Do we need government? What purpose should it serve?

The news these days is mostly about the train wreck that is Brexit, the controversies swirling around Donald Trump, the election rhetoric from India and Thailand, the chaos in Venezuela and other such high profile leadership debacles and debates. I’ve started to wonder what all these politicians and so-called leaders actually do for the benefit of their country and its citizens.

The thing is, being the prime minister or president of a country (or even lower down in the order, being an elected representative of any sort) seems to have become associated with power, with being able to drive the agenda that the individual is aligned to and with being very selective about recognizing the will of the people.

You’ll notice all of the examples in my first line come from countries that purport to be democracies. I’m excluding China for the moment from this train of thought, although I’ll come back to that in a bit.

So, here’s the thing. In most of these countries, we, the people, elect these leaders. The funds that allow them to be paid and to do whatever they do come from our taxes (for the most part). Therefore, according to me, they should be set up to serve the people, not lord it over them. Right?

Let’s examine that in a bit more detail – what does a government actually provide its people? Broadly, it can be defined as a framework and facilities for living your life. So, there’s defined laws that protect people’s lives, livelihoods and property. There’s infrastructure in terms of roads, public facilities, some kind of central bank reinforcing the rules around money, armed forces and civil defence forces of various sorts to provide protection. Governments deal with other governments and make some rules around how people or markets situated in different countries interact with each other, how easy it is to get into and out of other countries, trade with them, hire people from them and so forth. Also, in most countries, there is some kind of welfare net to take care of the unemployed. All of this is designed to allow people to live their lives freely, enjoy their rights while being conscious of their duties and generally live in a state of security and peace of mind.

If we go back a few thousand years in history, those needs were met in different ways. There was a feudal society where your feudal lord provided all of those things, in a way, but exacted a price in terms of having rights over your property, cattle and often even your life. Which wasn’t great, obviously, if you were at the lower end of society where you didn’t get much out of the system but got exploited by everyone above you. If you look at America about 200 years ago there was very little rule of law – everyone carried a gun and if you had a difference of opinion or a point of law with someone (like cheating at cards, for instance) you expressed yourself with bullets. If you were transporting goods a long way, across countries on the Atlantic ocean or over land across the American continent, there were pirates, highwaymen and others quite keen to part you from your property. Often when you got to the other end you were at the mercy of the buying party because it was too isolated a place to be able to feasibly threaten to take your stuff back, so you had to sell even at poor terms.

Is the world today much better? We may not have a feudal society but more and more, we’re seeing politicians dividing society with their political planks – using religion or race or outlook as a convenient basis for defining tribes and drumming up support. If you happen to belong to one of the “us” tribes then everything is fine, but if not you’ll find, slowly but surely, that you’re disenfranchised and discriminated against. We have countries in which delusional, misguided or malevolently inclined people can get hold of highly dangerous weapons and wipe out dozens of people before anything can be done to stop them. We have two plane crashes that can be attributed to poor administration of aircraft certification and training procedures rather than natural causes or pilot error – which fall into the province of civil aviation boards that are government departments. We have a complete mess over Brexit in the UK, a demonetization disaster in India and a record breaking government shutdown in the US. We don’t know who is the legitimate president of Venezuela but we do know the economy is in the toilet and people don’t have their basic needs of food being fulfilled. We have Russia annexing Crimea and nobody seems to care, but the moment there is any kind of unrest in an oil producing nation the whole world wants to get involved.

Did the people in any of these countries ask for this stuff to happen? Is this what they wanted when they paid their taxes?

We may all want different things and in the normal course of life, we’ll figure out how to get them. We don’t need so much government and we definitely don’t need the entire apparatus of politics leading up to the selection of a government.

It’s time for people in democracies to stop focusing on which political party or politician to vote for. It’s time to start defining expectations for government – as paying clients for a service, we need to define what that service should be, how it makes priority calls between different customer groups and how, overall it serves the greater good of all.

One last word here about China, which gets a lot of stick for not being a democracy. True, it isn’t a place where people get to choose who runs the country, but somehow, the system has, for about 3 decades now, delivered governments that have run the country extremely well by anyone’s standards. The economy has grown, infrastructure is the envy of most countries, per capita GDP has grown, entrepreneurs have thrived and the vast majority of people here are extremely proud to be citizens of China. While certainly you can argue that the leaders of China are very powerful indeed, their focus and efforts seem to be on doing stuff that’s good for the country rather than displaying their power. Perhaps they’ve understood the concept of leadership being a responsibility to serve, something that has escaped the attention of most leaders in the so called democracies on our planet. Anyway, I recognize that this system isn’t ideal and I’m not advocating that we abandon democracy and embrace a one party state, just saying that democracy isn’t as democratic in its output as we all think it is.

