Catering for Change

Posted on March 12, 2011 by Fred Pugsley

The cataclysmic events in Japan on Friday have rocked the world. They serve to illustrate how even the best preparations are sometimes inadequate. Even the best early warning systems, the strictest building codes and world-leading nuclear regulatory schemes were overwhelmed by a huge earthquake and massive tsunami.

But this is only the latest example of our collective challenge by huge disruptive and discontinuous change. To be sure, violent geological and meteorological events grab the headlines immediately. The carnage and devastation wrought by them is horrifying. The sudden and seemingly unpredictable nature of these disasters makes them all the more terrifying. It’s true that nobody can predict and earthquake with any sort of precision. But they happen all the time and most of the worst of them happen on the Pacific ‘ring of fire’ – Indonesia, Chile, Alaska have all had events in the last 40-50 years similar to what’s going on this weekend in Japan.

The aftermath of this event off the Honshu coast is yet to be fully assessed. Many thousands are unaccounted for and a level 4 nuclear emergency has been declared at Fukushima. Hundreds of thousands have been evacuated in the surrounding area. One report has said 10,000 people are missing from a single town obliterated by the waves. This seems to be an event for which there are no possible precautions.

Building nuclear power stations on seismically active real estate seems, in retrospect, highly inappropriate. Densely inhabiting the eastern coast of Japan knowing the risks of tremors & tsunamis seems, after the fact, to be asking for trouble. But what about California? What about Indonesia? There are nuclear facilities on the Pacific coast near San Diego. 90 million people live on Java; 50 million of them in and around Jakarta.

In an age of increasingly severe natural disaster, it seems the rules have changed – with frightful consequences. Millions of lives hang in the balance with untold physical, social, economic and political ramifications for many, many more. While our hearts go out to the people around Sendai, I’m sure questions are being asked both in Tokyo and other places around the region – were the risks sufficiently appreciated and mitigated? Do they need to be reassessed in these times of much more severe events?

If there does need to be an escalation in how we cater for these kinds of events, then where to we go for guidance? It’s clear that quakes & waves, fires & floods, droughts & storms are happening all around the world with ever-increasing ferocity. The episodes, when they occur, are very fluid and change from minute-to-minute and hour-to-hour, sometimes for extended timeframes. Where to we go to to learn how to cater for such changing situations?

The answer is not obvious nor clear to many, but mankind does have some rather remarkable capabilities in this regard. They are in the military-intelligence community. The mechanisms, both technical and economic, are already there in the global military-industrial complex. What’s not in place are the political governance structures – the laws and institutions – to deploy what spies, armies, navies & air-forces can do for the greater good in civil emergencies. That has to change as a matter of extreme priority.

An earthquake and a tsunami are like a surprise attack. The scenario needs to be war-gamed beforehand and the responses rehearsed in full-scale exercises. A big forest fire, like the one in Australia a couple of years ago and the one in Russia more recently, are like a probable attack. The conditions for fire arise more slowly and build up over time. The weather is somewhat predictable. Storms are similarly foreseeable, albeit in the short-term. Floods, like the ones in Queensland and Victoria this summer, are also like an attack that can be foretold to some extent. The La Nina rains that brought the floods this year that ended the long drought in Australia. These were hugely destructive, partly because there was little preparation and the response was carried out by civilian emergency services resources that were stretched to the limits.

On the other hand, nation-states and regional alliances have enormous standing defence forces. They have unmanned space and aerial surveillance and monitoring platforms permanently on station. A huge intelligence apparatus monitors these sensors combined with human assets to form assessments for national and alliance command structures, military & civilian. In almost every case in the richer developed world, the national commander-in-chief is an elected civilian political leader. In the more mature alliances, like NATO, the command structure includes diplomatic, legal, political and other civilian figures in shared leadership roles with their military counterparts. In short, the existing institutions have many of the key elements needed to apply them to non-warfare situations, like natural disasters.

So, I can hear people saying, the army gets involved with the rescue and reconstruction phase of many disasters already! That’s true. But their assets and capabilities are not ready either before the fact or during the fact as they are now needed. Emergency services doctrine needs to shift from its civilian legacy towards a new, more rigorous and intensely military-intelligence grade of service. These recent disasters are much more like battle than they are like a flood, a fire, a storm or a quake is assumed to be from an operational point of view. Many more people and many more assets are under threat. The nature of large-scale, high-density modern urbanisation situated in high-risk geographies demands military-intelligence grade doctrine, assets and resources to prepare and protect them (as well help them rescue & recover them).

The legal intricacies of this shift in doctrine, assets and resourcing are mind-boggling. How does intelligence-sharing between and within jurisdictions and alliance frameworks happen? Why would the smaller poorer nations of the world even want to help the larger richer ones? How does a national government allow the state-based emergency services organisations to access national defence force information, assets and personnel. Does martial-law or some less draconian form of it need to be declared pre-emptively to make this all work? What kinds of laws would need to be passed so that our war-fighting expertise, equipment and people could even engage based on a forecast of a disaster, let alone the occurrence of one? Is this the start of a slippery slope toward extreme state-intervention?

