More on globalization, or "WTF?"

Before I begin this week's (and the year last, thank God) sermon, let me share this very interesting list I found on yahoo (who knew?) news today -

Being both an economist and an historian, it seems to me that this recession will be something unprecedented. Keep in mind my raving about how physical "things" are being replaced by virtual "stuff".... (BTW, all bolds, italics are mine)

One reason is that that there was no Internet or mobile technology in the 1930s. That means individual people and companies have very low-cost, high-efficiency alternatives for doing a wide range of activities. That will accelerate the demise of those things fated to be replaced anyway.

Here are 10 things that I believe won't survive the recession.

1. Free tech support
The practice still employed by some companies of paying humans to answer phones and solve technical problems with hardware or software purchased for consumers will become a thing of the past. PCs, laptops, and hardware peripherals, as well as application software -- these categories will be purchased like airline tickets, with price becoming the sole criteria for many buyers. In order to compete on price, companies who now offer real tech support will replace it with message boards (users helping users), wikis, wizards, software-based troubleshooting tools, and other unsatisfying alternatives.

2. Wi-Fi you have to pay for
Everyone is going to share the cost of public Wi-Fi because the penny-pinching public will gravitate to places that offer "free" Wi-Fi. Companies that charge extra for Wi-Fi will see their iPhone, BlackBerry, and netbook-toting customers -- i.e., everybody -- taking business elsewhere. The only place you'll pay for Wi-Fi will be on an airplane.

3. Landline phones
Digital phone bundles for homes (where TV, home networking, and landline phone service are offered in a total package) will keep the landline idea alive for a while, but as millions of households drop their cable TV services and as consumers look to cut all needless costs, the trend toward dropping landline service in favor of cell phone service only will accelerate until it's totally mainstream, and only grandma still has a landline phone.

4. Movie rental stores
The idea of retail stores where you drive there, pick a movie, stand in line, and drive home with it will become a quaint relic of the new fin de siecle (look it up!). The new old way to get movies will be discs by mail, and the new, new way will be downloading.

5. Web 2.0 companies without a business plan
The era when Web-based companies could emerge and grow on venture capital, collecting eyeballs and members at a rapid clip and deferring the business plan until later are dead and gone. Yeah, I'm talking to you, Twitter. Sand Hill Road-style venture capital is shrinking toward nothing, and investors in general will be hard to come by. Those few remaining investors will want to see real, solid business plans before the first dollar is wired to any startup's bank.

6. Most companies in Silicon Valley
Tech company failures and mergers will leave the industry with a low two-digit percentage (maybe 25 percent) of the total number of companies now in existence. Like the automobile industry, which had more than 200 car makers in the 1920s and emerged from the Depression with just a few, Silicon Valley is in for some serious contraction. The difference is that the auto industry ended up with the Big Three, whereas the number of tech companies will grow dramatically again during the next boom.

7. Palm Inc.
Elevation Partners, which has among its principals U2 lead singer Bono, pumped a whopping $100 million into the failing Palm Inc. this week.

The idea is to give the company time to release its forthcoming Nova operating system, which will take the cell phone world by storm and give Apple a run for its money. It would have been far more efficient, however, to just flush that money down the toilet. With the iPhone setting the handset interface agenda, BlackBerry maker RIM kicking butt in the businesses market, and Google stirring up trouble with its Android platform, this is no time for a clueless company like Palm to be introducing a new operating system. By this time next year, Palm will be gone. And so might Elevation Partners.

8. Yahoo
Yahoo is another company that can't seem to do anything right. Or, at least, can't compete with Google. Yahoo will be acquired by someone, and its brand will become an empty shell -- used for some inane set of services but appreciated only by armchair historians (joining the ranks of Netscape, Napster, and Commodore).

9. Half of all retail stores
Many retail stores are obsolete and will be replaced by online competitors. Entire malls will become ghost towns. By this time next year, most video game stores, book stores and toy stores -- as well as many other categories -- will simply vanish. Amazon.com will grow and grow.

10. Satellite radio
I'm sorry, Howard Stern. It's over. The newly merged Sirius XM Radio simply cannot sustain its losses. The company is already deeply in debt and would need to dramatically increase subscribers over the next six months in order to meet its debt obligations. Unfortunately, new car sales, where a huge percentage of satellite radios are sold, are in the gutter and stand-alone subscriptions are way down.

Change is hard. But efficiency is good. While boom years gives us radical innovation and improve consumer choice, recessions help us focus on what's really important and accelerate the demise of technologies and companies that are already obsolete.

So say good-bye to these 10 things, and say hello (eventually) to a new economy, a new boom and a new way of doing things.

NOW! Back to our previously schedules program, already in progress...

There has been a lot of bloviating about "globalization" and it's various pros and cons, but we have been here before. Oh yeah reader, we sure have. From about 1880 to 1914, we had a global economy - it was called British (and to some extent Dutch) mercantilism. Between 1600 and 1800 most of the states of western Europe were heavily influenced by a policy usually known as mercantilism. This was essentially an effort to achieve economic unity and political control. No general definition of mercantilism is entirely satisfactory, but it may be thought of as a collection of policies designed to keep the state prosperous by economic regulation. These policies may or may not have been applied simultaneously at any given time or place.

We had a global, stable, political system too - it was called colonial imperialism. 19th century globalism with its irenic vision of free trade as the solvent for war and imperialism. In an 1846 speech given in Manchester, then the center of the British trans-Atlantic textile industry, the British liberal Richard Cobden laid out his vision: "I see in the principle of free trade" a force that draws "men together, thrusting aside the antagonism of race, and creed and language, and uniting us in the bonds of eternal peace." For the next half-century it looked as though Cobden's vision would prevail. By the late 19th century, globalization seemed irreversible. Investment, information, industrial goods, and food supplies moved freely between nations and across seas. Immigrants moved freely across borders without the need for passports. In 1913, writes Lindsey, "Merchandise trade as a percentage of gross output was about 12 percent for the industrialized countries. They did not match that level of export performance again until the 1980s." The British liberal Norman Angell, writing in a celebrated 1911 book, The Great Illusion, which was translated into 18 languages, argued to widespread applause that "internationalism had made states so dependent on the bond market" that they couldn't afford to even consider war. Three years later, World War I began initiating a period of war and totalitarianism, known as the short 20th century, that lasted until 1989, when the las t Soviet (read that Russian) troops left East Germany.

Today the world financial system is still near a dangerous tipping point of uncertainty and chaos. The mortgage crisis was only the beginning. Yet our politicians, from both political parties, fixate on the trivial. Our financial house is on fire, yet our leaders are squabbling over arranging the furniture in the front parlor. Instead, they desperately need to develop a “big think” doctrine that defines America’s economic and financial future in the world. Financial innovations, including those that new electronic technology makes possible, enable both firms and individuals to carry out their ordinary business more effectively and to protect themselves better from the risks to which they are inevitably exposed. But these innovations also make it possible for both firms and individuals to take on new risks to which they never would have been exposed in the first place. What are meant to be improvements therefore sometimes make people worse off, and when the risks involved are sufficiently intertwined those supposed improvements can make people worse off who never even sought to take advantage of them. Globalization, the great paradox of our time, has been an impressive wealth-creating, poverty-reducing machine. In the last quarter-century of globalized markets, the Dow jumped from 800 to well over 12,000. To match that success the next twenty-five years, the Dow would have to exceed 170,000. Yet the fruits of globalization are distributed unequally. Globalization itself produces huge pangs of anxiety for average working Americans. Oil and food prices have skyrocketed. There is no denying the globalized financial system both enables and threatens our national well-being.

But if you kill capital flows and you’ll kill the global economy. The problem is that the world today lacks a financial doctrine, or even much in the way of a set of informal understandings, for establishing order in a crisis. Instead, we grope and manage incrementally, like trying to perform delicate brain surgery with one hand tied behind our back and the other wearing an ill-fitting boxing glove. Today is very similar to an earlier period of globalization and prosperity, from 1880–1914, which ended with World War I. Soon the seeds were planted for an economic depression.

The collapse of the Wall Street firm Bear Stearns, as the devastation rippled throughout the financial system, would have savaged the pocketbooks and pensions of every working American. Still, policy moves have unintended consequences. The Fed appears to have placed a government guarantee under the entire U.S. financial system, not just the banks. Sounds great, but some new, all-encompassing regulatory structure is therefore needed to protect the public interest at a time of financial deleveraging. That means the profitability of the U.S. financial services industry will decline.

