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.

April 2024 newsletter – no. 9
April 2024 newsletter introduction

Welcome to my April 2024 newsletter which marks my 9th issue. We managed to make it through the winter and the clocks moved forward allowing for lighter evenings in the northern hemisphere.

The number nine is full of symbolism in a good way. In Chinese culture it sounds similar to long-lasting. It was strongly associated with the mystical and powerful nature of the Chinese dragon. From the number of dragon types and children to the number of scales on the dragon – which were multiples of 9. You have nine channels in traditional Chinese medicine. In Norse mythology there are nine worlds and Odin the all-father hangs on the tree of life for 9 days to gain knowledge of the runes.

Social media-related cognitive dissonance

A couple of conversations with people, spurred me to write this next piece.

I know it’s obvious and common sense, but it needs to be said occasionally. This time last year, I was on a Zurich work trip, providing support to a teammate running a workshop for a client who viewed the agency as the least worst option. We did good work and built temporary rapport, we got insight about the wider client-side politics at play. It was the classic example of the complexities involved in agency life and Lord knows we already have enough internal politics in our own shops to deal with.

The photo I shared on Instagram at the time gave no clue to what was happening, serving as a reminder to consider the curated nature of social feeds when scrolling through.

New reader?

If this is the first newsletter, welcome! You can find my regular writings here and more about me here.

Things I’ve written.
- Fads versus real trends
- A quick guide to jargon used in pharma marketing.
- What my answers to Campaign’s a-list questions would look like.
- Boutique e-tailers and why the multi-brand luxury retail sector has gone from boom to bust.
- Very Ralph and other things – Ralph Lauren’s world building abilities and how others from a cancer patient or overseas migrant workers have bent the world to their needs, or made a new one.
Books that I have read.
- There are a few books that I revisit and the March 1974 JWT London planning guide is one of them. In many respects it feels fresh and more articulate than more modern tomes.
- Chinese Antitrust Exceptionalism by Angela Zhang sounds exceptionally dry to the uninitiated. But if like me, you’ve worked on brands like Qualcomm, Huawei or GSK you realise how much of an impact China’s regulatory environment can have on your client’s success. Zhang breaks down the history of China’s antitrust regulatory environment, how it works within China’s power structures and how it differs from the US model. What becomes apparent is that Chinese power isn’t monolithic and that China is weaponising antitrust legislation for strategic and policy goals rather than consumer benefit. It is important for everything from technology to the millions of COVID deaths that happened in China due to a lack of effective vaccines. Zhang’s book won awards when it first came out in 2021, and is still valuable now given the relatively static US-China policy views. Given the recent changes in Hong Kong where she lives, we may not see as frank a book of its quality come out of Hong Kong academia again on this subject matter.
- Van Horne and Riley’s Left of Bang was recommended by a friend who recently left military service. It codified and gave me a lexicon for describing observations of focus group dynamics and observation-based shopper marketing. Probably of bigger value to people more interested in the analytical side of behavioural science is the bibliography – which is extensive.
Things I have been inspired by.

Sustaining a sustainable brand

Kantar do a good webinar series called On Brand with Kantar. I got to watch one of them: Why consumers ignore brands’ sustainability efforts. Consumers are reticent to trust in brand’s sustainable efforts. Kantar’s recommendation is to stay the course and continue to demonstrate real sustainability. Kantar’s work complemented System 1’s Greenprint US-orientated sustainable advertising report. There is a UK-specific version as well with half a dozen ideas for marketers published in partnership with ITV.

Media platform trends

GWI released their 2024 Global Media trends report. GWI takes a survey based approach to understand consumer media behaviour.
- Broadcast TV still commands the greatest share of total TV time, despite Netflix, Amazon Prime Video and a plethora of other streaming platforms from Criterion to Disney+.
- Survival/horror players are most excited about gaming luxury collabs, whether or not luxury brands are equally excited about survival or horror gamers is a bigger question.
- Games console ownership has halved in the past ten years. This surprised me given how many of my friends have a Switch or PlayStation 5. It probably explains why Microsoft is focusing on being a publisher rather than on platforms as well.
Japanese online media spend

Dentsu published a report looking into 2023 Advertising Expenditures in Japan. A couple of interesting outtakes.
- They focused exclusivity on internet advertising, which gives you a good idea on where they want the balance of media spend to go, rather than necessarily the right tool for the right job. Yes digital is very important, BUT, we live in a world were we are wrapped by and consume layers of digital and analogue media.
We can see from GWI data that this viewpoint is likely to be still excessively myopic in terms of media due to offline – online media linkages. This is likely to be even more so in Japan that still has a more robust traditional media industry.
- Internet advertising reached a new high, despite being a couple of years after the Olympic games were hosted in Tokyo. (Media spend when a country hosts the olympics tends to be skewed that year upwards).
One thing I would flag is that this report is based on surveying people across the Japanese advertising industry and built on their responses. So there maybe some biases built into that process. Overall it’s a fascinating read.

