Bleeding Edge No Place For Bleeding Hearts

You may have seen some of the bleating about Google's decision to retire some of its services that never hit the mainstream. Such whinging must be ignored, as to heed it only risks making the difficult process of innovation harder still.

Having been involved with internet start-ups since 1996, of course I subscribe to Geoffrey Moore's variation of the "Technology Adoption Life-cycle", that there's a "Chasm" between innovators/early adopters using a disruptive product, and successfully selling it to the early majority.

As an innovator or early adopter, you are out to get new stuff for free (or pay for it to be exclusive to you - thanks KM), and be ahead of the crowd. You love to show off the latest stuff and brag about how you were there at the beginning. And you definitely earn those bragging rights for putting up with the pain of participating in alpha- and beta-testing, the inevitable crashes and other technological mayhem. You understand that if you aren't protecting yourself against the failure of new technology you only have yourself to blame. Either you never let on there's a problem, or you wear the latest outage like a badge of honour. But if you whinge about it, then you aren't really an innovator or an early adopter, and you lose your bragging rights. You've become a member of the early majority - where new products with bugs or in beta-test (as opposed to new releases/upgrades) are not tolerated, and ongoing support is expected.

Similarly, if you're eager to sell your business to Google or some other behemoth in the hope that it will magically transport your "baby" across the chasm, then you're setting yourself up for intense disappointment. Even the big guys struggle to cross the chasm (which is why Microsoft waits patiently on the majority side). Until you've crossed there's still a ton of work to do, which is why they'll call one of the clauses in your sale and purchase agreement an "Earn Out".

The bleeding edge is no place for bleeding hearts.

Rant ends ;-)

OK, OK. But Absolutely No Fifth Runway

As Gordon Brown's wasteful, intrusive juggernaut grinds the blood and bones of yet another protest line into the political landscape, so the survivors must rush to the next defensive position.

But in the absence of any effective political opposition, it is wise to choose something that Gordon and his goons would be truly looney tunes to set their sights on. Something so inherently dangerous that New Labour will spontaneously combust in the attempt to achieve it. Because we all know now that as soon as the good citizens gather to defend their interests, New Labour acquires another target, and the Cavalry stays away.

Iraq turned out to be just another rut in the road for these automatons. And I'm sure they can squeeze in a fourth runway at Heathrow, if we don't mind the odd plane landing on the M4 by mistake.

But I reckon a fifth runway at Heathrow would put New Labour on collision course with the M25. Nothing could survive that.

Low Cost Government

Well, here we are in '09, the last of the Noughties: a fitting epithet for a decade of both reckless abandon and total collapse on the fiscal and financial front.

There's a lot of soul-searching going on, as well as a search for inspiration and leadership. While the US President-elect seems to have risen to the challenge, in the UK the search continues.

Bereft of vision, we look to the past, and it's a sign of the times that I was given Speeches That Changed the World for Christmas. Of course it includes Franklin D Roosevelt's First Inaugural Address, heralding the "New Deal", which has often been referred to in the news lately. It can also be read here.

While FDR's speech and the New Deal must be seen in the context of a more parlous economic situation than today's, and many of FDR's tactics are being deployed today, I was struck by one that's yet to be honoured in the UK:

"... insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced."

I mention it not just because UK civil servants were promised a 2% pay increase in a time of rising unemployment (public sector teachers will get 2.3% extra this year and next, while the Daily Mail shrieks that private schools are closing). I also raise it because New Labour might just mistake the need for fiscal stimulus as a wheeze for saddling us with more civil servants in the long term, who'll generate further cost in terms of random policy initiatives and bureaucracy to justify their existence. See the Taxpayers' Alliance "non-jobs" for examples.

Of course, hiring more public sector workers flies in the face of last September's promise to cut jobs, as reported in the Guardian:

"Separate ONS figures on public sector employment showed the number of people employed by the government fell 44,000 in the second quarter to 5.8 million, the lowest total since the second quarter of 2004. The government has pledged to cut 84,000 jobs by next April as a result of a review conducted by Sir Peter Gershon in 2005."

But as Chancellor, Gordon Brown approved a 13% increase in the public sector workforce from 5.1 in 1997 to 5.8m in 2006, according to the Institute for Fiscal Studies. So, Sir Peter's 2005 review was merely borne on the rising tide.

The IFS also says that public sector pay has caught up with private sector pay, yet about 76% of public sector workers have final salary schemes, versus 17% in the private sector. And public sector pensions are worth 25% of salary versus 20% in the private sector. With pay the same, there's no reason for that gap - if there ever really was one.

