In a few days time, this blog turns 10 years old. The changes in the world have been startling, dramatic and far-reaching. The Global Financial Crisis redefined the world economically. Smartphones and Cloud computing have changed the world in many, many ways. China’s influence and Islamist fundamentalist conflicts have changed the world in many other ways. Now it’s time to look back so we can look forward again.
Perhaps it’s hard for many people to even recall a world without Facebook, iPhones and Android phones. Those things have become woven into the fabric of everyday society – and not just in the rich developed nations. Maybe some yearn for 2006, before the GFC. Sometimes we forget what life was really like a decade ago, particularly if we think life is much better now. But not everyone is better off today than they were then. Millions of displaced people in Europe and the Middle East immediately come to mind. To a lesser extent, the “working poor” of the hollowed-out middle class do too.
None of these things happened overnight. Most of them were a direct result of many things that happened well before 2006. Consider the online world. Even Facebook was alive and well in the dorm-rooms of Harvard in 2004. Social-networking, in the form of LinkedIn, was up in 2001. “Smartphones”, in the form of a big Nokia brick that folded in two, were available in 2000. The Internet can trace its roots back to 1969 and the Web to the early-90s. PC users started to go online in the modern sense of the term in the mid-90s. The developments of wireless broadband technologies go well back before the advent of smartphones and tablets. WiFi was invented here in Australia in 1990.
The GFC was well and truly in the making well before the events of 2007 and 2008. Some say revoking the Glass-Steagall Act in 1999 was the “cause” of it all. Reckless and risky securitisation of sub-prime mortgages went on for years, particularly in the US. Regulators like the SEC seemed to do little to constrain or prosecute infractions of perfectly suitable and adequate regulations at the time. Credit-ratings agencies seemed fast-and-loose with their assessments of the quality of the “investment-grade” products they certified. Governments and businesses alike seemed very content for years before the crisis to continue on their merry way. As one of the movies about the behaviours in Wall Street and Washington put it, “…everyone was making money”.
Today, everyone is talking about China. The focus seems to be all about slowing down, transitioning from export manufacturing to domestic consumption and how the State communicates with the market. There’s also a lot of talk about corrupt officials being prosecuted for their misdeeds in times gone by. All of these things have their origins well before 2006. “Socialism with Chinese characteristics” was devised in the late-1970s. The export manufacturing boom was well underway in the 1980s and 90s. The transition to consumption and services from manufacturing and exports has been more recent but on the cards for well over a decade. The exposure and punishment of corrupt officials is very much a thing of President Xi’s administration but the corruption itself has been going on for a very long time indeed. Chinese intervention in the markets is as old as Communist rule in China. In the last 10 years or so, liberalisation of markets means the government needs to communicate better to avoid surprises. In today’s globalised world, even the Chinese Communist Party can no longer “control” things as they once did.
The struggle of Islamist fundamentalism is, of course, much older. In the modern sense of the struggle, events in Egypt in the 1950s and in Iran in the 1970s gave birth to new political regimes. These were either nationalist first (as in Egypt) and Islamist second or theocratically Islamist (as in Iran) and nationalist second. The two Gulf Wars and the War on Terror go back a quarter of a century. There have been a broad spectrum of similar but different developments throughout the region from Pakistan and Afghanistan in the East to Algeria in the West over the last 70 years. After WW II, the British abandoned both Egypt and Palestine. Gadaffi ruled Libya for decades before his assassination more recently. The Muslim Brotherhood was marginalised by Colonel Nasser in Egypt in the 1950s. The events of the last ten years – the Arab Spring, the war in Syria and most hideously, Islamic State – are just the most recent episodes of this strife. Some say the conflicts go back to the Crusades almost a thousand years ago.
What’s essential about the last ten years is the speed and intensity of it all. From 2007 to date, since the launch of the iPhone, there are now almost 3 billion Smartphone users worldwide. They have unprecedented access to services over widely deployed infrastructure. The GFC happened with lightning speed globally, largely due to the widespread reach of the securitisation chain, global financial services, very high interconnectedness of markets and economies and the technology that finance depends upon. China was inextricably linked into the global economy and to the North American and European nations particularly. Professor Ferguson coined the term “Chimerica” to refer to the deep interdependence between the Chinese and Americans. Electronic commerce flourished spectacularly fast over the last decade, much to the detriment of established businesses in many sectors and markets. Social networks tied together over a billion people in a matter of years. This changed the dynamics of the Arab Spring, news media more generally and accelerated events on the ground. All in all, things moved faster and harder in all sorts of ways and places.