Social media engagement benchmarks

RivalIQ published their 2024 Social Media Industry Engagement bench report, download it to get the full details. Three things that struck me straight away:
- Macro-level decline across platforms on engagement rate, which matches the trends that Manson and Whatley outlined ten years ago in their Facebook Zero paper for Ogilvy Social.
- If brands didn’t need enough reason already to reduce exposure to Twitter, the falling engagement rates on the platform add additional reasons. Overall video seemed to underperform on engagement compared to photos.
- One thing leaped out to me in the industry verticals data, if you are looking to reach student age adults, why not consider collaborating with higher education institution social media accounts rather than influencers?
Shocking health outcomes

The Hidden Cost of Ageism | A Barrier to Innovation & Growth | Future Work – sparked a lot of discussion with its implications on workplace practices, particularly within the advertising sector. What was less discussed but more important was the implications of ageism related biases on healthcare treatment.

Under-treatment or Over-treatment: Older adults may receive less aggressive treatment options or are overtreated because of age-related biases, rather than based on individual health needs and preferences.

Dismissal of Concerns: Healthcare providers might dismiss older patients’ health issues as inevitable parts of ageing, potentially overlooking treatable conditions.

Age-Based Prioritisation: In some cases, age influences the allocation of healthcare resources, with younger individuals being prioritised over older ones, assuming they have more “life worth living.”
The Hidden Cost of Ageism | Future Work

MSNBC News in the US did a report on what it called a ‘Post-Roe underground’ echoing the underground railroads to free slaves in the Southern states and the Vietnam war era draft dodgers who escaped north to Canada. This time it is to help women access abortion pills or procedures in other states or Mexico.

MSNBC

My friend Parrus hosted a talk on World Health Day, more on that here, the key takeaway for me was not trying to replicate developed market solutions in developing markets. Instead think about how it could be reinvented. Thinking that could be extended beyond health care to consumer goods, telecoms and technology sectors as well.

Luxury market shake-up

Business of Fashion covered a US court case where two women brought a lawsuit against Hermès, alleging purchase of its sought-after Birkin bag is dependent on purchase of other products and is an “illegal tying arrangement” that violated US antitrust law.

Hermès is more vulnerable than other brands because it owns its retail stores. The case, if successful could have implications far beyond the luxury bag-maker. For instance, how Ford selected prospective owners for its GT-40 sports cars, or most Ferrari limited edition for that matter.

While we’re on the subject of luxury, LVMH are rerunning their INSIDE LVMH certificate which is invaluable for anyone who might work on a luxury brand now or in the future. More here.

Morizo

Toyota are on a tear at the moment. They correctly guessed that electric cars were too expensive at the moment and focused hybrids as a stepping stone to electric and hydrogen fuel cell production. They have also successfully use the passion for driving in their products and their marketing. The Toyota GR Yaris was a result of Chairman Akio Toyoda instructing engineers to make something sporty enough to win the World Rally Championship and affordable.

He also outed himself as a speed demon who went under the nom de plume of Morizo.

Quebec

For many English speakers one of the most dissonant experiences is being confronted by a language you can’t speak. It’s part of the reason why ireland managed to become the European base of companies like Alphabet and and Intel. So I was very impressed by this campaign by the Quebec government to attract visitors and inbound investment.

Things I have watched.

I watched Mr Inbetween series one in March and managed to work through series two and three this month. I couldn’t recommend them highly enough as a series. They just keep building on each other.

Over Easter, I revisited some old VHS tapes my parents still had and rediscovered the Christopher Walken science fiction horror film “Communion.” It epitomizes its era, with alien abduction narratives emerging during the Cold War and permeating popular culture from “Close Encounters of the Third Kind” to “The X-Files,” tapering off after 9/11. “Communion” demonstrates how effective editing and minimal special effects can heighten tension and emotion. Despite the film’s incredulous premise, Walken delivers a fantastic performance.

