Ged Carroll

Category: economics | 經濟學 | 경제학 | 経済

Economics or the dismal science was something I felt that I needed to include as it provides the context for business and consumption.

Prior to the 20th century, economics was the pursuit of gentleman scholars. The foundation of it is considered to be Adam Smith when he published is work An Inquiry into the Nature and Causes of the Wealth of Nations. Smith outlined one of the core tenets of classical economics: each individual is driven by self-interest and can exert only a negligible influence on prices. And it was the start of assumptions that economists model around that don’t mirror real life all the time.

What really is a rational decision maker? Do consumers always make rational decisions? Do they make decisions that maximise their economic benefit?

The problem is that they might do actions that are rational to them:

  • Reducing choice when they are overwhelmed
  • Looking for a little luxury to comfort them over time. Which was the sales of Cadbury chocolate and Revlon lipstick were known to rise in a recession
  • Luxury goods in general make little sense from a ration decision point of view until you realise the value of what they signal
  • Having a smartphone yet buying watches. Japanese consumers were known to still buy watches to show that they care about the time to employers when they could easily check their smartphone screen

All of which makes the subject area of high interest to me as a marketer. It also explains the amount of focus now being done by economists on the behavioural aspect of things.

  • Life Bread & other things this week

    Life Bread homage by craft beer brand

    Life Bread is a brand icon. For Hong Kongers the blue or red checked wrappers mean western style bread. Life Bread is as Hong Kong as the Lion Rock – a granite peak that overlooks the city. Life Bread became an emotive icon used in the 2019 Hong Kong protests as an celebration of Hong Kong identity. It has even been celebrated in art. So when a local craft brewer FoamBeerBrewery was launching a bread based IPA it made sense that it would go with packaging that linked back to the Hong Konger lingua franca for bread.

    Foam Brewery Bread IPA
    FoamBeerBrewery Bread IPA packaging evoking the wrappers of Garden Bakery Life Bread – a local hero brand for Hong Kong

    FoamBeerBrewery Bread IPA is available from local high-end supermarket citysuper.

    Everybody’s business

    I came across this cold war era animated film that explains capitalism and extols its virtues. Nowadays there isn’t the same efforts to promote capitalism in the face of millennial socialism. As these things go, it’s not a bad explainer for economics neophytes.

    Immersive billboards

    A number of Asian cities have fitted high definition digital billboards that go around the corner of a building. The latest one overlooks Tokyo’s Shibuya crossing.

    The content has varied by market, including a golden bull to celebrate lunar new year in Kuala Lumpur. The Tokyo board taps into the Japanese love of cats. Here’s what the animation looks like. It appears sporadically to encourage bystanders to keep watching the adverts that stream on the billboard.

    There is a live stream of the billboard available.

    https://youtu.be/HX9pROOvTzA

    Brand China

    The communist party of China had its 100 year anniversary celebration to focus on past accomplishments and project its current strength. TL;DR China wants to smash your head into a wall of steel that has been made by 1.4 billion or so Chinese people.

    Meanwhile Pew Research was looking at ‘Brand China’

    While Xi Jingping might not care, it makes trade harder to do with more developed economy.

    The one segment where China does seem to have unwavering support is from the progressive left, particularly in American politics. This advocacy seems to be based more on their wishful thinking than any messages delivered by China as Noah Smith discusses in their newsletter.

  • The rise & fall of American growth

    The rise and fall of American growth

    It has been five years since The rise and fall of American growth was written by Robert J Gordon. When it was first published it was a New York Times bestseller and won awards from the FT and McKinsey. I felt that it was particularly interesting to go back and visit now, given current economic circumstances and the view that its data provides on the techno-optimism versus techno-pessimism that is currently raging on.

    The Rise and Fall of American Growth

    Understanding the author’s perspective

    Robert J Gordon developed his career as an economist in a crucible. He started his career during a time of battle between Keynesian and the monetarist supporting economists. Keynesian ideas had reached their peak in the 1950s. It was challenged by economists such as Milton Friedman and George Stigler. Both of whom were from the Chicago School. The Chicago School was the University of Chicago. It became a centre for economic conservativism. The Chicago School At his time, drew on the likes of Hayek for its ideas.

    Gordon became a ‘New Keynesian’. They assume that there is imperfect competition in price and wage setting to help explain why prices and wages can become “sticky”. They do not adjust instantaneously to changes in economic conditions. Wage and price stickiness, and the other market failures present in their models, imply that the economy may fail to achieve full employment. They argue that macroeconomic stabilisation by the government and the central bank leads to a more efficient macroeconomic outcome than a laissez faire policy would.

