Robot Reviews: Robots in Writing And Publishing


Robot-woman-office

How many writers will be left? – All rights: fabiusmaximus.com

The world is about to go through a period of unprecedented change and great disruption. “Macro-disrupters” are churning through the workforce, but have not yet reached a “Tipping Point” (to borrow from Malcolm Gladwell), where we “the big change” becomes visible. A virtuous cycle of better health and education, followed by higher income and smaller families, is erasing many of the differences in the standard of living around the world. This virtuous cycle leads to an end of global population growth by 2050, when the world’s population peaks at 11.5 billion. The population as a whole will no longer grow, but every year more of that population will be over 65 years old, leading to a cascade of disruptive changes to the work force, the economy and world culture.

Now, a new generation of intelligent “learning” robots are rolling off the assembly line, and headed to your workplace. Will your job survive the 21st century? It’s going to take more than one article to answer that question, which is why this series was created. In each article we look at specific jobs and industries, identifying the technologies that will have the biggest impact. Today’s deep dive will look at creative writing and publishing!

IN BRIEF – PUBLISHING: Traditional print publishing has been in trouble for decades. The arrival of radio and TV news, was the start of a long struggle between print and technology. Electronic news could deliver the message faster, but print could deliver in-depth coverage. The Internet broke the time limits of broadcast TV. Digital news could be as lengthy as you liked, and was enriched by multi-media content. Blogging arrived and would eventually grow to 39 million writers in just the US. But were these writers… reporters?

Blog content is sometimes very good (Huffington Post) and sometimes not so good (anything with cats), but bloggers and social media increasingly beat traditional news to the story: earthquakes, disaster sites, political revolutions, live video of controversial Publising - Ad Revenuesarrests, even trend spotting. The Internet also undermined ad revenues by offering advertising customized to the reader or to the story. And then Craigslist and competitors offered free classified ads. Not able to compete with rapid market changes, newspapers and magazines have been in steep decline. Since 2000, publishing in general lost a third of employees, and newspapers lost two thirds of revenue.

Book publishing has been equally battered by new technology. In the 1980s book lovers feared that Barnes and Noble type super bookstores would wipe out small bookstores and the specialty books they sold. Then Amazon.com arrived. Amazon was not the first on-line bookseller, but it quickly became THE dominant bookseller. Amazon also backed disruptive technologies: ebooks, the Kindle ereader, print on demand and a standard price of $9.99 or less for an ebook (far below the $25-$30 cost for a hard cover book).

Old publishing had strict limits on how many new book titles could be released every year, because physical books require investment by the publisher: payments to buy the book, artists to design of the cover, promotional materials, and book tours. Publishers would only gain back their investment as books were sold. Of course some books would lose money. Print on demand and ebooks have virtually no upfront costs, allowing anyone to “publish” a book by simply emailing a file to the epublisher. The file then sits on a server until purchased, when the ebook is electronically sent to the customer. Or, the file is sent to a robot that prints a single physical book, and then mails it to the purchaser.

Without sunk costs, and with every book sale delivering guaranteed profits, new publishing models are very attractive to authors. Traditional, and hefty, fees charged by Publishers are harder to justify. Technology has made book publishing increasingly challenging, but that same technology has also created a golden age for independent writers, who would never have been given a book to traditional publishers.

Textbooks are a $7 billion market, with very unhappy customers. Unlike books that readers choose, textbooks are assigned by schools and professors. College textbooks typically cost $100 or more, and new editions are issued every few years to prevent students from buying inexpensive used books. School boards want alternatives, and are increasingly participating in the “Open Textbook” movement. Just as various “Open Software” groups make software code available for free to the public, Open Textbook allows schools, teachers, students and the general public to freely print (books and ebooks), edit, translate and distribute their content. Use of Open Textbook content can reduce book costs for schools and students by up to 80%. That’s a positive trend for buyers, but not for text book authors.

NEW TECHNOLOGY: The last generation of robots were industrial. They reduced the cost of publication, distributed ebooks, and fueled indie publishing. The new robots are software, rather than physical devices. The key technology is Natural Language Generation and Natural Language Programming. Artificial Intelligence (A.I.) applications can collect information from the Internet or other sources and use it to write a story. Similarly, programs can be told what they need to do, by providing written examples, and feedback on the results.

Programming is out, and learning is in. Even simple tasks, can be composed of many even simpler rules. Programming required that these rules be identified, verified, converted into code, tested and then implemented. This process is slow and expensive when performed by humans, but a cheap and quick process when robots learn on their own. Robotic learning is just like human’s learning: provide examples of what needs to be done, rate the work, point out what needs to be corrected, ensure its the right language for the right audience, and repeat. New robot writers quickly become experts.

For newspapers and magazines, especially those with a technical focus, today’s generation of robot writers can take over reporter jobs. In the 20th Century, newspapers depended on News Services (ex.: Associated Press and Reuters) to provide stories to fill out their news coverage. Most newspapers use services for national and international news stories, and hire reporters to cover local news. The Associated Press (AP) reporters used to write “Quarterly Earnings Reports” for publicly traded firms, but could only produce 300 every quarter. AP turned to the robots of AutomatedInsights, and now quarterly production has risen to 3,750 reports, which AP rates as being as good or better than human written reports. Lower cost, much higher output and no late reporting because someone was out sick that day.

A competing firm, NarrativeScience produces similar products, and recently moved into sports stories. Their A.I. robot can write a story, or even customize stories for specific customers. Custom internet ads created new revenue streams. Could custom reporting, perhaps emphasizing information about local teams, help return newspapers to profitability? Robots can build new bonds with readers by corresponding on forums and social media, or by writing individual emails. This level of reader interaction is not possible, or cost-effective with human writers. Even if robots never produce quite the quality of the very best humans, the speed of robotic writing (which will get faster every year) will transform the position of reporter into something much more interactive, making it impossible for people to perform the function. Once last firm of note, is Arria in the U.K., which uses technology developed at the University of Aberdeen in Scotland. Expect to see many, many more providers soon.

EMPLOYMENT IMPACT: Writing is often a part-time or unpaid profession: volunteer writers, occasional contributors to professional jPublishing Statsournals, aspiring writers waiting for their first book sale. Many of these writers are not counted in employment statistics, and are instead reported under their “day job”.  The Bureau of Labor Statistics (BLS) reports that there are over a million workers in Publishing, only 294,000 of which are professional writers and editors, working primarily in magazines, newspapers and textbook departments.

Downward pressure from declining sales and lost advertising revenues have pushed writing towards a robotic solution. The process is already started, and the tools are available. Because these robots are disembodied software, we may not see much visual evidence in the workplace as the robots take over. We can expect that most full-time writing positions will disappear in a decade, with most newspapers and publishers heavily relying on robot writers by 2020. In the peculiar world of Textbook publishing, new 1st editions may still be written by human writers, but the job of publishing 2nd and later editions should be turned over to robots.

