Large caps as a class did better
mid-year when the US markets suffered a correction. In other words,
small caps have been outperforming in rising markets and losing during
sell-offs....Moreover, debt – the lifeblood of many smaller companies –
is still readily available.
===
It’s still a small world
Published: October 29 2006 20:35 | Last updated: October 29 2006 20:35
Is
small still beautiful? Over the summer, shares in big companies did
noticeably better than those of small capitalisation stocks, which had
made the running for at least five years. This month, the minnows are
back on top in spite of strong gains by individual blue chips such as IBM.
The total return on the Russell 2000 small cap index has beaten the
Russell 1000 index of big companies this month, in the year to date and
over three and five years.
Large caps as a class did better
mid-year when the US markets suffered a correction. In other words,
small caps have been outperforming in rising markets and losing during
sell-offs. That sounds suspiciously like the extra volatility they are
supposed to exhibit. It does not necessarily signal that large caps are
now the place to be. The Russell 2000’s valuation discount to the 1000,
as measured by its relative price to book ratio, has narrowed steadily
since 2000. However, at about 17 per cent, it is only just inside the
almost 30-year average of 23 per cent. Small caps traded at a premium
in the mid-1980s, and believers in cycles might expect the discount to
narrow further. That would imply more relative gains ahead for small
caps.
Moreover, debt – the lifeblood of many smaller companies –
is still readily available. Unanticipated jolts to the financial system
aside, few see easy credit evaporating any time soon. Friday’s
preliminary gross domestic product figure was a reminder of housing
market weakness. Nonetheless, consumer spending and business investment
remain strong and inflation is still bubbling. That should be positive
for smaller caps. Hopes of deal activity can only help their shares,
too. A less benign economic outcome might well favour defensive, big
company stocks. But this cycle does not look over yet. The pessimists
risk switching out of small caps prematurely.
John Kenneth Galbraith was
right when he observed: “All of the great leaders have had one
characteristic in common: it was the willingness to confront
unequivocally the major anxiety of their people in their time. This,
and not much else, is the essence of leadership.” Meeting the needs of
the anxious global middle is the economic challenge of our time.
==
The global middle cries out for reassurance
By Larry Summers
Published: October 29 2006 18:48 | Last updated: October 29 2006 18:48
Against
all odds, we are living in a time of plenty. Neither the after-effects
of September 11 2001 nor a tripling in oil prices has prevented the
world’s economy from growing faster in the past five years than in any
five-year period in recorded economic history.
Given this recent
performance and the pricing-in by world markets of an optimistic
outlook, one might have expected this to be a moment of particularly
great enthusiasm for the market system and for global integration.
Yet
in many corners of the globe there is growing disillusionment. From the
failure to complete the Doha trade round to pervasive Wal-Mart-bashing,
from massive renationalisation in Russia to the success of populists in
Latin America and eastern Europe, we see a degree of anxiety about the
market system that is unmatched since the fall of the Berlin Wall and
probably well before.
Why is there such disillusionment? Some
anti-globalisation sentiment can be seen as a manifestation of
resistance to the US arising from the Bush administration’s foreign
policy misadventures. But there is a much more troubling source: the
growing recognition that the vast global middle is not sharing the
benefits of the current period of economic growth – and that its share
of the pie may even be shrinking.
Two groups have found
themselves in the right place at the right time to benefit from
globalisation and technological change. First, those in low-income
countries, principally in Asia and especially in China, who are able to
plug into the global system. The combination of low wages, diffusible
technology and the ability to access global product and financial
markets has fuelled an economic explosion.
It is important to
remember that the period between the late 18th and early 19th centuries
in Britain and continental Europe was called the Industrial Revolution
for a reason. For the first time in human history, the standard of
living of one generation was demonstrably better than the one before:
in a single lifespan, real per capita incomes doubled and then doubled
again. If one looks at the growth rate of China during the past 30
years, living standards are increasing at a rate that will lead to a
hundred-fold improvement over a single human lifespan. The impact
cannot be overstated.
Second, it has been a golden age for those
who already own valuable assets. Owners of scarce commodities have seen
their returns rise prodigiously. People running businesses that can
take advantage of globalisation to source labour less expensively and
sell to larger markets have seen their incomes rise far faster than
incomes generally. Certainly those in the financial sector in a
position to benefit from the asset revaluations associated with
globalisation have prospered.
Everyone else has not fared nearly
as well. As the great corporate engines of efficiency succeed by using
cutting-edge technology with low-cost labour, ordinary, middle-class
workers and their employers – whether they live in the American
midwest, the Ruhr valley, Latin America or eastern Europe – are left
out. This is the essential reason why median family incomes lag far
behind productivity growth in the US, why average family incomes in
Mexico have barely grown in the 13 years since the North American Free
Trade Agreement passed, and why middle-income countries without natural
resources struggle to define an area of comparative advantage.