“Modesty Blaise” is from a time when comic book adaptations were uncommon in cinemas. This 1966 adaptation of the 1960s comic strip shares stylistic similarities with “Barbarella” and stars a young Terence Stamp. I received a tape copy from a friend who was attending art college at the time. The depiction of the computer as a character with emotional reactions in the film feels contemporary, echoing the rise of virtual assistants like Siri and ChatGPT, despite being portrayed as a mainframe. It is interesting to contrast it with Spike Jonze’s movie Her made 50 years later.

Useful tools.

A lot of the tools this month have been inspired by my trusty Mac slowly dying and needing to get my new machine up and running before my old machine gave out.

Time Machine

Apple’s native backup software, Time Machine, serves as a personal sysadmin for home users. Regular backups are essential. If a crucial document disappears while you’re working on it, Time Machine, coupled with a Time Machine-enabled hard drive, allows you to retrieve earlier versions of the document, potentially saving your sanity in critical moments.

Microsoft Office

I prefer the one-off payment model over Office 365 services. I use Apple’s Mail, Contacts, and Calendar apps instead of Outlook. While Office is available for just £100, which is reasonable considering its features, I still prefer Keynote over PowerPoint for creating presentations.

Superlist

Many of you may recall Wunderlist, which Microsoft acquired, but much of its original charm was lost in the transition to Microsoft To Do. Superlist is a reboot of Wunderlist by the original team, this time without Microsoft’s involvement. It’s available on iOS, macOS, and the web, catering to both individual and team task management needs.

https://youtu.be/2MzzbRhYlSA?si=04eBXH-MqKLpX2bN

ESET Home Security Essential

I used to rely on Kaspersky, and while I generally like their products, I have concerns about the potential influence of the Russian government. Therefore, I switched providers. ESET has a strong reputation and offers better Mac support than F-Secure. I can recommend their ESET HOME Security Essential package.

Amazon Basics laptop sleeve

I use a various bags depending on my destination and activities. Over the years, I’ve found that Amazon Basics brand laptop sleeves work well for my machines. They’re often among the cheapest options available and tend to outlast the computers they protect.

Laptop camera cover

The photo of Mark Zuckerberg’s laptop with tape covering the camera raised awareness about privacy. Webcam privacy covers, such as a sliver of plastic that slides across, are ideal as they allow your laptop to close fully. A pro tip is to use a red LED torch to clearly locate your camera when applying the stick-on cover.

Protective case and keyboard cover

I’m a big fan of clip-on polycarbonate shells to protect my laptop, as they provide a better surface for the stickers that personalize my machine over time. You don’t necessarily need a big-name case. The one I have came with a keyboard cover that works well. Anything that prevented Red Bull, coffee, or croissant flakes from getting under my keys is worth doing.

Screen protector film

The screen protector film provides great protection and is easy to apply and clean, even for beginners like me. I’ll update you if my opinion changes.

The sales pitch.

I have enjoyed working on projects for PRECISIONeffect and am now taking bookings for strategic engagements or discussions on permanent roles. Contact me here.

More on what I have done here.

The End.

Ok this is the end of my April 2024 newsletter, I hope to see you all back here again in a month. Be excellent to each other and enjoy the bank holiday.

Don’t forget to like, comment, share and subscribe!

Let me know if you have any recommendations to be featured in forthcoming issues.
April 25, 2024
Chinese Antitrust Exceptionalism

Chinese Antitrust Exceptionalism by Angela Zhang sounds exceptionally dry to the uninitiated. Zhang is a senior legal academic who works at the University of Hong Kong, which until recently got a front row seat to China disputes with both the European Union and the United States. Given the recent changes in Hong Kong where she lives, we may not see as frank a book of its quality come out of Hong Kong academia again on this subject matter if it was viewed to fall under the purview of ‘state secrets’. With the new security law that has come in, definitions have been left deliberately vague and wide-reaching.

So why is Chinese Antitrust Exceptionalism of interest?

If like me, you’ve worked on brands like Qualcomm, Huawei or GSK you realise how much of an impact China’s regulatory environment can have on your client’s success. Around the time I worked on one client, they were shamed on the evening TV news and some of their staff disappeared for questioning by the authorities. They then reappeared months later looking haggard and worn out. It is new important for everything from technology to the millions of COVID deaths that happened in China due to a lack of effective vaccines.

