Offshoring Jobs Is On the Wane: But Does It Matter?

Reshoring.

What a strange word. But if its basic thesis proves to be true, what a powerful message.

That said, it's a really big 'if.'

The notion is this: offshoring for cheap labor is so 2003. We're into value now. Sure, costs matter, but our analysis of what constitutes a cost and a saving has become more sophisticated. Or so we claim. It isnt just about who can provide the least expensive workforce, its also about skill sets, management, shipping, energy, insurance, financing and reliable business partners. If we have any sort of relationship, your screw-up is my stock price decline.

Foxconn's problems didnt take Apple down. In fact, the financial impact was barely discernible. Initially. But it raised some questions about supply chain management and strategy and competitive advantage. Which, eventually, like now, has caused investors to wonder whether the law of big numbers and bigger problems was finally catching up with the Company That Could Do No Wrong.

But forget tech. In basic manufacturing, consumer goods and their like, a couple of trends have emerged. First, prices and wages have come down sufficiently in the US and Europe to make them competitive. This is not exactly great news for the families trying to live on the stunted largesse of the new reality, but it does mean that the answer to every business question is no longer, automatically, China.

Secondly, technology as an application in production has evened the playing field. Fewer workers needed and those who qualify need to have some attributes other than a strong back and an empty stomach. Which, in the complicated, co-evolutionary way these worms turn, means that western companies or those producing in those locales, are going to have to invest in training. As resentful as they are about added costs, that is going to be part of the price of staying competitive. Higher education budgets are being decimated in the name of austerity, household incomes are down: the only entities with the wherewithal and the incentive to improve performance are the organizations ramping up to meet the new demand. That would be you, corporate world.

Advocates have long maintained that training is an investment, not a cost. This could be good news for productivity, employment growth and GDP. If it's done right. We are now going to see what the return may be. JL

The Economist reports:

The outsourcing of jobs to faraway places is on the wane. But this will not solve the West’s employment woes.

Emergency Room Visits Tied to Energy Drinks Doubled In Past Four Years

Dude.

Yeahsureitmaybebadforyoubutwhocanaffordtoignoretherushitprovidesespeciallywhenyouvebeenoutpartyingorupallnightwatchingrerunsofportlandia.

The reality is, we are addicted to addiction. We want our fixes. There may be a huge subset of people who are spinning or vegan or cultishly embracing CrossFit but who has the time or money or attention span to keep it up?

So we go with the times-sensitive and affordable alternatives: excess energy in a bottle or can. It might be a fad or it might be a reasonably pragmatic response to the need to hold two jobs or the fear of losing one. Either way we understand the trade-offs.

Now, we might be placing more faith in the regulatory authorities than is warranted, given that our society and its elected representatives are pounding on them to lighten up so businesses can sell more of whatever's selling so that it might create more jobs in Austria or Bangladesh or someplace, but they will, eventually, get on the case, especially if a couple of people die. Stuff happens when you're pushing the envelope.

In any event, point taken. Gotta go. Later. JL

Associated Press reports:

A survey suggests the number of people seeking emergency treatment after consuming energy drinks has doubled across the US during the past four years, in the same period in which the supercharged drink industry has surged in popularity in convenience stores, bars and on college campuses.

Measures That Mislead: False Efficiencies and the False Hopes They Beget

Privatization is frequently touted as the solution to governmental budget ills. A dose of ruthless private sector efficiency, it is believed by some, is exactly what unproductive service providers need.

That this point of view tends to be espoused primarily by those who have never worked in the private sector or by others who either inherited their wealth or work in industries prone to monopoly may be indicative of its efficacy. But the notion retains support, if rather more episodic than fulsome.

The reality is becoming clearer, as the global economy settles in to a period of adjustment following a generation's worth of intense cost-cutting competition. What research is indicating, as the following article explains, is - not surprisingly - business does some things better than government and government does some things better than business. This may come as a surprise to those who think government can not do anything right and business can not do anything wrong, but anyone who has worked in a downsizing company or a corporation going through post-merger-integration will nod knowingly.

It is increasingly important that countries in North America and Europe (and their leaders) get this right, because the economies in which they labor can no longer afford ideological flights of fancy. Global supply chains, allocation of capital and interactive labor markets have made more productive identification of proficiencies essential to competitive success.

Politicians have become enamored of financial solutions because they are relatively simple to understand (if not to practice, as rude experience has taught)and because the gross margins - literal and figurative - pay for a lot of campaigns and fact-finding missions. But in the end, both the voters and the investors will go with what works rather than what is hoped because it makes sense and because their lives and livelihoods depend on it. JL

Eduardo Porter reports in the New York Times:

As governments of all stripes have set out to privatize state-owned enterprises and outsource services — what does the private sector do better than government, and what does it do worse?

