10 Membranes

Models for Revolution in the Middle East

Everyone can basically agree that the events in the Middle East are good, can’t they? Well, yes, to a point. But it got me thinking about how high expectations are structurally built into the revolutionary moment both domestically and internationally, and how in the past these have always (inevitably) been let down. In the case of the Middle East there the models of the post-revolutionary functioning of the countries suggest that they may be in for a tough time. 

Pessemistic Post-Revolutionary Models

1.) Islamism (Afghanistan, Pakistan, Iran, Iraq): While all of these countries have very different circumstances they share the most critical problematic of the revolutionary Middle East - the involvement of radical Islamic elements, bent on the imposition of Wahabite Islam, Sharia law, notions of the Caliphate and jihad. Each of the countries has in post-revolutionary circumstances seen a massive rise in support for extremist views, which has lead to gross, widespread oppression and terrorism (Afghanistan), near anarchy, a fractured state and the death of liberalism (Pakistan), increased authoritarianism and strident attempts at global destabilisation and WMD proliferation (Iran) and bitter sectarian civil war (Iraq). We can argue all day about the culpability behind these tendencies, but what seems clear is that elements of them all are alive and well in the Middle East, and could in variously modulated ways serve as models. Those cheering the revolutions are doing so out of feelings of solidarity, yet we should all be worried about security and liberalism given this model. 

2.) Post-communism (Ukraine, Russia, Turkmenistan, Belarus): The chief lesson from 1989 is that where countries can be successfully bought into alliances and institutional structures and so on, in a very close way, they can be successfully made into liberal democracies, East Germany being the most obvious example. But then compare say, the Czech Republic with Belarus. The Orange Revolution in the Ukraine has been completely undone, the old laws established; Russia has hardly the semblance of freedom, its journalists silenced, money hoarded by oligarchs, themselves now totally in thrall to the State in the grip of the de facto dictator, Putin. Without the carrot of EU membership, and without the structure to move the economy into mass ownership, these nations have slid back to authoritarian and illiberal rule. 

3.) African post-colonialism: Through 1950s to the 1970s Africa went through a massive wave of decolonisation. In theory resource rich Africa should have been well placed to grow. Yet the resource curse struck (and may well do again in oil rich Middle Eastern countries); corruption ran rampant; economies actually shrunk in the period from 1980, only starting to grow again in the middle part of the last decade. States crumpled, civil war was rife and chaos reigned. Meanwhile a corpulent elite sucked up the proceeds of natural resources, even as those proceeds lead to chronic underinvestment in industry and production. The combination of kleptocratic elites, natural resources and a power vacuum without strong organically grown institutions has created problems on a vast scale. 

My argument is that this shouldn’t really be a moment of celebration for those committed to freedom and democracy (words that make one sound like an American ideologue, but meant in the best and truest sense). The work is only half done and each of the nations in the Jasmine Revolution balances on a precipice that, history suggests, could lead them to a return to where they have come from 2.) or worse poverty 3.) or harsh extremist positions that end up threatening global security and eroding rights and freedoms at home 1.). Of course, that it is happening at all is better than not and it could go right, there are some excellent precedents here:

1.) The American Revolution

2.) Germany, Japan, Korea in the wake of massive wars

3.) China after Mao and the internal revolution of Deng Xiaoping

4.) The 1688 Glorious Revolution 

Yet none of the conditions really hold. Of course, the situation is utterly specific and so will be the outcome, but thinking in these terms is useful in mapping possible futures. In the meantime thoughts are with the revolutionary people of Libya and elsewhere. 

Cool News

London and Cape Town: For Immediate Release

WORLD’S FIRST DECISION MAKING ENGINE IS LAUNCHED

Profile Books and award winning start-up Cognician team up to produce an interactive way of making decisions.

Based on the international bestseller THE DECISION BOOK this is the first book adaptation for the new “iTunes for ideas”, Cognician.

Imagine being able to sit down with the authors of a book and have them talk you through it. A tool that helps you make better decisions, whatever they are. THE DECISION BOOK is an interactive program that feels like it uses artificial intelligence, but actually just channels user thinking – this is artful intelligence, not artificial intelligence. Mikael Krogerus and Roman Tschäppeler’s bestseller – which distills the 50 best decision-making models used on MBA courses and elsewhere – is taken to new heights by allowing users to input their own problems and watch as the options are resolved to smart choices. 

