卦Trigram 2.0
Asian Snowcrash

All things change, and the globalized economy is no exception. The globalization of the early noughties was based on cheap oil - but oil isn’t cheap any more. At the same time, globalization took the internet… almost everywhere.  Two stories that I found via Slashdot show future directions…

1. Rising fuel costs make outsourced manufacturing less desireable. The cost of shipping manufactured goods from low-cost countries such as China is now such that it’s beginning to outweigh the price benefits of low wages. As a result, manufacturers in Western countries are becoming competitive again.
2. If the rising cost of oil is reversing the outsourcing of things, there is no such barrier to the outsourcing of knowledge work. Students in the UK have been found outsourcing their assignments to graduates in lower-cost countries. Universities are stumped for a solution. “The problem is definitely getting worse, it is hard to detect, the number of these sites is spreading all the time and it is impossible for us to monitor all of them.”, says one administrator.

Will these two trends develop and become persistent? The consequence will surely be a globalisation very different from what we first anticipated - manufacturing becoming strong and locally-based again, while intellectual work becomes the most competitive (and dishonest?) sector…

Living in China is fascinating in very many ways; one of them is watching the transformation of values as prosperity spreads through Chinese society. The Chinese are, of course, just like everybody else: they want security, consumer goods, education… and that shouldn’t be any surprise; it’s odd sometimes to hear Western commentators (especially in the US) attributing more sinister reasons to China’s increasing demand for the resources needed for a better life.

The worrying thing is whether it can last - not just here, but everywhere. Looking at my RSS feeds, I see many worrying trends:

• the price of oil is rocketing - $200/barrel soon? - and that’s affecting our entire society. In the US, the consequences will be felt most of all; Paul Krugman talks about this in today’s IHT, for example.
• One consequence is the rising price of food, for example, partly because so much agriculture is based on oil-derived fertilisers, partly because of the substitution of crops for ethanol production instead of food crops. (This situation may soon get much, much worse as the Ug-99 fungus looks set to devastate wheat production throughout Asia and the Middle East).
• The rise in food prices has already sparked food riots in Africa, Asia, and the Caribbean. What happens when people realise that their government is not capable of ensuring affordable food? Of course, they lose faith in the government and, eventually, seek more effective affiliations - perhaps criminal, or insurgent… and these groups are getting more and more powerful, with sometimes international or global influence. This is the kind of trend that John Robb is documenting in Global Guerillas, and it can make worrying reading. Just as a thought, who do you think will be strengthened by food riots in Afghanistan?

So the future looks tough. I don’t think it will necessarily be the Grim Meathook Future that did the rounds a year or two back; there will be technical fixes, and new discoveries, and political initiatives. At least, I really hope there will. Still, it’s worth reading and comparing two IHT articles on transition from abundance to scarcity and self-reliance. Which one would you choose for yourself?

1. Voluntary simplicity re-emerges. A renewed trend in the US of affluent, educated professionals shedding their possessions, and opting for a simpler lifestyle as on-line homesteaders, or techno-nomads.
2. Living off the land in a post-Soviet world. When their economic and political world collapsed, well-off skilled workers in Kyrgzstan were forced to become subsistence farmers. They were the lucky ones, perhaps, with land and clean water.

Like I say - which transition would you prefer? What’s the best way to prepare?

Are we heading for a global recession? All of the signs are that the US economy is now in recession. The next thing we find out is how much knock-on damage this will cause in developing markets. Are the Asian markets sufficiently decoupled from the US economy for India-China trade to keep everyone here afloat? We’ll find out in the next few months.

This recession, which was sparked off by the US housing bubble and compounded by bankers’ recklessness, has been a long time coming. Steven Roach at Morgan Stanley was warning about it even before I took my MBA, so it’s not as if we haven’t seen it coming.

What has come up swiftly and without much warning, and may yet bite us hard, is the shortage of food staples - rice, especially. With a number of media sources warning of food riots and social instability as a consequence, this is likely to be tough all around.

The people who are going to suffer the most are the ones Niti is investigating at the bottom of the pyramid - and this is going to be very different from anything we’ve seen before.

I remember, as a child, seeing the pictures of the famine in Cambodia, and the appeals for public donations. I helped to organize a Blue Peter Bring & Buy sale at my primary school to contribute. Soon afterwards, the focus shifted to Ethiopia. Here I oversimplify horribly, of course, but in essence the famine victims here had to be essentially passive, waiting for external food aid to arrive.

In a lesser case of food shortage, citizens in the old Soviet Union had to opportunistically join queues as soon as they saw one forming, hoping it meant that a delivery of food or other scarce goods had just arrived - even when (famously) they often didn’t know what they were waiting for until they reached the head of the queue. This would just be luck of the draw.