It
is this vast group that lacks the capital to benefit from globalisation
and is desperately seeking either reassurance or a change in course.
Yet without its support it is very doubtful that the existing global
economic order can be maintained.
Let us be frank. What the
anxious global middle is told often feels like pretty thin gruel. The
twin arguments that globalisation is inevitable and protectionism is
counterproductive have the great virtue of being correct, but do not
provide much consolation for the losers. Nor can they rally support for
policies that maintain, let alone promote, international integration.
Economists
rightly emphasise that trade, like other forms of progress, makes
everyone richer by enabling them to buy goods at lower prices. But this
offers small solace to those who fear their jobs will vanish.
Education
is central to any economic strategy, but there is a limit to what it
can do for workers in their 40s and beyond. Nor can education be a
complete answer at a time when skilled computer programmers in India
are paid less than $2,000 a month.
John Kenneth Galbraith was
right when he observed: “All of the great leaders have had one
characteristic in common: it was the willingness to confront
unequivocally the major anxiety of their people in their time. This,
and not much else, is the essence of leadership.” Meeting the needs of
the anxious global middle is the economic challenge of our time.
In
the US, the political pendulum is swinging left. The best parts of the
progressive tradition do not oppose the market system; they improve on
the outcomes it naturally produces. That is what we need today.
There
are no easy answers. The economic logic of free, globalised,
technologically sophisticated capitalism may well be to shift more
wealth to the very richest and some of the very poorest in the world,
while squeezing people in the middle.
Just as the Federal Housing
Administration’s effort to make owner-occupied housing more available
after the second world war was a crucial part of the policy approach
that permitted the Marshall Plan to go forward, so also our success in
advancing international integration will depend on what can be done for
the great global middle.
Our response will affect not just the
livelihoods of millions of our fellow citizens but also the prospects
for continuing global integration, with all the prosperity and
stability it has the potential to bring.
The reception on the street, though, was more enthusiastic: 15,000
people lined up to try to snag one of the 400 available jobs at the
store...
But Wal-Mart knows its target shoppers: the new store is aimed directly at local African-American and Latino residents.
Wal-Mart has made the store family-friendly, giving it a spacious,
light aspect. The aisles have been made wider than the usual Wal-Mart
aisles, affording room for large families that make their way in
clusters. The store’s manager says that 98 percent of the employees are
from the wards surrounding the store. And Reuters reported this amazing
fact: the new store has an enhanced fishing section that features
special tackle needed to catch catfish, since “Chicagoans like to go
for catfish.”
But Wal-Mart seems to understand our affection for local ties. The food
court, for example, instead of featuring the national fast-food counter
found in other stores, has a decidedly West Side vendor in place: Uncle
Remus Saucy Fried Chicken.
Among Mayor Daley’s many goals is to make Chicago a “green” metropolis.
One of his ideas is to plant lawns and gardens on the tops of big
buildings, cutting down the city’s radiant heat fingerprint. Thus half
of the new Wal-Mart’s roof has been planted in just such a
global-warming-addling garden. The other half of the roof has been left
bare. And the entire expanse is hooked to monitors that lead to
computers that analyze fluctuations in radiant temperatures. As an
added bonus, shoppers and catfishermen should be able to enjoy a
blossoming overhead garden come spring. ==
Op-Ed Contributor
A Windy Wal-Mart
by LUIS ALBERTO URREA
Published: October 29, 2006
Naperville, Ill.
Nora Krug
Unemployment’s down, inflation
is inconsistent, the housing
market is finally cooling
off and consumer confidence
blows with the wind. Just
how are Americans doing?
The Op-Ed page asked four
writers from around the country
to provide snapshots of
their local economies over the
course of the year. Here is
their fourth round of dispatches.
TO some Chicago residents, it
was surprising that America’s third-largest city managed for so long to
bar Wal-Mart from establishing a foothold inside city limits. What are
we, Aspen? The corporation’s stores have crept up on us in the suburbs,
but the Big Onion conspired to keep them out there. Until now.
Amid
protests of lawmakers, fair-wage advocates, community small-business
representatives and even environmentalists, Wal-Mart opened a
142,000-square-foot monster on the West Side last month.
The
city council thought it had stopped the store, and its inevitable
siblings, by putting an ordinance in place in July that barred stores
that don’t pay a “living wage” and offer acceptable benefits. Mayor
Richard Daley, however, is a restless kind of visionary, impatient with
obstructionists. Arguing against sending jobs, services and a juicy tax
base to the suburbs, he vetoed the ordinance and gave his potent
blessing to the new store’s arrival.
Critics made it sound as if
Godzilla had arrived on West North Avenue, looking to flatten the West
Side as if it were Tokyo. The reception on the street, though, was more
enthusiastic: 15,000 people lined up to try to snag one of the 400
available jobs at the store. (This was actually not a record: the
largest turnout of job-seekers in Wal-Mart’s history involved 25,000
potential employees vying for 325 available jobs. Mayor Daley couldn’t
have missed this event — it happened in the Chicago suburb of Evergreen
Park in January.)