Long dormant in the United States, the debate has acquired new urgency as governments from Washington to statehouses and city halls around the country consider privatizing everything from Medicare to the management of state parks as a possible solution to their budget woes.

How Apple Sets Its Prices

To bargain is human.

Which is one of the reasons why Apple has been able to maintain its other-worldly aura.

As the iconic company's stock price comes under attack and questions are raised about its products, its strategy and its leadership, one thing has remained certain: you wont find Apple products deeply discounted. Anywhere.

We know about Apple's control-freak tendencies, and price is one aspect of it. As the following article explains, the company uses fairly simple tactics to retain pricing discipline. The impact reinforces the reputation for quality and good value at any cost which Steve Jobs and his successors so prized.

If you claim to make a superior product, it helps to sell it that way. Permitting rampant discounting would undercut not just profits but the notion that Apple is different.

It has worked so far, but the challenge the company now faces has much to do with the Law of Big Numbers: the larger a business gets, the more difficult it becomes to achieve meaningful increases in revenues and profits. The baseline is simply too high.

To continue to grow at the rate investors expect - and demand - Apple will either have to create new categories, a challenge with which it is quite familiar, or it will have to expand the market it serves. There has been speculation about offering a lower-priced version of the iPhone or iPad. There has also been lots of debate about the introduction of AppleTV. The question is whether familiarity - and the difficulty of creating sustainable competitive advantage is possible in existing categories.

Whatever course the company chooses, past experience suggests that setting firm prices and policing retailers to make sure they stick will be a key part of the strategy. Consumers have gone along. But as Microsoft and others have learned, competition is relentless and the search for meaningful alternatives at more affordable prices is ceaseless. JL

Marco Tabini reports in MacWorld:

Comparison-shopping for new electronics can be fun and addictive. With a bit of patience, some luck, and an eye for good deals, you can find everything from TV sets to hard drives at a significant discount. In fact, in our economy, discounts are one of the primary mechanisms that retailers use to compete against each other.

But all bets are off if you happen to be in the market for a product made by Apple:

Mobility, Growth and the Access to Affluence

We know mobile dominates the present and will only consolidate that position in the future. The statistics are daunting: essentially more of everything is now being done by mobile device than by computer - laptop and desktop combined.

The degree to which companies are succeeding or failing - from Intel's CEO taking early retirement to Apple and Samsung battling it out for global preeminence to Microsoft trying to figure out how to get back in the game - all hinge on the degree to which they have positioned themselves to bend mobile to their will - and their future profits.

There is, however, another aspect to the equation that has gotten less attention but that may offer the prospects for future growth in macro terms as well as tech. And that is the degree to which the mobile phone has become the economic lifeline for those too poor or disconnected from reliable services to take advantage of computers in the traditional sense.

Nicholas Negroponte of MIT's MediaLab devoted years to developing an inexpensive 'world computer' that, for a few dollars, would provide internet access using inexpensive components and solar or 'free' sources of power. It never quite caught on, both because those already in the business werent so sure how they felt about sponsoring their competition and because distribution through corrupt or merely inefficient emerging governments was just too hard. But it turns out he neednt have worried. The mobile device is providing that access and possibly in a way that makes more practical sense than did a small, green, solar-battery-powered, plastic laptop.

The implication is that by making access available to the internet, the mobile device is making access to affluence possible in ways that may stimulate demand in places where it never seemed economically feasible. The potential impact on commerce, on wealth accretion, on life style and life expectancy may help drive the global economy back towards prosperity. Humans' inclination and ability to communicate with one another, as basic an instinct as walking upright and the opposable thumb, could be the key to the next economic cycle. And we will all be the beneficiaries if it happens. JL

Andrew Leonard comments in Salon:

Some eye-popping statistics from the digital marketing agency Walker Sands underscore the rationale for my end-of-year piece, “The Year Everything Went Mobile.”

According to Walker Sands 23 percent of total global website visits came from mobile devices in December of 2012. That’s up from 17 percent in the third quarter and 6 percent in January 2011

Do IPOs Stifle Startup Companies' Innovation?

Monetizing innovation.

That's what entrepreneurs - and their investment bankers and venture capitalists - have always claimed initial public offerings make possible. Funding new ideas, encouraging experimentation, rewarding risk takers.

But a new study from Stanford Business School - and they oughta know, right? - says the opposite. That going public distracts, disengages and dis-incentivizes.

