Platt Perspective on Business and Technology

China and its transition imperatives 46: thinking through Xi Jinping’s current realities in a larger context 4

Posted in macroeconomics by Timothy Platt on June 20, 2017

This is my 54th installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

I initially planned on writing this posting to go live on May 29, 2017 but have delayed doing so until now. It is not that I have not seen any recent news worth reporting on or analyzing here, as coming out of China. It is more because so much of that has simply fit into an ongoing pattern that I have been writing about for years now. And I have to add, I wanted to see at least something of how Xi Jinping would respond to Donald Trump and his chaotic bombast before writing this posting, and particularly as Trump has reached out towards China, and in what could arguably be seen as both positive and negative ways in Beijing.

On the negative side and certainly from a China perspective, Trump has presented himself as a source of destabilizing threat to China and in a number of significant ways and since his election. As an example of that, I have already made note of his direct dealings with Taiwan and of his privately held company seeking out massive business opportunity there – as the sitting president of the United States and regardless of any conflict of interest considerations that this might raise. It is fundamental to China that Taiwan is a part of one China, with Beijing as its true capital and the People’s Republic of China government the one true power that is supposed to be governing there: the so called One-China Policy.

Previous US presidents: Republican as well as Democratic have at least paid lip service to this understanding and have, for example, refrained from directly speaking with the president of Taiwan and even as the US and Taiwan governments have cooperated with each other in practice and on a variety of issues. Trump tore away that veil and in ways that made it look like he would completely repudiate the One-China Policy that has helped to stabilize the relationship between the Beijing and Washington governments overall, by formally recognizing Taiwan independence.

Trump has not actually taken that threatened step, but I pick this specific example here for a reason. Even without that move on Trump’s part, it represents a completely avoidable source of friction between Beijing and Washington: this unconsidered challenge to this accommodating fiction. And Trump’s action in this regard was carried out without any real thought as to its possible consequences, except perhaps for himself. He appears to have found it ego boosting to be called by yet another head of state. And he and his family business were and probably still are trying to land a massive infrastructure development project in Taiwan that would be expected to generate hundreds of millions of dollars in profit for himself.

On the positive side, Donald Trump has continued to do personal business with Mainland China and their state owned and at least de facto state controlled businesses, as well as with their government. I cite his and his family’s continued efforts to buy up Trump-related brand rights in China as well as his ongoing outsourcing of manufacturing of Trump branded merchandise to that country.

Trump and his election to the US presidency have been a mixed blessing to China. When I initially wrote of this in earlier installments to this series, I stressed the negative side-tipping value of his chaotic nature, and how even a seemingly stable positive for China can be made to disappear at an unconsidered whim and in an instant, as Donald Trump tweets and speaks off the cuff and at least seemingly without a thought in his head (see Part 39, Part 40 and Part 41.) But his instability and chaos, in and of themselves are probably the greatest positive that Trump could confer on China and it is one that he has given to the Russian government of Vladimir Putin and others too: and certainly for nations that directly compete with the United States. Trump has created a power vacuum from his diminishment of United States authority and influence in the world, as he repeatedly places American trustworthiness and reliability in doubt from how he repeatedly displays his own.

Is the government of the People’s Republic of China and the reign of their one allowed political party: their Communist Party now more stable and secure as a result of this seeming opportunity? They still face the same fundamental challenges of corruption and inefficiency and of authoritarian excess in their own systems as before, and they still see the same emerging consequences of them and in their air and water pollution and other environmental quality challenges that they cannot hide, and in their structurally unstable economy, among other fundamental challenges. But Donald Trump has, nevertheless, given Xi and his government and Party what amounts to a new lease on life. And as I will discuss in a few days in a concurrently running series, Donald Trump has made his influence self-limiting. It is now increasingly likely that he will face impeachment charges and that he will be removed from office, and by his own hand as he makes no effort to change either his behavior or that of his inner circle as they report to him and do his bidding (see my subseries: Donald Trump and the Stress Testing of the American System of Government, as can be found at Social Networking and Business 2, postings 256 and following.)

What will happen when and as Trump begins to really lose his support, and even in his own Republican Party in Congress, and in fact nationally in the United States? A great deal of evidence has been developed to the effect that Russia and their government led a systematic effort to throw the 2016 elections in the United States and help Trump win the presidency (see the above cited Trump-related series for references to that.) But the increasing sanctions imposed by the United States Congress on Russia and on Russian interests, in response to that and the re-imposition of cold war level opposition to Russia’s government in the United States and increasingly in the West as a whole, have made that a pyrrhic victory at best for them.

Will the American government and the American private sector take a new look at China and their expansionistic approaches to the East and South China Seas, among other ventures, if there is a Trump impeachment driven change in the American government’s executive leadership, and with effort made to reestablish America’s global position of authority that Trump has squandered?

I wrote in Parts 39-41 of this series and in other installments to it since then of the uncertainty that Xi and his government now face from president Trump and his presidency. And I find myself doing so again here, as I contemplate a possible early shift from a Trump presidency and most likely to a Pence presidency from a Trump impeachment. Will that happen? If it does, what would that mean to China specifically and to the world at large? And if Trump simply becomes more and more hobbled and isolated as president, but remains in office for at least one full term, what would that mean, as the United States Congress takes action, and even in complete defiance of Trump administration policy or directive?

I have a lot of specific in the news events and current events points of analysis that I have been accumulating for discussion in this series, and will probably delve into at least some of them in my next installment to it, but I decided to step back from these more-current news update details for this posting, to consider currently emerging and evolving events and their patterns from a wider perspective. And I end it by raising a point of assumption that I have been making here in this posting, that might or might not be true:

• Do a chaotic Trump presidency and the globally impactful power vacuum that he seems intent to create actually benefit China and Xi Jinping and their Communist Party, or any other powers or potential powers as they seek greater voice and authority in the world?
• And considering that strictly in terms of China and in terms of their longer-term prospects, does a Trump presidency actually confer any greater stability or resilience to them?

I leave these as open questions worth thinking about. As of now I expect to return to this series, with a next installment in approximately one month, and will undoubtedly at least briefly address those questions there. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on June 15, 2017.)

Innovation, disruptive innovation and market volatility 33: innovative business development and the tools that drive it 3

Posted in business and convergent technologies, macroeconomics by Timothy Platt on June 9, 2017

This is my 33rd posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business, posting 173 and loosely following for Parts 1-5 and Macroeconomics and Business 2, posting 203 and loosely following for Parts 6-32.)

I offered a to-address list of topic points towards the top of Part 32, that I repeat here for continuity of discussion, as my goal here is to continue delving into them in follow-up to that posting:

1. Innovation and its realization are information and knowledge driven.
2. And the availability and effective use of raw information and of more processed knowledge developed from it, coupled with an ability to look beyond the usual blinders of how that information and knowledge would be more routinely viewed and understood, to see wider possibilities inherent in it,
3. Make innovation and its practical realization possible and actively drive them.
4. Information availability serves as an innovation driver, and business systems friction and the resistance to enabling and using available business intelligence that that creates, significantly set the boundaries that would distinguish between innovation per se and disruptively novel innovation as it would be perceived and understood
5. And in both the likelihood and opportunity for achieving the later, and for determining the likelihood of a true disruptive innovation being developed and refined to value creating fruition if one is attempted.

I focused on Point 1 of this list in Part 32, and then stated at the end of it that I would turn to consider Point 2 here. I am going to do so but to set the stage for that, I want to at least begin by clarifying and explaining a point of terminology that I raised in Part 32 when discussing innovation per se. Innovation might be more minor and incremental in form or it might be more dramatic and overtly consequential, and disruptive innovation usually represents the more fundamental change end of that continuum. I noted that there is a gray area between innovation as a more general term and when more evolutionary change is considered, and overtly disruptive innovation, but without fully clarifying what I mean by that. Part of an explanation as to what this gray area represents, simply means that incremental change can mean smaller or larger increments on the one side, and that new and novel can be profoundly new and unexpected, or only somewhat new and novel; innovation does fall along at least something of a continuum as to the level and degree of novelty arrived at and even if we all tend to think more in terms of extremes and certainly for identifying the more disruptive-facing end of that continuum. But this explanation only tells one half of the story that I seek to convey in that term.

I in effect prepared to explain the other half of “gray area” in this context in Part 32, when I wrote of information and processed knowledge partitioning in an organization, in the context of business systems friction in information management: the ongoing cyclical processes of data collection and vetting, knowledge development from it, access and communications and use of both raw and processed knowledge and information, and their challenges.

I discussed this in terms of conundrums, where the same processes that can lead to risk reduction from prevention of sensitive information falling into the wrong hands, can also lead to the creation of barriers to effective legitimate information sharing too, and certainly where possible disruptive innovation development can call for new and novel patterns of who legitimately should be brought into an information sharing conversation. And as stated up to here at least, that just addresses the more contrived and planned-out, side to information sharing and its control, leaving out more entirely ad hoc decision making options and their use in information policy and information management.

