Category: Economy

The Clash of Two Shanghai Secrets

Thomas Friedman wrote an op-ed article in the New York Times he probably wished it never happened. “The Shanghai Secret“, as the op-ed is titled, received a blistering response from Ann Qiu. It’s not like Thomas Friedman said anything outrageous. By contrary, the article is as inoffensive as it can be, similar to many other written on the subject of China’s extraordinary focus on achieving international reputation in education. Anyone following the PISA rankings knows that the Shanghai region is included in this list as a country. Everyone was surprised when it topped the PISA score ranking in 2009.

After visiting Shanghai’s Qiangwei Primary School, Thomas Friedman declares he found the secret of Shanghai’s schooling performance: ” a deep commitment to teacher training, peer-to-peer learning and constant professional development, a deep involvement of parents in their children’s learning, an insistence by the school’s leadership on the highest standards and a culture that prizes education and respects teachers”. One could think he may have stirred the ire of some American or European teachers who work very hard doing exactly that, but surprisingly it was a Chines educator who took offense of the comments made in this article. Ann Qiu decided to write a replay when she read “what Mr Friedman said to the American people through this very influential newspaper, I couldn’t help feeling upset”. She goes on to say “an American who has interests in China at least should have some basic understanding of Chinese contemporary history. To me, Mr Friedman is not such a person”. That’s harsh. The game is on!

The anger stems from a personal experience shared by many parents in China. There are two frustrations that are brewing in this reply: the students are homework force-fed, they rote learn and they have to pass standardised test as an absolute measure of success in education, and fact that the parents are responsible for the homework working long hours as if they have a second job, unpaid mind you.

While Thomas Friedman quotes a Chinese teacher who said with pride that his job also includes “parent training”, Ann Qiu almost explodes at that thought: “Mr Friedman was applauding a deep involvement of parents in their children’s learning, Chines parents, in fact feel kidnapped by it. […]. Every afternoon, after school time, before dinner time, on a mother or father’s mobile phone, a homework list is sent by the teachers who often are in charge of three major subjects: Chinese, math and English. […]. Through these tools, teachers pass their duties to parents because it then becomes the parents’ job to make sure that their children complete the homework.”

This reminded me of a video I watched in the early nineties about education system in Japan where students and parents were under relentless pressure to perform and produce good results during tests. Young students from primary to secondary school levels would go to coaching colleges after school and then continue to study until late night with just a few hours to sleep before going to school next day. Japan invested in education with a clear goal of creating a skilled and disciplined workforce to establish itself as a global economic leader. It seems China is following the same steps Japan took a few decades ago.

Bubbling Tech Power Wants California Split

Could there be a state of Silicon Valley, a dream political unit in which innovation can be represented unhindered by the problems typical of the old industrial era? This is what Tim Draper is proposing in his plan to split California into six states.  The proposal cites the reasons of oversized California compared with other states in terms of population, geography and economic power, the lack of proper political representation and poor administrative services.  The movement behind this proposal already has a website for marketing and support gathering.

I assume a lot of effort went into the design of the territorial make up of the new states.  The logic behind this blueprint must consider the history of California, the demographical distribution and its group interests. It is clear though that beneath this general dry presentation that the high-tech are the key influencers. What they really want is to have one state for themselves, the state of Silicon Valley.

This is fascinating. What an idea! On one hand one could think that this is madness, an exaggeration, one of those crazy ideas that are doomed to failure from the beginning.  It could be interpreted as a sign of out-of-touch grandeur of companies that have achieved colossal success at a global scale: the Twitters, the Facebooks, the Apples and the Googles.  It almost sounds like a prank. On the other hand maybe the people behind this proposal are onto something. Tech companies are moving much faster than Washington, they have caused a revolution that is changing the economic landscape not only in terms of novel technological products, but in terms of structure of workforce, education, social relationships.