    American growth and techno-optimism

    The techno-optimism viewpoint is that continuing technology innovation is going to bring about a new golden age. There are essays trading perspectives on this back-and-forth.

    Gordon’s research suggests that the kind of growth suggested by techno-optimists as an outcome is usually because of very special circumstances.

    When he looked at American growth through the 19th century; growth had occurred in short spurts and much of it wasn’t driven by technology, but was multiple factors coming together. He further posits that those factors that drove American growth are unlikely to be repeated in the future.

    The last spurt of this growth was during the irrational exuberance of the dot com era.

    As you’d expect from an economist, Gordon pulls together to support his ideas very carefully and it is based on empirical analysis. IT has driven little economic growth, which makes one wonder about the benefits of digital transformation as touted by management consultancies.

    Gordon’s work is also an argument against globalisation, at least for the American economy. It brings into question the American dream.

    Finally, with technology unlikely to drive the kind of stellar growth promised, it brings into question the massive premium set on growth stocks over the long term and venture capital investments in the technology sector and the current Silicon Valley model.

    Gordon’s current research is focused on looking at European and American growth so it will be interesting to see commonalities and differences. I expect to see a spurt of growth from second generation mobile devices that freed up small businesses by providing an instantaneous connection with the customer. Rather than relying on an answer machines or a member of their family as receptionist.

    The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War: 70 (The Princeton Economic History of the Western World, 70)

    More book reviews can be found here.

    More information

    Robert Gordon’s academic papers here.

    Answering the Techno-Pessimists (complete) – Noahpinion 

    Interview: Patrick Collison, co-founder and CEO of Stripe – Noahpinion

  • Handset industry of South Korea + more

    South Korea’s handset industry

    South Korea’s handset industry is leading indicator of supply chain shift – Samsung has chosen to place two thirds of its global production capacity at 360 million phones near Hanoi, Vietnam and one third in Noida, India. At the same time, a group of American brands led by Apple have asked their Taiwan-based OEMs to set up production facilities in India. Taiwan’s three largest manufacturers Wistron, Pegatron and Foxconn all have production lines up and running in India. Before this, Taiwan-based notebook computer manufacturers had already moved their production to major ASEAN countries. It is a definite trend that manufacturers are relocating part of their production out of China into ASEAN countries and South Asia – Apple can learn a lot from South Korea’s handset industry. Apple’s approach to its supply chain compared to the handset industry looks risky. It is betting on Chinese behaviour that seems to run counter to Xi Jingping-era China. More on handset industry related content here.

    China

    Ketamine and the Return of the Party-State | Palladium Magazine – as China gets richer and its factional lines get drawn across social battles instead of economic ones, we can expect rhetoric about moral regeneration to become more potent. The party’s turn towards encouraging family and child-rearing might well be the first sign of things to come. When all your political capital has been invested in the narrative of national rejuvenation, there’s no easy way out when the low-hanging fruits of the market start to run low

    Former Chinese Party Insider Calls U.S. Hopes of Engagement ‘Naive’ – WSJ – “Wishful thinking about ‘engagement’ must be replaced by hardheaded defensive measures to protect the United States from the CCP’s aggression—while bringing offensive pressures to bear on it, as the Chinese Communist Party is much more fragile than Americans assume,” Ms. Cai wrote. Her 28-page paper is slated for publication this week by the Hoover Institution, a conservative-leaning think tank at Stanford University. A growing roster of Western politicians and analysts has concluded that U.S. diplomacy with China hasn’t paid dividends. But such views are rarely expressed publicly by sources as highly placed as Ms. Cai was just a short time ago. – Pretty reasonable assessment with plenty of empirical evidence to support it

    Fawning and complacent, the West has eased China’s path to power | The Sunday Times – while the statement is true, it also shows how much the tone has changed towards China

    Finance

    Brazil and China in talks to strengthen science and technology ties | ZDNet – China calls for financing to bring plans to reality…..

    France

    France probes fashion retailers for concealing ‘crimes against humanity’ in Xinjiang | Reuters – source told Reuters Uniqlo France, a unit of Japan’s Fast Retailing, Zara owner Inditex, France’s SMCP and Skechers were the subject of the investigation

    Hong Kong

    How Beijing humbled Britain’s mighty HSBC | Reuters – The decision by Baowu to blackball HSBC is part of a clampdown on the global London-based bank by many of China’s gargantuan state-owned enterprises – a campaign described to Reuters in interviews with HSBC bankers, and employees at state companies who have first-hand knowledge of their operations. Controlled by China’s ruling Communist Party, these companies manage the nation’s largest industrial projects and are responsible for $9.8 trillion of revenue annually. The reason for the pullback by state firms isn’t HSBC’s financial soundness, which isn’t in question, but rather Chinese politics. People inside the state enterprises and HSBC say Beijing has grown disenchanted with the bank over sensitive domestic and international legal and political issues, from China’s crackdown in Hong Kong to the U.S. indictment of an executive at Chinese national tech champion Huawei Technologies – this makes HSBC’s pivot to China look foolish