No mere store can cure a city’s ills. Nor can
it address all the issues of a community that has historically been
ignored and underserved. But Wal-Mart knows its target shoppers: the
new store is aimed directly at local African-American and Latino
residents.
Wal-Mart has made the store family-friendly, giving
it a spacious, light aspect. The aisles have been made wider than the
usual Wal-Mart aisles, affording room for large families that make
their way in clusters. The store’s manager says that 98 percent of the
employees are from the wards surrounding the store. And Reuters
reported this amazing fact: the new store has an enhanced fishing
section that features special tackle needed to catch catfish, since
“Chicagoans like to go for catfish.”
The critics’ worries about
the corporation’s reputation for annihilating mom-and-pop stores are
sincere. In Chi, we love our local businesses no matter what size;
witness the wave of mourning that overtook us when Macy’s bought out
Marshall Field’s last year. But Wal-Mart seems to understand our
affection for local ties. The food court, for example, instead of
featuring the national fast-food counter found in other stores, has a
decidedly West Side vendor in place: Uncle Remus Saucy Fried Chicken.
Among
Mayor Daley’s many goals is to make Chicago a “green” metropolis. One
of his ideas is to plant lawns and gardens on the tops of big
buildings, cutting down the city’s radiant heat fingerprint. Thus half
of the new Wal-Mart’s roof has been planted in just such a
global-warming-addling garden. The other half of the roof has been left
bare. And the entire expanse is hooked to monitors that lead to
computers that analyze fluctuations in radiant temperatures. As an
added bonus, shoppers and catfishermen should be able to enjoy a
blossoming overhead garden come spring.
However it all works out
— whether the city will allow further incursions by Godzilla and
whether this particular store is the success it seems to be — one thing
is forever certain: Chicago does things its own way.
Wal-Mart is
already finding this out in a vivid fashion. Its good-neighbor policy,
which invites weary recreational-vehicle drivers on the Interstates
around the country to park in its stores’ lots free, is getting its own
West Side permutation. People in the ’hood don’t have R.V.’s. But
several who have cars have taken to parking them in the lot and living
there, watching and waiting. It’s a safe haven, there’s good chicken,
and it offers a small shot at catching a part of the American dream.
Luis
Alberto Urrea, the author of “The Hummingbird’s Daughter,” is a
professor of English at the University of Illinois at Chicago.
Oct 26th 2006 | JOHANNESBURG
From The Economist print edition
Most South Africans do not have bank accounts. But most do have mobile phones
LIFE is now easier for Andile Mbatha, who owns a hair salon in Soweto.
Gone are his days of trekking to his bank, which could take two hours
by minibus, to send money to relatives. Nor does he keep piles of cash
in his salon any more. Last year, he opened a bank account with Wizzit,
an innovative provider of financial services. He now sends money to his
sister in Cape Town whenever he wants, from wherever he wants, using a
simple menu on his mobile phone. Half his customers no longer pay cash
for their haircuts. They use their phones to move money from their
accounts to his, in a few seconds. “This has taken out a lot of
stress,” says Mr Mbatha.
About half a
million South Africans now use their mobile phones as a bank. Besides
sending money to relatives and paying for goods, they can check
balances, buy mobile airtime and settle utility bills. Traditional
banks offer mobile banking as an added service to existing customers,
most of whom are quite well off. But Wizzit, and to some extent First
National Bank (FNB) and MTN Banking
(a joint venture between Standard Bank and a mobile-phone network), are
chasing another market: the 16m South Africans, over half of the adult
population, with no bank account. Significantly, 30% of these people do
have mobile phones. Wizzit hired and trained over 2,000 unemployed
people, known as Wizzkids, to drum up business. It worked: eight out of
ten Wizzit customers previously had no bank account and had never used
an ATM.
Mobile
banking is just one example of a wider phenomenon in South Africa. With
its odd mix of advanced capitalism and developing-world economics, the
country is successfully luring people who hitherto dealt only in cash
or barter to the world of formal finance. A simplified kind of account
called Mzansi was launched in 2004 to reach the unbanked, and portable
banks and ATMs have been rolled out in
townships and in the countryside. To this fast-changing scene,
mobile-phone banking looks to be a promising addition. Millions of
South Africans send money to their relatives in other parts of the
country. And most of these sums, which add up to about 12 billion rand
($1.5 billion) each year, still move informally.
South Africa
is not the first place to use mobile-phone banking: countries such as
Japan, South Korea and the Philippines have had it for a while. But the
potential is probably bigger in the developing world, and in countries
in which migrants remit money to their families in relatively poor
homelands. In Greece, a European Union member that is now awash with
migrant labour, Albanians or Bulgarians often send money home by
putting crumpled banknotes in the hands of a trusted compatriot, who
takes a cut. If they could do it all by pressing buttons, they would.