What difference will it make when the poor, who are most desperately affected by food shortages, all have mobile phones? Will governments and aid agencies use it to inform people of deliveries, and in this way alleviate anxiety? Will be see spontaneous, SMS-directed “hunger mobs” flash-forming on the rumour of food availability (either delivery, storage or hoarding)? And what will it mean for us when instead of seeing appeals for donations on TV, the hungry millions are calling us for help personally?

Mao Zedong’s famous dictum says that “the guerrilla lives amongst the people like a fish lives in water”. Without the people, the guerrilla cannot live.

To survive, a large-scale guerrilla movement, or insurgency, must have a message, a purpose, that resonates to at least some degree with the feelings and beliefs of the population in which it exists. There must be enough people who are broadly sympathetic, in order to supply recruits, shelter, and material support.

What does it take to turn the people against the guerrilla?

The people of Afghanistan know what the Taliban are like. The Taliban used to rule the country, and their treatment of women, their bans on popular culture, their public executions, and so on, were not enough to make the people turn against them and stand up to them.

After the American-led invasion, the Taliban were forced to retreat to their heartlands, and the areas of Pakistan where they had deep support. And yet, people there are suddenly prepared to stand up to the Taliban, with force if need be.

What happened?

The Taliban destroyed mobile phone masts.

Claiming that the Pakistani military, and Western armed forces, were tracking militants by locating their phones, the Taliban opted to take down the network - and provoked an immediate and forceful backlash from the ordinary people, for whom the mobile phone has been a life-changing technology. Even the Taliban’s own fighters are angry.

According to Afghanistan’s Minister of Telecommunications:

“The people said please … repair the infrastructure and we will guarantee the security of the tower,” Sangin said. “We believe that if the Taliban continue with these kinds of activities the hatred will increase against them, and as a result we are awaiting a change in their policy.”

Of course, mobile phones are no panacea. We’ve seen plenty of examples of their use to enable terror and death. However, this example clearly shows how the mobile phone is successfully improving the lives of impoverished communities in developing countries, and bringing them the benefits of integration with the wider world.

Over the past four years or so, I’ve written a number of posts on China’s role as a destination and a source of cultural influence. China hasn’t just been drawing the MNCs, the investors, the outsourcers, and the rest of the big battalions of globalization. It’s also been drawing the artists, the freelancers, the global nomads, and the dreamers - all those who recognise that change is brewing and want to be a part of it, no matter how small, or who seek the opportunity to reinvent themselves, or to find a niche for themselves that they couldn’t find wherever they came from. It’s this that separates China from Singapore, for example, where they prefer established artists who are already successful, and where up-and-comers are co-opted early on because there’s no way to get a platform without government or corporate sponsorship.

Amongst the foreigners here in Beijing - I hesitate to say ‘expatriates’, which is too loaded a term - there’s a common meme that Beijing now is like Paris between the wars, a society in flux, open to new ideas, prosperous whilst still cheap to live in; I have to agree, and it means that this city - and Shanghai, and Kunming, and Xi’an, and many others - are drawing in young, creative, adventurous people, who are engaging in a fertile exchange with the local scenes. Many of these people (I suspect) will be culturally influentual in the future, and are being shaped and influenced by China.

So, having felt all that for a while, it’s really interesting to see something on the same lines appear in the IHT today: For a new generation, land of opportunity may lie in China, not the US.

I almost used the title “Feels like June… 29th 1914″.

Kaiser Kuo over at Ogilvy Digital China Watch wonders if he is witnessing “the beginning of the Great Unravelling“, and I know exactly what he means.

Carlyle Capital collapsing… Bear Sterns going under… and no-one knows how much further or how much worse it will get but enough people are now saying that this could be as bad as the Great Depression to seriously worry me. The dollar at record low, gold and oil at record highs… Even back in 2004, when I was considering whether or not to take my MBA, Stephen Roach at Morgan Stanley was warning about the US housing market, and now it’s happened - and seems to be taking everything else with it.

And now Tibet… There’s a lot I want to say here but I haven’t time; but the very last thing we need now is a humiliated China, whose people were ,genuinely, eagerly anticipating the Olympics only to find them boycotted, for reasons that the ordinary man on the street doesn’t understand. We do truly need the Chinese people to feel that they have joined world society, and for the Games to be a success. But that’s not even addressing the elections in Taiwan and, later, the US - which, in an atmosphere of economic collapse, are going to be even more polarized than ever. Let’s just hope that ‘hope’ wins out over fear.

And new clashes in the Balkans

Wow. What a mess. How did we get here?

People waking up on June 29 1914, the day after the assassination of the Archduke Franz Ferdinand, may have sensed that their world had changed. Some, perhaps, were aware that in an interlinked world, the collapse of a small part might bring the rest smashing down. Looking at the headlines today, I sense tremors.

Take a deep breath. Hope that it will be OK.

… of the cultural tide reversing?

