More Than Lazy Journalism

I have below a ‘classic’ of the current genre but I will start with my basic proposition which concerns the turmoil in the global markets following the Brexit vote. At one level there are those on the “Remain” side who are saying “I told you so” but they are clearly wrong because something far more significant is happening. The Brexit vote has become more of a lightning conductor and a symbol for something far more radical which is that the whole idea of “globalisation” has probably run its course and together, the World needs to plot a totally new economic course for the future.

In this context and once the headless chickens stop panicking, Brexit may well have done the world and world peace a really big favour.

A Typical Headline

Because of my former background in IT, I still get regular news letters and one of the links had the following headline: “Apple shares fall as Brexit takes effect”

http://www.itpro.co.uk/mobile/26871/apple-shares-fall-as-brexit-takes-effect?

Having read the article, I was at a loss to understand the connection with the actual story which was about an expected decline in sales volumes and to quote from the article:

“The period of time for which consumers keep their iPhone before upgrading to a new model has been rapidly expanding since 2013, from 24 months to 28 months in 2016. This led to Apple’s first quarterly sales decline, which was announced in April in its first quarterly report of the 2016 calendar year.”

My response to that was:

“Sorry but just what has ‘Brexit’ got to do with Apple and other smartphone manufacturers having to deal with heavily saturated ‘Western markets’ ? Might this actually have to do with their past successes and no doubt, a plentiful supply of refurbished second hand models ?

I didn’t win a prize on my Premium Bonds this month, obviously that is the ‘Brexit Effect’ which has also fed into our Summer weather… Oh please do grow up.”

The Need for Renewal

I often touch on ideas for a ‘new economy’ such as – http://baldysblog.co.uk/2016/04/23/looking-back-thinking-forward/ but in a global sense there needs to be a better understanding of the way forward and how important concerted actions are, we need to stop “beggaring our neighbours” which seems the aim of far too many. We all need to understand for example that countries running massive trade surpluses as China and Germany have done in the recent past, is not a good thing for them or the rest of the world, countries having balanced budgets are far better for the global economy.

We should also be investigating how to distribute work globally because whilst conflict and natural disasters create refugees, so too does the lack of sustainable local economies. We need to to reconsider even basic concepts such as price in the West, are we paying too little and therefore, consuming too much ? Should we investigate the greater use where technically feasible, of replacing shipping finished goods with systems of local assembly from components to create economic diversity.

Globalisation has done much to spread wealth and opportunities but it has also had a down side too because manufacturing has become far superior through the extensive use of automation but at the cost of jobs and opportunities for people plus, the ever greater concentration of capital in even fewer hands. The unintended consequence is a far greater divide between the rich and poor and decreasing social mobility, this is not a sustainable situation.

Smartphone Examples

In a sense the Apple story is a good example to contemplate because of the key elements involved: An American designed consumer product with a high “Brand Status”, manufactured in China and the resulting sales volumes have made Apple the richest company on the planet. However there is another aspect to this which indicates that due to production and distribution costs there has to be a very high minimum sales volume in order for a brand to be profitable, the volumes are staggering.

For the year ending 2015 the top vendor was Samsung who sold 324.8 million units with a market share of 22.7%. Apple was in second place with sales of 231.5 million units representing a market share of 16.2%. Total sales for all brands during the year was an amazing 1,432.9 million units. https://www.idc.com/getdoc.jsp?containerId=prUS40980416

It must surely follow that these volumes are not really sustainable or certainly not at the premium end of the market where the retail price per one seems to be £500 – £600. However and most certainly in the UK, very few people actually put that money down upfront, most buy a phone with a calling plan on a set monthly figure and with a 24 month contract. As these things are reasonably well made, they will last beyond this time period and having paid the phone off, it should be cheaper monthly costs for the user thereafter.

However where someone actually trades up at the end of their contract, this will obviously generate a second hand phone that can be refurbished and recycled, in fact all the major mobile phone providers now offer “refurbished” previous models as an option for their customers. Nice but, inevitably there will come a time when if the market isn’t constantly expanding, there will become a glut that impedes new sales as well as depresses second hand values.

