Economist this week

From The Economist Apr 23 2011 printed edition

http://www.economist.com/printedition/index.cfm?d=20110423

Libya - Qaddafi's forces intensified in their siege of Misrata, the city now in the rebel's hands. Western worlds and rebels seek for the more aircrafts from US, but President Obama does not make any decision now, partly because of stigma the country experienced in Afghanistan and Iraq, and partly because of the budget constraint. Some strongly argues that US should involve in the process more, given that the operation in Libya is different from Afghanistan and Iraq, that the operation is humanitarian as well as pragmatic. If I were Mr. Obama, what would I do?

http://www.economist.com/node/18586995/print

Chinese in Africa - China is Africa's biggest trading partner so far. Because of no antagonism due to colonial period and the commitment the workers made, Chinese have gained popularity in the countries. However, in these days, the trend is getting to be a bit different, as seen in the miners' case in south Zambia, where they protested against poor working condition. The Africans' recent criticism toward China may be based on disguised protectionism, or it may be due to the impression that Chinese are hoarding African cheap labor forces. Some politicians are gaining political power thanks to the anti-Chinese movements. What would be the lesson for China, and will Japan be able to replace the Chinese?

Japan - the quickest way for the Tohoku region's revival would be to turn the region into a special economic zone, a free trade area with lower tax rate and immigrant workers. The Economist says it's worth a try given Tohoku's devastation, but I'm not sure if that is the right way in terms of both legitimacy and correctness.http://www.economist.com/node/18586786/print

Stoics of the Japanese, called "Gaman", gained admiration from the world, but it is at the same time obstacles for the drastic changes.

Business - due to the decreasing job seats, internship is getting to be a critical first step into employment. It is unpaid labor, but appreciated for both; employers can measure the capability of applicants, and potential employees can see if the jobs would fit to them. However, recently some say that the unpaid labor is illegal in light of labor code. Should the companies pay for students who actually add almost no value to the firm?

Social science - Crowds are like molecules, but to model the crowd's behavior accurately, the modeling should count the human nature that people behaves different when they're in fully packed places. Dr Moussaid and Dr Sabatier invented a new model including that factor.

Business - Johnson & Johnson, the health-care giant, is to buy Synthes for $20 billion. J&J recently suffers from its bad performance. Recent years have knocked J&J off its pedestal as one of the most venerated companies. It recalled a painkiller, Motrin, but they announced the fact a month later, the fact that represents striking contrasts with what the firm did for Tylenol. The firm shows the dissonance on the takeover deals as well. J&J said to its investor that the firm would buy-back its shares and that no takeover will be made until it solves its internal problems.

Russia & US - the coalition is strengthened these days. Russia became conduit for US on its operation in Afghanistan. Russia was supportive on UN policy towards Iran. The reset of the relationship is not that easy and simple, ans US may need to seek for the better way to democratize Russia through its foreign policy.

Politics - Golden state is under discussion on its voting system. Direct voting system has its virtue, but it does not necessarily means to give the power to people. The direct voting system makes it difficult for minorities to represent their will. Also, the change in political system is tough to reverse; once decisions are made, change in the new system calls for another voting and thus is difficult.

Singapore - the country is transforming into Aisa's top financial center thanks to its ability to take advantage of global financial upheavals. The recent rise was due to the Hong Kong's handover; it accepted many assets newly booked in Singapore and used the opportunity for the growth of asset management business. The country is eager to build the infrastructure to be the finance center: well-thought regulation, lower tax rate, friendly policy toward foreigners, fast internet, etc, all of which are done by government, not out of the laissez-faire.

What makes the Singapore so successful: language, skilled workers, efficient regulation, lower tax rate (max 20%), access (nice airport location), friendly policy toward foreigners, internet system, and, above all, strong leadership to bring all of them about.

Innovator's Dilemma

There are two sort of innovation. One is based on sustaining technologies and another is on disruptive technologies. Sustaining-technology-based innovation just enhances the function of current products. Disruptive one, which is the main focus of the book “The Innovator’s Dilemma”, changes the landscape of the industries.

