Věra Jourová’s love letter to platforms

By Kassandra – “Internet and the platforms can be very important player(s) in the countries where we will see increased power of the government, decreased power of the media, shrunk space of the civil society, and all these factors which we don’t think belong to healthy democratic system. So we should not only think about how to regulate and whether to regulate, and how to minimize the power of big tech – or tech in general; not only big. But we should think about how to enhance and support the positive role which we see necessary.”

It is not, dear Commissioner (European Commission Vice-President for Values and Transparency, Věra Jourová), the platforms who are the heroes in these societies where democracy has fragmented but the people who champion democratic values on these platforms. The people whose lives are in danger when they speak out. The journalist, activists, and citizens who, tired of the reality they face, take a stand. If you turn platforms into heroes, perhaps then you should consider them as noble publishers, and not just conduits of information.

It’s as if she has forgotten the ‘bad surprise’ of Facebook’s Cambridge Analytica days, or that Google has been found to be functioning anticompetitively in a whole range of issues. This is not a matter of fine and collect. This anticompetitive behavior has been very damaging to European companies and citizens and that is why Jourová’s colleagues running the EU’s competition authorities intervened.

And if Jourová would like to pretend these ‘bad surprises’ are a thing of the past, we have only to look at the latest clashes with the platforms: The EU opening two competition cases with Apple and the awaited outcome of the EU’s probe on Amazon.

In the US – mounting pressure for Amazon CEO Jeff Bezos to testify in Congress eventually led to a nod from the company signalling this is going to happen.

Meanwhile, in Europe, instead of asking for accountability, and for Bezos to appear – much like Facebook’s Mark Zuckerberg – in the European Parliament to answer some questions, politicians like Jourová are happy to turn a blind eye. more>

Updates from McKinsey

An operating model for the next normal: Lessons from agile organizations in the crisis
Companies with agile practices embedded in their operating models have managed the impact of the COVID-19 crisis better than their peers. Here’s what helped them cope.
By Christopher Handscomb, Deepak Mahadevan, Lars Schor, Marcus Sieberer and Suraj Srinivasan – For many companies, the first, most visible effects of the COVID-19 pandemic quickly created a challenge to their operating and business models. Everything came into question, from how and where employees worked to how they engaged with customers to which products were most competitive and which could be quickly adapted. To cope, many turned to practices commonly associated with agile teams in the hope of adapting more quickly to changing business priorities.

Agile organizations are designed to be fast, resilient, and adaptable. In theory, organizations using agile practices should be perfectly suited to respond to shocks such as the COVID-19 pandemic. Understanding the experiences of agile—or partially agile—companies during the crisis provides insights around which elements of their operating models proved most useful in practice. Through our research, one characteristic stood out for companies that outperformed their peers: companies that ranked higher on managing the impact of the COVID-19 crisis were also those with agile practices more deeply embedded in their enterprise operating models. That is, they were mature agile organizations that had implemented the most extensive changes to enterprise-wide processes before the pandemic.

That suggests implications for less agile companies as economies reopen. Should they set aside the agile practices they adopted during the pandemic and return to their traditional operating models? Or should they double down on agile practices to embrace the more fundamental team- and enterprise-level processes that helped successful agile companies navigate the downturn?

We analyzed 25 companies across seven sectors that have undergone or are currently undergoing an agile transformation. According to their self-assessments, almost all of their agile business units responded better than their nonagile units to the shocks associated with the COVID-19 pandemic by measures of customer satisfaction, employee engagement, or operational performance.

Executives emphasized that the agile teams have continued their work almost seamlessly after the shock, without substantial setbacks in productivity. In contrast, many nonagile teams struggled to transition, reprioritize their work, and be productive in the new remote setup. The alignment between agile teams’ backlogs and their business priorities allowed them to shift focus quickly. more>

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Updates from Georgia Tech

Why Restarting the Global Economy Won’t be Easy
By Jerry Grillo – As the world contemplates ending a massive lockdown implemented in response to COVID-19, Vinod Singhal is considering what will happen when we hit the play button and the engines that drive industry and trade squeal back to life again.

Singhal, who studies operations strategy and supply chain management at the Georgia Institute of Technology, has a few ideas on how to ease the transition to the new reality. But this pandemic makes it hard to predict what that reality will be.

“There is really nothing to compare this pandemic to,” he said. “And predicting or estimating stock prices is simply impossible, unlike supply chain disruptions caused by a company’s own fault, or a natural disaster, like the earthquake in Japan.”

