Ged Carroll

Category: jargon watch | 術語定義 | 용어의 정의 | 用語の定義

Jargon watch as an idea was something that came from my time reading Wired magazine. I found that in my work terms would quickly spring up and just as quickly disappear. So it made sense to capture them in the moment.

The best way of illustrating jargon watch is by example. I came across the term black technology through mainland Chinese friends. One of the key things that Chinese consumers think about technology products is the idea of ‘black technology’. This makes no sense to your average western reader. It equates to cool and innovative.

The term itself comes from a superior technology featured in a Japanese manga series plot. As an aside the relationship between Chinese and popular Japanese culture is becoming increasingly attenuated due to Chinese nationalism.

What might be black technology this year might be humdrum in six months as the companies quickly catch up. Black technology is a constant moving target, but generally its sophisticated and likely has a cyberpunk feeling to it.

I keep an eye out for jargon like this all the time, hence jargon watch. I find this content in my professional reading and in the sources that I follow online. What makes something worthwhile to appear here is purely subjective based about how I feel about it and how much I think it resonates with my ideas or grabs my attention. A lot of British youth culture doesn’t make it because it doesn’t have that much of an impact any more beyond the UK.

  • Guo chao

    2008 and guo chao

    2008 was the best and worst of times for Chinese brands. The Beijing olympics was supposed to spur national pride. Included in this national pride was pride for Chinese brands – guo chao. Chinese athletics brand Li Ning took centre stage in the opening ceremony, screwing over Olympic official partner Adidas. For other olympics ambush marketing is severely restricted, but this was a national champion in China. Chinese pride usually means someone else’s humiliation, in this case Adidas.

    Right after the Olympics in September that year, a major food adulteration scandal became public. Over 300,000 babies were harmed when melamine was added by baby formula. The reason why this was done was to boost its ‘protein content’ in tests. The main brand in focus was Sanlu – a local milk powder brand. Subsequent tests found that adulterated powder had been sold around the world, by multiple Chinese brands.

    Chinese consumers hoovered up milk powder all over the world. Several countries and Hong Kong had to limit milk powder purchases, due to Chinese tourists and intermediaries cashing in on the demand for safe milk powder. During 2013, I was working behind the scenes at an agency for FrieslandCampina to try and combat the shortages in Hong Kong. The ban has been put in place indefinitely.

    Move forward a decade and guo chao is mainstream

    Everything is political, this is even more so in China. With the rise of Xi Jingping he sought to stop Chinese ‘irrational worship of the West‘. There are well loved domestic legacy brands in China, a prime example would be White Rabbit candy.

    white rabbit
    Guo chao brand ‘White Rabbit’ candy

    Along with this inflated Han nationalism has gone a pride in domestic brands. Huawei handsets are as expensive, if not more so than Samsung and Apple – which equated to a perception of similar quality. The fact that Chinese live most of their online lives inside WeChat dulls the difference in software. The operating system is no longer important. This is similar to the vision that Jim Clark had for the Netscape browser. If apps were on the web and ran through the browser, that would negate the stranglehold Microsoft Windows had on corporate and personal computing.

    Young adults in China now favour products with Chinese cultural designs and products made in China – guo chao. In one survey 75% of Chinese consumers surveyed state they like products that incorporate Guochao design elements. Design and colour choice is particularly important: doesn’t just mean “made in China” but embracing traditional Chinese elements and inciting national pride. Foreign brands have struggled to maintain market share. Guochao brands have built a good consumer reputation and market share by relying on the advantages of lower price, practical and competitive levels of quality. They have also suffered from the perception of being a copy or imitation of more expensive brands. Domestic brands have managed to use e-tailing to get over established foreign brand advantages in market penetration. More consumer behaviour related content here.

  • Bullwhip effect aka Forrester effect

    Bullwhip effect

    I came across the bullwhip effect as a descriptor recently in discussions around the global chip shortage. Bullwhip effect is a concept that is well known in supply chain circles.

    The bullwhip effect is also known as the Forrester effect. Disruption ripples back from the retailer, through the wholesaler, manufacturer, on to their suppliers and so on.

    The usual causes for the effect are:

    • Demand forecast updating – this might be where a company might want to change their product mix to match consumer demand, if a product is very successful or grossly underperforms
    • Order batching – where members of the supply chain round up, or round down the quantity of orders. This happens with the periodic memory gluts or shortages affecting the technology sector
    • Price fluctuations – price discounts can encourage non-linear increases in purchases as it becomes worthwhile for customers to stock up, hedging against increased prices down the line. Oil reserves would be a classic example of this phenomenon
    • Rationing and gaming – buyers and sellers delivering over or under their order quantities. An example of this would be the actions of Enron in US electricity markets. This could be used in a positive way to promote changing the supply chain like renewable sources of electricity generation
    My, what a big holster you have.