Some of the answers to these questions are surprisingly simple and already with us today. In the US, the Federal Emergency Management Agency (FEMA) already has the power to suspend the Constitution in certain dire circumstances. In some countries, the army is significantly integrated into the the emergency management community infrastructure. In others, if not most, they have the capacity and capabilities to deploy in-country after a officially-declared state of emergency. But some answers to some of these questions will be difficult. There is no doubt that the space-based and unmanned aerial vehicles would greatly assist the management of long campaign fire or a great flood or even big storm events. But the thing that makes those tools useful in battle are not in place for civilian emergency services. Things like whole-of-situation command centres that integrate large amounts of real-time information from many sources into a single picture of what’s going on as it happens on the ground. Things like simulations of scenarios that have been prepared in advance in minute detail. Things like the war-game exercises that have been played out in real life time and time again.

Which leaves us with the most difficult of all the questions – why? Historically, war has been a very well-funded human endeavour. National security seems to be a very popular reason for raising and spending money on all sorts of things. Emergency services has traditionally never attracted that kind of funding either from the public or private sector. The military-intelligence community has all those thing because the people want them to have it. Consequently, they can afford it. Perhaps the pain of not affording tighter integration between the military-intelligency folks and the emergency services folks will become high enough so that this will change before too long. But the idea needs currency and people in the right places need to get behind it before it will happen.

Here too, there are some signs for optimism. One of the most powerful political lobbies in the free world is starting to sit up and take notice – the insurance industry. Natural disaster is starting to cost them, big time! The events in Japan this weekend are likely to carry very hefty repair bills, upwards of $100 billion. The last time they had anything like that was during the Kobe earthquake in 1995. The US actuarial community who know the insurance numbers well are starting to get very active through the extended financial services community on this matter. After all, through re-insurance, these risks are spread internationally and it’s in a lot of interests that this issue get resolved. It’s also the case that denying insurance to very high-risk is highly unpopular, both commercially and politically. So both financiers and governments need to jump on this one with some urgency. In the wake of the Queensland floods, there’s even some talk about the public and private sectors getting together to work out some form of shared insurance going forward.

Managing and mitigating the risks involved in sudden, profound and discontinuous change are all around us. The example of a tremor and tsunami originating off north-easter Honshu gets the world’s attention, much as Hurricane Katrina did in 2005. Systemic risk is not just about natural disasters, although they illustrate the point. If change is trending towards these sudden, big, deep and impactful events – like the Arab uprising in North Africa – perhaps catering for that kind of change can help us deal with many very practical things. It seems like it’s the doctrine and institutions that need to change to accommodate this first. Life-threatening change doesn’t always come in the form of a natural disaster. Mankind has a pretty grim track record of causing them also.

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The Pain of Change

Posted on January 4, 2011 by Fred Pugsley

A colleague of mine in a big retailer once told me, “Until the pain of staying the same exceeds the worst imagined pain of change, nothing changes”. He was right. Recent events around the world have certainly borne out the pain of staying the same. Now, it seems we’re up for some big changes. They too will be painful but I’m very optimistic about the road ahead.

The media has been full of bad news from around the world. Economically, the situation for the last few years has been extraordinarily dark. Earthquakes, tsunamis, storms, droughts & floods have brought hardship to many worldwide. Climate change consciousness has finally become part of the mainstream for many. Institutions like the Church, Government, corporations and the family are all being challenged around the world. The pain of staying the same seems to be approaching the threshold for change.

Over recent years, transformative changes are everywhere. In place of age-old established ways of life, new ones are arising. People seem to belong more to their professions & their social networks than to their communities, companies, countries or churches. They also seem more akin to their friends than their relatives.

What is it about family, neighbourhoods, firms, nations and congregations that’s so painful? Why are people around the world choosing Facebook, Twitter and LinkedIn (even over email and instant messaging) as a primary communications & collaboration forum? Was the kitchen table conversation at home really so bad? Is the office not working as a place to work? Have parliaments and the bureaucracy failed to serve the people they govern? Have organised religions stopped fulfilling people spiritually?

There’s probably some “yes” in the answers to all these questions. But like all generalisations such as these, there’s always some truth in there somewhere. But there’s also lots of non-truth. There’s still billions of people who subscribe to one of the major religions. Nationality and being governed is still hugely prevalent. Many, many people work for big and medium sized companies or government departments. People still spend time with their families. So, what’s going one?

It seems like the last several generations have widened their horizons. People travel much more. Almost everyone sees some other part of the world on TV, the Internet. They’ve been reading about it in the media for a long time. The institutions of yesteryear – Church, State, Family, Employer – are being challenged by more globalised institutions. And this is no coincidence. It’s entirely predictable as a consequence of the rise in global transportation and communication.

The last ten years has been called “The Digital Decade” by some (including luminaries like Gates). Things that have been around for decades – like maps, music, photography, the press, telephony, radio and TV – have all been substantially digitised. Existing digital things – like email and instant messaging – have been supplanted by social networks and (micro-) blogs. Digital search has made these digital assets much more accessible than their analogue counterparts. New business models have made a lot of there resources either free or cheaper. Booming emerging economies – like China, India and Brazil – have now become the growth engines of a world where global titans like the US, EU and Japan have stalled. All of this has enabled the rise of more global institutions.

But the problems have also become more global. Climate change and other geophysical phenomena are clearly affecting many, if not most, parts of the world. The Great Recession of the last few years impacted many world regions to the extent that you feel lucky to have remained relatively untouched. Capital slips between nations and regions with almost no barriers. World religions have become globally destabilised by great shifts in demographics and adherence. Work has moved to where cost & capability dictate in the last 10 years at an unprecedented rate. Transport economics & capacity has accelerated globalisation of production and consumption. Even war has become more off-shored as the conflicts in the Middle East have shown. An election in Iran sees more activity on Twitter than a major football game in the US or Europe.

