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?"
No comments:
Post a Comment