    What caused the global chip shortage that is driving the bullwhip effect?

    There were three causes to the global chip shortage

    1. Partial shutdown – The semiconductor industry went through a partial shutdown because of the COVID-19 epidemic. This meant that there was a smaller supply of chips.
    2. Unusual increase in demand – Home working drove an increase in demand: increased sales in PCs, wi-fi routers, external hard drives, mice, keyboards, printers and so on. There was also a corresponding increase in home entertainment as consumers upgraded smart TVs, Apple and Roku set top boxes. This all coincided with the launch of the next generation of gaming consoles by Sony and Microsoft – which can usually drive a squeeze on their own
    3. Supply chain disruption – A fire in Japan at Renesas Electronics. A trade war affecting Chinese semiconductor manufacturers. Freezing winter weather in Texas disrupting employees and their businesses. Now there is a drought in Taiwan affecting TSMC – the world’s largest semiconductor foundries

    More related posts here.

    More information

    Chip shortage is starting to have major real-world consequences 

    Global chip shortage: everything you need to know | CAR Magazine

    The global semiconductor shortage can be explained by the bullwhip effect 

    Chip industry pressures spur Renesas to diversify | Financial Times

    Taiwan’s chip industry under threat as drought turns critical | Financial Times

    Texas winter storm blackouts hit chip production | Financial Times

  • Conglomerate discount

    Conglomerate discount wasn’t a concept that I was that familiar with. Conglomerates had gone out of style in the west during the 1960s to the 1990s.

    Western conglomerates

    Classic conglomerate examples would be

    • GEC
    • ITT
    • Litton Industries
    • Lonhro
    • Teledyne
    • Textron

    Spivs and financiers bought in and broke them up into their constituent parts. Or a new CEO would do it themselves to focus on core competencies and release value for shareholders.

    Conglomerate discount

    A conglomerate discount is when the stock market values a diversified group of businesses and assets at less than the sum of its parts. This is because investors are worried about the management not being able to focus on improving the operational performance and figuring out a coherent strategic direction.

    Michael Milken moderating the panel on Investing African Prosperity - Los Angeles, 1 May 2013
    Michael Milken who was famous for financing leveraged buyout deals

    Taking advantage of a conglomerate discount

    So our spiv financier could borrow money, buy the company at a discount. Sell off parts to pay off the loan and be left with more money than they initially had to borrow. Many of the constituent companies couldn’t be sold quickly as a going concern. Instead they were shut, machines sold for scrap and their factory land sold for redevelopment.

    Asian conglomerates

    Asian business people, especially those running Hong Kong and Chinese companies don’t view conglomerates in quite the same way.

    Li Ka Shing 李嘉诚
    Li Ka shing

    The Li family manage two publicly listed companies in Hong Kong. They came out of the merger of Cheung Kong Holdings and Hutchison Whampoa.

    Cheung Kong

    Cheung Kong Industries was formed in the 1950s as a plastic flower manufacturer during the post-war industrialisation of Hong Kong. It evolved into a property investment company after the 1967 riots and Cheung Kong Holdings was established in 1971. Over the next decades it became one of Hong Kong’s largest developers and land owners.

    In 2015, the group went under a reorganisation, the groups property assets were spun off into what is now CK Asset Holdings.

    Hutchison Whampoa

    Hutchison Whampoa was bought in 1979. HSBC had a strategic holding in the company and sold that on to Cheung Kong. They also provided Cheung Kong with the loan to make the purchase. In 2015, Cheung Kong bought the parts of Hutchison Whampoa that it didn’t already own. It eventually became CK Hutchison Holdings, incorporating all the non-property aspects of the Cheung Kong – Hutchison Whampoa combine.

    In addition, the Li family have some of the shares in businesses that they own held in the Li Ka shing Foundation (LKSF).

    CK Hutchison and CK Asset Holdings

    CK Hutchison Holdings and CK Asset Holdings both trade at a conglomerate discount. However, the Li family has a controlling share in them. This probably explains why they haven’t come under attack by an activist shareholder from within China or abroad.

    In his article for Apple Daily Yeung Wai-hong explains how the Li family uses the concept of conglomerate discount to their advantage.

    The CK Hutchison Holdings and CK Asset Holdings creation allowed shareholders to see clearly delineated businesses. One focused on property, the other one on non-property assets in 2015.

    CK Asset Holdings started to blur the lines buying into businesses that more sensibly fit into CK Hutchison Holdings – aircraft leasing, pubs and utilities. Creating conditions for a conglomerate discount that is disadvantageous to non-family shareholders. The bigger business has a larger turnover. Even if the profit margin is lower, management still have an excuse to raise their salary and benefits.

