On a BBC News programme yesterday, I heard the UK defined as 'the world's sixth-largest economy'. I had been used to us being described as the fifth-largest, and had not seen any report of a new league table that relegated us; but that did not surprise me: I can't monitor everything, and we have become adept at burying bad news [as an unscrupulous civil servant suggested on 9/11].
It is no surprise to recognise that we will sometime be reduced to seventh, tenth and even - ultimately - twentieth unless policy is radically changed. As the superb Anthony Hilton pointed out in last night's Evening Standard, Mrs May's speech on Monday to the CBI Conference took her [and her government] no further forward on important issues; The 'industrial strategy' is yet to be be unveiled: but it is expected to be much less radical than had been expected in the first year of the May regime. There is no indication of the potential shape of a Transitional Agreement with the European Union after March 2019; to the obvious consternation of managers of large and small businesses in all sectors of the economy. The headbanging advocates of Britain being set adrift to sink - alone, alongside only Ecuador - in the cold waters of the WTO Rules, remain powerful in the government - to the extent that the Brexiteers are demanding that Priti Patel [who includes hard opposition to EU membership, or even close co-operation within the European Economic Area, to the stupidities that made her departure from government inevitable] must be replaced by someone with similar views.
Hilton points out that even the triumphant new-technology companies that now dominate the US stock market - Microsoft, Google, Apple etc - benefit from hugely from research that was done in state-funded laboratories decades ago. This observation does not belittle the originality and drive of those who have carried these concept into intellectual property which can then be marketed to millions of enthusiastic customers: they have - and deserve - their billions of dollars. But it does lead to the painful admission that the UK has no comparable corporation under British ownership; even though the country continues to be hugely generative of both deep concepts and and innovative applications of the highest thought. I have rabbited-on endlessly about the small British firms that have been created to implement such ideas, that have been unable to accumulate the finances necessary to support their voracious needs as they pass through the stages of implementation to the ability to deliver a final product to the market, and thus succumb to foreign ownership. In a few conspicuous cases, opportunist buyers have agreed - for the time being - to keep the company HQ and laboratories in the UK, but they can renege on that at any time; and the intellectual property - the all-important ik - is free for them to exploit anywhere, anytime.
A serious Industrial Strategy would provide finance for such emergent companies - or divisions of existing companies - in sufficient quantity and on sufficiently loose terms to allow developments to reach the global market in good time: recognising that not all the guesses can be correct. There will be losers as well as winners [though history shows that losers often have attributes that can be developed in different directions and circumstances to become successful themselves]. Even the sixth-richest country must be able to afford the few billions that would be involved [which the government could borrow on extremely favourable terms, against all historical comparisons].
The UK is also being criticised, deservedly, for its constant reductions in the size, efficiency and capability of the armed forces. One of the regular themes of this blog has been the symbiosis - over many centuries - of money spent on research for defensive weaponry and dividends later gained from the civil exploitation of those technologies, This is precisely the time when the country should be searching for new, super-effective weapons systems, communications and defence capabilities: in which the UK has led for almost a millennium.
Behind all these thoughts lies the need for investment - especially by the state, in combination with people with ideas - to bring new concepts, new materials and new processes into being. They can only be objectified by manufacturing, and it is through innovation in manufacturing that the productivity of the economy can be increased. Factories that produce highly-desired output [regardless of whether the buyer is the armed forces or the mass market] can make significant profits because the customers are prepared to support the exclusivity of the producer firm's ik, part of the profit can be reinvested in new concepts and processes, thus the productiveness of the firm is increased, which means that the average output per employee - the productivity - of the enterprise can be raised and the economy can grow substantially.
This virtuous circle cannot be achieved without individual entrepreneurship [both inside and outside companies] and the active, continuous support of the government. The cretinous Economics that has stressed free-enterprise and free markets with minimum state input has fostered the disastrous decline into which the British economy has been locked for more than a generation.
I will carry on blogging as a small voice for reason.