Regulations are slow to adapt. Maybe this is a good thing and a bad thing in the same time. You don’t want to make mistakes that affect future generations because you made a quick bad decision or because you procrastinated for too long.  This plan goes for speed.  The California six-way split is wanting to accelerate the pace of regulatory change and create a power base for the tech class that can rival those held by the finance, energy, manufacturing and agricultural groups. The Twitters, the Facebooks, the Apples and the Googles are the new dynasties as the Morgans used to be (they still are to some degree).  Or perhaps the likes of Kleiner Perkins Caulfield & Byers (Tom Draper is representing one of them) are the real dynasties pushing for this change.  If somehow through a miracle this happens, other states will follow. The consequences are incalculable.

Update 3 Jan 2014:  I found this map created by professor Andrew Shears who created a fantasy version of US based on past partition proposals.

USNeverWas

 

 

Fed Stimulus Blunted as Software Replaces Hardware: Economy

See on Scoop.itDisruptive Technologies

Mike Nobis saw how the financial crisis led his customers to postpone orders until the last minute, forcing his 100-year-old family printing business to work faster to deliver on time.

ThoughtKast‘s insight:

Business invests more in software to increase efficiency and reduce the headcount

See on www.bloomberg.com

Australian Banks Worried about Competition from Silicon Valley

In a rapid succession in the space of two weeks, two major Australian banks raised a red warning flag signalling their deep concern of what could be their biggest existential threat. The threat comes from not from the  Bank of America, or Citibank, HSBC or Bank of China, but from unexpected sources, in form of nimble technology companies from Silicon Valley.

Commonwealth Bank CEO Ian Narev expressed this view at the G100 Congress in Sydney in May this year.

The new competitors are “the Apples, the Googles, the Samsungs, the PayPals, the credit card companies, who can pick particular slivers as a result of the application of technology into financial services and compete. We need to be prepared for that.” he said.

Ian Narev alluded that regulations have to be adapted to reign in a new type of competition. The trouble with this competition is that there is no precedent. Disruptive innovators create solutions that address needs outside the boundaries of traditional models before invading the established markets threatening to displace the incumbents. What to do?

Take for instance the case of Dwolla. Founded by a 28yo young entrepreneur from Des Moines, Iowa, USA, Ben Milne, Dwolla is a 12-person startup that invented an online payment system that bypasses credit cards completely. This startup is onto something because large financial institutions are very interested in this idea. Venture capitalists are backing the company with money. Just last month Dwolla received $16.5m in funding, its biggest investment yet. It is hard to predict the impact of Dwolla and other similar innovators on the banking system in the near future if the momentum continues.

A couple of weeks ago, the ANZ chief executive Mike Smith described the technological innovation wave that is about to hit the financial industry as “terrifying”. Smith made this statement to the board based on information received following a study undertaken by the bank during a tour in California. “Much of it is being driven by small companies that are very active in payments but very well-funded, and they are moving very quickly.” It is interesting how quickly ANZ followed Commonwealth to look at what is happening in the Silicon Valley.  Something must make them nervous.

Reputable banks have some of the deepest moats protecting their business from new competition, something that Warren Buffet always liked about banks. But rapid changes can ruin that assumption. The transformation will go beyond improvement of operations. It’s about service, it’s about having a different presence in the peoples’ lives, with new perceptions. If a “normal” bank is still something that brings to mind images of prestigious physical old buildings (you-come-to-us), the new banks need to become virtual, quick, creative and very social (we-come-to-you).

Will the disruptive innovation brought by super-smart technology companies become a systemic threat to the traditional banking system? Maybe not, not entirely that is. It is more likely that a wave of restructurings, consolidations, and small bankruptcies will re-shape this business. Banks that “read” the market signals will either buy some of the successful fresh innovators, or innovate themselves, or establish alliances to surf this new wave of opportunities and reap the benefits. Others that refuse to see the threat may well as disappear.

Innovation is Local and Adoption is Global

Successful innovation is difficult because it is not enough to have a bright idea. Everybody has one, including me. What separates the boys from men is the implementation. The road to heaven is paved with hard work from the initial blueprint until the finalised product, and its successful adoption which requires team work, focus sustained over a long period and ability to execute and deliver.

The core team that innovates successfully is the equivalent of a queen bee starting a new colony: it produces ideas continuously while surrounding itself with a growing team that takes on tasks derived from those ideas, all of them orchestrated into a collective effort to build a long-lasting product enterprise.

