More coming

I am planning posts on implications of the emerging world order on business. Looking forward to new posts! Sphere: Related Content

Implications for Global Businesses of the Emerging World Order

It appears, on occasion, that we may be seeing the arrival of some new “epoch”, some unpremeditated discontinuity. Socio-political, climactic, natural—all sorts of signals of potentially discontinuous change setting in …

I am not thinking “end of the world”, but fundamental changes to “environment,” that force large adaptive responses across economics, politics, business, etc.

One example, from business world—as “fixed” costs of doing business go up, and products get commoditized, Industries tend to consolidate. I think we are seeing the cost of “Sovereignty” go up, of information go down. Driven by this, we should expect significant impacts on our business model.

Sovereignty is about handing over capital to another entity, which then allocates it, per agreed upon rules, to attain a contracted end, and enjoys complete authority for the period of that contract.

It is said that institutions (Firms, Governments, Military, or Church) exist to allocate knowledge; while transactions serve to allocate capital. An election (or a revolution, as in Egypt) is a transaction in which the rulers are granted the capital to rule. An exchange is where a firm is allocated capital to acquire resources. Investors and electorate hand over direct control of capital because it is more efficient to allocate knowledge (make decisions) within a firm, than in a transactional environment. At the heart of it is the “cost” of making decisions—information gathering, comparison of options, organization of effort, accountability, etc.

Sovereignty produces efficiency when decision costs are high in the absence of that organization.

I think what might be happening is that cataclysmic changes are rendering sovereign organizations inefficient, and stake holders are finding the need and means to directly participate in change. The “complete authority” clause is being supplanted by a “participatory authority” paradigm.

In a world of growing food shortages, direct communication of commodity prices to farmers in India is so valuable, that current systems that restrict such dissemination of information (under the guise of “planned economy”) are becoming too costly for that society. Expect a farmer’s revolt. The demands of Sovereignty to keep China and Taiwan separate are straining under the economic efficiency of value-chain integration. Lincoln’s “emancipation”, and Reagan’s “Freedom” might have been other words for the efficiencies promoted by abrogation of non-economic sovereignties.

I think the changes we are seeing—revolutions, with the demos (people) asserting their opinion directly on the cratos (power/rulers), versus through the controlled cadence of elections—are a signal of the impending cataclysm. But in our case, I feel, there is a Tsunami of change immanent—wrought by natural disasters, food shortages, water scarcity, unemployment, political crises, climate change, all accelerated to warp speed by mutual reinforcement and INFORMATION. (See how, strangely, Wisconsin and Egypt got conflated.)

As costs of sovereignty go up, as they seem to be trending, groupings of states would seem to be indicated to emerge. Unwilling, but economically beneficial groupings are often enforced by war—e.g., the American Civil war, or the WW II (Germany looking to consolidate Germanic people, and access the ports via Lorraine). Arab nations are sub-optimally formed. I’d say regional wars are not out of question, as the economic rational for combining labor and capital-- labor in oil-poor countries chasing capital in oil rich ones, and vise versa. The border with Mexico is better enforced by a recession, and more weakened by a booming economy, than can be explained by Sovereign effort. American Sovereignty is not strong enough to curtail immigration in the long run.

What will test American power more might be the unraveling of the middle-east, because that is where energy and feed stocks lie. Not this year, but over the next decade, America will intervene in the Middle East, Korean peninsula, Indian subcontinent, Africa, Eastern Europe, South China Sea—i.e., EVERYWHERE. UN will lose more credibility. New capital systems will need to be erected (who will buy Afghan bonds?). Information will be key.

Information is a key ingredient of this change. Business in the "Information" value chain, would benefit from this accelerating change, as would businesses and business models that mitigate uncertainty.

Current business model will have to adapt. For example, for business in "Information value chain", with information becoming critical, governments will step-in to their areas of business. These businesses will need to build a strong government-affairs arm to help develop PPP (public private partnerships)-- something they cuurently do, but in a more institutionalized and systematic way. There is a lot of money and power at stake. Also, multinational character might become a liability. Like Unilever, whose local subsidiaries are indistinguishable from local businesses, firms need to learn the art of strategic camouflage, and promote indigenization of resources. It will prove to be a competitive strength. Finally, global firms need to work to promote informational platforms that help sovereign interests—like electronic passports, e-Government, etc

Provided my little theory, that the defining cataclysm of our time is an assault on Sovereignty, is true.

Sphere: Related Content

Letterman and shock culture: Structure, Conduct, Performance

It is a far stretch to insinuate that Mr. Letterman, that avant garde man of letters, in any way engineered the current frakas.

That said, weird as it is, he likely to benefit in the ratings game.