Governments are meant to serve the people. Not the other way round. If they fail at that purpose perhaps we should examine the option of privatizing the key services that a government provides. Security, infrastructure and financial and legal frameworks all exist because we agree that they do – we don’t necessarily need a government to enforce them. Blockchain is a great example, although far from being mature enough to put a lot of applications on it. Privately built infrastructure that levies fees for usage, decentralized security services that any citizen can leverage… all of these things are possible and entrepeneurs are starting to think about them and do them. When most of these things become self-regulated / private enterprise services, perhaps we will see someone actually bidding for the right to run a country for 5 or 10 years, promising certain KPIs and having a management contract with a bonus attached to it.

What should we do in the meantime? I feel like it’s time for the politicians to respond to what people really want – almost like a charter of expectations that citizens vote on and then present almost as some kind of brief for anyone who’s willing to do the job. It could be a single political party that responds, it could be a coalition of parties or even politicians across parties. Perhaps it could even be regular people stepping up to the plate and putting together a convincing team and resources to do the job.

Money and wealth on Planet Earth – an Alien perspective

Sometimes the best way to think disruptively about something is to try and imagine it from a completely different perspective – to which end I was trying to imagine what an alien might think some of the oddest human practices and beliefs are. Here we go…

Money and property ownership

Money is one of the oddest things you humans have ever invented. It allows some people to be very rich and have the ability to acquire things beyond what they can really consume – while some people really need to consume something but don’t have the means to acquire it. If you go back to the beginnings of your world, food and shelter were your most basic needs. Food was available and free in nature, as was shelter – but in limited supply that ensured a natural limit on population.

In your world today, there are often situations where a certain group of people needs food or shelter, there is surplus food and shelter available for use, but your rules around property ownership and money prevent it from being used by the people who need it.

Money itself is a neat idea but it needs to be applied to non-necessities. You cannot withhold food and shelter from someone who’s starving or homeless just because they don’t have money. You can withhold a smartphone, car, software or some of the higher order products of life, but not the necessities.

The second element of that which needs examining is the concentration of wealth. If 8 chartoftheday_7585_the_worlds_staggering_wealth_divide_nindividuals on Earth own as much as the bottom 50% (that’s 3.5 BILLION) of your rapidly growing population, clearly that is an imbalance that needs to be corrected. How? There are many ways – perhaps by increasing tax rates for any income or wealth beyond what is considered a healthy maximum and making that money available for public benefit. Another way is to limit what can be inherited, thus ensuring that the families of the rich do not inherit a permanent, unbalanced advantage. (Infographic from Statista, backlink here)

It is heartening that certain individuals on your planet – notably Bill Gates and Aziz Premji – devote a large part of their resources to helping other people. Nonetheless, it is clear that the vast majority of people with more resources than they need tend to hold on to them rather than redistributing them to those in need.

Why would people work hard then, you might ask? The answer may lie in still allowing for a gap between the ability to have the means to exist at a basic level of human comfort and to have access to finer things in life. Everyone should have access to the basics but only those who go beyond and create greater value are rewarded with the ability to consume non-necessities. Nobody is left with so much purchasing power that they can never use it within their lifetimes, so there is a cap on maximum wealth and income and the rest is used to fund the basics for everyone else.

Cameras, MP3, video recorders… what will smartphones disrupt next?

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Digital camera user at Beijing’s Bei Hai Park, a vanishing breed

Statista-Infographic_15524_worldwide-camera-shipments-The camera industry has suffered more dramatic changes than most others. First, from basic single plate exposure photography to film, black and white to color and then finally to digital photography. Recently, I came across this chart that shows we’re not done with tearing up the industry and throwing it away – the decline in sales of cameras ever since smartphones came around. There will always be a demand for cameras because there will always be professional / expert photographers who want something more suited to their skills, but it’s safe to say that the consumer boom in cameras that digital photography started has now dissipated completely.

Statista-Infographic_10066_losers-of-the-smartphone-boom-Which led me to this next chart on what else the smartphone has replaced.

The multipurpose nature of smartphones and the fact that people always have them handy are driving the integration of a lot of capabilities into one device. Some of the things we’re not measuring in the same way because they’re not hardware replacement are already happening – credit cards and cash, for instance, becoming more electronic with Google Pay, Apple Pay, Alipay and Wechat Pay, for instance.

Most of the photography companies today seem to have moved into related businesses (there have been a few mergers as well – Konica with Minolta, for instance). Also, many of them are clearly struggling as their revenues went down and haven’t managed to replace camera sales with their new lines of business quite as successfully.

Specialist GPS companies have the same story to tell. Garmin in 2018 has still not risen back to its peak revenue from 10 years ago. Apple discontinuing the iPod is a sign of what happened to the MP3 players.