At the beginning, there is no light around innovation, but just a faint white star shining in the distance. There is little information, no training classes and no user manuals. Could your normal team or business units do it? Not likely. They are not suitable for this kind of undertaking because there is no documented process or job description. You need a special team: a small community of practice whose members are innovators.

A community of practice is made of people who have frequent face-to-face meetings; they meet around the water cooler and talk and pick-up clues from little things to spark a creative chain of thoughts. The members of such community are highly skilled, they have knowledge far beyond what is required by the standard job description and they thrive on uncertainty.

Creative enterprises know this very well. Valve’s HR (blasphemy!) induction manual is an interesting case of encouraging teams to work as small communities of practice. It is all about having strong relationships that work, are creative, productive and fun.

Adoption however, although it still depends on communities of practice to figure out how to use the innovation, relies on large social networks to fire-up the spread of the idea.

In fact, the adoption works best if the network is a huge collection of groups linked through weak connections. This is because the networks of strong ties are usually small due to impossibility of individuals to maintain strong relationships beyond say 20 people. Great networkers may go up to 150, but for the average person, even maintaining 10 strong relationships is a struggle. This means that if a community of practice adopts your innovation, you shouldn’t rush to pop that bottle of Don Perignon yet. Settle for a Stella Artois and a barbecued shrimp for the time being.

Mark Granovetter coined the term ‘weak ties’ to describe lose connections in a social group. His research led him to the conclusion that these types of connections are actually the ones that make a personal network very effective. Christakis and Fowler demonstrate in Connected that weak-ties are great for finding fresh information, aka code for new habits.

So, if your Facebook is limited to close friends that think like you, you are missing on a great opportunity to learn something new and useful you and your close friends never thought of before. Better ‘like’ someone different soon!

Globalisation is the other side of localisation. They are like yin and yang, embracing each other.

Two consequences derive out of this:

  1. The local innovators need to have access to great networks to spread their ideas. If the innovators are not great communicators and if they don’t have network bridges, their innovation will be lost in anonymity and dry
  2. Innovators and adopters need to think alike as they need each other, but both need to influence a lot more people to get the network going. If the growth in adoption doesn’t keep growing to reach about 16%, they are doomed. They fall into the chasm, Moore’s chasm.

In a recently published book, The New Geography of Jobs, Enrico Moretti says that despite the popularity of the global social networks, the vast majority of the phone calls and web traffic is local. The most innovative cities and regions are based on small, tightly knight, and local communities. With other words, the secret of global success of Silicon Valley is local, very local.

This is also why the local economies’ prosperity depends so much on innovation and free trade.

Grinding Times, Turbulence and the Death of Stocks

The problem with our times is that it doesn’t give us any clear clues about what will happen or what will need to happen so that all of us can finally relax and go to the beach. But when was the last time it did? Most probably never. I asked a friend of mine who has worked for the same company for over twenty-three years what he thinks about changes in his organisation and industry in general and after a thoughtful pause he said “I prefer the old times”. Always for people who lived long enough to be able to claim they reached the controversial middle age, the old times have an irresistible appeal.

If things don’t look good now, some of us may suspect this is just plain winging. If you really dig into the issues, the good ol’ times, aren’t that good and actually the present is as bright as it can be. It is in our nature, some would say, that we like the old times because we were young then and the experiences as we remember them are thrilling, surprising and full-on. And yet, our history hasn’t been a linear script. It is easy to look in the past and say “oh, those times were terrible because so and so” and even feel a bit baffled thinking why those people could not figure out the issues from the beginning, but when you are in the middle of that time, it is difficult to recognise the type of period you are in. However, the history it giving us clues and some of them are telling us that the present may be one of those grinding, nerve-racking, and turbulent periods.

Bill Gross, the PIMCO investment manager who oversees the world largest bond fund, describes the economic outlook as the “new normal” when growth is sluggish and spectacular returns are a thing of the past. Last week he went even further and declared that stocks are dead. People will have to work much longer to maintain their standard of living.