Digital is now a noun, as well as an adjective (much as Google became a verb before that). But as an adjective, it is most prominently used in the phrase “digital disruption”. It is used in all sorts of contexts – businesses of all kinds, government, not for profits and others. It means to have reach from inside an organisation directly to the external stakeholders – customers, citizens and the like. It means speed. It often means new business models and a new mindset. It most visibly means having a app on a smartphone that lets people outside the organisation interact with the organisation very quickly, simply and easily. It means being agile and responsive to changes outside the organisation on the inside. It changes the way people work and what they do for an organisation. But whilst Digital is a prime focus today, it wasn’t born within the last ten years.
In 1986, Sam Walton (of WalMart fame) bought a special kind of computer that could answer queries put to large amounts of data quickly. He hooked it up to his procurement and sales operations. Then his suppliers started using it to find out where (which store) their products were being sold, how many and when. Then they went there and replenished the stock on the shelves directly. No inventory people, no warehouses, no procurement people. Direct business-to-business electronic commerce. It was a real coup. At Christmas time, the sales of seasonal merchandise (Christmas stuff) would be monitored in real-time and discounted, store-by-store, to clear the stock. Today we call that Big Data operations analytics. Another coup – WalMart could get rid of most of the Xmas stuff before Christmas.
What was a good idea at WalMart 30 years ago in the US has now become part of the conventional wisdom for almost everybody throughout the developed world. Mobile, cloud, big data and social networking are sufficiently mature and deployed today to make it so. But business and government is still struggling to become more Digital. It’s because they have to change inside – like WalMart did – as well as outside – like WalMart’s suppliers did. That kind of change is hard and needs extreme levels of mandate, sponsorship and lots of resources. It also needs smarts – good ideas about why, what and how. It needs different kinds of people, not necessarily the ones who are already there. Above all, it needs leadership – and that’s in short supply and high demand these days. Sam Walton was not an IT guy, he was a retailer. The innovation was only partly technological. It was mostly operational – doing things a different and better way because technology could enable it.
This itself is not a new thing. Technological innovation and financial capital have been enabling this kind of change for 250 years, as the first post of this blog said. What is telling about the last ten years is the speed of the change, the reach of the change and how profoundly it will impact the world going forward. Some people are very worried about this (but they have been before). The worry is not so much about speed, reach and depth being undigestible (as it occasionally has been before). The concern this time is over Digital being a “survival event”. It’s about if you don’t go Digital and quickly, your organisation might not make it at all. Some people worry about the next economic downturn – with opinions varying between GFC Mark 2 and something less dramatic. One thing is for sure, it will be faster. Some people worry about the next cycle in Professor Perez model (likely to be centred around clean energy). That is probably going to happen faster too and be very profound. That’s probably the ultimate survival event. Many worry about conflict between China and the US. But that’s something that deserves an entire blog post.
New ways of doing things will emerge across the board. They’ll emerge more quickly. Things will get faster. It’s almost inevitable. Coping with speed will be difficult, particularly for the change-resistant ones. But that’s happened before too. Maybe this time, we can be more aware of the downside consequences of the changes. Lots of people were hurt in the GFC. Many have been displaced in the Middle East. Ironically, many IT workers have been rendered either unnecessary or unhelpful by the Digital revolution. If history is any guide, there are always casualties to change. But this is not World War Two. But it’s not bloodless either.
New ways and means always benefit some people – this time, it seems the beneficiaries are fewer and fewer. Sam Walton was not only a folksy retailer who drove a Chevy pickup and dressed out of his stores. He was a billionaire plutocrat who founded a dynasty of billionaire plutocrats. In the technology sector, there are many such billionaire founders. Some of them have turned to philanthropy. But that does not spread the income, wealth and benefit the way it did in America and other places after The War. People in the US still remember that. In very different ways, both Donald Trump and Bernie Sanders are appealing to those who remember when America was a “great” country. God help us all if either of them gets elected. I never thought I’d say this, much less write it publicly: I’m endorsing Hillary Clinton for President. Maybe she can find a way through all this. Of course, that’s something that has not changed in the last 10 years. Hillary for President…
As always Fred – well written and well balanced. The majority of the points you raised are my position and history so it is easy to agree.
I have no doubt the story will continue during the next 10 years.