What could all these companies have done differently? I’ve seen 3 broad strategies:

  1. Let the disruption happen but focus on the consumer need for a standalone product
  2. Be the disruptor
  3. Join the disruptors
  4. Leverage the technology you own for new applications – going from cameras to industrial imaging and so on

The first strategy hasn’t been very successful for anyone – although many of the companies survive it’s very clear that they’re still far below their peak revenues from 10-20 years ago.

Apple was the best example of the disruptor – moving quickly to integrate more functionality into the iPhone and iPad and not worry about the impact it had on other businesses.

Leica is an example of joining the disruptors – putting its lenses as OEM into Huawei phones – Karl Zeiss did the same thing with Sony phones many years ago but unfortunately they picked the wrong horse to back and Sony was never a leader in smartphones.

Canon and Konica-Minolta seem to be focusing on related diversification in their annual reports but again, their revenues haven’t grown beyond their digital camera heyday.

The reality is, when something as fundamental as the smartphone comes along, it is going to disrupt a lot of industries – simply because consumers can now make one device do the job of many.

I don’t doubt that there was a moment in the life of each of these companies when it had a chance to recognize that the future was going to be vastly different and they had to make some big changes to get ahead of it, but I think it must have been really difficult to know what to do. What management consultant would have dared to suggest to Canon that they should buy a smartphone company or sell their technology and lenses to one, way back in 2008? And what company CEO would have dared pay heed to that suggestion?

That’s the problem with disruption – it’s easy enough to see after it’s happened. When it’s still in the near future it can be hard to recognize and even harder to know how to deal with. Even if you can figure out a way to deal with it, it may not be a particularly easy or comfortable solution.

Back to the original topic – what will smartphones disrupt next? Personal computing seems like an easy guess, given how screen sizes and processing power are growing. Hearing aids, perhaps? At least for people with less serious problems, a combination of a good earpiece and software through the phone could deliver a good workable solution at a fraction of the cost of conventional (expensive) hearing aids. As phones acquire their own AR / VR hardware capabilities perhaps many aspects of modern living will be subsumed into their capabilities.

And one last thought, what’s likely to come along and wipe out smartphones in the future? It might seem a bit too soon, but if you’re working at one of the phone companies, worth thinking about starting now.

The Great Whisk(e)y Disruption of 1830

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The Irish claim that they were the first to distill whiskey, on the basis of a report from 1405. (Annals of Clonmacnoise stating “A.D. 1405. Richard Magrannell Chieftain of Moyntyreolas died at Christmas by taking a surfeit of aqua vitae. Mine author sayeth that it was not aqua vitae to him but aqua mortis.”)

The first Scottish record dates to 1494, although, to be fair, it isn’t linked to anyone dying from it.

(I heard all this from Mark, the gent in the picture – who conducts a tasting and tour at the Whiskey Museum in Dublin)

Today, the world over, we drink Scotch whisky and except for occasionally choosing Jameson in an Irish pub – without any reference to whiskey type, you’ll notice – most people don’t even know that Ireland makes whiskey. Quick, name three brands of Irish whiskey… see, I didn’t think so.

aeneas coffey

The main reason for that is an Irish gentleman – Aeneas Coffey – who patented an improved version of the continuous still in 1830 and revolutionised the whisky (and indeed, the broader distilling) industry. Ironically, while he was Irish and first took his design to the Irish distilleries who were using pot-stills at the time, most of them refused to adapt because they felt the quality of whiskey from a triple pot-still distillation was better. Coffey took his technology to Scotland, where most distilleries adopted it to produce whisky in a more economical way, which made it affordable and accessible. The Scottish whisky industry took off, their spelling for whisky became standard and Scotch is now synonymous with whisky. The Irish went from a peak of 412 distilleries of which the largest – Rose – produced more whiskey than all of Scotland to a mere 21 today, while most whisky drinkers around the world can probably name more Scottish distilleries than that just off the top of their heads.

Coffey’s invention – or rather, innovation, since he improved on earlier versions of the continuous still – led to him being compared to Henry Ford with the mass production of the automobile.

It’s funny how reminiscent the lack of interest from the Irish distilleries is of things that happen in the business world today. If you’ve ever run a startup that seeks a new way of doing things and the initial reaction from a lot of people is that it will never work, then think back to the Irishman who drove the disruption of the whisky industry by the Scots. And if you’re feeling particularly down about it, perhaps sample some of the output of said whisky (or whiskey) industry – the Irish make some really good whiskey too, so don’t hesitate to try Bushmills, Powers, Teeling, Knappogue Castle, the Irishman and others. Don’t expect to find them at your friendly neighbourhood Irish pub though, or even in duty free – the sign of how much that disruption cost them is how difficult it is to get Irish whiskey outside Ireland, nearly 200 years later.

What’s the lesson here? It’s the same old one I keep repeating, I’m afraid – if you say no to new ideas, you run the risk of one of them disrupting the industry, and your business. That doesn’t mean you have to entertain every crackpot who shows up at your door, but it does mean you have to attract everyone with a new idea to show it to you first and find ways of trying out as many of them as possible.