    ‘Unstoppable storm’: rights take back seat under Hong Kong security law | Yahoo! News – from the journalist’s Twitter thread when she shared the article and additional material that didn’t make the cut: “Judges hope to be given more trust and discretion. Prosecution wants more power. What can defense do? …I’m not as naive to believe they won’t come after lawyers. Losing license is the minimum charge.”

    Luxury

    Streetwear Has a Homophobia Problem | Highsnobiety – where to start with this? I think that some of the homophobia is down to in-out group dynamics. Gays have been in the streetwear industry for a long time. Bomber jackets as a streetwear item came from creatives like Judy Blame and the Buffalo Collective

    Media

    America’s New Post-Literate Epistemology | Palladium Magazine – McLuhan believed that the West was due for a period of “re-tribalization,” but by “tribal” he meant much more than the commonly understood definition. Yes, there would be polarization: people would by and large become less civil, less rational, touchier, and more defensive about the smallest things. This much, we already know and see every day. But McLuhan went even further in his use of the term, arguing that electronic media—more so than any political ideology—shifts the sensorial basis of Western society away from the visual, the literate, and the abstract and toward the oral, the tactile, and the tribal. In other words, he saw re-tribalization as a process that will eventually return modern man to the mental and epistemic world of his pre-literate tribal ancestors: the “global village.” Over the long run, this can be quite benign, even sublime: in 1969, McLuhan imagined its endpoint as a society of “mythic integration” where “magic will live again.” Speaking in lofty millenarian terms, he predicted technology would merge humanity “into an inclusive consciousness…a new interpretation of the mystical body of Christ…the ultimate extension of man.”

    ‘Crypto Keepers’ NFT-Backed Drama Series Hatched by AMM Global – Variety – the production company spun out of Hong Kong’s Asia Television – a former free to air TV station

    Facebook, Twitter, Google Threaten to Quit Hong Kong Over Proposed Data Laws – WSJ – the problem is that the online platforms don’t put teeth behind it. Like taking unilateral action against Chinese advertisers and Chinese media. Lets assume that Facebook, Twitter and Google would have to leave Chinese territories. They can then squeeze China two ways:

    1. China’s small factories rely increasingly on direct to consumer sales through Facebook and Instagram advertising. As does product aggregators like Wish.com and Shein. Squeezing them out of advertising would send 10,000s of Chinese employees out of work
    2. Shutting out China’s SOEs (Air China etc) and Chinese media accounts would severely cripple China’s external united work front efforts to influence the global market

    Vietnam

    Vietnam to phase out 2G, 3G serivces starting 2022 – Vietnam’s Ministry of Information and Communication (MIC) has decided to start phasing out 2G and 3G technologies within the country in 2022 in a bid to encourage people to use smartphones and promote digital society.

  • Machine learning powered services + more

    Machine learning powered services

    Intelligent Relations – Matt Muir nails this in his take down of their machine learning powered media relations platform – Vapid, largely-pointless busywork which despite its almost universal lack of import is nonetheless treated by its practitioners as somehow REALLY VITAL and with a reverence normally reserved for stuff that matters rather than with the disregard appropriate for an industry staffed largely by double-figure-IQ morons. Anyway, that’s all by way of preamble to the introduction of Intelligent Relations, a new company which is set to make PR even worse if you can imagine it. Intelligent Relations (it sounds…it sounds like an escort agency for the sort of people who bother applying to Mensa, is what it sounds like) is PR, but with AI! That’s right, AI! The MAGICAL SECRET SAUCE that makes EVERYTHING BETTER and definitely isn’t a sign that someone is attempting to sell you some magic beans! Just listen to this – “GPT-Powered Outreach, 24/7 analysis of all relevant public event data to identify opportunities and pitch your company’s stories faster than the competition…Relentless customized global outreach based on AI-ranked relevancy to your brand. Generate responses that start, nurture, and build personal relationships with media influencers. Put your execs and your company in the heart of the conversation. No agency. You own your relationships – not your PR firm…Precisely worded campaigns, aggressively scaled with technology. Faster than humans, more personal than email blasts.” So, er, you are outsourcing the writing of pitch emails, and followups, to a machine? Have, er, you read any non-tweaked GPT-3 generated copy recently? – All of this stuff about machine learning powered media relations reminded me of the start of my agency career.