See videos at http://bit.ly/fRyfgY for an introduction to the Seedcamp selected Cognician platform and http://www.cognician.com/cog-store/cog/the-decision-book for a walk through of how THE DECISION BOOK works.

“This is a world first for the publishing industry”, says Cognician co-founder Patrick Kayton. “Reading a book or ebook is a passive experience like listening to a lecture.  This is like having a conversation with the author as they guide you through how to apply their ideas.”

“Unlike most productivity apps or self help books this actually works”, says Profile Books Digital Publishing Manager Michael Bhaskar. “A revolution in what we can expect from books and we look forward to collaborating with Cognician on many more titles. ”

Cognician gives authors and publishers an unprecedented opportunity to present material in a new, interactive medium. “Cognician is a tool that helps you think clearly about something, be it your business, a project or assignment or any other decision making process”, says Cognician co-founder and CEO Barry Kayton. “It perfectly complements THE DECISION BOOK to produce a uniquely useful approach to think and plan more effectively.”

The Cognician platform, together with six free cogs, is available for free as a downloadable desktop app (Macs, PCs and Linux) or web-based app at www.cognician.com and is monetised by premium content. iPad and iPhone apps are in development. The Decision Book cog is available for download at US$15.

For more information please contact:

Michael Bhaskar, Profile Books

Thoughts on the Music Industry

Last Thursday I was lucky enough to attend Universal Music’s Open Day: an event designed to showcase a new more transparent and discursive positioning of one the biggest of the majors in an attempt, largely successful, to start regaining the street cred lost over the past few years. I learned a lot. Here a few thoughts from the evening:

-          Record labels are the cooler younger siblings of publishing houses. In terms of the style and feel it makes publishing look full on swottish. Hardly a surprise, but just wonderful to revel in the ridiculous reality of stereotypes.

-          Very seriously people in the record industry wonder why they are disliked and called greedy fat cats etc. This is a very good questions – 90% of people working at labels does so not for the money but a profound love of the music and of getting it out there. That’s what matters (ditto for publishers) and the rest is noise. However customers are cleverer than that, seeing what those in the labels themselves choose not to see: the nature of corporate ownership itself. This is the underlying reality beneath the dedication and belief and cool free living spirit of the labels. Universal is stuffed full of talented, hard working passionate people and labels with history and aura: but ultimately it is just an empty money making vehicle for conglomerate owner Vivendi, and not a particularly good one at that. The real share holders and accountants look at the business very differently from the stakeholders on the inside; ultimately those on the inside do not control the business and this is what has been noticed. There is a massive disconnect between corporate profit generating structures and creative industries like music or publishing, but those in the big corporates have basically deluded themselves that there isn’t. The public is not. Andre Schiffrin has outlined this problem with the publishing industry, arguing that actually the industry is unsuited to corporate ownership given the low likely rates of return, and given that the logic of corporate ownership runs counter to why most people enter the industry in the first place.  This is why people hate the record industry – not for the people, but for the ownership pattern, the corporate structure and the knock on effects of both. $50bn groups are not rock and roll, never will be, and the industry tries to have both ways, but it can’t. All the creative industries need to dwell hard on how to reconcile corporate ownership with the production of that which is nominally antithetical to corporate ownership.

-          Music also provides an excellent illustration of what private equity does for a business. Take EMI, one of the all time great British media businesses. Give it to a corpulent, arrogant shit head like Guy Hands. Load it with £3.4bn of debt, simply for the pleasure of his ownership. Watch as many of the key brands flee in horror. Watch as his cost driven lunacy doesn’t work, it can’t finance the debt and a meaningless legal battle is enjoined. Now EMI is owned by Citigroup, and is likely to be broken up and sold off. The whole thing is utterly tragic and utterly pointless wasting economic value, musical heritage and decent jobs in the process. That is what private equity does to the creative industries.