And the other lesson? Also an old one – disruption doesn’t have to be digital. This one is clearly analog, apart from being nearly 200 years old – which suggests that perhaps it’s time for the Irish to disrupt the industry right back!

China’s slowdown could be the biggest push for Chinese brands to go global – are you ready for the competition

Huawei foldable

It was interesting to read about Huawei coming out with a foldable phone – not necessarily a very affordable product or destined to be profitable or successful in it’s own right, but certainly a statement of Huawei stepping up to fill the vacuum left by Apple falling asleep at the wheel. Chinese brands have been leading the design and innovation charge in many other categories – notably consumer electronics, appliances, solar power and electric cars, but increasingly in other areas as well.

Normally global brands would look at that and worry about how to win in China against these local innovators. Now, in the context of the China slowdown, I believe they may have a very different scenario to worry about.

So far, everything I’ve read seems to point to people only treating this as a contraction of demand in China for a limited period of time – so if various international companies have business in China they’re thinking about how the contraction of demand will reduce revenue for a while, perhaps a few years at most, before things go back to “normal”.

I believe a far more disruptive trend will emerge in the next few years as Chinese companies also suffer from the contraction of domestic demand in key categories. Companies which hitherto were happy to focus on the massive domestic market in China will now start to expand. Provincial players will go national (an already established trend over the last couple of decades) and national players will go international (also an established trend that will only accelerate).

Will they all succeed? Obviously not – some will learn how to adapt and compete in new markets and some won’t. There are some brands and categories where we can already see Chinese successes – Huawei is clearly one of them. The electric car industry is definitely being led by Chinese brands at this point – brands like BYD and Roewe are way ahead of Tesla in terms of mass producing a viable electric car (in fact, several different models). They have some pretty spectacular consumer electronics and appliance brands as well.

Consumer products may be slower to follow – but inevitably they will.

So here’s the thing to think about. Do you currently have business in China? If so, who are the biggest local competitors you face? Imagine them being local competitors not just in China but in more countries around the world – because that’s definitely going to happen in the next few years. How would you deal with that situation?

There are lots of ways of looking at this, one of the most productive being to try and hedge your bets by buying into some of the most likely future successes from China. The point is to start worrying about it now.

China Giant to Global Behemoth – competing soon in a store near you

chinese-brands

One fifth of the way into the 21st century it’s already very clear that China will be the biggest economy in the world for this century. Chinese consumers dominate a lot of categories – notably overseas travel, luxury goods purchases and so on.

While a large number of global business have responded to that in various ways, there are still more companies that haven’t yet done anything about it. They’ve not started manufacturing in China. Nor have they started selling to China.

However, this post isn’t about either of these things. It isn’t about leveraging the Chinese population as a cheap labour force or as a vast consumption market.

It’s about recognizing that in the next few years, Chinese companies are going to go from being domestic giants to becoming global behemoths.

We have a few examples already. Huawei, which has been in the press for negative reasons, is clearly in the spotlight because it’s one of the rising stars of China, poised to become a global leader in cell phones (goodbye, Apple). Many moons ago, Lenovo bought out IBM’s computer business and continues to be one of the big global brands in personal computers and laptops even today. Chinese brand Roewe is the metamorphosized Rover brand that reinvented itself with electric cars. Geely bought Volvo to give itself a global platform. Xiaomi, Oppo and others are expanding rapidly across Asia and Africa. China is pioneering high-speed, long distance mass transportation with it’s Maglev and high-speed rail expertise and starting to export that across the world. Many new areas like AI and alternative energy are already dominated by Chinese companies.

We’ve been reading about Apple’s woes in China recently. What happens when Chinese phone and hardware brands innovate themselves ahead of Apple not just in China, but across the world? We saw Japanese and then Korean cars overturn the US car industry and luxury Japanese cars compete with European marquees like Benz and BMW. How long before Chinese brands start to dominate the West?

Preparing your business to survive and thrive in the Chinese century isn’t just about having a strategy for China any more. It’s about having a strategy to counter Chinese competitors worldwide. Some of the keys to that could be:

  1. Having a strong business and consumer base in China to compete with Chinese brands in their homebase and delay their expansion abroad
  2. Evaluating up and coming businesses in China and striking strategic alliances with them early to profit from their international expansion
  3. Leveraging innovations that win in the competitive Chinese market and launching them elsewhere to block a niche in the market before the Chinese originator of that innovation arrives (that’s a polite way of saying learn from and copy the successes of Chinese brands and business models)

All of which sounds very different from how people thought about China when I first got here – 21 years ago. Which makes me think, while this post is all about China and Chinese brands, India is on its way too – perhaps 20 years slower. Be prepared!