In addition to this. people picture central banks as having magical powers to step in and save the day. Dream on. All (Paul Volcker, Alan Greenspan, and Ben Bernanke) would admit the power of the central bank is rapidly diminishing. Worse, in the case of the United States, interest rates have increasingly become a captive of global financial forces. To a certain extent, therefore, Americans are no longer in complete control of their own monetary policy. That is why central banks, led by the Fed, have become a kind of grand global theater. Because the world’s ocean of capital is so huge and powerful, the central bankers have had no choice but to become the lead actors. They use their dramatic skills to try to tease, persuade, charm, and bluff the markets. And of course the Lawrence Olivier of this process was Alan Greenspan. It’s not quite like The Wizard of Oz with the little man behind the curtain pulling the levers, but the analysis is not completely off the mark. The job of central banking, because of the need to bolster confidence, has become an elaborate form of ‘theater,’ with the financial markets acting as the audience. But during the subprime mortgage crisis, we are forced to travel down an endless, dangerously twisting and turning road of volatility with steep valleys and risky mountainous climbs. We can’t see financial risk ahead. A small village in Arctic Norway can see its entire financial future destroyed because its financial managers invested heavily in a Citigroup product called a collateralized debt obligation.

Greed-driven bankers and investment bankers deserve the most blame. They set up dubious, off-balance-sheet vehicles to hide risk. The lack of transparency created a global crisis of confidence that nearly tanked the world economy and now threatens the future of liberalized capital markets. The world still faces a trillion-dollar credit problem. When the credit crisis hit in August 2007, the world’s central banks flooded the global economy with liquidity to avoid immediate disaster. Luckily, today’s policymakers have learned from the mistakes made in the 1930s. The Federal Reserve also placed all U.S. financial institutions under the government “safety net.” Sounds reassuring, but the credit contraction is still likely to linger for years, and could become worse if policymakers aren’t careful. In the face of today’s powerful ocean of capital, there are limits to the effectiveness of government solutions.

The financial world is still a dangerous place. That’s because the world is flirting with moving away from the last quarter-century’s model of globalization and free-flowing capital markets toward something more reminiscent of the nineteenth-century mercantilist economic model. What I’m describing is an era of backroom rivalries, deal making, and tensions based on ambitious national political agendas with capital flows, and commodities led by oil, increasingly controlled by governments. One does not have to be a rocket scientist to see the picture emerging: financial wealth and power are moving away from the United States, Europe, and Japan.

The global financial system is near a tipping point of uncertainty and could come crashing down to the detriment of all of us. Protectionist and class warfare policies, and other policy prescriptions to curb reckless volatility, may be well-intended efforts to deal with the anxieties of global trade and financial markets. But the danger is that they produce unintended consequences that could send us over the edge.

Next time ----> "a credit swap what?"

More on monetizing (or DE-monetizing) virtual worlds

"Pirating music? Oh man, that's so 1995..."

Yeah. I quote voraciously from The New Statesman online rag:

"The relationship between context and content in music has always been problematic. The rise of the anonymous public in the course of the 18th century certainly liberated musicians from the patronage of prince or prelate. Never again would a composer of Mozart's stature be booted out of the service of the Archbishop of Salzburg ("with a kick to my arse", as Wolfgang put it in a letter to his father). The development of a prosperous public sphere in London allowed Haydn, in a matter of months, to make six times the annual salary paid to him in Austria by Prince Esterházy. Yet public patronage came at a cost. Haydn chose not to settle in London, but to remain in the service of the Esterházys until the day he died in 1809. He may well have had an inkling that the public could be a much harder taskmaster than the relatively undemanding aristocrats he served at home."

"In the course of the 19th century, ever- growing markets, bigger spaces for music and better communications allowed many more performers to make much more money. Sopranos, especially, became rich beyond the dreams of avarice of even the most famous singers of the past. Between September 1850 and June 1851 Jenny Lind, "the Swedish Nightingale", gave 95 concerts in the United States, earning $176,675 net of all expenses. Moreover, all along the way she was feted as a queen. Had she lived long enough to take advantage of the invention of recording, her colossal fortune might well have been multiplied many times over. In 1914, Enrico Caruso was earning £20,000 a year from world sales of his records, which may even have increased ten fold after 1918."

"

In the course of the past century, a rush of technological changes has made music more accessible and ubiquitous than ever before. Cinema, the gramophone, radio, the jukebox, television, the electric guitar, transistors, LPs, stereo, the Walkman, discotheques, CDs, the internet, DVDs, the MP3, the iPod and all the rest have drenched the modern world in music. Moreover, the eruption of youth culture after 1945 simultaneously propelled musicians to pole position in both status and material reward. As the annual Sunday Times Rich List shows, no other branch of the creative or performing arts can boast such a concentration of wealth. When Bono or Bob Geldof (both honorary Knights of the British Empire) lecture politicians on what to do about the problems of the third world, those politicians have to appear to be listening.

Here's a point: As I said in a previous post, physical stuff (records, tapes, CD's, software boxes, etc) is being replaced by non-physical stuff (FTP's of mp3 files. .avi movie files. .dmg or .img, or .iso files to install software).

For years the music industry made its money primarily through the creation of a physical product -- first the record and then the CD. But with the evolution of the digital age, the physical nature of music is fast becoming obsolete. Just at vinyl records hold nostalgic value, soon CDs will be a novel relic of a bygone era. I remember telling several of my buddies at Computer Sciences Corporation that the CD was transitional technology - they challenged me to name the replacement. In 1995, I didn't have a clue... but I knew it would happen. Remember the scene in the movie "Men In Black", where Tommy Lee Jones is giving Will Smith a tour of the secret facility? Row upon row of advanced alien tech, wonderous and breath-taking, is displayed - the they come to a mounted...well, it looks like a bottle cap to me. Tommy Lee intones "See this? They say some day this will replace te CD.". HA!

So is this the death of the music industry? Of course not. Music has been written, performed, and enjoyed for centuries. Music is part of culture. In many ways music as a business is thriving more than ever before. It is a period of fundamental change for this industry.

But, for every Bono and his countless millions, there is a host of modestly paid session players, 90 per cent of whom earn less than $35,000 a year, according to one of their leaders. It will come as no consolation to them to know, if they do not know it already, that it was ever so. Ever since musicians emerged from the servile but cosy world of aristocratic patronage into the harsh daylight of the public sphere, the musical profession has been a pyramid with a broad base and a sharp top. The new opportunities brought by every major technological shift have also left many casualties among musicians unable or unwilling to adapt. A good example was the advent of the gramophone, which sent an army of pianists, piano teachers and piano manufacturers to the scrapheap.

More recently, a combination of digitization and the Internet has torn a great fissure in the recording industry, which has not died (as Norman Lebrecht claimed in a characteristically strident book last year), but which has certainly been forced into fundamental change. Nor, one imagines, will the musicians plugging their way through yet another Muzak recording session be cheered by the reminder that Jimmy Page (worth $175m, according to the Sunday Times) started out as one of their number."

One of my LinkedIn buddies published an online poll asking about how to implement DRM effectively to protect intellectual property rights, especially for producers of music and to "protect" the buyers of same - the overwhelming response was "who the hell buys music anymore?!?!".

Well... what's on YOUR iPod?

The REAL Economic Tsunami - Conclusion or what's the GD point?

Let's review the topics of my current sermon/rant -

1. Root economic change
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The point is simply (or not), that things are not disappearing, so much as they are changing. Now, people don't like ONE change at a time, but we have several (there are many more than the five I have screeched about), and that is what is imputing the sense of "dis-ease" we all feel today. It's like related rate problems in calculus - it's not the rate of change that's accelerating... it's the rate of the rate of change that is accelerating. Maybe even the rate of the rate of the rate!!!

You've heard your friends talk about it - they have a sense of doom. It’s like the 1930’s. Everyone knows there’s going to be a war with Germany. Some, like Chamberlain, deny it. They don’t want to believe it. Others, like Churchill, are clear that we must not appease the Nazis.

I'm not talking about the spectre of the disaster of the week - climate change, ecological implosion, terrorists with nukes, Bush/Cheney/Haliburton (wasn't Bush supposed to declare martial law a few years ago?), Religious zealots oppressing the atheists, Militant atheists calling on burning churches and killing priests (1789 anyone?), children being exploited by radical gays and lesbians, radical gays and lesbians being exploited by everybody, Bush/Cheney/Haliburton being exploited by children - AAARRRRGGGHHH!

EVERYBODY JUST SHUT UP!

It's not just the spectre of CHANGE, and the execution of change, but the sheer number of things changing and we are having a real hard time dealing with it all.

