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.
Last week Fred Brooks died. Brooks was famous in technology circles who designed the IBM OS/360 operating software for the IBM System 360 series of mainframe computers. Some 50 years later, the computers that perform the equivalent tasks to the mainframe still ensure that they can run OS/360 application compatible code.
The reason for this was that Fred Brooks did his job really well for mission critical business processes.
OS/360
OS/360 was remarkable. At the time IBM was the leading edge in computers. The 360 system was a major leap forward. It was able to support a wide array of applications, and it was one of the first operating systems to require direct-access storage devices – like a modern computer.
The first release of OS/360 had about a million lines of code, much larger than any previous IBM operating system, and eventually grew to over 10 million lines of code. By comparison the latest version of macOS contains about 85 million lines of code and Google’s technology stack contains about 2 billion lines. But the IBM team that Fred Brooks worked with were doing this about 60 years ago, with all the limitations that that would have entailed.
OS/360 is now in the public domain and its code is often poured over by computer science students looking to learn lessons from the past. That alone would have made Fred Brooks achievement live on today.
Mythical Man-Month
The journey to build OS/360 was to turn out as important as the software itself. Fred Brooks wrote a book based on his experiences and what he had witnessed during the development process. This was encapsulated in a book called The Mythical Man-Month: Essays on Software Engineering. You might not have heard of the book, but Fred Brooks offered insight for anyone managing complex projects. If you’ve experienced Agile and Scrum methodologies in work, you’ve experienced ideas that try and address the challenge that Brooks realised. Large programming projects suffer management problems different from small ones due to the division of labor; that the conceptual integrity of the product is therefore critical; and that it is difficult but possible to achieve this unity.
The ideas within the Mythical Man-Month go beyond software engineering. We use his thinking in most of the advertising agencies that I have worked in.
Polaris
You can see Fred Brooks Mythical Man-Month principle turn up in all kinds of unusual places. My Dad worked on the UK’s Polaris ‘Resolution class’ submarine programme through the 1960s. Advertisements went into the newspapers of Ireland and former Commonwealth countries looking for time-served skilled tradesmen. My Dad worked alongside other Irishmen, people from Hong Kong and at least one Sikh man.
The shipyard was paid by the Royal Navy on a cost plus basis, which meant that the yard was incentivised to have as many people working on the ship as possible, working as much overtime as they liked. The result meant that in a cramped space, there was a lot of people sitting around as they couldn’t physically work alongside other tradesmen.
Which is why some authors have alleged that workers described these submarines as ‘gravy boats’; my Dad hadn’t hear of this term but doesn’t mean that some didn’t use it.
With regards the conceptual integrity of the product; in a time before CAD systems, errors worked their way into working drawings over time.
Frederick Brooks, the famed computer architect who discovered the software tar pit and designed OS/360, died Thursday. He also debunked the concept of the Mythical Man-Month in his book, writing: “Adding manpower to software project that is behind schedule delays it even longer.”
The idea of the disruption crisis came from a series of conversations that I have been having in recent times and recent online news.
TechCrunch Disrupt NY 2012 Day Two – May 23, 2012 (Photo: Devin Coldewey)
What is the disruption crisis?
The rise of big tech such as Meta, Twitter, Google, Amazon, Bytedance, Alibaba and Tencent drove a wave of digital disruption over the past quarter century. Now the disruptors are being disrupted themselves and I think that they may precipitate a disruption crisis.
Continuing to look to these digital disruptors is the equivalent of Jimmy Swaggart or Jim Bakker being held up as an exemplar of a good husband and faithful spouse.
Mass lay-offs
Others have talked about the layoffs in more depth, so I have included a video explanation.
I started my agency career during the dot com bubble. We had going for growth at all costs. They talked about trying to move at ‘internet speed’. This was down to the go for growth funding model that drove start-ups through their angel and VC funding rounds and beyond. Common sense was often set aside. if this sounds 180 degrees away from the lean start-up model you’re not wrong.
…Amazon made big bets on long plays, willing to sacrifice immediate profitability to boost its overall position in blue ocean markets. When Amazon’s had to play catch-up, it largely hasn’t worked: the Kindle Phone is maybe the most high-profile mistake/missed opportunity, just to name one. It’s hard to deny that this loss-leader approach has been key to Amazon’s success, although it often made the company a mystery to Wall Street. This would signify a huge shift, totally aside from the 3% of employees who will likely leave the company.
