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Sunday, April 18, 2010

The Dogs of War: Apple vs. Google vs. Microsoft

The Dogs of War: Apple vs. Google vs.  Microsoft

It’s hard to grasp the breathtaking scale of the epic war between Microsoft, Google and Apple. Billions upon billions of dollars. Entire industries at stake. This is the board. These are the pieces.

If you think about it, what’s shocking isn’t the size of Microsoft or Apple, companies that are decades old, established titans of industry (even if they have stumbled in the past) — it’s Google. In just over 10 years, Google’s become arguably the most important company on the web, spreading to anything the internet touches with astonishing speed, almost like a virus: From the web and search to books, video, mobile phones, operating systems, and soon, your TV.


Friends have become enemies, enemies more paranoid. And you know, it’s only a matter of time before Google’s remaining gaps on this map are filled out. (BTW, you can click on the picture to make it bigger.)

Back in the 1990s, “hegemony” was another way to spell “Microsoft.” It was Microsoft that looked to invade everything. It was Microsoft in the Department of Justice’s sights for antitrust issues. Anywhere there was computing, there was Microsoft. But today, it’s Apple that conquered music. Apple that revolutionized mobile phones. Apple that might make tablet computing mainstream. Not Microsoft. As the incumbent, Microsoft’s not going anywhere. But it plays catch up more often than it leads, at least when it comes to the things people care about now, like the web and mobile.

What’s at stake? Nothing less than the future. Microsoft wants computing to continue to be tied to the desktop — three screens and a cloud, as Ballmer is fond of saying. For Apple, it’s all about closed information appliances with lots of third-party apps, computers anybody can use. And for Google, all roads lead to the internet, and the internet is synonymous with Google.

This isn’t a road map. It’s a study guide.
By Gizmodo


Saturday, April 17, 2010

If things don’t change, they stay the same

SHUT UP ABOUT ADVERTISING BY PAUL LOOSLEY

 NOW I’ve been rereading a book. (You know, that a small papery thing with words printed on it). It’s one of the very few books about advertising worth reading. It’s called “From those Wonderful Folks who gave you Pearl Harbour”.

The author is one of the legends of American advertising, Jerry Della Femina. The story goes that, in the middle of a brainstorming session to find a new theme line for Panasonic, Jerry, then a copywriter, leapt up and proudly suggested the words that became the slightly, un-politically correct title of the book. It seems only his art-director saw the funny side! Whether there were any Japanese in the room he doesn’t say. The book was written in 1971 and it may be that long ago since I first read it. It was written during the heydays of BBDO, DDB, Ted Bates and early Ogilvy (also legendary people you may be less familiar with like Mary Wells, Carl Ally and George Lois). So, for a change, this month I’d like to share a couple of hopefully interesting observations drawn from this belated reread.

First is that the TV show, Mad Men, is total bollocks. Anyone who has watched those rather effete, supposedly suave actors wandering across your TV screens with their shiny grey suits, clouds of cigarette smoke and dry martinis are viewing, at best a caricature, at worst a total fabrication.

Reading Della Femina’s book you would see that ad people in the 60s were quite tawdry. They didn’t hang around with models, they didn’t eat at the swankiest restaurants and they certainly didn’t regularly schtup the clients’ wives. For instance, Jerry talks about creative teams moving desks into the office stairwells because it gave them the best view of the partially dressed girls in the apartment block opposite. Day and night they perched there until the cops came and arrested them as peeping toms. And the art director who, sick of his constantly ringing telephone stabs it with a pair of scissors. These were (and probably still are) the real creative people.

Della Femina also makes the classic observation that creative people fully realise that no-one is watching the TV or buying a magazine to look at their ads. Most normal people say, on meeting a creative person, “Oh, you put the captions under the pictures”. This means there was, and remains, so much BS that creative people had no way of measuring their self worth. (Today we have, of course, entirely trustworthy creative rankings and creative award shows to help us!)

And this brings me to my second point. Much of what Jerry recounts in the book – the turns of phrase and the incidents, the anecdotes are exactly the same things that still happen in advertising today. It’s an industry that seems never to move on. Over 40 years later the industry is still saying the same dopey things and making the same dopey mistakes. (I intend to talk more about this next month).

But most of all, the thing that remains so completely the same today as then, is the fear. Jerry spends many pages discussing it. He recounts an agency president telling him: “I start worrying about losing an account the minute I get it.”

The fear of losing a piece of business has most account executives perpetually standing in a puddle of pee. And it filters down to the work. He tells a tale of a new piece of business that came in asking for “new, exciting” work. But no-one could bring themselves to show “new, exciting” work to the client; it was just too dangerous, so they showed extremely “safe and comfortable” work. And they lost the business! Naturally “new and exciting” and “safe and comfortable” go together like oil and water. Did then, does now.

My particular favourite Della Femina fear story is of the time he brought a tape recorder into a creative review board. It filled the board with terror. None of them wanted their comments to be on record, it seems they talked about anything except the creative work. As Jerry says, “it represented truth”. Last thing anyone wants or wanted.

Altogether there are so many things Jerry talks about in the book that apply now.

The people who always agree with the boss or the client – constantly on the lookout for the signals – a twitch, a certain tone of voice, a small gesture – so they can neatly preempt the boss/client before he says “It stinks.”
Ad people who could smell a recession coming as the clients stop spending.

And how keen agencies were to fire expensive older people and hire relatively inexperienced people for salaries up to 75% less. He goes on to speculate that creative people over 40 are all on an island somewhere full of burnt-out writers and art directors.

He supposes that guys who are wigged-out write wigged-out stuff.

He posits that censorship, any kind of censorship, is pure whim and fancy.