In most of
Africa, meanwhile, only a fraction of people have bank accounts—but
there is huge demand for cheap and convenient ways to send money and
buy prepaid services such as airtime. Many Africans, having skipped
landlines and jumped to mobiles, already use prepaid airtime as a way
of transferring money.
They could
now leap from a world of cash to cellular banking. In Kenya, a pilot
scheme called M-Pesa is being used to disburse and pay micro-loans by
phone. Meanwhile Celpay, which FNB bought last
year from Celtel, a mobile-phone company, is offering platforms for
banks and phone companies in Zambia and Congo. In countries like
Somalia, with chaotic conditions at home and a huge diaspora, cash
transfers by phone would be a boon.
For banks,
persuading people not to use branches for simple transactions such as
balance enquiries or transfers should reduce operating costs. So far,
they charge the same for mobile as for traditional banking, though
Wizzit says its services are at least a third cheaper than those of a
traditional bank.
But drawing
the unbanked into the joys of cell-finance isn't always easy. Many
think banking too expensive and complicated, and helping new customers
become financially literate takes time. The technology remains clunky
in some cases, with downloads requiring dozens of text messages.
Several rival platforms are still in the fight, but so far those that
emphasise simplicity and ease-of-use over state-of-the-art technology
and security have made the greatest strides. A lot also hangs on
putting in place the right laws and regulations. They need to be tight
enough to protect vulnerable users and discourage money laundering, but
open enough to allow innovative mobile banking to grow.
If the
transfer of money by mobile phone—between countries as well as within
them—takes off, it could have implications far beyond the salons of
Soweto. In 2005, according to the United Nations, global migrants
remitted $232 billion, of which up to 20% was lost on the way, mostly
in bank charges or fraud. If cellular transfers could slash that
figure, mobile banking would prove to be a good call.
Oct 26th 2006 | NEW YORK
From The Economist print edition
Landov
Is Citigroup, the world's biggest bank, big enough where it matters?
AFTER
the string of scandals that has rocked Citigroup, the world's biggest
bank, in recent years, one might think it would open its trademark
umbrella and take cover. Instead, Chuck Prince, Citi's chief executive,
has been out and about. On October 27th, just a week after Citi
announced disappointing third-quarter profits, Mr Prince and his crew
are hosting another conference call to tell investors how its heavy
investment spending is panning out. In doing so, he hopes to convince
Citi's many critics that it is now opening its stride, not hunching its
shoulders.
A bank of
Citi's heft and complexity cannot change overnight, Mr Prince says,
with reason. His predecessor, Sandy Weill, built a financial-services
juggernaut by snapping up companies on the cheap, wringing out the
costs, then buying more. But he put little thought into how the pieces
could fit together, nor how his sprawling machine could be steered.
On taking
over, Mr Prince's first job was to get the regulator off Citi's back;
his second, to rediscover an engine of growth under all of Mr Weill's
bolted-on body-parts. His answer was to do some things his predecessor
had neglected, and to undo other things Mr Weill should have left
alone. He sold various insurance businesses that did not fit his
vision. He also began investing in the areas that Mr Weill, in his zest
for cutting costs, ignored: bank branches, internal controls, product
development and technology to weld together Citi's many parts.
So can an
unencumbered Citibank grow? The answer depends heavily on Citi's
consumer business—corporate banking accounts for only a third of its
profits, retail most of the rest—and also, it says, on opportunities
abroad. Citi, like its rivals, hopes to cash in on two big trends: the
growing middle class in emerging markets, which will need to borrow
money for cars, homes and university tuition; and the growing numbers
of multinational companies that require bankers who can do business
from Kazakhstan to Canada.
Citigroup,
with offices in over 100 countries and 80m customer accounts outside
its home country, is by far the most cosmopolitan American bank. Last
year it pocketed $2.7 billion in profits from its international
consumer business. It has opened 574 bank and consumer-finance branches
so far this year, mostly in faster-growing places like India. Earlier
this month it bought a fifth of Akbank, a Turkish bank, and it is said
to be in the running for China's Guangdong Development Bank. Only HSBC, a British bank, and GE Capital come close to matching its breadth of reach and depth of local knowledge.
But this
globetrotting has so far yielded meagre returns. Revenues from Citi's
international consumer business were flat in the third quarter,
compared with the second. (They were up 9% compared with a year
earlier.) The danger, says David Hendler of CreditSights, is that Citi
spreads itself too thinly. Despite its vast size overall, it may not
grow big enough in any market to be really profitable. With the
exception of Mexico, where it bought Banamex, one of the country's
largest banks, Citi still lacks a commanding presence in most
attractive international markets. It thus fails to benefit from
economies of scale in marketing, technology and the collection of
credit-history data, which is vital where formal credit bureaus do not
exist. Nor can its modest retail banks attract much custom for the
other businesses, such as stockbroking, under the Citibank umbrella.
