May 2011 - Global Economic Watch

The Economist: Australia's Economic Success

05-31-2011 4:00 AM with no comments

How about that Land of Oz?  First it weathered the Asian Crisis of the late 90s.  Now it seems to have come through the Global Economic Crisis as strongly as any developed economy.  It is tempting to say that Australia's success is good fortune, a case of an economy not quite large enough, or simply too rich in mineral wealth, to fall victim to the plight of Western trading partners.  But as The Economist's John Grimold points out, starting in 1983, governments from both the left and right put forward important economic reforms that appear to have strengthened the foundation of one of the world's wealthiest nations:

The incoming government in 1983 led by Bob Hawke, a former trade unionist, was the first to take serious remedial action. With the popular, politically astute Mr Hawke presiding, and the coruscating, aggressive Mr Keating doing most of the pushing, this Labor government floated the Australian dollar, deregulated the financial system, abolished import quotas and cut tariffs. The reforms were continued by Mr Keating when he took over as prime minister in 1991, and then by the Liberal-led (which in Australia means conservative-led) coalition government of John Howard and his treasurer, Peter Costello, after 1996.

By 2003 the effective rate of protection in manufacturing had fallen from about 35% in the 1970s to 5%. Foreign banks had been allowed to compete. Airlines, shipping and telecoms had been deregulated. The labour market had been largely freed, with centralised wage-fixing replaced by enterprise bargaining. State-owned firms had been privatised. A capital-gains tax and a valued-added tax had been brought in, and the double taxation of dividends ended. Corporate and income taxes had both been cut.

These reforms have done much more to transform the Australian economy than the recent improvement in the terms of trade. They have also transformed the country.

Still, the question is whether Australia will continue to be a model economy.  The Economist offers this short video primer on the Australian economy and potential challenges ahead:

Read the full Economist article here.

And listen to an interview with Grimold here.

Posted by Graham Griffith

Incidental Economist on Supply, Demand, and Pig Pickins

05-31-2011 3:49 AM with no comments

For a Memorial Day weekend post, Don Taylor of the Incidental Economist took a break from posts on major national economic and health care policy discussions to analyze something closer and dearer to our hearts (and stomachs): barbecue.  Or more specifically, the economics of barbecue:

I can vividly remember two pig pickins at the home of my grandparents: one to celebrate the wedding of my mom to my step father, and the other to celebrate the life of my grandfather, the afternoon after he was buried. The menu for the two events was exactly the same, but the purpose for the gathering was not. Why the pig pickin?

I think it has to do with the economics of the ‘cull hog.’ A cull hog is a pig that develops a problem that decreases its desirability as it is being ‘topped out’ or grown to a size to take to market to be sold for slaughter (about 180-200 pounds is optimal). When something is wrong with such an animal, such as having an injured foot that would cause a noticeable limp, or having a bulging hernia, it greatly reduces the price that an animal can be sold for at auction. I can remember my grandfather pointing out a hog with a hernia one day when we were loading animals to take to sell at market and saying we would save that one for a pig pickin he was going to hold to celebrate my grandmother’s birthday in a few weeks time. Because the price that could be gotten for such an animal was so low, it made it much easier for people to have large feast celebrations on momentous occasions. And if you raise many pigs, some of them will be such cull hogs, so there will be a steady supply of such cheap animals. And access to such pigs was relatively easy in the past, so many people could get and afford to buy such a pig because the price that could otherwise be obtained for them was so low. Even 30 years ago, there were few people who lived in this general area who didn’t have some connection to a farm, and 100 years ago this would have been even truer. And one 200 pound hog would yield a dressed carcass that weighed ~ 140 pounds that would yield around 45-50 pounds of edible meat, easily feeding 100 people or more. If even 1 in 5 of the 100 attendees brought a side dish or a dessert to share, you had a feast, for a relatively low cost.

Read The economics of barbecue here.

Posted by Graham Griffith

MarketingProfs: Key Traits of a Successful Chief Content Officer

05-31-2011 3:37 AM with no comments

Not many years ago, the only businesses that needed content editors were in the media business.  Now, most companies are essentially content creators in some capacity.  As Ann Handley, chief content officer for MarketingProfs, writes, "everyone doing business online is a de facto 'site publisher.'"  With Chief Content Officer becoming an essential management position, Handley offers this list of "11 key traits" to look for when hiring:

1. Training as a Print or Broadcast Journalist

2. Nose for a Story

3. Digital Intuition

4. Business Acumen

5. An Amateur Passion

6. A Community Leader

7. Social DNA

8. An Open Mind

9. Knowledge of the Industry... or Not

10. A Winning Personality

11. Editorial Skills

Read Handley's elaboration on these traits here.