The research suggests that newly rich entrepreneurs, despite claims about their superior intelligence and motivation - react to their recently-acquired wealth the way lottery winners and athletes with upwardly revised contracts do: their performance declines.

All too often, they begin to focus on how they are going to make up for all the 'sacrifices' they were forced to endure on the way up - and they become too obsessed with what others, both inside and outside the company, are earning compared to them rather than focusing on developing the next set of products that will grow the business.

It's an old story. Envy, hubris, paranoia. Homer, Herodotus and Shakespeare would recognize it immediately. And there is a practical explanation for the disconnect: running a public company under the scrutiny of professional investors and regulators is much more difficult than working quietly with a few friends and some people who believe in you. There are reports to fill out, rules to be obeyed, other people's expectations to be met.

Our own research in the early 2000s on IPO success determined that despite the popular mythology about young guys in a garage somewhere in Palo Alto and environs, the majority of financially rewarding IPOs were older companies with more experience, more employees and bigger revenues than the public would have one believe.

The implication for investors and entrepreneurs is that managing the tension between continuing to create and providing a return on investment is difficult. Which is why selling out to a 'strategic buyer' who has the resources to take it to the next level is becoming a more common tactic. Success is sometimes harder to maintain than failure. JL

Addy Dugdale reports in Fast Company:

If your young, hip 'n' happening tech firm is Superman, then going public is its Kryptonite.

A study by a Stanford academic has concluded that a firm's IPO can put the lid on creativity and innovation.

Those Magnificent Men in Their Flying Machines: Most Boeing Dreamliners Sold to Emerging Markets Airlines

It's been a tough couple of weeks for Boeing. The manufacturer's Dreamliner aircraft, the computer-designed, globally assembled plane finally released years behind schedule and just beginning its hoped-for decades of service has been plagued by a series of disconcerting fires related to its batteries.

This might be a small glitch - though the definition of small at 30,000 feet is probably open to interpretation - or it might be evidence of deeper problems.

But as the following article explains, it seems that while attention has been focused both on the US Federal Aviation Administration and on Japan's ANA airline, the majority of planes in service are owned or leased by airlines in emerging markets.

Which raises some interesting questions about trade incentives, business development and the intersection of safety and commerce. It is no secret that Boeing and its primary competitor, Airbus, provide purchase decision encouragement to potential customers, especially when initially attempting to establish the market for new planes. Airlines in emerging markets are particularly susceptible to these emoluments because of their chronic need for cash, instability, competitive disadvantages - and, just in case we werent clear - their need for cash.

The challenge is that these companies are also probably least capable of identifying and fixing such problems on their own. Which raises a host of questions about the efficiency of global sourcing for such complex and expensive products, particularly when host governments insist that in return for orders, some technology transfer takes place as part of the deal. We might well argue that given the all the technological glitches being passed along with the purchase, the purchasers are not actually getting much of a bargain. That pesky safety issue, however, and the financial implications of liability do raise questions about whether, in pursuit of market share dominance, taxpayers in the US and Europe are being asked to invest in export financing schemes of decreasing value to them and to the plane builders' customers. JL

Rob Minto reports in the Financial Times:

While most of the coverage of the grounded Boeing 787 Dreamliner has focused on Japan and the US, the problem is worldwide, from Poland to Chile (via Ethiopia).

So who has the aircraft on order? Which airlines have already got them – and how big are their fleets? In fact, of the airlines that taken delivery of Dreamliners, most are in emerging markets.

Consumption Convenience: The End Game

We might start by stipulating that the lives of many, if not most denizens of technologically advanced and economically developed countries are not exactly hard. At least by historical standards. But who cares?

For reasons that have primarily to do with finding ways to sell more, convenience has emerged as the driving force of the consumer economy. Make it easy, make it fast and, if possible, make it frictionless.

We have voted with our feet, thumbs and wallets. The tallying is done and the winner is whatever makes our lives as simple as possible. We will even pay more for the privilege, though we like to be convinced we are getting a deal, even if it's illusory.

The reasons for this may have to do with the explosion of choices available. While technology embraces, as one of its advantages, the saving of time, it does so in a way that can require thought, contemplation and analysis. All of which we appreciate but resent. Just do it for me, the trends suggest. Figure me out. Understand what I want and give it to me. Technology expanded our knowledge and options to the point where they became overwhelming and, frankly, inconvenient. So we are now attempting to limit them.

Will this last? Will informed and engaged consumers push back, demanding more say in how their choices are framed? Maybe. Some day. But we wouldnt bet on it anytime soon. JL

Zuobin He comments in Advertising Age:

There seemed to be no reason for Apple to launch a smaller version of the popular iPad after its enormously successful launch. But the secret sauce of Apple's products has always been to create convenience for consumers.