The striking things about these developments is their speed, scale and impact. After 30 years of giving “the slide show”, Al Gore made a movie of the same presentation and ignited an instant global phenomena. The numbers living in storm, flood, wave and quake prone locations have skyrocketed. The disaster events have become all the more pronounced because their causes have become more intense. A mortgage practice in the US impacts the entire world financial system at a ferocious rate. There are now more Christians in South America and Africa than in Europe or North America. There are now more information & communications technology jobs in India and China than in the rest of the world. Apple’s statement “Designed in California, Assembled in China” is emblematic of so many things in today’s world. This Christmas, due to currency movements, offshore online shopping was at an all-time high. The floods in Queensland seem as interesting to the British as to the Australians.

The old institutions seem powerless before these challenges. The UN has been active in global climate change for decades, always in the same way, with extremely disappointed effect. Nation-states or intra-national government agencies simply cannot cope with emergency management. Central banking and world-regional governance fails to manage fast-moving economic crises. The headquarters of worldwide religions or corporations fail to recognise the globalised nature of their own organisations, let alone their suppliers’ suppliers or their customer’s/adherents’ customers/adherents. The almost total offshoring of ICT product-manufacturing & service-provision to Asia has a fundamental impact in many other places in the world. All of this change is extremely painful.

So, why am I so optimistic? For centuries, the West – Europe and latterly America – has dominated most of the rest of the world. Now demographically and increasingly economically, the centre of gravity in the world is shifting. The “American way of life” that President George HW Bush said “… was not subject to negotiation” in the early 1990s in reference to the Rio Earth Summit, is certainly up for change. European dominance of trade and commerce has shrunk to the point that they can only go forward together as the EU. Japan’s post-war domination ended some years ago. Russia’s suffering of the twentieth century is diminishing. India’s on the road back after centuries of colonial repression. South America – led by Brazil – is making its way out of the US shadow. Resource rich Africa is earning its way out of poverty & sickness. For many, rather than the few, the future looks rosier.

There are threats. China’s on the way to regional hegemony. Some Middle Eastern states, like Iran, are fanatical. The situation in North Korea is frightening. Terrorism still hasn’t been defeated after almost a decade-long war on it. The status quo of the the post-cold-war era – one in which the US, EU and a few allied nations thrived – is unlikely to return for a generation. The damage done is just too deep and too fundamental.

Finding a place in this new world will be challenging for many in the old order. Surprisingly, here in Australia, we’ve seemed to find our place – supplier to China, customer of China & India, friend to the US and deeply linked to Europe. Lucky country indeed! That’s a huge reason for optimism…

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Changing Television

Posted on December 1, 2010 by Fred Pugsley

When I was a boy, we had a lot of different TVs. A black & white mono one in NYC in the early-to-mid 1960s, another one in Switzerland & Holland in the late 60s & early 70s, a colour one in London for a couple of years. When we got to Australia, they were transitioning between B&W and colour, so we had one of both. By the time I moved in with my then-girlfriend (now my wife), we got a second-hand colour TV from a pawn shop for about $200. TVs were commodity items.

Then things changed – video, cable, digital, DVD, Blu-ray, HiDef. Many people seemed to spend a lot of money on TV hardware and associated accessories. We bought a nice German TV in 1985 with a nice German VCR for about $3000. We rented a lot of videos, but didn’t buy any more hardware. We got an analog cable set-top box in 1996 and a digital one in 2001, but no new TV. We spend a lot on content – over $1000/year.

We recently upgraded to a Full HD TV, a Blu-ray player and a Full HD set-top box. It’s great! Total cost was $1600. The set-top box plugs simultaneously into the cable network and the Internet. The TV can also accept other inputs, like some of the other Internet content provider’s boxes. Those boxes usually cost about $100.

Our first TV cost about $1000 new in 1980. In current dollars that’s over $3000. Our second TV & video cost twice that in current dollars for much more technology a couple of years later. Our latest TV is half as much for much, much more technology and an infinitely better experience.

But that’s not the end of the story. A 1980 TV breaks down frequently. It also needs a sophisticated roof-top antenna with a diplexer to defeat ghosting in the inner city. By the time you cost in all the repair and the antenna, it’s closer to $4000 in current dollars.

If you repeat the exercise with the 1985 TV and factor in the video player, all the video rentals over 10 years and the servicing and repair, you get closer to $16,000.

If you do the numbers for the set-top boxes on the old TV for about ten years, you get about $12,000 in current dollars.

My expectation is that we’ll consume about $20K (2010 dollars) worth in digital content over the next ten years. I expect to update the hardware twice in that time, at a cost of about $1-2K.

Seems like the big thing that’s changed about television is how much you spend on it. Free-to-air TV is still the one-and-only norm for 70% of households in Australia. Otherwise, it seems like we’re going to a pay-as-you-go model for content and a fiercely competitive global commodity consumer electronics model for hardware.

Looks like TV-in-the cloud needs to get commoditised. That’s the real change that’s needed.

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Changing Home Communications Infrastructure

Posted on November 12, 2010 by Fred Pugsley

30 years ago, the then state-owned telecommunications monopoly, Telecom Australia (now Telstra) paid a visit. They were installing a pulse-dial phone service. I asked how fast a dial-up modem could go on that service. The technician showed me the pit where the copper twisted pair wire was outside in the street. He told me it was put there in the 1920s. Then he carefully explained why, for materials-sciences reasons, that wire would never be able to carry a modem signal faster than 14.4 kilobits/sec. If I was lucky, I might get 9600 baud on a modem (in 1980).