Hacking away at the Devices and R&D divisions is the most perplexing to me. These are the sources of Amazon’s most signature successes, with the Kindle, Alexa/Echo, and Fire TV. They’re what hook customers when they’re still kids, and that customers above all associate with the company, even as they help ensure loyalty and drive their share of media purchases and retail revenue. The Kindle, like the Echo and the Fire Stick, was always supposed to be a loss leader: you sell the razor at close to cost and make your money back selling the blades. How many books has Amazon sold because of the Kindle? How many Prime subscriptions? How many impulse purchases do people make on their Echos and Fires?
Tim Carmody, Loss Leaders. (Issue #50) Amazon Chronicles
Consultants have taken the idea of transformative technology and scrappy startup methodologies to try and reinvent business, or facilitate digital disruption. The problem is that the examples they use as exemplars are failing, casting doubt on their doctrine and fuelling a disruption crisis in boardrooms and the consultants that advise them.
Unilever – a cautionary tale
For instance, I contracted at Unilever. I worked rolling out digital brand assets for their Family Brands product line. This was a line of margarines, due to organic growth it has different names in different markets:
Blue Band
Country Crock
Flora
Fruit d’Or
Margarina Primavera
Plantta
Rama
While I was doing this work, I worked closely with the Becel functional foods and Bertorelli brands. Family Brands was being put into a separate business to develop a ‘startup mentality’. The thing was Family Brands hadn’t been a startup for decades. In fact, it hadn’t been a startup since the 1870s when Antoon Jurgens branched out from trading in butter and started to manufacture margarine. His company merged with rivals Van den Bergh’s, Centra, and Schicht’s to form Margarine Unie (Margarine Union) in 1927, by which time it had a dominant position in margarine manufacturing.
Three years later, Margarine Unie merges with Lever Brothers Limited to create Unilever and the rest was history.
Margarine as a substitute good
Margarine historically was a substitute product for butter. My parents (both of whom came from farming families in Ireland) used to talk about how poor children in the towns would have eaten margarine rather than butter. As a child, we might use margarine to bake a cake, but if we wanted the cake to keep a while my Granny or my Mam would only use salted butter. Despite butter (which we kept in the fridge) being so hard that it might break up the surface of the bread, we used it on our sandwiches, toast or to fry with. Margarine just wasn’t the done thing.
One of the most damning things that my Granny once said about a friend of hers was:
She uses margarine to make the ham sandwiches when you’re invited around for a cup of tea.
One of the first courses that I had at university was in economics, where they used margarine as an exemplar for a substitute good.
Healthier option
Margarine started to be considered a healthier option due to concerns about heart disease and cholesterol. Much of this was down to Flora, invented in 1964, which contained polyunsaturated fats derived from sunflower oil. At the same time wholemeal bread started to become preferable due to the requirement for fibre in the diet.
Yellow fats category decline
However Although 21st century sales declined as many consumers switched to butter. This was down to changes in consumers wanting a more natural product and heart health improvising. In the five years leading to 2014, sales of margarine fell 6%, while sales of butter rose 7%.
It was in this atmosphere that the startup narrative was fired up for Family Brands.
The other shoe dropped when Unilever narrowly managed to fight a hostile bid from 3G Capital a couple of years after I was there. Paul Polman got rid of business lower margin businesses as an attempt to increase earnings. These were still great businesses which is why KKR were happy to take the business off Unilever’s hands.
Unilever didn’t spin out a startup. It wasn’t disruptive thinking, it was an act of desperation to fend off takeovers or possible greenmailing. The problem with with this is Unilever now has a lot less buying power on global supplies of oils and fats needed for its ice cream, mayonnaise, food additives and personal care businesses – which was the rationale for forming Unilever in the first place.
Foundational technologies in crisis bringing crisis
Foundational technologies were cited as new elements that would cause digital disruption. The fall of these technologies and the companies that have championed them have fuelled this disruption crisis.
Cloud services
Microsoft and Amazon both saw declining sales in SaaS and related services, as businesses has less employees and needed less seats. Amazon has been cutting deep in its R&D function and devices. This means that Alexa for the hospitality industry and health sectors are likely to be borrowed time.
