To hear Mark on the BBC World News, with host Peter Day, discussing next year’s predictions and trends, go to:
“Mark’s insights make my analytical and strategic life much easier. He has the ability to highlight the machinery underpinning our society in an amazing way, and he provides analysis and insights that the mainstream folks (Times, WSJ, Wash Post, CNN, etc.) just are not equipped for or capable of.” – Rob Berkley, Partner, GroupMV LLC
In order to fully appreciate the SNS concept of “Economic Cyberwar,” one should start with the idea that the form of war preferred by mercantilist states is not militarist, but economic. Any military conflict is the result of poor planning, and reduces the economic success of the mercantilist, since exports are the prime source of revenues.
And in order to fully appreciate the importance of this subject, it may be helpful to do a quick review of the role of Intellectual Property in modern trade and economics.
Much is made of the word “innovation” in today’s world, but very few seem to know anything about it. Let’s stipulate that creativity, innovation, drives the creation of Intellectual Property, and let’s further suggest that IP is the core economic value structure in an Information Society, the civilization model most of the world enjoys today.
IP may be created and owned by individuals, nonprofits, or universities and research laboratories, but the preponderance of IP is created under, and owned by, corporations. Hundreds of billions of dollars – perhaps even trillions – are invested annually by corporations to create new IP. Shareholders demand a return on this investment.
I will note here, and come back to, a shifting level of international organization: company, country, civilization/society. We will want to pay attention to the changing role of corporate IP control vis-a-vis these other structures.
When we look at the modern mercantilist model, or what China calls the “East Asian Socialist” model, we see recent histories of strong success, and evolving models, ranging from Japan to South Korea to China. Their past histories and politics, dramatically different, matter little compared with the similarities of their economic models in the 20th and 21st centuries.
In each case, we have a relatively simple, and very successful, story: steal or appropriate IP from the countries creating it; use top-down controls to favor government-selected industries; and create an export-based economy, funded by high domestic prices and low (often WTO-illegally low) export pricing, usually supported by forex currency manipulations. Discourage or prohibit imports, particularly in targeted export industries, favor your internal “champion” companies in all deals, and ultimately create large trade imbalances with so-called trading “partners.”
In the case of China, the evolved model includes encouraging huge amounts of foreign direct investment, but generally disallowing majority ownership by foreign companies, and prioritizing market success in targeted industries (wind and solar energy, Internet search, wireless infrastructure, social networks, etc.). Government policy favors local firms, locally owned, using Chinese-owned IP (now, that’s ironic; where could it have come from?), under Chinese brands, and often – another specialty – only if the products themselves are made with Chinese equipment. In Chinese law, this is called “Indigenous Innovation.”
Can you imagine your own country (assuming it is not China) having such a publicly stated policy of preference? It is offensive to the most basic concepts of free trade.
Finally, as partner countries are gutted of jobs, targeted industry companies, and money, the mercantilist country starts moving plants inside partner borders (Japan did this with Toyota, and China has just begun with solar energy fabs) so that they are immune to tariff laws, and to the inevitable adverse World Trade Organization outcomes.
We’ll come back to this theme shortly, but first, let’s update our views on security.
» Security Until Now
In recent times, computer security has been a subject of interest by many different parties, often for similar reasons. Those reasons, stated generally, would include:
- Avoiding spam. This problem persists today.
- Avoiding viruses. Ditto.
- Avoiding worms, Trojans, etc. Ditto.
- Avoiding Personal ID Theft. Still a problem today.
- Avoiding ID Theft of employees and customers. More a problem now than yesterday.
- Avoiding your computer becoming part of a Botnet and wreaking havoc on others on the Net. Still a problem.
- Avoiding other forms of malware, changing daily. Lots of new problems.
- Experiencing Denial of Service attacks and other misbehaviors and sources for extortion and criminal behavior against corporations and groups.
- Avoiding privacy invasion, generally the result of legal or quasi-legal malware installed without permission on systems, often for “ad-tracking” purposes. These issues are multiplying daily.