In 1985, I managed to buy a modem that boosted my 2400 baud rate to 4800. Five years later, I did get a 9600 baud modem that seemed to work OK. In 1995, 14.4K was normal. By 1997, I was getting 56K from a little card in my laptop.

Then hybrid fibre-coax cable TV came to my neighbourhood. We got an analogue cable TV box and a DOCSIS cable modem on that service. On a good day, you could get 10 megabits/sec on some websites. Most days, especially as more people got on the service, it was way less than that.

In 2001, we switched to an ADSL service for the Internet, mostly for economic (price/performance) reasons. Also, my employer – Microsoft – subsidised the home Internet service to the tune of $70/mth. We got a 1 megabit/sec down, 512K up ADSL 1 modem hooked up to the copper-twisted pair. Seems like 20 years of comms R&D had exceeded the phone technician’s 1980 bandwidth limit by 2 orders of magnitude.

In 2005, ADSL 2+ came to our local exchange. For $100/mth, we were meant to get 20 megabits/sec down and 1 meg up. We actually get 6-8 meg down and about 300K up. And that mileage varies according to transient conditions on the network.

Over the last 4 weeks, we’ve negotiated to put everything back onto the cable. Telstra has an offering for 100 megabits/sec in our neighbourhood. A product bundle gets us all the TV in Full HD (with a new set-top box), all our broadband at the higher speed (with a new DOCSIS 3 cable modem) and all our fixed-line and mobile phone charges on one bill for about $300-$400 per month. I’m sure our mileage and charges will vary too.

The most frustrating thing about this latest home communications infrastructure upgrade is the appointment(s) for installation. Telstra has rescheduled the date/time for coming to our home to install the new boxes and activate the new service 4 times in 4 weeks. Very annoying!

I guess after 30 years, a new cable, 6 orders of magnitude bandwidth/speed improvements and several generations of technology, they still haven’t learned how to run a diary for their field force. Grrrr…

Perhaps by the time the National Broadband Network comes to my home (in about 5 year’s time), the fibre-to-the-home infrastructure will give me another order of magnitude improvement in bandwidth/speed. Maybe it’ll cost about the same, if not a bit more. With any luck, the people installing it will be able to keep an appointment…

UPDATE: Almost a year later, the speed of this service seems to be holding up:

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Changes in Aspen

Posted on February 28, 2010 by Fred Pugsley
Aspen, Colorado is one of those places you expect to weather almost any storm – meteorological, economic, social or otherwise. In some ways, that’s true. Since the Second World War, Aspen has grown to become the playground of the rich & famous in America. It’s been one of our favourites for years. The quality of the climate and snow are legendary and, until recently, have been among the most consistent in the world. The accommodation & food have always been excellent. The people have been friendly and welcoming. All in all, a great place to be.

We’ve been there in boom-times & busts. In 1998, Aspen was riding high on a surging American & world economy. The gliterati were all there to be seen in the exclusive places. The doctors & lawyers held their conferences there. The well-off from around the world were all there in force. We went back in 2002 and were surprised how little had changed. The snow was still great, the food & hotels wonderful and people from all over were out there having a ball. But all that seemed to have changed by 2010 when we went there in February.

The last few years have been tough in America and for many ski-resorts the world over. I was expecting some visible changes in Aspen, but nowhere near what we actually saw. Somehow, the complexion of this ever-growing place has taken on an ugly façade and Aspen/Snowmass is all the worse for it. Failed property developments, incomplete construction sites and dilapidated & ageing infrastructure were only the beginning of what we noticed. People were uncharacteristically frugal almost to the point of stinginess. Retail shop-fronts were vacant and empty. Everything was discounted and the vendors spoke in hushed tones about the effects of the downturn.

Then there was the snow. When we got there, it was almost non-existent (in February!). The difference between the published snowfall statistics and the actual observable coverage on the ground was almost scandalous. The sun wasn’t shining but the snow wasn’t falling either. The skiing was interrupted by several lifts not running and the lift-lines were trivially small (if there were any at all). I’d never seen anything like it in a top-10 major resort in the high-season anywhere in the world over the 40-odd years I’ve been skiing on 4 continents.

The doctors’ conferences were still there but no lawyers. The television sets had been upgraded to HDTVs but the commercials were full of weigh-loss products, junk foods, legal services and automotive advertising. The doctors seemed more interested in skiing & drinking than attending their sessions. A famed physics researcher from CERN cancelled his highly-promoted lecture, disappointing an old friend of mine. The Russians were there in force but very few Europeans and almost no Asians. The Americans that were there were much more upper-middle class types than the rich & famous.

Strangely, Australians & New Zealanders were much more prominent this time than I can ever remember. It seems that Pepperidge Farms has been granted a licence to make and distribute the signature Australian cookies – Tim Tams. I even met an old high school buddy of mine from Melbourne there, quite unexpectedly. Another Australian, a former-life colleague of mine, was also there at the same time as part of a 6-week American vacation. This time, Liesa & I were not part of a minority demographic. If anything, we were part of the norm.

President’s Day weekend was the exception. People from all over America came to Aspen/Snowmass. Lift-lines grew longer and restaurants filled up. Unfortunately, the weather closed and quite suddenly and disrupted the travel plans of many. We heard from a local 4WD chauffeur than people were paying nearly US$1000 for a one-way trip into Denver when the local airport couldn’t cope. My high-school buddy missed boarding his flight home that Saturday due to crowds and logistical failures at Aspen airport; he was very “hacked-off”.

