Posts Tagged ‘FT’


In some parts of the world the media love Apple. Their affection is born of years of attachment. After all in the days when Apple was struggling for its very existence, its PCs were the computers of choice for those we call media people. In China it is not like that. The media on the other side of the Great Wall have been taking it in turns to take pot shots at the company and its so called arrogance. The question is: are the accusations they throw at the giant US company justified, or is there something else going on?

In the West there is something almost irrational about the way some people hold Apple so close to their hearts. Now that the company is the world’s largest– or close, depending on which day you look at its market cap – that affection may not be quite so strong. But during Apple’s golden growth years nothing seemed more likely to wind up its public than a media publication being in some way negative about the company. Maybe such affection was in part down to Apple’s roots as a desk top publishing company, and the machine of choice for the media world. After all, the media world is the place of opinion formation. If you want to get any one sector of society on your side, it is best if this sector is one of opinion formers.

In China, however, the opinion formers seem to be distinctly un-Apple friendly. The Chinese paper the ‘People’s Daily’ accused the US company of two forms of arrogance: both “unparalleled arrogance” and “swaggering arrogance.” It said the company displayed the “traditional superiority enjoyed by westerners”. It said: “If you insist on challenging Chinese customers’ love and patience, and continue to be heedless, then your business will eventually decline no matter how glamorous or successful your brand is.”

Not all feel like that way, however. The ‘FT’ quoted one Chinese blogger as saying: “Everybody is eating cooking oil recycled from gutters, no problem! Everybody is drinking poisonous milk powder, no problem! We drink water filled with dead floating pigs, no problem! But when you change the back cover of iPhones for foreigners but not for us then that is not OK, that is far more serious than any of these problems.”

So are the accusations justified, or is there some kind anti-Apple conspiracy going on, or is there another explanation? I don’t know about you, but speaking as a westerner, a big question mark seems to apply to this notion that westerners think they are superior. A great many westerners may – if anything – suffer from an inferiority complex when it comes to China, especially when applied to the Chinese apparent penchant for mathematics.

Some have suggested there is a Chinese government backed anti-Apple campaign; that the government is – in effect – practising protectionism, a tariff made of press negativity. The ‘Economist’ speculated that a rival may be behind the campaign.

All these accusations may have merit, but here is a third explanation.

But before the third explanation is described, consider another Western company that has been a victim of Chinese media: Volkswagen. A recent report on Chinese television accused large Western auto companies of shipping cars into China containing materials that can cause cancer. China’s Central Television ran a programme focusing on the difficulties owners of Volkswagens in China have had with their car. These problems may be legitimate, but frankly common sense suggests there is a lack of press impartiality at work here.

Then again, look at Toyota in the US. Look at BP. Both companies made errors and the press reaction was extreme, both companies were found guilty by the court of US media. No attempt was made to compare design faults in Toyotas with the incidence of designs faults in cars made by famous US car brands. As for BP, the company had to change its boss to one with an American accent. US companies that were at least partially responsible for the oil rig disaster were not subjected to the same degree of scrutiny by the US media, and that very much includes one particular company that used to be headed by a former US Vice President.

If China is practising a form of protectionism, then the US has been doing likewise.

Or maybe – and this is the alternative theory – the explanation lies in self cultural identity. Some nationalities, and it is not hard to think of examples, just think they are the best. The media will slate foreign brands because there is an implicit belief that foreign brands are not as good as domestic ones.

The UK self-cultural identity is quite different. Brits are easily swayed into believing that goods made abroad must be superior; that there is nothing the UK is good at. This, in turn, makes the UK more open to foreign goods. It’s a form of anti-tariff.

PS. It is not clear what the Chinese cultural self-identity is on this one. According to Boston Consulting, more than 60 per cent of Chinese consumers say that they are willing to pay more for products labelled ‘Made in USA’ than for those labelled ‘Made in China. See: US and Chinese Consumers Willing to Pay More for Made in USA Products

©2013 Investment and Business News.

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As the earthquakes became worse, the ancient Minoans demanded blood. Clearly the gods weren’t happy, so it was time to make more human sacrifices. Of course, there were occasions when a blood sacrifice was followed by less seismic activity, which was cited as proof positive that the policy worked.

Except of course, from our enlightened position in the 21st century we get causation. Any fall in natural disasters following a religious ritual was a coincidence. There may have been a time when a leader of a country was also a priest, charged with appeasing angry gods, and such people were held responsible when the gods wreaked havoc, but these days we are a touch more sophisticated.

Perhaps you could, at a pinch, blame hurricane Sandy on manmade global warming, but it would be stretching credibility to blame any individual for the storms hitting the US East Coast. Some people across the pond are very anti-Barack Obama, but it seems not even they blame him for hurricane Sandy.  Although Obama they say can do his election prospects some good by looking presidential.

Yet the logic that says Obama was responsible for the poor US economic performance of the last few years is not much different from blaming a Pharaoh for lack of rain.

Two economists who have led the charges against Obama are Professor John Taylor and Glen Hubbard.

