The Nature of Liquidity

In praise of liquidity

Q: What do parts of Europe, the USA and pretty much every startup have in common?
A: They all lack liquidity!

While sifting through my EMBA Accounting notes, I came across this wonderful ode to the nature of liquidity, the lifeblood of every business. Very apt for our troubled times, don’t you think?

Liquidity, The Accounting Cat by John Clarke
To the tune of Macavity, The Mystery Cat by T S Eliot

Liquidity’s a mystery; it’s very rarely seen,
It strikes and then is gone again, its getaway is clean,
And despite forensic evidence and great deductive flair,
The conclusion’s inescapable, Liquidity’s not there!

Liquidity, Liquidity, there’s nothing like liquidity,
Its presence gives you confidence, its absence gives timidity,
You own perhaps a property, you own perhaps a share,
But once you’ve lost your credit card, Liquidity’s not there!
Your understated opulence inheres in what you wear,
But in the end, you face the fact, Liquidity’s not there!

Liquidity’s a nifty term, it’s business talk for cash,
It’s money not tied up in things or hoovered in the crash,
Investments may return amounts of staggering obscenity,
The vastness of your holdings may explain your great serenity.
In publishing, to take the case of either of the Fabers,
A warehouse full of Larkin and The Bumper Book of Neighbours
Is very well, and when they sell, will satisfy the editors,
But not much use, in real terms, when dealing with the creditors.

Liquidity, Liquidity, there’s nothing like Liquidity,
The glint of actual duckets brings respect and dip the lid’ity,
It’s likely to self-immolate on contact with the air,
Say ‘Raffle’ in a crowded room; Liquidity’s not there!

In the conduct of a company (proprietary, limited)
There’s always a suspicion that the system’s maladministered,
In proper corporate planning you allow a little spare,
But when you need the wherewithal, Liquidity’s not there!

Liquidity, Liquidity, there’s nothing like Liquidity,
In purely economic terms it constitutes validity,
I wish I had a pound for every credit millionaire,
Who completely failed to register, LIQUIDITY WASN’T THERE!
When reputations tumble and the search is on for clues
(I might mention humpo-bumpo, I might mention drinkie-poos)
There’s a suspect who can prove he was in Lima at the time,
They can’t catch him, he’s the brilliant Scarlet Pimpernel of crime!

A Dozen Jobs to tell your kids to avoid…

I’m going to go out on a limb here and make some informed predictions.

1. Store-based retailing, in general: Because almost every product is purchaseable online. Groceries, computers, music, videos/video rental, books, electrical appliances, holidays and clothes. But can you buy the “experience” of shopping? Do people really care about that? Increasingly time-poor people would prefer to avoid the trip, the petrol bills and the hassles of parking. Macy’s, at least, is trying to improve that experience through augmented reality. But it’s a battle that most retailers will lose. Only the smarter ones, like Zara, with an incredibly responsive supply chain, will survive.  We are seeing the first signs of this in book retailing. Last year, I purchased almost all my books online – mainly from Amazon. This year, I subscribed to Audible (also an Amazon company). So now I hardly read, I just listen (while I drive, while I weed the garden, change nappies) and that includes my daily subscription to the Wall Street Journal.
2. Publishing - as more people ‘listen’ to books, or read them electronically, printing and distribution costs are less relevant and hence the capital barriers to entry don’t matter. There will be more industry fragmentation, and swarms of smaller-scale publishers will inevitably overwhelm the big guys, eventually. A case in point? Newspaper publishing
3. Reportage - I always wanted to be a cricket commentator and reporter. But in statistics-heavy games, the technology now exists to automate factual reportage. Check this out from Narrative Science. It’s equally applicable to real-estate and financial reports. There will still be a role for the off-the-wall journalist, methinks, for some time yet.
   
4. Call Centres, Helpdesks, Standard Form Advice - IBM’s DeepQA can beat human contestants at jeopardy, so the day that computers can answer your queries is nearer than you think. I frankly think that many general practitioners can be replaced by Wikipedia, already. Who’s next? Standard form professional advice can also be automated greatly. 
5. Soldiering – Sure, you can travel to interesting countries, meet interesting people and kill them, but part of the work is getting outsourced to the automatons. Already, 1 in 50 troops in Afghanistan is a robot. From bomb detection and disposal bots, recon scouts on the ground and unmanned aerial vehicles in the air, to checkpoint duty, these bots are bound to take on a greater workload in the future as “serious autonomy” emerges, and ‘sense and avoidance’ technologies mature further
6. Manufacturing: Yup, it’s all gone or going to lower-wage countries – low-tech (apparel) especially.
7. Petrol stations: Not for the next decade, but perhaps they’ll all be changed to electric car charge outlets, as envisioned by BetterPlace
8. Photofinishing: I can’t recall the last time I printed my photos at a booth. I use my home printer, even if it is a little more expensive due to the time saving. But with hi-res tablets, I don’t need physical copies anymore. The physical atom can be replaced by digital content.
9. Wired telecom carriers – First, there was fixed to mobile substitution for voice and data, then there was voice-over-IP which has cut long distance and national call revenues for wired telecom carriers. Add to that national fibre buildouts and the rosy margins in (especially copper) access are being eroded fast. Those that have hedged their bet on wireless networks are doing much, much better.
   