Root Economic Change - As I said "My contention is that these eight conditions are contributing to the real economic tsunami that is about to hit us. And like the Industrial Revolution before (the so-called "information revolution" is just a preliminary ripple), it will affect everyone on the planet, with the attendant "law of unforeseen consequences" vaporizing our current world view of the nature of work." (see Part I for detail on the 8 points)

What Is A Job? - " today's organizations are trying to use outmoded and underpowered organizational forms to do tomorrow's work. They insert an empowerment program here and a new profit-sharing plan there and then announce that those things aren't so great after all because profits are still falling. Such organizations won't have better results until they do two things. First, get rid of jobs. Second, redesign the organization to get the best out of a de- jobbed worker. A big task, sure. But like any evolutionary challenge, it will separate the survivors from the extinct." (see Part II for details)

The Death Of US Manufacturing - " the coming transformation will be painful, but we will get through it. We will have a money economy of highly intelligent machines (robots, if you will) manufacturing goods for sale here and abroad, designed built and maintained by American workers and a huge non-money economy of DYI types using the technology the money economy provides, to provide for themselves. - IF and only if, we have the guts to be flexible, agile and swallow our stupid pride and re-tool out skills to meet the paradigm shift. Or wallow in your "I'm a victim" status and become a ward of the state." (see... well you know what to do).

The Death Of Traditional Media (newspapers, etc) - " The simple historical fact is that mass communication technologies are never replaced by newer technologies. They co-exist, while continuing to evolve. We still have the newspaper, the telephone, the radio, and the movies, despite the fact that each of these was at the time of introduction viewed as the beginning of the end for the other. The only mass communication medium in history to have been replaced by another is the telegraph, a service which began in 1851 with the founding of the New York and Mississippi Valley Printing Telegraph Company and spanned 150 years, ending finally on January 27, 2006".

Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher. - " How is all this supposed to make me any money!"

The unifying factor of all this crap, is that this transformation requires the evolution of information into knowledge, and it's capture, storage, use and re-purposing - this is a continuum process. All of you computer science and IT majors my remember the progression you learned in those interminable classes on " the profession" - facts are processed into data, data is processed into information, information is processed into... what? Knowledge, that's what! And as the late, great Peter Drucker said in "Managing in a Time of Great Change", when you apply knowledge to knowledge, you should get wisdom...

Remember that, besides its great flexibility, knowledge has other important characteristics that make it fundamentally different from lesser sources of power in tomorrow’s world. Thus force, for all practical concerns, is finite. There is a limit to how much force can be employed before we destroy that we wish to capture or defend. The same is true for wealth. Money can't buy everything, and at some point even the fattest wallet empties out. By contrast, knowledge does not. We can always generate more.

The Greek philosopher Zeno of Elea pointed out that if a traveler goes halfway to his destination each day, he can never reach his final destination, since there is always another halfway to go. In the same manner, we may never reach ultimate knowledge about anything, but we can always take one step closer to a rounded understanding of any phenomenon. Knowledge, in principle at least, is infinitely expandable. Knowledge is also inherently different from both muscle and money, because, as a rule, if I use a gun, you cannot simultaneously use the same gun. If you use a dollar, I can’t use the same dollar at the same time. By contrast, both of us can use the same knowledge either for or against each other—and in that very process we may even produce still more knowledge. Unlike bullets or budgets, knowledge itself doesn’t get used up. This alone tells us that the rules of the knowledge-power game are sharply different from the precepts relied on by those who use force or money to accomplish their will.

But a last, even more crucial difference sets violence and wealth apart from knowledge as we race into what has been called an information age: By definition, both force and wealth are the property of the strong and the rich. It is the truly revolutionary characteristic of knowledge that it can be grasped by the weak and the poor as well. Knowledge is the most democratic source of power, which makes it a continuing threat to the powerful, even as they use it to enhance their own power. It also explains why every power-holder—from the patriarch of a family to the president of a company or the Prime Minister of a nation—wants to control the quantity, quality, and distribution of knowledge within his or her domain.

The control of knowledge is the crux of tomorrow’s worldwide struggle for power in every human institution.

That's all for now --- now I have to take my medication and relax through Christmas.

Merry Christmas everybody!

The REAL Economic Tsunami - Part V

Took a while to get this out due to social obligations and fast-shifting events concerning Part 4! Check this out -
"As the combination of NBC's decision to replace its 10 p.m. scripted dramas with a talk-show format and a threatened actors' strike throw a chill over tinseltown, Marley-like voices from the writers' walkout that shut down Hollywood last Christmas are telling cautionary tales.
The industry has already been battered by the estimated $2.1 billion impact of the 100-day writers' strike that ended in February. Now, everyone from top showrunners (usually writer/creators who've become top producers) to the daytime scribes, say times in the television industry, long considered the writer's medium, are getting tougher.
"It is a particularly difficult time," says veteran showrunner J.J. Abrams, noting that as networks turn to shows from overseas as well as remakes of old shows to save costs, he feels "lucky" to have an original show on the fall schedule ("Fringe" on Fox).
"It's always hard, but it's getting harder," says Bryan Fuller, creator and showrunner of ABC's "Pushing Daisies." When the show returned after the strike-imposed hiatus, he says, the network made budget cuts as well as numerous requests to make the story less "weird."
Whether you are a prime-time, A-list writer such as Steven Bochco, who has migrated from broadcast networks to cable in pursuit of creative freedom, or a daytime soap opera scribe such as Karen Harris, who grinds out an 80-to-90-page "General Hospital" script every week, the challenges facing the nation's small-screen storytellers are the same: dwindling clout, an industry in historic transition and a larger economy in tatters.
Individual network heads such as Angela Bromstad, the new programming chief for NBC, often voice their respect for writers.
"I've always been very protective of showrunners' vision and passion," she says. "If it's not led by their passion, then we don't have a show."
But business trumps passion, more often than not these days, says Patric Verrone, president of the Writers' Guild of America, West (WGAW).
"In an era of motion picture and TV production controlled by seven multinational conglomerates, it's difficult for any individual to have clout or personal creative freedom," he says. "When it's in the hands of the conglomerates there is a lack of appreciation not just of writers but of the entire talent community and what they bring to the table in terms of development of content."
WOW! No wonder I watch most of my content on HULU.com, And none of it is scripted shows. In a rare show of sanity, MSNBC's Courtney Hazelett declare scripted television dead at the 10 pm mark... the rest to follow. WOW!

Pulling into the station now, so hang in there!

So we have covered:

1. Root economic change.
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)

We need to cover:
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

How is all this supposed to make me any money!

Web 2.0 provides potent business models for making web applications which apply them successful, or least, ever popular with their users. These techniques typically have to do with connecting supply with demand cheaply and effectively (The Long Tail theory) or by providing a unique source of information that is difficult to recreate elsewhere. Unfortunately for the creators of many of these web applications, they sometimes confuse popularity with financial success, or more often, they optimistically believe the former can turn into the latter. The truth is, monetization of Web 2.0 services is a genuine issue for those that are planning to use Web 2.0 ideas for non-strategic purposes. Yet many Web 2.0 services seem to be intent on tactical financial capitalization of the attention and user base which Web 2.0 applications can build almost overnight. ZDNet's Phil Wainwright thinks this issue, namely lack of revenue, is a big piece that's missing from the Web 2.0 business model. He posits that the next iteration of Web 2.0 will solve this and other problems, which he dubs Web 3.0. Phil's analysis is pretty sharp and he has identified at least three revenue models that will form the basis of commercial succesful Web 2.0 services:

• Advertising: Phil doesn't think much of this model, no matter how well Google is doing with it and despite the fact the Microsoft is increasingly interested in the entire online ad space.
• Subscriptions: Divided up into fixed rate, variable rate, and fixed+plus variable models, subscriptions are very popular with leading Web 2.0 companies like 37Signals and I'm with Phil that this will continue to be popular for large footprint services, but not for mash-ups and aggregation services that provide bite-size functionality.
• Transaction Commissions: Best exemplified by companies like eBay that charge for a given successful transaction, Phil believes this will ultimately become the biggest player.

My issue with this trinity of revenue models is that it doesn't explicitly leave room for a fourth or possibly fifth needed model. I truly believe there is an active need for one or two as-yet-uninvented revenue models to fund Web 2.0 services that face the general public. Web 2.0 monetization, for now, is heavily reliant on advertising. UsingGoogle’s AdSense contextual advertising program is one of the fastest and most popular ways of monetizing a new Internet business. For more information see Deitel’s Google AdSense and Website Monetization.