Zhang breaks down the history of China’s antitrust regulatory environment, how it works within China’s power structures and how it differs from the US model. The rise of antitrust was as much down to bureaucratic politics of the Chinese government.

What becomes apparent is that Chinese power isn’t monolithic and that China is weaponising antitrust legislation for strategic and policy goals rather than consumer benefit.

Zhang talks about how regulatory hostage taking and public shaming was a tool of the regulatory authorities from early on.

The book then looks at foreign reactions to Chinese government from EU investigations to current US-China trade restrictions and discusses how China weaponised its regulatory frameworks making ‘hostage taking’ trans-national in nature.

Last of it’s type?

Zhang’s book won awards when it first came out in 2021, and is still valuable now given the relatively static US-China policy views. More on Chinese Antitrust Exceptionalism here. More book reviews here.

April 20, 2024
Boutique e-tailers
The luxury sector is undergoing a transformation, and nowhere is that more apparent than in the world of boutique e-tailers. I am of a generation that grew up with boutiques, carefully curated fashion looks from multiple brands.

TAKA@P.P.R.S

Exclusive

As a child, my Mam would get me jumpers as I grew up from different small stores like this. To this day, the ultimate compliment she would give any item of clothing was that it was ‘exclusive’.

As I started buying my own clothes I pivoted between sports shops for my footwear, Ellis Brigham for layers, Caran D’Ache – a menswear boutique in Birkenhead at the time for jeans and ‘going out’ clothing. (Having known the owner/manager quite well, I suspect that the store was named after the Swiss writing instrument company, rather than the pseudonym of French satirist Emmanuel Poiré). This was where I got my first down jacket (by Naf Naf), Oshkosh B’gosh dungarees and Champion sweatshirts. At the time Ellis Brigham was a sea of Polartec and Gore-tex with no down jackets in sight.

I started venturing further afield and went to Quiggins in Liverpool, Affleck’s Palace in Manchester and what’s now the Victoria Quarter in Leeds. I’d also started coming down to London with friends to find brands I couldn’t get at home.

Famous high-end boutiques like Browns built a reputation for championing up and coming womenswear designers like Hussein Chalayan and Alexander McQueen. They also helped the likes of Ralph Lauren, Jil Sander and Calvin Klein start seeing in London. At their best boutiques moved culture as curators and taste makers. I got my love of American workwear from Caran D’Ache and Japanese streetwear from the late lamented Hideout which was just off Golden Square.

Department stores were the first aggregators of boutiques with a mix of single brand and multi-brand concessions under one roof. Brands like Selfridges, Harvey Nichols, Isetan, Lane Crawford, Mitsukoshi, Neiman Marcus, Saks Fifth Avenue, SEIBU and Shinsegae.

These established businesses have their place, indeed LVMH owns a number of selective retail businesses like DFS (often known as T Galleria), Le Bonne Marché and Starboard Cruises. So multi-brand distribution has a place in the luxury retail mix. Over time the premium department store brands and LVMH’s select retail brand would both have boutique e-tailers within their brands providing an omni-channel experience.

In the run up to COVID, multi-brand retail counted for 57 percent of luxury sales, management consultancy Bain expect this to decline to 36 percent of luxury sales by 2030.

Online

Online continues to disrupt retailing over a quarter century after it landed. The first casualties were book stores and music stores. Twenty years ago, one of the most enjoyable activities that I did in my spare time was rifling through record store shelves, digging for surprising or elusive vinyl records, CDs and DVDs.

Some of the places were I did this are long gone, like Tower Records in Piccadilly Circus. On the flipside, new businesses sprang up to be online first, or online only. Amazon started as a book store and eventually became the modern-day equivalent of the Sears Roebuck catalogue.

Luxury was no exception and a variety of dedicated boutique e-tailers sprang up:
- Matches
- MyTheresa
- Net-a-Porter
- YOOX
- Farfetch
In the same way that mobile operators were the key determinators of whether mobile phone shops were successful, luxury brands had the whip hand over multi-brand boutiques. Phones4U died when its relationships with EE and Vodafone came to an end. The FT article T he implosion in luxury ecommerce implied a similar pivotal moment between Farfetch and Kering, but with Farfetch managing to sell itself to Korean e-tailing business Coupang instead of going into administration.