• In practice, businesses face real risk of porosity, and unexpected information transfer out of the areas where specific forms of sensitive data and knowledge belongs, and into areas where it should not go, coupled with the equally unintended development of barriers to acceptable and even essential information and knowledge transfer and sharing.
• Information access and control processes and practices in actual day-to-day use can and all too often do leave the door open to sensitive information transfer and visibility where they should be limited and blocked, while limiting and blocking where they should be more open and communicative – and particularly, for the later, where novel lines of communication and information sharing would be called for, as for example when developing a disruptively new innovative opportunity and in ways that can lead it to a production line and profitability. I repeat this detail intentionally here.
• Let me pick up on and highlight a crucially important aspect of this, to clarify what I am addressing in these points. If the gold standard for controlling and managing sensitive and confidential information is to be found in developing and following explicit rules-based access and storage systems, and ones that can be largely automated with explicitly rules based, established permissions assigned to anyone who in principle might be involved in this information sharing, then novel and unexpected and unplanned for communications requirements that would bring in unusual combinations of experience and expertise into a conversation, would likely be blocked and certainly for proprietary and closely held in-house business intelligence and as both raw data and as more processed knowledge – barring explicit exception making decisions.

And this brings me to a scenario that I briefly touched upon in Part 32 where a business fails to develop a new and potentially very profitable innovation, and even a disruptively novel one, and even though it has had all of the pieces to that puzzle in place, because they cannot bring what they know together and into production. So another, competing business that may have started much later in the race to develop that type of innovation gets there first. And this sheds a whole new light on that “gray area,” where a lack of effective business intelligence development and sharing, and for actionable processed knowledge in particular, can mean real innovation and even disruptively novel innovation going essentially completely unrecognized for the value potential that it carries. Barriers there can prevent event the potentially most valuable disruptive innovation from ever taking place, and from being brought to market if started upon.

• If the gray area in the innovation continuum that I made note of in Part 32 represents a perhaps-rapidly evolving but still just incremental and perhaps-disruptively new, middle ground area along a continuum, where different viewers might rate the level and significance of change differently,
• That gray area also represents an area of friction-clouded uncertainty and of loss of visibility, where innovation and its potential are not going to even be visible and for at least some of those who should be key stakeholders of innovative change and advancement. And when that “some” includes the key gatekeepers who control which developments can be prototyped and which of them can be developed for production and brought into market-facing production, that can have long-term consequences.

I cited an earlier series in Part 32, with essentially this same area of concern in mind that I repeat here for its importance: Keeping Innovation Fresh, as can be found at Business Strategy and Operations – 2, as postings 241 and loosely following. And once again, see its Part 2: Xerox PARC and Menlo Park and its Part 3 continuation of that in particular, for their relevance here. The Xerox PARC research facility is renowned for both the volume and importance of the innovations that its researchers conceived, and the much smaller proportion of those innovation opportunities that its parent company ever allowed to be developed in-house and to their own profitability and benefit.

So the gray area that I touched upon so briefly in Part 32 and that I have been exploring in more detail here, is both a product of more objective reality where not all change is equal is scale, and subjective, and subject to information barrier-facilitated friction, if not always information barrier-creating friction. And with this stated, I overtly acknowledge that I have written this entire posting up to here as a direct and immediate response to Point 2 of the to-address list that I repeated towards the top of this posting.

Blinders can come from preconception and bias and even when all of the information that could possibly be needed to take a next conceptual leap is right in front of us. But more insidiously, those blinders can come from a lack of essential information that might be fully developed and in-principle available in-house, but that is so scattered in non-communicating offices that the people who would most need it are constrained to be unaware of it. Then they cannot even know enough of what is in-principle available for them to know and act upon, for them to even just realize that they are missing something – and even when that is a vital something.

I am going to continue this discussion in a next series installment where I will address Point 3 in the above list:

• Making innovation and its practical realization possible and actively drive them.

In anticipation of that line of discussion to come, this means my addressing approaches for both identifying where deleterious information and knowledge bottlenecks and barriers have arisen and remediating them, while still meeting genuine information access control requirements. And I will explicitly consider disruptive innovation, where novel and unexpected patterns of information and expertise sharing might be essential for timely success, that would call for both precise and flexible rules-based systems for allowed sensitive information sharing, with explicit exception handling capabilities built into them.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And see also Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation.

Reconsidering cause and effect assumptions in feedback-driven systems: implications for real-world business and economic systems planning

Posted in macroeconomics, reexamining the fundamentals by Timothy Platt on May 28, 2017

Feedback-driven systems fundamentally violate at least some of the basic underlying assumptions that underlie traditional cause and effect models. Or rather they tend to violate tacit assumptions that many and even most people tend to make concerning cause and effect and what those terms mean. The reason for that is very simple; in a truly causally connected linear once-through system, cause and effect are categorically distinguishable and both for their temporal order and for their respective fundamental natures. They are completely separate in nature and function then. And most of us at least occasionally, approach causality as if it routinely arose in a vacuum in this manner, and with a clearly definable starting-point causation and an end-point consequential effect. But causation almost always actually arises in the course of ongoing interactive processes where resultant effect leads to next-step cause and even in a tightly cyclical manner. It is rarer that causation per se can be simply and entirely viewed and understood outside of any possible pertinent context, and certainly when considered in complexly organized systems such as flows of business supporting operational processes.

Let’s consider such a linear once-through system as noted above, as a starting point for further discussion:

• If I hold a baseball out in front of me and let go of it, that action on my part coupled with the predicable action of gravity on the ball, as a complex of causal factors in play there, leads to the results of that ball falling and in time hitting whatever surface is immediately below it.
• Cause and effect are readily categorically distinguishable in this scenario, as each side to the cause and effect relationship described in it takes place in a particular temporal order, and right up to the point where that ball actually strikes the ground and the scenario ends.

But in a cyclical cause and effect-driven process, effect as arrived at in any one turn of that cycle becomes input for the next round of activity. And this brings up new types of functional relationships, and particularly as activity in one round in such a recurring process might have impact that continues past the end of that one cycle itself. This possibility in effect defines what feedback is, that effects achieved in any given cycle in a recurring process do not simply end there, but rather have longer term and recurring consequences that can be dampening overall, or additively expanding in cumulative influence (e.g. as negative and positive feedback respectively.)

Effect, in effect becomes cause or at the very least a parametric shaper of it in cyclically structured causally driven systems. And this has implications that are not always taken into account, and particularly in complex systems as arise in business operations and economic systems modeling.

Let’s consider this in the less abstract context of a specific working example, as drawn from economics: calibrating where a best tax rate would fall for maximizing revenue generated for a government, along a Laffer curve.

The basic concept of the Laffer curve seems to be relatively intuitively obvious. The maximum overall amount of revenue that a government can secure and bring in through taxation depends on the tax rate that it imposes as a percentage of revenue generated in the communities and society that it governs. If a government sets its tax rates at 0% it is not going to generate any revenue from that, and if it seeks to impose a 100% tax rate, it is unlikely to generate any revenue then either. In between it can generate a positive taxation-based revenue flow for itself. And the Laffer curve model seeks to predict at least categorically where as a matter of tax rate imposed, it can maximize the taxation-based revenue that it can receive. That percentage determination, of course depends on what assumptions are being made and both with regard to outside societal factors and with regard to government activity and its involvement in the overall economy as well.

Let’s at least begin to examine the assumptions made here with a brief and selective consideration of the high end of the curve for tax rate imposed. In a closed economic system where at least one crucial resource that is essential for day-to-day life, is monopolistically controlled by the state, and when that state can and would offer all goods and services that its citizens could or would access and use, then it would have the power to impose a 100% “tax” rate – in effect imposing a state-ownership form of servitude on one and all. And the wealth of that society as a whole and any “revenue” generated through its state-owned and controlled systems would go to and remain in the state and its hands.

• Money, as such would be more an accounting abstraction than anything else in such a dystopian, all government controlling society, but its movement would be entirely into government hands and coffers and would be maximized for that – not zero in value.

Now let’s consider less centrally controlling, but still significantly restrictive and controlling systems in which a government in effect skews the marketplace and its monetary value flows: its cumulative cash and monetizable value transfer flows. The more significantly a state controls and shapes availability of goods and services, and particularly for essential ones, the higher the tax rate it can impose and still receive greater overall revenue flow value from that.

Different economists arrive at very different understandings as to where a maximum revenue generation point would be for a conceptual model such as the Laffer curve. And the line of argument that I have just been offering here represents just one point of assumption that can lead to differences in what is concluded – and particularly when different people start out with different automatically assumed, axiomatic assumptions as to what would and would not arise in and shape a real-world marketplace. And I would argue that feedback and process cyclicity in general, drive the positioning of where a tax revenue generation maximum would fall, along any given proposed Laffer curve representation of an economy, as ongoing experience and feedback from it by members of the general public determines the overall levels of revenue generation that they will sustain that would be taxable.

The points that I make here apply to business systems too, and even in the extreme example form that I made note of above where a government controls and owns essential products and services, and taxes for access to them. Here and in a business systems context, consider the historical examples of geographically relatively isolated company towns, where a single business is both the major employer and economic driver of a community, and owner of essentially all stores and related businesses there that provide day-to-day essentials such as food and clothing. Members of such communities can all in effect become as if serfs to those community and region-dominating businesses, and in a manner that parallels the situation faced in my above-offered government controlling example. And I add that where money per se becomes essentially an in-government abstraction there, company towns and businesses that own them have commonly, historically paid their employees not in nationally minted currency but in their own company script – that only their company owned businesses would accept as if legal tender.

• Where that magic number maximum for tax revenue generated falls on a Laffer or similar curve, depends entirely on what political and politically-shaped economic assumptions are made, and particularly when they are simply assumed and axiomatically so.
• And where that magic number falls along such a curve, crucially depends on what feedback and societal response patterns are assumed and on how members of such a society calculate what is and is not in their own best interests to do.