Posted by Graham Griffith

The New 3D Ad Platform

05-30-2011 4:56 AM with no comments

The BBC informs us that the first 3D ad for the iPad has gone public.  Cooliris developed the ad (for a new Weather Channel series).  We're on the lookout for the ad itself (let us know if you have seen it, and share your impressions).  But thanks to MarketingVox, we were able to track down this demo from Cooliris on their platform for 3D ads:

It seems, as the BBC story points out, that the near future of 3D ads depends a lot on getting the cost for producing a 3D campaign down.  But given how quickly production costs have dropped for other new developments in the digital realm, it appears it is time to start paying attention to 3D and getting a sense for how this technology might be helpful in connecting with consumers.

Posted by Graham Griffith

The Case for Strategic Thinking

05-30-2011 4:40 AM with no comments

Writing Forbes's Work in Progress: Career Talk for Women blog, Holly Green advocates an end to strategic planning.  Instead, she argues that "strategic thinking" is the proper approach in today's business climate.  The old approach is static, but the new approach is based on developing a system that allows a company to respond on the fly in an ever-changing environment.  Green writes:

Strategic planning has a beginning and an end. It is typically conducted by senior management, and usually results in a formal written plan. Strategic thinking never ends. It becomes an integral part of how the organization conducts its business, and needs to be practiced by employees at all levels.

Green argues that successful managers will develop strategic thinking in their organizations by doing the following:

Focus on a target.

Ask the right questions.

Balance the big picture and the details along the way.

Explore new channels.

Teach strategic thinking skills.

Stage your field of vision.

Read Shifting From Strategic Planning to Strategic Agility here.

Posted by Graham Griffith

New Technology, Social Innovation, and Economic Development

05-27-2011 3:53 AM with no comments

We spend a lot of time here at The Watch looking for analysis of the latest innovations in digital media and how they are changing the way people do business in the world today.  And much of that is focused on business in the developed world. But it is important to also recognize that digital innovation can make even more of an impact in the developing world. London Business School professor Kamalini Ramdas addresses the power of social innovation on business and life in Bangladesh in this Wall Street Journal interview:

Posted by Graham Griffith

Mark Thoma on the Output Gap

05-27-2011 3:41 AM with no comments

Mark Thoma is no pessimist.  He believes that the economy will recover, just as it has after past recessions, and even the Great Depression.  He even points out that the US economy is now recovering at "trend rate"-matching the long, long term rate of growth of GDP from 1870-2008.  BUT, Thoma points out that this recovery is still going to take a good bit of time. He shares this projection in his CBS Moneywatch column:

Read Does This Ease Your Worries?: US GDP from 1870-2008 here.

Posted by Graham Griffith

5 Reasons for Small Business Owners to Blog

05-27-2011 3:31 AM with no comments

While some media experts have become skeptical of the future of blogging, and wonder if it hasn't already jumped the shark, the power of blogs in the small business world seems to keep gaining steam.  Martina Iring,  small business marketing consultant and blogger at Small Business Bliss, is a true believer.  And she offers up five reasons all small business owners should be blogging.

SEO (Search Engine Optimization, or Google "juice")

Email marketing content

A new communications channel

A quick and easy way to post updates

Food for social media

Read 5 reasons blogging rocks for small business here.  

(H/t Small Business Trends)

Posted by Graham Griffith

Harvard Business School Dean on the 'Capacity for Moral Failure' Among Business Leaders (and other humans)

05-26-2011 5:26 AM with no comments

As Dean of Harvard Business School, Nitin Nohria is charged with leading the development of some of the top business leaders of the future.  This includes teaching students about business ethics.  Nohria rejects the notion that there are simply bad people who do bad things.  Rather, he argues that overconfidence in one's own "moral capacity" is often the key problem in ethical failures in the business world (and in life, in general, we presume).  Nohria recently addressed this "capacity for moral failure" in an interview at Big Think:

Posted by Graham Griffith

SF Fed Economic Letter: Impact of Energy Costs on Consumers' Inflation Expectations

05-26-2011 4:51 AM with no comments

The latest Thomson Reuters/University of Michigan consumer survey shows that American households are becoming more wary of inflation.  While the survey showed consumers' anticipating 3% inflation back in December, now they are expecting inflation to average 4.5%. 

Bharat Trehan, a research advisor at the Federal Reserve Bank of San Francisco, warns us not to put too much stock in this forecast (largely because of how energy prices affect inflation expectations).  He shares the following graph in an Economic Letter for the San Francisco Fed:

Trehan explains:

Figure 2 shows the results of a regression, a statistical exercise that allows us to estimate how much attention consumers pay to recent core and noncore inflation in setting their inflation expectations for the year ahead. Importantly, the statistical procedure allows for the possibility that the amount of attention consumers pay to either measure of inflation can vary over time.