When is the last time you clicked on a banner ad/google adwords ad? I don’t really believe that there is going to be a silver bullet that can monetize all sites, but there are interesting ways to rein in the brand that most successful have built. (And no, I am not talking about “Mashable” Brand Potatoes.) Maybe the best way to make money as a content producer is to do direct sales, according to folks who’ve been there (I concur).” I believe what is missing is the adaptation of successful advertising models from outside the net to online.

Or maybe the key is not to sell the content, but sell the process. Content alone doesn’t get the job done. The dominant web 2.0 business model is the FREE business model. It comes in many different variants, but the most widely used are the freemium business model (I always thought Fred Wilson came up with that term, but he says it was Jarid Lukin) and the free with ads based business model. With freemium you get a service for free, but for the real cool features you need to upgrade and pay a subscription. Flickr, YouTube and others use that business model. The free with ads based business model lets you use a service for free, but in return you get advertisement. Facebook is the most obvious example, but many other services use that model as well. So the subscription model looks good for certain types of transaction, but it NOT a panacea, as we shall see.

I just saw an ad on TV (yeah, I still watch TV!) for the singer Rhianna - the tag line was not, so and so many albums sold or records sold... it was "100 million SONGS sold"! Now that's a subtle, but powerful and important message. Not physical units of anything, but MP3 files off of iTunes Store, or Amazon or Rhapsody. Like the software we used to buy in a box (it's all downloaded off the Net now), these things are not physical (or, as Alvin Toffler would say "symbolic") but electronic files (again, the Tofflerism is "super-symbolic"). And that is one of the most fundamental changes in our goods and services world - the physical things we are used to that represent value (symbolic) are no longer all that physical, and have become "super-symbolic". It's like the difference between a "classicist" painter/sculptor and an "impressionist" When a classicist paints a house, or a tree or the sky, that's just what he paints - but an impressionist looks at these things, then paints the IDEA of a house, a tree or the sky - do you see? When you buy music or movies (or just watch movies and TV, like on HULU) you are purchasing a super-symbolic thing. And HULU and other video media sites sell you LOOKS at the media -what would we call that? Hyper-symbolic?

So what's the point here? Simply, that the massive changes in socio-economics, what work is, what is manufacturing, what is media and how do we get it, how all this is monetized (you always have buyers and sellers, but now that term much more universal, and a just plain different PROCESS) are all happening simultaneously. Because of this, we as a culture are undergoing a similar confusion that out great-great grandparents underwent during the Industrial Revolution.

Look for me to pull all this rubbish together by Wednesday ---->>>>

The REAL Economic Tsunami - Part IIII

So far we have covered:

1. Root economic change.
2. What is a job?
3. The death of US manufacturing

We need to cover:
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The Tribune Corp filed a Chapter 11 bankruptcy on December 8th in Delaware. It reportedly has 13 billion in debt. The Chicago Cubs franchise and Wrigley Field are not included in the filing. Tribune has fallen below the cash flow required under its agreement with its bondholders, but it is not clear how seriously Tribune is thinking about seeking bankruptcy protection. Analysts and bankruptcy experts say that the hiring of advisers, including Lazard and Sidley Austin, one of the company’s longtime law firms, could be a just-in-case move, or a bargaining tactic. Like most newspapers, Tribune’s have suffered double-digit percentage declines in advertising this year, as ads and readers continue to shift to the Internet, and the recession has prompted retailers and other businesses to curtail their ad spending. What makes Tribune’s problems more serious is the heavy debt load it carries as a result of last year’s buyout.

The weak state of newspapers has made some lenders more loath than usual to force bankruptcy, fearing that it could worsen their chance of significant recovery, or at least delay it
Maureen Dowd writes about a newspaper that’s offshoring editorial content and learning to make it work. James McPherson is the editor and publisher of Pasadena Now, a small weekly. A year ago, he fired his entire editorial staff and farmed out coverage to a staff of Indian writers he recruited on Craigslist. He pays them about $7.50 per 1,000 words, compared to the $30,000 to $40,000 he was paying each reporter annually. The Indian writers “report” via telephones, web harvesting and webcams, with support and guidance from McPherson and his wife work for.

Reaction to the idea was brutal at first, but the concept of editorial offshoring is gaining traction. Dowd counts MediaNews Group chairman Dean Singleton among the ranks of executives who have recently talked about massive offshoring to save costs. Singleton says most preproduction MediaNews’s California papers is already outsourced to India, which has cut costs by 65 percent.

If the idea sounds preposterous, think about it. How many people in a standard newsroom never leave the building? Any job that primarily involves computer and phone work is a candidate for offshoring. Between cell phones, webcams, virtual meetings and instant messaging, the need for face-to-face contact is diminishing to the point of irrelevance in many cases. On-site reporters will always have value, but in the future they could become a small corps of feet on the street feeding copy to a virtualized production force that is largely invisible. The compelling cost efficiencies give publishers a lot of incentive to be creative.

Former Los Angeles Times editor James O’Shea comments at some length on recent statements by Tribune Co. CEO Sam Zell about the failure of newspapers to listen to their customers. O’Shea has a problem with that philosophy. “If all we had to do was ask readers what they wanted in a newspaper and then give it to them, wouldn’t someone have done that years ago?” he asks? In fact, they did. “I’ve seen dozens of papers march down that road to no success.”

O’Shea agrees that journalists have done a poor job of demonstrating their value as stewards of the public trust, but he thinks that failure is actually due to their efforts to listen too closely to their customers. The conventional marketing wisdom is that readers want soft, lifestyle stories and the more we give them that pabulum, the more we undermine our value as serious journalists. “To the extent we blur the differences between these once-distinct voices with pandering coverage that resembles advertorial and not editorial we play right into this trap,” he writes.

And if the newspaper industry is dying, apparently no one told Saharra White. The California State University, Northridge journalism major pooled her savings and donations from friends last year to launch Say It Loud!, a newspaper for African-Americans of the San Fernando Valley. “I wanted to start the newspaper because there are black people in the Valley doing some positive things,” she says. Say It Loud! is one of about 200 black community newspapers across the US, according to the Black Newspaper Publishers Association. White says she felt the stunning election of an African-American as President demanded new media to cover the impact of the Obama administration on America’s future. She distributed the paper in print for a year, but now has gone online-only as a matter of economic necessity.

Folks, this train has been a-comin' for about 18 years now...since the early 1990's. I remember the first time i saw the World Wide Web - remember: the Internet is not the WWW - The WWW is part of the Internet. The Internet includes file transfer capability email and chat and other mechanisms for communication. What I saw was simplistic, even crude graphics, and loopy text formatting - but you could click your mouse cursor on some of the words, and BAM! You instantly transported to another document explaining the meaning of that word, and attendant subjects. And you could click and click and click. I was flabbergasted, stupefied (some say that's a permanent condition with me)... How was such a thing possible? And what would it lead to?
Well, we have response times, when it comes to news, measured in seconds - not days or even days. Ad revenue has been declining for a decade now- ask the newspaper guys and they mutter "aw, it's that damned innertubes, or whatever.". Did they "get it" then, and do they "get it" now?
Frankly, I think there are many reasons for the decline and eventual fall of traditional media (newspapers, magazines, radio & TV) - the culture wars, "happy talk" replacing hard news and vice-versa (the public is a harsh mistress), plus the "homogenization" of news to reflect the MacPaper framework of USA Today. However while this may be the case there are certainly other issues we should consider.

Firstly, a similar thing happened around the last so called “dot.com bubble”. Businesses flocked online, spending millions advertising etc... Then the “dot.com bubble” burst leaving many people in serious debt. It could be considered that this current increase in online advertising is just another “dot.com bubble”, only time will tell whether this is the case or not.

Secondly, this increase could be a temporary “blip” so to speak. Many of the traditional media companies have been slow to act on digital media, meaning that some of the newer so called “new media” companies have been able to take up a large market share quickly in the absence of any real competition. It could be argued that once the traditional media companies embrace digital media that we may see this shift in advertising revenue re-balance itself as the traditional media companies will be able to integrate digital media into their traditional medias easier than a digital media company can integrate itself into the tightly controlled and extremely competitive traditional media market. We have already seen some of the traditional media companies trying to buy their way into the successful new media companies for example, News International buying the company that owns the hugely successful MySpace.com website. Again it may be a number of years before we can see whether this theory is correct.

