for tech breakthroughs, the Communist Party is pushing aside private initiatives | Merics – the government is trying to pick winners and backfill the funding gap left in the VC industry which has declined over 40%.

China’s long view on quantum tech has the US and EU playing catch-up | Merics – China sees quantum technology as pivotal in global science and technology (S&T) competition and has stepped up government spending on scientific and industrial development to about USD 15 billion.

Consumer behaviour

Paper People | Yun Sheng | Granta – virtual dating simulators and virtual love. Japan leads where the aging world is likely to follow

2024 Year in Review – Pornhub Insights – young people (gen-Z) make the highest traffic.

Gen Alpha report: Teens see Starbucks as the new Venmo – Fast Company – equivalent to rounds in a bar.

From like to love: understanding why consumers fall in love with some products | Kearney

Culture

Y3K: Futuristic fashion trend sweeps China | Jing Daily – Inspired by AI, VR, and the metaverse, and propelled by K-pop idols and Korean brands, Y3K is rapidly gaining popularity among Gen Z. – very William Gibson ‘Burning Chrome’ era

Economics

Diverging demographic destinies: Cars and the middle class | WARC – According to Pew, the American middle class has shrunk significantly in the last few decades. The top 20% of earners now take more than 50% of aggregate income because theirs has grown faster. 88% of Americans have less than $2000 in their checking account and 50% have less than $500 in savings. The average cost of a new car in 1984 was $6000 and the average household income was $27k. Today average household income is $80k [Fed] but averages conceal the widened gap between maxima and minima: the median income per person is around $35k [Census]. The average price of a new car is almost $50k, which is surprising enough that CNN wrote an article about it. They explain that “much of the reason Americans are paying nearly $50k for a car is that automakers decided to go all-in on expensive cars. The more they charge for a car, the more money they make off it.”

Whereas forty years ago an average new car cost about a fifth of an average annual salary, a new car is now prohibitively expensive for most. That’s why Americans have a record $1.6 trillion of outstanding car debt and delinquencies are rising.

What the Bubble Got Right | Paul Graham

2025 AI & Semiconductor Outlook | Fabricated Knowledge – early indications for an economic downturn?

Energy

Is China’s “peak coal” just spouting emissions? | Too Simple, Sometimes Naive

Hong Kong

Asia’s Walled City: The Erosion of Transparency in Hong Kong | International Republican Institute – interesting report, particularly some of the knock-on effects for sectors such as public affairs professionals, financial analysts and being able to do due diligence on businesses.

Japan

FirstFT: Nissan and Honda hold talks about a merger

Biden’s Move to Block US Steel Deal Is No Way to Treat Japan – Bloomberg – In the executive order preventing the deal on spurious national security grounds, staffers for President Joe Biden appeared to accidentally copy-and-paste the title of a previous presidential order — one ordering a Chinese crypto mining company to vacate property near an Air Force base. The left the Nippon Steel directive entitled: “Regarding the acquisition of certain real property of Cheyenne leads by MineOne Cloud Computing Investment.”

Luxury

Interesting research from two sources that don’t quite square with each other. Walpole’s The State of London Luxury 2024 report came out and painted a rosy picture about the ultra high end aspect of the London property market. Meanwhile over at the FT, Why London’s property market is stagnating points at the same end of the market as being moribund in nature.

United States Luxury Fine Jewelry Market Expected to Reach USD 24,374.3 Million by 2034, Driven by Sustainability and Personalization Trends | Future Market Insights. – The luxury fine jewelry market in the United States is poised for steady growth, with the market size expected to reach USD 17,353.6 million in 2024. The market is projected to continue expanding at a compound annual growth rate (CAGR) of 3.5%, reaching USD 24,374.3 million by 2034

Marketing

Ipsos In Talks To Acquire Kantar Media | Media Post Agency Daily

Full article: Infusing Affective Computing Models into Advertising Research on Emotions | Journal of Advertising Volume 53, 2024 – Issue 5: Computational Advertising Research Methodology – academic study to look at the kind of research techniques that the likes of System 1, iPSOS and Kantar use in assessing advertising

Ageism in advertising: AI and layoffs exacerbate the issue | Ad Age – baked in (but largely incorrect) perceptions about ‘not being able to use AI’ and reducing headcount is crippling the existing DEI dumpster fire in the advertising industry.