One brand / one store

Luxury brands have looked to gain more control over their customer experience and get closer to the customer overall. This has seen many brands open single brand stores. Up until the 1980s, Louis Vuitton sold mostly through department stores, now it’s mostly through its own brand channels. Some brands like Audemars Piaget, now only sell through their own single brand showrooms.

The big name department stores continued to hold a position in the marketplace due to their own brand power, even while smaller mid-market stores in provincial cities folded.

Over time, brands extended their shop front into the online sphere. This was done once two things were able to happen:
- An all-up online and offline view of a given customer and CRM systems allowed this to happen. This wasn’t for efficiency reasons to go online only, but to provide an omnichannel service to match customer’s omni-channel lifestyles.
- Getting this all-up view will also help with future EU legislation moving towards a circular economy.
- The ability to provide a high level delivery experience for online purchases. This mattered less with fragrances than it did with watches and handbags. High security logistics providers like Ferrari were able to provide this to the main luxury brands.
One small chink of hope for multi-brand stores is that single brand stores may be forced to either change business practices, or insulate themselves from legal action via authorised dealerships. A court case brought by two women against Hermés in the US claims that having to buy other products to get a crack at purchasing a Birkin bag is a violation of antitrust laws.

The obligation to buy other products first, is what the women claim is an ‘illegal tying arrangement’ which is why Hermés might be in violation of antitrust laws. Other brand who have authorised dealers rather than their own showrooms are less likely to be at risk.

Compressed middle-class

One of the first things that I learned when doing LVMH’s INSIDE LVMH certificate was that the bulk of luxury purchases are made by the middle classes.

Robert Gordon’s Rise and Decline of American Growth outlined how the middle classes in America (but also many other western countries). Income inequality, automation and globalisation drove a stagnation and decline in middle class numbers, even as the number wealthy increased.

Globalisation elevated a new middle class in Asian countries like Japan, Korea, Hong Kong, Taiwan and Thailand. Energy drove middle class growth in the countries surrounding the Persian gulf and Nigeria. Louis Vuitton opened their first show rooms in the US in 1914, in Japan in 1978 (though department stores had been selling their products for years). The first Korean shop opened in 1984 and China eight years later.

Over the past few decades this was compensated by new middle classes growing. They don’t necessarily have the earning power of a middle class westerner, but the purchasing power level may vary considerably. So a middle class consumer in a country like Thailand, Malaysia or Singapore might have more disposable income than someone in the UK.

Japan’s middle class quickly reached stagnation due to the lost decades of economic growth after their 1989 asset bubble. Korea has gone through a similar challenge, it has seen raised consumption, but recently this is driven by household debt rather than prosperity.

China

Quantity is a quality of its own, which is a reason why Chinese consumers have been so important to luxury brands since the early 2000s when China joined the WTO and its economy took off. Once there was even a small growth in middle class numbers that represented a big increase in global luxury sector sales. The decline in economic growth due to the property sector bubble has dampened luxury sales to China. It is not only about the decline in ability to purchase, but also the decline in being seen to purchase western luxury goods.

This less conscious consumption started early on during the Xi administration’s desire to combat corruption and aspire to a more equal society. Gifting declined. Economic decline accelerated this Chinese macro-trend.

COVID and after

COVID changed consumption. Money that would have previously been spent on experiences such as restaurant meals or travel transferred into things. Both single brands and boutique e-tailers got a lift in this environment. But a wider economic effect is still working its way through the economy. This effect is known as the bullwhip or Forrester Effect.

This resulted in a number of economic distortions:
1. Partial shutdown – Consumers no longer went to work or high traffic retail hotspots. Non-essential workers didn’t go to work. Logistics systems buckled under the weight of packages and luxury businesses diverted production to support medical needs such as LVMH’s perfumes businesses making hand sanitiser.
2. Unusual increase in demand – Home working drove an increase in demand from media consumption and home improvement to buying more stuff from all that money they saved from not going out.
3. Supply chain disruption – Air cargo prioritised medical supplies while existing stock sat in empty shops.
All of this disruption which drove inflation, this reduced demand as consumers had less to spend.

Luxury brands focused on their inflation proof ultra-high net worth customer base and raised prices to compensate for the reduction in sales volume. The fight for that reduced volume pitched multi-brand boutique e-tailers against their suppliers and the results weren’t pretty.

Boutique e-tailers are going to the wall, or consolidating to weather the fiscal storm until such time as middle class consumers can start spending aspirationally again.