10. Translators – Remember Douglas Adams’ Babel Fish? Well out of the realm of science fiction, we’re closer than most realise to real-time translation services. They will replace many human translators. See Google’s attempt here.
    
11. Drivers – Computer-controlled cars will be our new chauffeurs. And they will be able to parallel park. Perhaps road insurance premiums will then come down with fewer crashes. Road-building will  be cheaper – there will be no need for lane markings, or road signs, and there won’t be a need for the safety gap if every car was driverless. Developments in radar, lidar, computer vision, and the established GPS capability will converge in the driverless vehicle. Check out the DARPA Grand Challenge.
    
12. Dictatorships: While there are continued attempts to limit the flow of information, like the Great Firewall of China, it is increasingly more difficult to do so. Decentralised electronic communication, done on a peer-to-peer basis and over mesh networks will make it easier to thwart the established order. Good news for freedom fighters. And terrorists.
    

What other industries and professions do you think will be left in the wake of technological progress? What do these developments mean for your business? Comments welcome.

Rest in Peace, Steve Jobs

Who would have thought a consumer technology company could become larger than an oil major by market capitalisation? Steve Jobs’ genius was to make experiences people wanted, not just products to be promoted. He changed how we communicate, listen to music and use technology. Check out Steve’s thoughts on how to live before you die.

Stuxnet: Anatomy of a Virus

Stuxnet is described as an “open-source weapon,” one that is “entirely made of code,” and a “cyber-weapon of mass destruction.”

ABC1 in Australia has created this short video documentary on the Stuxnet programmable logic controller based virus that shutdown Iran’s nuclear weapon enrichment facilities by changing centrifuge drive speeds to slowly crack them, and manipulating valves. It also tricked the operators in the control room into thinking that nothing was wrong – just like in a Hollywood movie.

Ralph Langner, who was one of the first researchers to successfully uncover Stuxnet’s modus operandi. He spoke at TED 2011 on how Stuxnet works. This is real. And it is quite scary.

 

Insight – Connecting With Others Beats Connecting to Content

This is why social networking is important. The data from Google suggests that people spend more time connecting with others online than they do connecting with entertaining content.

• Facebook takes the top spot with 870 million unique visitors with a trillion page views by July 2011. YouTube and Yahoo are next with 790 M and 590 M unique visitors, respectively. Note: Google does not rank itself.

• Facebook has 750+ million users but the number of unique visitors (870M) is much higher because Facebook Pages and Profiles are open to non-users as well.
• People spend over 700 billion minutes per month on the site and the average user visits 1150 pages on Facebook in a month. YouTube manages only 126 views per unique visitor per month. Connecting to other people trumps connecting to entertaining content.

Phone = Wallet

I just cleared my receipts today from my wallet so this ad for Google Wallet really resonates!

Innovation, Litigation and The World Order

Over the last few weeks, I’ve delivered keynotes, in Brisbane and Sydney, to 200+ business customers, on the business model impacts of emerging technologies.

There,  I had an interesting discussion with my co-presenter, Dr. Richard Hames. His position was that the decline of the US is a foregone conclusion. My position is that while things are currently tough, the US will ride out the debt crisis. Too many have too large a stake in the US to allow it to fail.When you owe the bank, $1M and can’t pay it back you have a problem. When you owe the bank, $1 trillion, and you can’t pay it back, the bank has a problem. The world (and particularly China’s foreign reserves) is the bank for the US.

Besides the economic reasons, the wealth-creating engines of innovation in the USA are still well lubricated and firing on all cylinders.

1. Creative people still want to go to the US for its stellar universities and entrepreneurial culture. Money (and economic growth) will always follow smart people.
2. The US still has the most mature and largest pool of venture capital availability – in the last decade alone, we’ve seen the likes of Facebook, Google, Amazon, Groupon, LinkedIn born, and the rebirth of Apple.
3. 8 out of 10 of the world’s most innovative companies are American as rated by Fast Company.
4. The strategic competition with the USSR sparked tremendous military innovation which spilled into the civilian space. It can and is happening again.
5. The US is more than just Silicon Valley. There are innovation clusters such as the ones described by Wired below, that create jobs, and fund related industries, and generate high margins.