The Value Riddle Goes Public

That old black magic.

Glenn Miller and Frank Sinatra may have popularized the concept in the 1940s; 'that old black magic has me in its spell, that old black magic that you weave so well...' but they had nothing on today's accounting profession.

The issue is the valuation of what are euphemistically referred to as 'hard to price assets,' - like brands, customer lists, employee retention percentages. Even somewhat more tangible figures like pension fund values and 'private investments.'

The challenge, alas, has nothing to do with magic and everything to do with a refusal to acknowledge that accounting conventions developed 500 years ago, then standardized during the height of the industrial revolution might no longer provide the degree of specificity required in a post-industrial economy dependent on the exchange of ideas, concepts, theories and related ephemera.

The global economy is increasingly driven by intangibles not found on balance sheets and income statements. Not because they dont have value - but because the powers that be can not agree on a set of comparable factors and methods acceptable to all those to whom they may apply. Institutionalization of these notions might hurt the energy industry and help the software industry - or vice versa - not that anyone is trying very hard to find common ground. And the accounting profession is perfectly happy to play along because they can make money from the confusion.

The reality is that intangibles now account, conservatively, for upwards of 70% of most global corporations market value. The amounts are too large to be ignored and the factors too basic to be sloughed off as immeasurable. This is the present and the future of business value creation. That regulators are beginning to shine an unwelcome light on the dark recesses of the obscure practices that govern these processes suggests the time is well past for companies themselves to take more responsibility for providing solutions. Given the tarnished recent history of attempts to value 'easy to price' assets, new impetus from outside the intellectual confines imposed by the current gate-keepers may be both welcome and salutary. JL

Emily Chasan reports in the Wall Street Journal:

As many companies kick off their annual audits this month, they are taking great pains to document how they arrive at the values they put on their books for hard-to-price assets like thinly traded securities, pension-fund assets and customer lists.

That’s because regulators have warned that companies and their auditors have been relying too heavily on figures provided by third-party valuation advisers and pricing services without fully understanding how they were calculated.

We Are Losing the War Against Email

At this rate, by 2020 it will be faster to send and receive snail mail than it will to do email.

Which is pretty funny. But the growth in volume suggests that email usage will continue to grow at 4-5%, above the rate of inflation. Given everything people with jobs are expected to do, it is impossible to keep up.

The interesting question is why. Computer usage is down. Texting and its various offshoots are arguably more popular. The presumptive reasoning is that because it's free, and because people in organizations like to cover themselves by copying half the office on emails of only passing consequence, the cost-benefit of sending rather than not weighs heavily towards inclusiveness.

But experience suggests there may be another factor responsible for the growing volume. It is that as a society we value the distance that texting or emailing provides. People text more than they talk on their mobile devices. To the point where calling them phones seems a misnomer. We like the emotional cushion that remove provides us. It enables us to avoid discomfort and controversy, to keep our feelings at a safe distance from those who may hurt them or whose own feelings we may rub wrong.

The problem is that texting is inconvenient for anything other than the most basic messaging. It is not efficient or effective for delivering the more subtle and comprehensive disquisitions sometimes required for modern adult interaction. So we pour our feelings, intellect and strategic imperatives into email instead of picking up the phone or scheduling a meeting. Message delivered - and we didnt have to listen to all those counter-arguments that would just annoy us - and slow us down.

So, the challenge is cultural and societal. We want what we want. We sort of like socializing but we are no longer have the patience for - or are particularly good at - sharing. We hide behind our devices both to get our way and to avoid the unpleasant. Like every form of communication, it comes with a cost. In this case, email volumes are up and the ones sent or received often require a more thoughtful and time-consuming response assuming we wish to avoid escalating to an actual conversation.

We have done this to ourselves - by choice and preference. And the irony is that we may eventually revert to those 19th century institutions - the conversation and the mail - because we will have abused every other 'improvement' we can think of. JL

Gideon Lichfield comments in Quartz via Mashable:

Cue, an app for organizing your online personal information, collects data about its users and found that it now takes people around 10% longer, on average, to answer their email than it did just one year ago.

For Dead Brands, the Path to Resurrection Is Often Torturous

Seems like a no-brainer. For cents on the dollar, buy a 'heritage brand' that has fallen out of favor. Resuscitate it with an infusion of marketing moxie and a twee, latter day sense of style and irony. Boost sales, then sell to some global behemoth looking to fill a gap in its shelf space portfolio.