BLS reports another 637,000 workers in Advertising, Marketing and Public relations. Few of these positions are full-time writers, but many have significant writing responsibilities. Simple robots have been spamming email and writing ads that are stories in disguise. Google and other search engines search for these articles, and penalize robotic content. The latest wave of internet ads are cooperative and put an end to the “bot wars”. Advertisers and search engines now work together, presenting “sponsored” or “native” ads, which look like news stories or search results. As news and advertising blur together, tools designed for reporters become increasingly relevant to advertising, marketing and public relations. Earlier technologies cut telemarketing employment by half, and Natural Language Generation will make advertising a one-to-one relationship that humans cannot provide.

Similarly, corporate managers do a lot of writing and reporting. Before computers, a corporate manager might have spent most of his time producing just one or two reports every month. Today, “spreadsheet” type reports are mostly computer generated, and managers spend time interpret reports, and converting the data into insights, usually as a PowerPoint. Academics and Scientists must “Publish or Perish”, producing books and articles to advance in their career. 1.3 million scientists and 1.8 million post-secondary educators do a lot of writing, but are rarely counted as writers. Robot writers may make their lives easier, but it’s not likely to have a major impact on employment. However, writers in advertising and marketing, will probably shrink by a third and corporate managers can expect at least a 10% to 20% impact.

Robots can write books, but so far they haven’t written any great books. Even if robots become good book authors, the book market will continue to expand until at least 2050, when world population reaches a peak of 11.5 billion. Even after population growth stalls, the book market may continue to expand as populations grow older. Today’s population of 43 million Americans over the age of 65, will grow to 84 million by 2050. A large retired population has more leisure hours for reading.

What about screenwriters? There are only 12,000 members of the screenwriter’s guild, and only 10% of members are listed as “actively employed”. Nonetheless, Hollywood has done much to find a magic formula to simplify the screenwriting process. Blake Snyder authored the book, “Save the Cat”, which claims to have discovered that formula, breaking the script for every movie into 15 “beats”, or events, that must occur in order in every successful movie. According to Snyder you script is broken into pages, and each page is one minute of movie time, and you can mark the beats to know exactly where each event will happen. If Snyder broke the code, or if his students write all of Hollywood’s movies (actually, they do) if you read his book you will see that every big American movie made in the last decade follow his beats…. to the minute. Movies are now digitally recorded, increasingly with computer generated graphics. Thanks to Mr. Snyder’s book, robot script writing doesn’t have far to go to remove human creativity from movie making.

SUMMARY: At less than a million jobs, professional writers represent less than 1% of the US labor market. The introduction of Natural Language Generation will quickly tale over a significant number of these jobs, and then automate writing functions for the remaining jobs. Fast and intelligent robot writers will produce hyper-specialized correspondence, articles and reports, fueling a new age of customer-centric journalism and advertising. Advanced robot writers already create articles for newspapers and professional journals. “New Titles” published by the textbook industry are mostly “new” editions of old books, with little or no new content. Squeezed by budget constrained school boards and parents, and a growing library of free “Open Textbook” publications, the industry must find a  new business model or turn over post 1st  edition publishing to a robotic staff. The rapid decline in publishing markets and revenues will drive rapid adoption of Natural Language tools, and by 2020 the robot writer will be a common feature of every publisher.

The impact on book publishing, especially fiction, is harder to predict. More readers, with more leisure time, will increase the size of the book market. At the same time, every potential author will be able to publish a book, setting new records in Publishing, well beyond the 2 million new book titles (US = 300,000) published worldwide today. This growing market is increasingly fragmented: printed books, ebooks, self-published books and free books. Expect few millionaire writers, not that the “millionaires club” for authors was ever large.

Natural Language tools, electronic publishing and other technologies will significantly reduce employment in publishing and advertising, probably eliminating 30% or more of total employment. While this is significant within publishing, it has little impact on a labor market of 145 million workers. The real impact of robot writers will be in all of the non-writer jobs, that have significant writing responsibilities. Academics, business managers, scientists and other professionals spend a lot of time turning data into presentations and documents. If robot writers make these positions just 10-20% more efficient, millions of positions might be vacated.

The next time you’re at work, take a look around you. Are you one of a large number of people performing exactly the same function? Does your writing follow a template, and have a standard “look and feel”? Your job might be on the front lines of the robot revolution. If you’re a brilliant writer with an established and engaged audience, you  don’t need to start clearing out your desk quite yet. But if you spend most of your day writing competent but uninspiring content, it’s time to start thinking about a new profession.

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Who Will Manage Your Robot Revolution?


Robot - PepperThe robots are coming and they will profoundly your job and how employment works in America, and the world. That’s a big statement, but it is a big, big revolution. By now you know the world “Drone”. It means an unmanned machine, usually one that flies. Just a few years ago, almost no one used this term for a robot. From non-existence to a regular on the nightly news. That’s how the robot revolution works. Today… nothing. Tomorrow they’re everywhere!

It’s not just multi-million dollar planes for reconnaissance and killing terrorists. The US military has thousands of military drones on the battlefield, and more arriving every day. Civilian are buying small helicopter-like drones, as hobbyists, often to take high resolution aerial photography. No one knows how many have been sold, but on Amazon, the top 4 drones had more than 10,000 reviews. Not everyone who buys places a review, so 2-3 times that number were purchased, and then add in other models… 50,000? Double that foe everyone else that sells drones… a conservative 100,000? Robots are going from unknown to mainstream just as fast as drones, and the new generation of robots are looking for jobs. Robots may create new jobs, or they may replace human workers. In your firm, who at your firm is in charge of the robot revolution?

Employment Statistics

Bureau of Economic Analysis, National Income and Product Accounts.

The nature of employment went through dramatic and turbulent changes in America. In 1900 agriculture was 40% of all employment, down from 70% in the 1840’s. Today, even including logging, fisheries, and all managers (half of farming jobs), it’s just 1.5% of U.S. employment. As dramatic as this drop was, remember that in 1840 the 70% of us that were farmers, fed just under 18 million Americans. Today the 1.5% of farmers, feeds 320 million Americans, plus we sell a huge surplus to overseas markets. Technology drove these changes. The horse gave way to the internal combustion tractor, which gave way to modern GPS and computer guided farm management. Agriculture is not unique. In 1840 just 10% of the workforce was employed in manufacturing. By 1960 it was 40%, and by 2010 it had fallen to 20%. These numbers will fall still further as work that was automated or outsourced in the wake of the 2009 Global Financial Collapse, yields further efficiencies.