Some of these businesses can’t be saved. Matchesfashion, which was bought out by Frasers Group didn’t have much chance.

You can find similar posts here.

More information

The implosion in luxury ecommerce | FT

Case Study | Selling Luxury to the 1% | BoF

Matchesfashion axes half its staff after going into administration | FT

Harvey Nichols staff face redundancies as it eyes return to profitability – Retail Gazette

LVMH-Backed Luxury Watch Site Hodinkee Cuts a Fifth of Jobs – Bloomberg

Who Gets to Buy a Birkin Bag? | BoF

The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World) by Robert J. Gordon

Canada Goose is cutting 17% of its corporate staff | Quartz

What’s up with 10-year-old kids in Sephora? Why the question itself is driving controversy | CBC News

US Luxury Purchases Fell 15 Percent in February, According to Citi Credit Card Data | BoF

Why Frasers Group Shuttered Matchesfashion | BoF
April 17, 2024
Morizo and more things

Morizo

Akio ‘Morizo’ Toyoda, of the Toyoda family who made their first fortune designing automatic textile looms in the early 20th century and their second fortune as the founders of Toyota. During the week Toyoda-san is the chairman of Toyota Jidōsha kabushikigaisha. But in his spare time he liked to do circuit racing under the name Morizo. At first, the Morizo name was to keep his moonlighting racing of the radar of Toyota board. But recently it has become an asset, with Toyota and its GR performance brand creating some of the best drivers cars available.

Toyota have started to use his natural enthusiasm for the company’s benefit. The Lexus LBX Morizo RR is currently a concept car that sees a baby Lexus LBX SUV benefit from the mechanicals of a Toyota GR Yaris.

Although talk about this as a Morizo only concept, it feels like the company might be feeling consumers out to possibly put this into manufacturing. If they did this, it would allow the company to take advantage of the GR Yaris-only components currently made and use them more widely.

The Criterion closet

Criterion as a publisher of DVDs and Blu-Rays is a badge of quality. The closest equivalent in the UK would be Curzon who bought Artificial Eye a number of years ago. One of the things Criterion do is video taste-makers who are allowed to take away some of their favourite films away from the company’s stock. Here are a couple of my favourites.

William Dafoe

Hideo Kojima

Watch trends

While much watch collector videos know feel more like Bloomberg reporting on a commodity because of the rise in the secondary market, this wrap-up strikes a nice balance. Some of the factors mentioned in this review appeared in my 2023 wrap-up and here.

Mexican street culture

If you had uttered those words to me before this week, I would have immediately thought of saints festivals, the day of the dead and the Chicano culture that grew out of Mexican communities who emigrated to the US. But there is so much more in Mexico itself as Refinery 29 shows in this film.

The 50 French words test

You can imagine the brief that came down to this government department in Quebec: make more English speaking visitors and businesses come to our province. The insights being along the lines of most English speakers don’t feel confident dealing with a foreign language, so how to do demystify French.

I don’t know who the Ministère des Relations internationales et de la Francophonie used, but they deserve every penny of their fee with this film.

April 2, 2024
AI two-step
The phrase AI two-step is something I first heard from my friend Antony Mayfield. He used it to talk about how companies were adopting the latest developments in AI for business processes. And then reduce headcount to reflect the newly AI derived tasks instead.

The AI two-step isn’t necessarily a new concept, companies like Pegasystems were using rules-based systems to take away the drudgery of back office work in banking and fund management for decades.

Further back, companies like Experian, through their access to CCS’ CardPac software provided a service for credit card issuers in the UK using rules-based credit scoring and applications approval. This ran on time-shared mainframe computing resources, which also provided Experian with a good source of ongoing credit worthiness data. All of which reduced the back office work and employees needed by the credit card company. MBNA used to make a virtue out of having every decision reviewed by real live credit analyst, who could overwrite a scoring decision if they saw a compelling reason to do so. (CCS became part of First Data and eventually part of Fiserv).

As these services were being rolled out, there was a corresponding cut in jobs.

Examples

Here are just a few examples of businesses adopting AI, some of which are prime examples of the AI two-step.

IBM

While IBM may no longer trumpeting its Watson AI service as loudly as it used to, AI methods are dispensing with the need to replace staff who leave the technology company.