And this conceptual gap in how a Laffer curve model is more usually formulated is at least partly informative as to why I see problems in the basic underlying model as whole in framing any given specific tax policy: it is presented as if it were a systematically analytical model but it leaves too much out, that is not going to be addressed and certainly in anything like partisan political debate, that would go into actually meaningfully applying it in setting taxation policy.

As a final thought here, I acknowledge one that I have been implicitly basing this posting on up to here on a number of unstated assumptions too, and on assumptions that I readily acknowledge are not always going to be valid. When you review the maximum personal income tax rates that nations impose upon their citizenries as of this writing, you find extreme ones for high percentage that would not fit all Laffer curve calculations and certainly as they would be arrived at for nations such as the United States (see List of Countries by Tax Rates.) Finland, for example, is listed as having income tax rates that go as high as 61.95% when combining maximum national and municipal tax rates and added-in social security taxes too.) Even this though, would actually fit the basic model if you consider the value of services provided by the state, as balancing competition to pressures that higher tax rates can impose on overall productivity levels in an economy. But on the other hand, there are low-end for income tax rate nations, that in effect have what amounts to negative tax rates for their own citizens. Some of the major oil producing nations have in effect subsidized their citizenries in this way. And if the Laffer curve breaks down for the occurrence of any circumstances where a 0% income tax rate would make sense financially for a government, it certainly does not address nation states making ongoing support payments of this type. This can only be addressed by changing the basic assumptions to allow for nation states that own significant means of value production: such as oil production, where they in effect share the wealth with their own citizens and even to a level that makes all of their citizens wealthy.

I add this final detail here to highlight that I have only begun to touch upon the types of assumptions that an economic paradigm model such as the Laffer curve rest upon. And differences in what is assumed behind it, can and do render the resulting calculated curves into what can amount to veritable Rorschach tests. This is all very important and certainly as it looks like partisan Laffer curve predictions and calculations as variously made by differing ideologs, are going to play an important role in any Congressional debates and actions taken in the United States and I add elsewhere as well, in the coming year and more as tax policies come under review. So this is not just an abstractly considered topic or posting.

You can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And I also add this as a supplemental posting addition to Section VI: Some Thoughts Concerning a General Theory of Business, as can be found at Reexamining the Fundamentals.

China and its transition imperatives 45: thinking through Xi Jinping’s current realities in a larger context 3

Posted in macroeconomics by Timothy Platt on May 15, 2017

This is my 53rd installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

I have been repeating variations on the above orienting paragraph in essentially every installment to this series, as a means of maintaining a clear continuity of discussion and focus in it. But I explicitly step back from that starting point here, even as I repeat it to note that this series is at least as much about how Xi Jinping has changed in the crucible of his seeking to lead China too. He has had to change and adapt his vision and understanding, and both in response to forces and demands arising from within China and from those arising from the outside world as well. The later source of influencing forces and pressures has included in it at least some factors that have been predictable and certainly categorically if not always in detail. But some of the most consequential of the events and emerging forces that Xi has faced have also been disruptively unexpected and unpredictable too, and even in general terms.

That includes factors such as the “predictably chaotic unpredictability” coming out of Pyongyang and North Korea’s government, as led by number three in the Kim family dynasty there: Kim Jong Un. And that disruptive chaos has become particularly irksome as North Korea has developed progressively more advanced nuclear weapons and ballistic missiles and as it has become more aggressive in asserting its independence from China and their strategic needs, and certainly regionally in Asia. But more importantly, this includes factors such as the election of Donald Trump as president of the United States.

When I first began writing of the impact of Donald Trump United States presidency on China and on Xi’s leadership there, in Part 39: rethinking China’s emerging trends and challenges in the emerging era of a United States Trump presidency, I had disruption and uncertainty in mind, and certainly as Xi would seek to plan for stability and both in his country and in his leadership there (and also see Part 40 and Part 41.) President Trump and his brand of chaos and in essentially all areas and arenas that he has influenced at all, have had significant impact and both within the United States and globally as well.

But uncertainty coming out of the US White House, and the risk potential that creates is only one element that a Trump presidency all but compels Xi Jinping to face and respond to. The other really significant element to that, that I would address here is a direct cause and effect consequence of that chaos and uncertainty: a sudden globally impactful power vacuum that a failing and ineffectual Trump presidency is creating, where the United States was a stable source of strength, and globally until Donald Trump’s election and inauguration.

Much of what Xi has faced in China and in his dealings with the world at large are unchanged by this turn of events, and certainly as of this writing at just over 100 days into the Trump presidency. But this power vacuum creates opportunity for Xi and I add for a great many other national leaders and their governments, even as it hinders and concerns others (such as the leadership of America’s traditional allies.) And this brings me to reassess China and where it is headed as a nation, as Xi faces new and disruptively unexpected opportunity as well as risk.

Let’s consider where this new and emerging context is being built from, from a China perspective. And I begin with a consideration of Xi and his agenda and then move on from there to consider China as a whole.

Does Xi Jinping still seek to be Mao Zedong’s one true successor in absolute power in China, and in a way that none of Mao’s successors in Communist Party leadership have been able to even approach? I would contend that the answer to that is still an emphatic yes, and perhaps now more so than ever. Xi clearly sees himself as China’s one and only truly indispensible man and the only person in China who can successfully navigate the troubled and uncertain currents that his nation now faces. Mao was The Great Helmsman in his day and Xi, whether he would use that identifying term or not, sees himself as China’s one true helmsman now in this still early 21st century and with all of the challenges that have been emerging, including ones that have long festered and that are now coming to a head. And he sees himself as the one person who could best lead China in the face of a Donald Trump American presidency.

And if he can succeed in gaining value for China from his dealings with Trump, by a combination of flattery for Trump’s ego and shrewd negotiations in managing the details with Secretary of State Tillerson and others, that would greatly increase his chances of succeeding in staying in office for a third term as leader of China’s Communist Party’s Politburo Standing Committee, and as such of their Communist Party and government as a whole.

A Trump presidency per se cannot alter, let alone eliminate China’s internal challenges, that I have been writing about for years now. So China’s economy is still in many respects a Potemkin village, to use the old Tsarist Russian term, as repurposed and continued under Soviet Communist rule; it is a convenient and attractive fiction in many respects and certainly when its purported underpinnings and its actual fundamentals are considered.

• Their Party bureaucracy is still both powerful and corrupt and inefficient, and tremendously locally self-serving.
• Their centrally managed open and official economy is still burdened by the ongoing presence of a vast black market and related underground economy, and a gray market economy that connect it to their open and official one.
• The most powerful people in China: their top 1% and top 1% of 1% benefit from and even actively support their black and gray economies and to their own personal benefit and even as they run their country. As just one indicator of this, wealth inequality and the flight of privately held wealth out of China and into foreign investments and savings, and into stronger and more stable currencies continues. And China continues to try to control the recognized value of its own currency to reduce the incentive driving this wealth flight, among other problems faced.

And for once this effort has started to actually work for them, at least according to early indicators. See, for example:

Trump Isn’t Wrong on China Currency Manipulation, Just Late.

China has been spending down their foreign currency reserves at a furious and I add completely unsustainable rate to visibly prop up its currency, the Renminbi and its economy as whole. But since the Trump election, they have actually started to build up their foreign currency reserves again. Uncertainty coming from the United States and its leadership can have a positive effect as well as a negative one depending on where you look for impact. See:

China Stanches Flow of Money Out of the Country, Data Suggests.

I have written a number of times in this series of China’ efforts to take hegemonic control over the East and South China Seas and simply note that this effort continues unabated. In fact it is likely that a weak and uncertain Trump presidency, with a disorganized foreign policy that is more ad hoc than anything else, will strengthen China’s hand there. But my intent here is not to focus on China’s foreign policy as it plays out in this one more local region. It is to at least briefly consider China’s growing opportunity for global reach and strength, that this new power vacuum has created. And I cite a recent as of this writing, news stories that both verifies what I am stating here, and shows that Xi is very intentionally, very consciously seeking to fill that gap: that power vacuum with a China alternative:

Behind China’s $1 Trillion Plan to Shake Up the Economic Order and
Xi Jinping Positions China at Center of New Economic Order.

China’s fundamental inefficiencies have not gone away and have not even changed and certainly not in any fundamental sense. But a Trump presidency and the seismic shifting in the world order that this has created, has given China and their system of government and their economy a whole new lease on life where they had been unsustainably propping up their economy and their system as a whole and with limits as to how long they could sustain that. A Trump presidency, to be more specific here, has given Xi Jinping a whole new springboard for both maintaining and even elevating his power and authority and both within China and on a world stage. And he is already actively capitalizing on that. What I am writing of here, is a fundamental turning point for China and for Xi as their leader.

Donald Trump may or may not remain in office, with the possibilities of impeachment dogging his every step even if he does manage to avoid its actual realization. But Xi is now much more likely to stay in power and for longer than anyone would have expected, and certainly when I first began writing about him in this blog.

I will follow up on this with a next installment, in approximately two weeks. And in anticipation of that, I expect to focus on infrastructure development in that posting. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on May 14, 2017.)