Robots entering the workplace today will drive the next, and possibly last, stage of human industrial production. A century ago, technology provided artificial muscle, but that muscle needed to be guided by a human hand. Motors and engines developed for industrial use, later became part of our consumer products. A car is a big mechanical muscle on wheels, but it’s evolution added power steering and braking to allow us to control every more powerful vehicles. At home, the typical American has power tools to make DIY jobs easier. The next round of industrial technology added robots, machines able to perform simple tasks faster and better than humans. But these early robots were just giant arms, with tiny brains that could not see or hear. They did their one task fantastically well (ex.: attach 4 screws into a door), but were unable to handle any errors or changes in the assembly line. Robots could only work in highly structured factories, not an office or a less structured environment. New robots can see, hear. They can talk and they can deal with changes. New robots are beginning to think.

Today, “lights out” manufacturing is focused on factories that can be completely automated. No workers, no administrators, no managers. The robots even deal with supply and inventory. Robots will be managed by robots. In the next decade, experts believe that a third of American jobs will be replaced by robots, virtually wiping out employment in manufacturing.  Total replacement of human employment in manufacturing, and the few remaining positions in agriculture, are not the end of robotics. Instead, it is the start of a new stage in American employment. The same robots that can manage a factory, can manage functions in corporations. And…. they will!

http://www.businessinsider.com/experts-predict-that-one-third-of-jobs-will-be-replaced-by-robots-2015-5

Robots in the Corporation: While farm machines were evolving into farm robots, and factories were learning to run themselves, corporations have benefited from advancements in robotic. Corporate robots rarely have arms and legs, instead they rely on robotic intelligence and: answer the phone, find information you want in a database, or track your access as you move through a building. Years ago, visiting a corporate headquarters meant being greeted at the door, guided from floor to floor, and then handed off from one receptionist to another…. each person guiding you to specific locations, and away from secure areas. Today, a guard checks a database and gives you an ID card. After that, a smart building acts as a robot, managing your time in the building. You scan your ID to get past doors and turnstiles at the main entrance, and then again at different floors. The ID has your meeting locations printed on front. Elevators scan your ID, only letting you off at floors you are programmed for.

Collectively, these  systems perform tasks that used to require a large number of guards, receptionists and secretaries, but are  far more coordinated. In an emergency, such as a fire, some buildings can produce reports on everyone in the building, including your guests… and who has not yet been evacuated. Existing systems will soon be upgraded with the newest generation of voice recognition and voice generation. Imagine more advanced versions of Siri and other tools on your phone, that can replace the human being at the other end of a phone: phone operators, call centers, someone taking your order when you shop on the phone, information kiosks, anyone walking your through filling out a form (insurance, opening an account, etc.). Some minor robots are already in place, such as the electronic assistants that answer questions and accept payments for your cell phones. Add a little more intelligence, and they can take simple commands to pull together data into reports and presentations.

Today, “knowledge workers” spend all day finding and manipulating data, in spreadsheets and databases. Big corporations have thousands of workers who spend most or all of their time doing this. These “knowledge workers” have become the 21st century’s data factory workers. Just as manufacturing takes lower cost materials and turns them into higher value goods, knowledge workers take lower value data and turn it into higher value data. Consider “analytic” jobs in corporate America. In 1970 analysts would to a nearly library to gather data, and then manually calculate formulas to get results. The PC revolution of the 1980s-90s replaced manual calculations with spreadsheets. In the 190’s and beyond financial data went from  print to electronic, and was available on the desktop. Electronic tools competed with ever more useful macro’s and tools to automate the writing of financial models.

When a senior investment banker wants a financial model that compares the value of companies, he tells an analyst, “Do a comp model for company ‘X’, with three comparable firms.” New A.I. systems can be taught to understand this request, and respond to this request. Once the task is understood, every robot can learn the tasks in few minutes, as opposed to months to train a human being. A trained A.I. would produce results in a few minutes, compared to an analyst taking hours or days.

A huge amount of corporate work is  sorting out and replying to emails, or filling out spreadsheets.  “Reading” an email or a spreadsheet can now be done with natural language programming, where computers look at documents, try to figure out how to handle it (answer the email, forward it to someone, build a spreadsheet, etc.). Because of all of the automation that has gone before, and all of the examples of good and bad work done by humans, computers can “learn” from these documents. Letting computer learn by themselves is far faster and cheaper than having humans do the programming. Robots programming robots is why the robot revolution will move much faster than previous waves of technology.  A.I. will learn from the vast archives of documents in every corporation. Learning robots will quickly move from basic competency to high level expertise.

A human workforce needs a generation to develop a new type of expertise and then train a significant number of workers. Consider computer support, MBA’s, or environmental scientists. Once each of these become rapidly growing fields, it takes decades for schools to develop new degrees, create standards and train students. Clearly, human beings cannot learn at this speed. Once a robot learns how to perform a corporate function, new robots just need to upload the new information. Analysts in investment banks, junior lawyers in law firms, interns starting in accounting firms… even after they have the academic training, it has to be followed by years of corporate training. When new workers arrive, the same training needs to be repeated every year. If the work remains the same, you just need to upload last year’s program to do the work.

Even more importantly, a third year lawyer (or bankers, or accountant) has skills that a 1st or 2nd year does not. If the work suddenly requires twice as many third year professionals, you cannot easily obtain them. You, and all of your competitors, need two years of training to get a starting third year professional. The alternative is to try to hire them away from your competitors, usually at a significant premium. If you succeed, then your competitors will be forced to steal your junior professionals. You need to plan your needs years in advance, and your plan from 2 years ago is almost always at odds with reality. Alternatively, robotic capacity can be added as needed, and robots double in power (or drop in price by half) ever couple of years. Human capacity is pretty much unchanged from year to year.

Who Runs The Robots?: Today, the responsibility for office robotics is loosely divided between HR, IT, Procurement and the business unit. HR keeps an eye on people issues, including changes in the employment market. They know what is needed to staff today, and may examine alternative sourcing (contract worker? Interns?), but HR knows little about specific robotic replacements, or how an automation project managed by IT will ultimately impact the firm or how workers can be redeployed. IT will be responsible for maintaining robots, or may just have oversight of outsourcing vendors who implement new robots. IT will help define the technology and provider, but they cannot create the business plan… the map… that will lead your firm from the old employment market to the new one.

The most likely player to pull together the stakeholders and develop the business map is procurement. Procurement currently examines the firm’s expenses, finding trends in the spend and then looking at alternatives to source the same service or product. Employee compensation, however,  usually falls outside of procurement’s domain. Once robots and human workers are both legitimate resources to perform a function, we will need a more integrated way to deal with sourcing these jobs.

Procurement has the tools and expertise to build the business map, HR controls the domain and It will implement and manage the solution. These groups need to work together and use their individual talents to develop and implement a change roadmap for how robots will be integrated into a modern corporation. This requires more than a short term plan that shows which jobs will be lost to robotics this year. It requires an in-depth. Long-term (10 years?) analysis of where technology is advancing, which types of employment are most likely to be affected and what are all the options to replace and redeploy current staff.