Optimists say
Citi's small size in these markets gives it more room to grow,
especially as its main competitors are relatively unsophisticated local
banks. But the locals have other things going for them. Regulation is
one. India, for instance, does not allow foreign banks to wholly own
domestic ones. Citi has dodged this rule by opening “consumer-finance
branches”, which lend but do not collect deposits. But it now has only
409, compared with the thousands of branches of its local rivals. In
other countries, like Turkey or Brazil, there are few, if any,
opportunities to buy a bank outright. This leaves Citi with no choice
but to take small stakes in local banks or build branches from
scratch—a painstaking process.
For all of
Citi's vaunted internationalism, it still makes 57% of its profits at
home. Unfortunately, it faces similar problems there. It is America's
sixth-biggest bank in deposits, with a 3.5% share, according to SNL Financial, a research firm. Bank of America (BoA),
the country's largest and most profitable retail bank, is almost three
times bigger. At home, as abroad, Citi is spread widely, but finely.
According to Dominion Bond Rating Service, it holds less than a tenth
of the branch market-share, in every state. It thus loses out to the
likes of Wachovia and BoA, which dominate their favoured markets and enjoy operational efficiencies as a result.
For example,
Citi's competitors can dip into a deep well of cheap deposits to
finance their loans. Citi, by contrast, must raise money on the
markets. It has thus suffered more than its peers from rising borrowing
costs. To attract more deposits, Citi is offering generous interest
rates to new customers of its online bank. It is also launching its
first branches in places like Boston, on the untested theory that it
can convince its brokerage and credit-card customers there to bank with
it too.
Mr Prince is
counting on such investments to help Citi grow organically. But
investors are impatient. So are some of Citi's investment bankers.
Despite losses in fixed-income trading in the third quarter, Citi's
investment bank does quite well—its proud money-movers see themselves
as peers of Goldman Sachs. But despite their relative success they have
watched Citi's stock price flounder since 2001, dragged down by its
flailing retail side. Worse still, they have recently seen their
salaries squeezed in the name of controlling costs. Investment
bankers—like Citi's investors—may wonder how long they have to suffer
for the travails of Citi's consumer business. Golden parachutes, not
red umbrellas, may be on their minds.
must a performance based company always have pay as a tool?
==
Mr
Christiansen's heirs decided to stand by the family business. They
injected some DKr800m of their own money and appointed Jorgen Vig
Knudstorp, a former management consultant at McKinsey, to get the
company back on track. After speaking to toy retailers, who told him
not to mess with Lego's brand or its core products, he decided to fix
rather than reinvent the firm, which had gone astray when it branched
out into businesses it did not understand.
The logic of
diversification was compelling, says Mr Knudstorp, but Lego went about
it the wrong way. It tried to become a lifestyle brand with its own
lines of clothes, watches and video games. And as it tried to attract
more girls, it started to neglect its main customers, boys aged five to
nine. “We had become arrogant—we didn't listen to customers any more,”
says Mr Knudstorp.
Lego's
turnaround plan, launched in March 2004, was painful. Around 3,500 of
the firm's 8,000 employees were laid off, with more cuts to come:
almost half the 2,400 workers in the firm's hometown of Billund will
lose their jobs over the next three years...The new boss
also simplified the management structure and tried to foster a more
commercial culture through a performance-based pay scheme and frank
communication between management and employees. “We were not used to
speaking about money,” says a Lego employee.
Despite the greater focus on Lego's core business, some bits of the diversification strategy remain
==
Lego's turnaround
Picking up the pieces
Oct 26th 2006 | BILLUND
From The Economist print edition
The venerable toymaker has recovered after a mistaken over-diversification
These are the toys you're looking for
“PLAY
is nutrition for the soul,” begins Lego's description of itself, before
going on to explain the Danish firm's philosophy of learning and
development through play. For seven decades Europe's biggest
toymaker—its name derived from leg godt, Danish for “play
well”—has prospered with its ethereal corporate philosophy and openly
professed disregard for maximising profits. Lego became a national
treasure and one of the strongest brands in the toy industry. Its
colourful bricks are sold in over 130 countries: everyone on earth has,
on average, 52 of them.
Yet a couple
of years ago the company's very survival was at risk. After six years
of slowing sales and falling profits, Lego's crisis peaked in 2003,
when it made a whopping DKr1.6 billion ($240m) operating loss on sales
of DKr6.8 billion and was sitting on some DKr5 billion in debts.
Rumours abounded that America's Mattel, the biggest toymaker, would
take over its long-coveted European rival. Private-equity companies
circled what they considered a perfect prey: a mismanaged, medium-sized
firm in the hands of a single owner, the family of Ole Kirk
Christiansen, a carpenter who founded the company in 1932.