When times are tougher the contrast between the left and right sides of the political spectrum becomes sharper. This is could be an indicator that we are entering into turbulence. Deresiewicz wrote in his column at The American Scholar (“In League”) about a similar period preceding the New Deal marred by vicious confrontation between political sides supported by bankers, industrialists and businessmen promoting a Darwinian system and liberal politics represented by Theodore Roosevelt and Wilson Woodrow. The bad news is that great ideas and daring reforms do not come quickly and they are not designed by the mind of one hero. It takes time and public impetus to drive the change. Progressive steps are taken under the socio-economic pressures and they may look random and imperfect, but then over many years of public exhausting debates, loss of hope, arguments and confusion, a moment will come when everybody throws the towel into the ring and declare ready for a big change. Thus, the New Deal came at the right time only after many years of preparation.

Deresiewicz concludes that we are only beginning the grinding progressive period. We are comparatively in the year of 1882 which was the start of a process that culminated with the New Deal.

Will it take the same time to arrive at a new beginning for prosperous times? The chilling detail in the grinding period that gave birth to the New Deal is that we had to go through two worldwide wars before we settled.

Today, the political landscape is different. US political culture and socio-economic institutions are only a part of the global scene which all of us are part of now. Europe needs time to settle, Asian countries have to come to terms with new trading conditions that dampen their traditional export enthusiasm. The demographic forces are in full swing worldwide. Will migration patterns remain the same? This is a key question because when migration stops, a new order needs to be installed, and when that happens everything is on the table for negotiation.

We are in for a long soul-searching period. As Deresiewicz put it “for now, there is only blood, toil, tears and sweat.”

Modern hiring is about casting, not filling

I am the first to admit, that I am not a public performer, and yet it doesn’t take to be an Oscar trophy holder to recognise that nowadays excellence in customer service is more than just a scripted process in which anyone can learning by memorising the steps and procedures after one day training. A great customer services needs people with emotional skills with attitude. This trend is not purely driven by the supply side, but also by the demand: you and I respond much better to people who can show empathy, are good story tellers and have a great smile.

I was watching Mentor on Bloomberg and following the conversation between the Jamba Juice CEO James D. White and Drybar CEO Michael Landau. As James entered first time into the Drybar salon, Michael was explaining to him how the business operates. James has an incredible experience in business having worked for Coca-Cola, Gillette and Safeway stores with expertise in brand management and marketing. Michael was reporting in a happy, passionate but measured demeanour how they struggle to cope with demand. The design of the salon limits the number of seats to eight which is not nearly enough to satisfy all those who want to buy their service. The key aspect of Drybar’s business is to offer to their customers a great experience, which is not only about having the hair done well, but make them feel as if they go to a bar where you order your service off a style menu. It’s all about the experience

Michael said they hire people carefully to make sure the best experience is created. He explained to James that the recruitment process is more like casting. Those who are hired have to have the right attitude. James acknowledged the comment and said that at Jamba Juice the staff is selected based on the idea that they are performing in front of an audience and they have to feel comfortable in that role and be good at that. The staff needs to have the right energy level.

This simple exchange of experience suddenly made me realise, that in fact this is what we want from any service, not just those that have an obvious artistic element. This is what Howard Schultz noticed when he studied thousands of coffee bars in Milan, Italy when he was really intrigued not only by the professional knowledge of the bar owners, but by their chatty, familiar and almost theatrical relationship with their customers.

We talk a lot about knowledge and competency when we evaluate a person, but we do recognise later that the ability to work in a team is important. Somebody once said that there are three questions you really need to answer when you face a job interview: can you do the job, do you want to do the job, and can you work with the team (or can the team work with you). I think this should be extended to include your clients: can they work with you?

Performance is about the ability to create a positive emotion that unlocks motives, passions and readiness to connect. This is not only about closing a monetary transaction, but an emotional deal too. It is a healing process. When your customer has a positive experience, the stress level just goes down by a notch and for that, he or she is ready to do business with you and come back at another time.

Knowledge is not enough. Performance needs to be added into the mix. This is a bit tricky, because performance cannot be learned by reading a manual. It is attached gradually through life experience. It depends on the environment you lived in when you grew up, the people in your entourage and your cultural fabric.