The further taste of the Apple

Yesterday, Apple overtook Exxon as the largest corporation in the world (excluding Russia and China). That is, as measured by their share values. Does this make them equally important? Not at all. Let’s carry out a brief Gedanken experiment. Suppose that both of them, and all their business assets, were to disappear from the world. What would happen?

In the case of Apple there would be a howl of protest from millions of people, particularly young people, all round the world. These would be those who are hoping to buy iPads or other Apple products in the near future. The US Treasury would almost certainly shut down the New York Stock Exchange immediately in order to avoid a general shares collapse. This would only need to be maintained for a few days until the world came to realize that its economy could, in fact, exist without Apple. Because almost all Apple’s production is already subcontracted then it would only be a matter of a few months, perhaps even only a few weeks, before Apple’s competitors would be filling the demand gap with iPad look- and do-alikes.

In the case of Exxon vanishing, however, the world economy would collapse immediately to some very low level, perhaps to 50% of what goes on now. All Western stock exchanges would probably close down for a while. This is not because Exxon occupies half of the world’s economy in financial terms — it’s only a small fraction — but its disappearance would be large enough to cause a significant disruption in the physical movement of oil and gas on which, of course, we vitally depend. The 50% economy would start recovering within days, but it would probably take between 5 and 10 years before all Exxon’s well-heads, pipelines, oil tankers, refineries and distribution systems to power stations, factories and cars were replaced.

The iPad is a conjunction of a personal computer and the original brick-sized mobile phone. Not only is the modern mobile phone is a unique product but the existence of businesses like Apple would have been inconceivable as recently as 30 years ago when IBM manufactured the first personal computer or when the first mass-produced radio phone appeared in Finland. The monetary value of Apple Inc lies almost exclusively in its brand name plus the innovative ability within the minds of a few key individuals. These could easily walk out and join another firm. If they were to do so, and subsequently design even more versatile alternatives, then Apple’s brand image would disappear quite quickly and the shares would then be worthless within a few months.

But if iPads and suchlike are little more than consumer gewgaws, having little direct bearing on the real economy of the world, they are certainly proving to be socially and politically explosive. The Arab Spring wouldn’t have happened without them. Nor would the riots, looting and arson of August last year, which spread immediately from London to other major cities in England, have occurred. Nor, in the next month, would Occupy St Paul’s Cathedral or Occupy Wall Street have happened (or, at least, not so very suddenly). Nor would the riots in Syria, which may yet develop into a full-scale civil war and revolution, have occurred on such a widespread scale without mobile phones.

And what about a possible revolution Moscow in the coming March when the next presidential election is going to take place and Putin will once again be putting himself up? Recent demonstrations, mainly by frustrated middle-class well-educated young people have already been enormous. The Grand-daddy of them all is now being organized, no doubt mainly by means of the iPod and similar. Garry Kasparov, the chess master, and Mikhail Prokhorof, another presidential candidate, both think (among many others) that the demonstration in March could turn into a revolution and that Putin will be arrested for trial for giving privileges to billionaire cronies. (Or, very possibly, Putin could lock up these two before then!)

And what about China. Since the credit-crunch of 2008 some very powerful events are going on there. Firstly, some large workforces in the prospering coastal provinces are now freqnently striking for more pay. These are usual in any fast-growing country and these are being quietly bought off one by one. But there’s now a secondary wave of many millions of ex-rural Chinese migrant workers who not only want better jobs than their present skivvying and begging, but also legal permits for health care, homes and schools for their children which residential workers already have but they don’t.

The bicycle, radio, telephone, car, and television all had huge social, political and infrastructural effects from about the 1870s and onwards. But each and all of these took many decades to fully reveal themselves — and they came about largely peacefully, too. But the celerity of the mobile phone (with the internet only recently behind it) is of a different order entirely. The taste of the Apple and other similar fruits is already explosive. We’ve probably only seen glimmerings yet.

Questionable hope from Davos 2012

There was a time, 20 or so years ago, when the annual World Economic Forum at Davos was interesting. It was paid hardly any attention in the press, but usually there were some snippets which suggested that some young economist had contributed an intriguing idea or two. Since then Davos has changed enormously. It still invites mavericks, and still has some intellectual fire-power, but by far the most who attend (and pay heavily to do so) are those who are known as the Great and the Good.