Showing posts with label Google. Show all posts
Showing posts with label Google. Show all posts
Thursday, 9 November 2017
Tuesday, 17 October 2017
Intellectual Property and Corporate Power
One of the key components of my 'dissident' approach to economic science [or political economy] is my assertion that all ownable things - assets - come in four categories:
1. Keyn. anything in the category that J M Keynes described as chartalist in his definitive Treatise on Money. These are all the immaterial creations of the human mind that can be claimed as the possession of the person who invented them, or of the person who was able to capture such command over them as would be recognised in a court of law. Thus people and corporate entities [governments, local government, institutions, companies etc] come to be the 'owners' of control of the land, and owners of shares, stocks, bank deposits, patents, copyrights, brand names, trademarks etc. Most defined keyns can be sold . The most massively increasing category of keyns in the contemporary economy are items of intellectual property [or 'intellectual keyns' shown as ik in my text].
2. Quon. A material asset whose price includes both the costs of assembling the material thing and a charge for the intellectual property that the owner of the object is able to enjoy with the material thing. The owner of the ik sells the user a right to enjoy the benefits of their brand, and the intellectual property that inheres in the object.
3. Jev. A material asset whose price when resold is determined by its perceived rarity and aesthetic quality, rather than by its cost of production or its contemporary usefulness in any material sense to the owner. Thus this category covers antiques, works or art etc; which can be bought and sold and which - over time - often appreciate in retain price, so they can be assets of increasing inventory 'value'.
4. Marcom. These are commodities which are sold at prices that equal, or are close to, the cost of production and delivery [allowing for a reasonable return on capital to the producers and distributors], with no premium for any ik such as occurs in the price of a quon.
There are huge implications that arise from this differentiation of assets. I refer to two today.
A. Firms that are licensed and regulated as 'banks' have huge privileges. In particular, because they manage keynic money for natural and corporate persons they get special guarantees from the state. The most extreme version of this protection was the 'rescue' of the banking system in 2007-9, whose effects are still affecting everybody in the advanced economies. Despite the huge direct and indirect cost of 'saving' the banks, governments and their agents, the central banks [e.g. the Bank of England] have done nothing that definitively separates the socially-necessary and economically-indispensable banking functions of the huge complex firms that include banking divisions from the parts of the firm that trade in stocks and shares, bonds, investment advice, creating and trading in derivatives and futures and other speculative keyns. Thus the entire western world remains at risk from rogue trading or sheer incompetence in these pampered businesses. This remains one of the biggest risks to civilisation; even allowing for jihadism, rogue states, cybercrime, plague and famine.
B. Hundreds of thousands of people and firms own ik that has become increasingly desired by more and more people over the past twenty years. Computer games, films and records and all accessed from cyberspace, and social media have become massive foci of consumption; and although the ownership of such assets is widely diffused, a small number of points of access are used by the vast preponderance of users. Thus Google, Alibaba, Facebook and a few other leading points in the cyberworld are absolutely dominant. The creators of these platforms have established their intellectual property with immense rigour, and are constantly extending their [patented] means of checking on their customers so that they can increasingly tailor 'special offers' that will tempt them to spend their money and their time at the profitable direction of the ik owner. This gives more power over the consumers and their world to a small number of firms than has ever been held by firms that control material commodities. Economic models have not even begun to cope with it: the Econocracy have been content to monopolise their fantasies while Silicon Valley has established a much firmer hegemony than the professors can comprehend. Politicians are increasingly exercised by the new sort of power that is held by the dominant holders of the ik that shapes hundreds of millions of consumer's lifestyle; and don't know what to do about it. They can't even work out how to tax the massive cash flow that they receive.
My basic taxonomy of economic assets forms a basis on which public control, exercised by the political system of the state, can properly be established over the cybernauts within a sensible structure of political economy. One small step for man?
1. Keyn. anything in the category that J M Keynes described as chartalist in his definitive Treatise on Money. These are all the immaterial creations of the human mind that can be claimed as the possession of the person who invented them, or of the person who was able to capture such command over them as would be recognised in a court of law. Thus people and corporate entities [governments, local government, institutions, companies etc] come to be the 'owners' of control of the land, and owners of shares, stocks, bank deposits, patents, copyrights, brand names, trademarks etc. Most defined keyns can be sold . The most massively increasing category of keyns in the contemporary economy are items of intellectual property [or 'intellectual keyns' shown as ik in my text].