Remember, adoption of new technology is just the start of your business roadmap. After the transition begins, what happens to the human workers? Can the corporation develop these workers for higher skilled positions? If highly educated young professionals can only look forwards to a few employable years in a corporation, will the best and the brightest graduates choose other options… such as entering the creativity industry and self-funding through crowdsourcing and on-line sales? If major corporations fail to develop a roadmap to deploy workers in the new employment market, the robot revolution overwhelm them … just as the outsourcing revolution did!

HR, IT and Procurement need to pool their resources to get in front of the changes that robotics and artificial intelligence will bring. This is the biggest change to the corporation that has happened in the 21st Century. For most corporations, the very best scenario means that corporations and employees will go through decades of challenging transition. In the worst case, corporations without roadmaps will be unable to rapidly redeploy staff and integrate robotics, failing to keep up with the market and  eventually failing to operate as a corporation, causing far greater disruptions to employment and national wealth.

The robot revolution is going to set a record for the speed of change. If your corporation is not aware of the coming changes and building a plan in the next few years, it may be too late to catch up later. New, opportunities for the best and brightest of America’s young workers exist outside of the corporation, and will mature into competitors to traditional corporations. If your corporation wants to keep your best workers, start drawing up your map today! At least, that’s my Niccolls worth for today!

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The Robot Revolution… Is Closer Than You Think!


Robots - Baxter and Sawyer

Sawyer, and his big brother Baxter! Photo – All Rights: rethink robotics

The latest Avengers movie, “The Age of Ultron”, has the media thinking about robots. Of course, it’s not just Ultron. Everyone’s favorite Killbot, the T-800, AKA Terminator, AKA Arnold Schwarzenegger, is back from the future to take one last shot at conquering the box office. And then there’s nearly nightly news on real life drone strikes in the Middle East. We can see on the nightly news that our military is trying it’s best to imitate art as it replaces soldiers with… well… robots that… umm… shoot and kill political targets. Suddenly, robots everywhere in the journals of the Corporate 500’s… the New York Times, Harvard Business Review, Forbes and McKinsey (the world’s largest consulting firm)…  are all writing about the impact of the new generation of robots. I do want to logic behind legally sanctioned Killbots, but not today. Rather than the robot apocalypse, today we will examine the only  slightly less frightening topic… will robots steal our jobs?

There are two camps of thought on robots in the workplace. First, we have the palpable fear that when robots combine with Artificial Intelligence (A.I.), human employment will be decimated. Extremists in this school (tech luminaries such as Elon Musk, Bill Gates and Steve Hawking) fear that robots learn and improve so quickly, they will soon surpass human intelligence, take over the world and possibly wipe out humanity. The other school of thought, has a calmer message. Yes, there will be changes and displacement, but if robots and super intelligent A.I.’s work together with humans, we can create a golden age of productivity and innovation. The merger of technology and humanity may cure all diseases, allow us to colonize the stars and perhaps conquer death.

It’s too soon to organize resistance cells for the robot revolution, but, “co-operate and everything will be OK”,  doesn’t sound right either. There’s nothing wrong with technology cooperation, but that’s a last-gen scenario. Knowledge workers have been cooperating with ever advancing technology for decades. Industrial workers have been cooperating with technology for much longer, for at least all of the last century. Perhaps, if we examine the last technology revolution we can tell us something about coming changes in the corporate workforce.

A Bit of History: Paul Drucker was one of the most influential management theorists of the 20th Century. Drucker’s concepts heavily influenced U.S. manufacturing, and launched quality management in Japan in the 1980s, when they dominated international manufacturing. A 1991 report from Drucker showed that the effective use of technology and management techniques, increased 20th century  worker productivity by 45 times. That is absolutely staggering! However, in professional services corporations (accounting, legal, consulting, finance, etc.), the same increases in productivity were not seen.  Why? Because professional service corporations did not apply “scientific management” to the degree that a factory would.

We easily forget how rapidly our environment changes, the things we buy improve in quality, features and price. In 1950, a 12” Black and White Philco brand TV cost $499 ($5,000 in 2015 dollars). Today, you can buy a lot of TV for $500 or $5,000: MASSIVE screen size, color, HD, digital recording, streaming media, stereo sound, etc. Most of these options would have been unobtainable in 1950, at any price. Or you could  watch free TV via an app on your smart  phone. This concept of “A lot more for a lot less”, doesn’t apply to the bills from your lawyer, or any other professional service. Yet, professional service firms have invest heavily in computers, software, and automation… just like factories and agriculture. Computers have their own rules of efficiency. This most important of which is Moore’s law. This states that the cost of a computer drops by half every couple of years. But the efficiency given by decades of technology investment has not driven down prices. Where is the “missing” efficiency?

The biggest cost for a professional corporations, is the cost of professional compensation. In an investment bank, compensation is half of all costs, with compensation for the most senior member rising dramatically over the last few decades. So long as these positions exist, they will remain high cost. Strangely, while professional service firms apply all sorts of productivity and cost controls though their procurement department, similar controls are not applied to professionals, especially the most expensive professionals. That’s not the say that there are no costs controls for personnel, staff: reports on time per project or per client, fills out an expense forms, etc. However, the level of control this provides over their primary cost is about the same as the time cards used in factories at the turn of the 20th Century. A very expensive resource, a multi-million dollar lawyer or banker, can assign themselves to projects and usually doesn’t fill out a timesheet. In a factory, a multi-million dollar piece of equipment requires numerous approvals before it can be used. True, a professional is not a machine, but your bottom line does not care if your underutilized resource is an A.I. or an analyst.

High compensation, poor tracking and ineffectively defined processes keep expensive professional services, expensive. A law firm and a car factory are not the same, but they share many of the same characteristics. They both have many people with the same titles performing similar or identical work, generating “value” for the work they process. The most important difference may be that in a car factory, the “focus” of the organization is the car, but in the law firm the focus is the lawyer.

Law firm automation focuses on augmenting lawyer capabilities, and developing junior lawyers into higher paid senior lawyers. The “law factory” splits it’s efforts into producing completed cases, and creating senior lawyer, adding both costs to client billing. Publications such as The America Lawyer provide critical statistics on lawyer compensation, new lawyer graduates, lawyers per firm, etc. These are lawyer specific numbers. The auto industry produces statistics on cars: what they cost, features, mileage, expected years on the road, etc. When the focus of the firm is the products, become just one element of the product. That’s when the work can be experimented with and new types of resources substituted. That’s when innovation, including automation and outsourcing, happen and where production costs drop dramatically.