Mr
Christiansen's heirs decided to stand by the family business. They
injected some DKr800m of their own money and appointed Jorgen Vig
Knudstorp, a former management consultant at McKinsey, to get the
company back on track. After speaking to toy retailers, who told him
not to mess with Lego's brand or its core products, he decided to fix
rather than reinvent the firm, which had gone astray when it branched
out into businesses it did not understand.
The logic of
diversification was compelling, says Mr Knudstorp, but Lego went about
it the wrong way. It tried to become a lifestyle brand with its own
lines of clothes, watches and video games. And as it tried to attract
more girls, it started to neglect its main customers, boys aged five to
nine. “We had become arrogant—we didn't listen to customers any more,”
says Mr Knudstorp. Lego was also hit by the general malaise in the
traditional toy industry, which has been shrinking as a result of
low-cost copycats, competition from high-tech gadgets, and falling
birth rates in many developed countries.
Lego's
turnaround plan, launched in March 2004, was painful. Around 3,500 of
the firm's 8,000 employees were laid off, with more cuts to come:
almost half the 2,400 workers in the firm's hometown of Billund will
lose their jobs over the next three years. Factories in Switzerland and
America are being closed down and production moved to Eastern Europe
and Mexico. A majority stake in Lego's four Legoland theme parks was
sold to the Blackstone Group, a private-equity firm, last year. Assets
in America, South Korea and Australia were sold off. The new boss also
simplified the management structure and tried to foster a more
commercial culture through a performance-based pay scheme and frank
communication between management and employees. “We were not used to
speaking about money,” says a Lego employee.
The Knudstorp
cure is working. In August Lego reported pre-tax profits of DKr238m for
the first half of 2006, compared with a loss of DKr202m for the same
period last year. Sales were up by 19%.
Despite the
greater focus on Lego's core business, some bits of the diversification
strategy remain. Lego has continued to expand its Bionicle range and to
launch new toys based on film tie-ins, notes Zsuzsanna Kantor of
Euromonitor, a market-research firm. The Bionicle characters,
futuristic figures based on elements of Polynesian mythology, were the
first story-based franchise to be developed in-house, and have spawned
books, cartoons and videos. Toys linked to the “Star Wars” and “Harry
Potter” films continue to do well. And the latest “Lego Star Wars”
video game (pictured), in which Lego figures re-enact the “Star Wars”
saga, was a bestseller.
As Lego gets
ready for the busiest shopping time of the year, the mood at the firm
is festive. The toy industry has been stagnant for five years, says
Gerrick Johnson, an analyst at BMO Capital
Markets, but things are looking up. Mattel, Hasbro and other toymakers
have reported strong results in the past couple of weeks. And with Lego
preparing to celebrate its 75th birthday next year, Mr Knudstorp sounds
confident when he says the firm can remain independent for another 75
years.
great half article until it falls apart somewhere in the middle...
===
As more communities joined, Boyd noticed new and unexpected
behaviour. Some people - nicknamed "friendster whores" - competed to
see who could gather the longest lists of friends. Some users - known
as "fakesters" - registered under pseudonyms such as Ali G, LSD or
Homer Simpson. This behaviour was playful and experimental. People were
exploring their new world and testing the limits of its technology and
rules. Boyd saw that the users were also trying to improve
communication. You couldn't really do much with your Friendster page
beyond what the rigid template allowed you to do, so people began to
devise new ways of saying something about themselves. Gathering
hundreds of friends signalled sociability or importance, while you
could declare a lot about your interests and meet people with similar
interests by linking to LSD, for example.
In Boyd's opinion, this
was healthy behaviour, but it was not what Friendster wanted on its
site and Abrams began to delete the fakester profiles. Following the
clampdown, many users left. They were also put off by Friendster's slow
technology, which was struggling to cope with the increase in traffic.
Some people went back to using e-mail, forsaking online social networks
altogether. Others switched to rival websites, the most significant
being MySpace.
As Boyd watched these millions jump on to the networks, she began to
develop clearer ideas about what deeper purpose the sites served. A
large number of members were obviously still using them as a tool to
meet new people. But while some were interested in extending their
social network, most were not doing that at all. Instead, they were
using it to reinforce existing relations with the group of friends they
already had from their offline lives. For them, MySpace had become an
electronic version of the local mall or park, the place they went to
with their friends when they just wanted to hang out.
"When I have to explain it to parents, I say it is the place kids rush to when the bell goes," said Boyd.
This
analogy may be familiar to generations of parents whose children have
returned from school and immediately picked up the telephone to talk
endlessly to the very people they've just spent the day with. Yet the
need for such a place is even more acute today, according to Boyd, as
traditional real-world public spaces have disappeared or have been
declared out- of-bounds by worried parents.
"These sites act as
digital public spaces, replacing the malls and parks that most of us
took for granted when we were growing up," said Boyd. "They are no
longer accessible. So the kids have gone virtual."