But COVID-19 represents a new kind of mystery when it comes to something as complex and critical to the world’s economy as the global supply chain, for a number of reasons that Singhal highlighted:

  • The global spread of the virus and duration of the pandemic. “We have no idea when it will be under control and whether it will resurface,” Singhal said. “With a natural disaster you can kind of predict that if we put in some effort, within a few months we can get back to normal. But here there is a lot of uncertainty.”
  • Both the demand and supply side of the global supply chain are disrupted. “We’re not only seeing a lot of factories shutting down, which affects the supply side, but there are restrictions on demand, too, because you can’t just go out and shop like you used to, at least for the time being,” he said. “And all this is taking place in an environment where supply chains are fairly complex – intricate, interconnected, interdependent, and global.”
  • Longer lead times. “We get close to a trillion dollars of products annually from Asian countries, about $500 billion from China,” Singhal said. “Most are shipped by sea which requires a four-to-six-week lead time. The fact that logistics and distribution has been disrupted and needs to ramp up again will increase lead time. So, it will take time to fill up the pipeline, and that is going to be an issue.”
  • Supply chains have little slack, and little spare inventory. While manufacturing giants such as Apple, Boeing, and General Motors have more financial slack to carry them through a massive economic belt tightening, their suppliers, spread out across the globe, come in different sizes, different tiers, “and these smaller companies don’t have much financial slack,” said Singhal, pointing to a report of small and medium sized companies in China, “which have less than three months of cash. They’ve already been shut down for two months, and cash tends to go away quickly.

“Many of these companies may go bankrupt,” he added. “So we need to figure out how to reduce the number of bankruptcies. Government is going to play an important role in this, and the stimulus package the U.S. has approved will be helpful.” more>

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Yes, someone is to blame

A pandemic may be represented as a ‘natural disaster’. A global depression is however the product of ideology and powerful political actors.
By James K Galbraith and Albena Azmanova – An unprecedented economic crisis is descending on Europe. It is, the president of the European Central Bank, Christine Lagarde, declared recently to the European Parliament, the worst in peacetime.

In the United States, the Federal Reserve Bank reports the worst decline in output and employment in 90 years. The World Bank warns that the world is on the precipice of the deepest slump since 1945—with up to 60 million people pauperized, many in countries already poor.

Lagarde hurried to clarify that this vast human tragedy was, in her view, ‘of no one’s fault or making’—as if a medical crisis could metamorphose into a social crisis all by itself. The catastrophe is however the work of ideas, of politics and of policies.

In the US, testing was botched, delayed and is still not available on demand. In France, vast stocks of personal protective equipment, accumulated for the H1N1 epidemic, had been sold off, stored badly and ruined. In the United Kingdom and Sweden, the authorities thought first to let the virus run free, seeking ‘herd immunity’ at the implicit price of many thousands dead.

These were not mere mistakes or simple accidents: they were political decisions. They were consequences of an ideology built over decades. There were sins of commission and sins of omission—to invoke a pair of concepts developed by Hannah Arendt—their result a fragile economic structure, marked by precarity and primed for collapse.

The sins of commission came first. From the late 1970s, political leaders throughout the west embarked on the formidable project which came to be known as neoliberal capitalism. Deregulation, decentralization, privatization, balanced budgets and tight money were key elements of the ‘Washington consensus’ advanced by national elites and the international financial institutions, especially the International Monetary Fund. Public services and welfare programs were slashed, including critical expenditures on public health.

The initial goals were to break trade unions and curtail inflation, albeit at the expense of core manufacturing capability. more>

The Main Street manifesto

By Nouriel Roubini – The mass protests following the killing of George Floyd by a Minneapolis police officer are about systemic racism and police brutality in the United States, but also so much more.

A vast underclass of increasingly indebted, socially immobile Americans—African-Americans, Latinos and, increasingly, whites—is revolting against a system that has failed it.

This phenomenon is not limited to the US, of course. In 2019 alone, massive demonstrations rocked Bolivia, Chile, Colombia, France, Hong Kong, India, Iran, Iraq, Lebanon, Malaysia and Pakistan, among other countries. Though these episodes each had different triggers, they all reflected resentment over economic malaise, corruption, and a lack of economic opportunities.

The same factors help to explain populist and authoritarian leaders’ growing electoral support in recent years. After the 2008 financial crisis, many firms sought to boost profits by cutting costs, starting with labor. Instead of hiring workers in formal employment contracts with good wages and benefits, companies adopted a model based on part-time, hourly, gig, freelance and contract work, creating what the economist Guy Standing calls a ‘precariat’. Within this group, he explains, ‘internal divisions have led to the villainization of migrants and other vulnerable groups, and some are susceptible to the dangers of political extremism’.