In one of its accidentally successful frameworks, McKinsey came up with the SCP idea to aid Industry Analysis--
(S): Structure: A structure, decided by policy, costs and norms, exists in an Industry. The global steel Industry has huge economies of scale, is faced with buyers that can play on supplier against another, and ore is located far from demand, forcing advantage to mill owners who can buy vast volumes from mine owners and feed it to operations world wide-- it is a structure that favors scale and cross-globe holdings. The Entertainment Network industry has a structure where 70% of eyeballs are attacted by 10% of shows. Loyalty for a successful show can be high if a successful formula and personality are found, eyeballs dictate revenue, and these eyebalss allocate attention by shock value

(C): Conduct: Industry structure drives the conduct of players. The global steel Industry has a structure that favors scale and cross-globe holdings. The Entertainment Network industry has a structure that allocates attention by shock value of conduct. So, steel magnates have tended to consolidate capacity and huge, multinational M&A is common. In entertainment industry, networks seek programs that can shock. Late night shows, more insulated by the norms that look askance at exposure of the young'ns to debauchery, are more free to satisfy this demand for shock.

(P): Performance: How players in an Industry perform is driven by their conduct. Steel Industry has very volatile earnings (performance is cyclical)-- the London Metal Exchange can supply the spot price for steel, making price transparent, and mill owners price takers. Supply-Demand balance dictates price almost entirely. That and fuel cost, but that is baked into all commodities.

The Entertainment industry has become progressively more raunchy. Accidental dissolution too brings disrepute, notoriety, and eyeballs. Eyeballs rule.

So, while David didn't mean for it to be so, his misfortunate dalliance would probably accrue a fortune for his sponsor network. Sphere: Related Content

Not So Obscure: Paten Law, Supreme Court, and Aristotle's Four Causes

In one of my recent blogs I invoke Aristotle's Four Causes theory-- that an effect has four identifiable causes;

1. Material Cause: the material of which the effect is made (a statue of stone, so the material cause of a statue is stone)
2. Efficient Cause: the (physical?) agency that marshals the effort to shape the material (human arms that chiseled the statue)
3. Formal Cause: The design that artists mind, or the program that drives the agency in (2) above.
4. Final Cause: The purpose that motivates the final cause. For the statue, it may be the need to satisfy a customer.

The Supreme Court recently heard a case on the patentability of software. As you'd see from the list above, it is unclear where software lies between (2) and (3) above. I hold that patent laws have been seen in the US justice system to apply to the "efficient cause". In the case of software, is it the efficient cause or the formal cause of problem solving? I'd say that is the nub of the issue.

I hold that it is the efficient cause, and so should be patentable. Red Hat lawyers, on the other had, do not. They argue,

"the Supreme Court and lower courts had held that abstractions couldn't be patented and that a patent needed to cover an abstraction incorporated into a particular machine, or be a process that "transforms a particular article into a different state or thing," Tiller wrote."

The wording "an abstraction incorporated into a particular machine," suggests they believe the machine is the efficient cause, the code the formal cause. And therefore a machines is patentable, and software not patentable.

This just to illustrate that these philosophical concepts are more applicable than we credit them. And that fasting is productive of philosophical thought.

Sphere: Related Content

Cell Phones Go Fishing: A Case Study From Kerela, India

In a study on the impact of improved information on commerce, Harvards Robert Jensen makes some interesting, though entirely unsurprising, observations.

In brief, for an extended period before the penetration of phones, fisherman in Kerela had seen their incomes decline. Forced to compete in local markets, at the mercy of local traders, they had seen both prices and volumes decline over the years.

Then with the advent of cell phones, these same fishermen could discover the best prices rapidly, leading to better prices for the fishermen, AND, lower average prices for the customers.

A true Pereto optimality.

More later.

Sphere: Related Content

Arab Israeli Conflict: In Search of a Common Enemy?

Perhaps peace will come to the Mid East when the two adversaries find a common enemy. A recent blong-exchange opened my eye to some new facts.

In a blog exchange, "shimshonit" chides me for suggesting (inter alia,  in a comment on his blog) that the Arab Israeli conflict is essentially one fueled by hatred, that hatred itself facilitated by symbols of dissimilarity. My thesis being that even when the interests of two tribes are the same, their apparent differences, and the dynamics of power, can result in mindless internecine war (as among the houses of Lancaster and York, the Lilliputians, the Daevs and Asurs, the Marovingians and Carolingians, ad nauseum through history).

 

Now, I have the deepest regard for the tribes of Issac and Ishmael. The Israeli's are a more peaceable nation, and one with no lesser regard for human life than any other. The Arabs are a prouder folk than any that walked this Earth. Steeped in history and lore, the two are as similar in their sense of destiny, as they are dissimilar in their world views. United only by tragedy, the flip sides of which they share, the one regrettably the fodder for the other's victories, they appear locked in a tragic struggle.

 

However, this struggle, though very real, is not entirely unavoidable.

 

Referring back to my post on shimshonit's blog, I state that "The (most) Arabs hate Jews. Jews (many, if not most) hate Arabs." The statement is inaccurate according to him, because, "most Jews do NOT hate Arabs, and there is certainly nothing in Judaism that suggests that we should." 