- Avoiding the Unknown, dodging future hacks that will disable, publicly embarrass, or somehow compromise business operations in the short term, at least.
Although, as you can see, not one of these security motivations has been successfully removed from today’s CIO nightmares, they all now pale in comparison to something new. Whatever your reasons for investing in security up to now, you will have to create a new line item of expenditures for this new issue.
» IP-Based Trade Wars
Two weeks ago, I was visited by two people speaking for China, representing a new company whose job would be to – well, they described it, but it was a bit vague. During this description, we talked about IP and China, and they pointed to the new high-speed trains China is building everywhere.
Indeed, China has laid more high-speed rail, and plans for more of these showcase trains, than any other country in the world.
My visitors pointed to these trains as examples of how China was now developing its own IP, and not just depending on IP theft or forced disclosure from others.
Last week I learned the rest of the story: how Japan (Kawasaki Heavy Industries and others) brought this technology to China, hoping to make money, and now are watching as their IP reappears in Chinese products owned by Chinese companies, and the Japanese get little or nothing.
That’s the story of modern mercantilism, and of the so-called China Miracle. (For a more detailed description, Premium Members, see the “
If the sustained ability to invest in – and get a return on – IP is the cornerstone of modern civilization, then corporations have unwittingly compromised society’s well-being.
We live today in an Information Society, whose future is driven by innovation and Intellectual Property. Those of us creating it have an obligation, to our shareholders and to the system itself, to protect that investment. If the value of IP is repeatedly degraded or destroyed, we’ll enter a world that no one – not even the mercantilists – desires.
After all, those Somali pirates drive pretty nice cars these days.
Your comments are always welcome.
Mark R. Anderson
Strategic News Service LLC Tel. 360-378-3431
P.O. Box 1969 Fax. 360-378-7041
Friday Harbor, WA 98250 U.S.A Email: email@example.com
“This is a subject that speaks not just to Brazil but to all emerging markets.” – Fernando Pimentel, Brazil’s Trade and Industry minister; on removing China’s dollar peg.
“China may be more sensitive to what the other major emerging market countries think about its currency. It undermines their moral high ground when it’s Brazil criticizing them, instead of the U.S.” – William Cline, Senior Fellow at the Peterson Institute for International Economics; quoted in the Wall Street Journal
“Indeed, Premier Wen Jiabao sees China’s growth as ‘unstable, unbalanced, uncoordinated and ultimately unsustainable.’ --- China’s progress over the past three decades is a successful variation on the East Asian Growth Model that stems from the initial conditions created by a planned Socialist economy.
“That growth pattern has now almost exhausted its potential. So China has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could be suddenly lost. China’s rapid growth has been achieved at an extremely high cost. Only future generations will know the true price. The country’s investment rate now stands at more than 50% – a clear reflection of China’s low capital efficiency.” – Yu Yongding, president of the China Society of World Economics; writing in the China Daily.
The watchdog also identified “possible operational abuses, whereby the search engine apparently imposes exorbitant conditions on its partners or customers, treats them in a discriminatory manner, or refuses to guarantee a minimum of transparency in the contractual relations it establishes with them.” – The French Autorite de la Concurrence, regarding Google’s practices; quoted in the Financial Times.
“I don’t want to live in a world where everyone is watched all the time. I want to be left alone as much as possible. I don’t want a data trail to tell a story that isn’t true.” – Jacob Applebaum, hacker working for Julian Assange and WikiLeaks.
“Our long-term goal is to collaborate with a broad community of consumer electronics manufacturers to help drive the next-generation TV watching experience, and we look forward to working with other partners to bring more devices to the market in coming years.” – Gina Weakley, Google spokeswoman.
The FCC will “fulfill its historic role as a cop on the beat.” – FCC Chair Julius Genachowski. Actually, as predicted, Julius buckled on Net Neutrality, not declaring data to be communications, and not including wireless communications in the regulatory domain, while allowing carriers differential charging for packets.
Totally caved, Julius.