We were lucky enough to be there for a month. In mid-February, a 5-day snowstorm came in from the west. For 4 of those days, unusually damp snow fell over the Roaring Fork Valley and covered Aspen/Snowmass with almost a metre of new snow. On the last day, the climate turned much more typically Colorado-classical: cold days & much colder nights (-25C or colder), dry fluffy snow and lots of it everywhere. The moisture seemed to be sucked out of the top layer of the snow. The following day, Feb 23, was perfect by any definition: cloudless blue skies, no wind and a max temp of -7C. It was one of the best days I’ve ever had skiing and much more like the Aspen I remembered. One of the locals told me it was the best day on that mountain for 3 years. It was a privilege to have been there and certainly made our trip. Here’s a few pictures: 



There are several more (and higher-resolution) pictures from this trip elsewhere on this website.

I guess the contrast between the one perfect day and all the others was put into stark relief by all the other differences we’d noticed since we were last there. The gaudiness of the newest up-market developments seemed to have lost all of the alpine soul of the Aspen/Snowmass we knew from other trips. The older places were clearly not maintained to the standards of years past – broken toilets, shabby carpets and a general lack of cleanliness were the most obvious. The ‘best’ places were pushing the envelope on quantity rather than quality. The top restaurants were serving ridiculously large (even for American standards) portions of food that wouldn’t pass for acceptable in a bistro in Melbourne. Wine lists were enormous and the prices for the better French wines were astronomically high. Yet a modest local Italian place was selling a stunning Amarone (Masi Costasera) for less than we’d paid in Australia (or Switzerland, France & Italy). Of course, down the road in Aspen, that same wine was selling for 40% more…

It seems that Aspen has changed, and not for the better. We’ve come to expect the best of the best from the top-10 resorts in the world. The one perfect day and a few of the meals were definitely up to scratch. The best places disappointed. The newest premium places were clearly the result of over-financed, over-designed modern monstrosities that were emblematic of the times of excess in America before the global financial crisis. The weather, as we have seen in the current Winter Olympics in Vancouver, has deteriorated markedly.

We saw some of this in Chamonix at Christmas 2008 but we did not expect what we saw in Aspen – a country gone mad with flashy and ugly over-consumption, 6-litre SUVs and a tragic loss of connection to Alpine culture. No wonder the weather has changed. What else could it possibly do.

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What a Year For Change

Posted on August 13, 2009 by Fred Pugsley

The last 12 months have been extraordinary in terms of change. An African-American in the White House. The Global Financial Crisis and The Great Recession. The collapse of the US Automotive Industry and the resurrection of GM & Chrysler as very different (and much smaller) companies. This morning, GM claimed their electric Chevy Volt may get 230 mpg (!) Microsoft laid off people for the first time in their history. Apple, Google, Facebook & Twitter are prospering. What a year!

Here in Australia (which has fared better than most developed nations), some of the changes have been more muted. At work, many have lost work and more have changed jobs. I’ve had 4 managers in 12 months. My clients of a year ago – GM, Mercedes, Toyota, Honda in Australia – are all in a very different place. My job changed – from the Automotive guy in an Industrial group to a guy in the Public Sector group. I changed my computer from a PC to a Mac. On the home front, we’ve switched from being a 20+ year BMW driver and bought an Audi (which arrives in a few weeks).

Car companies, financial institutions, computer companies are just some of the visible symptoms of the last year of change. It seems to have been a turning point of a long cycle. Not since 1930s & 40s has there been so much hardship across the developed world. Not since the reconstruction after the Second World War has there been so much talk of how to remake worldwide social, political and economic institutions. Alternative energy, micro-blogging, social-networking and a huge renaissance in government intervention are visible signs of this broader change.

Changing a globalised economy based on fossil-fuel energy sources is no mean feat. Hydrogen public transport in Iceland and hydrogen fuel-cell trials in California are both promising but very small-scale initiatives. Electric cars with either no or very small internal-combustion motors are another one which have yet to really come to market. Geothermal power in New Zealand, Iceland and a few other places is another renewable source. France’s enormous nuclear power industry seems to be the best example of non-fossil fuel energy source in widespread production use. Cellulosic ethanol use is also pushing up food prices in some parts of the world.

The needs of the emerging economies are daunting. China’s dependency on coal-fired power stations is frighteningly large. The urbanisation of both China & India are placing huge demands on the fossil-fuel sources. Tata’s Nano looks to be in tens of millions of households in a few year’s, each with a 700cc petrol motor that isn’t particularly efficient or environmentally friendly. South America (especially Brazil), Africa (to a lesser extent) and Eastern Europe are also emerging from some very tough effects of the recent troubles. They too – with their billions of people – will start consuming more and more energy.

Over half the planet now lives in cities. Going forward, more and more people will be urban dwellers. The road networks, utility networks and other systems will be similarly strained by the population influx. Making better use of existing infrastructure is one way to alleviate some of this stress. Building more infrastructure (which is almost certainly needed) is another. In the interim, there will be changes foisted upon the existing and new city folk. Public transportation, public housing, public healthcare and public education will all feel the pressure of more people too. It’s almost unimaginable that governments will either be able to or want to fund the required increases in these social services.

By contrast, life in the country has been spiralling towards an all-time low in modern times. Many rural-sector economic activities have become interwoven into large-scale businesses run from cities. Agri-business is the most visible form of this change. In China, displaced factory workers from the current global economic climate seldom have viable alternative places to go. Their villages and family (and collective) farms have been radically transformed. Some rural communities have disappeared. Some have been flooded by large-scale damming of rivers. Some have been deserted by the people moving to the cities. Some have no viable natural resource base left – their land is no longer arable, their water so polluted it poisons any living thing.