As corporate America transitioned from the 20th to the 21st century, outsourcing and automation migrated from manufacturing to the corporate workplace. Outsourcing mainly impacted support services, but the line between support and professional services moved. Outsourcing was sometimes problematic, and automation often did not go far enough or was not robust enough, but it got better, and the line moved again. Malcolm Gladwell’s book, “The Tipping Point,” tells us that things don’t suddenly happen. Rather, change happens slowly for a long time until a point is reached where change happens very quickly. That’s the tipping point. A period of rapid change. The latest generation of robots and A.I.s are the results of years of slow progress. Now they are approaching that tipping point where new robots will move quickly and deeply into manufacturing, agriculture AND the corporation. Take the capabilities of robots, add the economic pressure of a growing economy and mix in the pressure for higher wages after years of flat compensation, and we have a formula for a revolution in the workplace. But that revolution wont’ come from HR, it will come from the procurement department. And that’s the game changer.

Outsourcing Drives Robotics: Consider how China has dealt with its labor market issues. Back in the 1970’s it was clear that the population of China didn’t align with their economic plan. Too many people, too few jobs, not enough industrial development. China instituted a one-child policy in 1981, to align population growth with reasonable economic growth, and preserve political stability. Globalization and open international trade was just taking hold in the U.S. and Europe, allowing China to target manufacturing outsourcing as the driver for the tens of millions of new jobs they needed every year. Economic stability would guarantee political stability. China would give away land, mineral resources, electricity and anything else needed to build the world’s largest portfolio of outsourcing programs. While each outsourcer individually needs profitable contracts, overall China put jobs ahead of profitability. At least in the early years.

China did become the premier outsourced manufacturing location in the world, progressing from low-end manufacturing to eventually building the most sophisticated products in the world. Along the way China began shifting its focus from Chinese workers to the Chinese Brand, and national prestige. Foxconn, LG, China Construction Bank, Alibaba are some of the biggest, best known and highly rated companies in the world. China’s perception of itself has changed. In an underdeveloped China, everyone did whatever was necessary to survive. But as the world’s biggest economy, the workers of China want their share of the prosperity.

For years there have been massive strikes and protests (up to 500 a day in 2012) that received little coverage in the US and Europe.  More recent protests that endangered the production of the iPhone, went viral and focused attention on the working conditions and pay in China. A shocked world watched as workers receive huge pay increases, instead of lifetime prison sentences. The next transition of the Chinese economy, a working class that can buy its own products, had finally arrived! Unfortunately, this is not quite a happy ending.

Remember the one child policy? Three decades later, China has a labor shortage. A tight labor market plus pay increases has made China the “higher cost” outsourcing location. Chinese factory workers are paid 3,500 Yuan (the currency of China) a month, compared to 900 yuan in Vietnam, and 600 yuan in Cambodia. China has started outsourcing to nearby countries to take advantage of the lower cost, but China’s labor needs could easily flood the market and drive up costs. China’s solution is to massively invest in robots, displacing millions of works in the next few years. Obviously, the focus for China has moved from the workers. We can expect robots to initially be used strategically to catch up with the backlog of work, but they also need to bring down their costs to match other outsourcers. Once they do that, they will have redefined the market and make many other jobs suitable for robotic replacement.

Robot Plan, In China and Beyond: In order for their economic plans to work, China has to put more robots on-line than all of the other countries in the world combined. Today , the total world production of industrial robots is about 200,000 annually. China buys 25% of that production, and expects to buy  over 50% in the next couple of years. In addition to these numbers, China will build its own robots, many exclusively for internal production. China has set out some notable milestones.

  • China is a preferred low-cost outsourcing site, mostly due to cheap labor. A high-tech Chinese factory has far less mechanization or automation than a US or European factory. New outsourcing clients are very aware that more mechanized factories can reduce their cost of production more quickly than a similar program in China.
  • China has 30 robots for every 10,000 manufacturing workers. South Korea is the leader in robotics, with 437 per 10,000 industrial workers. China claims it will meet South Korea’s robot density, which would require adding 4.4 million robots.
  • China predicts that their first fully automated factory will be on-line by 2020. That seems reasonable. Japan’s first automated factory went on-line in 2001, and can operate for up to a month without human intervention. Likewise, Siemens AG in Germany has a fully robotic electronics factory. Even Mexico has a full robotic brewery.
  • Foxconn, with 1.3 million workers, pledged in 2011 to have a million robots on its assembly line by the end of 2015. While they missed this goal, this plan would have replaced 75% of their staff in just 4 years.
  • Instead, by early 2015 Foxconn had just 50,000 robots in production. Clearly, Foxconn assumed that more robots would be available (only 200,000 industrial robots annually), and they would be more capable. More realistic estimates say that by 2017 all of China (not just Foxconn) will have a robot population of 500,000. Remember, one robot usually replaces MANY workers, meaning that millions of Chinese workers will be replaced in the next two years.
  • To speed up China’s robot revolution, Foxconn started to manufacture robots for its own use. Foxconn’s new “Foxbots” started to arrive at the start of 2015, and will start with at least 10s of thousands of robots a year.
  • Other nations have been listening to China’s plans. The European Commission launched what is so far the world’s largest robotic research and innovation program, SPARC.

Whatever the specific number, it is clear that China robotic ambitions will vastly increase the number of robots in the world, which will drive down their cost and expand their capabilities. Even if the rest of the world stopped buying robots, China alone could drive the next stage in automation. China’s investments alone will evolve robotic capabilities. In just a few years, virtually every factory in the world COULD be automated. That includes management functions and decision making. Factory managers have worked in corporate environments. Therefore, the A.I. that manages the factory can take over some positions in the corporate world, with minimal re-training. Once the software is re-trained, it can be rolled out into corporations as quickly as installing a new browser on your computer. The speed of transition to fully robotic factories (and initial corporate work) will be faster than the last transition, to global outsourcing.

Robot with Benefits, or Robot Apocalypse?: Robots may herald in  a new golden age, where difficult, dangerous and even boring work is no longer handled by human beings, freeing everyone to pursue the jobs that provide the greatest satisfaction. That golden age may eventually happen, but the next few years are going to introduce very disruptive events into the workplace. These changes are not just driven by robotics. Outsourcing will magnify the impact of robots in the workplace. Changes in population, both in the number of people and in the locations where they will live, adds more complexity to the robot revolution. Even the 21st Century’s other major issue, Global Climate Change, is sure to have a hand in the coming labor market changes, as both flooded cities and regions without water force workers to move, and disrupt manufacturing.

China’s robot revolution has focused on manufacturing, so far. This may be the final stage of the industrial revolution, as mainstream manufacturing ceases to employ human beings. By 2020, working prototypes of all types of automated factories will be rolled out around the world. Global manufacturing outsourcing piloted in the 1970s, when Ford built car radios in Brazil. By 2010, outsourcing was fully integrated with manufacturing and corporate support services. Based on that speed of implementation, it is reasonable to assume that 20-30 after these new pilots (2040-2050), robots will be the new global norm in factories and all but the top corporate positions.