But take heart! Perhaps it's a sign the trend is about to reverse that certain people in the public sector are bizarrely receiving their Honours now - it's to reward them before they can be accused of selling out their colleagues.

On that basis, we really should have welcomed the news that, for overseeing massive public sector expansion and bail outs at the taxpayer's expense, the Permanent Secretary of HM Treasury gets a knighthood, while the captains of private sector finance get hunted out of office for their part in Brown's Boom and Bust.

The last of the Naughties?

Let's hope so.

Enjoy the year as best you can!

Madoff Unleashes the Counter-Veblen Effect

I seldom bother to read the Sunday Times, but today I had little choice but to learn how the Madoff scam has rocked the exclusive world of the super-rich.

We can skip the lecture on supply and demand, save to say that all the featured sob-stories suggest that Madoff targeted the mega-wealthy private investor on a personal level, triggering a snob effect and/or bandwagon effect. In other words, the mugs confused either exclusivity itself or popularity amongst their "circle", with the quality of the investment. According to the FT, even "Union Bancaire Privée, the Swiss bank that is one of the world’s biggest hedge fund investors, told clients in a letter this week that it had spotted potential dangers but had been reassured by Mr Madoff’s reputation and clean regulatory record." More snobs on the bandwagon.

Of course, appealing to investors on this basis was especially insidious, as it robbed them of any interest in transparency. Whereas concern at the lack of it kept more rational institutions and professional investors safely at bay. Even the publication of Michael Ocrant's article in May 2001 ("Madoff tops charts: sceptics ask how") strongly suggesting a scam, failed to restrain the rampant enthusiasm amongst the wealthy elite for the long social climb ahead.

Well, they're all down from the mountain now, of course, claiming they should've been warned by the SEC and raging round their lawyers' offices spouting the whole sorry history of restaurant names and lunch dates while litigators take notes. But once they've ridden the whole length of the change curve, I have little doubt they'll get their own back without any help from the lawyers or regulators.

In fact, the backlash could well unleash what has been termed the "counter-Veblen effect: preferences for goods increasing as their price falls, over and above the traditional supply and demand effect, due to a conspicuous thrift amongst some consumers."

This will be more than merely an austerity measure. Like investing with Madoff, the counter-Veblen effect will be the product of a lifestyle choice. So, while it's interesting to see how it fits with the ways in which we are tightening our belts as a tactical response to the credit crunch, the counter-Veblen effect might actually chime better with, say, the actions of prominent people driven by environmental concern - like Darcey Bussell leaving for Australia to become an "eco-Mum", the committment of the entrepreneurs behind the Tesla electric car, and ultimately the Bill & Melinda Gates Foundation - as well as the authenticity demanded by the Web 2.0 community that clashed with "gut instinct" politics during the recent US Presidential campaign. Like these trends, the counter-Veblen effect could well turn out to be real and lasting.

So welcome, I suggest, to a new world of battered Bentleys, frayed collars and housecoats in Knightsbridge, where cheaper is better and champagne is for wimps.

EC to Ask First, Shoot Later

Great news. In her recent blog, the European Commissioner for Consumer Affairs, Meglena Kuneva, has said:

"In January, I will publish a report on the realities of cross-border e-commerce for consumers in Europe and investigate what the real barriers to shopping online in another Member State are. Once the problems are identified, they are easier to resolve."

This is indeed a welcome departure from the Commission's approach to facilitating cross-border e-commerce over the past 8 years or so, which resulted in firing out a plethora of European directives that only 7% of EU citizens have been able to enjoy.

Time, at last, to focus on the analysis and resolution of the root practical causes of why cross-border appears to be growing so slowly - if that is truly a problem in itself.

Of course, there is no single “e-commerce market”. Rather, every market has its online segment, and each develops differently from its offline counterpart as well as online segments of markets for other products. Drawing together the “vertical” analysis may help identify which areas of e-commerce may be more ripe for early progress and/or especially difficult practical problems on which work/education needs to start now if a market is to materialise in the longer term.

For example, it is worth considering that the May 2007 study by Civic Consulting revealed the main barriers to a single European market for consumer credit to be “different language and culture; consumers’ preference for national lenders; credit risk for lenders – no access to creditworthiness information; problems related to tax, employment practices etc.; difficulties to penetrate local market; different consumer demand in different Member States; lack of consumer confidence in a brand; differing stages of development of consumer credit; and lack of adequate marketing strategies.” The study concluded that “a single market for consumer credit cannot be expected to be created by harmonisation of legislation alone, and this is a long term rather than a short or medium term perspective.”