Innovation, disruptive innovation and market volatility 32: innovative business development and the tools that drive it 2

Posted in business and convergent technologies, macroeconomics by Timothy Platt on April 20, 2017

This is my 32nd posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business, posting 173 and loosely following for Parts 1-5 and Macroeconomics and Business 2, posting 203 and loosely following for Parts 6-31.)

I have been developing what amounts to a case study example in recent installments to this series, and I add in a concurrently running second series: Intentional Management (as can be found at Business Strategy and Operations – 3 and its Page 4 continuation, postings 472 and loosely following. And see in particular that series’ Part 30.) And this case study takes the form of a discussion and analysis of a new approach to business process flow analysis, and to business systems management that I offer here in this blog as a new source of value for improving business modeling and strategic planning, and that would be both hardware and software dependent for its implementation. The hardware called for would be largely off the shelf, but as primarily marketed and sold to very different, non-business market audiences. And much of the underlying software required would be off the shelf in nature too – reducing costs of development among other considerations – but at a cost of increasing resistance to earlier more mainstream use and to acceptance into business practices from its novelty of source too. I discussed by way of comparison, the historical case study example in Part 30, of how businesses were reluctant at best to adapt easier to use graphical user interface computers in their offices, and in large part because of a non-business image that they brought with them. In that, the advent of the graphical user interface approach, represents a case study example of a more general phenomenon that I would argue likely to arise here too, that also fits into our general understanding as to how new innovation and invention diffuse out into general acceptance and use.

I have been discussing the business modeling and imaging innovation case study example of this series, in terms of innovation and disruptive innovation per se and in terms of how the products of change diffuse into and with time throughout consumer, end user-oriented markets and from initial pioneer and early adaptor acceptance outward towards being generally and routinely accepted, and even by late and last adaptor market segments.

The business visualization innovation that I have been developing and presenting here, can in large part be viewed as a resource that would offer increased information availability to business planners and strategists, and for improving overall operational systems – and exception handling contingencies as well if effectively implemented. My focus in this installment is to step away from the specifics of that case study example to consider information flow and availability, and business systems friction in the organization in general, and to discuss the boundaries between and the distinctions between innovation per se and disruptive innovation per se – and from an information flow and accessibility perspective. And I begin by asserting a fundamentally important set of points:

1. Innovation and its realization are information and knowledge driven.
2. And the availability and effective use of raw information and of more processed knowledge developed from it, coupled with an ability to look beyond the usual blinders of how that information and knowledge would be more routinely viewed and understood, to see wider possibilities inherent in it,
3. Make innovation and its practical realization possible and actively drive them.

That much is obvious, and should not come across as being particularly new or innovative. But as a next, and I add crucial next step to that progression of thought, I add two more details here:

4. Information availability serves as an innovation driver, and business systems friction and the resistance to enabling and using available business intelligence that that creates, significantly set the boundaries that would distinguish between innovation per se and disruptively novel innovation as it would be perceived and understood
5. And in both the likelihood and opportunity for achieving the later, and for determining the likelihood of a true disruptive innovation being developed and refined to value creating fruition if one is attempted.

And it is the last two of these now five points that I will focus on here, building towards a fuller discussion of them in terms laid out in the first three.

Information and knowledge drive innovation, and set the boundaries between innovation per se and disruptive innovation, and certainly as value creating possibilities. And yes, this does mean that the boundary between “simple” innovation that might even just represent a more slow-paced next step of evolutionary change, and disruptive innovation, has a gray area between their more usually considered extremes. Understanding and thinking and developing in terms of that gray area can be leveraged as a capability for making a business, or any innovative effort more effectively innovative and less bound by small and even just cosmetic change.

This all begins with raw data and how it is organized and developed in producing what should be usable, actionable processed knowledge. And this all begins with the questions, issues and challenges of bringing what in fact would be the essential basic information that can be made available, together. And it begins with making this available to the people who would most need it and who could best use it. And that compelling need for more open sharing and for collaborative information value creation, has to take place within the constraints of necessary and even legally mandated information flow restriction and the barriers to free information flow that any real world business has to face, and function within. I have just outlined a few of the highlights of what in practice would become a more extensive process-driven system, and one requiring management and oversight and one that would require ongoing review and change. And I posit all of this as fitting reasonably into a single “and it begins with” as phrased above in this paragraph, as capacity to effectively innovate demands effective basic information access as one of its initial foundational requirements – and certainly if innovations that would be pursued are going to be oriented from the start towards more effectively supporting and enhancing the business that they would be developed in, and if those innovations are to be supportive of ongoing value creating, value center business activities.

Let’s consider this from an operational, rules based information access and use policy perspective and with the absolute basics and with a basic conundrum that actually developing and implementing this type of policy actually entails:

• Effective information access control is a necessary fact of life for any business or organization that gathers in, stores, or uses any information that it might be required to maintain as confidential, and for either internal to the business reasons or to meet outside legal or other regulatory requirements. And this means identifying and classifying both potential information sources and potential information recipients in risk management terms, as to what information they can categorically be allowed access to, and as to whom they could share this information with.
• Database and other storage systems, and channels of information sharing, and of information flow monitoring, and policies and practices for deleting information that should no longer be held: the functional, structural systems in place for carrying out the storage and transmission of this information flow, would all be developed so as to more effectively enable approved information management at the level of the above bullet point while at least ideally preventing unapproved, ad hoc information sharing, and I add local user storage of information that the rules based system in place and its underlying business model thinking would not approve.
• But, and this is where the conundrum of this narrative enters in, when barriers are created in the assembly, storage and sharing of information, that information becomes fragmented and in ways that limit the capability of any one potential user or any group of them as they would create actionable knowledge out of it. The more that the basic information available is partitioned and fragmented, and the more locally known-only, the actionable knowledge can be that is derived from it, the greater the business systems friction there is going to be that would hinder the development of new and less routine knowledge out of it.
• Information access partitioning leads to reduced risk management challenge and certainly in shorter time frames. But it can also actively hinder and even prevent innovative insight, by preventing that information and knowledge from being reconnected in new and potentially valuable unexpected ways. And this creates what can be seen as long-term risk management costs – but ones that can be impossible to see except reactively and even just way after the fact, as for example when a lost opportunity comes to light. Consider the all too common a reality of learning that another competing business has just marketed a breakthrough development, where all of the pieces necessary for it were there in-house in your own business – but disconnected from each other and from the people who could have used them, and never developed from as a result.

I have written repeatedly over the years of businesses that have arrived at even profoundly revolutionary innovation that has gone on to found entire new industries, but with those potentially first mover businesses left out of all of that, because they did not or could not organize and capitalize on what they had in-house and what they had paid to develop there. (See, for example, my series: Keeping Innovation Fresh, as can be found at Business Strategy and Operations – 2, as postings 241 and loosely following, and its Part 2 and Part 3 in particular.)

• And this, of course means people in these systems only having access to the precise information and information types that a simple linear business development, business as usual approach would identify as their legitimately needing. This leaves out the perhaps less expected, and the wildcard factor of how innovators reach out beyond their own day-to-day when arriving at new. Think of this as either a second face of the same conundrum as just noted about or as a second separate conundrum in and of itself; these two considerations do work together in toxic synergy, and either way.

I have primarily been addressing the first of the five initial numbered points offered towards the top of this posting here, as a foundation for discussing the next two. I will turn to them, and in terms raised here, in my next series installment. In anticipation of that, I will consider the issues raised here and those of points four and five, from a financials perspective as well as from a more explicitly risk management one. And as part of the overall discussion to follow, I will also discuss process systems complexity and the role of developing lean and agile systems as innovation enablers.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And see also Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation.

China and its transition imperatives 44: thinking through Xi Jinping’s current realities in a larger context 2

Posted in macroeconomics by Timothy Platt on April 15, 2017

This is my 52nd installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

I focused in Part 43 of this, on economic challenges that China and their government and their one allowed political party face. And as one key element of that, I offered a recalculation upward of the level and pace of the flow of personal wealth out of their country, and by essentially anyone and everyone with anything in the way of significant wealth to hold or move. And as part of that analysis, I also made explicit note of the level of wealth inequality in China and how that disparity has only increased in recent years.

These factors and the potential that they create for public unrest constitute a vast source of risk and uncertainty, and of potential crisis that government and Party in China have long sought to forestall. It is just that now, the potential risks faced have reached immense proportions, and their responses have too.

Controlling the conversation in China by controlling and limiting, or at least by attempting to control and limit what China’s citizenry can know is a piece to that self-protective response that has been in place for a long time now, and certainly for government initiatives such as their Golden Shield Project, or the Great Firewall of China as it is also called. But that is only one element of what they have been doing.

China as a matter of at least public policy, has also sought to discourage and where possible block the flow of privately held wealth out of their local economy and their country too. And they have sought to present their government and Party as being supportive of their people. But they have found themselves in basic conflict with themselves and with the wealthy and powerfully politically placed when doing so, and for these measures and for others also undertaken.