Will professional jobs be safe from takeover until the end of the century? Will more education protect our jobs? Which types of employment will be safe from robots? There are answers to these questions, but it’s going to take a lot more space than we have here. In fact it’s going to take a new series, a Robotic Review, to answer  these questions.  The robot revolution is on, and we can expect robots to completely take over some areas of employment. But there are still some very surprising things events that will happen, and major changes that no one has predicted. So, stay at the front lines of the robot revolution and keep reading this blog!  And that’s my Niccolls worth for today!

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Revisiting the MATURE Outsourcing Program


In the past, we’ve talked about where outsourcing programs are headed when they finally reach their “mature” stage. That is to say, if you operate one or more lower cost locations, which have all passed their “training” phase, and are working efficiently. Within

All Rights: Wikimedia Commons

All Rights: Wikimedia Commons

this program,  you logically assign work to each location based on cost and efficiency, there are no obvious location for a pilot program that can operate for a significantly lower cost or produce a significantly better product, three is no new software or management methodology that is expected to deliver double digit cost reductions, then your  operation is mature.

After years of experience, you now intimately know the capabilities and limits of your program. Assuming that you have already renewed or rewritten your contract since your initial pilot (within the last two-three years), both your outsourced and total blended hourly cost (for all locations) has pretty much reached its lower limit. If your program has been operating for three or more years, your onshore/in-house staff costs will probably be headed upwards.

Since many outsourcing programs hit their height during periods of economic stress (mergers, recessions, etc.) the corporate expectation (not necessarily your expectation) at the start of your outsourcing program was that outsourcing will continue to cost less every year, and in-house staff will have a stable cost. Now, you’re hearing from all sides that it’s time for raises, promotion, higher salaries and “catch-up” for the missing years of cost of living adjustments.

Consider the rate of inflation for outsourced locations. When you first started your program, no one brought up the issue of offshore inflation. Now, you are learning that most offshore locations have 2 or more times the rate of inflation of on-shore. The next three to five year contract may have a startlingly high increase.

In a mature outsourcing program, you have undoubtedly focused on the reduction of staff in the most expensive locations, usually the big city. This gave you significant cost reduction in the early part of your program, but now you see that many of the best locations in smaller cities can have lower unemployment rates and higher wage increases.

Take Fargo North Dakota as a prime example. Fargo has been a preferred location for on-shore programs. It has also been a boom town for the oil industry. Over the last few years, Fargo’s unemployment rate has been a half to a third of that in New York City. Now that the price of oil is falling and the market is cooling, unemployment may rise in Fargo, butUnemployment Rate NYC vs Fargo as of June 2015, Fargo’s unemployment is 3% compared to 6.5% in NYC.

If you haven’t had it yet, expect that call from your near shore operation about the need to raise salaries to retain staff. To offset costs, or to drive to a new level of savings, you need to do three things:

  1. Develop an “ultimate” in-house or on shore model.
  2. Identify location neutral production targets for every work function.
  3. Test each location for real production levels.

Not too difficult, right? Let’s look at each element. Separately and see what we can learn. For this example, we’re going to look at a mature Document Center. Document centers typically, have very structured functions that are well documented. Also, each individual tends to perform only a limited number of functions; the larger the program, the more restricted each individuals function.

The Ultimate Model: Well run off shoring programs continually test how well a function works offshore, iteratively reducing the size of the main center (in-house and/or onshore), sending functions to your outsourced centers. Eventually, the in-house center will be a similar but smaller version of the original model, with all or most of the management, quality control, and administrative functions.It’s a decent early model, but a mature operation still has room for improvement.

It makes sense to retain a limited production capacity onshore. There are individuals who need to work with someone in person, or at least in the same time zone. If someone shows up waving a cocktail napkin with a scribble on it and says, “I need to make this into a document”. This could be handled remotely, if you have invested in high quality scanners, allow customers to have video conferences with the offshore staff, etc. If not, some capacity to deal face to face with customers is reasonable. And, the ability to work with efficiently with exceptions will earn considerable good will.

Eventually, though, you do need to consider if most administration and management should move to where most of the production staff work. Likewise, IF each location is supposed to be truly functional, quality control should be there and not back in the main office. One of the reasons that “mature” offshore operations fail is that these centers never has the full set of functions that the original model had. The lack of these skills holds back the ability of the center to take on new skills, and maintain the old ones. It then becomes a self-fulfilling prophecy that, “The offshore facility is never able to do everything that the onshore operation did.”

With proper knowledge transfer and training, just about any function can be run from any location. You need to determine which location is the most efficient. Some may say that QC must remain onshore, but for highly documented and procedure based functions (a good description for document services), it’s just a question as to when the offshore staff has enough experience to take on a function.

Production Targets: The staff hired on shore, near shore and off shore should all be intelligent and capable. If a center does not eventually develop all of the skills needed to produce the products of your firm, then you should inform your outsourcing firm that they are not meeting your expectations. They need to identify what is holding back your center… the wrong recruiting strategy, the wrong salary ranges, or just a lack of promotional opportunities?

Back onshore, you need to consider one more step for your “final stage” model, the transformation of your in-house center into a customer service gateway. That gateway will include a small but vital emergency production capacity and customer service staff. The CS staff may be the former supervisors or it may require different staff with different skills. This small number of highly skilled managers will focus on the satisfaction of your customers. Because seats in the headquarters (where primary document center is usually located) are expensive, the functions performed here must provide the highest value or require proximity to customers.

Test Your Assumptions: What services have you outsourced? How have you planned for the final stage model for your services? Take another look at your model and carefully review where each service is performed: what does it cost, what is the level of quality and how does it differ by location? Has this discussion made you rethink where you place the resources for your services? Are there missing elements to your offshore program that need to be in place before it can truly be called “mature”? Examine each function and set the productivity bar based on whichever location is the most productive. There just might be room for greater productivity in your model.

If some of your locations are not at their highest levels of productivity, your outsourcing vendors need to start committing to a date (and milestones along the way) as to when they can deliver. Once you set these targets, you need to follow through with effective testing and reporting to ensure that all locations achieve and maintain their expected level of productivity. Not too difficult! Just, rethink your expectations and hold each site/vendor responsible for attaining productivity targets. I hope that this provides you with some new ideas for your operations, because that’s my Niccolls worth for today!

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6 Lessons From Sony’s, “The Interview”


Sony The Interview - 2

Photo: All Rights – Sony Media

For years we’ve been told how the Internet is a very dangerous place. The stories keep trickling in, especially the ones about stolen identities, or a big box store being hacked for credit card numbers. The stories have been more frequent, and the thefts more blatant, but in the end it’s just been more of the same. These threats are usually more unsettling than frightening. It’s been a long time since the internet has served up a truly new threat. But now we have something special for the holiday season, a story about Sony Entertainment, a strange movie and international terrorism.