So how do we explain the seemingly excessive bombardment of Gaza-- and it is excessive. He goes on to provide arguments that I will, in all of this blog, fail to counter, viz., " Islam is viewed by Judaism as one of the religions of The Book, and in their avoidance of any graphic representations of God, they resemble Judaism much more than Christianity. If Jews did hate Arabs (Muslim or Christian), they would not treat them in hospitals despite their enemy status, give them the right to vote and hold office, own property, or any of the other rights they are given in Israel."

 

This is sincere and impassioned polemic. Everything he states is true, and worth quoting. The case he makes, with an eloquence borne out of honest and informed conviction, is true at least for a majority of his compatriots.

 

And yet, he appears to discount the disconnect between the intentions and beliefs of a people, and the policies and practices of their state. If the state of Israel feared that the Obama administration would be less hawkish than the Bush regime, which is widely expected to be the possibility, and if an election was imminent in Israel, as it is, and if at the confluence of these portends Hamas started inviting Israel's displeasure, then, it is possible, and it did indeed so transpire, that the state of Israel would unleash an overabundance of force against their hapless, if primitive and ignorant, neighbors.

 

Now, in private discussions there is always a greater emphasis on intent, and in public discourse ever the greater care for appearances. My wise and insightful interlocutor is giving voice to his peoples unquestionable intentions. He is not willing to see that his leaders, individually of an equally sterling disposition, are collectively the practitioners of a less generous creed.

 

What is this creed? This is the creed of "an eye for an eye." This is the belief that, faced with a fratricidal struggle, the indiscriminate decimation of the enemy's ranks furthers ones security better, than does a reasoned attrition of the hateful few among them.

 

It is my view that the Israeli-Arab conflict is fueled by parochial hatred and promoted by political opportunism. Israel individuals by conviction, and the state by constitution is inclined to compassion. However, the dynamics of power-struggle among Palestinian factions, and electoral rivalry among Israeli parties sets off a lethal dynamic of belligerence toward the other. In the thrall of this competition, the Israeli leaders all become hawkish, and the thugs within Hamas the more vicious. The more Hamas can constrain Israel to ruthless adventurism, the tighter their (illegitimate) hold on power. The more the Israeli leaders can appear uncowed, even ruthless, the better their chances of (undeserved) electoral gains. The same gullibility of the public that makes it defend its leader's mistakes in such times, also persuades it to hate the projected enemy.

 

It is this game of hatred that I was alluding to in my comment on his (very interesting) blog.

 

Now, in no way do I absolve the Arabs, whom you will notice I call "primitive" and "ignorant", of their culpability in the fate that befell them. The Muslims represent, at once, the flower of human progress, and the blight on human weal. They developed and spread science and civilization in a time when Europe was in dark ages, and the East was isolated. But today, lead by greedy and ignorant leaders, the Muslim Umma has come to profess some of the most retrograde views to infect any people.

 

What the Muslims are NOT is deserving of the current pogrom. My friend makes the error of proposing that, because I watered a man on a Monday, thereby I may torment him on the Tuesday. A peoples virtue does not apologize for their sin, or the transcendental  law of Karma would decay into the secular rules of consumer credit.

Sphere: Related Content

Why, Gaza? Why Now?

A week king leaves throne, a new prince prepares to ascend. This has always been the time for opportunistic adventurism in the far reaches of the empire. Is that what happened here? Did Israel take these last days of Bush administration, and the cover provided by Hamas's foolish rocket-launching, to make a strategic military move? Sure seems like it.

Here is the self destructive mistake that some Muslim partisans make-- they provoke destruction of their own to engender blind hatred, and from that reap new converts to their brand of militant activists. Or, as the world calls them, terrorists.

If Hamas wasn't foolish enough to launch rockets right now, or ever, and if Israel didn't always have to return Armageddon for fire, the venomous cycle of hatred and war would simmer down.

But Hamas is, and Israel chooses to. In the process, hatred is turning Muslims into self destructive zombies. Is it possible that someone whose father and brothers, children and sisters were killed by mindless enemy bombs will not want to kill that enemy, or die trying?

As Gandhi said, and eye for an eye, and the whole world goes blind.

What is miserable is that each wants "the West," or "the US," or someone to help extricate them from this dynamic. And, when the time comes, the West, or US, or the rest of the world, sets the same example-- of demanding and eye-for-an-eye. Each tragedy, each terrorist act succeeds in lowering the sum total of human sanity.

Israel will never kill its way out of this hatred. I realize that it cannot appear week in that part of the world. But a show of force as brutal as what we are witnessing is hardly proportionate. At what point does the legacy of the Holocaust start getting squandered?

The Arabs will gain little if Israel is made to hurt, or go away, and they loose little if Israel stays. The best revenge an Arab can have on a Jew is NOT hate him, but to outlive and out create him. If the Arabs didn't have this baggage of hatred and victimization, if they could work at building institutions, and developing technologies, they would build a civilization that could outshine the tiny Jewish state in their midst.

Working together, with Israel, they could use their vast resources to dazzle the world.

Instead, we have the horror of Gaza.

Sphere: Related Content