And even back in 1971 he said “boutique advertising is the new advertising” because it means you’re going to be dealing with the man who owns the store.

And he ends the book with the greatest (and most debatable) ad quote; possibly of all time. “Advertising is the most fun you can have with your clothes on.”

If you can get a copy take a look. Keep it for another 40 years and see if things have changed in 2050. Even money – nothing will change.

PS: Jerry still has an agency named after him in New York, he runs restaurants, sits on boards and writes for magazines and papers. Clearly no longer wigged-out.

> Paul Loosley is an English person who has been in Asia 30 years, 12 as a creative director, 18 making TV commercials. And, as he still can’t shut up about advertising, he tends to write every month. Any feedback; mail
p.loosley@gmail.com (but only if fully dressed)

The passing of a central banking generation

General Douglas McArthur famously said that old soldiers never die, they just fade away.

Central bankers are the generals of monetary policy, because they fight currency wars, combat inflation and defend financial stability. Retired central bankers do not fade away. Like Greenspan, they can write best selling memoirs and retire very comfortably.

Recently, Federal Reserve vice-chairman Donald Kohn, who has decided to retire, gave one of the most frank analyses of where mistakes were made, in a speech: “Many central bankers and economists, myself included, were a little complacent coming into the crisis. We thought we knew enough about the basic structure of the markets and the economy to achieve economic and price stability with relatively minor perturbations. And we thought we had the tools necessary to deal with liquidity shortages and mal-distributions. The reality is that we didn’t understand the economy as well as we thought we did. Central bankers, along with other policymakers, professional economists and the private sector failed to foresee or prevent a financial crisis that resulted in very serious unemployment and loss of wealth around the world. We must learn from our experience.”

Why did such clever people not see the crisis coming? Why is there a tendency of disaster myopia, when policymakers very often react too little too late? Of course, it is understandable that people are complacent or are too cautious. No one likes to disturb the status quo. Almost all of us would like to wait till the next piece of information comes in to confirm our hypothesis.

Californian Prof Frithof Capra, who is a physics professor and also a systems analyst, wrote a book back in 1982 called the Tao of Physics and another important book called the Turning Point. He felt that the academic profession and government bureaucracies had become so specialised and fragmented that they could not see the wood from the trees. No one is looking at the earth from 30,000 ft up and asking why it does not add up.

A famous Harvard professor of business strategy put it another way. We are used to top-down departments and bureaucracies, where orders and strategies are formulated at the upper echelon, and they are supposed to be executed at the bottom layers. However, we forget that most businesses are coordinated and done horizontally, between different departments and arms of a business or government. Coordination of different parts of government or business, with different agendas and interests, is the most complex task of modern governance.

What most economists and central bankers forget is that markets are all about human behaviour and such behaviour is reflexive. Human beings do not stand still – they observe each other, anticipate or predict their competitors’ behaviour and act accordingly. The market is always watching how the government policy is implemented – they make money from regulatory and tax arbitrage.

Once they can predict how central bankers or policy makers behave, the policies begin to lose their effectiveness. This is why legalist Han Feizu said the ruler must be silent and observant, not allowing the public to predict what he will do. If the policy is predictable, it will be negated.

This is like a tennis player. If your opponent knows that you always like to play backhands to a certain corner, he can read you and exploit this weakness.

The best example of the need for central bankers to understand reflexive action is Goodhart’s Law. London School of Economics Prof Charles Goodhart is one of the best monetary economists, who has trained a whole generation of central bankers and financial regulators. He worked in the Bank of England and was also an adviser to the Hong Kong Government on the establishment of the Hong Kong peg. Goodhart’s Law states that every monetary target loses its efficacy, because the market immediately changes its behaviour to negate that policy target. Goodhart’s Law also can be generalised to regulatory policy.

As Donald Kohn admits, the trouble with the recent generation of central bankers is that they think that they know how the market functions. The fashionable thinking is that they must stick to clear monetary targeting or rules of behaviour, such as Taylor’s Rule, named after Stanford Professor and also former US Treasury Undersecretary John Taylor. If the market can read central bank behaviour, they can adapt and change their behaviour very quickly. For example, if there is too tight regulation, then the market moves more business either offshore where there is less regulation or they move into shadow banking, where regulators cannot see what is going on.

It is also dangerous to compartmentalise between monetary policy and financial regulation, as if the lines between the two can be clearly drawn. Monetary policy has implications on financial regulation and vice versa.

There is, however, an elephant in the room that most central bankers and financial regulators of advanced countries have missed. The elephant in the room is the biggest and most important issue that is before one’s eyes, but we ignore it because we do not know how to handle it. Hence, most people tip toe or move around the elephant rather than confront it.

The biggest item that is common to monetary policy, financial regulation and fiscal policy is land and real estate, including fixed investments. The value of land and fixed assets is directly related to interest rates – the lower the interest rates, the higher the value of real estate. Real estate is the biggest collateral of bank loans and often the biggest asset of most households or firms. Land sales are also the biggest revenue for many local governments. Hence, asset bubbles are most difficult to handle because their deflation can kill banking systems and eventually become fiscal deficits.

Recently, it was revealed that US regulators did not see that real estate-related loans of the US banks accounted for 55% of total loans and asset-backed securities accounted for 74% of their debt securities holdings.

Since real estate is 225% of GDP, it was not surprising that a 20% fall in real estate caused the massive melt down in the financial derivative markets and eventually the solvency of banks.

A new generation of central bankers will have to learn new lessons from the current crisis.

THINK ASIAN BY ANDREW SHENG 

Datuk Seri Panglima Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission, and is currently a member of Malaysia’s National Economic Advisory Council. He is the author of the book “From Asian to Global Financial Crisis”.