The precariat is the contemporary version of Karl Marx’s proletariat: a new class of alienated, insecure workers who are ripe for radicalization and mobilization against the plutocracy (or what Marx called the bourgeoisie). This class is growing once again, now that highly leveraged corporations are responding to the Covid-19 crisis as they did after 2008: taking bailouts and hitting their earnings targets by slashing labor costs.

One segment of the precariat comprises younger, less-educated white religious conservatives in small towns and semi-rural areas who voted for Trump in 2016. They hoped that he would actually do something about the economic ‘carnage’ that he described in his inaugural address. But while Trump ran as a populist, he has governed like a plutocrat, cutting taxes for the rich, bashing workers and unions, undermining the Affordable Care Act (‘Obamacare’), and otherwise favoring policies that hurt many of the people who voted for him. more>

Updates from McKinsey

Ready, set, go: Reinventing the organization for speed in the post-COVID-19 era
The need for speed has never been greater. Here are nine ways companies can get faster.
By Aaron De Smet, Daniel Pacthod, Charlotte Relyea, and Bob Sternfels – hen the coronavirus pandemic erupted, companies had to change. Many business-as-usual approaches to serving customers, working with suppliers, and collaborating with colleagues—or just getting anything done—would have failed. They had to increase the speed of decision making, while improving productivity, using technology and data in new ways, and accelerating the scope and scale of innovation. And it worked. Organizations in a wide range of sectors and geographies have accomplished difficult tasks and achieved positive results in record time:

Redeploying talent. A global telco redeployed 1,000 store employees to inside sales and retrained them in three weeks.

Launching new business models. A US-based retailer launched curbside delivery in two days versus the previously-planned 18 months.

Improving productivity. An industrial factory ran at 90-percent-plus capacity with 40 percent of the workforce.

Developing new products. An engineering company designed and manufactured ventilators within a week.

Shifting operations. Coordinating with local officials, a major shipbuilder switched from three shifts to two, with thousands of employees.

At the heart of each of these examples is speed—getting things done fast, and well. Organizations have removed boundaries and have broken down silos in ways no one thought was possible. They have streamlined decisions and processes, empowered frontline leaders, and suspended slow-moving hierarchies and bureaucracies. The results, CEOs from a wide range of industries have told us, have often been stunning:

“Decision making accelerated when we cut the nonsense. We make decisions in one meeting, limit groups to no more than nine people, and have banned PowerPoint.”

“I asked on Monday, and by Friday we had a working prototype.”

“We have increased time in direct connection with teams—resetting the role and energizing our managers.”

“We adopted new technology overnight—not the usual years—as we have a higher tolerance for mistakes that don’t threaten the business.”

“We’re putting teams of our best people on the hardest problems. If they can’t solve it, no one can.”

Because of the pandemic, leadership teams have embraced technology and data, reinventing core processes and adopting new collaboration tools. Technology and people interacting in new ways is at the heart of the new operating model for business—and of creating an effective postpandemic organization. more>

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Updates from Ciena

With great fiber count comes great responsibility
Spatial Division Multiplexing (SDM) cables are a key focus area for submarine network innovation in 2020. Ciena’s Brian Lavallée explains how SDM cables offer massive increases in submarine cable carrying capacity and the challenges associated with these new wet plant designs.
By Brian Lavallée – In a recent blog entitled “The Submarine Network Seascape in 2020”, I wrote about what I believe are key areas for focused submarine network innovation in 2020. One key area is Spatial Division Multiplexing (SDM) cables. This new wet plant design allows submarine cable operators to “side-step” the Shannon Limit by expanding Channel Bandwidth (B) in the equation, which is the usable optical bandwidth in the submarine cable. In other words, the more bandwidth available in the cable, the more capacity is enabled. It’s as simple as that.

Once a submarine cable (wet plant) is laid upon the seabed, the Channel Bandwidth (B) is fixed and is dictated by the number of fiber pairs and the total usable optical spectrum of the optical repeaters (a historical industry misnomer of what are today, optical amplifiers). This means that once a submarine cable is deployed, one must improve the Signal-to-Noise Ratio, on the right side of the equation above, to increase the Channel Capacity (C). This is exactly what the industry has been doing for years with constant technology innovation taking place in the Submarine Line Terminating Equipment (SLTE) and the coherent modems they house.

