When the Elites become tone deaf

Source: Daily Telegraph

The #Brexit vote will have a major impact on Britain, EU, NATO and the West more broadly. The 52-48 majority voting to leave the EU — like many recent US presidential elections — shows a country deeply divided.

The Telegraph’s map shows how London and a few other city centers voted strongly for the EU, while the rest of England voted decisively against the EU. (As the Guardian notes, Labour voters at the edges of London and Liverpool voted against the city center).

Before the results were in (HT: NY Times), pro-EU columnist John Harris wrote Thursday in the Guardian

The UK is now two nations, staring across a political chasm
Leave voters aren’t lemmings jumping off a cliff, and the left urgently needs to understand their choices.
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Two nations, in short, are staring at each other across a political chasm.
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Even those who understand that something seismic is afoot among predominantly working-class voters are still too keen on the idea that they are gullible enough to be led over a cliff by people with whom they would actually disagree, if only they knew the facts. But most people are not really being “led” by anyone. In my experience, Farage, Boris Johnson and Michael Gove et al are viewed by most people with as much cynicism as the people fronting the remain campaign. Moreover, this argument is dangerously redolent of that lousy old Marxist trope of “false consciousness”, whereby people enthusiastically following the supposedly wrong cause are only a speech or poster away from enlightenment, and a sharp left turn.

We need to face up to two things. First, a lot of people want out of the EU because they are worried and angry about the consequences of the free movement of people, and in that sense they have made their choice rationally. Second, even if Farage, Johnson and Gove would doubtless use Brexit as an opportunity to further our journey towards an essentially sink-or-swim society, there are plenty of working-class voters who would probably go along with that.

Meanwhile, pro-Brexit James Bartholomew made a similar point today in the Spectator

Britain’s great divide
The referendum has exposed a huge rift between the metropolitan elite and the rest
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Every election is divisive, but none has pitted rich against poor like this one. The social divide has been far more dramatic than the divide between the two main political parties. In general elections, the professional and managerial classes favour the Tories by a margin of four to three. The difference is nothing like as marked as the social divide in the referendum vote. As a generalisation, the split has been between the educated ‘haves’ on one side and the working class on the other. The Remainers found ways of making this point — casting themselves as cosmopolitan and ‘open’ against the crude and (presumably) closed-minded Leavers.

I came across quite a bit of scornful self-righteousness among the rich Remainers. In one street of private houses, a woman repeatedly shouted at us: ‘You’re all bonkers! Get out! You are not wanted here!’ A prosperous-looking man at the doorway of his private house informed us that immigration was a good thing and was economically necessary: the implication being that those who seek controlled immigration are both anti-immigrant and ignorant of the economics of the matter. His irritated parting shot was: ‘I hope you lose!’

The divide shows how changes brought about by globalisation and large-scale immigration have affected different classes in contrasting ways. For the ‘haves’, it has been a boon. The Notting Hill crowd now has cheap, highly qualified Polish builders, well-educated Polish cleaners and perhaps a Romanian nanny for their children. They go to Caffè Nero and are served by polite Italians. They feel deliciously international and open-minded while enjoying cheaper, better services than they otherwise would.
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At the other end of the spectrum was Gladys, who I met at the door of her council house on Monday. She was reluctant at first to say which way she was voting. She got her council house in 1975 after two years waiting for it. But now she worries for her sons and grandchildren. How are they going to afford somewhere to live? The cost of mortgages just goes up and up, she said.
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Gladys was not xenophobic or racist. What bothers her isn’t immigration, as such, but the government’s inability to respond to immigration and the resulting shortage of housing and school and hospital places. The rich folk across the road could get round these problems. Hector and Harriet could go to a private school if necessary. If there was a two-week wait to see their NHS GP, they could go private. They have already got their own flat or house, which has gone up nicely in value, thank you very much.

Both reminded of whjat Peggy Noonan — a moderate Republican and former Reagan speechwriter — wrote in February:

Trump and the Rise of the Unprotected
Why political professionals are struggling to make sense of the world they created.
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I keep thinking of how Donald Trump got to be the very likely Republican nominee. There are many answers and reasons, but my thoughts keep revolving around the idea of protection. It is a theme that has been something of a preoccupation in this space over the years, but I think I am seeing it now grow into an overall political dynamic throughout the West.

There are the protected and the unprotected. The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully.
The protected are the accomplished, the secure, the successful—those who have power or access to it. They are protected from much of the roughness of the world. More to the point, they are protected from the world they have created. Again, they make public policy and have for some time.

I want to call them the elite to load the rhetorical dice, but let’s stick with the protected.

They are figures in government, politics and media. They live in nice neighborhoods, safe ones. Their families function, their kids go to good schools, they’ve got some money. All of these things tend to isolate them, or provide buffers. Some of them—in Washington it is important officials in the executive branch or on the Hill; in Brussels, significant figures in the European Union—literally have their own security details.

Because they are protected they feel they can do pretty much anything, impose any reality. They’re insulated from many of the effects of their own decisions.

One issue obviously roiling the U.S. and western Europe is immigration. … It is of course the issue that made Donald Trump. Britain will probably leave the European Union over it.
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If you are an unprotected American—one with limited resources and negligible access to power—you have absorbed some lessons from the past 20 years’ experience of illegal immigration. You know the Democrats won’t protect you and the Republicans won’t help you. Both parties refused to control the border.
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Many Americans suffered from illegal immigration—its impact on labor markets, financial costs, crime, the sense that the rule of law was collapsing. But the protected did fine—more workers at lower wages. No effect of illegal immigration was likely to hurt them personally.

