Quoting Nate Silver

"In science, one rarely sees all the data point toward one precise conclusion. Real data is noisy-even if the theory is perfect, the strength of the signal will vary". Nate Silver, in, The Signal and The Noise: Why Some Predictions fail- but some don't. Loc. 6920-32

Smart Phone Future

In an earlier blog post here, I argued that Microsoft Corporation had chosen to expand its business into devices. Apple's success with devices gadgets which include the iPod, iPad and iPhone (the 3 IPs) on which it has based its strategy for dominating the technology industry. It is now known that Microsoft is planning to take the competition into the smart phone and tablet businesses.

With the forceful entry of Microsoft into the smart phones markets, I have been wondering how much growth is reasonably expected. The main barrier to entry into the smart phones businesses is the costs because these gadgets command a premium price. Mobile Business Briefing reports that Smart Phones reached the 1 billion milestone in the third quarter of 2012. According to the report, the milestone is reached after a period of 16 years. In addition, it proves that smart phone owners are still a minority and with increasing  competition, prices will fall sufficiently to generate new demand.    

Is Microsoft Copying Apple?

Conventional wisdom held it as a given that Microsoft's hold in the realm of technology and especially software was almost unassailable. In the last decade, it has become very clear that this assumption was not neither well informed nor justifiable. In the last decade, both Google and Apple have gained substantial recognition through innovation and emerged not only as Microsoft's primary competitors but also the leaders in the industry. Part of the evidence for this is seen in reports such as this in the Irish Times, which showed that Google surpassed Microsoft in the equity markets. Certainly, stock market valuations alone do not mean  that one corporation is more innovative than another but valuation is a sensible barometer by stock buyers about the expected revenues of one corporation.

Notably, the leading corporation has been Apple, whose valuation has been rising and is the recognized leader in the technology industry. Microsoft's CEO, announced in this article in the Irish times that it is changing strategy and will commence reorient itself to go into production of gadgets in addition to software. As argued, this will involve the integration of software and gadgets in order to compatibility in products with high margins and huge demand. Any person who follows the industry understands that that path is one that Apple has taken with spectacular results. This state of affairs is empirical demonstration of the fact that competition is  a major driver of innovation.

To my mind, this entry of a large firm with a great background in innovation into the integrated gadget and software business forebodes further innovation and efficiency. That means that the consumer surplus will only expand. Competition makes capitalism and capitalism thrives on competition.        

Recommended Reading for Some African Leaders

A number of nations on the African continent have been independent for half a century now. In that time, very few of these nations have had an unbroken series of hand over of political authority. Also instructive is that a good number of the individuals with economic clout have an existing or past connection with the governments. Daron Acemoglu and James Robinson have a book that explains by trawling through history how and why societies have generated economic prosperity and political stability. In their view, societies are either extractive or inclusive. Extractive societies are those in which political institutions channel power and wealth from the majority towards the minority while inclusive institutions exist where there is pluralism that allows for participation in public affairs and reduces monopoly in both markets or political power.

"However, in most cases of sub-Saharan Africa and many in Asia, the post-independence governments simply took a page out of Robert Michel's book and repeated and intensified the abuses of their predecessors, often severely narrowing the distribution of political power, dismantling constraints, and undermining the already meager incentives that economic institutions provided for investment and economic progress."  In, Why Nations Fail, Pages 112-113.

  

How the Rolls Royce Competes

In using Us presidential campaign parlance, I care for the 47% but also admire the 1% for their justly earned income. Seth Stevenson puts out a very detailed article in Slate Magazine in which he describes the super-luxury vehicle with the name Rolls Royce. In that piece, he describes the features of the vehicle but more impressive is the workmanship that distinguishes it from other equally good vehicles that cost nearly 15% of its price.

Among the amazing features is that while the average car is produced in 30 hours tops, the Rolls Royce is produced in the range of 400-450 hours. One sees why this is so because the machine is largely assembled by hand unlike other vehicles that are made with very hi-tech robots. A good indicator is that the Rolls Royce reverses the 90-10 rule and has humans undertake an overwhelming portion of the work that is required to put it into the show room.

Understandably, the vehicle that is mostly made from high quality craftsmanship is expensive because the labor component is high but I also think that the luxury signal contributes substantially to the price of this vehicle. Nobody who purchases a Rolls Royce for upwards of US$ 300,000 cares much that its fuel efficiency is at 14 miles per gallon and would embarrass an environmental conservation advocate. Its a delightful thing that the manufacturers are able to produce a limited number of a fine machine and keep the firm profitable. That's as it should be.      

Out With Oddball Interview Questions

Occasionally, I meet acquaintances who are scheduled for an interview in order to take a new job with a firm and have thought that most people think that the interview is a situation for a battle of wits between the panel and the outnumbered interviewee.For that reason, I have asked myself whether the human resource consultants and the interview panels really consider whether these situations enable them to get the best responses from those that they seek to recruit.

One must trust Lucy Kellaway to bust the myth and expose the emptiness of the fads that come with everyone trying to prepare for interviews in either the Microsoft or the Google way. In this very deep article in the Irish Times, she exposes why firms are mistaken in asking odd questions in the guise of getting the best out of the interviewees.As she states, if the founders of Google are the best in their class, it is unlikely that many people know much more about any subjects that they do. For that reason, to ask an interview to teach them is either a sign of arrogance or a misunderstanding about what person they are searching for. To be honest, I am not surprised that Larry Page gets bored during interviewing for most of them are frankly unable to tell him much that would impress him. That he gets frustrated by this is what surprises me instead.

It is also possible that the interviewees are not impressive because they are over-prepared to answer questions that they have read from guide books purporting to educate them to state smart answers. And so my free advise is to loosen up and ask these interviewees to reduce their knowledge to about 500 words or less. This may tell one more about a person because people who care to write clearly and coherently are bound to be very keen workers and excel in new tasks too. This may not be a perfect system for hiring new workers for a corporation with billions of US dollars in revenue but it is far better than asking questions that allow people to regurgitate what the "How To" books say.     

When Entrepreneurship Results in No Jobs

There are few countries that can claim to have a real answer to the creation of employment and this question continues to animate the world's largest economy today. And yet a number of popular approaches and policy stances to the need to expand employment are often based on belief and strong sentiment than on empirical evidence. The common claims are that the provision of loans on preferential terms are sufficient to create new business through new enterprises. A related claim that is quite common is that self-employment is one sure way out of the unemployment problem in both low and high income countries.

Employment is rightly considered one of the major issues in the ongoing presidential campaigns in the United States. Catherine Rampell of the NYT, writes about the difficult employment problem generally but more particularly about the fragmented and small nature of most start-ups in the United States. The nature of the new corporations is that they are creating a smaller number of employees on average and therefore essentially unable to drive strong employment growth. As the piece states, this phenomenon has startling policy implications for those who believe that small firms will be the creators of jobs as they have been.

Whether this change in the structure of the labour markets is permanent or not is subject to confirmation in the future. What is mot certain is that the quest to expand employment cannot be found in the purported silver bullet of entrepreneurship.economies are complex and this works in a way that precludes the ability to push buttons on one end and generate jobs on another.