Web 3.0 (blockchain, NFTs, cryptocurrency)
Here’s what my friend Nigel Scott had to say about FTX on LinkedIn:
There has been a lot of commentary over the weekend on the #ftx #cryptocurrency #exchange collapse
A lot of words have been typed and spoken but in the end I think the numbers probably sum it up best
Back in 2018 there was an estimated 200 Crypto Exchanges scattered around the globe
Over the past 3 years an estimated 200 Crypto Exchanges have either collapsed or disappeared
This rate of attrition is nothing new. Back in 2014 – after the Mt Gox event – it was estimated 45% of all #Crypto Exchanges had either collapsed or disappeared
The harsh truth is the risk of failure has always been central, rather than peripheral, to the Crypto Exchange model
Today there are almost 600 Crypto Exchanges open for business
The only question that needs to be asked is what fraction of them will still be in business in 2023, 2024, 2025 and beyond?
and, more importantly, what is the probability of picking a survivor, never mind a winner, in such a volatile environment?
Which is to say, contrary to most of the commentary I have read over the weekend, the #ftxcrash isn’t the exception, it’s the rule – what makes it exceptional is the scale, not the probability of the failure
Blast radius
One edition of the Axios Login newsletter used the headline ‘blast radius‘ describe the impact that FTX and other crypto economy problems were having on the wider Web 3.0 ecosystem of decentralised services. Creating a disruption crisis.
Less than four years before disruptive technologies had become mainstream when IBM brought a ‘better way’ of managing supply chain for Walmart by putting their heads of lettuce on the blockchain. Just writing that last sentence made me like my IQ number was dropping; but just four years ago, this was a point of validation…
Metaverse
Prior to Meta’s recent financial results and job cuts you had the likes of McKinsey cheerleading for the metaverse.
With its potential to generate up to $5 trillion in value by 2030, the metaverse is too big for companies to ignore.
To give you an idea of how far we are from the much vaunted metaverse, have a look at my discussion paper.
Social media marketing
Alphabet has seen a decline in YouTube advertising and search advertising is down by about a fifth in October. Twitter is heading towards bankruptcy as brands stopped advertising on the platform. Meta has also shown a decline in advertising revenue. Snap is doing much worse. TikTok seems to be the outlier.
Accenture and the disruption crisis
A quick search of Accenture and disruption yields about 628,000 results. Accenture has latched itself onto disruption in the same way that IBM glommed on to e-business during the first dot com bomb, Sun Microsystems became the ‘dot in dot com’ and the whole of the entire enterprise IT industry latched on to the millennium bug.
Better than ‘the dot in dot com’
Some bright minds at Accenture came up with a concept that was ownable, not time-bounded like ‘e-business’ or ‘the dot in dot com’ – you’re kind of done when everyone has a website that can do transactions of some sort.
Sun Microsystems advert circa 2000
Accenture welded itself to disruption with the Disruptibility Index which looks at how disruption affects different vertical markets.
Dark thoughts
Disruption tapped into deep negative behavioural emotions. Fear, uncertainty and doubt. As tech executive Andy Grove had constantly repeated ‘Only the Paranoid Survive‘. Disruption didn’t necessarily promise a thriving business due to sustained competitive advantage, like earlier generations of technology companies and consultancies. Instead it promised, merely survival in a globalised hostile world, with constant waves of disruption coming at the c-suite. This is the business equivalent of Adam Curtis’ video essay Oh Dearism.
This gives your internal champions on the client side a bit more political space if their digital transformation projects doesn’t hit all the goals that we would like it to hit.
Of course all of this could come off the wheels if a great disruption crisis hit, wouldn’t it?
The disruption crisis doesn’t just toll for Accenture
It would be remiss of me to just single out Accenture. They have been part of a much bigger movement across professional services, finance, the technology sector and academia. Here are some of the people across academia have had a similar idea to Accenture; they’ve written books like these over the past 10 years or so:
It has been the fodder of countless conferences around the world. For example here’s a representative of Euromonitor International speaking at a conference of the International Homeware Association (IHA) on digital disruption.
I am not putting this in here to make fun of the IHA – it is the professional association of a market worth 80 billion dollars a year globally and deserves our respect. Globalisation has centralised a lot of homeware production in the Far East due to globalisation over the past quarter of a century; but it still plays a central, if less visible part in our lives today.
Instead I am using the IHA as an exemplar of how digital disruption has pervaded all parts of the economy as a central organising principle in modern business thinking.