It was good for the protected. But the unprotected watched and saw. They realized the protected were not looking out for them, and they inferred that they were not looking out for the country, either.

The unprotected came to think they owed the establishment—another word for the protected—nothing, no particular loyalty, no old allegiance.
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What marks this political moment, in Europe and the U.S., is the rise of the unprotected. It is the rise of people who don’t have all that much against those who’ve been given many blessings and seem to believe they have them not because they’re fortunate but because they’re better.

You see the dynamic in many spheres. In Hollywood, as we still call it, where they make our rough culture, they are careful to protect their own children from its ill effects. In places with failing schools, they choose not to help them through the school liberation movement— charter schools, choice, etc.—because they fear to go up against the most reactionary professional group in America, the teachers unions. They let the public schools flounder. But their children go to the best private schools.

This is a terrible feature of our age—that we are governed by protected people who don’t seem to care that much about their unprotected fellow citizens.

And a country really can’t continue this way.

In wise governments the top is attentive to the realities of the lives of normal people, and careful about their anxieties. That’s more or less how America used to be. There didn’t seem to be so much distance between the top and the bottom.
Now is seems the attitude of the top half is: You’re on your own. Get with the program, little racist.

My European history isn’t very good, but the French Revolution happened in part because the Elites became tone deaf. (IIRC it was also a factor in the Russian and Chinese revolutions, although both involved a well-organized grab for power by one faction against another). In a democracy, we get to have our elections via ballot box — as long as the system isn’t rigged. In that regard, such a vote is a triumph (and not a failure) of the system of democracy that England pioneered in the 2nd millenium.

Source: Financial Times

Understanding Apple's platform strategy: A little theory can help

Today is the first day of the Worldwide Developer’s Conference (WWDC), Apple’s annual effort to both inform and excite its ecosystem of third-party providers. As with any conference, it’s also a chance to get together with friends, old and new, particularly at parties thrown by companies that want to improve their visibility to the developer attendees.

I remember in 1988 going to my first WWDC in San Jose: our company was so poor that the two cofounders (Neil and I) had to split a single pass to be able to have any presence at all. My last WWDC was in 2003, as my company neared its end, and I went to meet with a former employee who was in town for the conference. The conference is capped at 5,000 developers, but rather than use price to discourage demand (as do most media companies), since 2014 Apple has used a lottery system to allocate seats to registered developers.

Since the early years of the Jobs II era (1997-2011), WWDC has been used to make important product and technology announcements for the broader public. As such, it also gives the business press to take another junket to San Francisco and write their annual (or quarterly) pontifications on the state of Apple, its products, market position, competitive advantage, business model, stock price or anything else.

One article caught my attention on Twitter this morning:

Apple's True Strengths Don't Lie in Innovation
By Christopher Mims
Wall Street Journal, 13 June 2016, p. B.1.
…Apple's normally festive Worldwide Developers Conference begins Monday under something of a pall. The company's first quarterly sales decline in 13 years has many people asking whether it will grow again. They also want to know how Apple, with its healthy supply of cash, could make that happen.

The conventional answer is "create a totally new product line," or its cousin, "unveil something no one has done before." That is, Apple should try to out-innovate its competitors.

That is a terrible idea. It runs counter to Apple's strengths, as well as its growth trajectory.

Here is why: Apple's core strengths are the scale of its ecosystem -- the company says it has more than one billion active devices world-wide -- and the spending power of their owners.

As someone who’s studied the theory of standards wars for two decades — and Apple’s practice of standards wars for three decades, and wrote the most-cited paper on Apple’s iPhone strategy — this seemed somewhere between foolish and idiotic.

But if you dig a little deeper, what the columnist (who seems prone to exaggerating for effect) really is doing is playing a semantic game. The language of "innovation is bad, no innovation is good” would be more accurately summarized as “risky radical innovation is bad, continuous incremental innovation is good.”

The author states

Apple is expert at offering a more polished, more accessible version of products and services that rivals have offered for years. And yet, it reaps over 90% of the smartphone industry's profit, and in 2015 its App Store delivered 75% more revenue to developers than Alphabet Inc.'s Google Play store.

If you look up “innovation” in the Oxford English Dictionary, the very first definition is:

1a. The action of innovating; the introduction of novelties; the alteration of what is established by the introduction of new elements or forms.

In other words, by offering a superior (and unique) version of a now standard product category, Apple is following the dictionary definition of “the introduction of new elements of forms.”

Meanwhile, any MBA who’s had a decent competitive strategy class can tell you that if you have a better product — and consistently superior profits — then you have successfully created some form of sustained competitive advantage that has survived efforts by your rivals to compete away that advantage and those superior margins.

Perhaps this confusion is because the author has an undergraduate neuroscience major but no business degree.

But once we get away from the terminology problems, I did find one paragraph that seemed both factual and prescient:

In any case, I think it will be many years before mobile is toppled as the dominant platform. The PC ruled for nearly 30 years, and we are less than a decade into the age of the iPhone.

I don’t agree with the conclusion that Apple (or Google or Facebook) shouldn’t pursue related diversification. However, I do agree that it must feed and harvest its mobile “cash cow” (as BCG defined it 45 years ago) while continuing to search for new growth opportunities.

As an Apple shareholder, I’m disappointed at the loss in price and market cap over the past year as it lost its growth multiple. But I still think there’s enough of the company’s DNA (even after the loss of its visionary founder) to propel it to new growth as it finds a way to meet needs unmet by its many competitors and imitators.