Pfizer’s Charlie

One might think in the UK that Pfizer should have thought a bit more carefully about the name Charlie, but the aspiration behind the platform is interesting. Charlie was noted to be helping with content creation, fact checking and legal reviews. Research by Bain & Company have found that it isn’t just Pfizer in the pharmaceutical and biotechnology sector that are taking this approach. Some 40 percent of executives who were surveyed said that uses of generative AI were factored into their 2024 budgets.

Bain indicated uses across a wide range of business functions within pharma:
- IT programming code review
- Competitive intelligence
- Research and biomedical literature review
- Marketing copy
- Augmenting the selling process as a sales co-pilot and contact centre automation
Publicis

French listed marketing combine Publicis made a high profile adoption of machine learning and AI-based services back in 2017 under the moniker Marcel. Back then Marcel was being used for workflow type tasks and organisation of data. This year Publicis rebranded its approach to the less playful CoreAI, so far it has cut the use of freelance staff – which are usually essential for project delivery in ad agencies, rather than the usual AI two-step of lay-offs.

UPS

UPS adoption of AI techniques in everything from workflow to customer service allowed the logistics company to make the largest lay-offs in its 116-year history.

Clear analogues to the AI two-step?

Various commentators compare the AI two-step happening to the dot com boom of the mid-1990s to the early 2000s. The comparison with the dot com boom is easy at first. You have businesses that have phenomenal share price growth, widespread interest and experimentation. Business sectors from advertising to Hollywood are concerned about massive disruption.

The examples I would think about would be factory automation and business process re-engineering. In factor automation, over decades companies used machines to negate the need for unskilled and semi-skilled workers. A friend of mine worked in Huddersfield in a textile mill. He was one of just a couple of people who worked a shift. None of them were weavers, they were engineers and an IT admin who maintained the lines of machines turning out high-end suiting fabric that was mostly sold to Japanese clothing manufacturers. This came very close to being a ‘lights out production line‘ where the product is handmade by robots as they used to say in the old Fiat car advertisements.

Weavers and machine operators were replaced by a lot fewer, but more expensive roles.

Business process re-engineering was driven by enterprises implementing enterprise software to drive efficiencies and automate workflows. This was a lucrative time for consultancies who were brought in to shape a company’s workforce and processes to fit a software company’s pre-defined template for that industry. This was usually based on average industry standards. Software giant SAP have been building and refining these templates for the best part of 50 years, each industry template draws on individual units that might cover a business function like HR, finance or asset management.

A bit of software customisation was needed to fit a given business, and it might have to interface with third party products to handle market complexities such as different tax regimes.

The consultancy teams also laid-off employees that didn’t fit the framework. That’s what business process re-engineering actually meant.

Automation was responsible for putting up to 47% of American jobs at risk. However other research indicates that new forms of skilled or professional jobs are being created. One of the big problems with this data is that they are speculative models. More positive takes from businesses fuelling automation like McKinsey and Company versus more critical predictions from government think tanks and academics.

Factory automation and business process engineering are both similar to the use of AI in business, in that they are primarily helping mature businesses maintain their position and drive efficiency. The dot com boom on the other hand was much more disruptive and spawning more upstart businesses – some of which were very successful and leaving mature businesses struggling to cope. From financial services to media – pre-internet businesses are still struggling to cope with the innovation and disruption that begat the dot com boom.

Optimists versus pessimists

The optimists highlight a number of nuances that they think mediates the impact of automation and machine learning over time.

Tasks over jobs.

It’s tasks rather than whole jobs are being lost. Yet if you look at the data that Scott Galloway shared in his newsletter and the speedy ‘these job losses aren’t down to AI denials’ this optimistic assumption is pure fiction. The jobs being lost are the second part of the AI two-step.

Creative destruction.

Jobs are being created too and it’s often about ‘skill shifts’ rather than ‘job shifts’. While there are redundancies being made, there is a requirement (at the moment) for people skilled in writing ‘prompts’ to get the most out of the AI models created.

Overconfidence.

Overconfidence in technology and what it can do. An extension of this is a belief in the perfectibility of technology. A classic example of this is Air Canada’s recently aborted use of an AI-powered customer service chatbot. The airline quietly pulled its chatbot offline after being found legally liable for bad advice given by the customer service bot to a customer.