Media

Jellyfish Launches Share of Model™ Platform, First-to-Market Solution to Track How LLMs Perceive Brands, Products & Services – Marketing Communication News – Share of Model™ Platform – a first-of-its-kind solution that enables companies to analyze how different Large Language Models (LLMs) perceive their brands, products and services. Critically, the new platform can identify whether or not brands are optimizing their digital presence enough to prompt coveted recommendations from Gen AI models such as ChatGPT, Google’s Gemini and Meta’s Llama, when people tap into them for guidance.

The Media Mix Navigator tool

Retailing

Foot Locker hit by slower spending and NIKE ‘softness’ | WARC | The Feed

How WhatsApp for business changed the world – Rest of World

Security

Romania blames Russia for election meddling | FT

How Chinese Hackers Graduated From Clumsy Corporate Thieves to Military Weapons – WSJ

How macOS has become more private – The Eclectic Light Company

Afgantsy Redux: How Russian military intelligence used the Taliban to bleed U.S. forces at the end of America’s longest war

Technology

Intel on the Brink of Death – SemiAnalysis & The Death of Intel: When Boards Fail – by Doug O’Laughlin. This interview with former Intel CEO Pat Gelsinger, back when he was the project manager for the Intel 386 processor. In retrospect, Gelsinger’s return as CEO could be seen as an Intel C-suite cargo cult hoping for 386-like success again.

Telecoms

U.S. officials urge Americans to use encrypted apps amid cyberattack | NBC News

Web-of-no-web

Top secret lab develops atomic clock using quantum technology – GOV.UK

January 16, 2025
Interpublic acquisition by Omnicom
Interpublic disclosure

I have worked at Interpublic twice during my career. Once at the very start of my career and more recently at McCann Health. I was never vested in Interpublic stock and I don’t own any Interpublic or Omnicom shares. This is not financial advice I am not telling you what you should do.

This post is not intended to be, and shall not constitute, an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

I am pointing out the bits in discussions that I found interesting, and some bits that I found deathly dull, but pertinent.

The shape of it

The acquisition would be done by issuing stock. It wouldn’t involve Omnicom’s cash reserves or raising debt to make the purchase. Following the deal, the new Omnicom would be owned by
- 60.6% of former existing Omnicom shareholders
- 39.4% of former Interpublic shareholders
Deal expected to close in the second half of 2025. Once it is closed Omnicom expected to get $750 million in cost savings over the following two years. Combined cashflow of more than $3 billion a year.

Investment analyst call

The investment analyst call was led by Omnicom’s John Wren and featured Phillippe Krakowsky. One of the main factors raised on the call by Wren was the reduction on debt to EBITDA of Omnicom from 2.5x to 2.1x. The combined organisation also had a more balanced maturity profile on debt.

The deal impacted scale in two ways:
- Efficiencies due to scale.
- Increased capacity to borrow and fund future purchases.
What was less clear from the call was the value to customers. Healthcare was cited as an area of opportunity as both businesses had a substantial healthcare marketing offering. But nothing on how to capitalise on the opportunity.

What I didn’t hear was how the combined business was going to get to 750 million of savings, but that they were confident that they could hit that number in two years after the deal closed.

I also didn’t hear a clear position on how the combined firm would deal with the drain of advertising revenue from marketing conglomerates and media companies to platforms. There was some lip service given to being able to better address generative AI related change as a larger group.

Finally there was no analysis, or consideration about how Omnicom and Interpublic would surpass their competitors innovation. Instead the focus was purely on existing combined size.

Shareholder value

At the time of the announcement, the deal was said to offer a premium in terms of value to Interpublic shareholders.

As for Omnicom shareholders, they claimed: The transaction will be accretive to adjusted earnings per share for both Omnicom and Interpublic shareholders.

Slow gains – which might make taking that money out of their existing shares and instead putting it in a S&P 500 tracker ETF seem more attractive.

Industry animal spirits (aka what people were saying in my feeds and op-eds)

The reaction on social platforms was shrill and overwhelmingly negative. The reasons given included:
- The inevitable job cuts.
- The internal preoccupation that comes from two large organisations coming together.
- The lack of clarity about unique benefit that the new company would provide.
- The two-year inward focus on consolidation would allow more innovative competitors (depending who you listened to this would be Accenture, Brandtech, Dentsu, Publicis, Stagwell) gain further ground.
Later on, the discussion moved on towards the reactionary nature of the discussion itself.

From within Interpublic itself, I heard concern about the future from people in different parts of the business. This was down to a lack of internal communication rather than anything specific in nature.

Left unchecked, it could be morale sapping and might encourage some of the best talent to leave for more stable environs.