• Consider their Great Firewall: this is a massive undertaking that employs more than a quarter of a million people who screen and report on foreign online content for possible allowance through, or blockage. Most of these screeners are young tech-savvy adults who are at an age when they might be loyal to Party and government but when they might be more open to new ideas and to new sources of influence too. They see themselves as having future prospects without having already invested their futures in their country’s or its Communist Party’s current status quo. And here they are, being pointed at outside online content that in many cases differs from the allowed and supported, received wisdom of their Communist Party and its one officially true Party line. So the very tool that China’s government and Party use to protect themselves from possible outside New, and from information and perspectives that could potentially lead to public dissent is also one of their greatest threats faced, as it creates risk of radicalizing the very same people who would be in among the strongest positions to become threats to their status quo.
• As for wealth flight: many of the worst offenders there for the volume of wealth leaving China are in fact drawn from among the most powerfully placed members of their government and Party hierarchy and power structure. Some of them have individually moved the equivalent of billions of US dollars worth of personal wealth out of China and into more fiscally stable and secure safe haven economies – and with a great deal of that in fact going to the United States.
• And as for presenting an image of public support for China’s proletariat: its workers and peasants: Xi Jinping and others from his inner circle do actively seek to present themselves as being men of the people. And this follows an already familiar pattern that goes back to the founding of the People’s Republic of China and to Mao Zedong himself. But the same smart phone and tablets and laptops and personal computers and the same all but ubiquitous connectivity that has become available in China, that is seen as essential if that country is to remain competitive globally, means that news and opinion that the government and Party would not want known, can and does travel fast, including scandal coming from their crown princes and powerfully placed. Politically embarrassing online content might be taken down from public view fast, and certainly on a posting by posting, shared video by shared video, and story by story basis. But people in China know to share and view quickly while online videos and other short-lived content are still available, and before their Great Firewall censors can take it down. And many Chinese have come to take the more comforting, public-friendly Party line with a large grain of salt, while at least tacitly assuming that the “real” news is being blocked from view.

I have at least touched upon all of these issues for years now in this blog. So I only bring them up again here in order to put another such two edged sword challenge that China faces into clearer perspective. And that issue is China’s actively pursued plan for moving vast numbers of their overall citizenry into their cities and into urban settings and out of the countryside.

This means displacing literally hundreds of millions of people from their traditional communities and ways of life and into tightly packed high-rise building communities that are not of their choosing. And that creates vast opportunity for the generation of widespread angst, alienation and anomie and across equally large swaths of their overall population as well. So why are China’s leaders doing this, and particularly when larger in China for population centers and for population density, inevitably seems to correlate positively with greater levels of palpably visible and unavoidable air pollution and with the corresponding degradation of quality of life that reduced environmental quality brings? Why are they doing this when this massive move is certain to create tension and at least low-level ongoing resentment and unrest and an erosion of public trust?

The bottom line answers to that are all fundamentally economic in nature and they all relate to China’s centrally designed and centrally run attempts to maintain stability and order in their nation.

• Displaced and relocated people do not have the same types of stable local support systems that they had in their traditional communities and in the communities that they were born into. This certainly holds when they individually find themselves living among strangers, but it also largely applies when entire small communities are moved en mass into larger urban settings where they are surrounded by seas of strangers too, and particularly where they have to learn new ways and live and work in different ways too. That creates tension that could lead to unrest but it also creates uncertainty and even fear of speaking out too.
• But this is only part of the underlying rationale at work here. Taking people off of the land this way can effectively end small holding farming with its inefficiencies. And that holds potential for reorganizing arable land into large and even vast holdings that can be farmed on a more industrial scale and with automation where that would create greater efficiencies for their feeding their people and cost-effectively.
• At the same time this disempowers all of the local Party and government bureaucracies of those communities and all of the sources of friction that they have maintained as they have maintained their own personal power prerogatives.
• Turning back to those new and burgeoning urban centers again, this mass migration and the concentration of population that it creates, makes it easier to offer centralized social services including support services for the elderly and particularly for those who do not have sons. Traditionally, it should be noted, sons have supported their aging parents in China, and have shared this burden amongst themselves within individual families in accordance with pre-Communist, Confucian principles. And there have never been government or Party supported social safety net systems in place to carry this burden if needed for those elderly who do not have their own family support systems to turn to. But as China’ age distribution-skewed population ages, with more and more elderly having no family to care for them in the traditional family-based support system manner that China has always assumed, offering government and Party-based support is going to become vitally important if China is to avoid unrest there. Now a growing number of elderly have no son to take on this responsibility and China and its leadership is looking for new solutions that it can afford and that it can ideologically support. This bullet point specifically addressed a core element to a solution that is emerging in China as their government and Party face the emerging unintended consequences challenge that their failed One-Child Policy has created for them, so I include this here as an example of a self-inflicted challenge and a big one.
• That example has both sociopolitical and economic ramifications. But some of the most pressing reasons faced that would compel this population relocation, at least when viewed from China’s central planning perspective, are essentially entirely economic in nature. And one of them that is particularly important now is in how that change can help China to remain competitive in the global marketplace and with lower priced products offered to the world and with lower personnel and related costs helping to make that possible.
• Bringing everyone and everything that would go into global market facing business together in single places means shorter and faster and more efficient supply chain and other systems. But it also means that for every person who would secure any particular job in this economy, there are many more living in the immediate area that they do, who would compete for it too. This makes the job market a buyer’s market for employers, and both for government owned and controlled enterprises and for more privately held ones as well. And this, coupled with looser regulatory control as to employee rights, means much lower pressure to offer larger compensation packages and higher pay. Salaries remain low and manufacturers can afford to offer what they produce at lower price points and still remain profitable from that. Of course this is all being carried out in a context of already significant and rapidly growing wealth inequality in China and when much of this profitability is being moved out of China and out of their economy, where it is most needed if it is to contribute to their overall national stability and security. But that is just a small part of the list of two edged sword trade-offs that China’s government and Party face.

What happens when half or more of China’s peoples live in a relatively small number of vast tightly packed urban settings? Let me offer a nightmare possibility that cannot be ignored in any risk management planning and certainly if public health is in any way taken into account. What would happen to China and its one Party-based system if its increasingly tightly packed and increasingly urbanized population were to confront an event such as the 1918 flu pandemic? Remember, most new flu strains in fact arise in and around China and from within China in particular. That is the country that any new flu strain of such virulence would most likely arise in. And the masks that many Chinese wear for protection from the air pollution they face, does not block that and cannot reliably stop the spread of readily contagious viral infections either.

I have written in recent postings of how the new United States president Trump creates challenges for China and their leadership, and that is a legitimate topic for consideration and discussion, as are issues related to China’s neighbors in and flanking the East and South China Seas. And no one should forget to add North Korea to any list of outside issues that impact upon China. But it is vitally important to remember that many and even most of the issues and challenges that China faces either arise essentially entirely within their own country, or at the very least build from decisions made and actions taken there – and from within too.

I initially approached this posting and the prospect of writing it with a somewhat different list of issues and puzzle pieces to address, but decided to re-center this series discussion of China, more explicitly on China itself. All of the issues that I raise here and all that I mention and even just in passing, stem for their instabilities and risk potentials on the flaws and inconsistencies inherent in their Communist system with its essentially built-in inefficiencies and corruption. So I offer this, as a reminder by way of at least briefly sketched example, of what Xi Jinping starts from and has to build from as he seeks to become China’s new Mao Zedong and its next absolute ruler.

I am going to continue this series and its narrative in a next installment that at least as of this writing, will probably go live to this blog in approximately one month. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on April 14, 2017.)

China and its transition imperatives 43: thinking through Xi Jinping’s current realities in a larger context 1

Posted in macroeconomics by Timothy Platt on March 10, 2017

This is my 51st installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

I begin this posting by acknowledging an error in calculation, and certainly one of presentation that I offered recently that in retrospect reflected undue conservatism on my part. I wrote in Part 33 of this series that:

• “China’s government officially limits the amount of currency that its citizens can legally move out of their country to the equivalent of approximately $50,000 per year. But a growing number of China’s wealthy elite, including highly positioned members of their “top 1% counterpart” Crown Prince Party have been actively bypassing that limit to move what is collectively a vast amount of wealth offshore: the equivalent of many billions of US dollars in total.”

And I knew that as written, this reflected a very significant underestimation of the actual numbers involved there; I was thinking in terms of hundreds of billions of US dollars and their equivalent, flowing out of the People’s Republic of China, and certainly since their open white market economy began to significantly collapse, as was more publically exemplified by how their stock market did – with that slide only significantly slowing when emergency government support was provided to prop it up. (I posted that this was imminently about to happen on June 16, 2015, just over a week before it did. See Part 19.5: China’s expanding economic bubble and a prediction for the coming year.) And I add here parenthetically that since then, the government of China has at a conservative minimum, expended well over the equivalent of one trillion US dollars from their reserves to prop all of this up – and with much of that literally coming from their US dollar and other hard-earned foreign reserves. But that is another story that deserves separate consideration.)

My primary focus of attention here is on the level of privately held wealth fleeing the country, and particularly as it became impossible to ignore China’s profound structural economic weakness. I was too cautious in my earlier published estimation and in how I presented it; I was confident enough to publish that their economy was in such peril, but my deeper thoughts as to the actual levels of privately held wealth flowing out of China seemed so difficult to swallow that I toned it down when I offered my more specific order of magnitude assessments of what was transpiring there. But I want to update that now, and I have developed an evidence base that would support what should be the completely outrageous in this. My current assessment, and with this stated in terms of what I would consider actually, prudently conservative too is that the equivalent of more than one trillion dollars of personal wealth has flowed out of China just since June, 2015 and that this flow had most probably already been on the rise leading up to that, as those more in the know in China – and who held this wealth there, saw prudent value to move it to more secure sites. And I would argue that the overall privately held wealth of China’s political and economic elite that has been moved out of country has to total into the several trillions of US dollars for its overall value, and certainly when both government and Communist Party, and more private, non-government, non-Party wealth are included and when wealth transfers from before Xi Jinping’s rise to power are included. And that is just over the course of the past few years.