This year the theme is world economic growth. That is, how to restore its previous fast clip. In particular, how to stabilize and re-launch the Eurozone before it becomes a spanner in the whole works. The probability is, though, that it won’t attempt to ask or to answer the most important economic question of all. This is: When and How are governments going to stop manufacturing money ad lib and begin to treat it as a physical commodity with its own intrinsic value? If so, worthy though Davos 2012 may attempt to be, it will fail to give any guidance, as all previous get-togethers have done.

Survival of the intelligentest

It is astonishing, but what most politicians and economists fail to realize (or are afraid to tell the public) is that consumers no longer have a shopping list of brand-new goods they can aspire to own. The consumer goods pipeline has dried up. All that consumers can think of is more of what they already have — a larger home, a better car, more holidays, smarter mobile phones, more channels on television, better health care (particularly in old age), and so on. There is nothing brand-new which the rich are presently able to flaunt but which, in due course, can be mass produced in wider tranches and thus made affordable to the lower classes one by one.

More ominously (if that is the correct word), mean wages in real, not inflated, money have been declining for the last 25 years or so in the advanced countries, disguised only by increased automation and the consequent lower cost of the most popular goods. It is only the top social quartile of advanced countries which has gained in real income. Even more ominously for advanced populations, the cost of basic needs such as food and energy has been rising, and will continue to do so in future years, given the world’s still-rising population and the increasing energy needs of the developing countries. In the latter, up to two billion people are now actively striving to reach the same standards of living as the billion people of Japan, America and Western Europe. You can be sure that the populations of China, Brazil and one or two other countries will revolt powerfully against their governments in future years unless they get what they see we have on television.

But there have been no revolutions in the advanced countries. Three quarters of our populations have reacted in other ways which largely stabilizes their standard of living. They have reduced their living costs — and very considerably, too — by having smaller families, voting for politicians who promise them more welfare and other benefits at election times (and obtaining them so far), and by increasingly parking their senile or infirm relatives in nursing homes and hospitals. They are also increasingly voting for political parties which promise to drastically reduce immigration — and thus job and welfare competition — from the poor world. Crime and high social stresses are tending to become more concentrated in particular locations of our major cities and can be overlooked if need be.

As always, those who are intelligent enough to see the real picture, will look after themselves as best they can. Those who are parents (even those who are poor) will motivate their children by means of giving them a rich perceptual environment at home, encourage and praise their best learning endeavours and to choose subjects and schools which will maximise their childrens’ chances of entering the next generation’s top quartile. Impossible though intelligence is to define, or even to measure in the round, it is going to be a continuation of the evolutionary ‘survival of the intelligentest’ as it’s always applied so far in competition between species and competition within species.

Helicoptering to success

We, in Western Europe and America, would have a chance of resuming economic growth if our populations were one tenth the size and we all lived in detached houses with an acre or two in the countryside. We could then all aim to buy a family helicopter as it became increasingly mass-produced and cheaper. The helicopter would then join the long line of iconic consumer goods of the last 300 years which were initially hand-made and exorbitantly priced but then, generation by generation, class by class, was able to make its way downwards, each one giving each class a status uplift as it became affordable in turn.

Never mind today’s credit crunch. The history books of the future will tell us that this was merely one of the symptoms of the industrial revolution that, since about the 1980s, was finally easing its way towards its end. Massive debts of governments. banks and people are merely the resultant signs of massive desperation under the surface in the last 30 years or so. The currency catastrophe to come and the long period of recovery that will follow are merely signs that, as always, the market will have its way and economies will be purged.

But actually, we have a helicopter. It’s called biology. While the physical world of consumer goods (and vast over-population) sorts itself out, a new universal helicopter of biological research is now lifting off. The exploding science of genetics is already helping us to weed out a few dozen lethal dominant genes. It has also started on the task of advising individuals with nasty, sometimes lethal, recessive genes about what to do before they think of having children. There are thousands of these genetic diseases and thus the task will be a much lengthier one. And then there’s neuroscience which, among other benefits, will help us to be able to educate our children far more efficiently and enjoyably than ever before.

None of the above is social engineering. It is not taking us along any particular evolutionary path. It is merely expediting what nature does anyway over the longer term. No-one — not even a single biological scientist — can tell us just how homo sapiens will evolve in the future — what qualities will be desirable. That’s for our future environments to shape. In the meantime, no matter how gruelling the coming economic recession is going to be, there’s a lot of healthy, and exciting, work to be done.