“It is extremely important to probe the moon --- as we now see the dawn of ‘the age of great voyages’ in the solar system.” – Expert panel advising the minister for Space Development, in Japan; quoted in the Vancouver Sun.
» What If Dell Prospers in China?
There are two bets an investor might make that would favor DELL Computer after their blowout third quarter report. The first is that the U.S. economy is on the upswing. The second is that the company’s $25B per year new investment in China will lead to profits and serious market share growth, without intervention by the Chinese government.
The first bet is easier to make for the long term; the second, if at all, only in the short term.
Here are the charts.
The below article captures the true power and magic of the iPad:
I believe that this life-changing app represents just the tip of the iceberg of what’s to come. Whoever would have thought such a compact computing device -- combined with affordable Internet access – would serve to unshackle the disabled, uneducated, and Government suppressed! Steve Jobs will find a spot in U.S. history books for generations to come.
Exciting times ahead in IT.
CEO / Angel Investor
Santa Barbara, CA
Season’s greetings. I hope all is well. I just read your predictions for 2011; thought provoking as usual. Number 5 will be particularly interesting. I agree that Google will necessarily run out of resources to allocate inefficiently eventually. I’m not sure it will happen in 2011, though.
Anyway, that is not why I write. I want to suggest that you consider the relationship between online privacy and targeted advertising/marketing as a topic for FiRe in May. With all the attention this topic is getting – FTC, IAB, all the big web properties come to mind – 2011 may be the year to dig into the forces at play and give your perspective on how it will sort out.
Just a thought. I have been spending some time thinking about it and would be happy to help if you think it will be interesting to the membership.
Ho, ho, ho. Enjoy the holidays.
San Jose, CA
This is right in track with our planning vis-a-vis security and economics, one of the core themes of this year’s FiRe, as you might guess from today’s issue.
I hope others interested in these themes will join our conversation, and help us make this again the best FiRe yet.
Merry Christmas to you. My wife and I have recently moved to California, to be closer to Grandchildren.
In your predictions you said Mexico will become a failed state. If that happens the implications for the U.S. are great. Borders make no sense for ideas, perhaps not for people either. Drugs are purchased by Americans, so we are contributors to Mexican unrest. The Hispanic people I meet in California are nice people wanting to have a better life. Will technology save America given our loss of manufacturing jobs?
You deal with the brightest people in America, so your reports cause me to think and I appreciate that. Life is good for us and I hope for you. ---
Best wishes to you for the New Year.
[Past Chief Justice
It’s great to hear from you. I imagine that life in your new home will be quite enjoyable, and I have no doubt that you have earned it. Having grandkids around – I am told – would just add to the benefits.
I think borders are necessary for the proper management of resources, and the application of rule of law. I certainly don’t want China’s laws, and probably not Mexico’s, either.
The same problem exists for social services, and budget: without borders, there is no head count, and so no control over expenditures, and no way to project revenues. Welcome to the current state of California.
I hope we have a chance to meet again soon. Perhaps you would like to join us at our next FiRe Conference, May 24-27, at the Montage Laguna Beach Hotel. We will be addressing privacy issues, and this might be something you find of interest from a judicial perspective.
My best to you and the family in this coming year,
» Disposable Apps: The Next Step in Car Computing
Since we first began looking at Car Computing, back in around 1997, there was a vitally important set of distinguishing characteristics that attached to this market.
First in line was driver attention: we have learned, with the advent of smartphones and texting, that driver attention is the rare commodity, and flowline checkpoint, when it comes to driving safety. It is not only at a premium; it is also now limited by law in many states and countries.
So: what one could put in front of a driver, and when, was extremely limited. Early emergency aid services were high on the list, but the general assumption was that the car would not be moving. This was extended as GPS became omnipresent, and sound-system controls came in behind, perhaps led by Sirius.
The success of Microsoft’s SYNC over the last five years has not gone unnoticed by Ford competitors, nor Microsoft’s, and the question of what else the computing and communications industries can do for and with cars and occupants has had growing promise. This has happened in spite of legal constraints on smartphones, and perhaps, in a cynical sense, because of them. (There are no laws against looking at your in-dash screen.)