This is a story of blackmail, theft and extortion… and a timely reminder that the biggest threats to a corporation may be its top executives.  The dust still hasn’t settled down yet, but there are already many lessons to learn. Today, we’re going to look at six lessons from Sony’, “The Interview”…

Cyber Crime Is Real: We don’t yet know when this started, but sometime in the past few weeks a group of hackers informed Sony that they had breached their firewall, stolen emails from their top executives and were about to release the most embarrassing emails… unless Sony cancelled the release of their new movie, “The Interview”.

Since this is a comedy about the assassination of Kim Jong-un, the dictator of The Democratic People’s Republic of Korea (DPRK), the smart money is on the DPRK  being the ultimate mover behind the plot. After all, during the summer they threatened the US, and said they would retaliate if the movie was release. Whoever did it, the threats at Sony kept coming, and when they were not acknowledged, the threats went public. First threatening to release stolen emails, and then physically threatening any viewers.

Roles Are… Confusing: in the pre-cyber days, in order to attack an American company, you needed to get on US soil, or you needed to get into a US owned facility overseas. On the Internet, physical borders go away. Anyone can be attacked by anyone, regardless  of geography. Some nameless offshore entity could have attacked Sony. It could be the DPRK, or some proxy in another country. Their target could be the US, which they consider an enemy. Or they could have targeted Japan, which they have had a very bad history with due to their kidnapping of Japanese citizens throughout the 70’s and 80’s. The US could retaliate (and probably will), but so too could the Cyber Force, Japan’s cyber-attack quick response group (is it just me, or could Cyber Force be the name for a new Anime?)

Then again, Sony could hire its own hackers, or an independent hacker group could intervene… whether Sony wants their help  or not. Those in the know fear the damage that caused by two big government groups could cause if they slug it out on the Internet. What about the potential damage if private hacker groups choose sides and start a small war?

In 2013 a similar “small war” broke out between hackers who were for and against Spamhaus, a Dutch ISP that either A) fanatically defended the right to free speech on the Internet or B) provided a refuge for hate speech, neo Nazi’s and kiddie porn (depending on your point of view). When the object of a small war is better publicized, you can expect MANY more participants and probably more than just two sides.

Email Still Matters: The Sony story began with an electronic break-in, and stolen emails from the studio executives. Didn’t the Sony exec’s hear that you just don’t put certain things in email? Don’t write about how bad your clients are, don’t joke about the stupid things they do, and don’t send around notes to your friends on how much you hate your clients.

The perpetrators thought that the threat of exposing the most insensitive and egotistical emails from Sony’s executives would be enough to kill the release of “The Interview”. The strategy made sense. Look at the most boneheaded emails from Wall  Street. These emails insulted clients, pointed to potentially criminal activity and managed to alienate the American public. Sony… not so much. I’ve seen a few poorly written emails, and some badly turned phrases, but not the biggest mistakes I’ve ever seen. Even the email from Son’s Co-Chair, Amy Pascal, are surprisingly mild. So far.

We’ll see if there is more to come. The next executive email that’s splattered across the Wall Street Journal’s front page might come from Sony, or from some other corporation. Just be sure that it doesn’t come from YOUR corporation. See that your training department reminds everyone, especially your executives, that email is still the most frequent “smoking gun” on the Internet.

Demands Never End: The first demand was simple, don’t show the movie. After a few theater chains pulled out of the release, Sony gave in and cancelled “The Interview”.  Instead of an end to the threats, they got new demands. Sony was told, “That doesn’t just mean theatrical release, it means DVD’s, cable, streaming media, related products… anything! Independent theaters wanted to show the movie, and Sony was in a very embarrassing position, so the release was back on for Christmas day.

If Sony hadn’t rescheduled the release, what would the next demand have been? Would Sony be able to distinguish between the “real” terrorists” and the copy cats and pranksters that would inevitably follow? Would all screenplays need to be released onto the Internet for “pre-approval” before they could be released?

Don’t Threaten the Internet: Ironically, the history of this attack reads like a bad Hollywood script. The powerful Western (or is it Japanese?) Corporation is brought to its knees by an anonymous group of techno-geeks. But the geeks, might not be just some anonymous characters. Instead, they may be the secret agents of the last great dictatorships on earth. The attackers (at least briefly) won an extraordinary victory, over one of the most sophisticated corporations in the world. But then they decided to go a bit further.

They not only threatened Sony, they threatened everyone who wanted to see “The Interview”, or download it off of the Internet. And thus the plot turns once again, and the overconfident villain… in the last chapter, loses. Sony did stand up to the hackers until a few major theater chains opted out of the release. But “The Interview” was rescheduled for a Christmas release, using a coalition of independent theaters and streaming services like YouTube, Netflix and Amazon. In the end, the backlash from the Internet may make the Interview a bigger success than it would have been without the hackers.  The Sony incident also accelerated the next big thing in Hollywood…

Day & Date Streaming: The greatest impact of the hacking at Sony may result from the actions of the big theater chains. By caving into terrorism, they brought about the one thing the chains were all against… day and date streaming. Movie ticket sales have been in decline for over 20 years. The high cost of tickets, plus the quality (and comfort) of home theaters has diminished the theater experience. A big release movie… 3D, Imax movie, with popcorn, soda and snacks (not to mention gas and parking) … can cost a family of 4 plus $100 to $200.

Watching a streaming movie at home provides a big screen, great sound system, and comfortable seating for just a few dollars. Theaters are fighting back with better seating and better food, but that means higher prices. The only thing that theaters have that you don’t have at home is the a monopoly on first day releases. Studios want to release to theaters and streaming services at the same time (the strategy for scheduling movie releases through different channels is called “day and date”), but the big chains unanimously resisted simultaneous releases, knowing that it will diminish ticket sales. But Studios need more simultaneous releases to limit piracy between the release in the theaters and on-line. Once the theater chains pulled out, Sony had an irresistible opportunity to stream “The Interview” on the release date. By the end of 2015 we can expect to see many more simultaneous releases.

This story is far from over. In the final days of 2014, we saw what appears to have been a cyber-attack on North Korea, as well as attacks on the Sony on-line gaming platform. Both of these attacks may have nothing to do with “The Interview”, but you can bet that the next attack, or the one after that, may be the next small war on the Internet. At least, that’s my Niccolls worth for the New Year!

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Katy Perry: The Real Magic Act In “Dark Horse”


Dark Horse

Photo: All Rights Katy Perry/Capital Records

 

Katy Perry is a music mega-hit machine. Her latest hit is Dark Horse, is set, as the video says, “A crazy long time ago” in Memphis Egypt. This tightly crafted video is typical of the best new entertainment. Very high production values, very skilled artists… and absolutely no production credits for anyone other than the stars!