Moffatt booked airfares and retrospectively submitted an application for a refund to the reduced bereavement fare after travelling. Air Canada denied the request. Moffatt challenged that decision, saying he was owed the refund because he had relied on the information provided to him by the chatbot on Air Canada’s website. Air Canada admitted that the information provided by the chatbot was “misleading”, but it contested Moffatt’s right to a refund, highlighting that he had been provided with the correct information via the link the chatbot shared in its message.

The Civil Resolution Tribunal considered whether Air Canda was liable for negligent misrepresentation, which arises under Canadian law when a seller does not exercise reasonable care to ensure its representations are accurate and not misleading. Moffatt was required to show that Air Canada owed him a duty of care, that its representation was untrue, inaccurate or misleading, that Air Canada made the representation negligently, that he reasonably relied on it, and that that reliance resulted in damages. The court held that Moffatt met those requirements.

The Civil Resolution Tribunal noted that Air Canada had argued that it could not be held liable for information provided by one of its agents, servants or representatives, including a chatbot, but had not explained the basis for that suggestion. The Civil Resolution Tribunal rejected as a “remarkable submission” Air Canada’s suggestion that the chatbot was a separate legal entity that was responsible for its own actions.
Air Canada chatbot case highlights AI liability risks by Meghan Higgins, Pinsent Masons

Demographic change.

Demographics – the idea that aging countries from the west to China, Japan and Korea have skills deficits due to population decline. Automation is one of the coping mechanisms alongside globalisation and migration that have been suggested solutions. The Chinese are also looking at building factories in countries like Ethiopia, who have a young and growing population. Automation makes sense where migration would adversely affect social cohesion and the cost of globalisation would be more expensive than automation technologies. Workers in the global south are dependent on being cheaper than machines, rather like the American legend of John Henry versus the steam engine.

Companies like Automata have been looking to help businesses automate repetitive low skilled work, such as sandwich making in food service factories or low volume manufacturing tasks.

The state of automation in different roles is running along at different rates of progress. While John Deere have managed to make the most of arable farmland through the use of telematics and GPS guidance of tractors, automating farming for tasks like harvesting is proving more difficult. This is exasperated in the UK at least by the challenge of getting sustained v enture capital for hardware. Technology automation in other sectors such as construction and healthcare continues to move at a slow pace.

In an area like consumer electronics we have seen benefits and declines in automation. Benefits in the way a company like Apple can manage a sophisticated global supply chain workflow via automated software. Apple has also pioneered the use of robotics in dismantling its more modern smartphones when they are brought in to be recycled.

The declining area has been one of design choice. Prior to the smartphone and broadband internet, companies like Panasonic designed circuit boards that were less dense with components. The reason for this was to facilitate automated board manufacture through the use of ‘pick and place’.

Nokia used similar techniques for its cellphones and smartphones until the business was disrupted. Apple iPhones needed much more manual assembly because of the tightly packed components in their phones. Young women were valued for their small hands and manual dexterity leading to concerns about worker conditions.

More work to be done.

Creation of new jobs seems to be a matter of faith. IT in businesses drove an increased amount of management, the move online drove a need for webmasters, web designers and online marketers. There is an assumption that over time AI will have a similar effect, beyond people who can write prompts.

Limiting factors

Technology

While GPT based models have surprised both in terms of what they can do and fail to do, there is a belief amongst experts that:

Data sets will only get you so far. There is no clear path to a new technique, or what older techniques would need to be combined with GPT-based systems. Of the data sets out there, a significant minority could be filled with ‘poison’ data like nightshade.

That there isn’t enough data to train models in a lot of cases and synthetic data is often used instead. Others believe that this will corrupt and stunt future AI models rather than help them.

Resources

AI systems like crypto mining consume a lot of energy and require a lot of water for cooling which is already straining data centres and infrastructure. All of which will impact corporates ESG profile and larger investor relations health. You could have an amazing AI model, but if you have as bad an ESG rating as Exxon you willl struggle to raise funds.

More information

Corporate Ozempic | No mercy / no malice

No, Robots Aren’t Destroying Half of All Jobs | London School of Economics (LSE)

Antony Mayfield – Antonym newsletter

AI feedback loop will spell death for future generative models | TechSpot

Mixtral 8x7B: Quality, Performance & Price Analysis | Artificial Analysis

AI-poisoning tool Nightshade now available for artists to use | VentureBeat

AI sucks at telling jokes — but it’s great at analyzing them | The Next Web

At WEF in Davos, Sam Altman and Will.i.am differ on AI | Quartz
March 26, 2024