The black line in the top panel of Figure 2 plots the estimated response of household inflation expectations to recent core inflation. To take one example, the estimate for the fourth quarter of 2000 shows that, if recent core inflation had been one percentage point higher than it was, households would have expected 0.4 percentage point more inflation over 2001. As the figure indicates, the estimated response of consumer expectations to core inflation was unchanged for much of the subsequent decade, though it did rise a bit in 2007 and 2008. Perhaps more noticeable is the decline since 2008, which brought the black line to about 0.1 by the first quarter of 2011, the end of our sample. The two blue lines are error bands that provide a measure of the uncertainty around the estimated response. Two-thirds of the time, the true response should lie between the blue lines. The lower blue line fell below zero beginning in 2010. Once the lower blue line falls below zero, statistically speaking we can no longer distinguish the estimated response from zero. In other words, we can no longer be sure that households are paying attention to the core inflation rate when forming inflation expectations.

The bottom panel of Figure 2 presents the relationship between household inflation expectations and noncore inflation. Household response to noncore inflation seems more variable than household response to core inflation. It is high at the beginning of the sample and falls toward the middle. In the past few years, household expectations seem to have become more sensitive to noncore inflation-at about the same time that household sensitivity to core inflation has gone down.

Read Household Inflation Expectations and the Price of Oil:
It's Déjà Vu All Over Again here. 

Posted by Graham Griffith

Paul Graham and What Y Combinator Looks for in Startups

05-25-2011 4:51 AM with no comments

Six years ago Paul Graham launched Y Combinator, and created a new process for funding and developing startups.  Y Combinator brings selected entrepreneurs to Silicon Valley for a few months, and gives them some, but not a lot of, funding ($18,000).  The conceit is that the money is not so much the key to getting a successful business off the ground.  Rather, it is the training that matters.  And that training is hard to come by in traditional educational institutions. 

So the question then is "who is Y Combinator looking to tap for this training?"  That`s the question that Charlie Rose asked Graham at the TechCrunch Disrupt Conference.  And Graham`s answers might surprise you.  He`s not looking for simply the "best and brightest." 

Video streaming by Ustream

Posted by Graham Griffith

Marketing Optimization Expert on Improving Email Campaigns

05-25-2011 4:39 AM with no comments

While many people focus on exciting new developments in social media, email remains an essential tool for marketers.  In looking for advice on how marketers can get more out of email outreach, Adam T. Sutton, Senior Reporter for Marketing Sherpa, turned to Gaby Paez, Associate Director of Research for the Conversion Group at MECLABS.  Sutton used a recent campaign by Slow Food, a global nonprofit organization, as a case study.  But Paez offered advice that is applicable to a variety of organizations.  Here are the five "tweaks" Paez recommended:

Tweak #1. Emphasize the sender's brand

Tweak #2. Gradually increase subscribers' commitment

Tweak #3. Over-clarify all confusing topics

Tactic #4. Clearly connect emails and landing pages

Tweak #5. Prioritize a single call-to-action

Read Campaign Analysis: Optimization expert lists 5 tweaks to boost an email campaign's conversions here.

Posted by Graham Griffith

Leading a Turnaround at a Not-for-profit During the Recession

05-24-2011 4:25 AM with no comments

The Global Economic Crisis was particularly difficult on many cultural institutions.  With patrons, foundations, and public institutions all going through needed belt-tightening, museums and arts organizations have seen funding drop significantly.  So the efforts of Jack Meyer, chairman of the Boston Ballet, provide some interesting lessons--and not just for leaders of not-for-profit organizations but for all managers.  Meyer took over the Boston Ballet in 2009.  He spoke about managing the ballet's financial recovery during the downturn in this Harvard Business Review interview:

Posted by Graham Griffith

eMarketer: Signs Point to Tablets as More Conducive to Shopping

05-23-2011 2:19 AM with no comments

Citing data from the e-tailing group, eMarketer argues that tablets appear to be better shopping devices than smartphones.  So while fewer people own tablets--eMarketer estimates that just 7.6% of the population will own tablets in 2011, compared to 23.4% of the population for smartphones--marketers might be wise to focus attention on the iPad and its competitors.

Those who do have a tablet are eager to use them for shopping, according to the e-tailing group. One in 10 tablet owners reported using their device for browsing or buying online every day, vs. 6% of smartphone owners. They also made more purchases. Nearly one in four had made at least six purchases in the past six months, compared with 15% of smartphone users who had done they same. They were also much less likely to never use tablets for online buying.

Read Tablets Beat Smartphones for Online Shopping, Buying here.

Posted by Graham Griffith

Planet Money Sells Their Gold

05-23-2011 2:08 AM with no comments

Back in October, we told you about the Planet Money folks buying a small bit of gold.  It was a bit of an experiment, designed at figuring out why gold remains so important, and why it becomes valued in times of economic uncertainty.  Last week, they sold their gold.  And they were left with a big question: "What is the fundamental value of gold?"  They shared a little of what they learned about that value in a report on NPR's Morning Edition. 

Take a listen.

Read and listen to Planet Money's series on gold and the meaning of money here.

Posted by Graham Griffith