Emerging Epicentres of Innovation

It is fitting that 2 weeks ago, the US Patent Office issued its 8 millionth patent for a medical device to assist certain blind people . The first patent was issued in 1863 for a locomotive cog. The 1 millionth patent was issued 100 years ago for a tyre that was more resistant to being punctured. 7 million patents in 100 years. In the USA. Patents are intended to reward the inventor with legal protection for their invention so that they can obtain commercial benefits from their efforts. Thus, innovation is incentivised.

Rewind a year. I entered the  Hawthorne industry labs of IBM. There, on a board that streched 5 meters, in size 10 font, were all the patents that had been granted to the company in the last 10 months. There were over 5000 patents. That was one company. And not even one year.

So based on that, I think it’d be fair to say the rumours of the demise of the US are frankly, exaggerated. That’s not taking anything away from the rapid return of Asia, either.We’re headed for a multi-polar world of innovation, but let me stick my neck out and say that’s still at least a decade away. China’s supercomputer was the world’s fastest for a few months earlier this year, but the Nvidia chips were still American.

AN IMPORTANT QUALIFIER: Where Richard and I wholly agree, is that there are too many lawyers getting involved in the innovation process.And money that could be spent on real innovation (wealth creating) is being spent on litigation – at best, wealth redistribution, at worst, wealth destruction. This is a dangerous trend. Visible symptoms include:

• Companies are now acquiring patent portfolios (like Google’s $12.5B spent on Motorola Mobility and the acquisition of Nortel patents by a consortium including Apple and RIM) so they can either better defend or attack others.
• Countries like Taiwan are setting up large funds to defend their national icons, like HTC against Apple.
• This graphic shows how convulted things are becoming, where patents are weapons rather than incentives to innovate.

Who's Suing Who in the Mobile Industry

More cooperation is needed when creating new markets. Nokia, Ericsson, Motorola, and Siemens, among others, came together to cooperate on the GSM standard. And that, more than any other factor, was the launchpad for the mobile revolution. There are some things too valuable to fight for.

Thoughts welcome.

Cloud Computing’s Impact on Enterprises and Providers

Cloud Computing is Making an Enterprise Impact

Computers once filled entire rooms, before they were miniaturised to fit on to desks and into pockets. They were then connected to each other over ever-faster networks. Now dependencies between computer hardware, operating systems, application software are being removed, through virtualisation. Hence, computer storage, compute and network resources, developer platforms, software applications and the entire desktop can evaporate entirely and reside in the ‘cloud.’

The ‘cloud’ is to computer software and hardware what the grid has been to electricity – a trusted, reliable source that can be easily connected to, and which can be turned up or down instantly by the user at the flick of a switch, and is charged for on a usage basis. It is driven by self-service and automation for responsiveness, and the intelligent mapping of workloads to the most appropriate resource, to enhance utilisation and return on assets (ROA).

The role of the network is central – in providing end-to-end service level agreements, application awareness, presence and location information. The cloud is a provider hosted delivery model that allows enterprises, small businesses and consumers to instantly outsource the non-core IT function. Accredited ICT skills, high-performance infrastructure, development platforms, latest software and desktops can be rented, improving cashflow and compliance.

For the provider, virtualisation technologies raise asset utilisation from under 5% to 40-80%. This ultimately means fewer, more powerful, centralized computers doing more with a lower energy footprint.

 

The Battle for Online Eyeballs

To show how important Facebook has become, the above comScore data shows time spent inside Facebook for U.S. users versus Google. Note that Google sends people away from its core search product, while Facebook wants to trap them inside. But it shows how big a time draw Facebook is, and how much it can pick up on users that Google just can’t get. Hence Google + is a bet the company product for Google.

Facebook is a walled garden that Google hasn’t penetrated to date, and it’s a battle that will ultimately reflect the valuation of each firm and the fortunes of developers who’ve nailed their colours to either mast.

 

Why the iPad matters

The Only Tablet that Matters So Far?

For now, the iPad stands alone while  Android-based tablets are in second-place in most countries. China isn’t one of the countries reported by comScore in this data. That is a market where Android does particularly well. Of course, plenty more competition is on the way from the likes of HP, and Microsoft. But it shows how much mindshare and marketshare the iPad has with its market defining iPad product. And who said it was just a larger version of an iPod Touch?