Subprime attention crisis is a short book, or a long essay depending on the way you want to look at it. It was written by Tim Hwang.
About Tim Hwang
Hwang is a lawyer working for email newsletter platform Substack. Prior to this he worked in a US think tank attached to Georgetown University: Center for Security and Emerging Technology and in public policy at Google focused on machine learning. So he brings a deep set of knowledge to writing Subprime attention crisis. One also has to bear in mind that his current employee Substack is based on the online media model moving from online advertising driven to subscription driven.
Timing is everything
I read this book over a couple of days at the beginning of this month. By this time, Meta and Alphabet has published quarterly results that were below what investors expected with falling sales. Add into the mix that the problems that Twitter and Snap have had (which are are bigger issues than just down to the dynamics of the online advertising market), all of which makes this book feel timely.
On the other hand, one could also argue that much of the crisis had already landed. Ad tech businesses like Rubicon Project have either gone under or merged with their peers creating a massive amount of consolidation. The latest wave of consolidation happened in 2020 – 2021.
Meta-specific issues
Even with Meta and Alphabet there are business specific issues. Meta has struggled to compete effectively with TikTok. The poisonous nature of debates on Facebook, together with an aging audience on the platform hasn’t helped. In fact it’s a wonder that the context collapse that the platform has suffered from for at least the past six years hadn’t dragged it down yet. WhatsApp has helped enrich Facebook data and provided a channel for business services. At the time Facebook bought the business partly because Zuckerberg needed a brain trust for the future. The brain trust is gone and Zuckerberg’s dive into the Metaverse looks very similar to Apple’s peak John Sculley moment with the Knowledge Navigator concept. You can see glimpses of the Knowledge Navigator in the smartphone, the iPad, the now abandoned WikiReader product or the use of contextual information and national language processing like Siri. Apple didn’t waste the kind of money that Meta has spent chasing an illusory vision of the future.
Alphabet-specific issues
I was surprised that Alphabet growth had lasted this long based on the following considerations:
With mobile, Google also pivoted a different type of search from product search to where is my nearest coffee shop with free wifi and has managed to sell search ads against them. This meant that Amazon and eBay managed to capture a lot of product searches, with consumers only hitting up Google afterwards and Amazon’s advertising has been eating Google’s lunch. Secondly a lot of the high street and neighbourhood shops have been eaten alive by food delivery services and this was then exasperated by the COVID which has changed at least some people’s consumer behaviour
Historically, Google has been too focused on looking for multi-billion dollar opportunities which haven’t panned out and closed down smaller services that were making money and bringing in attention. In essence, over the years they have thought Google Reader, the Google Search Appliance, Google Health, Boston Dynamics and several other projects were the big payday. They weren’t, but they were respectable business opportunities, just too small for Google to want to pursue. In its wake Google had destroyed entire sectors, or turned them into cottage industries such as enterprise search and knowledge management, RSS newsreaders autonomous robots
“something like almost 40% of young people when they’re looking for a place for lunch, they don’t go to Google Maps or Search, they go to TikTok or Instagram.”
YouTube seems to struggle getting brand building advertising dollars in the face of TikTok, Instagram and this explains why you saw a decline in sales over 2 percent. Instead you see a lot of D2C product ads a la day trading and drop shipping courses advertised. Part of this might be down to the product. YouTube has been screwing over creators and creators have made it clear that they’re not happy. You don’t need to go to YouTube if you get the directors cut of your favourite creators content on Patreon or Curiosity Stream. Censorship of political analysis content around China or Ukraine seems to be particularly bad.
Back to Subprime attention crisis
Hwang in Subprime attention crisis points out many of the things that agency employees and owners have known for years:
Online advertising effectiveness has declined compared to its performance 25 years ago
Audiences don’t see a lot of the ads that are displayed. Different reports will give you different numbers on this
Online advertising is destroying the very media industry that its content is shown on
Online advertising fraud is a big problem
Online advertising business practices are an even bigger problem with up to 70 percent of of online programmatic advertising spend going to advertising technology intermediaries such as The Rubicon Project (now Magnite) and Xaxis
This has allowed businesses like Procter & Gamble and adidas to reduce advertising spend at no loss in effectiveness. In the case of P&G Subprime attention crisis highlights how they cut $200 million in online advertising spend, moved that spend on to offline media like radio and print AND managed to increase their reach by 10 percent.