The Great Paradox

The cowardly behaviour of Captain Francesco Schettino of Costa Concordia infamy only seems to confirm the usual stereotype of Italians held by many Europeans, particularly older ones who fought in World War II days and had memories of Italian soldiers at war or, as frequently averred, avoiding it. But it would be wrong to characterize Italians as cowards. There were several Italian heroes during the course of the disaster who more than compensated for Schettino.

I’m not old enough to remember Italian soldiers in warfare, but I remember Italian prisoners-of-war immediately after the end of the war when working parties, under the supervision of American soldiers, would be repairing the sewers and water pipes at the end of our street. They didn’t seem to be working very hard and were frequently cracking jokes among themselves. And they’d laugh and sing to us, too. I remember one who struck up a Grand Opera pose and started to sing an aria to us which caused us all — prisoners and children — to fall about until he was stopped by a GI. On other days, there were working parties of German prisoners-of-war who would never make eye contact with us children but worked away grimly. No singing on those days!

What makes Italians Italian and Germans German is far too complex to describe adequately in an essay, or a book or, realistically, several books. And the same would apply to the Greeks or the Portuguese or those Flemish Belgians who are so very different from, and antipathetic to, the Walloon Belgians.

In truth there are only two ways by which two different cultures can deal with one another. They either trade between themselves and maintain their own cultures. Or one culture invades the other culture militarily and imposes its language and a thousand-and-one other cultural tweaks over the other for many — many — generations until the differences are gone. (In the so-called United Kingdom, what with the increasing separation of Scotland, the 300 year military superiority of England since the Act of Union hasn’t been long enough!)

And this, in brief, is why the League of Nations failed, as also the United Nations, as also the World Trade Organisation and why the European Monetary Authority (the Eurozone) is now failing — to be followed in due course, no doubt, by the European Union itself, the International Monetary Fund and the World Bank.

Major nationalistic wars are now largely in the past. Such warfare is either too expensive or it is too dangerous. Because most of the 200-odd nation-states of the world will now therefore freeze within their boundaries, then the differences between their cultures will only intensify — just as dialects do between the major cities of the same country. It is here that we have a great paradox. Just as globalized trade will continue to expand between countries for reasons of cost efficiency and customer choice (as also English as a world-wide secondary language for business and scientific reasons, as also a standard world trading currency in due course), the other side of the coin will be an increase in cultural differences, be they ever so subtle. Senior politicians and bureaucrats had better get used to it.

Tunnelling to success

Occasionally a story arises which lightens the mood in these gloomy times. One such appears in our papers today even though the event it relates occurred on Monday evening (or night) of 2 January. It concerns the tunnel that was built in order to raid a cash machine at Fallowfield Shopping Precinct, Levenshulme, a suburb of Manchester. Starting 100 feet away at a railway embankment, the neat 4ft high tunnel, amply furnished with supports and lighting, conveniently popped up under the cash machine. The cash was extracted and, of course, quickly travelled in the opposite direction and thence to freedom.

The likelihood is (me, putting my detective’s hat on) that the thieves were local — probably young men who, since childhood, knew the railway embankment quite well. The entrance to the tunnel must have been at a spot that was entirely invisible from normal passers by or obscured by some sort of railway furniture, an old coal bunker or suchlike. Anyway, they knew they would be undiscoverable over a long period of time while they tunnelled away. According to the police, it must have taken them months.

Here, a bit of economics lends more evidence. The “opportunity costs” (the money the thieves might have earned otherwise) in terms of time and equipment (cutting through 18 inches of reinforced concrete was also involved) must have been somewhere between £50,000 and £100,000. It’s unlikely that the machine contained anywhere near this much money, particularly on a Monday. I think they might have been disappointed. Serious professional bank robbers would only have undertaken such a job in order to pop up in nothing less than a complete bank vault with a great deal more money.

Because they got their bearing exactly right, they were obviously a pretty intelligent gang but, nevertheless, if they are local lads, word will get around sooner or later on the basis of “Tell not thy secret to a friend, for thy friend has a friend”. If so, and they are ultimately caught, perhaps they were even more intelligent about the economics of the operation. Once they’d served their time (and, these days, a prison sentence would be very modest), they could find a literary agent who’d get them a good ghost writer who’d make it all into a fascinating best-seller. Maybe also a film. It wouldn’t have quite the panache of, say, The Italian Job, but it could still be vastly amusing. Ultimately they could earn the equivalent of a row of cash machines.