Also, with all the reports describing this decline of traditional media compared to digital media, there have been reports of digital media companies such as Myspace and Google using traditional media methods. “MySpace weighs up spin-off magazine” (The Guardian, 2006). This reports how Myspace is considering a “spin-off print magazine” for the users and fans of Myspace. Although this is less surprising since the takeover of Myspace by News International and the want to integrate it into some of News International print output. Google has also used traditional media recently “Google Ads share the love with newspapers” (NYT, 2008), “Google's radio ads” (NYT, 2006) both of these report on a trial being conducted by Google on it’s advertising output, both of the trials for the different mediums work along similar lines to Google’s “Adwords” technology used on it’s search engine. Long established Internet and search engine company Yahoo is also conducting a similar trial with US local newspapers “Yahoo! to share classified ads with US local newspapers” Yahoo has signed a deal with 150 local US newspapers to provide them with classified advertising and content.

It can also be argued that another one of the reasons why these digital media companies are making deals with local newspapers (like Yahoo) relates back to one of characteristics of digital media described in the chapter “What is digital media?” One of digital media characteristics is that while it can be a mass media, it can also be personalized unlike traditional forms of mass media. While this is true, one of the most popular forms of digital media, the World Wide Web has struggled until recently to be personalized or “local”, yes it is possible and rather clever that you can speak to someone on the other side of the world. A lot of the time though, users of the World Wide Web want local content, hey want to be able to see when the bus is coming, or when the film they want to see at the cinema is on, or what is happening in their town. Digital media’s characteristics that it is in a “constant state of flux” (Lister, 2006) rather than fixed lends itself perfectly to this. Where digital media has failed mainly is actually being able to deliver that local content, this is why they are making deals with the local newspapers etc to enable to finally make the idea a reality. Traditional media companies are also trying to use digital media for the very same thing. “ITV broadband television in the starting blocks” (NYT 2008) reports ITV is “gearing up for the launch of its local broadband TV service, ITV Local” The same report also describes how ITV has also acquired Enable Media, which owns directory service Scoot, another part of ITV local strategy. As we can see there is a clear trend by both traditional and digital media companies towards providing this local content and this can be seen in advertising campaigns such as yell.com made by the company AKQA (AKQA 2005).

This customization feature is the "killer app" of the new media - I think the entire concept of the "newspaper" and the "magazine" is disintegrating. They were the products of physical formats that are increasingly irrelevant. I have found much smarter people on the net than I ever encountered in newspapers and most magazines. (Journals are another issue.) I use Google Reader to set up sophisticated filters to handle information noise and overload. I felt much more information overload in ye olden days of print, which I miss not in the least Yet, there is, of course, another point of view here...

PriceWaterhouseCoopers C-levels say traditional media are not dead yet… because their consumers are not dead yet. Analyst Marcel Fenez (via Press Gazette): “One of the things we need to get into context here is that traditional media isn’t dead yet and won’t be for the next five years. It’s very important to think why. The over-50s are helping to sustain traditional media, and also in many of the emerging markets there is still plenty of room for traditional media. The death of traditional media is exaggerated, at least in a five-year context.”

So media forecasting becomes mortality prediction. On that basis, assuming advances in healthcare continue to extend human lifespans, “traditional” media may even be around for more than five years. Although digital ad spend will grow 11 times faster than print up to 2012, it will still only be 10 percent that in newspapers, Fenez said.

In a way I agree: I used to love reading my Sunday newspaper in bed, munching on donuts, giving the kids the comics and my wife the fashion and social sections, This was a ritual in my life - but nowadays, no wife, kids are grown - no ritual, because it no longer serves any purpose. But consider the following - (there is no cohesion to these thoughts, but here it goes):

1. Internet advertising is not the end all be all. A lot of local businesses, where you live, are picking up on the new media/ social media craze, by hiring new media savvy marketing and IT staff. Its amazing how marketing firms continue to blindly exploit internet advertising to sustain their businesses. This is unsurprising looking at the recession in the advertising industry general, as marketing firms are looking for ways to sustain and increase business.

2. How can we predict the usage and adoption of digital and social media? Think about what they call the “Internet generation- a 20 year old in 1995 (when the Internet became prevalent) would now be 33 years old. Think forward another 10 years. Not only are we looking at an increase in education, maturity, and access around the Internet- but also an influx of Internet savvy youth, who will grow into their jobs, taking an “Internet aware” approach to their work.

3. Print Will Never Die: The Internet in harmony with print. Arianna Huffington, with the HUFFINGTON POST uses this great analogy: “The shifting dynamic between the forces of print and online reminds me of Sarah Connor and the T-101 in The Terminator. At first, the visitor from the future (digital) seemed intent on killing Sarah (print). But as the relationship progressed, the Terminator became Sarah and her son’s one hope for salvation. Today, you can almost hear digital media (which for some reason has a thick Austrian accent) saying o print: “Come vit me if you vant to live!”
In a way, the trad media and new media sort of feed off each other, the way I decribed the relationship between the nonmoney economy and the money economy. Not the death of the trad media (my friend Laura calls it the "drive-by media"), but a transformation into something else - the point of this whole rant.

The Great Television Switch Off

The television switch off is real. In the United States, 2.5 million viewers switched off in the spring on 2008 compared to the same time in 2006. Statistically this is only a small percentage of the overall viewing audience, but among those still watching television, the amount of television they watch each day is declining.

The decline in television viewing is stronger among younger statistical groups. In Europe, a 2005 study from the European Interactive Advertising Association found almost half of 15- to 24-year-olds are watching less TV in favor of browsing the web. A study reported in The Guardian in 2007 headlined with “Young networkers turn off TV and log on to the web.” The television switch off in the United States among younger people has seen the average age of a TV viewer increase to 50. Why? What does it mean?

We can think about whether television is going to die in two ways. First, by looking backwards, at the history of the mass media, and second, by looking forward, and trying to understand some of the impulses behind what is going on, behind media proliferation.

The simple historical fact is that mass communication technologies are never replaced by newer technologies. They co-exist, while continuing to evolve. We still have the newspaper, the telephone, the radio, and the movies, despite the fact that each of these was at the time of introduction viewed as the beginning of the end for the other. The only mass communication medium in history to have been replaced by another is the telegraph, a service which began in 1851 with the founding of the New York and Mississippi Valley Printing Telegraph Company and spanned 150 years, ending finally on January 27, 2006, when Western Union discontinued the service. Western Union report that telegrams sent had fallen to 20,000 per year, due to competition from other communication technologies, including -- and probably mainly -- email. Arguably, of course, the telegram was not a mass communication technology." Thus, the Five Year plan of Marcel Fenez.

I have some sadness for the putative death of television. Anyone in Generation X or older would have grown up with the medium, and spent countless hours on the couch watching it, and yet today, people worldwide are switching off. As younger viewers happily switch to their computers, forgoing the experience of a television set altogether, newer, more consumer friendly devices will deliver Internet content to the broader population, often via the television screen, and the switch off of television networks will accelerate. By the time my (by now 17 year old) daughter has children of her own, broadcast television will be a thing of the past, replaced instead by an always on society with the Internet as a nearly unlimited smorgasbord of choice.

Just to clarify one point in this post that some seem to be confusing, and perhaps I wasn’t clear enough. I am not suggesting that the experience of sitting around a large screen TV watching sport or other content is going to fall. It never will, but content delivery via broadcast television (ie television networks, or collectively the television media) will fall. There will always be a place for a television set in many lounge rooms, but that set in the future will be a conduit for digitally delivered, on-demand or custom mixed content, delivered over the Internet, from many different providers.

The "sine que non" here is-

a) New media technologies have altered the flow and increase the volume of social communication by decreasing costs and distance sensitivity of moving information; increasing the speed and volume of communication. The exchange of information have become instantaneous and global.
b) New media technologies have changed the way journalists 9and everybody else) work through the abundance of easily accessible information over the net as well as giving portability for journalist to produce news, e.g., notebook, PDAs, etc. Together with advances in long-distance traveling have make it possible to down-size and de-skill newsroom by increasing reliance on pooled information fed into eth information net by PR firms and news agencies.
c) The transformation of ‘broadcasting’ to ‘narrowcasting’ to audience. The customization of the flow of news, etc is the important change and control factor here.

And one final point - no communication technology is easier to use, or more portable, than a book. Paper is the most successful communications innovation of the last 2000 years, the one that has lasted the longest and had the most profound effect on civilization. One can easily make the case that without the technology that is paper, there would be no civilization. Yet most of the time, we don’t even think of paper as a technology. And so we don’t ask the questions we routinely ask about other technologies: How does it work? What are its strengths and weaknesses? Is it easy and enjoyable to use?

