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.
The Foreign and Commonwealth Office of the British Government has always had the best online presence of all the different government departments, but I still find it interesting that it is they rather than the department of media and culture who are looking to lead a discussion on the future of the web and associated technologies. The FCO are hosting a conference on cyberspace in London on November 1-2, 2011 and are extending it online through social media platforms. I can’t help but feel the dialogue is aimed as much within the UK as internationally.
Of course, the ironic thing is that the UK isn’t at all progressive in terms of all things internet related compared to the likes of South Korea, Singapore, Hong Kong, Australia, Iceland or Finland to name but a few countries. The Digital Economy Bill and actions done by the likes of Ed Vaizey have shown resistance rather than working out how it can benefit from the change. The music industry tried to fight the change and has torn itself apart so it will be interesting to see how that stance will work out. I look forward to following the conference on cyberspace; in cyberspace.
Find out more here. More online related topics here.
On leaving office, Gordon Brown immediately spent a lot of time hammering out a book Beyond The Crash. Unlike Peter Mandelson this wasn’t the Westminster equivalent of a sordid kiss-and-tell exposé or a Tony Blair-esque sales brochure to secure speaking engagements. Instead Brown set out to do what he does best, putting on page deep thought and analysis about the knotty problem of global finances. He did an excellent job of marshaling ideas and sources in the book. His grasp on Asian economics and China in particular is very good. There is a whole section on the Asian crisis of 1998 which is well worth reading on its own.
In this respect, the Beyond The Crash is a solid piece of work, Brown isn’t as compelling a writer as other economic thinkers that the Labour party has looked to like Will Hutton; but he does a good job at making his ideas and concepts understandable to the average reader.
Where things go wrong with the book is where Brown tries to humanise his writing. His comments of praise for colleagues and other politicians feels wooden, as if it was written into his book as a postscript. And it is because of this that we see a glimpse of Brown the politician; the polar opposite of his predecessor Tony Blair. Someone who thought at great depth and knew what to do but didn’t have the surface finish.
If you are prepared to persevere with the book, it is a good read, and is currently for sale in Amazon Marketplace at a massive discount to the cover price. More book reviews here.
Funds of Funds May Actually Increase Risk, Study Finds – NYTimes.com – this feels counter-intuitive at first, until you realise that funds of funds are a synthetic financial instrument from the prospective of the end investor. Synthetic financial instruments led to problems like the 2008 financial crisis and the Savings and Loans crisis of the 1990s. The reason for the problem of funds of funds for the end investor is that there lots of known unknowns under the hood. It is conceivable that several funds make a similar wrong headed bet and get stung by it. Without directing the funds, how do you maintain continued diversity of investment and strategies to ensure the bet hedging. Lastly funds are less liquid assets in the grand scheme of things with limitations on when and how much you can withdraw. I wonder if a similar study has been done around thematic ETFs as well?
With the Bing Search Engine, Microsoft Plays the Underdog – NYTimes.com – I am not seeing a cohesive vision to change search from Microsoft; this looks like the ‘we are innovative’ foot-stamping PR wrapped in a storytelling methodology that comes out of Microsoft corporate PR. I think that the social search stuff at Google and Facebook is of more interest. Bing needs to come out of the box with something 10 times better to get people to move in significant numbers. Qi Lu didn’t manage it at Yahoo!, what makes them think he can manage it at Microsoft?
New IBM Fellows push computing frontiers – IBM fellows are the company’s most prolific innovators. This batch of IBM fellows is interesting because it is a good indication of technology areas which will be hot: question-and-answer systems, a holistic approach to hardware and software design (like Apple), mathematical modelling for environmental risk management, stream computing, network optimised computer operating systems, cloud services, virtualised data centres and semiconductor design verification tools / processes (presumably to deal with increasing complexity and parallel processing at the silicon level)
Nintendo’s Satoru Iwata Promotes Game Consoles Over Smartphones – NYTimes.com – The president of Nintendo told video game developers Wednesday that smartphones were driving a trend toward lower quality, and economically unsustainable, video games. – So much to unpack in this Nintendo speech. Mobile gaming is about more accessible gaming, filling in shorter slots of time like a commute or a cigarette break at work. This is very different to the kind of games that Nintendo makes now. Secondly, smartphones might be an outlet for very old Nintendo games.
What this speech conceals is how Nintendo can change our idea of what a games console actually is. This is where Nintendo can innovation since it can’t ‘out perform’ gaming PC rigs or Sony and Microsoft games consoles. Lastly, Nintendo can create family moments. Something that isn’t possible with mobile gaming or Xbox and PlayStation libraries.
Consumer behaviour
Competition for Brides Fuels High China Savings – China Real Time Report – WSJ – If you reduce your savings, you doom your son. – One has to remember that in China families have an ‘ancestral home town’ and will contribute to the upkeep of clan halls. The demise of a family has an even bigger significance with the weight of those ancestors on them. Not even the cultural revolution could completely wipe that out
Monocolumn – Here come the gals [Monocle] – Monocle on Tokyo Girls Collection. What they miss out is also that TGC is an entertainment spectacle and compensates for the very different retail distribution model in Japan. This year was interesting because of the involvement of YouTube to stream the event
Wanted: Chinese Consumers for Luxury Survey – Scene Asia – WSJ – “The stereotype of [Chinese] people wearing the big Dolce & Gabbana or Versace logo — that isn’t true anymore,” said Mr. Atsmon. “It’s not that the consumers are changing. It’s that the new consumers are less concerned about being flashy.” – really interesting stuff about how they enticed survey respondents
JNKsystem.com : HUF San Francisco Closes – I remember six years ago paying a pilgrimage to HUF and the Timbuk2 shop on Hayes as I spent an unplanned weekend (due to work) in San Francisco. Interesting that he is moving away from retail and distribution whereas the likes of Stüssy, Norse Projects and BAPE are vertically integrated
. Unlike Peter Mandelson this wasn’t the Westminster equivalent of a sordid kiss-and-tell exposé or a Tony Blair-esque sales brochure to secure speaking engagements. Instead Brown set out to do what he does best, putting on page deep thought and analysis about the knotty problem of global finances. He did an excellent job of marshaling ideas and sources in the book. His grasp on Asian economics and China in particular is very good. There is a whole section on the Asian crisis of 1998 which is well worth reading on its own.