Here in Australia, there has been a drought for most of the last decade. The last year has been particularly dry. Depression and suicide among farmers is at an all-time high. Family farms have been devastated by the twin effects of the drought and global financial crisis. My own family sold a country home on the shore of an irrigation reservoir whose shore-line retreated from the property in 1996 never to return. I drove over a bridge of that weir last weekend. A trickle in the original riverbed was all the water we could see, some 15 metres below the bridge. The district – once a thriving farming community – is now a tourist destination for the city-based people who can still afford their holiday homes. The local economy is now almost entirely dependant on people from Melbourne. The local water will be piped south to Melbourne when the (politically controversial) pipeline is finished next year.

The switch from private sector to the public sector of much of this activity is staggering. Billions and sometimes trillions of dollars of government debt are being clocked up to do all sorts of things today. From bailing out Wall St to supporting Motor-town to plain-old cash handouts to stimulate consumer spending. Pipelines and river-basin rescue programs are buried in huge government appropriations that do everything from building broadband networks to building bridges, schools, hospitals and train-lines. Government “stimulus” spending has become the new boom industry, Spending on a scale that even a year ago was just unthinkable is almost universally popular.

For me, my Audi is just as fun to drive as my BMW but it’s 30% more fuel-efficient and 35% less-polluting (at about the same price). My Mac is much more fun to use and is faster and greener than my PC at about twice the price. My new job is much more satisfying than my old one because the customer is buying. I like Obama much more than Bush despite the fact that I’m centre-right politically. I’m one of those many millions of people who contributed to his election campaign last year. Despite being a paid-up member of the Liberal Party here in Australia, I take my hat off to Mr. Rudd (and Mr. Swan) for their performance in very tough circumstances.

I feel very fortunate that I live in Australia and I work for a global company that’s in great shape. I get a lot of people asking me for advise (and sometimes for a job). I can’t say I saw this all coming but I knew something was going to happen, so I made some changes in anticipation. I’m so glad it turned out the way it did. I can’t imagine what it must be like to be in other places that’ve been much more harshly affected.

 

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The Changed World Financial Situation

Posted on October 18, 2008 by Fred Pugsley

Over the last few weeks, the world’s governments, bankers, economist and media have been fixated on a Financial Crisis. It seems to have started as a consequence of the sub-prime mortgage practices in the US. This crisis has gripped the world with fear and panic not seen since the 1930s. It seems to be all anyone can talk about.

Some of the dimensions of this crisis are staggering. Trillions of dollars of public money has been injected into the financial system. Politicians of all complexions have become fiscal interventionists. The Swiss and American governments have bailed out their nations’ principal private banks. The UK and other European governments have nationalised some failing banks. Governments around the world have put some form of guarantee on deposits to bolster confidence in the system.

Coordinated multilateral action, albeit faltering at first, seems to be working. Central bankers from the world’s developed and emerging economies are cooperating in a way not seen since the end of World War II. At the same time, the EU now want to re-write the rules of their financial system to depart from the system agreed at Bretton Woods in 1944. Then, as I believe it will now, the US got what it wanted. But things are very different today than they were in the dying days of the War.

Today, the centre of financial gravity has moved from the US and Europe to Asia. When all the accounting has been done, I believe the recent financial crisis will mark the official transition in that process. It will declare that Asia is wealthier than America or Europe in real net present value terms. It will be a passing of the torch from the old world of money to a new world of money that will dominate this century. It is a stark and sudden way for this to happen but history is full of these disruptive transformations.

Americans, Australians and many Western Europeans have been living well beyond their means for some time now. What started with continuously improving living standards in the post-war generation (largely borne of hard work and savings) became obsessive materialism. What began as ‘keeping up with the Joneses in the streets of pre-fab suburbs like Levittown, NY in the late-40s has become almost obscene conspicuous consumption by the upper-middle-class. Even the behaviour of an entire generation (Gen "Y") is profoundly unsustainable in economic and financial terms.

Modern banking was probably invented by the Templars during the Crusades. There’s even some suggestion that after Friday 13 October 1307 (Friday the 13th), some Templars & their treasure helped establish the Swiss banking system. In the 1500s, Philip of Spain needed the House of Rothchild in Paris to finance his wars with England. Last century, the American Lend-Lease program was probably the greatest example of buy-now, pay-later. After the War, the web of financial services available to an ever-more prosperous and ever-growing middle-class scaled up into the billions of consumers. Now, as some of the titans of Wall Street, of The City (London), of Zurich and other places fall into insolvency, the road ahead looks very uncertain.

I can’t imagine Visa and Mastercard going broke. I wouldn’t want to live in a world where people had to pay cash for their houses and cars. I can see an awful lot of "McMansions" selling for a fraction of their construction price. I can see executive compensation retreat from the extraordinary levels it has been at for some years now. I can see a great deal more people (and perhaps and number of different kinds of people) returning to saving part of their net-disposable income as a habit.

But the greatest change I can see is that what constitutes "middle-class" is going to change. It will be much less about a two-car garage in a suburban housing estate with a double-income family with two kids and a dog and/or cat. It’ll be much more about living at 75% of household income after tax and making do with less. Who knows, a few billion people saving some money might just repair the world financial crisis better than knee-jerk government intervention.

