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.

  • Heavens Bankers by Harris Irfan

    I was given Heavens Bankers to read as a friend. I can’t say I had thought that much about Islamic finance before. I knew that it had a couple of patches of ‘heat’ behind it in the banking sector. One was in the late 1990s. It then took a back seat post-911 and took off again as Dubai boomed.

    It helps that Harris was not only an insider, but passionate about banking in its widest sense. He’s also sickening polymath who is a top flight racing driver.

    History never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends. – Mark Twain and Charles Dudley Warner

    Irfan delves into the intricacies of how modern Islamic finance grew and contracted. The industry he provides us an inside view of is now worth a trilliion dollars.  The start of history like most things were pretty straight forward. As the industry grew more arcane and complex financial instruments became the norm. This reminded me of a lot of Mark Lewis’ Liar’s Poker. Lewis dealt with bonds and modern derivatives became so complex customers didn’t understand them. The Savings and Loans debacle of 1985-1996 foreshadowed subprime mortgages.

    Where Irfan really excels for the non-banker as reader is in his ability to break down the basics. He takes the concepts many of us learned in business or economics classes back into pre-medieval history. He provides a historical perspective on modern capitalism as we know it. So the book becomes invaluable regardless of how you feel about the current economic system. The background gives you a more informed perspective. More on Heavens Bankers here. More book reviews here.

  • Chinese industrial decline + more

    Chinese industrial decline – It is hard to explain to people the diversity of China. If you’ve followed China as a subject area you’re used to discussions around tier one to six cities. We tend to buy into ‘Blade Runner’ China because its the tier one and two cities that you end up visiting. Its pretty much the same with the media. I really like this New York Times documentary that deals with the slowdown of heavy industry in Northern China and apparel manufacturing in Guangzhou province in the South.

    Chinese industrial decline in this documentary shows off it’s rust belt and left behind areas. This city’s mayor and is project is a microcosm of the efforts going on.

    China has been in a constant state of reinvention. I worked out of old electronics factories in Shenzhen that had been turned into offices and creative studios, with Shoreditch style retail attached. Whilst, Shenzhen is famous for manufacturing, the reality now is more complex. It has a thriving finance sector that China hopes will eclipse Hong Kong.

    Further up the Pearl river delta cities like Dongguan were industrialised by Hong Kong entrepreneurs and became crucial parts of the global fashion supply chain. Here too changes is happening, areas of Dongguan are being repurposed as tech campuses. Huawei built their ‘European theme park’ campus there. Of course, the unskilled workers get replaced. They move further inland along with some of the industry.

    Some of the industry, has moved abroad. China has become too expensive and onerous to deal with. In the North, heavy industry was built at break neck speed relatively close to coal fields, rather like the UK during the industrial revolution. During this go-go time China could use or export all the steel old. After the 2008 Olympics China started aiming for more sustainable growth and heroic efforts became surplus production.

    A Brazilian flavoured tune as a free download Oya’ Indebure feat. Laudir de Oliveira | DJ Nu-Mark. However, don’t mistake free, for low quality, this is an amazing tune. More on DJ Nu-Mark here.

    Maybe a team up with Scanner would have been more appropriate but liking Jean-Michel Jarre + Edward Snowden – ‘Exit’

    May the 4th aka Star Wars day saw geeks dominate the web, I did really like Japanese airline ANA’s rendition of the Star Wars theme purely from aircraft related found sounds

    TBWA in Amsterdam pulled together these clever DJ controller place mats for McDonalds. It shows how much is now possible with printed circuits. I love the combination of material smarts and  creativity.

  • Bury the hatchet tech style + more

    Google and Microsoft bury the hatchet | Techeye – this is potentially huge. Especially if Microsoft is considering itself to be less of an OS business and more of an enabler. There is also a certain irony in this behaviour from Microsoft. Previously companies like Sendo and Nortel usually found when Microsoft bury the hatchet, it was in their backs. More on Microsoft here.

    10 forces that threaten to tear the internet apart | World Economic Forum – really nice read. Unsurprisingly government, in particular cyber sovereignty is high on the list.