While most of the players have been trying to improve interface interaction, particularly with voice commands, a second set of constraints has, until now, kept the development growth rates to a minimum. Broadly stated, those constraints, in apposition to PC constraints, were:
Because it involves drivers, and is tasked with life-threatening tasks, software in a car can never fail. In other words: give me the velocity and the usual dashboard data, some radio, weather, a map, and we are done.
Guess what? That is all about to change.
And what is the change agent this time? Again, we can thank wireless (which prevailed in most states under the hands-free clauses) and smartphones
To really get how this all works, SNS members might hark back (or search archives on) what we first called the T-phone, or transfer phone: your cellphone will act as a data transfer agent, with the display residing in the dash of your car.
This solves two problems at once: crummy micro apps are in the phone domain, technically, rather than the car domain; and technical updates of hardware and software are not limited by being welded to the chassis of your auto.
A good example of this radical shift is the newly announced Entune multimedia system from Toyota. The system is entirely voice-driven (an arena Microsoft looks ready to dominate – members take note) and involves MS Bing searches and maps, Pandora music, restaurant reservations through OpenTable, movie ticket purchasing, etc.
The system is available now for most smartphones and featurephones, linked via Bluetooth.
In my view, this is not additive, but a breakthrough, allowing software developers and content providers access to a huge new platform base of cars, under unconstrained conditions, and without any serious legal limits.
In other words, this is the gating event in Car Computing that all of us have been waiting for for decades.
We should applaud GM first (OnStar), then Ford (SYNC), and now Toyota (Entune) for taking this new industry ecosystem forward. No wonder Johnson Controls’ Prince Division just bought more market share. Haven’t traveled to Milwaukee lately?
How about Redmond?
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» About the Strategic News Service
SNS is the most accurate predictive letter covering the computer and telecom industries. It is personally read by the top managers at companies such as Intel, Microsoft, Dell, HP, Cisco, Sun, Google, Yahoo!, Ericsson, Telstra, and China Mobile, as well as by leading financial analysts at the world’s top investment banks and venture capital funds, including Goldman Sachs, Merrill Lynch, Kleiner Perkins, Venrock, Warburg Pincus, and 3i. It is regularly quoted in top industry publications such as BusinessWeek, WIRED, Barron’s, Fortune, PC Magazine, ZDNet, Business 2.0, the Financial Times, the New York Times, the Wall Street Journal, and elsewhere.
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» About the Publisher
Mark Anderson is CEO of the Strategic News Service. He is the founder of two software companies and of the Washington Technology Industry Association “Fast Pitch” Forum, Washington’s premier software investment conference; and has participated in the launch of many software startups. He regularly appears on the CNN World News, CNBC and CNBC Europe, Reuters TV, the BBC, Wall Street Review/KSDO, and National Public Radio programs. He is a member of the Merrill Lynch Technology Advisory Board, and is an advisor and/or investor in OVP Ventures, Ignition Partners, Mohr Davidow Ventures, the UCSD Calit2 Laboratory, the Global Advisory Council of the mPedigree Network (Ghana), SwedeTrade, The Family Circle (Europe), and the Australian American Leadership Dialogue.
Mark serves as chair of the Future in Review Conferences, SNS Project Inkwell, The Foresight Foundation, and Orca Relief Citizens Alliance.
» Where’s Mark?
* This week, Mark will be at the CES in Las Vegas, Nevada; feel free to email him if you would like to meet during the Show. * On January 21st, he will share his predictions at the annual Technology Alliance Group Predictions Event in Bellingham, Washington, at Whatcom College. * And May 24th-27th, he will be hosting FiRe 2011 at the Montage Laguna Beach Hotel, California.
In between times, he will be wandering the halls of a town called “The Stars,” wondering why, and finding new CarryAlong PCs at every turn. CES: The CarryAlong Excitement Show?
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