    I was working with an agency that was part of the Interpublic Group. We were riding the technology boom of the mid-to-late 1990s. This was a series of booms that were inter-related.

    • Telecoms boom, came from deregulation, the rise of data services, globalisation and the internet
    • Enterprise software boom driven by Moore’s Law, the ability to interconnect systems and exchange data at rates previously unseen. There was a strong incentive to replace old systems due to concerns about the millennium bug
    • Mobile boom as GSM networks and their CDMA equivalent democratised the mobile phone and allowed for nascent data services
    • The dot.com boom as companies built service layers over the top of data networks. Much of the ambition was way ahead of where technology was
    • Hardware boom. Businesses and consumers needed to get online

    Our CEO at the time Larry Weber came over to the office in Covent Garden, met clients and held court. He turns around to the junior staff and tells them how soon they won’t have to worry about manually contacting journalists or compiling status reports. Instead, the contact work will be outsourced to the Philippines (thanks to the telecoms boom). And data that was entered once in the company intranet WeberWorks would through the power of Lotus Notes be diced into the reports that the clients needed.

    WeberWorks in its first iteration was a proof of concept, not a viable product. Though I believe that the successor agency Weber Shandwick stuck with developing the platform.

    22 years later and agency life faces much the same problems, except an algorithm is touted to replace Filipino call centre workers in this scenario. What does machine learning powered media relations have that a Filipino call centre doesn’t? How will the PR profession grow when the on-ramp for people to learn how it works is now taken over by a machine learning powered media relations service instead?

    A lot of PR technology is based on the expectation that (machine learning powered) content will be fed into a media sausage factory and coverage will come out. But relationships are important, as journalists get hundreds of pitches and press releases per day.

    Consumer behaviour

    Phoenix eyes’ on catwalk of mainland academy’s fashion gala draw fire for insulting China ｜Appledaily – Some netizens accused the university of humiliating China after a video of the event on YouTube showed that most of the models either had an eye shape known as phoenix eyes, or were using eyeliner to present the same appearance. The eye shape, which is identified by a slight upward lift at the outer corner of the eye, is considered a desirable facial feature. However, some people regard it as a harmful stereotype reinforced by Western culture and the fashion industry. One influential blogger on Weibo, China’s dominant social media platform, said that because this look conforms with the stereotypes of ethnic Asians it carries a meaning of serious humiliation – this might be what passes for woke in China. The story was originally published in the English version of the Apple Daily Hong Kong on June 21, 2021 three days before the paper closed down. I have linked to to a Wayback Machine archive of the article.

    Political trolling twice as popular as positivity, study suggests – BBC News – unsurprising as taps into system 1 thinking

    Economics

    Competition and concentration | Financial Times – The 1980s financialisation of the US economy created a mindset that manufacturing did not matter — and that it should therefore be shifted to lower-cost labour markets. The high value-added stuff, including R&D, would remain onshore. It didn’t turn out like that. Like any other activity in life, manufacturers learn by doing, which means that the most effective innovation usually takes place alongside production. That’s why so many of America’s most impressive companies, including Intel, shifted a lot of their R&D to China – great take on globalisation here. It also gives a sense of where the FT’s view is on the process

    Private equity ‘raid’ on UK companies sparks furious row in City | Financial Times – best quote in the comments ‘The British should be relieved to have their assets stripped by relatively familiar, relatively transparent organizations. It may be the Chinese next.’

    The Evolution of Corruption in China | Foreign Affairs – corruption comes in distinct flavors, each exerting different social and economic harms. The public is familiar with three main types. The first is petty theft: police officers shaking down people on the street, for example. The second is grand theft: national elites siphoning off massive sums from public treasuries into private accounts overseas. The third is speed money: petty bribes paid to regular officials to bypass red tape and delays and grease the wheels of bureaucracy. All three types are illegal, vociferously condemned, and rampant in poor countries. But corruption comes in another, more elusive variety: access money. In this kind of transaction, capitalists offer high-stakes rewards to powerful officials in exchange not just for speed but also for access to exclusive, lucrative privileges, including cheap credit, land grants, monopoly rights, procurement contracts, tax breaks, and the like. Access money can manifest in illegal forms, such as massive bribes and kickbacks, but it also exists in perfectly legal forms – I was thinking of the favoured firms during the British empire and the chaebols during the Park presidency in South Korea. The chumocracy of UK politics is closer to speed money