    How Traditional Storytelling Is Ruining Virtual Reality Film – not really that surprising, it took years for the craft of cinema storytelling to

    Nokia to buy digital health firm Withings for $191 million – Nokia said Tuesday it is buying French fitness gadget maker Withings to kickstart its re-entry into the consumer market and boost its move into digital health. Smart buy, Withings design some the nicest wearables out there

    Daring Fireball: The Encryption Farce – interesting read of WSJ coverage on Apple vs. FBI legal issues

    Top risk expert says Apple could be shut out of China | South China Morning Post – more likely to be about helping domestic brands as China understands the need to defend against foreign attacks , more so than US politicians

    BeautifulPeople.com Leaks Very Private Data of 1.1 Million ‘Elite’ Daters — And It’s All For Sale – Forbes – but its a handy database for identity theft and blackmail

    Why Facebook and Baidu Are Becoming Fast Friends — The Information – in addition to Chinese e-commerce businesses looking to sell abroad

    Operational WhatsApp (on iOS) — Medium – tweak the security settings on Whatsapp

    Three ways behavioural science can identify the best messenger for your campaign | PR Week – ok op-ed, it reminded me a lot of the narrative around Edelman’s Trust Barometer in past years

    Reject Parochial Nationalism for Sake of Continued Progress_英文频道_手机财新网 – interesting, however seems very out of step with the government position

    The Internet Really Has Changed Everything. Here’s the Proof. — Backchannel – As we discuss other apps on his home screen — YouTube, eBay, Facebook, Twitter, Yahoo  – we forget the draw that Yahoo! Sports is

    Microsoft Android patent-licensing revenue falling – market is skewing to cheaper handsets and not all (Chinese) manufacturers are paying licensing fees. I also presume the razor thin to no margins mean Microsoft legal action wouldn’t be worthwhile. And if it was done in China wouldn’t be likely to succeed

  • Platform utility

    Silicon Valley VC Andreessen Horowitz put togethers slides that cover platform utility and the role of network effects. The  presentation does a good job at providing a taxonomy on different products. It comes in handy when thinking about channel role / platform utility from a media planning perspective and also evaluating start-up ideas. They define platform in terms of development, but for advertisers we can think of it wider as we are likely to be making API calls in terms of data, targeting and ad placement. It is something that we are building demand or brand equity on.

    Key takeouts from the presentation

    • A network effect occurs when a product or service becomes more valuable to users as more people use it

    Network effect benefits

    • Create barriers to exit for existing users
    • Create barriers to entry for new companies
    • Protect from competitors eating away at margins
    • Creates a winner takes all style market

    Communications networks laws that provide indicators likely platform utility

    • Sarnoff’s law – the value of a network is proportional to the number of viewers
    • Metcalfe’s law – the value of a network is proportional to the square of number of connected users
    • Reed’s law – value of a group forming network is proportional to the number and ease with which groups form within it (subgroups grow faster than sheer number of P2P participants

    If it isn’t clear where they fall within these networks, it’s a warning flag for brands on whether to invest in the platform.

    User modes

    • Single ‘player’ mode – the product has immediate utility for a single user. Examples would be Flickr in the early days for photo storage, Foursquare in the early days to bookmark places you’d been to as a locative memory. Social bookmarking sites like Pinboard, or Delicious would have been in here had it not been retired
    • ‘Multiplayer’ mode – the product has no utility for a single user. This is particularly true for communications products. Examples would be Viber, Skype, Slack, Zoom etc.
    • Products can be both single player and multiplayer. So the community that built around Flickr for example.
    • Single player is more powerful when accompanied by an initial tactic to drive early network growth. Instagram photo filters was a way to post pictures on Twitter before there was enough critical mass. They help with adoption in the early days of a product when network effects aren’t sufficiently strong yet.
    • What’s the initial growth lever or tactic that will get it to scale?

    Case studies

    • Facebook found that connecting a new user to 10 friends within 14 days of sign-up was key to improving retention
    • Focus on daily usage (habit building) to help grow network. Focus on engagement rather than just overall number growth
    • Growth usage, even as user numbers grow is a sure sign of network effects at work
    • Facebook took a clustered approach: Harvard, then Stanford and eventually other universities in the US and abroad. Rather than focusing on growth. The immediate ‘single player’ utility they offered was an online school directory
    • WhatsApp had a different network type to Facebook. Each WhatsApp user had about 20 connections compared to approximately 980 friends on Facebook. Fewer connections also meant clustering around family, close friends of interest based WhatsApp groups with more engagement
    • AirBnB had two sides of their network. More hosts attract more guests and even become guests themselves. More guests means more business and money for hosts
    • Medium found that ‘single player mode’ can help get to ‘multiplayer mode’ through building sufficient critical mass.