Update: January 17, 2025 – Campaign magazine podcast. The most interesting argument made in the podcast was that the media buying and creative arms of Interpublic are seen as having little-to-no-value and that deal from Omnicom’s perspective was all about Interpublic’s data platform.

Any self-respecting investment banker worth their salt would be able to break the conglomerate down into constituent parts and sell it off (as what has happened with Interpublic agencies R/GA and Huge already).
- In the PR and social / influence sector Golin and Weber Collective would make natural groupings to be spun off and still with enough scale to compete on the global stage.
- From a creative agency perspective, it would be a similar situation with Mullen Lowe and McCann World Group.
- IPG Health looks like it had already been pre-packaged for private equity when it was carved away from its advertising groups and nominally has a full suite of offerings to provide the pharmaceutical sector clients.
- For bits of networks that you can’t sell. For instance if the purchaser doesn’t want to have an agency office in Malaysia (Malaysia is only in here hypothetically, in reality I have no idea why more global corporate headquarters aren’t located in the Cameron highlands); you can recoup some of your money by facilitating a management buyout. These are more common than you realise.
Instead the podcast participants think that clients are just all about first and third party data platforms. I would argue that’s a simplistic view that ignores:
- The relative complementary nature of the Interpublic and Omnicom networks in terms of product spread and geographical reach. In most markets, one or the other network has an appreciably stronger position. Where there is consolidation needed, this would most likely result in redundancies in the Asia Pacific and European regions.
- Client brands need for continued brand building and the current chaos in the major platforms pivoting to the new presidential administration’s direction.
- ‘Bad neighbourhoods’ for brand content will adversely affect the ability of brands to advertise or promote themselves effectively. It’s harder to build effective brand memory structures in what consumers are likely to perceive as a hateful, or hostile environment.
- Finally there is the the little acknowledged fact that social platform advertising is disproportionally supported by D2C marketing and varying forms of hucksterism from Temu to get-rich schemes. This isn’t the kind of businesses that fill up the client ranks of large marketing conglomerates like Omnicom and Interpublic.
What business thinking says

Harvard Business Review claims that 70 to 90 percent of mergers and acquisitions fail. By comparison, anywhere between 25 and 80 percent of large IT projects fail. 70 to 85 percent of new consumer product launches fail. TL;DR running a business is tough.

Secondly, Omnicom and Interpublic grew historically through acquisitions. Which would mean that they understand how to move a business forward and integrate their new acquisition.

The business model that marketing services conglomerates historically worked on was a mix of an arbitrage play, driving integration and efficiencies.

Arbitrage

Omnicom and Interpublic both relied on a few ways to gain an arbitrage benefit:
- Private companies are generally cheaper to buy than publicly listed firms. It’s a matter of economics, publicly listed firms list in a closer to perfect market. Secondly, buyout contracts to get the management to meet financial targets that facilitate either a faster financial payback or a cheaper price on the business.
- Larger companies like Omnicom can borrow money at more favourable terms than a small to medium-sized business. Larger companies that have lower levels of leverage will be able to get money in a more favourable format than more highly leveraged business of the same size.
Driving integration

Historically these groups take a light touch on integration for agencies where the capabilities are common to more than one agency, WHERE the acquired agency is hitting the ambitious financial targets set by the holding company. Integration in terms of integrated new business pitches and common selling of new products or capabilities.

This might be where the client is looking for an integrated solution. Or it might be where it makes sense to pool resources to deal with a new area like Amazon advertising and retail media or generative AI services.

Once a newly acquired business has become ‘part of the furniture’ and the founders have stepped away, you are more likely to see it become more deeply knitted into the holding group business fabric. This is likely to include common systems and processes: time-tracking software, HR and talent management software, accounting software, cloud services and productivity software.

Efficiencies

Sources of efficiencies overlap integration through standardisation and being able to buy in bulk. A second source of efficiency is consolidation of common business functions:
- Accounting / finance
- Business development
- Freelance staff pool
- Human resources and recruitment
- IT
- Knowledge management
- Legal services
Open questions

Both Omnicom and Interpublic have experience of integrating and spinning off parts of their businesses. What’s different about the Interpublic acquisition is that the scale involved is different from anything else that’s been undertaken in the sector.
- How will this be done successfully?
- What (additional) value is in the resulting business for clients?
ADWEEK polled marketers to better understand their attitude to the merger. On balance they weren’t supportive of the deal. Twice as many respondents were negative about the deal compared to those who felt positively about it. The good news was that almost 60 percent either hadn’t made their mind up or were on balance neutral. At this point I need to caveat the results with the note that there wasn’t a breakdown on the types of respondents in terms of their role and seniority.