You have a similar situation developing with regard to new car sales where many consumers only in effect “rent” 50% of a car on a three year contract when they can buy the car outright for a final ‘bubble’ payment or, start over again with a new car and a new contract. Inevitably you will end up with a glut in the second hand market which will both depress second hand values plus act as a brake on new car sales. Both of these schemes/markets rely on there being cheap money and high volume sales but the point surely is that this merry go round must inevitably stop.

A Lack of Innovation

My proposition is that one of the main reasons that the global economy as people imagine it to be has faltered and as yet shows little sign of meaningful recovery lies to a large extent in a lack of innovation particularly in the main western consumer markets. Now obviously, we still have the debt hangovers from the 2008 period and quite a few other factors too but they do not detract from my main argument.

Let me be clear here by making the point that a lack of innovation does not just apply to hardware and physical gizmo’s, it also applies to whole concepts that may or may not surround particular pieces of hardware. So smartphones aren’t just pieces of hardware, they also host ‘platforms’ such as Facebook, Twitter and the like plus useful software applications such as on line banking, maps, electronic diaries and so on.

Taken in this concept, it is clear from just looking at any ‘App Store’ that there are zillions of Apps available of which probably only a handful are truly universal. So the business model is there, phone, network connections, app stores, connectivity on the go but whilst it may get a bit better here and there, connectivity get faster, costs get cheaper, this has all been around for some time now and it doesn’t really look like its going much further. If we pose the question whether this is a developing market or one that has plateaued if not yet actually declining, I don’t think we would see it as having too much further development potential in it.

That other old chestnut the motor car which fundamentally hasn’t changed in over 100 years apart from better engineering and new materials/methods of construction but may just be in conceptual terms, on the brink of genuine innovation. The driver less car technology may well, starting in cities, sweep aside the whole concept of car ownership but that will take some time to mature and the disruption to the current business models that surround the “motor trade” will be very far reaching.

A Very Personal Perspective

As an old man, to project my experiences as some kind of universal template would be wrong, I am very much of an age where less is more but all that said, I will focus on two aspects, technology that I use a lot, PCs (computers), and cameras as in photography.

Starting with my computers of which I have about 6, none are ‘state of the art’ being on average, 5/6 years old in terms of their origins, I build and upgrade my own machines as required so the exact age of any one can be difficult to say exactly because it is not as if I went into PC World and bought a complete set up on a given day. However at the last major upgrade they all got RAM upgrades and SSD drives as boot disks which made them all zip along much better. But the point is, I’m not sitting here panting for the latest new processor because I have what I want for my current needs however it is more than that, there really haven’t been very significant advances made recently, we are sitting on a kind of plateau as far as major technical improvements are concerned.

When it comes to photography it is not that much different. We have more megapixels and 4K video but the reality is that when it comes to taking photographs, apart from that, we haven’t seen any startling technical improvements so that cameras from the past 5 or 6 years are every bit as capable as new fresh out of the box ones. There will be a handful of photographers who may say that they can do things with the latest kit that they couldn’t do previously but for 99% of the consumer and enthusiast market, I doubt that this would be remotely true.

The last camera that I bought was back in the New Year, in part because I got a massive discount but also because it was a different technology to those I already had. The reality is that whilst it has some neat little tricks, these are matched by some downsides so for a technology supposed to be the next best thing to sliced bread, it really isn’t. As with all kit, once you know its limitations you can make best use of it so for me it represents another technical choice but that is all.

Second Hand

I can remember my son Michael saying to me many years ago that “There is no value in old technology…” and whilst that is right when technology is moving forward rapidly, it may not be true when things are stagnant. The reason that I have both too many computers and cameras really lies in the fact that when you upgrade there is no value in your old kit so my attitude is that I may as well keep the old stuff and get a use out of it or give it away rather than stick it in a landfill. But perhaps the main point in hanging on to it all is simply that there is nothing totally compelling out there to replace them with.

Conclusion

Brexit may well just be the kid who shouts out; “The King is in the altogether and naked as the day that he was born” when confronted with the King’s Magic Suit of Clothes. The turmoil in the markets has less to do with what is happening in the UK and the EU and most to do with people realising that whatever it is “The Current Model” is broken and this applies right across the board. It is less that change is coming and more the realisation that change has already happened and has crept up on us and caught us unaware.

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