The argument runs like this. In the past the US has seen much more rapid recovery from a recession. This time recovery has been slower, ergo, Obama is to blame. Some go further, and say ergo Obama is the Devil, meaning maybe he was responsible for hurricane Sandy after all.

Martin Wolf, the ‘FT’s’ economic guru, has been crossing swords with Professor Taylor. The prof says that even in the 1930s, the US saw sharper recovery than it is now. ‘Duh’, replies Wolf, ‘that was because after 1929, when US authorities messed up, failed to support banks, and made cutbacks, the resulting contraction in the economy was enormous. Of course growth was higher in the aftermath because it had further to grow from’. See: You can’t measure an economy’s performance on recovery alone

Professor Taylor then compared the US performance today with its recovery in the late 1800s. Wolf countered with the argument that surely it is more realistic to compare the US today with other economies across the world, such as Japan, the UK, the Eurozone, or even China.

It takes an extraordinary level of arrogance about the superiority of your country to think the fact that the rest of the world is suffering a very severe economic shock bears little or no relevance to your country.

Over at the ‘New York Times’, it’s been a case of daggers at dawn between Nobel Laureate Paul Krugman and Glen Hubbard.  According to Hubbard, the US recovery should have been V shaped.  In the UK – where the debate is over whether the economy will be W, An elongated L, or even a letter than hasn’t been invented yet – the idea of a V shaped recovery feels like a pipe dream. Krugman says the Romney team is ‘waving’ little things like facts away, because it is politically convenient to do so. See: More Financial Crisis Denialism

The fact is, of course, that the US economy has been posting figures that we in the UK envy. It may well be that the US recovery has been stronger because it has had less austerity. It is certainly absurd to say that if Obama had been Austerian in his approach, the US recovery would have been stronger.

But where both Krugman and Wolf may have it wrong is not conceding that there is any benefit to creative destruction at all. Recession can correct bad habits, remove poor practice, and ensure only the very fittest companies with truly strong business models can survive.

The snag is that right now the debate between economists is black and white. Either we need to let the economy correct via allowing failure, or we have a really massive Keynesian push. There seems to be no middle group. Maybe what we really need is both, and economists are so blind to their adversaries’ opinions that they are forcing us to make a choice, when what we really need is the best of both worlds.

©2012 Investment and Business News.

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Nudge nudge, wink wink, know what I mean?  Your pension, squire, is it a goer?

And so it is that the UK government has introduced regulations meaning that employees will automatically be enrolled into pension schemes, and for them not to take part, they have to consciously opt out.

The reform is not being introduced overnight. To begin with, the new scheme will only apply to companies employing 120,000 workers or more. But bit by bit, the scheme will be widened, so that by 2015 small businesses will have to take part.

According to the FT, it is estimated that 11 million Britons – or 40 per cent of the working population –­ are not saving enough to maintain living standards when they retire. (Can you believe that? This implies 60 per cent of the working population are saving enough. That is surely not true!)

There are snags with the scheme. For one thing the level of savings that employees will automatically start making will be tiny. Someone earning £20,000 a year will save just £2.37 a week.

Of course, the more you put in the more you get out, and workers setting aside £2.37 a week might think that one day a great windfall will be theirs, but in reality all they can really look forward to is either a retirement made of poverty, or working until they are very old indeed.

And while many argue that we all need to save more, it could be said: what’s the point? What’s the point when the rate of interest is so tiny, and stock market returns over the last 12 years have been so awful. After all the FTSE 100 still languishes some 1,000 points below its all-time high set on January 30 1999.

The truth is that the only way the UK will be able to meet the need of its baby boomer generations as they enter into their late 60s, is by extending their retirement age. Some may find that quite  unappealing, but put the choice in these terms. The good news is that we are living longer, and are much healthier in our sixties and seventies than we used to be. Do you want to either:  (a) work until you are in your seventies, or (b) see a return to what it used to be like, when the life expectancy was much lower?

But what is interesting about the pension reform is that it is based on the ideas of nudge economics.

There’s a book called Nudge, written by Richard Thaler and Cass Sunstein – and a very good book it is too.

Economic theory assumes we are rational. Maybe we are all inclined to think of ourselves as rational. Be honest now, when you go about your daily life, do you do the things you do because you are a sensible rational human being, or do you think you are little more than a collection of cells living in a world for which you were clearly not designed? Most of us probably think the former, but the truth is more likely to be the latter.

The book Nudge shows that sometimes we don’t do the things that are in our own interest. So until it was made compulsory to wear seat belts when we were driving, a lot of us didn’t.  Or take the ATM.  So you put your card in the that hole in the wall, ask for your money. Suppose the money comes out first, then the card. What then? Research shows a lot of people forgot about their card, and wandered off, leaving it behind. Then the banks, aware of the ideas of nudge, reversed the process, now the card comes out first, then the money. It is not often we forget about the cash, and just collect the card then go.

In short, we are nudged into not leaving our cash point card behind; we are nudged into putting a seat belt on when driving, and now we are nudged into saving for our pension.

Expect a lot more nudging to follow over the next few years.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here