Apparently, Damon Albarn, of Blur and Gorillaz fame, has written his first opera…

Apparently, it will be performed here in Beijing later this year, in June. I’ll be here… I’ll look forward to seeing it!

I’ve already spoken about why I moved from the old blog address, and mentioned that I split the topics of that one blog between several new, more focussed blogs - of which this is one.

One consequence of moving was that my traffic dropped significantly (only temporarily,I hope!) That made a recent spike in visitor numbers all the more noticeable. The new traffic was all to one post - the one about the Meizu MiniOne being featured in the Straits Times; my post got mentioned in the MeizuMe forum site, which drew a flood of traffic, several hundred visitors over a day or so.

I’m still watching the traffic for a while before i do any detailed analysis, but it’s immediately clear that the interest is concentrated in Europe and the US. There’s some, but not much, traffic from developing countries; almost no-one came from Africa.

Initial summary of my conclusions:

• this traffic came from a fan-site, not mainstream media;
• traffic to my post spiked immediately after the link went up; MeizuMe members are monitoring the site closely for updates;
• the site members are eagerly anticipating the release of the M8, and there is a great deal of speculation over what the phone’s final specifications will be;
• the traffic came largely from developed, mature markets. There are plenty of handphone models available there, and yet these indivduals are interested in a specific model from a Chinese manufacturer.

I find this very interesting indeed: what we are seeing seems to be a ‘cult’ forming, beneath the radar of most analysts. Of course, it’s nowhere near the size, and has nothing like the strength, of the iPhone movement. Furthermore, it draws much of its initial momentum from the iPhone, which has clearly inspired the design. However, to dismiss it as a cheap knock-off clone,as the Straits Times did, is pretty lazy; the M8 is a feature-rich phone that improves on the iPhone in various ways. What exactly is generating the excitement is something to be looked at further. Speaking personally, as someone who is also looking forward to the M8’s release, I find that while the iPhone is very cool, it just doesn’t suit my day-to-day needs; it also costs more than I want to pay, given that I don’t spend much on fashion items, and need features more than I need ‘cool’. This, for example, is why I bought an Asus EeePC rather than a MacBook Air!

Also…. and I speak here as a long-standing Mac fan, I’m turned off by the way Apple seem to be developing the iPhone as a closed system. I know that they’ve turned around, and announced that third-party apps will be allowed soon, but first impressions count, and Apple’s gone corporate; the ‘rebel’ factor has moved to China…

Another notable point about the M8 is that it is Meizu’s first phone; the company is better known as a manufacturer of MP3 players, and is now diversifying into a new product line, bringing a strong consumer base with it.

I think this is an important indicator of future trends. The scattershot design method of Chinese phone manufacturers, which I wrote about on a previous occasion, is generating a lot of niche models. These are already beginning to find a market outside China, and as they become better-known for variety and pricing, their market will grow. Since manufacturing costs are not high - which makes short-run production feasible - I’m thinking of this process as guerilla design for the long tail…

More on this later, perhaps. As for the M8, that Straits Times article wasn’t backed up by anything solid. I’m going to assume that it was filler, since pretty much all of the content has been available online for some time. Regarding the local content, where the author referred to local shops preparing to stock the M8, I was in Sim Lim Square a few days afterwards, scouting out prices for the EeePC, and I didn’t see any evidence of phone shops advertising the M8. That’s not to say that nobody is, but there’s no buzz to speak of. In fact, the MeizuMe forum is reliably suggesting that the M8 won’t hit the market until Q2. Speaking personally, I can’t wait that long, as my current phone is on its last legs… I’m still tempted by the CECT T100, as I am curious about its bioemetric security system….

A mention in China Digital Times pointed me to this Washington Post article: In China, Pulled by Opposing Tides. It’s talking about the culture shock experienced by Chinese who return to China after a long period of study and/or work in the West, usually the US. There’s a term for them, “sea turtles”.  I have to confess, I thought that this term was out of date. I first encountered it in 2005, and wrote about it then; even at the time, it was a phrase slipping out of currency. During my time at Tsinghua, my Chinese friends knew the term, but didn’t really use it any more…  I think it was more relevant in the late 90s, and very early noughties; by 2005, the numbers of returnees who only knew the pre-boom China were dropping significantly.

The Post article focuses on someone who’s been away for ten years; perhaps there aren’t so many like him left…

 IBM’s Innovation Factory is going to be working with China Telecom to set up a research centre in Shanghai. What I find interesting is that the centre will be based around collaborative media and social technology, pulling in knowledge from not just the two partners but also their customers, suppliers and the rest of their extended human networks.

It will be fascinating to see how this works. Much of my experience in China suggests that Chinese employees still tend to be knowledge-hoarders by instinct; the market right now is still lending itself to job-hopping and the search for a better salary above all else, and that encourages talent to try to maintain its value by not sharing. I looked at this for my HRM course at Tsinghua two years ago, and the tendency hasn’t changed.