However, as we get ever-closer to the Shannon Limit of a submarine optical fiber, we start to experience diminishing returns in terms of the upgrade leaps in total information-carrying capacity of the optical fiber. This means that the industry focus must shift back to the wet plant interconnecting the SLTE coherent modems.

Compared to rapid, ongoing SLTE coherent modem innovation over the past decade, the wet plants they connect to have witnessed comparatively less innovation – until recently. One way to expand the Channel Bandwidth (B) in the equation above is to add many more fiber pairs to the submarine cable to provide a higher aggregate of usable optical spectrum in the submarine cable. This is referred to as Spatial Division Multiplexing (SDM). Modern submarine cables have 4 to 8 Fiber Pairs (FP), while SDM offers 12 to 16 FPs, and potentially more in the future.

As an industry proof point, the first SDM submarine cable will be Google’s transatlantic 6,400km  Dunant cable, which supports up to 250Tb/s of overall capacity provided by an aggregate of 12 fiber pairs – very impressive! more>

Updates from Chicago Booth

Could anything unite the United States?
Cultural and political divisions have persisted for decades. Now there’s a growing gap in how Americans see each other.
By Rose Jacobs – As the Democratic Party battles over whether a moderate or liberal presidential candidate stands the better chance of winning the White House in November 2020, many Americans are asking a similar but broader question: Has the country ever been so divided?

Academics, for their part, are attempting to measure what often feel like widening gaps. In 2017, Stanford’s Matthew Gentzkow looked at a series of Pew Research Center surveys of Americans’ views on policies ranging from government regulation to welfare, immigration, and the environment, and noted that fewer individuals in 2014 than 10 years earlier held positions that put them across the political divide from their own, self-identified political party.

Nor do divides appear confined to politics and policy. Chicago Booth’s Marianne Bertrand and Emir Kamenica examined three national surveys that probe Americans’ consumption habits, leisure time, and social attitudes. They find that different groups of Americans—rich and poor, black and white, men and women, politically liberal and conservative, college educated and not—tend to eat different food, watch different television programs, pursue different hobbies, and adopt different social attitudes. The algorithms the researchers developed for their study were able to predict people’s income bracket with nearly 90 percent accuracy on the basis of the brands of products and services they bought; they could do the same for gender by looking at what TV shows and films people watched and what magazines they read; and they could predict race with 75–85 percent accuracy using self-reported stances on topics such as marriage, law enforcement, and government spending.

Yes, then, the nation appears to be divided.

Bertrand and Kamenica point out that cultural gaps in the categories that they studied, between rich and poor or black and white, for instance, are worrisome in part because they might dampen social and economic mobility. The real-world effects of growing partisanship are less obvious, but research is beginning to probe how a politically divided populace plays out in areas ranging from corporate finance to macroeconomics to medicine and law.

The researchers looked at the months surrounding President Trump’s election in 2016, and find that analysts registered as Democrats were more likely to issue downgrades to the companies they covered after November 8 than were Republican analysts. This effect was greater with analysts who voted more frequently. This result is in line with their wider analysis of political affiliation and presidential elections going back 18 years, which suggests that analysts whose politics do not align with the sitting president’s are more likely to downgrade companies’ debt than analysts who share a political party with the president. more>

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How to Disguise Racism and Oligarchy: Use Economics

By Lynn Parramore – James McGill Buchanan is a name you will rarely hear unless you’ve taken several classes in economics. And if the Tennessee-born Nobel laureate were alive today, it would suit him just fine that most well-informed journalists, liberal politicians, and even many economics students have little understanding of his work.

The reason? Duke historian Nancy MacLean contends that his philosophy is so stark that even young libertarian acolytes are only introduced to it after they have accepted the relatively sunny perspective of Ayn Rand. (Yes, you read that correctly). If Americans really knew what Buchanan thought and promoted, and how destructively his vision is manifesting under their noses, it would dawn on them how close the country is to a transformation most would not even want to imagine, much less accept.

That is a dangerous blind spot, MacLean argues in a meticulously researched book, Democracy in Chains, a finalist for the National Book Award in Nonfiction. While Americans grapple with Donald Trump’s chaotic presidency, we may be missing the key to changes that are taking place far beyond the level of mere politics. Once these changes are locked into place, there may be no going back.

MacLean’s book reads like an intellectual detective story. In 2010, she moved to North Carolina, where a Tea Party-dominated Republican Party got control of both houses of the state legislature and began pushing through a radical program to suppress voter rights, decimate public services, and slash taxes on the wealthy that shocked a state long a beacon of southern moderation. Up to this point, the figure of James Buchanan flickered in her peripheral vision, but as she began to study his work closely, the events in North Carolina and also Wisconsin, where Governor Scott Walker was leading assaults on collective bargaining rights, shifted her focus.