But of course it's never quite that simple. There are, for starters, all those legacy brands that managed to keep selling product. Who, despite your appeals to some nascent sense of historical affiliation will simply refuse to bow out of the way. Then, there is the fact that the brand faltered for whatever reason. Those who remember it most fondly may no longer care - or be in a financial or geographic position to add it to their weekly list.

The reality is that a brand is a promise to the consumer. And when a brand is withdrawn, the promise is broken. We live in a society where blame is frequently frowned upon and rejuvenation a sign of moral largesse. But the harsh economics of global marketing and distribution militate against anything that requires too much effort or investment.

It is conceivable that residual value makes the resuscitation of a once-great brand more cost-effective than starting from scratch. Those legacy values and associations may be as much a drag as a spur to sales. And niches may require as much work as scalable initiatives.

We are conditioned to accept that newer is better, especially in a society as predisposed to convenience as this one. Which is why the image may have more value hanging on a wall as a symbol of something lost than sitting on a shelf as a fact of daily life. JL

Adriana Gardella reports in DealBook:

At a time when bankruptcy auctions are filled with sad tales of beleaguered brands, snagging a well-known name for pennies on the dollar can seem like a sure bet for ambitious investors.

Facebook's New Graph Search Makes It Official...The Product Is You!

Facebook is becoming the Brittany Spears of Tech: "Ooops, I did it again," being their shared mantra.

The company desperately seeking salvation has entered the search business, which might actually be a smart move. The theory is that your network of friends and likes may provide a more actionable set of recommendations than some alien algorithm. Now, your friends may be lovely people and lots of fun, but it is not yet apparent that their taste in shoes or bistros or personal coaches is above reproach. The theory is that you may take their advice anyway. Yes, it's just a theory.

The problem, or to be more specific, the recurring problem, is that Facebook's disregard for its members' attitudes has become a constant source of friction with...its members. What's yours is theirs and what's theirs is theirs. You dont really feel like sharing? Tough noogies, read the fine print of your contract - assuming you know where to look for it.

The company is absolutely determined to monetize everything associated with it, especially the stuff you provide for free, even as you innocently believe it offers a personal window on your soul. The conflict arises from that fact: you think Facebook is providing a service you can personalize and 'own.'The company believes you should pay for the privilege of membership but since they can't charge without losing most of their billion-plus friends, they have to mine for value in other ways.

The reality is that Facebook's founders created a mighty platform, but one about which members feel rather more proprietary than they do about say, LinkedIn, or Twitter. Crossing that proverbial chasm has not yet been figured out. Facebook keeps trying, but with limited success since every time it launches a new initiative, it alienates someone. Or rather, lots of someones.

In this case, a noble experiment has been launched, but again reliant on the participation of those who belong - and without so much as a 'by your leave.'And at some point, like now, people are starting to ask what's in it for them. Doesnt their contribution to content have a value for which they should be compensated, even if it is only with cents-off coupons at Starbucks? JL

Jonathan Baskin comments in Forbes:

With the announcement of Graph Search, Facebook has confirmed what we’ve known all along: we users aren’t there to enjoy content as much as we are the content. That means we’re the products it intends to monetize.

Brand, Bravado and the Cost-Benefit of Confession

Gamification.

Computational power, simulations and widespread cynicism have given us the ability to identify, measure, modify and manage expectations and outcomes. We test, refine and resubmit. We control the variables, normalize the outliers (both human and quantitative), weight the impacts and build a strategy around the optimal outcome.

Brand and reputation are linked. In many cases, they are dependent on each other. When you are a celebrity - and value that status in every sense of the word - then ups and downs are part of your life. In fact, as the quote below suggests, some cyclicality and variation are good for business. They build attention. And providing the opportunity to grant redemption enables one of our favorite passtimes.

No likes a goody-two-shoes. Give us your tired, your failed, your besmirched and your humiliated; the wretched refuse of our public relations culture. Let us hold their futures in our hands and feel good about ourselves for forgiving their manifold trespasses. Which then enables us to forgive ourselves.

As the following article explains, Lance Armstrong has embarked on his campaign of resurrection. His brand and his wealth are inextricably tied both to his athletic prowess and, perhaps more importantly now, to his charitable good works. He is a cancer survivor and has raised almost half a billion dollars to support oncological research. That's his gambit - and the key to his future. When he retired several years ago he was already too old to compete in cycling, so no loss there. But he has to turn the liar/cheat thing around. The only way to do it is to his admit his fallibility, acknowledge his moral weakness - and throw himself at our mercy. Which we, the public, will almost certainly grant.