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Changing Back

Posted on September 5, 2008 by Fred Pugsley

The first computer I ever bought with my own money was an Apple Macintosh in 1984. Before that, personal computing meant sharing a computer with other people – at school, at work or some other place (like a college dorm room). We had a small townhouse in inner-suburban Melbourne, Australia and an even smaller desk to put it on. I was a road-warrior IT guy and a university student. Macs were an ideal computer – mobile, useful and fun.

We did everything we could to learn about the technology deeply. We went to Apple in the US for developer education, we participated in local and overseas user groups and I read everything I could get my hands on. When Steve Jobs left Apple to form NeXT, we knew something was up and we followed him on his journey. At a shop near Stanford University in Palo Alto, we saw NeXT make it’s retail debut and almost bought one. Some of our friends & colleagues bought NeXT cubes and workstations, but we stayed faithful to the Macintosh.

In 1991, we made the decision to switch everything to Windows. It was a traumatic experience. We became VB developers and refocused our business on the Microsoft ecosystem. Some years later, I went to work for Microsoft after over half-a-decade in their Partner community. I bought my last Motorola-CPU Mac in 1992 and never touched that platform again – until recently. I left Microsoft 5 years ago and exited their ecosystem a couple of years ago. It just wasn’t what we wanted to do any more.

Now, at IBM, I see some of my colleagues in Australia using Macintoshes as their work computers. It’s a supported platform inside the corporate infrastructure, although much of the software we use is still in beta on Mac. I even have one of the Solution Architects in one of my projects using a Mac everyday. Back in 1984, I never thought I’d see Apple Macintosh behind the firewall at IBM. The guys at Lotus are hard at work supporting Macintosh and the iPhone from their whole family products – Notes, Sametime, mobility and so on. Those betas have either gone public or will do so very soon.

For their part, Microsoft have continued and extended their support for the current-generation of Macintoshes and iPhones. Office 2008 for Mac is out and I see my colleagues at IBM using it everyday. The iPhone 3G has ActiveSync natively supported in the software stack. Seems like Macs and iPhones are headed to become first-class corporate citizens sanctified by both IBM and Microsoft!

Of course, Apple has changed remarkably in recent years to make this all happen. Apple’s Mac OS/X is an evolution of NeXT’s software. Steve Jobs has been back at Apple for over a decade and continues to do a great job. The iPod phenomenon has brought Apple back to commercial health and Macintosh has become a technologically respected platform. Ironically, the Macintosh did this by using IBM’s PowerPC CPU for over a decade and more recently by morphing into a great Intel PC. Apple, NeXT software & Intel hardware have come together to produce what Macs are today.

Lately, Intel announced some new CPUs – some mobile processors for notebooks and the "Nehalem" processor dubbed Core i7. I’m waiting for Apple to announce a 17" MacBook Pro. That’s the Mac I want to use everyday at work. For my private software development efforts (particularly for the iPhone), I want an Core i7 Mac desktop with a big screen at home. I’m excited and I’m anxious at the same time. I haven’t read so much technical literature at the software development and technology infrastructure level for 20 years.

Going back to Mac is about going forward. 5+ years of using a Microsoft Smartphone on a 2G network and over 15 years of using Windows, Office and Exchange on slow Ethernet connected to a ever-growing Internet are over. I stopped using Outlook a couple of years ago and that was the beginning. Using an iPhone on modern 3G network is wonderful. Apparently, using a recent Mac on a fast (100 Mbps 802.11n) wireless network is fantastic. I’m looking forward to it.

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Changing the Game – Apple’s iPhone 3G

Posted on July 16, 2008 by Fred Pugsley

Getting an iPhone 3G in Australia has been a long wait with a wonderful surprise at the end. Like so many things Steve Jobs has done in 30 years of innovation, there’s a strange combination of secrecy and publicity surrounding every launch. It was that way with the Macintosh in January 1984. It was remarkably similar last year with the US launch of the iPhone. Anticipated, much speculated in the press, almost no pre-launch PR from Apple. A huge frenzy of pent-up demand among the customers.

I decided against standing in line on the night before the iPhone 3G became generally available in 20-odd countries around the world. July in Melbourne can be a wintry time at the best. The night of July 10/11 was particularly cold, windy and damp. As it turned out, that was a good decision. Systems melted down on July 11 with the rush and there were delays in all 3 of the Australian carriers offering iPhone 3G. Some phones couldn’t be activated for many hours after purchase. Apparently, this happened all over the world.

I did go into a telco retail shop in downtown Melbourne on the following Saturday morning. It was a very circumspect affair. We were 2 of the 8 people waiting for the door to open at 9am. When we got to the shop 5-10 minutes beforehand, there were only 4. We were immediately served by a nice young lady who explained that the day before there had been system difficulties. She tried to manage my expectations down to a level she could easily deliver to, but I was impatient and persistent. I had waited for an iPhone for 4 years.

Eventually, after a couple of attempts, my number was ported from a competing telco and my iPhone 3G was activated. I selected a few accessories from the very limited range in the shop and went to the point-of-sale. We were out of the shop in about 2 hours very relieved that I had a functioning device and service. The combination of excitement, frustration and satisfaction was intense and unfamiliar. I can’t remember getting that emotional about a technology toy in many, many years.

After a short drive home, I got all the accessories unboxed and plugged in. I then proceeded to register the phone through iTunes, buy some music and apps and subscribe to MobileMe – Apple’s re-branded .Mac service to do push email, calendar, contacts and cloud-storage. It was absolutely simple and straight-forward. Everything was done in a few minutes without looking at a manual or touching a customer support service. Satiated and hungry, we went out for lunch.