-          Mixed business models are and will work in the long run. You can sell cds and downloads; you can have paid for streaming, add supported listening or bundled music over every conceivable platform; you can have licensing and other commercial arrangements. This is a case of more is more; the more channels and platforms you have, the more business models and means of listening, then the more money you will make. Over the past three years music has exploded everywhere and this time the record labels have been there driving it creating a genuinely diverse marketplace for music. In publishing we still have ebook downloads or cloud hosted. We should pay attention to this.  Interestingly though one platform dominates the listening of music more than any other: Youtube. We saw an extraordinary graphic that displayed music listen in terms of circles – Youtube was off the scale by a large distance, Justin Bieber alone having over a billion plays on Youtube. Figuring out the most effective means of monetising this will be key.

-          Breaking new acts is getting harder. The industry wide trend rates for new acts selling to Gold (100K sales) is around 25 new acts per year; last year there were only nine such acts across the industry. This is thought to reflect both hostile retail environments from people like the supermarkets but also the fragmentation and hyper-localisation of music taste driven by the web. Confidence in new acts and new music seems to be very high, however. In general this is a problem across creative industries, the need to franchise, the imperative of the Big Brand, the winner takes all slow decimation of the midlist, the consequences of retail monopoly and the fissioning of taste engendered by mass personalisation online. The more you look across the creative industries the more you begin to realise there is a certain shared problematic; the problematic of late-capitalist techno-populist monopolism, if you will.

-          The majors still dominate to a huge extent, with Universal, then Warner, then Sony and lastly EMI hanging on with Katy Perry and Tinie Tempah. The only non-major released album on the bestseller lists (headed by Universal’s Take That with 1.8 million sales) was the xx on the fabulous and important indie label XL Recordings. Sales in the charts are generally on a much higher scale than books although this doesn’t seem to affect profitability to any great extent.

-          Patterns of download and demographic are fascinating and possibly the most interesting thing for other sectors. Downloads still only constitute around 17% of album sales, which have pretty much held steady although with a trend decline. CD sales then are still the mainstay of albums to a much greater extent than is commonly imagined. In the singles market however the CD has all but disappeared with the overwhelming majority of sales downloads. Moreover this has seen a rapid increase in the overall size of the singles market. Crucially though, there is very little overlap in the content and the buyer profile of these two. Downloads (e.g. singles) are mainly dance, urban and R’n’B poptastic yoof choons downloaded by, well, yoof. Albums are downloaded by the older (rather than old) demographic and could be anything from Florence and the Machine to U2, the point being that there is a clear stylistic break between the markets. The two obvious conclusions are that firstly specific types of (populist, disposable, commercial) content are well adapted for digital download and secondly that the younger age groups are preponderant in the digital space.  Yet neither quite holds for digital reading where the typical ebook buyer is an older – 50s- heavy reader far removed from be-hooded teens and while commercial content is bestselling we shouldn’t forget that it was academic monographs and journals that pioneered the whole form.

Plenty to think about. 

Industrial and Economic Policy: Part I

There are, for me, several structural problems with the British economy where the belief in a free market overshadows the economic logic that underlies a society.  If the British economy is ever going to have a sustainable future it should address the following:

-          Foreign takeovers. The logic of allowing foreign takeovers is that the movements of capital should be unimpeded to produce the greatest efficiency possible and maximise profits transnationally. Companies are global and thus operate in a sphere where nationality becomes irrelevant. What is relevant is that they can become better business. Moreover a foreign takeover is investment in a country. There are three problems with this. Firstly there is no uneven terrain of acquisition law; it is easier to take over a British company than a French; easier to take over a French company than a Chinese company and so on. Essentially the current system is rigged in favour of those with closed economies and wealthy companies – like for example almost the whole of the Far East; India; Russia; the Middle East and to a certain extent places like Brazil. The system is not reciprocal. Secondly, national interests do matter. Ultimately foreign companies will, often for political and not economic reasons, be more likely to close foreign outlets and plants etc than home ones. It is not in the long term interests of a country to have too much foreign ownership as it runs the risk of having R&D taken away, asset stripping, closures and so on. Lastly foreign takeovers, like takeovers generally, can barely be seen as investment. In fact they are often the reverse, when the debt financing of the takeover is laid on the company itself, with the result that rather than investing in growth the company is crippled by debt finance repayments. Profitable businesses are wrecked, the profits from the deal have no bearing on the company, and the long term health of the economy, at all. The British lassiez faire policy on takeovers should be revised so that the long term strategic national interest is taken into account much more than is presently the case.