    Ideas

    Digital Addiction Hunt Allcott, Matthew Gentzkow, and Lena Song (NBER.org working paper) – Many have argued that digital technologies such as smartphones and social media are addictive. We develop an economic model of digital addiction and estimate it using a randomized experiment. Temporary incentives to reduce social media use have persistent effects, suggesting social media are habit forming. Allowing people to set limits on their future screen time substantially reduces use, suggesting self-control problems. Additional evidence suggests people are inattentive to habit formation and partially unaware of self-control problems. Looking at these facts through the lens of our model suggests that self-control problems cause 31 percent of social media use. – or in other words social media is like big food, the illegal drugs industry, alcohol, tobacco and gambling (PDF)

    Innovation

    Losing sight of the Future – Noahpinion – interesting article but the author forgets about energy density as an issue in their own predictions whilst mentioning it as a flaw in prior ones

    Marketing

    The fashion marketing shake-up: As Instagram, Facebook costs surge, where next? | Vogue Business – marketing inflation is hitting the fashion industry as platform and influencer costs surge, but sales don’t. More online related content here.

    North Face Owner Pulled Xinjiang Criticism, Then Reinstated It – WSJ – VF Brands struggling to navigate divergent Chinese and western markets. Its not been a good week for VF Brands as the Futurelight logo court case with Futura is bring a lot of unwelcome attention to the North Face brand and may blow on to its Supreme brand.

    McDonald’s, Wendy’s Cut Back Value Meals, Focus on Pricier Food – this is partly inflation. But I think that they are working an angle to squeeze premium burger brands: Five Guys, Gourmet Burger Kitchen (GBK), Byron Burger and similar

    Retailing

    S.Korea retailer E-Mart buys eBay’s S.Korean business for $3 bln | Reuters – purchased by Shinsegae – part of Samsung chaebol

    Technology

    Panasonic defends $7bn Blue Yonder deal after questions over price | Financial Times – interesting that Panasonic bought Blue Yonder. Blue Yonder is a supply chain software provider

    Wireless

    EE to reintroduce Europe roaming charges in January – BBC News – EE, which is part of BT Group, previously said it had no plans to reintroduce roaming charges in Europe. – No plans meant that they didn’t have their act together at that time, typical BT in other words

  • PostScript + more things

    PostScript

    Adobe is dropping PostScript Type 1 font support. Be prepared for the change – huge move, given the amount of time that PostScript had been at the centre of design and print. There must be brands out there still using Type 1 fonts for standard print design work that haven’t changed style in 30 years beyond a logo tweak. Without PostScript fonts you couldn’t have had the laser printer or modern design software tools

    Business

    Amazon Exploding Hoverboard Case Could Forever Change Company – Bloomberg – Last month, a California appeals court ruled that Amazon can be held liable, even though the seller stored and shipped the device itself. The decision sent shockwaves through the e-commerce world. Though it will probably be appealed again, the ruling raises the possibility that Amazon might have to exert more control over the activity on its own website. “Courts are rejecting the internet exceptionalism idea when it comes to a company like Amazon,” Agnieszka McPeak, a Gonzaga University professor, told Bloomberg Law. – It could also have implications for companies like Shopify

    Sennheiser to spin out its consumer audio business | EE News Europe – AKG got sold off by the family, Sennheiser is selling off its iconic headphone business. This leaves only Beyerdynamic – Sennheiser sells auido business to hearing aid maker | EE Times Europe 

    South Korea’s Kakao to buy two U.S. storytelling apps for $950 million | Reuters

    Why SoftBank’s THG deal has more questions than answers | Financial Times – What exactly the Ingenuity business does is something of a riddle: chief executive Matthew Moulding described it as a “social media influencer platform” but it also handles the prosaic business of logistics and translations for third parties launching in new markets – I don’t get The Hut Group (THG), maybe they’re bad about telling their story?

    Luxury

    Why Victoria’s Secret Body Positivity Spin Won’t Work in China | Jing Daily – Victoria’s Secret’s has a long history of glamorous supermodel perfection, therefore this choice is seen as inauthentic for the Chinese consumer and has left many citizens bewildered. Global brands need a localized approach in China, but one that resonates convincingly with the company – on Victoria’s Secret trying be more inclusive and body positive

    Technology

    EVs Will Drive A Lithium Supply Crunch – IEEE Spectrum – not new news, but interesting that it is being highlighted by electrical engineers now just as many electric cars are coming to market. More lithium related content here

    Web of no web

    Northrop Breaks Into DARPA’s Blackjack « Breaking Defense – Defense industry news, analysis and commentary – software-defined Positioning, Navigation and Timing (PNT) technology will offer military users an agile new signal from low Earth orbit (LEO) that is not dependent on existing satellite navigation systems – it could be interesting to see what new services can be built on this eventually