  • Lotte + more news

    Lotte

    Lotte shareholders reject bid to remove Chairman Shin Dong-bin as family feud continues | The Japan Times – particularly interesting Chaebol feud given the unique Japan-Korea structure of Lotte. Lotte in Korea is huge in FMCG, entertainment, hospitality and retailing. Lotte has been driven out of China by the government. More Korea related posts here

    Business

    Changing of the Guard – Edelman – nice bit of shade by Richard Edelman on group margins and independent versus publicly listed holding groups

    Consumer behaviour

    Which Generation is Most Distracted by Their Phones? | Priceonomics

    Economics

    Silicon Valley Has Not Saved Us From a Productivity Slowdown – The New York Times – In mature economies, higher productivity typically is required for sustained increases in living standards, but the productivity numbers in the United States have been mediocre. Labor productivity has been growing at an average of only 1.3 percent annually since the start of 2005, compared with 2.8 percent annually in the preceding 10 years – Silicon Valley failed

    How to

    Tracking story changes with NewsBlur – as if NewsBlur’s learning technology and mobile clients aren’t enough, being able to track changes on stories is a powerful online journalism tool

    Ideas

    The People’s Net – Douglas Rushkoff’s original article on the dot com crash for Yahoo! Internet Life revisited for the current age of unicorns – Time to channel my inner Dave Winer – Joi Ito’s Web and Joichi Ito on the same theme

    The rise of American authoritarianism – Vox – scientific explanation behind Trump but also the pervasive fear of terrorism that has gripped the west

    Korea

    As 4th trial nears, Samsung asks judge: Make Apple stop talking about Korea | Ars Technica – it because perhaps they’ve mentioned the dishonest involvement in political slush funds as background to explain relative brand honesty and trustworthiness?

    Media

    Maxus launches mood-based planning tool | Marketing Interactive – interesting, particularly with political campaigns

    Welcome to the Era of Programmable Marketing – The AppNexus Impressionist – great primer on programmatic

    China’s new television rules ban homosexuality, drinking, and vengeance – Quartz – so that leaves dramas about patriotic war against the Japanese sans Nanking massacre and dramas about Mao sans cultural revolution

    Online

    Apple is Running BitTorrent Trackers in Cupertino – TorrentFreak – Using the file-sharing protocol, we launched a side-project called Murder and after a few days (and especially nights) of nervous full-site tinkering, it turned a 40 minute deploy process into one that lasted just 12 seconds – interesting article that touches on the enterprise use of BitTorrent. I suspect Apple’s use of trackers is IP enforcement related

    Retailing

    It’s Discounted, but Is It a Deal? How List Prices Lost Their Meaning | NYTimes.com – interesting article. I remember being shocked when I was first guided through Shenzhen’s markets where products originally destined for UK markets were sold to local consumers – with price reduction tags already attached.

    No surprise with Powa | Steven Prowse – almost as good as The Kernel’s legendary dissection of SpinVox

    So how much was Powa Technologies really worth? | FT Alphaville – clear gap between claimed value and real value even before administration (paywall)

    Adidas to operate 12,000 shops in China by 2020 in bid to tap growth in leisure wear, sports participation – interesting that they are going to 3,000 additional real-world stores rather than focus on e-tailing (paywall)

    Security

    Swarm of Tiny Pirate Transmitters Gets the Message out in Syria – could also reinvigorate pirate radio…

    The FBI Might Be Apple’s Best Ally In iPhone Encryption Flap | Fast Company – the government messed up and its backfired

    Software

    Microsoft canceled $8 billion Slack bid due to Bill Gates and Satya Nadella pushback – Business Insider – Qi Lu would have known Butterfield from Yahoo! ,both worked in the search business at the some time

    Why I’m breaking up with Slack | Quartz – interesting perspective

    Wireless

    In Search of the Amazingly Elusive Non-Smartphone Owner | Recode – not really surprising. I imagine the privacy aspects might encourage a small set to follow them