-          House prices. House price inflation ran at 100% over the years 2000-10. Wages rose on average 40%. The ratio of earnings to mortgage repayments has spiralled. In the long term this is not good for the economy – it reduces people’s living standards by giving them less disposable income; unfairly benefits the baby boomers (although I concede this point may have more grudge) and lastly and most importantly ties wealth in non-productive assets e.g. property. Not only could the capital tied up in property be used more effectively to build long term success – by being invested in good business etc – but it actively contributes to economic stability by forcing overstretched borrowing and then repackaging of sub prime mortgage debt. While this is unlikely to happen again we can conclude that rising wage to house price ratios lead, without strong regulation, to “weapons to financial mass destruction” to quote Warren Buffet, in order to keep the spiral, which like a Ponzi scheme everyone becomes dependent upon, growing ever upward. Currently there are two things holding up property prices – historically low interest rates and the price elasticity of demand. Given the Bank’s hand is tied on interest rates for now, this suggests that there is a core lack of supply in the UK housing market, as was recognised by the last and present governments. Clearly, over the past 30 or so years, the free market has not built enough houses to keep housing within the bounds of affordability. The government should step in and build houses on a vast scale against the protests of house builders. Such a scheme would pay for itself, contribute to the government coffers and would rebalance the economy away from an over-emphasis on property as a source of wealth into more productive and sustainable sources. Growing property prices is an easy way of growing money out of thin air; yet it cannot continue indefinitely above wage increases, and it cannot provide a back bone for an economy.

-          Overemphasis on services. Past governments have been quite happy to see the advance of services over manufacturing as a mark of progress and a mature economy. While relative shifts are inevitable given rapid productivity growth in manufacturing (so that its relative position in terms of the total economy is reduced) the utter dominance of services is bad for two main reasons. Firstly is that services enjoy much lower productivity growth than manufacturing – a solicitors total possible productivity is not much greater in 2011 than 1911, a little yes, but there is only so much head space a solicitor can devote to a problem. Ditto for hairdressers, cleaners and management consultants. Yet a factory worker’s productivity has grown, through technology and workflow improvements an unbelievably vast amount in that time. There is thus always more productivity growth potential in manufacturing; a higher proportion of manufacturing means a higher overall productivity growth potential; which means a higher growth potential for the economy as a whole. Secondly services are much more difficult to export than manufactured goods. While Britain has become export at exporting services it will never be possible to export services to the same extent as manufacturing – services hence underperform against manufacturing. Given that we know that the engines of growth over the coming decades will come overseas; given that we know we need to export more and given that we should improve our balance of payments the logical answer is to manufacture more.  

-          How to manufacture more? This requires government help. It is clear that firstly the position of the UK in manufacturing terms has fallen relative to both peer nations in Europe and of course the industrial powers of the East. Only the US to a certain extent has de-industrialised, probably because like the UK its government mistakenly believes in not supporting sectors. However when you look at Japan in the 1950s and 60s, Korea in the 70s and 80s and more recently China you notice two things – firstly their average growth rates in these years was 10% and secondly their industries enjoyed close links, plentiful investment and ample protection by the government. Likewise in France and Germany in their golden postwar years. As with infrastructure manufacturing is capital intensive, requires nurturing, foresight and the possibility of returns only in the very long term – all antithetical to the kind of fast moving capitalism we now “enjoy”.  Governments should put cheap money into their best manufacturing businesses and shield them from international competition – where this is mostly happening. For example GKN got £60m from labour to develop new composite material technologies for the Boeing Dreamliner; the present government insanely cut a grant for £80m that would have allowed Forgemasters to become only the second firm on earth capably of casting the cases for nuclear reactors. Such projects never get built; the UK manufacturing industry is checked again; companies with sympathetic governments develop the tech and become dominant. Without such moves – e.g. an active rather than passive industrial policy – we will never grow manufacturing beyond the help of minor currency fluctuations; we will never proper rebalance our economy and both our growth prospects and our balance of payments will hence suffer.

Even the present government wants to structurally change – diversify, make more productive, evolve from consumption to production, import to export, the City to the provinces – the economy. However within a rigid ideological straightjacket of the free market it will be unable to do this. The free market comes to London; we need to go elsewhere. In short the government needs to rethink its bias and realise that we do not live in fair free world and that leaving things to markets has been insufficient in certain areas to provide the best platform for the economy.