There will be some eye-rolling about roping Oprah into this (speaking of brands that could use some rebuilding)and some outrage that he wants what amounts to a quickie revival. But the 24/7 communications culture demands fuel. Ratings are only as good as their last uptick. So the entire media industry doesnt just enable this because it has lost its moral compass: it's future depends on such fables because the audience demands them. Interestingly, Oprah's initial comments suggested that he had not delivered the fulsome confession she thought appropriate; but sticking with that narrative might have turned people off and damaged the ratings, so her expression of unease was quickly walked back. She now says he confessed - and they will both ride that to the bank.

Are we too cynical? No, we are realists. We dont expect too much from our heroes anymore. We know they, like us, are fallible. We accept the bravado because we like the brand. The confession cost-benefit equation is all benefit. And we'll pay for access to it. JL

Matt Seaton comments in The Guardian:

"I cant help thinking that the cheats win on the way up and the way down."

Breaking Up Is Hard to Do: Intel and Microsoft Split

Wintel, the partnership between Microsoft's Windows and Intel's chips, was arguably the most successful business collaboration of the modern era.

Intel Inside was the best, and possibly the only, slogan to define the power, intelligence and potential of technology on contemporary society and the economy that supports it. Windows was, for most of that time, the only introduction to computer usage with which most humans were familiar.

Wintel dominated the competition even as it ushered in The Computer Age.

And now it appears to be over. As the following article explains, the pressure of mobile phone and tablet computing as well as mobile commerce has driven the former heavyweight into its corner, too battered, possibly, to ever reemerge as a contender. Intel's current CEO is taking early retirement. Microsoft's CEO hangs on, under siege but defiantly demanding one last chance (there have been about a dozen of them over the past few years) to redeem himself and demonstrate that he is a worthy successor to Bill Gates and not just a lucky bureaucrat who got to manage the decline of something bigger than he was.

To survive, the two companies have apparently determined their chances are better alone than together. They are seeking new partners, uncoupling the decades-long partnership that defined each of them. Whether the split will provide a solution or merely heighten the profile of the myriad challenges is subject to debate. Both are formidable enterprises with proud and rich histories. But like so many before them, they clung too long to what worked rather than taking the risk that the leap to a new future might be optimal - and least threatening - path.

Acquisition or merger seems a likely end for either or both. But this is truly the end of an era - and worthy of note. JL

Dana Blankenhorn comments in The Motley Fool:

For decades, the most successful team in technology was Microsoft and Intel. Microsoft defined the Windows software, and Intel designed the x86 chips that software ran on. Brad Pitt and Angelina Jolie were Brangelina, Microsoft and Intel were Wintel.

But Microsoft's failure with Windows RT, the new interface introduced with Windows 8, to give it play over Christmas in tablets and phones has caused a rethink, and an important schism.

Is the Patent Bubble Deflating?

2012 was the year of the patent. Kiss it good-bye.

After multi-billion dollar legal verdicts, 'frenemies' consorting to gain advantage and everyone in the tech world plotting intellectual property strategy, the early signs in the new year are that MAD (mutual assured destruction) has now had the same effect it did in geopolitical brinksmanship: stasis.

The vast sums invested and the armies of lawyers deployed succeeded in...well, creating the legal equivalent of World War I's Western Front: miles of deeply entrenched adversaries, none of whom have been able to gain long term strategic advantage. Apple 'beat' Samsung - but the latter is winning the mobile market share battle. Google and Amazon and Microsoft and Facebook are all beavering away to claw some sort of intellectual high ground from each other - but while they were doing so - or perhaps, precisely because they were doing so - the site of the battlefield shifted.

The nature of latter-day success in tech has always been collaborative. Sharing credit and profit was always the optimal strategy because the advances were cumulative, iterative and cooperative. The components were spread across a vast economy, the brains working on them simultaneously were never in isolation and the economic benefits to sharing always outweighed those to going it alone. Even Apple, the Lone Ranger of the tech border wars, was more than occasionally forced to buy a company or technology it hadnt been able to create itself.

The last time this sort of 'patent whatever thought first pops into your head as you wake up' mania hit was at the peak of the dotcom bubble. Ten or twelve years later, Apple's stock is collapsing, Dell is considering going private (again) and RIM may actually be stabilizing. This suggests that whatever gains are to be realized have been achieved for the immediate future. Venture funds are consolidating. Apps are cheap and so is access. Like any gold rush asset, intellectual property will return to its role as an obscure but important, if not sexy, corner of the global economy. Where it probably belongs. JL

Theresa Poletti reports in MarketWatch:

There are some signs that wireless patents are losing steam as both legal weapons and valuation boosters.

Brain Scans Show Entrepreneurs Do Think Differently

The brain engages primarily in two approaches to problem-solving: exploration and exploitation. One involves seeking alternatives, the other focuses on harvesting what you already know.