Confused yet? GOOD - that's the point! All this stuff is onter-related, as i hope to wind up in my conclusion this weekend. Now, let's see how this all relates to generating capital, and how that capital is used ------------->

The REAL Economic Tsunami - Part III

Before I get going on the "death" of US Manufacturing, allow me to quote from The Rational Capitalist on this latest guvmint stag part--er, bailout -

It is immoral for the government to expropriate the money from the earnings of others and shower it upon bankrupt firms such as the automakers. If individuals believe it is truly in their self-interest to invest or provide alms for bankrupt firms they may do so – by purchasing their stock, bonds or by simply sending them money. The idea that the “need” of the automakers and their employees somehow justifies theft is the height of evil and is an argument that could be used to justify virtually anything. Since when does the “need” of anyone justify theft? If this argument is not valid in a criminal court, then why does it become valid when applied to firms?

Every business, whether big or small, must stand on its own merits. If it does not provide a product that individuals are willing to voluntarily purchase then it must restructure or fail and the faster the better. It is absolutely unconscionable that these CEO’s would plead for their Godfather’s in Washington to shake down taxpayers rather than focus on how to make their failing firms more profitable.

Plus some "housekeeping" - some folks can't seem to get Blogger to save comments, so I will post them. This one from my old pal Carl Sarrazolla, International Superstar:

"For some reason the blogger won't let me post my comments on the site, so here's my feedback.
I like where you're going with this. In additions to companies needing to change, we need to get some laws changed, especially the ones that define a job as 8 hour day, 40 hour week, etc. In addition, the laws that govern contractor/employer relationships also need to change as many are designed to force people into classic job roles once certain conditions are met."

Well put, buddy!

Now, let's get going- so far we have covered:

1. Root economic change
2. What is a job?

We need to cover:

3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The "death" of US manufacturing - like Mark Twain's death - is a little premature. It's not dead or dying, just changing. But since people don't recognize change while it's happening, let me help you all out.

Massive amounts of manufacturing have moved overseas in recent years, specifically to China, Malaysia and India . The pressure to turn a profit in manufacturing has prompted many companies to seek refuge in low-cost labor areas, putting onshore factories at a competitive disadvantage.

The problem with this logic is as follows: in many industries, labor accounts for less than 10 percent of total manufacturing costs. Factory automation, robotic inspection and process efficiencies have made labor less of a factor in the overall competitive picture. Savvy companies have learned to take advantage of these and other innovations to make their Americas-based business a success.

And now I will quote massively from the Washington Post's Gilbert B. Kaplan - He said it better than I:

No wonder this is an issue in the presidential campaign, especially in big manufacturing states. To get to the bottom of the problem, though, we have to cut through the many myths that have been fabricated about the industry over the years.

1. It's all about cheap wages. American workers are just paid too much.

For most manufacturing sectors, that's just wrong. Labor costs are already less than 10 percent of the cost of making many products (emphasis mine), including steel and semiconductors. Many of the real cost disadvantages the United States confronts are self-imposed. Our government doesn't rebate taxes to corporations when they export manufactured products, the way other countries do: A Brazilian steel company, for example, can get a 17 percent tax credit for every ton of steel it sends abroad. In addition, many foreign countries keep their currencies valued extremely low against the dollar. Most economists believe that China undervalues its currency by as much as 40 percent. That makes Chinese goods very cheap here and U.S. exports very expensive in China. This is a key driver of the $260 billion trade deficit with Beijing. We should deal with these issues in our international trade negotiations, but we haven't.

2. U.S. manufacturers can save themselves by investing in innovation.

Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up. Whatever you may think about the recent U.S. Air Force decision to buy tankers from Airbus rather than Boeing, one thing is clear: Through its subsidies, the E.U. has managed to build a highly competitive aircraft industry. South Korea has put more than $12 billion into its semiconductor industry to similar effect, severely harming the U.S. semiconductor manufacturing base. Business' are leveraging Guvmint resources for strategic advantage - this a sort of "reverse State Capitalism" (SC is MY deal BTW)

3. Trade laws and trade agreements level the playing field for U.S. manufacturers.

If only this were so. This should be the main goal of our trade negotiations. The manufacturing sector is hurting more than any other, but we're using our political capital -- in the Doha round, for example, the latest World Trade Organization negotiating round -- to help the service and agricultural sectors. Little is being done for basic manufacturing. There are international trade laws under which U.S. companies can file cases to offset unfair practices in China, Japan and other countries, but they're difficult to use, expensive and haven't solved the problem. In 2006, despite a manufacturing trade deficit of more than $600 billion, U.S. manufacturers filed only eight new trade cases. If these statutes were really working, we would see hundreds of new cases each year, instead of watching U.S. companies decide that it's better to give up and just move manufacturing plants abroad -- something I've recently heard executives in both the textile and electronics sectors say they're thinking about doing.

4. Good management can make U.S. manufacturers lean enough to fight in the international economy.

I wish it were that easy. Even the best management can't overcome some of the structural disadvantages we face. Take health-care costs. In Europe, these costs are absorbed by the government. In the United States, manufacturers have to pay for them. General Motors, for example, has estimated that the cost of health care adds about $1,600 to the price of each of its vehicles. How can you compete when you have to add that cost to all the other challenges a U.S. manufacturer faces? Then there are environmental-compliance costs. One recent study shows that these costs are about $77 billion a year for U.S. manufacturers. China, Taiwan and many other foreign jurisdictions have no environmental costs of any significance, because they either have no environmental laws or don't comply with them. The United States also has laws and regulations to keep our products and workplaces safe that we don't require our trading partners to comply with.

5. We make high-tech goods here, so we're okay. It's only schlock items that come from abroad.

Really? The truth is, very few high-tech companies are building new plants in the United States. The name on the box of the computer you just ordered may be Dell or HP, but the computer itself was probably made in Asia. The fancy light-up screens on your cellphone and iPod -- liquid crystal display screens, or LCDs -- are all made in China, South Korea, Singapore and Japan. Even our greatest semiconductor companies, such as Intel, are building new state-of-the-art facilities in China. And what about the most sophisticated high-tech product in the world -- microlithography machines used to make semiconductors? These machines are a true enabling technology -- a technology from which everything else follows. It's too bad that not a single one is made in the United States. We depend on Europe and Japan for them.

All true. But the real transformation may not be where things are made, but HOW and WHY. Now you may ask yourself "Russell, what in the name of God's holy creation are you jibber-jabbering about NOW". Well, just... think about it. It's actually some good news - remember, PROCESS is more important that MECHANICS.

There are powerful, unrecognized interactions between the nonmoney, or “prosumer,” (producing what you consume - eating your own dog food) economy and the money economy of our world. Rather than ignoring these interactions, we need to understand that these two economies are, in fact, parts of a unified “wealth system” in which the two parts pass value back and forth. If you really think about it, I mean REALLY think about it many of the linkages through which prosumer activities, from creating blogs and open source software to volunteering in a hospital, or Habitat For Humanity, or performing do-it-yourself projects, frequently add significant value to the money economy. There just isn't a "mechanism" to account for it! But, I assure you, it is very real.

Think about this - Many of us still think of the money economy as a closed system. But the growing importance of knowledge and prosuming in the wealth system makes the closed model obsolete.

There are all these channels between what people do without money and what goes on inside the money economy. I think these channels are going to multiply as the money economy creates more and more technologies that people can use to do things for themselves. For example, if you’re of a certain age, you probably remember that when you wanted to get photos developed and printed, you took them to a drugstore, they sent them to Kodak in Rochester, N.Y., Kodak sent them back, and then you paid the drugstore, and took your prints home. Now you do all that in the palm of your hand, because you have the digital camera technology that makes that possible. As a result, the market for printing and developing film is disappearing. It is moving from the money economy into the nonmoney economy.
This i s in the same tradition as the "seLf-sufficient" American, but on an immensely larger scale. What’s new these days is the cyberstructure that allows prosumers to create value and rapidly disseminate it across the globe, where others find ways to commercialize (monetize) it.

This transformation that we think of as the “new” economy actually started in the 1950s (the rise of consumerism - based on a RAND Corporation study) and is far deeper and more complex than most people suspect (as I have been saying ad nauseum). The underlying pattern is the breakdown of Industrial Age civilization, fed by the replacement of Industrial Age technologies and sweeping cultural changes, as well. The nature of the emergent wealth system is changing our civilization. But the reverse is also true, and to understand how these affect each other, you have to synthesize observations across all traditional academic borders, the boundaries that separate economics from sociology, from history, and so on. How do you lump finance, manufacturing, services, and countless other activities under the term economy? The link is that they are all monetized. The term prosumer (again, thanks to Alvin Toffler for that word!) deals with activities that are not monetized.