The principles of disruptive innovation show that when good companies fail, it often has been because their managers either ignored these principles or chose to fight them. Even successful companies with efficient and capable management team are toppled down with the disruptive innovation. See what happened in TV industry for example. Here is the dilemma: large companies, even with the great management team, cannot rationally follow the disruptive technologies, but those technologies are the critical factors in winning new era. The industry just opened by disruptive technologies is too small to enter for giants, too small to analyze properly, and too small to be accepted or highly evaluated by the large number of customers. However, if you are the managers of large companies, you should follow those technologies so that you would achieve sustainable growth in changing business scenes, even though you face difficulties in explaining to your shareholders on what you do with those disruptive innovations.

Dr. Clayton M. Christensen, author of this book, mentions several way for the successful companies manage disruptive technological changes:

1. They embedded projects to develop and commercialize disruptive technologies within an organization whose customers needed them. When managers aligned a disruptive innovation with the “right” customers, customer demand increased the probability that the innovation would get the resources it needed.

2. They placed projects to develop disruptive technologies in organizations small enough to get excited about small opportunities and small wins.

3. They planned to fail early and inexpensively in search for the market for a disruptive technology. They found that their markets generally coalesced through an iterative process of trial, learning, and trial again.

4. They utilized some of the resources of the mainstream organization to address the disruption, but they were careful not to leverage its processes and values. They created different ways of working within an organization whose values and cost structure were turned to the disruptive task at hand.

5. When commercializing disruptive technologies, they found or developed new markets that valued the attributes of the disruptive products, rather than search for a technological breakthrough so that the disruptive product could compete as a sustaining technology in mainstream markets.

It’s been more than 10 years since the book was issued, but the point that Dr. Christensen made is still valid or even getting more crucial than before. Entrepreneurship would be the key to success even in large organizations.

Positioning

The central point in advertisement / marketing is positioning. The purpose of position is to occupy a certain part of potential clients' mind.

Since Al Ries and Jack Trout argued importance of positioning in their book "Positioning", the importance is getting larger as our society sees deluge of information. Nowadays, consumers see too many advertisements. Their minds are like sponges fully soaked with water. It is not easy to add new water into it.

If you are an author, think about your clients’ bookshelf. They have a lot of books in their mind to fill the empty space. The author should think about what sort of book is missing in consumers’ bookshelf, or, in other words, what kind of book could be the one to be called “this is it!”.

How can we occupy consumer’s mind? The authors give us a simple answer: be the “First”. You know the highest mountain in Japan (Mt. Fuji), but less likely the second highest one. You may remember the most-selling book in the world (the Bible) but not the second. To occupy one’s mind, what you sell should be the first in something. If you think your product is not the first, maybe you will be able to find “first” in any particular fields, or sometimes you may be able to create the new field in which your product is the first.

The next point in positioning is naming. You should come up with the name that represents what it is. This is not the time when you can go with the name like Morgan Stanley, Harry Winston, etc. Look at the successful companies in this century: Google, Facebook, Twitter, Groupon, etc. They all represent what they are. By naming, tell your position in the market.

The name should also be unique. If you come up with new product, you need to put the unique name. A good example I think is “MacBook air”. If the name was “MacBook thinner”, it would not be sold like MacBook air.

The theory of positioning can be applied to every field. Successful countries need positioning, and successful politicians as well. Just follow the principle: position yourself in the field where you can be the first, and tell the world where you are.

Aging & Skewed sex ratio

Aging society and the skewed sex ratio are the two main topics in population problem.

To the certain extent, aging of societies is inevitable, requiring changes social system and the way of doing business.

Ceteris paribus, in 2050 2.6 Americans need to support one pensioner, and the staggering figures for France, Germany, Italy and Japan will be 1.9, 1.6, 1.5 and 1.2, respectively. Most say that the best way to cope with the disequilibrium is to make the retirement age raised to 70. There are some virtues in raising of retirement ages: first, the old people will enjoy the increase in lifetime income; second, since the working force increases, the government will see the increase in tax revenue; third, the economy grows thanks to the more working force. To me, increase in the retirement age has additional rationale, given that originally retirement is to enjoy the last days of one’s lives. In the societies with longevity, the retirement age should be adjusted based on the life expectancy.