2. Quon. A material asset whose price includes both the costs of assembling the material thing and a charge for the intellectual property that the owner of the object is able to enjoy with the material thing. The owner of the ik sells the user a right to enjoy the benefits of their brand, and the intellectual property that inheres in the object.
3. Jev. A material asset whose price when resold is determined by its perceived rarity and aesthetic quality, rather than by its cost of production or its contemporary usefulness in any material sense to the owner. Thus this category covers antiques, works or art etc; which can be bought and sold and which - over time - often appreciate in retain price, so they can be assets of increasing inventory 'value'.
4. Marcom. These are commodities which are sold at prices that equal, or are close to, the cost of production and delivery [allowing for a reasonable return on capital to the producers and distributors], with no premium for any ik such as occurs in the price of a quon.
There are huge implications that arise from this differentiation of assets. I refer to two today.
A. Firms that are licensed and regulated as 'banks' have huge privileges. In particular, because they manage keynic money for natural and corporate persons they get special guarantees from the state. The most extreme version of this protection was the 'rescue' of the banking system in 2007-9, whose effects are still affecting everybody in the advanced economies. Despite the huge direct and indirect cost of 'saving' the banks, governments and their agents, the central banks [e.g. the Bank of England] have done nothing that definitively separates the socially-necessary and economically-indispensable banking functions of the huge complex firms that include banking divisions from the parts of the firm that trade in stocks and shares, bonds, investment advice, creating and trading in derivatives and futures and other speculative keyns. Thus the entire western world remains at risk from rogue trading or sheer incompetence in these pampered businesses. This remains one of the biggest risks to civilisation; even allowing for jihadism, rogue states, cybercrime, plague and famine.
B. Hundreds of thousands of people and firms own ik that has become increasingly desired by more and more people over the past twenty years. Computer games, films and records and all accessed from cyberspace, and social media have become massive foci of consumption; and although the ownership of such assets is widely diffused, a small number of points of access are used by the vast preponderance of users. Thus Google, Alibaba, Facebook and a few other leading points in the cyberworld are absolutely dominant. The creators of these platforms have established their intellectual property with immense rigour, and are constantly extending their [patented] means of checking on their customers so that they can increasingly tailor 'special offers' that will tempt them to spend their money and their time at the profitable direction of the ik owner. This gives more power over the consumers and their world to a small number of firms than has ever been held by firms that control material commodities. Economic models have not even begun to cope with it: the Econocracy have been content to monopolise their fantasies while Silicon Valley has established a much firmer hegemony than the professors can comprehend. Politicians are increasingly exercised by the new sort of power that is held by the dominant holders of the ik that shapes hundreds of millions of consumer's lifestyle; and don't know what to do about it. They can't even work out how to tax the massive cash flow that they receive.
My basic taxonomy of economic assets forms a basis on which public control, exercised by the political system of the state, can properly be established over the cybernauts within a sensible structure of political economy. One small step for man?
Thursday, 24 August 2017
A Changed World: WPP and Advertisisng
One of Britain's most successful companies in recent decades is WPP - originally Wire and Paper Products - whose success is almost entirely ascribable to the genius of its long-term Chief Executive. Though it is still a London-listed company, it has a truly global reach; which means that for at least twenty years its fortunes have largely been independent of the ups and downs of the British economy. When Asia has been in crisis, the Americas have generally been strong; when Europe has stagnated, Asia has thrived: so WPP has been able to expand in most years, as a global conglomerate.
Like Warren Buffet, Martin Sorrell entered and then took over an existing company that was not doing particularly well, re-oriented its business by moving into a completely different sphere of activity where it proved uniquely innovative and deservedly became a leader in its field. The chosen field for Wire and Paper Products was advertising: precisely at the tie when brands were becoming globally important and technologies were advancing rapidly. Standards of living worldwide were rising, and consumers were becoming more conscious of their power in the market. Consumers were also better-informed than ever before, as firms increased their advertising and sales budgets. By the use of better-informed I do not imply that the quality of the customers' understanding was enhanced: simply that more information was being presented to them, much more professionally. Commercial television was in most homes in the advanced countries; radio was still expanding as a means of disseminating news, information and entertainment [particularly popular music]; and print media - books newspapers, magazines and journals [both popular and targeted at specific groups] were more affordable and better-presented than ever before. In that world, WPP thrived: and as more countries entered the consumerist age [at least, for the upper and middle classes] so WPP could bring in its expertise and marry it with an intelligent development of local methods and traditions.