More on adidas via its inhouse head of media Simon Peel
Hwang marshals his facts well. Which is what you would expect from a lawyer. He uses analogous examples from the US financial services sector including the 2008 financial crisis. The book itself is 141 pages in length and there is a substantial section detailing his sources. Subprime attention crisis is based exclusively on desk research.
The Ford Fiesta will be forever linked to my early driving experience. I started learning to drive in the 1990s. Back then leasing agreements and car finance weren’t really a thing due to high interest rates. (There is a whole other blog post that I should write at some point about the risk of sub prime car loans, but not today.)
Car insurance was cripplingly expensive. It was even more expensive when you had no no claims and three points on my licence for an accident that I still claim wasn’t my fault.
I also have a Dad who is a time-served mechanical fitter and all-round engineering wizard. At the time we had access to a garage with a vehicle pit, welding equipment and an engine hoist on the evenings and from Saturday afternoon on during the weekend. My Dad had good personal relationships with a number of people who ran scrapyards. You went in, tore the parts you wanted off the cars and took them to the owner and negotiated a deal.
One salvage yard took things a step further by tearing cars down themselves and selling the parts alongside the basics that you’d need for servicing and usually buy from a motor factors. They’re still going strong and still only do business in-person or over the phone. No fax machine, email or website.
My Dad had been servicing and repairing cars since the mid-1960s and worked repairing a wide range of tracked and wheeled vehicles for the likes of Bord na Mona and Massey Ferguson.
Driving bangers
The vehicles that I owned were nothing to brag about, but they were really, really cheap and at least one of them was really, really dangerous. The most dangerous car was a Fiat 126. It cost £150 and I bought it off a former colleague who I met working one summer repairing tools and equipment rented out for use on construction sites. Even in the early 1990s that was a ludicrously cheap car.
The engine was terrible, as were the drum brakes. The body work crumbled in a way that one would expect for a Fiat made in the 1970s. Drum brakes ‘fade’ with repeated use (like going through a set of turns), they don’t work particularly well in the wet and they were prone to locking up on occasion.
Because of the noise, dangerous brakes, exceptionally poor build quality and Russian roulette-like standing starts it was tiresome to drive anywhere for anything more than an hour. The lights were pathetic the wipers were ineffective and the all the rubber seals leaked.
But it also put a smile on my face more times than any other car that I have owned. It handled really well. You could go sideways around corners and still stay in lane. You had a ludicrously low seating position and an exceptionally direct gear change. As a young man with a complete lack of appreciation for risk, it taught me that small cars can be fun.
Also as a cash-strapped young man, I appreciated that paying less to run a car was a good idea, so I aspired to own a diesel.
Building a Ford Fiesta
Eventually, through my Dad’s contacts I managed to get the diesel engine from a Ford Escort van that had been rear-ended and a Ford Fiesta delivery van with a blown petrol engine. At the time a friend that I knew through scuba diving had done a diesel engine swap into a mark two Ford Fiesta XR2. My vehicle was much rattier.
A mark two XR2 very similar looking to the car my friend transplanted with a diesel engine. The only difference being that his had the ‘pepper pot’ alloy wheels. Picture by Kieran White on Flickr (creative commons licence)
We used the beefier Escort springs to handle the increased engine weight, but kept the Fiesta braking system and gearbox. So I had a diesel Ford Fiesta van. Over a weekend, we used a Makita jigsaw to remove the van panels were the windows should be. New window gaskets and rear side windows from a totalled Ford Fiesta mark one. In went the mark one seats and rear seat belts and I had a car.
The van was old enough that I didn’t need to pay VAT after converting it to a car according to the DVLA at the time.
The gearbox was less direct than my previous cars, the steering lacked the go-kart feel of the Fiat and there was more body roll, but the Fiesta was a good car to drive. It had enough power for confident standing starts at junctions and motorway driving was comfortable. The best part was the fuel economy, I typically got 70 miles to the gallon (over 29 kilometres per litre).
I read that Ford was getting rid of the Fiesta and I was reminded of my old car and the role that it played in taking me around the country and allowing me to earn a living before I had moved to London.
Why are Ford Motor Company likely to be binning the Ford Fiesta?