So I have a tip for the police. If they are suspicious about this or that group of local lads, enquire as to whether one of them has been taking economics at school or is even taking the subject at university. If so, that would clinch it! However, there’s only one flaw in this morning’s wild supposition. Any individual who could think in so many steps and so far ahead would do much better taking up another career such as a plausible bond investment consultant or a hedge fund trader. Considering their taking advantage of the credulity of their customers, they’re only a smidgeon this side of criminality.

Naughty Mr Thompson

As a young man I once stole a book from a bookshop. It was an interesting book (a biography of Darwin) but I wasn’t desperate to read it at the time, nor was I short of money. I stole it because (apart from scrumped apples in childhood) I had never stolen previously and I wanted to know what a blatant act of theft felt like. Well, all I can remember is that, although I was nervous when leaving the bookshop, I didn’t feel any sense of guilt. In fact, I felt quite exultant and I seem to remember reading the book with rather more pleasure than usual.

This 40-year old memory came flooding back to me this morning when reading about the waywardness of one of our celebrity chefs, Anthony Worrall Thompson, who appears regularly on television. (He also owns several restaurants.) He had been nicking wine and cheese several times from the self-service check-out at a Tesco supermarket before he was finally arrested. (I’ve little doubt that this decision was ultimately taken at Board level!) He is obviously not very bright or he would have realized that a CCTV camera would have been watching him or he was clumsy (which means he ought not to be a chef!). Apart from “not knowing what came over me” and various other attempts at plausible explanations — that he may be suffering from early onset of Alzheimer’s, for example! — why didn’t he just say: “Sorry Guv, I was naughty and you found me out”? We’d all understand.

My own previous bout of criminality convinced me that personal guilt is not about any internal sense of morality but of fear of being found out. In my case, had I been found out, I probably wouldn’t have been prosecuted or, if I had, it would never have been publicised. In Mr Thompson’s case, however, he will probably lose his television career and might even lose him his restaurant customers — perhaps enough of them to make him bankrupt in these hard times.

However, if there is any morality at all, it is the practicality that honesty pays — most of the time, and in most of our dealings. Without this strategy, usually acquired fairly early in childhood — and spontaneously from our peers quite as much as from fear of parental punishment — then society wouldn’t possibly be able to work for more than a day or two. In almost every transaction we carry out, even in business as well as socially, there are moments of time where we trust someone else’s word and they trust us before anything can be written down. Even in many billion dollar deals between rival businessmen (particularly Asian) there are still moments during a verbal understanding when one can renege on the other at profit. This seldom happens. If deception or exploitation is involved it’s usually over matters which don’t happen to be discussed (kept quiet by one of the parties!) and reveal themselves later. It’s fair play if one party is not sufficiently well prepared at the time!

Actually, I sympathize somewhat with our celebrity chef, stupid though he’s been. It’s the morality of the Tesco self-service check-out counter that bothers me. Obviously, Tesco suffers from constant theft, like any other food supermarket, and items can still be smuggled out through the normal check-out counters. I believe the normal losses are about 5% (as are additional losses from their own staff). I wouldn’t blame Tesco for keeping a very watchful eye on any and all proceedings by customers, whether in the aisles or at the counters. But a self-service counter comes very close indeed to being a super-temptation — an agent provocateur in fact. Such may be justified in cases of suspected potential murder or terrorism but this is disproportionate in the case of food. It will not only inevitably catch the clumsy or the stupid but also tempt those who have a desperate need.

Perhaps Tesco don’t prosecute in such cases. They probably don’t, if and when the store security chief is persuaded that there’s a genuine emergency. But for a business which seeks to be super-professional in everything it does, it is wrong that it should extend this to the last crinkle of human need, whether it is exploiting child labour on some distant farm or a parent with children short of food.

Keith

Feeling sorry for Sarkozy this morning

France is still afraid of being invaded by Germany, as happened in 1870, 1914 and 1939. Yesterday, for example, Nicolas Sarkozy, the French President, warned that the end of the euro could signal the end of peace. “The euro is the heart of Europe. If the euro is destroyed, it’s the whole of Europe that goes up in smoke. If Europe goes up in smoke it’s the peace of our continent that will be one day or another be called into question.”

What nonsense! Germany has put its past behind it. It is far too preoccupied with exporting its products to the rising economies of China, Brazil and Russia to be thinking of invading France. Besides, France will soon have the almighty problem of having to start on de-commissioning its 59 ageing nuclear reactors. Already bankrupt, the country cannot possibly afford to carry out this work properly. It can’t even afford to treat its existing radioactive waste but sends it off for parking in distant Siberia.