Although they are very different activities, they have a powerful aggregate impact on the money economy. In fact, their very disparity points to how widespread prosumerism is, and how important it is. Measuring things does not necessarily make them important, and unmeasured things are not necessarily unimportant. On the other hand, although I’m not a mathematician, I am an engineer, so I believe everything can, in principle, be measured, at least to some degree, by measuring a “surrogate” that is presumed to be analogous to the phenomenon at hand.

I'll leave it to you math geniuses, to figure out how....

So, I see the bifurcation of the manufacturing economy in the US - and it will be painful, but so was the Industrial Revolution. Split between highly mechanized production and the "prosumers". Here's an apocryphal story (and it has the added virtue of being true):

The Jacquard Loom is a mechanical loom, invented by Joseph Marie Jacquard in 1801, that simplifies the process of manufacturing textiles with complex patterns such as brocade and damask. The loom is controlled by pasteboard cards with punched holes, each row of which corresponds to one row of the design. Multiple rows of holes are punched on each card and the many cards that compose the design of the textile are strung together in order. It is based on earlier inventions by the Frenchmen Basile Bouchon (1725), Jean Falcon (1728) and Jacques Vaucanson (1740). This was part of my Econ History doctorate, so I know this story very well.

Each hole in the card corresponds to a "Bolus" hook, which can either be up or down. The hook raises or lowers the harness, which carries and guides the warp thread so that the weft will either lie above or below it. The sequence of raised and lowered threads is what creates the pattern. Each hook can be connected via the harness to a number of threads, allowing more than one repeat of a pattern. A loom with a 400 hook head might have four threads connected to each hook, resulting in a fabric that is 1600 warp ends wide with four repeats of the weave going across.

The Jacquard loom was the first machine to use punch cards to control a sequence of operations. Although it did no computation based on them, it is considered an important step in the history of computing hardware. The ability to change the pattern of the loom's weave by simply changing cards was an important conceptual precursor to the development of computer programming.

Now, this device, invented at the dawn of the Industrial Revolution, could be hooked up to dozens of looms, and produce beautiful, sophisticated textiles by the thousands of yards, very cheaply. Which, of course, put thousands of French weavers out of work. With no French Guvmint bailout to rescue them, the weavers treated like any good socialistic Luddite - they rioted. They took their wooden shoes (SABOT) and threw them into the infernal machines, thereby committing the act of sabot - age : sabotage.

The point is, the coming transformation will be painful, but we will get through it. We will have a money economy of highly intelligent machines (robots, if you will) manufacturing goods for sale here and abroad, designed built and maintained by American workers and a huge non-money economy of DYI types using the technology the money economy provides, to provide for themselves. - IF and only if, we have the guts to be flexible, agile and swallow our stupid pride and re-tool out skills to meet the paradigm shift. Or wallow in your "I'm a victim" status and become a ward of the state.

I'll leave the choice to you, because you own it ---->

The REAL Economic Tsunami - Part II

Let's review the topics of my current sermon/rant -

1. Root economic change
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher. In an earlier blog I wrote this, about the concept of "the job" as an organizing principle of performing "work";

"We (the US) are in the middle of an economic transformation the likes of which we haven't seen since the steam engine. Yes, people will be thrown out of work - for a while. Yes, companies will be in receivership, in order to re-organize - for a while. But the transformation will come, no matter what manner of backward, insane, neo-socialist, buggy-whip making stupidity the guvmint tries to inflict, And if the guvmint doesn't midwife this transformation, it will be stripped down against it's will too. We are moving, albeit slowly, into a new economic paradigm, in which KNOWLEDGE, will supersede information as the controlling factor - this means jobs will be discarded and replaced with new types of jobs, manufacturing will shift from human-based to machine-based labor, hell, even the very definiton of what a damn job IS will change. The end of the "job", if you will, is coming, and nothing can be done to stop it..

The end of the "job" as a way of organizing work, it is a social artifact that has outlived its usefulness. Its demise confronts everyone with unfamiliar risks -- and rich opportunities.

Each day's newspaper and blog carries another story of new job losses. We hear the recession has been in effect for quite a while. The coming Obama Administration is trying convince you that they can create jobs, but critics claim some of its new taxes and regulations will destroy jobs. We are told the only way to protect our jobs is to increase our productivity, but then we discover that business process re-engineering, using self-managed teams, flattening our organizations, and turning routine work over to computers always make many jobs redundant. We used to read predictions that by 2000 everyone would work 30-hour weeks, and the rest would be leisure. But as we approach 2010 it seems more likely that half of us will be working 60-hour weeks and the rest of us will be unemployed. What's wrong? It is not that the President or his critics don't care what happens to us, or that organizations that asked for our loyalty and grew because of our efforts have double-crossed us. The fault does not lie even with that dread monster overseas competition, which has been blamed for everything from unemployment to falling living standards. It's a shame these things are not the culprits, for if they were our task would be simpler.

The reality we face is much more troubling, for what is disappearing is not just a certain number of jobs -- or jobs in certain industries or jobs in some part of the country or even jobs in America as a whole. What is disappearing is the very thing itself: the job. That much sought after, much maligned social entity, a job, is vanishing like a species that has outlived its evolutionary time. A century from now Americans will look back and marvel that we couldn't see more clearly what was happening.

The job is an idea that emerged early in the 19th century to package the work that needed doing in the growing factories and bureaucracies of the industrializing nations. Before people had jobs, they worked just as hard but on shifting clusters of tasks, in a variety of locations, on a schedule set by the sun and the weather and the needs of the day. The modern job was a startling new idea -- and to many, an unpleasant and perhaps socially dangerous one. Critics claimed it was an unnatural and even inhuman way to work. They believed most people wouldn't be able to live with its demands. It is ironic that what started as a controversial concept ended up becoming the ultimate orthodoxy -- and that we're hooked on jobs. Now the world of work is changing again: The conditions that created jobs 200 years ago -- mass production and the large organization -- are disappearing. Technology enables us to automate the production line, where all those job holders used to do their repetitive tasks. Instead of long production runs where the same thing has to be done again and again, we are increasingly customizing production. Big firms, where most of the good jobs used to be, are unbundling activities and farming them out to little firms, which have created or taken over profitable niches. Public services are starting to be privatized, and government bureaucracy, the ultimate bastion of job security, is being thinned. With the disappearance of the conditions that created jobs, we are losing the need to package work in that way. No wonder jobs are disappearing."

Definitions of job on the Web:

• occupation: the principal activity in your life that you do to earn money; "he's not in my line of business"
• a specific piece of work required to be done as a duty or for a specific fee; "estimates of the city's loss on that job ranged as high as a million dollars"; "the job of repairing the engine took several hours"; "the endless task of classifying the samples"; "the farmer's morning chores"
• a workplace; as in the expression "on the job";
• an object worked on; a result produced by working; "he held the job in his left hand and worked on it with his right"
• the responsibility to do something; "it is their job to print the truth"
• the performance of a piece of work; "she did an outstanding job as Ophelia"; "he gave it up as a bad job"
• a damaging piece of work; "dry rot did the job of destroying the barn"; "the barber did a real job on my hair"
• problem: a state of difficulty that needs to be resolved; "she and her husband are having problems"; "it is always a job to contact him"; "urban problems such as traffic congestion and smog"
• a Jewish hero in the Old Testament who maintained his faith in God in spite of afflictions that tested him
• profit privately from public office and official business
• any long-suffering person who withstands affliction without despairing
• subcontract: arranged for contracted work to be done by others
• (computer science) a program application that may consist of several steps but is a single logical unit
• a book in the Old Testament containing Job's pleas to God about his afflictions and God's reply
• work occasionally; "As a student I jobbed during the semester breaks"
• caper: a crime (especially a robbery); "the gang pulled off a bank job in St. Louis"

Whew! That's lot to digest, but you get the idea - there are a lot of definitions for the word job, but for now, let's focus on "occupation: the principal activity in your life that you do to earn money". This is changing, and at an exponential rate - just as in calculus, the rate of the rate of change is increasing. One great example can be found at Toyota (just down the road from me in Georgetown, KY) - no one line worker has just one "job". They perform, as in olden pre-industrial revolution times, shifting clusters of tasks... but still on the assembly line, at the plant, in Georgetown. But this is a quantum change from the UAW, unionized paradigm of singular tasking, a la Frederick Taylor ( see http://en.wikipedia.org/wiki/Frederick_Winslow_Taylor for more). What is the "job" becoming? In a fast moving economy, jobs are rigid solutions to an elastic situation. I think it means: tasking is "permanent"; economies have always changed, so that it is necessary to have flexible solutions to solve problems in the tasks to be performed. For coming generations, the traditional job will never exist. Even the idea of the 9-5 job is becoming obsolete, simply because it's not good time management, and it's expensive. Productivity doesn't need a stop watch, or people poring over time sheets. All it needs is actual production and viable costs. The job monoculture no longer exists. You won't get vast crops of new accountants, herds of clerks, and fields of paper pushers anymore to be JUST accountants, etc. Bureaucracy is dying, and so is its infrastructure. They're inefficient. You don't need them any more. A spreadsheet, a document or so, and an email address will do. That's got rid of a lot of dead end jobs, and careers based mainly on inertia. Nor are you stuck with a career path which turns you into a clone of your parents. With the removal of the office motif, the workplace and the employment market are now a lot more advanced, and this is only the beginning. The new generations may never need to work under such restrictions, with so few options.