We drove up into the country for a Saturday night in a Manor house near the mountains. The 3G service from the dominant telco in Australia performed flawlessly. The iPhone 3G on this network ran at full speed in all the locations we stayed at – including a ski-resort on the Sunday. At no place along the way did I ever lose signal entirely (no mean feat for a network that’s only a year or two old). I managed to use 1GB of data traffic within the first 24 hrs and most of that was in the bush. The GPS + 3G location finder found me in a bedroom in a manor house in the country on the weekend as easily as it did in my living room at home yesterday.

Facebook and The New York Times were the first two applications I used heavily. I downloaded the Facebook app thru iTunes on my work (Windows XP) PC connected to my home broadband. I did the NYT app over the air in the country on the 3G network. Both recognised me as an existing Internet customer of some years instantly and almost without intervention. I was posting mobile photo-blogs within minutes. The resolution of the iPhone screen (160 dpi) makes reading the paper a dream. I even found out how do to a screen-shot yesterday:

My iPhone 3G

Since the weekend, I’ve been filling out the content. More music, video, podcasts and audiobooks. More mail & contacts in MobileMe from the various email services I use – Lotus Notes at work, Google gmail, Yahoo mail, MSN LiveMail, email from my local broadband provider. Getting the relationships between services right and functional has been rather more straight-forward than I’d imagined. There’s even a pre-announcement from IBM’s Lotus group about a forthcoming product for Apple’s iPhone.

There’s a ton of free Wi-Fi hotspots around that the phone recognises. Getting my home Wi-Fi network in order proved to be a much bigger challenge than I’d imagined. Someone from the telco will be coming to fix that next Monday. It seems that my PayTV, home phone, home broadband and now home wireless network – all from the same company – need some special attention to all work together. Good thing they’re not charging me for that remediation service. That would be something to complain about.

I’m waiting for my next phone bill with some trepidation. I’m sure I’ve been a heavier user of the 3G service this month than I plan to be over time. No Wi-Fi at home will do that. After the home & work Wi-Fi issues are sorted out, I’m sure I’ll be as satisfied economically as I am functionally. I never thought a phone could have so much of a computer in it, despite all my time in the industry. Undoubtedly, my next step (excuse the pun) will be to the SDK to write my first app. But that’ll be another post.

The game has been changed. The device you carry in your pocket has now become the phone, email, browser, blogger, social-networking and location-service device. No other device seems to have captured the public imagination like Apple’s iPhone. The iPhone 3G is a wonderful upgrade to a wonderful concept. Sure, the camera could be better – but I already have a really good (12 MP) camera. Sure it could do videos, but my other camera does that just fine. Sure there’s always more to do, but I figure they’ll get around to that in successive releases, For me, I’m delighted.

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Changing of the Guard at Microsoft

Posted on June 28, 2008 by Fred Pugsley

Bill Gates’ widely-reported departure from Microsoft yesterday is the kind of event that aptly evokes cliches like "end of an era". Demonised by many, revered by others, Gates’ exit has been a remarkably gradual and more importantly a managed affair. As a Microsoft employee of 5-10 years ago, I recall the beginning of the end vividly. Despite working for IBM, I’ve been personally touched by the moment.

Steve Ballmer has been the (rather unimpressive) CEO for the last 8 years. I understand from insiders that Bill & Steve first spoke about Gates retiring in 2004. Ray Ozzie, arguably the best hire at Microsoft in recent times, has been doing the Chief Software Architect job for some time now. Since it was announced 2 years ago, there have been endless pieces in the media on Bill leaving from almost every angle. Over the last week, the media coverage has been extraordinary, particularly in blogs.

But it’s not just a media feeding frenzy. Just 2 days ago, a former colleague from Microsoft in Melbourne retired after 15 years. I wasn’t the only one of the "old guard" at his small invitation-only farewell celebration. A few of them still work there; only 3 of us don’t. Despite the intimacy of the gathering, the guy leaving couldn’t help himself making an oblique reference to Gates "having his Microsoft chip removed too". The mood in the room was palpable.

Both Steve & Bill were brought to tears in public at the handing-over of a scrapbook on the final day. They’re not the only ones weeping. Ballmer and his team have their work cut out for them. New threats to (and opportunities for) Microsoft are everywhere – Google & Apple among them. The majority of the senior leadership in Redmond are long-time employees. The company is bigger than ever. Can the old guard change something so big and commercially successful?

Calls for Ballmer to retire are mounting. The disappointment with Windows Vista alone would have brought any other CEO unstuck. It has certainly cost some senior execs their jobs. Renewal may well need to come with new blood at the top. Changing the company sooner rather than later is widely thought to be a decisive factor in its future. Shedding the tarnish of the anti-trust case(s) will need some serious successful delivery of new and better products & services, not just marketing, PR and perception-management. Buying Yahoo was never going to do it.

If "cloud computing" and wireless handheld devices are the future, no wonder Google & Apple are doing so well. Eric Schmidt & Steve Jobs must feel just wonderful, as they were both roundly beaten when they competed with Microsoft before. Personally, I’ve been waiting for Microsoft to offer me me everything as an online consumer that they offered me as an online employee. 5 years after leaving Microsoft. I’m still waiting for much of it.

Change doesn’t often happen until the pain of staying the same exceeds the perceived worst-case pain of change. If that day comes for Microsoft, as it did for IBM in their near-death experience of the early 1990s, it will be traumatic. Maybe a changing of the guard will help.

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