I’m feeling sorry for Sarkozy this morning. The Euro is losing its value, the Eurozone will probably collapse sometime during 2012, he is in danger of not being re-elected president in April, he will then have to face charges of corruption which are hanging fire at the moment, and his fairly new wife already wears the trousers from all accounts.

The Mormonizing of America

If Mitt Romney becomes the Republican candidate, and if he then succeeds in defeating Barack Obama in November this year, then he has a fair chance of eventually converting millions of Americans to Mormonism. Having been a Mormon missionary in his youth and a practising member ever since, he would have no objections, presumably.

He would be shrewd enough not to be the front runner in this initiative, however. He would take a leaf out of Roosevelt’s book in the 1940s when the President badly wanted America to join the Allies against Germany and Japan in World War II. He knew, however, that the majority of Americans wanted to keep right out of it. So Roosevelt had to wait until some particular event enabled him to catapult America into the war. In Roosevelt’s case it was the Japanese bombing of Pearl Harbour in 1941 and the destruction of most of America’s Pacific fleet. If this had not happened then it is very doubtful that America would have entered the war — at least for another two or three years.

If this is the right strategy, what events would Romney have to wait for? It wouldn’t have to be a nasty event in his case but merely to await the normal activities of local Mormon churches to build up to a sufficient threshold the one thing they’re very good at. This is to look after (and make use of) young Mormons. In the Great Depression of the 1930s no young Mormon was out of a job. He was either encouraged to go on missionary service for a year or two or was found a job in one of the businesses of local church members. If the latter opportunities weren’t available, then Mormon churches actually bought local businesses (usually farms) in order to employ their jobless young.

Vast numbers of young unemployed Americans could be brought into the world of work in the same way. For one thing, a vast swathe of new businesses are being created every year even in a severe recession. The number of new enterprises in America since the credit-crunch of 2008/9 has expanded already. However, about 70% of these will fail in their first 18 months through lack of good managerial advice. Romney’s own personal experience in business resuscitation tells him that some of those failures could be prevented. If the failure rate were brought down only marginally then, potentially, millions of new jobs could be made safe in those fragile early years. Mormons are well used to being heavily tithed, so young unemployed Mormons would be much more easily induced to accept lower wage rates than non-Mormons, particularly if the local church were to apply themselves more comprehensively with additional help such as housing and education.

Then there’s another vast swathe of labour-intensive jobs that have left the country for Asia in the last 20 years where wage rates are — or, rather were — much lower. But wage-rates of Singapore, Taiwan and South Korea have already reached (and even exceed) those of America. China’s coastal province wage-rates will do so within a few more years. One third of these Asian jobs have been due to American corporations investing abroad and most of these corporations’ products are made in small and medium-sized factory units. What with higher wage rates in Asia and a touch more automation, many of those jobs, even those in sizeable factories, could be brought back to America with the same level of profitability in just the same way as Japanese, Korean and even Chinese car factories are now established in the UK to fill the gap when ours collapsed in the 1960s and ’70s.

When Islam started spreading into many countries of the Middle East, central Asia and northern Africa, from 800AD and onwards, the invaders had one simple strategy for ultimately expanding the number of converts. It is a Western myth that this was achieved by the power of the scimitar. They simply ensured that Muslims didn’t have to pay taxes. After a few decades of this entirely voluntary strategy, then whole national populations had become converted (by then, of course, the taxation system would have had to be re-established among believers!).

If Romney were elected and if he were to give quiet encouragement to those Mormon churches which begin to accept that high unemployment among the young is here to stay (given the present wage- and job-structure) for many years to come, and start to repeat what they did two generations ago, then voluntary conversion to Mormonism would grow enormously. Given two terms of office under Romney then unemployment might be reducible to the 4% or 5% — called frictional unemployment — which is normal even in prosperous times when people are leaving their jobs and getting new ones.

Of course, none of the above would solve the more fundamental problem that, as advanced nations becomes increasingly specialized, schools need to be upgraded enormously and to invest heavily in more science teaching and more universities such as MIT. In this way, protective barriers (by adult job-holders against the young) can be broken down and highly-paid jobs more widely shared. But the “Mormon Solution”, if I may call it that, might give some useful breathing space for America’s education system to start adjusting and be totally transformed in the next 20 or 30 years. The same applies to the UK, of course, with many Mormon churches already. But as I’m not a Mormon myself then I’ll not be contributing to the solution apart from venturing these speculative early morning thoughts.