A joint research project by the neuroscience department and business school at MIT found that entrepreneurs were quite different from the rest of the population. Were they more exploitative or more exploratory? One can imagine rational and passionate arguments on both sides of that question, probably based on ones biases and experiences with entrepreneurs and entrepreneurialism.

The answer, however, was not what many expected. What differentiated entrepreneurs was their almost equal use of both sides of the brain, meaning that they pursued both exploration and exploitation to achieve their goals.

The implication appears to be that the creative, competitive and logical impetus for business success demands an open, wide-ranging approach to problem-solving. Raising money, creating new products or services and making them ready for market requires multiple skills - and a tolerance of alternatives that might not originate with the individual in charge. This model supports a focus on success over dogma or doctrine.

While the research was designed to understand entrepreneurs specifically, the findings may be useful to managers in any organization who seek success in a complex and competitive economic environment. JL

Anya Kamenetz reports in Fast Company:

A brain scan study at MIT suggests that entrepreneurs are more likely to use both sides of their brains when making decisions.

The Genius of Samsung

Genius is an anthropomorphic term. We assign it to those who mirror our personal images of exceptionalism. And we tend to be rather culturally biased about it.

Hence, the cult of Steve Jobs, of Silicon Valley and of western technological prowess generally.

So the achievements of companies like Samsung, from Korea, of all places, challenges our notions of success. As the following article explains, however, Samsung - and the fact that it is Korean based - is neither an accident nor a feel-good exemplar of serendipity.

Korea may be the most net-centric, digitized society on the planet. Psy's billion+ -viewer Gangnam Style YouTube sensation is due both to the ironic but catchy tune - and to the digital dexterity of his supporters. Samsung, similarly, has had several generations to grow, learn, adapt and master the elements of global business dominance. It's relatively small, but secure base, gave it government support, a talented, dedicated workforce - and the initial absence of competition that allowed it to experiment without severely negative consequences.

One of the key lessons the company has learned is that failure is cheap. New technologies in a global market are constantly evolving. Building on past successes and failures spreads the cost over a broad base of products, each of which is the lineal, genetic successor to its predecessors. This lessons costs and increases the chances for eventual hits. The achievement of its Android-based Galaxy line is representative of this approach.

The point is that we have, as a society been conditioned to look for evidence of genius in break-through products. But there can only be so many of those. It may well be that the genius of processes like those pioneered by Samsung will prove to be more significant and more profound. JL

Farhad Manjoo reports in Slate:

How the biggest tech company in the world got that way.

Prediction and the End of the Productivity Paradox

The big knock on computerization initially was that businesses were investing tremendous sums in new machinery or devices but had difficulty demonstrating what they were getting from it. Productivity. Profitability. Full spectrum dominance. All proved elusive. At first.

No one questions the importance of computers anymore, though most managers would probably be hard-pressed to describe exactly what benefits they have wrought. Funny how little some things change.

We now look at mobile and social and big data and The Cloud and we sense that we can not live without them - but we are having trouble articulating what, exactly, the benefits will be. And perhaps more to the point, when they kick in.

The history of technology adoption cycles tells us that benefits are often hard to identify at first. Water power, electricity, automobiles, telephones, computers. All changed the world around them, but few could have predicted how it would all work out.

The secret, as it were, turns out to be in the process. As the following article explains, what technology does is speed up the process of evolution by enabling simulation. This gives organizations the ability to more quickly - and less expensively - experiment with alternatives, eliminating those that do not appear to offer optimal solutions to the problems the enterprises face.

Knowledge and speed encourage simulation which, in turn, stimulates more accurate predictions. The resultant process shortcuts save time and money by reducing wasted resources and misplaced effort. In effect, the ability to simulate and therefore predict winning solutions is the answer to the need for heightened productivity.

Every new development comes wrapped in a web of paradoxes. We can guess at the value of the innovation, but history teaches us that we are frequently wrong. Not that the latest and greatest dont have any value, but that its optimal application may not become apparent until we have had more experience with it. And until the products and services that emerge in co-evolutionary response have had time to better frame the opportunity it presents.

Every new development - technological and organizational - can and should now be viewed through this prism: how it enhances our ability to more accurately predict the future in a shorter time frame. JL

Greg Satell comments in Digital Tonto:

In 1982, Steve Jobs first made the cover of Time magazine, where he was celebrated as the 26 year-old college-dropout-wunderkind who created the personal computer industry and made a fortune in the process. It seemed like a new age had dawned.

Unfortunately, tangible results were frustratingly hard to find.