Many of the
personal messages on MySpace are "Hi," and "Hi back," rarely anything
more elaborate than that. Boyd found teenagers were logging in each day
for a few minutes at a time, checking their messages, seeing whether
friends had made changes to their profiles, and leaving their own
messages...
Boyd was interested in what lay behind the explosion of self- expression on the sites...It was one of the surprising aspects of the social networks that people
were ready to express themselves so creatively and in such a public
fashion....
But apart from a few intense self-promoters, most people, Boyd found,
were using the sites to present themselves to a small group of friends
and get their recognition and feedback. The sites are an opportunity to
define in public who they are. By providing an audience, and the tools
to interact with that audience, the social networks are satisfying that
need. Boyd calls this behaviour "identity production" and, employing a
favourite phrase of hers, says that young people are trying to "write
themselves into being". The MySpace page is like an online version of a
teenager's or student's bedroom wall. "They are tuning into an
audience," said Fred Stutzman of the University of North Carolina at
Chapel Hill, who studies student behaviour on Facebook. "One of the
things students do at college is they test out identities. Maybe that
is one new thing we are seeing now - more rapid changes of identity.
Online you get feedback and you can change at a moment's notice."
===
The high priestess of internet friendship
By Graham Bowley
Published: October 28 2006 03:00 | Last updated: October 28 2006 03:00
In
January 2003, Danah Boyd moved to San Francisco just as a new internet
phenomenon was taking off: online social networking sites. They were
virtual meeting places where people could log on to their computer,
meet friends and talk. San Francisco was at the heart of this boom.
Boyd, who had studied how internet users represent themselves to others
online for her masters degree at the Massachusetts Institute of
Technology, was intrigued. She went into cafes in the city's Mission
and SoMa districts, where people were sitting chatting on their
laptops, and asked why they used these new sites. She published her
findings on her blog and they became the basis for the PhD she started
later that year at the University of California at Berkeley.
Boyd
was monitoring the social network sites in 2003 around the time a new
site called MySpace was launched. Since then, MySpace has attracted
more than 116 million registered members, cementing online social
networks as a global cultural phenomenon and as big business. Around
the globe, it's thought more than 250 million people now regularly use
an online social network site. Last year, Rupert Murdoch paid $580m for
MySpace. This month, Google paid $1.65bn for YouTube, another
networking site where people post home-made video clips, while
Facebook, a popular service aimed originally at college students, is
currently attracting bids of close to $1bn.
Through
her observations, Boyd has become one of the chief thinkers of the
MySpace age. Her work tells us about the people who inhabit this new
world, what they do there, and why. Boyd says online social networks
have become a vital space for young people to express themselves and
build their personal identities. While adults worry about the culture
and dangers their children are exposed to on the internet, she says
that what parents think children do online and what they are actually
doing is very different. She defends a technology that has
repercussions far beyond teenagers and could change the way all of us
order our world, interact with each other, get information and do
business.
"[Talking to people online] was so empowering for me as
a kid, as a teen," Boyd said recently when I visited her small
white-stuccoed home near Venice Beach in Los Angeles. Boyd is 28 and
has blonde spiky hair, brown eyes, rings on her toes, and today was
wearing an orange T-Shirt that asked, Got Attitude? She speaks in a
lively high-pitched voice that grows even more excitable when she talks
about her all-consuming passion: social networks. She had just moved to
LA to take up a one-year post at the University of Southern California,
where she will study technology's impact on society. "I am what I am
because of what I have done online," she said as she sat cross-legged
amid the clutter of her move, cradling her beloved Apple Mac laptop. "I
want teens today to have the same power."
Boyd grew up in a small
town in Pennsylvania. The internet was a connection to the world
outside. When she was 17, she started a website of feminist song lyrics
on the school computer and struck up friendships with some of the high
school students who sent e- mails to her. She was contacted by one girl
who said her parents were cutting her. Boyd tried to get her to seek
help but one day the messages stopped. Boyd says she's pretty sure the
girl killed herself. "These were kids who were having fights with their
parents... nasty shit."
While MySpace and Facebook are a new
phenomenon, many of the links that connect each of us with our family,
friends and colleagues have been set down for years in our address
books or our e-mail inboxes. In 1997 a new website, sixdegrees.com,
began to map the connections. The theory was that users could see who
was connected to whom and then use a friend's introduction to get a job
or a date. Sixdegrees.com closed after a few years, but another site,
Friendster.com, launched in 2002 and fared better. As well as showing a
photograph of yourself, you could collect electronic links to your
friends' pages on your Friendster page and leave messages for your new
circle of "friendsters" when you visited their home pages.
"It
hit me that the way people interacted on the internet was very random
and anonymous," said Jonathan Abrams, Friendster's creator, who was
then a 33-year-old software engineer from Toronto. "We interacted as if
we were strangers. I wanted to bring the real-life social context that
people have offline to the online world."