But it implied that Omnicom had a serious communication job to be done convincing wider stakeholders on the merits of the deal.

The problem might be greater than telling a better story. By some estimates 60% of Interpublic and Omnicom scopes of work are allegedly already understaffed – if true, likely putting customer satisfaction at risk. And that’s before the reduction in headcount to match the need for cost savings.

More information

Omnicom to Acquire Interpublic Group to Create Premier Marketing and Sales Company – Omnicom Group Inc. Newsroom

Omnicom SEC filings – Omnicom Group Inc. Investor Relations

IPG Mediabrands To Lay Off 103 Staffers | AdWeek – this is fast, if related to the Omnicom acquisition announcement

Things to Consider During Blackout and Quiet Periods | Gilmartin Group

CAGR S&P500 calculator

Don’t Make This Common M&A Mistake | Harvard Business Review

More Marketers Disapprove of Omnicom Acquiring IPG Than Approve | AdWeek

3 Main Reasons Why Big Technology Projects Fail – & Why Many Companies Should Just Never Do Them | Forbes

The Merger Mystery: Why Spend Ever More on Mergers When so Many Fail? by Geoff Meeks and J. Gay Meeks

Most new products fail: Implicit sensory testing can help beat the odds | Food Navigator Europe
January 12, 2025
Japan Re-Emerges + more things

Japan Re-Emerges

Japan Re-Emerges is Ulrike Schaede’s riposte to the neo-liberalist dogma that Japan is done. Since the bubble era finished, corporate Japan has been reinventing itself and building blue ocean strategies to stand up and out against the rise of China and South Korea. Schade has turned this journey into a book, Japan Re-Emerges. This interview was conducted at the Foreign Correspondents Club of Japan.

Going back to neo-liberal doctrine, Japan Re-Emerges offers a way out of the terminal societal and economic death role that many middle powers like the United Kingdom and Germany are currently undergoing – if they have the leadership who can make it happen. I’ll let you know how I get on with Schade’s book.

The Detroit of Asia

Thailand earned its name as the Detroit of Asia thanks to factories assembling vehicles like the Toyota Hi-lux and manufacturing a wide range of car parts. Nikkei put together a film on how Chinese electric vehicle makers have entered Thailand poaching staff, expertise and market share from Japanese manufacturers representing an existential risk of non-Chinese businesses and threatening how Japan Re-emerges.

Futurama

General Motors was a large conglomerate in the 1960s. This seems to be based on footage made at the New York World Fair of 1964/65. This Futurama exhibition was a homage to a similar one done at the 1939 world fair. The themes of the exhibition at the time reflect big societal concerns including overpopulation and creating adequate food. The seabed was seen as an equally momentous destination as space. Deep sea exploration was post-war phenomenon and the first submarine that had gone under the north pole did so only six years previously.

The space and modernist themed architecture feels like it’s from a different universe to our current world. Despite M Hubert King warning about peak oil in 1956, concerns about energy seemed premature at the time when nuclear power seemed to have so many uses and man was actively exploring outer space implying a technological solution was possible for everything. Out of this World as a film builds on the Futurama work done by General Motors as a cohesive vision of the future. While the Ford Motor Company still uses futurists, General Motors subsequent history is one of missed future opportunities, from the German, Japanese and Korean ‘invasions’, its futuristic EV1 car project to efforts in autonomous driving efforts.

Cadillac racing

At first I thought that the idea of a Cadillac racing programme was an oxymoron. As a European my idea of a Cadillac is the black armoured land barge that ferries the US president around, or its historic civilian equivalents that represented mid-century luxury prior to the German invasion of the U.S. car market. So I was curious when I came across No Perfect Formula.

What was more interesting about this film for me was that it was part of a wider trend. While Liberty Media’s Drive To Survive series looked to bolster its Formula One motorsports franchise, manufacturers like Cadillac and Porsche have been producing their own feature-length content and publishing it on YouTube – disintermediating brand partnership type deals with the likes of Netflix or Amazon Prime in favour of YouTube. This makes sense when one thinks about YouTube in terms of raw reach.

Where I think it gets more interesting is what is says about the value of the latent endorsement of a partner media brand and what this will mean for the likes of BBC Worldwide and non-subscriber revenue streams for streaming platforms.

January 5, 2025