I am not going to discuss the full details of how I arrived at this, any more than I did when predicting the economic collapse that China saw open up in mid-2015 when I first offered a prediction of that happening – at least not here in this posting. It is going to be long enough for one series installment anyway. But I will at least begin to flesh out a few of the details in this posting, as the points I would raise in that analysis, that have direct bearing on future discussion that is essentially certain to come.

Let me begin with two points of interest: a recent, as of this writing news story that came out in the New York Times and that confirmed an assumption that I had already reached from research through more direct, if spotty sources, and China’s position along the scale of a basic macroeconomic metric: the Gini coefficient – that directly measures and charts measures of wealth inequality in an economy and the society that contains it. First the Times article:

Chinese Lawmakers’ Wallets Have Grown Along With Xi’s Power.

Just considering the wealthiest members of China’s parliament – that one governmental body: their National People’s Congress, their top percentage holders of personal wealth collectively hold some $500 billion dollars among them. Amplify that out to include the rest of their parliament alone and beyond that, the rest of their powerfully placed political elite as distributed throughout the higher ranks of their government and Party – with all of their opportunity and capability for amassing personal wealth too. And add in their still small but increasingly significant private sector wealth too (with its gray area connections to government and Party wealth) and this brings me to the second of the two points of interest that I would raise here: China’s Gini coefficient.

In brief and even cartoonish terms, the Gini coefficient is a metric that ranges from .00 to 1.00 in possible value with the lowest possible score representing absolute wealth equality across an entire population and with everyone holding exactly the same there, and a score of 1.00 representing a situation in which one individual holds everything, and everyone else nothing. A score of .40 or higher is generally considered to represent extreme wealth distribution inequality, and I cite the World Bank as just one organization that uses that valuation as its demarcation line for this. Officially, China’s Gini coefficient reached 0.491 in 2012 and it has been falling since then, though it is still rated as being over that .40 cut-off for extreme wealth inequality and has remained so consistently. But I would argue that this drop-off is in fact an artifact of the limitations of data availability. China, as I have discussed in at least some detail, has three economies:

• Their open white market economy that is overtly visible and that is addressed in these official and semi-official determinations, and
• A black market economy that is at least nominally entirely illegal and that serves as the economy for all of their extra-legal businesses (such as their extra-legal but vast rare earth metals mining industry with all of its government official and Party functionary support (see my series: The China Conundrum and its Implications for International Cyber-Security, as can be found at Ubiquitous Computing and Communications – everywhere all the time as postings 69 and loosely following, where I raise the issues of rare earth mining as a working example from its Part 1 on.) And perhaps most importantly for purposes of this posting and its discussion, illegal here also includes off the books income and wealth that are not reported as required by law for taxation and related purposes. Otherwise legitimate types of business activity that are carried out, outside of China’s legal system of reporting and accountability are illegal too, just as more overtly criminal business activities are – at least as a matter of legal principle.
• And this brings us to China’s vast gray market economy that among other things serves as a bridge between the first two, where large areas of China’s industrial base and overall economy are black market, or at least have black market aspects – essential commodities development only counting as a part of that.

And as China’s economy has become more and more unstable and unreliable as a safe haven for personal wealth, more and more of the wealth actually held has been effectively taken off-books and has been moved into their gray and black economies – and from there out of country where taxation and other issues would not arise and from any step of that process. The official Gini coefficient calculations as to China’s wealth distribution have become less and less accurate and for this and for a variety of related, connected reasons as well. And a true evaluation here that was based on a larger and more inclusive data set would all but certainly be at least as high as the 2008 peak of 0.491. And I expect that it would in fact exceed .50, putting it in nose bleed territory for the potential impact on societal stability that this might suggest.

Let’s consider another puzzle piece to this narrative here:

China Income Inequality Among World’s Worst.

The top 1% of China’s wealthiest hold approximately 25% of their nation’s wealth – and just when their more openly visible economy is considered, and their bottom 25% collectively hold just 1% of their wealth – and with no need or ability to in any way hide any significant amount of that. Adding in gray and black economy wealth to these calculations would only skew these numbers even more than they are more openly listed at now. (And as a point of possible clarification here, I first wrote about China’s black market rare earth mining in a cyber-security context is because I first approached this complex of issues from the perspective of how the Chinese government so actively seeks to keep knowledge of this type from their general population – as they do for many types of information that might challenge their official self-supportive narrative.)

The one piece to this puzzle that I have not delved into here but that is essential to my scratch pad calculations that would lead to my wealth flow totals, is that of what percentage, overall of this wealth has been shipped out of country. That percentage obviously cannot included fixed assets that would of necessity stay in place, in China. It would not include business and personal property and other large-scale physical assets held either, and it would also not include significant levels of personal wealth including significant levels of liquid wealth – cash wealth – and certainly where that was openly visible in their white economy. But it would include openly held white market economy wealth that was being moved out of the country as openly visible foreign investment, and in real estate, business acquisition and more. And it would include any less visible assets moved off-shore, and for black market economy assets, all of those so moved. This represents the rough outline categorical breakdown of what would be considered in this type of calculation. Then it is a matter of estimating proportions of the actual, overall economy represented by these general categories, and how wealth would be expected to flow out of them. I will hold off on delving into that and into how I arrived at my numbers for another occasion. I will simply say that I am still taking a conservative approach there.

My reason for addressing all of this here as a start to this posting, has been to set up a discussion of an emerging dynamic that China and their government and Party, and that Xi Jinping in particular have to understand and deal with: the sudden and still expanding range of uncertainty and risk that is now coming out of the West, and certainly with the 2016 election of Donald Trump as the president of the United States. China is inextricably connected to the West and to the United States in particular as a major trading partner. And the United States and its economy, with its strong US dollar has become a gold standard for many in China, as they seek out best outside investment and personal asset protection options.

• China’s wealthy elite’s own economy at home is fragile and weak and from deep underlying structural causes that cannot readily be addressed and certainly on anything short of a very long-term basis, and regardless of what measures are attempted from the top and regardless of the fact that China has a largely government and Party controlled command economy (command economies, actually. And the Wikipedia piece that the article behind this link points to, addresses them as a more strictly Soviet Union phenomenon but the People’s Republic of China has refined this approach to a whole new level now.)
• The members of this elite group see greater stability in the West than they do in China, and in the countries of Western Europe, and in emerging opportunity in some of the African nations, and elsewhere – and in the United States economy and as a major wealth relocation and protection base.
• But they now face growing uncertainties there too – and with vast levels of their wealth tied up in the United States and its globally reaching businesses, and in ways that would be difficult at best to unwind if need be.
• And I add to this set of details that one of the clearest and most easily discerned strategic process and policy decision that China’s government and policy leadership has made – coming from Xi Jinping as much as from anyone else, is that China must expand its reach and its larger regional and global strength if it is to survive – and certainly as anything like the type of officially Communist state that it is now.

And this has led to China taking some at least apparently widely divergent approaches and simultaneously, where for example:

• They have actively sought hegemony over the South and East China Seas and that large region’s collective assets – creating conflicts with their nation neighbors there and with the world as a whole too – and increasing tensions and uncertainties with the West and with the United States and that nation’s policies and interests as a result.
• And at the same time their wealthiest have been more and more actively moving their wealth into those countries – and with the United States and its economy definitely included there, further tightening the bonds that connect and further making any reactive response from China’s government to US push-back that much more risky.

And this brings me to the last puzzle piece that I would address here, and it is one that I have been foretelling for almost as long as I have been writing about Xi Jinping here at all – and very directly for several years now. He sees himself in the image of a nation defining ruler in the manner that Mao Zedong achieved – and that none of his successors have come close to, at least (perhaps) until now. And it is likely that Xi will both actively seek out and achieve an up to now disallowed third term as supreme leader of government, military and Party in China and regardless of term limit and age limit restrictions that have come to be seen as basic to their system now. For a current in the news piece that very publically addresses this possibility, see:

China Income Inequality Among World’s WorstXi Jinping, Seeking to Extend Power, May Bend Retirement Rules,

though evidence in support of this type of development, and of conclusions reached as to what it means, has been available and visibly developing for a long time now – and not just as offered in my postings.

Xi Jinping seeks out personal power and he wants to hold onto and expand it, as long and as far as he can. And equally important for this, he sees himself as the one and only person: the one and only true leader of China who can successfully lead his nation through its current and emerging challenges, and certainly now and through any foreseeable future. He sees himself as the absolutely indispensible man if his party and government and nation as a whole are to endure and certainly essentially as-is and long term. And with that I state one perspective on China’s and Xi Jinping’s current realities, and in at least something of a larger context that he would make this decision in.

Once again, I am going to continue this series and its narrative in a next installment that at least as of this writing, will probably go live to this blog in approximately one month. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on March 5, 2017.)

China and its transition imperatives 42.5: some thoughts concerning Xi Jinping’s American dilemma – an update

Posted in macroeconomics by Timothy Platt on February 10, 2017

This is my 50th installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.) This, I add is also an essentially immediate snap posting update to a fuller series installment that I write a few days ago, to go live just two days ago. And that makes this a first for this series and for my ongoing China-related writings, and for this blog as a whole.