Users of TV viewer are aging more rapidly than the aging societies. In US, the median age of viewers is around 50. Those median people have their own and fixed tastes, and that is why TV programs mainly target at people with age ranged from 19 to 49 in their promotion. Trends are the same in newspaper readers. In US, 45% of newspaper’s readers are over 55, and in Japan the average is circa 50. Big chunk of their sales is coming from subscription of older people. Same are in the music industry. For many of the companies, the aging is realized as costs, but it potentially is opportunity. Some companies succeed in taking advantage of old people as work force. They have knowledge which would not be depreciated shortly, experience and network. If I were an entrepreneur, I will start my business with more than one elderly person. The faster switch across the industries is mainly due to progress of IT. Younger generation switched their source of information from paper-based ones to internet-based ones faster than the older generation. The transition is unavoidable, and the shakeout of the newspaper firms would be accelerated. In the case of newspaper, only those with strong contents (personally speaking, WSJ, FT and Economists are the ones) would survive.

Another serious issue is skewed sex ratio. In China and India, whose population accounts for about one third of the world population, there are more boys than girls, due to gendercide. Cause of the issue is regulation and economics. China’s notorious one-child policy, together with the weaker economic status and rising education costs, is leading to the tragedy. In China, the ratio of boys to girs is 123 to 100, and the figures for India is 1000 to 914. The skewed ratio would have repercussion effects: human trafficking and rapes will be increased as many men cannot find wives.

Risk of efficiency

Crisis often unveils unexpected connection of the system. Japan's earthquake buffeted the world's supply chain known for its efficiency characterized by the just-in-time delivery system.

Japanese makers have core technologies in many goods. Nihon seikojo dominates market of the pressure container for nuclear plants. Some chemical makers damaged in the earthquake provides special devices for computers and mobile phones. Now prices of those devices are soaring not only because of the lower mid-term supply but also because of its supply chain with low inventory.

The case could give us some insight on the importance of slack. Perfect systems work perfectly in normal days, but when the regime changes it gets significantly prone to the outside shocks. We'd better to hedge some risk, and as finance theory tells to us, the optimal hedge ratio lies between the both extremes.

Second momentum

Acid rain in Schwarzwald (black forests) was the first opportunity for the Greens to gain its popularity. Here they get next one.

Nuclear crisis in Japan brought about byproducts even in Europe politics. In the recent Germany state election in Baden-Württemberg, the state with four nuclear reactors, the Greens now gain the 24.2% of votes and taking control of the government.

Source: http://www.economist.com/node/18485945/print

Even though the contribution of the Greens is limited in changing energy policy (as nuclear reactors in Baden- Württemberg are under federal control), the votes reflect the change in the wind. Obviously the main reason of winning more seats would be nuclear disaster, but the next reason is said to be that the Greens succeeded in appealing to young generations with high education.

Maybe someone in Japan could establish the Greens at this moment.

Unknown unknown

Today life is divided into three parts. Eukaryotes is the most popular one, and then next Bacteria. The third one, tiny and not visible in naked eyes, is archaea which was recognized only in the 1970s. So the striking question is : wouldn’t there be the fourth? Dr Eisen found that both RecA (genes in DNA combination) and RpoB (genes in translating DNA) have one evolutionary branch that really was an unknown unknown. The fact suggests the existence of new life, but not sure under the current circumstances.

As with archaea whose discovery changed scientist' CO2 forecast (since it generates methane), the new life would have significant impact in understanding the world. To me, the implication is not limited to biology : Distinguishing known unknown and unknown unknown is vital to think about all unknowns. The effect of Tsunami on the east part of Japan was known unknown since long before, and we could prepare for it by adjusting tolerance toward the potential risk. However we could not prepare for unknown unknown, which is totally out of the recognition of human being.