Holiday Catalogue Sales Crush Social Media

Social consciousness has its limits. Not the do-gooder type, but the friends and likes variety.

The numbers for the holiday selling season are in and if you are a social entrepreneur they are, well, embarrassing. Old school romps.

By which we mean that sales attributed to traditional catalogue distribution far outweighed those generated by social media. This is not to say that Facebook, Twitter et al should be ignored or abandoned, but their managements have not yet found the model that drives sales, even during a highly promotional sales-conscious period like December.

Perhaps the even more important lesson is that traditional forms and platforms retain significant appeal, especially for older consumers, meaning that they will continue to generate business far beyond what has come to be perceived as their useful life. Which, come to think of it, may say something about the entire economy and its demographic demarcations. JL

Giselle Abramovich reports in Digiday:

Despite all the hype about the potential for social media to influence consumer purchase decisions, the traditional paper catalog influenced more holiday shoppers than Facebook, Twitter and Pinterest both online and in-store.

The Digital Kingdom

Disney has always been the road grader of the Convenience Economy. Bulldozing through the challenges of enticing visitors, then managing the lines, increasing the number of contact opportunities to enjoy - and buy.

So the only question that arises in learning of the company's plans to effect a 'digital wallet' approach to the various Disney Experiences is wondering what took them so long.

There is for any perfectionist culture like Disney's the desire to 'get it right.' And to do it 'The Disney Way.' The problem - and the opportunity cost - arise from the old Clausewitzian warning about the perfect being the enemy of the good.

In the interim, while they experimented, market share was lost. A generation conditioned to raise any image they wanted on their personal baby iPad would simply no longer stand for hour long lines in the hot sun to see something that might be less diverting than that which their moms were carrying in their Tinkerbelle backpacks.

Now that it has arrived, the new technology will enable the company to enhance the visitor experience in theme parks, retail outlets - and at home. It will also permit the company to capture even more data than its previously impressive initiatives had yielded. This is the future of commerce, with all of its attributes and threats. It is possible that Disney, like others before them, will abuse the privilege of access to personal information. That they will become too familiar and intrusive. They claim to be aware of the threat that poses - but it is dwarfed by the threat from Visa and American Express and Verizon and Google and Amazon, all of whom are chasing the same consumer with overlapping offers.

It is not clear which combination of alliance partners will ultimately prevail, but Disney had to get into the game if only to see who its most competent competitors were. May the best code-reader win. JL

Brooks Barnes reports in the New York Times:

Imagine Walt Disney World with no entry turnstiles. Cash? Passé: Visitors would wear rubber bracelets encoded with credit card information, snapping up corn dogs and Mickey Mouse ears with a tap of the wrist. Smartphone alerts would signal when it is time to ride Space Mountain without standing in line.

Fantasyland? Hardly. It happens starting this spring.

The Crisis of the Middle Class and the Threat to American Power

Median 2011 income in the US was $49,103. Which doesnt sound like a bad deal in a lot of places around the world.

Adjusted for inflation, however, that is less than the median in 1989. The implication, is that average and lower-than-average Americans are not living as well as they or their parents and grandparents did a generation ago. This, as the following article explains, is not because Americans have become lazier. The data show that they are working harder and that it now takes two incomes to support a lifestyle for which one used to be sufficient.

Many will cluck their tongues and say what a shame that is for 'them.' The problem, however, is that this decimation of living standards has rendered all of 'us' like 'them.'

American power has been based on a socio-economic proposition. There was always inequality but even those at the bottom usually generated enough to support themselves, however difficult it may have been. This grand bargain enabled the establishment of surpluses that funded successful wars, business dominance, innovation and a middle class lifestyle that was the envy of the world.

The elimination of that surplus in the name of efficiency and austerity has reduced America's demand on the world's products and attention. Many people around the globe still learn English in school, but Chinese is the language with the most impressive growth rate.

The US has lived its values: the power of the marketplace, untrammeled access to success through education and hard work, but that confidence was based on an assumption that may no longer be valid; that the US would always find a way to prevail. The historical good fortune that left the US the last economy standing in 1945 had lost its power thirty years later. The ability to wear those values proudly was paid for by monopolistic economic advantage whose value declined as competition supplanted complacency. Without those margins, the money for schools and roads and aircraft carriers disappeared.

Many in the US continue to believe that a way will be found again. As it always has. But unless policies are designed to be consistent with reality rather than ideology and hope, rewards will flow to the few whose preeminence will soon disappear like that of those in the middle who sank before them. JL

George Friedman comments in Stratfor:

The United States faces a potentially significant but longer-term geopolitical problem deriving from economic trends. The threat to the United States is the persistent decline in the middle class' standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power.