I focused in Part 42 of this progression on uncertainties and risk, and as faced by Xi Jinping and his government and Communist Party in China, and as now suddenly erupting out of the United States and its now three weeks old Trump administration. And as one puzzle piece element of that, I wrote of how Trump and a combination of his politically driven government policy, and his personal business empire-supportive self-interest have come to challenge the United States’ long standing One-China policy.

Then right after that posting went live to this blog, Donald Trump pivoted again, at least in his spur of the moment decisions and pronouncements, and the February 10, 2017 issue of the New York Times arrived with these news stories and the announced policy change they suggest, showing prominently on its front page (this news story broke the evening before in their online edition):

Trump Tells Xi Jinping U.S. Will Honor ‘One China’ Policy and
Trump, Changing Course on Taiwan, Gives China an Upper Hand.

If I were in a position to advise president Xi in matters of dealing with president Trump, I would do so with the following briefly stated note as a matter of suggesting a path through at least part of this challenge. And I offer this supplemental posting update as a platform for offering this note to anyone else why might find my China postings of interest or utility:

Dear President Xi,

As the world has come to learn through just-released new stories and related new analysis pieces, President Trump has now chosen to accept as valid the One-China policy that has formed a foundation element in the relations between our two nations. That is a positive sign that would indicate that the strident rhetoric and threats that have been coming out of the Trump White House and the Trump Twitter account might be coming to an end.

The fact that by all accounts that have been publically shared, you had a more cordial phone conversation with President Trump, and one more oriented towards bridge building than burning is also very positive. And a key consideration in all of this is that Donald Trump’s Secretary of State, Rex Tillerson, and a number of other key members of his administration have also now spoken out in support of this policy change and in support of a rapprochement between China and the US. That is all very positive too. This confluence of supportive context for President Trump’s announced change of mind suggests that this shift in announced approach might represent more than just an easily forgotten Twitter comment, and that it might represent the start to a new, and in this case a renewed positive relationship that can be build from. But I find myself offering you a cautionary note here, even as I offer these hopeful thoughts.

Donald Trump is the President of the United States. But at the same time and regardless of possible US constitutional conflicts or challenges faced by continuing his dual role, Donald Trump is also still the principle owner and manager of a business empire that does and that seeks to do business in both the People’s Republic of China and in Taiwan – and under circumstances where decisions and actions would be taken as if in accordance with a Two-China policy.

President Trump’s efforts to secure a multi-billion US dollar infrastructure development project in Taiwan, where (he and) his business would work with both their private sector and their government there, can be seen as challenging and even violating the so called Emoluments Clause of the US Constitution and related legally mandated restrictions that would outlaw this type of behavior on his part. I am sure you know of that from news and analysis coverage that has come out in the West and certainly since his election. But perhaps more importantly from your perspective, this should raise red flags in your assessment as to what his seeming change of course really means – and particularly if it is one that only holds meaning to President Trump when he is working half-time as the President of the United States, but not when he is working his other half-time job as a still very actively involved business owner who is out to maximize personal profits for himself and at all costs and by any means.

I offer this note in admittedly dire terms, with a goal of provoking you to ask which President Trump you are talking with, and which one you are hearing what might be construed to be policy decisions from. And at the end of the day when US President/Business President Donald Trump finally turns off his Twittering for the night, which half of him holds the view that will predominate in guiding what he actually does the next day?

I am sorry to have to tell you this, but the risk and uncertainties that you have suddenly found yourself facing, coming out of Washington, have not actually fundamentally changed – and you need to stay aware of that on an ongoing basis and certainly in any near-term planning.

Sincerely Yours, Timothy Platt, PhD

As stated at the end of Part 42 of this series, I am going to continue it and its narrative in a next regular installment, that at least as of this writing will probably still go live to this blog in approximately one month from now. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on February 10, 2017 as an immediate-release update.)

China and its transition imperatives 42: some thoughts concerning Xi Jinping’s American dilemma

Posted in macroeconomics by Timothy Platt on February 8, 2017

This is my 49th installment, counting supplemental additions, to this ongoing and even open-ended series on China. Basically, what I am doing here is to trace how China has changed under the rule of Xi Jinping, with this series narrative starting approximately one year after he first took leadership of their Politburo Standing Committee, and through that of their entire Communist Party of China and of China as a whole (see Part 1, as written to first go live on this blog on February 8, 2014.)

The relationship between China and the United States has been complex and nuanced for a long time now, and certainly since president Richard Nixon first reached out to the Beijing government, visiting China in 1972 to help create an openly acknowledged point of connection based on mutual recognition as supported by dialog and trade. This relationship was in effect permanently complicated and strained in 1989 by an event that the Chinese government and their Communist Party still denies ever actually happened, but that was photographically broadcast to the world at least for its beginnings, and for word of what happened from after the cameras were forced away too: the Tiananmen Square massacre. The images of that event that did make it out of China for the world to see, were seared into people’s minds – including but not limited to haunting photos such as that of a lone protestor standing in front of a line of People’s Liberation Army tanks in an attempt to convince at least someone not to drive forward into the crowds. I do not know if he survived that, or if he did if he survived the immediate days to come following that specific incident. Well over a thousand unarmed, peaceful protestors did not.

I write that in most dire terms for a reason; it is that image and others like it that have shaped and reshaped the relationship that China holds with the United States and with the West in general since 1989, for the cautionary note that it offers as to how the Beijing government might act next too, if for no other reason, to put this in the perhaps mildest terms. That memory: that image and message are in fact why I posted the way that I did when the yellow umbrella protests erupted in Hong Kong over Beijing’s ham handed behavior in reining in what they see as restrictions in the treaty under which Great Britain turned Hong Kong back over to China (see my two 2014 supplemental postings to this series: Part 12.5: an inserted news update re Hong Kong and its Part 12.6 continuation.)

Concerns have seemed to settle down that a Tiananmen Square type of response might be repeated since 2014, and perhaps particularly when the Beijing government showed some self-restraint when faced with Hong Kong’s challenge to their overall authority in the region as arose in these protests. And the Beijing government did show restraint, certainly in comparison to what happened in 1989, resorting to legal challenge and procedural responses instead.

The United States has continued to adhere to the One-China Policy , among other measures to assure China and their government that their concerns were being respected, and under both Democratic and Republican presidential administrations. Trade and commerce, and open travel between the two nations has continued and flourished, and efforts have been made on both sides to at least blunt the potentially sharp points and edges of the sometimes real points of disagreement that do arise. Issues of state-allowed if not entirely state-sourced cybercrime and worse, and of currency manipulation on the part of the Chinese come to mind there, as just two of this set of sticking point issues, and I add that these are two of the challenge points that I have been delving into in this blog for years now.

No one in the United States government or in the governments of the West in general seem to have been at all happy with China’s efforts to claim rights and even hegemony over the larger sweep of the South and East China Seas, and certainly as that has become China policy under Xi. But this type and level of disagreement has been viewed for the most part as calling for a negotiated diplomatic response and without overt challenges let alone threats that would simply create resistance to change or accommodation from Beijing. And then Donald Trump happened. He ran for the Republican Party nomination, and then ran as their party standard bearer and presidential candidate, on a narrowly xenophobic and isolationist platform, as driven by ego and narcissism and an unwillingness to listen to anyone who was not telling him what he already thought and already believed – and even contrary to any real world empirical evidence to the contrary.

I wrote the immediately preceding three installments to this series about China, in large part from a Trump perspective and on his decisions, actions and threats as they have been addressed towards China and its interests (see Part 39: rethinking China’s emerging trends and challenges in the emerging era of a United States Trump presidency and its Part 40 and Part 41 continuations.) And from the first of them on, I stated that I would pivot back from pursuing these issues from an American and a Trump administration perspective, to one of examining the China perspective on this complex of issues.

With this 700+ word historically framed preamble in place, I begin to do that here with this posting. I have reported here on issues such as Trump’s direct rapprochement with the Taiwan government and about something of his personal business entanglements with Taiwan in earlier postings, on the negative side of any international relationships ledger between the US and China as it would be viewed from the Beijing perspective. And I have written of a few more positive entries there, as they would view them with Trump’s repudiation of the Trans-Pacific Partnership (TPP) as a perhaps most significantly impactful example of that. How is all of this playing out from Xi Jinping’s government’s and his Communist Party’s perspective?

I have mostly focused in that on what China would see as the negative side of that in the last three postings here, as these ledger entries are more plentiful and more visible, and certainly as a matter of general public awareness. I begin flipping the orientation and perspective of this discussion by considering a positive, that is in the long-term and perhaps even in the shorter-term likely to hold more importance and value to China and their elite in Party position and wealth, than the demise of the TPP ever could. And I begin addressing that by briefly recapitulating a few details here that I have been delving into in more detail for well over a year now: the current state of China’s economy and the valuation of its currency, and how the government of China has sought to prop up both in order to stave off economic collapse into deep recession – and social unrest – by expending vast proportions of their hard-earned monetary reserves to do so. And the key detail that I would repeat here, relevant to that is in how anyone who can move personal wealth out of China from their middle class on up, has been doing so. And this has added up to a flight of wealth from China that adds up into at least the hundreds of billions of US dollars, equivalent, and into the billions for at least some single “investors” from their counterpart to the US top 1% of the top 1% (see The Richest Rich Are in a Class by Themselves for a Bloomberg News piece on them.)