I suspect that it is down to a number of factors:
Consumers want the higher driving position of a crossover or SUV, super mini vehicles like the Ford Fiesta have fallen out of favour
Small vans no longer share the same body shape as their car equivalents. Ford has its Transit Courier small van with a body better designed to cope with large objects or small pallets. So there are less common tooling that they can use to mitigate for lower production volumes
Germany is an expensive place to built a small car, even in a highly automated factory
It makes sense to prioritise scarce components in crunched supply chains to vehicles that produce the highest profit margin
An electric version of the Fiesta would give only a limited range between recharges. Electric battery carrying capacity is directly proportion to the size of the vehicle floorpan and Fiestas are very small. BMW couldn’t get its I3 to work from a business and consumer offering perspective
The price point of an electric Ford Fiesta would represent poor value for money for consumers
Goodbye to the Fiesta
Ford of Europe put together a farewell video to announce the end of Ford Fiesta production.
https://youtu.be/UYcoJ5cU-v4
Ford of Europe
YouTube channel Big Car did a great history of the Fiesta that is worth watching. Until I watched this video I had no idea that the impetus to develop the Ford Fiesta didn’t come from within Ford of Europe, but from American executive Henry Ford II. Henry Ford II is most famous amongst gear heads now as being the executive who drove support for the Ford GT40 after talks had collapsed with Ferrari.
Hank Deuce as he was known was portrayed by Tracy Letts who acted opposite Matt Damon and Christian Slater in the movie Ford vs. Ferrari.
State capitalism has been created in various forms in China since opening up. Some of the new forms have aspects that impacts the relative attractiveness of doing business in or with Chinese companies.
Opening up
Historically since opening up China has been a mixed market model. There were small private businesses including many farmers. There was the state owned enterprises, a direct descendent of Mao’s work units and businesses that the government wanted to keep a strategic hold on.
Taken at an exhibition that was part of the Shenzhen Biennial, when I was there back in 2010
Grey zone and hybrid companies
Grey zone companies
A classic example of a grey zone company would be Huawei. In their 2019 paper Who Owns Huawei, Balding & Clarke make a convincing argument that Huawei is a state controlled company, if not state owned in the conventional sense. This view is supported by:
The state hacking of Nortel which Huawei disproportionately benefited from in their subsequent telecoms carrier contracts and 5G technology
State bank vendor financing on behalf of Huawei at negative interest rates that telecoms providers like BT and Vodafone were given
Zichen Wang translated a Chinese academic paper that pointed out an alternative view. Yes the ownership structure was a shit show, was pretty much the one point of agreement between the two papers.
But that much of this was down to domestic practice influenced by classic state capitalism and modern business law that China brought in and still doesn’t square up with what was happening on the ground in terms of business laws.
You can make up your own mind if this is an element of state capitalism.
Hybrid companies
An example of this would be the Stellantis | Guangzhou Auto Company joint venture that made Jeep branded SUVs for China. These joint ventures were basically the way the Chinese government coerced technology transfer from western firms to local firms. The Stellantis JV has gone into bankruptcy and GAC seems to have its own range of capable SUVs based on Stellantis expertise gained over the years.
Huawei’s joint venture with 3Com allowed the telecoms giant to build a large enterprise networking business to compete with the likes of Cisco Systems. At the time that China first rolled out its Golden Shieldinternet censorship platform, it relied on Cisco technology, and China would want to remedy this under its state capitalism system. Huawei now supports internet censorship around the world. This form of state capitalism has been common in a number of developing countries over the years, but China was particularly successful in using it in a coercive manner to enhance state capitalism rather than just driving economic growth.
Rise of the hybrid firm – Gavekal Research – Today, 48% of onshore listed companies, representing 67% of market capitalization, have a mixed bag of major shareholders from the private and state sectors. While many of those companies are still clearly controlled by either state or private shareholders, a large and significant group of firms occupies an intermediate position that is harder to characterize. – on China’s state capitalism system
How China’s communist officials became venture capitalists – Times of India – The US and other Western governments have long been wary of the economic power of China’s “state capitalism,” fueled by giant state-owned companies and an industrial policy driven by subsidies and government mandates. But policymakers need to pay more attention to what’s really propelling China’s growth: private firms with minority government-linked investments. “The distinction between state-owned and private has been important for policymakers outside China and for analyzing the Chinese economy,” says Meg Rithmire, a professor at Harvard Business School who specializes in comparative political development in Asia and China. “That boundary is eroding.” – see also Chinese banks vendor financing deals which is the real reason behind Huawei’s growth (alongside stealing IP and other proprietary elements: Nortel cough, cough)
Influenced firms
Influenced firms are a particularly pernicious part of the Chinese state capitalism system. The Chinese economy has always relied on relationships and even patronage of government power brokers similar to Malaysia, Thailand and Korea. But the state has looked to move personal bonds to state bonds. Much of this comes from National Intelligence Law 2017; that puts demands on Chinese citizens, Chinese companies and anyone connected to China.