But with apparent suddenness - this week - the past year's results from the company show a downturn in business that has instantly been associated by commentators with major global trends.
Over two decades entertainment and information have been digitised: people now look to their smart phone for data on almost every topic. Companies have responded, so that it is now possible from one's armchair to find out which shop in the locality currently stocks which item. As this process has developed, so the great organisers of information - most obviously, Google - have responded by developing the means largely to predict what a user will want as soon as he or she types in [or says] the first fragment of the request. Hence the demise of traditional advertising is confidently predicted; though it is recognised that new brands, products, services and approaches will always have to be promoted, and most promoters will not want to have to put their fate entirely in the hands of the giants like Amazon and Google. Thus independent advisers who are up-to-the-minute on technology and offer an affordable service will always be needed; but this will be a niche rather than a mass-market business. Print media are declining. Families no longer sit around looking at one TV set, as all members have their own access to their own preferences: so the value to a firm of advertising through that medium needs to be focused on specific groups - like the elderly - who are likely still to watch 'conventional' TV.
If any affected firm can keep abreast of these developments it is the highly-adaptable WPP; but how much of the world's business will need to use such services in the future is an increasingly disputed area of prediction. Most of the pundits expect WPP to survive for at least a decade, but probably in a shrinking context: unless, of course, some as-yet unimagined innovation comes to their rescue. In his eighth decade, Martin Sorrell remains an outstanding innovator and developer of ideas. I would not yet write off him or his firm; despite the changed world in which he is now operating.
Like Warren Buffet, Martin Sorrell entered and then took over an existing company that was not doing particularly well, re-oriented its business by moving into a completely different sphere of activity where it proved uniquely innovative and deservedly became a leader in its field. The chosen field for Wire and Paper Products was advertising: precisely at the tie when brands were becoming globally important and technologies were advancing rapidly. Standards of living worldwide were rising, and consumers were becoming more conscious of their power in the market. Consumers were also better-informed than ever before, as firms increased their advertising and sales budgets. By the use of better-informed I do not imply that the quality of the customers' understanding was enhanced: simply that more information was being presented to them, much more professionally. Commercial television was in most homes in the advanced countries; radio was still expanding as a means of disseminating news, information and entertainment [particularly popular music]; and print media - books newspapers, magazines and journals [both popular and targeted at specific groups] were more affordable and better-presented than ever before. In that world, WPP thrived: and as more countries entered the consumerist age [at least, for the upper and middle classes] so WPP could bring in its expertise and marry it with an intelligent development of local methods and traditions.
But with apparent suddenness - this week - the past year's results from the company show a downturn in business that has instantly been associated by commentators with major global trends.
Over two decades entertainment and information have been digitised: people now look to their smart phone for data on almost every topic. Companies have responded, so that it is now possible from one's armchair to find out which shop in the locality currently stocks which item. As this process has developed, so the great organisers of information - most obviously, Google - have responded by developing the means largely to predict what a user will want as soon as he or she types in [or says] the first fragment of the request. Hence the demise of traditional advertising is confidently predicted; though it is recognised that new brands, products, services and approaches will always have to be promoted, and most promoters will not want to have to put their fate entirely in the hands of the giants like Amazon and Google. Thus independent advisers who are up-to-the-minute on technology and offer an affordable service will always be needed; but this will be a niche rather than a mass-market business. Print media are declining. Families no longer sit around looking at one TV set, as all members have their own access to their own preferences: so the value to a firm of advertising through that medium needs to be focused on specific groups - like the elderly - who are likely still to watch 'conventional' TV.
If any affected firm can keep abreast of these developments it is the highly-adaptable WPP; but how much of the world's business will need to use such services in the future is an increasingly disputed area of prediction. Most of the pundits expect WPP to survive for at least a decade, but probably in a shrinking context: unless, of course, some as-yet unimagined innovation comes to their rescue. In his eighth decade, Martin Sorrell remains an outstanding innovator and developer of ideas. I would not yet write off him or his firm; despite the changed world in which he is now operating.
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