Could it be that this relatively obscure economist’s distinctive thought was being put forcefully into action in real time?

MacLean could not gain access to Buchanan’s papers to test her hypothesis until after his death in January 2013. That year, just as the government was being shut down by Ted Cruz & Co., she traveled to George Mason University in Virginia, where the economist’s papers lay willy-nilly across the offices of a building now abandoned by the Koch-funded faculty to a new, fancier center in Arlington.

MacLean was stunned. The archive of the man who had sought to stay under the radar had been left totally unsorted and unguarded. The historian plunged in, and she read through boxes and drawers full of papers that included personal correspondence between Buchanan and billionaire industrialist Charles Koch. That’s when she had an amazing realization: here was the intellectual linchpin of a stealth revolution currently in progress.

Buchanan, a 1940 graduate of Middle Tennessee State University who later attended the University of Chicago for graduate study, started out as a conventional public finance economist. But he grew frustrated by the way in which economic theorists ignored the political process.

Buchanan began working on a description of power that started out as a critique of how institutions functioned in the relatively liberal 1950s and ‘60s, a time when economist John Maynard Keynes’s ideas about the need for government intervention in markets to protect people from flaws so clearly demonstrated in the Great Depression held sway. Buchanan, MacLean notes, was incensed at what he saw as a move toward socialism and deeply suspicious of any form of state action that channels resources to the public. Why should the increasingly powerful federal government be able to force the wealthy to pay for goods and programs that served ordinary citizens and the poor?

In thinking about how people make political decisions and choices, Buchanan concluded that you could only understand them as individuals seeking personal advantage. In an interview cited by MacLean, the economist observed that in the 1950s Americans commonly assumed that elected officials wanted to act in the public interest. Buchanan vehemently disagreed — that was a belief he wanted, as he put it, to “tear down.” His ideas developed into a theory that came to be known as “public choice.”

Buchanan’s view of human nature was distinctly dismal. more>

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Updates from McKinsey

Return: A new muscle, not just a plan
Return is not a phase; it’s a way of operating. A nerve center can help build the capabilities that businesses need in the “next normal.”
By Mihir Mysore, Bob Sternfels, and Matt Wilson – In less than four months, COVID-19 has upended almost all expectations for 2020. Beyond the loss of life and the fear caused by the pandemic, businesses around the world have faced disruptions at a speed and scale unprecedented in the modern era.

Companies everywhere are now wrestling with the question of how to reach the next normal safely. Many talk about a return to the workplace as a plan that needs to be implemented: a series of systematic steps to reach some kind of stable operating model, in a world where vaccines are adequately available or herd immunity has been reached. In many cases, these plans suggest a return to some relatable version of the past.

Yet the intrinsic uncertainties that might scupper such plans continue to mount. Executives readily admit, for instance, that it is tough to write a deterministic return plan because of the likelihood of a resurgence, discoveries about how the virus is transmitted and whom it affects, the nature and duration of immunity, and continued changes in the quality and availability of testing and contact tracing. The best possible plan today is merely a strawman that will need near-continuous recalibration and change.

Another critical uncertainty is the future of remote work. Some feel that recent events have driven a real productivity gain they do not want to lose. However, they recognize that a wholesale shift to remote work has had many false dawns. Silicon Valley has experimented with it most extensively, but after many attempts to implement telecommuting, our research found that at 15 top firms, only 8 percent of the employees work remotely. These companies do not want to try this again only to roll it back in a few years.

Customer behavior is a third unknown. Companies see the clear shift to digital among consumers and its inevitable impact: online shopping has expanded by up to 60 percent in some categories, and up to 20 percent of online consumers in the United States have switched at least some brands recently. But it’s unclear whether once the pandemic recedes, these customers will return to their old ways or if the pandemic will create new types of consumers.

Given these and other uncertainties and the need for experimentation and fast learning to navigate through them effectively, we believe that the next step in the response of businesses cannot be thought of as a phase at all. It will be open ended rather than fixed in time. A better mental model is to think about developing a new “muscle”: an enterprise-wide ability to absorb uncertainty and incorporate lessons into the operating model quickly. The muscle has to be a “fast-twitch” one, characterized by a willingness to change plans and base decisions on hypotheses about the future—supported by continually refreshed microdata about what’s happening, for example, in each retail location. And the muscle also needs some “slow-twitch” fibers to set long-term plans and manage through structural shifts. more>