Like the more widely reported Cybersecurity Law (which went into effect on June 1) and a raft of other recent statutes, the Intelligence Law places ill-defined and open-ended new security obligations and risks not only on U.S. and other foreign citizens doing business or studying in China, but in particular on their Chinese partners and co-workers.
Of special concern are signs that the Intelligence Law’s drafters are trying to shift the balance of these legal obligations from intelligence “defense” to “offense”—that is, by creating affirmative legal responsibilities for Chinese and, in some cases, foreign citizens, companies, or organizations operating in China to provide access, cooperation, or support for Beijing’s intelligence-gathering activities.
The new law is the latest in an interrelated package of national security, cyberspace, and law enforcement legislation drafted under Xi Jinping. These laws and regulations are aimed at strengthening the legal basis for China’s security activities and requiring Chinese and foreign citizens, enterprises, and organizations to cooperate with them. They include the laws on Counterespionage (2014), National Security (2015), Counterterrorism (2015), Cybersecurity (2016), and Foreign NGO Management (2016), as well as the Ninth Amendment to the PRC Criminal Law (2015), the Management Methods for Lawyers and Law Firms (both 2016), and the pending draft Encryption Law and draft Standardization Law.
For Young Chinese, Even State Sector Jobs Are No Longer a Safe Bet – the public sector hasn’t lived up to its reputation of being a safe haven. Nearly three years into the pandemic, many of China’s local governments are facing eye-watering fiscal deficits and implementing austerity measures. And those cuts are hitting civil servants hard. Wang had originally expected to earn at least 250,000 yuan ($34,600) per year at his new job. In reality, he estimates he’s being paid just 160,000 yuan. His basic salary has been cut by 30%; his social insurance payments haven’t risen as promised; part of his annual bonus has never been paid. Instead, Wang finds himself forced to work regular unpaid overtime shifts, helping to implement the town’s virus-control policies, and trying to cut back spending at home. His plans to trade in his boring SUV have been put on hold indefinitely.
Chinese ‘police stations’ in Canada under investigation | Hong Kong Free Press – there is a definite turning point around the illegal Chinese police operations against its diaspora. I expect United Front activities to be the next point of focus and you could see triad organisations treated less like organised crime and more like the paramiilitary or terrorist arm of the United Front
How the U.K. Became One of the Poorest Countries in Western Europe – The Atlantic – “Between 2003 and 2018, the number of automatic-roller car washes (that is, robots washing your car) declined by 50 percent, while the number of hand car washes (that is, men with buckets) increased by 50 percent,” the economist commentator Duncan Weldon told me in an interview for my podcast, Plain English. “It’s more like the people are taking the robots’ jobs.” That might sound like a quirky example, because the British economy is obviously more complex than blokes rubbing cars with soap. But it’s an illustrative case. According to the International Federation of Robotics, the U.K. manufacturing industry has less technological automation than just about any other similarly rich country. With barely 100 installed robots per 10,000 manufacturing workers in 2020, its average robot density was below that of Slovenia and Slovakia. One analysis of the U.K.’s infamous “productivity puzzle” concluded that outside of London and finance, almost every British sector has lower productivity than its Western European peers. Read alongside – What British politics looks like to the rest of the world – The Face TL;DR a joke that makes their country look good by comparison.