I begin examining this story as it has started to play out in a now suddenly Trump era, by citing a news story that came out after Trump was elected but before he was sworn into office as the sitting president of the United States. I simply add in anticipation of offering the link itself, that neither Donald Trump nor the members of his family who advise him as president, not his personal business empire have in any way backed away from doing business with China’s elite, including most senior members of their Party and government as they seek to protect their personal wealth by moving it into financial safe harbors that show more long-term potential for stability then they could find at home. And this definitely still includes investments and the parking of liquid wealth in the United States still, and certainly where Trump and his businesses are invested and involved too:

Jared Kushner, a Trump In-Law and Adviser, Chases a Chinese Deal.

First of all, aside from Kushner being Trump’s son in lay and husband to his daughter Ivanka, he is formally and even officially one of Trump’s closest and most trusted advisors. And he would not pursue a deal of this sort without Trump’s active support, or probably without at least a level of his more active participation too. So this is not a Kushner story or a Kushner business deal alone; it is at least as much a now-president Trump story and deal too.

I have written, and particularly in the preceding three installments to this series as noted above, of Trump’s cozying up to the Taiwan government in pursuit of a massive infrastructure deal there, that would enrich his and his family’s businesses. Donald Trump is overtly and without any effort at understanding the consequences, seeking to play off both sides against the middle here between the People’s Republic of China, and what they see as their runaway province of Taiwan. That fact has to be overtly obvious to China’s leadership and particularly as they personally off-shore their wealth through business organizations such as the Anbang Insurance Group that is highlighted in this January, 2017 news story. And this, among other still emerging progressions of events both lead to and create the dilemma, or quandary if you prefer that Xi and his Party and government leadership face right now and with all of the uncertainties that an unconsidered snap-decision driven Trump administration can engender.

For a third party perspective on the Trump administration that in fact mirrors both my own views here, and those of others I know and respect, see this management-perspective piece on how Donald Trump performs, and as both a would-be manager and leader:

Case Study in Chaos: How Management Experts Grade a Trump White House.

But to return this narrative back to a China perspective on their international context as addressed here, I want to add two more puzzle pieces to this posting’s narrative, both of which involve Chinese investments and efforts to develop them in the United States:

MoneyGram Deal May Test Trump’s View on Chinese Investment and
Trump and Trade: Extreme Tactics in Search of a Point.

The first of these is a news analysis piece on how an Alibaba Group spin-off: the Ant Financial Services Group (formerly known as Alipay) is trying to buy out a large US based payment processor and money transfer company (that is still dwarfed in size by its main competitor: Western Union.) This type of acquisition essentially automatically comes under review under terms of the Exon-Florio Amendment as initially passed into law in 1988, as a review mechanism for evaluating such deals in terms of their national security implications and risk. It was enacted as a part of the larger Omnibus Foreign Trade and Competitiveness Act of 1988 and serves as one of its key regulatory mechanisms – which is a curious tool for a president Trump to want to invoke, given his seeming across the board desire to limit or repeal financially impactful regulatory law and practice. But if for whatever reason Trump would want to block this particular deal, as part of his general challenge-and-attack approach towards China, this is the tool he, or rather his inner circle will use. Will heated political talk and his campaign rhetoric-driven China policy kill this deal, or will his self-interest in working with Jack Ma of Alibaba, and its spin-offs sway him to step back and allow this to proceed? Ultimately, to put this in admittedly cynical terms, that probably depends at least in significant part on whether this deal would or would not present itself as serving Trump’s own personal interests.

The second of these puzzle pieces is easy to summarize by citing its original print version title, and a tagline text that the Times appends to it when someone shares a link to it via email or text. The original title was “On Trade, Trump Wields Sharp Tactics That May Not Have a Point.” And the tagline text reads “Rejecting the premise of international accords is one thing. But displaying irrationality for effect, without a rational objective, can end in war.” And with that I offer two more recent, in the news puzzle pieces to this mix:

Task Force Urges Better U.S. Engagement With China
U.S. Policy Toward China: Recommendations for a New Administration.

The first of these two news pieces is a February 6, 2017 New York Times piece about a just-released bipartisan report that urges president Trump to act more prudently and consistently in his dealings with China. And it urges him to do so in accordance with something of a real, organized, communicated policy, and both to avoid trade war and to limit the risk of what in the South and East China seas in particular cound become military incidents and skirmishes, that could arise as tensions and responses to them escalate. The second of these puzzle pieces offers a link to an Asia Society news story on this report, and I specifically note here that the online version of this news piece as pointed to here offers PDF file download links to both an executive summary and a full text version of this report itself.

And with this all noted I find myself thinking back to the chaos in management news analysis piece that I offered above, as my second puzzle piece to this posting. The issues and challenges that are raised there and that we see validated for their relevance seemingly every single day now from what comes out of the White House and Trump’s Twitter account – they collectively represent the core of the dilemma, the conundrum, the challenge that Xi and his Party and government now find themselves facing – and at a time in China’s history and in their term of rule in it when China’s own internal instabilities and uncertainties call the most poignantly and loudly for something in the way of certainty and stability that they can rebuild from. That is not going to happen, at least from the United States: one of China’s biggest and most important trade partners, and certainly in anything like the near-term.

I am going to continue this series and its narrative in a next installment, that at least as of this writing will probably go live to this blog in approximately one month. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (And as a time stamp, I wrote this as a single draft on February 7, 2017.)

Innovation, disruptive innovation and market volatility 31: innovative business development and the tools that drive it 1

Posted in business and convergent technologies, macroeconomics by Timothy Platt on February 3, 2017

This is my 31st posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business, posting 173 and loosely following for Parts 1-5 and Macroeconomics and Business 2, posting 203 and loosely following for Parts 6-30.)

I recently wrote and posted a thought piece note to this blog, titled When the Tool You Most Compelling Lack is a Hammer, Everything Can Begin to Look Like Nails. I wrote that as a matter of addressing an alternative view of the challenge raised in a better known adage: “when the only tool you have is a hammer, everything begins to look like nails.” However the thoughts there are raised and expressed, both of these adages address the issues of the familiar and expected, and of the assumptions that they all but automatically bring with them. That is also centrally important to this series’ flow of discussion, and certainly to this phase of it.

I have recently been discussing a new approach to visually depicting and analyzing business models as they are actually carried out in flows of operational processes and their causal relationships (in this series and also in a concurrently running second series: Intentional Management, and see in particular its Part 30.) And I concluded my discussion of this, at least as pursued up to here in this series, in its Part 30, by raising the issues of new technology acceptance and use.

I step back from the specific example of that new technology adaptation here, and from market-facing innovation per se, to consider business process innovation:

• First, I explicitly acknowledge that I have written fairly extensively about this arena of adaptive change in this blog – primarily as it arises and is developed and implemented and used in-house as a business evolves and adapts to remain as effectively competitive as it can be.
• But the business process-oriented innovation that I have been addressing up to here in recent postings to this series, is one that calls for new-to-the-business hardware, for it to be to implemented. And it is a type of strategy shaping operational change that most businesses would acquire as new and novel to them, from the outside and from explicit business-to-business markets and providers. So this business process modeling and shaping tool set, represents an explicit exception to the basic, more evolutionary path to business process innovation that I have addressed up to here.

Partly, this difference arises from the way that this new approach is hardware dependent, and explicitly novel-hardware dependent at that. But I would argue that the disruptive nature of this proposed innovation is a factor too, and particularly as it is a type of disruptive innovation that a developing business could market and offer, without in effect competing against itself in the process. Here, I refer to business consulting firms that bring such tools to their clients, as case in point examples.

• Many businesses that see this approach walking in through their front doors in the hands of a business management-oriented consultant, or consultant team, would see it as a specialized tool set that they would not need to develop and maintain in-house – when it might be more cost-effective for them to bring in the “outside experts” when and as needed, for carrying out this type of in-depth business process analysis, and when initially planning out its follow-through.
• Some, and particularly businesses that are led by earlier adaptor oriented managers, might want to bring this in-house so they could carry out at least select aspects of such a business modeling exercise on their own, and at their own schedule, and with fuller control over their own confidentiality due diligence as they do this – without having outsiders involved.
• And with time and as more businesses used this approach and saw it applied to their systems, this type of tool and its adaptation would expand out to include later and later adapting businesses, led by and managed by people who were more aversive to accepting early-stage change per se – and who need to see longer performance records for what they do adapt and bring in-house first.
• And pace and timing in adaptation of new here, would largely correlate with the overall pace of change and innovation – and market demand for it, in the businesses and their industries in question. Businesses that are always looking for that next innovative edge in what they bring to market and how, would be among the first to adapt anything significantly new and novel of the type that I have been discussing here – provided only that a case can be made that this would in fact give them a more competitive edge in maintaining and even expanding their overall market share. And established businesses in fully mature (and even relatively moribund) industries that look first to the traditional and tried and true, would be the last to adapt anything like this – and then, only after it has effectively lost its new and novel luster and become commonplace and standard.

I am going to continue this narrative in a next series installment where I will explicitly tie this line of discussion back to one of the core foci of discussion of this blog, when I deal with the question of information availability as an innovation driver – and as that helps to set the boundaries between innovation per se and disruptive innovation. And as part of that, I will discuss process systems complexity and the role of developing lean and agile systems as innovation enablers.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And see also Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation.

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