These videos are mini movies, but unlike theatrical movies, there are no credits at the end, to show who contributed to the production. In this video, men are in elaborate blue and red body paint, and the women are in identical gold outfits wearing cat-head masks that completely cover their heads and hair. It’s impossible to see who in acting in the video. The real magic in Katy Perry’s video is that the production credits have disappeared!

You may think, “Well, who cares who did what?” Keep in mind that the coin of the media world is exposure and recognition for your work. If you don’t know who did what, how do you know who to hire for the next video or album, or whatever?

At the end of every commercial movie, you have that endless procession of people and positions you’ve never heard of. It’s what’s called, “The Ending Credits.” Yes, it does go on (and on) for what seems like forever. However, this is where all the people who contributed to the movie get credit for their work. People that you don’t know, who perform jobs that you never knew existed, get their few seconds of fame.

Instead of just leaving at the end of the movie, take a few seconds and read the credits. Just what is a key grip, or a best boy? What do they do? Well, whatever it is, if they didn’t do it, you probably wouldn’t have a movie to watch. The actors on the screen are usually just a tiny fraction of the talent needed to produce a move, TV show or a piece of music. We recognize the stars, but without credits no one else gets much recognition. Especially if their costumes hide their faces.

In the strange workings of the media world, a commercial movie has very strict rules, and these rules are enforced by union contracts, including how credits work. If it is not a movie, and it was not produced by a unionized studio, the rules can be very different. Including giving no mention or no credits at all, to everyone else in the production other than the very recognizable stars. Just like  Dark Horse.

Of course, you might think that the industry should give up its antiquated ideas of credited work, and instead focus on how talent is paid. Maybe, but the industry is changing even more quickly there, and not in the right direction if you happen to be an artist. A hundred years ago, most artists were just learning that they could get paid for recording their work. Today, artists are learning that most forms of new media barely pay them for their work. Tiny details of how your work is played, make a very big difference in what you will be paid.

Residuals, the money artists are paid for replaying their work, differ based on minutia about how the music is used.  Did you know that residuals are much higher for talent when you play a song from a CD or a downloaded MPG, than when you listen to a streaming service, like Pandora? We’re not talking about a little difference here, it’s a staggering amount! One artist said that in the past for one song he did with a well-known star he made enough to by a house. Today, he did a digital release that got a huge number of hits, and had enough to buy a discount breakfast.

In the past, the idea was that radio helps to promote your “real” sales, and so they receive a steep discount per play. When media went digital, and then went streaming, strange new rules took over that dramatically reduced payment per play. For example, one artist showed that for 18,797 plays on commercial radio, already far less than if you bought a CD or MP3, he was paid just $1,374. You’re probably thinking, “That’s all?” Well, on Pandora, one of the most popular streaming services, the artist got over a million plays of the same song but only received $16.89.

This is the real magic in Dark Horse. As most media becomes digital media, the niceties about how credit and money from projects is split between the talent… niceties that took decades to put in place…  is quickly being lost.  Young artists need recognition in order to become tomorrow’s stars. Pay attention to the credits and to how you choose to use digital media, or the disappearing act in Dark Horse is going to deprive us all of the next generation of entertainment! And that’s my Niccolls worth for today.

 

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High Cost for Cheap Phones


Star N9500

Photo: All Rights, … Mysterious Persons in China

No term in the English language better describes today’s story than,  “I told you so!” In the past, I’ve written about the problem with fake goods from China, spying from China and the world’s biggest market for counterfeit goods, EBAY! Each of these issues is a story, a very long story, in itself. Today we’re going to pull all of these issues together into one jumbo tale of exceptionally bad judgment.

Having the best smart phone is a matter of status, for all of us. It might be the highest res screen, or the fastest processor, or a new 3D technology… but we all crave new “bling” on our phones. Plus, most smart phone plans have a loan built into the plan that only requires an up-front payment of between $0 and $200, instead of the $600 or more cost of the phone. When you make your last loan payment, you’re usually told, “You’re eligible for a free new phone!” That process has created a culture where we upgrade our phone every two years, making even slightly old phones look outdated.

Why are our tiny phones so expensive, when entry level laptops can cost as little as $300? Well, for the most part, our phones are computers. They have similar amounts of memory, not quite as good storage and processor speed, higher resolutions monitors and better battery time. Not identical,  but smart phones are equivalent to laptops, if you think of them as specialty laptops… or tablets. And, it has always cost a lot more when you want to package the same features in a smaller space. There are definitely consumers who want to upgrade their phones much more quickly than they would upgrade their home computers.

Given our appetite for new phones, we shouldn’t be surprised to see counterfeit phones. Earlier this year we saw a credible looking Samsung Galaxy knockoff, the Goophone i5S. Clearly designed to look and act like the Galaxy phone of a similar name, but at half the price. Now we have the Star N9500, yet another Galaxy knockoff (this time the S4). You can buy this Chinese manufactured fake on EBay. For those of you who don’t know about Ebay, aside from being the world’s largest auction house, it may also be the world’s largest seller of counterfeit goods (although that dubious title may soon be taken by Alibaba, China’s big trading site).

Ebay has been repeatedly sued and  petitioned by well-known brands, such as Tiffany’s, to stop the sales of counterfeits. However, because Ebay is an auction house, and not a department store, the law does not provide the same protection against counterfeiting. You can sue thousands of individual sellers, but not eBay itself, which is technically not selling… just facilitating a sale between two other parties. In an environment where buyers actively seek “knockoffs”, fully knowing that they are not the real product, it becomes even more difficult for major brands to protect their brands and reputations.  Which brings us back to the Star N9500. Most buyers know that it is not a Galaxy, and that it a different phone with different specs. But, what no one knew was that the phone has malware built into the operating system!

Yep! This phone was designed as a spying device. It doesn’t just have spyware, IT IS SPYWARE! The software that allows it to remotely control your camera and capture all of your activity, and then hide this so deeply that you cannot find it, is built into the core of the phone’s hardware and cannot be removed!  How’s that for a bargain phone? It’s like someone put together every urban legend about the Internet into one story. Chinese espionage, the dangers of buying on-line, corporations ripping off the average citizen, my phone is spying on me!

It looks like your Grandma was right. You get what you pay for. Big brands have been screaming about counterfeits for years, but the average buyer thinks, “What’s the harm? Besides I know it’s fake!” You may know that it’s not a real Galaxy, but do you know that it is a “real” spyware device? It’s hard to resist that once in a lifetime deal, and the bad guys know that. But for a deal like this, once in a lifetime is once too much… and that’s my Niccolls worth for today!

 

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