Japan cannot survive without Russian oil, warns trading house chief | Financial Times – Some analysts have expressed concern about Itochu’s heavy exposure to China through its 10 per cent stake in Citic, but Okafuji stressed that its risks were lower since its investment was in a government-owned company. “Currently, what they are doing in China is to move private assets from private companies to government-owned companies to reduce the gap between the rich and poor,” he said. “Our objective is to contribute to providing a prosperous lifestyle to the Chinese people, so I think the Chinese government welcomes that.” – I expect that the Chinese government and CITIC will tear the face off Itochu
Concerns mount over German Chancellor Scholz’s upcoming trip to China | Axios – it looks like there is a battle royale brewing between the German public and their large corporates. Add to this: Ports in a storm: Chinese investments in Europe spark fear of malign influence | South China Morning Post and Watching China in Europe with Noah Barkin – 55 percent of Germans believe he (Scholz) is out of his depth), deepens divisions in his government, and undermines its quest for a common European policy toward Beijing, a goal that was spelled out in black and white in the three-party coalition agreement. More worryingly, it shows that Scholz and his advisers still have a steep learning curve on China. Germany’s sway with Beijing depends on a united front in Berlin, in Europe, and across the G7. Scholz has managed to torpedo them all in the span of a few weeks. To be clear, the problem is not that Scholz is meeting with Xi. The party congress showed that Xi may be the only member of China’s leadership who is worth talking to these days. And it is normal for Scholz, who has been chancellor for nearly a year but unable to meet with Xi in person because of China’s restrictive COVID-19 rules, to want to sit down for a face-to-face with the country’s newly anointed leader for life. But the when, where, and how of this first meeting are important. And Scholz has whiffed on all three. The situation is reminiscent of his predecessor Angela Merkel’s decision, two years ago, to hurry through the EU-China Comprehensive Agreement on Investment (CAI) weeks before Joe Biden entered the White House. Like Merkel, Scholz is gifting Xi a geopolitical victory without much in return. And he is voluntarily sacrificing whatever leverage his government might have had with China. He may not realize that but members of his own government—some of whom have been working diligently for months on a new, tougher China strategy—are furious. “As long as the German chancellor doesn’t buy into his own government’s China strategy, then it is worthless,” one German official fumed. “The Chinese can see the divide in Berlin and Europe, and believe me, they will find a way to exploit it. It is absolutely fatal. And what is so stunning is that Scholz has done all of this of his own free will.”
Hong Kong
America’s Biggest Financial Firms Are Still Collaborating with the Sanctioned Hong Kong Government – After an increasing number of critics began to pile on, including the co-chairs of the Congressional Executive Commission on China Representative Jim McGovern and Senator Jeff Merkeley, a coalition of 20 U.S.-based Hong Kong activist groups, and the Wall Street Journal editorial board, Citibank’s Jane Fraser claimed that she had tested positive for Covid-19 and will pull out of the summit. The rest of these executives have only a couple of days to come down with similar illnesses or unexpected family commitments, but I’m not holding my breath and Hong Kong Summit Surrounded by Drama Before It Even Begins – Bloomberg – Top executives pull out after getting Covid; storm approaches. Event aimed at showing city is back in business after pandemic
9 in 10 marketers spend time in making global marketing locally relevant: report | Advertising | Campaign Asia – Marketers say local requirements are kept in mind by headquarters when making decisions, however, the majority (82%) feel they spend too much time educating HQ on Singaporean nuances and needs. 47% of marketing decision-makers in Singapore say that senior leadership in regional or global offices are misaligned with local marketing teams, there is a lack of local understanding of effective channels, and in some cases, there’s an assumption that a global approach will work across countries. Over a third (36%) of marketers believe in localising content for maximum ROI, however, the local tone, diversity and humour in campaigns is often not well understood by global offices teams.
– The departures mean Apple is losing at least three vice presidents — the highest manager level below Chief Executive Officer Tim Cook’s executive team — in recent weeks. Evans Hankey, Apple’s vice president in charge of industrial design, is also leaving the company, Bloomberg News reported earlier this month. Chief Privacy Officer Jane Horvath has departed Apple in recent weeks as well, taking a position at a law firm
Trio conduct 6G reconfigurable intelligent surfaces trials … – Reconfigurable intelligent surfaces can be programmed to modulate the phase of electromagnetic waves and reflect signals into blind spots, enhancing coverage and improving user experience. The low cost, low energy consumption and easy deployment, of RIS have attracted broad interest in 6G research and made it a popular candidate technology. The technical trial mainly evaluated the deployment effects and performance of sub6 GHz RIS and mmWave RIS in different indoor and outdoor scenarios. The tests modelled deployment conditions with and without RIS, different incidence and reflection angles, different deployment distances, etc. Recorded performance index parameters included RSRP, throughput and others. The trial participants worked together to carry out several RIS test projects yielding hard data that makes a strong argument in favor of continued RIS technology development.