    CK Asset Holdings has a large amount of cash on hand indicating a lack of investment opportunities. Recently CK Asset Holdings bought shares in utilities from LKSF in exchange for shares in CK Asset Holdings.

    I’ll let Yeung Wai-hong explain the next bit

    …CK Asset promised to buy back shares equivalent to the amount of HK$17 billion and cancel them. Whether the equity will be diluted is up to the minority shareholders. If they do not accept buyback, their equity will be diluted; if they do, then it won’t. The buyback price is about 10% more than the average share price of CK Asset, so the minority shareholders do have a chance to cash in at a “high price.” However, the buyback price of HK$51 per share is only 53% of the net asset value after deducting the debt. So accepting the buyback is like allowing Li’s family to grab a bargain at half price.

    Conglomerate discount by Yeung Wai-hong, Apple Daily Hong Kong (March 29, 2021)

    If that happened outside Hong Kong there would be shareholder class action suits. The theory goes that these trades slowly put the squeeze on minority shareholders at a discount. Transferring value to the Li family. Eventually allowing for a gradual privatisation of the business at the expense of retail shareholders.

    Once this has been done the value of the assets at their full price can be realised. More finance related content here.

    More information

    ‘Conglomerate discount’ | Yeung Wai-hong ｜ Apple Daily 

    Britannica, T. Editors of Encyclopaedia. “Conglomerate.” Encyclopedia Britannica, September 26, 2007.

  • The split economy

    Split economy

    The split economy is used a term differentiate from the sharing economy. I first heard of it on the Robin Hood Snacks Daily podcast. The sharing economy has been discussed ad infinitum and is very popular. It encompasses high growth businesses like AirBnB, Uber and DoorDash.

    The split economy is used to differentiate itself from the sharing economy. They have some elements in common. Like the sharing economy, the split economy focuses on maximising the utilisation of assets. The difference is that the consumer isn’t paying for a just a service, but also fractional ownership of an underlying asset.

    An example would be fractional ownership of sports cars via ‘clubs’ :

    • Curvy Road
    • AutoXotica
    • Exotic Car Share

    Fractional ownership of art:

    • Feral Horses
    • Masterworks
    • ArtSquare.io

    None of these are necessarily ‘new’ business ideas, but they are now starting to get heat behind them.

    Pacaso

    Snacks Daily discusses a company called Pacaso. Pacaso buys high end properties and then divides it up into fractional ownership. They then charge a management fee to configure the home with personal pictures, a full fridge, fresh laundry and extensively cleaned. Its a sophisticated boutique experience, that is cheaper than full ownership, but with all the practical benefits.

    Pacaso

    Back in the day, Pacaso would have been described as a timeshare business. However the reputation of timeshares has been tainted by high pressure selling and criminality. Split ownership allows Pacaso to put distance between the timeshare sector and itself. It allows the business to ride the coat tails of valuations enjoyed by sharing economy companies.

    More similar posts here.

  • Digital sustainability

    Digital sustainability

    Wunderman Thompson Intelligence highlighted digital sustainability as a trend. The internet is the seventh biggest polluter in the world. Data centres energy consumption is comparable to that of the largest ships.

    Web designers have been looking to do their part by designing leaner, faster web pages that take up less memory.

    Samsung is looking at up cycling its smartphones providing longevity rather than built-in obsolescence.

    https://youtu.be/m9AL266C0lc

    Ecosia, Bing and DuckDuckGo sell themselves as a more eco-friendly search engine. Due to the level of ad targeting technology, a Google search uses four times as much energy per search.

    Cryptocurrency mining consumes more energy than Argentina and is increasing. That doesn’t take into account the maintenance of a blockchain: the distributed database to support each cryptocurrency transaction.

    Performance per watt

    Digital sustainability isn’t necessarily a new idea. A veteran Apple user would remember the launch of Intel processors on the Mac at the 2005 Apple Worldwide Developers Conference (WWDC). Jobs talks about the company’s focus on performance per watt as a key reason for the transition. Intel was thinking about processors for workstations and mobile computers, while the Power PC was being refocused on its minicomputer heartland and embedded applications.

    The problem is that a lot of Apples current product designs from AirPods to MacBook Pros make up cycling all but impossible. Apple does have some interesting technology to recycle their own phones, but we don’t know how that will scale to create real digital sustainability. More related posts here.

    More information

    Bitcoin consumes ‘more electricity than Argentina’ | BBC News

    Energy consumption of cryptocurrency mining: A study of electricity consumption in mining cryptocurrencies by Jingming Li, Nianping Li*, Jinqing Peng, Haijiao Cui, Zhibin Wu – College of Civil Engineering, Hunan University, Changsha 410081, China (PDF)

    Digital sustainability – Wunderman Thompson Intelligence