For job hunters, this may involve some good organization, and very good sources of information, but in practice, it works entirely in their favor. This is an extremely fluid workplace, and there are now multiple job opportunities, literally every second. You don't have to commit a whole day to just one job. Nor are you confined to just one career, or just one skill set. In the past, a person with multiple skills across multiple fields was very unusual. People specialized in one field. Their career choices were severely limited by that specialization. Now, you can accumulate multiple degrees, multiple qualifications, and transfer common skills across different professions. All the suffering caused by downsizing workforces and cost cutting in wages has had a very strange result. It's completely changed the entire concept of employment, both for employers and employees. What used to be a so-called good solid job now looks like a bad risk. Cheapskate wages and neurotic downsizing, particularly in the US, have added a lot of incentive to looking for much better ways of earning a living The rise of the contract worker, originally seen as the end of the world by the traditional job market, has worked well. The average contract worker has more choice than anybody in the employment market has ever had before. If you're prepared to do the work, you can make as much money as you can find in the contracts, and have some spare time for your own projects. You can even have a life.

And what about companies, corporations? Who will do the ...er, jobs? Well, you won't have jobs, I think, just task clustering. And corporations will become more like movie studios - project factories, with flexible scheduling, task assignment, even manufacturing (off-shored to some Third-World sh*thole no doubt, at least at first. Labor exploitation is part of the human genome you know). Manufacturing will return to the US, but it will performed by American made robots (!?!?!?) designed and maintained by, yes American workers, as one their clusters of tasks, as part of a project. Specifically, companies that have already begun to employ de-jobbed workers effectively seem to share at least four traits:

1. They encourage rank-and- file employees to make the kind of operating decisions that used to be reserved for managers.
2. They give people the information that they need to make such decisions -- information that used to be given only to managers.
3. They give employees lots of training to create the kind of understanding of business and financial issues that no one but an owner or an executive used to be concerned with.
4. They give people a stake in the fruits of their labor -- a share of company profits. The organization that wants to move down the path toward the post-job future must answer several key questions:

-- Is work being done by the right people? -- Are the core tasks -- requiring and protecting the special competencies of the organization -- being done in-house, and are other tasks being given to vendors or subcontractors, temps or term hires, or to the customers themselves? -- Are the people who do the work in each of those categories chosen in such a way that their desires, abilities, temperaments, and assets are matched with the demands of the task? -- Are such workers compensated in the most appropriate way? -- Is everyone involved -- not just the core employees -- given the business information they need to understand their part in the larger task? Do they have the understanding needed to think like business people? -- Does the way people are organized and managed help them complete their assignments, or does it tie them to outmoded expectations and job-based assumptions? Too often new ways of doing things are viewed as add-ons: "If we ever get a spare moment around here, let's flatten the organization chart!'' That's a big mistake, of course. Part of the reason there is so little time is that most of today's organizations are trying to use outmoded and underpowered organizational forms to do tomorrow's work. They insert an empowerment program here and a new profit-sharing plan there and then announce that those things aren't so great after all because profits are still falling. Such organizations won't have better results until they do two things. First, get rid of jobs. Second, redesign the organization to get the best out of a de- jobbed worker. A big task, sure. But like any evolutionary challenge, it will separate the survivors from the extinct.


More on this later ---> ONWARD!!!

The REAL Economic Tsunami - Part I

I've been threatening to write about his for over a year now, so finally here goes:
the question really is - What the hell is going on? Why all this chaos in the economy, in world affairs is, well, everything?

Change, friends, change - and it ain't gonna be pretty. Here is the view from from low Earth orbit:

1. Root economic change
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

Now these are topics of biblical scale, so I'll probably end of tackling them one post at a time, but bear with me. You may realize a few things overtly, and maybe learn a few things you haven't thought of (or only in a tangential way).

Root causes/real outcomes -
The implosion of the US, and subsequently European, then Asian economies has been blamed on a variety of processes, from the toxicity of mortgage backed securities, derivative instruments values at 500% or more of actual asset value, to the self-immolation of the US auto industry - I could go on and on. But, as usual, there is a deeper meaning here, a deeper and more pivotal reason (or rather, set of reasons) that point to a more fundamental change in our world, how we work, interact, communicate and entertain ourselves. what's really going on here? Why are all these things happening now and all at once?

Many years ago, when I was working on my M.B.A., I tried to show a demonstrably more efficient way to use capital to replace labor, via the massive use of Information Technology at all levels of production: a radical idea at the time. Seemed like a slam-dunk at the time, I mean after all, there must be a solid reason why all corporations and even small businesses used PC's and networks to conduct the tasks that business required right? There must be demonstrable economic advantage to the use of IT, right? Or we wouldn't be doing it at such a massive level...right?

WRONG! Or at least my preliminary analysis showed that, by using GAAP (Generally Accepted Accounting Procedures), you could not show any advantage in the use of IT over a pencil and legal pad, to run a company. What? This can't be... or can it? Like Professor Bob Solow (1987 Nobel Prize, Economics) says, "You can see computers everywhere but in the productivity statistics." So does my old professor, Paul Strassmann (former CIO of the Department of Defense and Xerox). The debates about the productivity paradox range from strongly held biases and self-serving claims, to misused statistics, to facts. My own work, which is based entirely on verified, validated, and audited corporate data, has been involved in such discussions. Therefore, the credibility of my work depends entirely on the reliability and trustworthiness of that data and the analytical methods. And that's what I found - That GAAP cannot measure these kind of productivity numbers, so I turned to IFRP (International Financial Reporting Processes), and voila, the productivity numbers fell out. IFRP was more recent at the time, so what was really being measured here?

Indications are (as my pals at CIA like to say) that the world might be in the early stages of a major paradigm shift in global economic development. It is the root cause of most (if not ALL)social, political and economic instability and insecurity.

Eight points-
Root causes of the socio-economic crisis must/should be addressed simultaneously. Below is an eight-point list-in-progress of root causes.

• Anthropocentrism, the assumption of human superiority over nature.

• Unlimited, linear economic growth in a world dependent on nonrenewable resources and closed loop production cycles.

• Technology worship, the prevailing paradigm that technological evolution is invariably good and that problems caused by technology can be solved by more technology.

•Modern chemistry, the invention of substances that cannot be returned productively into the planet’s natural cycles. For many modern chemicals, such as DDT or PCBs, there are no organic counterparts capable of biologically degrading these substances.

• Domination of mass media (particularly TV and advertising) by viewpoints that serve the interests of the "smokestack" industrial world and suppress alternate views.

• The concentration of power amongst corporate executives and owners, and the consequent loss of democratic empowerment that has been profoundly detrimental to human beings.

• The absence of long-term time perspectives: actions based on the desire for short-term gratification can degrade the conditions for life and reduce options for subsequent generations.

• Lack of education in industrial cultures in general systems theory or whole-systems thinking leading to ignorance in the "quantum connectivity" or impacts of one set of actions upon another, on a global basis.

Now, don't mistake this for a hippy-dippy, "one world is enough" clarion call. It's practical. My contention is that these eight conditions are contributing to the real economic tsunami that is about to hit us. And like the Industrial Revolution before (the so-called "information revolution" is just a prelimenary ripple), it will affect everyone on the planet, with the attendany "law of unforseen consequences" vaporizing our current world view of the nature of work.

More on my next post----> stay tuned, talk amongst yourself and discus!