Initially, Friendster
was used for socialising and dating by young professionals in San
Francisco. Its popularity spread among Silicon Valley computer
programmers, the New York gay community and fans of the Burning Man
festival who used it to keep in touch with people they'd met at the
annual event in the Nevada Desert. "Freaks, geeks and queers all
invaded Friendster in the early days and they made certain that all of
their friends were there," Boyd wrote this year on her blog.
As
more communities joined, Boyd noticed new and unexpected behaviour.
Some people - nicknamed "friendster whores" - competed to see who could
gather the longest lists of friends. Some users - known as "fakesters"
- registered under pseudonyms such as Ali G, LSD or Homer Simpson. This
behaviour was playful and experimental. People were exploring their new
world and testing the limits of its technology and rules. Boyd saw that
the users were also trying to improve communication. You couldn't
really do much with your Friendster page beyond what the rigid template
allowed you to do, so people began to devise new ways of saying
something about themselves. Gathering hundreds of friends signalled
sociability or importance, while you could declare a lot about your
interests and meet people with similar interests by linking to LSD, for
example.
In Boyd's opinion, this was healthy behaviour, but it
was not what Friendster wanted on its site and Abrams began to delete
the fakester profiles. Following the clampdown, many users left. They
were also put off by Friendster's slow technology, which was struggling
to cope with the increase in traffic. Some people went back to using
e-mail, forsaking online social networks altogether. Others switched to
rival websites, the most significant being MySpace.
MySpace was
founded by Chris DeWolfe, now 40, and Tom Anderson, 30, who had been
involved in internet businesses in Santa Monica. They were getting
"antsy" about doing something new, especially in social networks, they
told me, and thought they could get away from the pre-programmed "box"
that Friendster locked users into and instead let people "really open
up and do all sorts of things with their profiles".
"Our site worked," said DeWolfe. "You could actually log on, surf, customise your web pages and really be creative."
In
contrast to Friendster, MySpace encouraged people to put up wacky art
or even pipe music on to their pages. Music, and the culture around it,
became an important part of the site. Most fakesters and other group
characters were allowed. Bands and movie stars could all be your
friends on MySpace. To get access to Friendster you had to be a member,
but anyone could go on to MySpace and browse through the profiles.
Friendster enforced an age limit of 18, MySpace lowered its age limit
successively from 18 to 16 to 14, reflecting the growing reality that,
while social networks originally centred on twenty- or thirtysomething
users, they were becoming hugely popular among teenagers. As Friendster
fell back, MySpace became the leading social network site, its millions
of pages a cacophony of teenage self-declarations, friends'
testimonials, flirting, provocation, scrawls, art and music.
As
MySpace expanded, other sites also took off. Some maintained a less
chaotic air, such as Bebo, which launched officially as a social
network in July 2005 and today has 27 million members. Orkut gathered a
loyal following in Brazil and has spread to India. QQ, in China, has
more than 78 million users. Japan has a site called Mixi. Cyworld in
South Korea has about 19 million members, or more than a third of the
population, and opened in the US this autumn. Other sites focused on
building networks for specific social groups. LinkedIn.com helps
business executives find people who could offer them a better job.
Facebook was started in February 2004 by a then 19-year-old Harvard
University undergraduate who wanted to put the student yearbook
directory online. Today it has 10 million registered users and last
month opened to anybody with an e-mail address. BlackPlanet appealed to
African American users, MiGente for Latinos. (Many people who use
online social networks are often registered on more than one site.)
As
Boyd watched these millions jump on to the networks, she began to
develop clearer ideas about what deeper purpose the sites served. A
large number of members were obviously still using them as a tool to
meet new people. But while some were interested in extending their
social network, most were not doing that at all. Instead, they were
using it to reinforce existing relations with the group of friends they
already had from their offline lives. For them, MySpace had become an
electronic version of the local mall or park, the place they went to
with their friends when they just wanted to hang out.
"When I have to explain it to parents, I say it is the place kids rush to when the bell goes," said Boyd.
This
analogy may be familiar to generations of parents whose children have
returned from school and immediately picked up the telephone to talk
endlessly to the very people they've just spent the day with. Yet the
need for such a place is even more acute today, according to Boyd, as
traditional real-world public spaces have disappeared or have been
declared out- of-bounds by worried parents.
"These sites act as
digital public spaces, replacing the malls and parks that most of us
took for granted when we were growing up," said Boyd. "They are no
longer accessible. So the kids have gone virtual."
Many of the
personal messages on MySpace are "Hi," and "Hi back," rarely anything
more elaborate than that. Boyd found teenagers were logging in each day
for a few minutes at a time, checking their messages, seeing whether
friends had made changes to their profiles, and leaving their own
messages. It is what Cory Doctorow, a prominent technology blogger I
spoke to in Los Angeles, explained as "simple grooming exercises" - in
the same way that other primates groom each other to reinforce their
relationships.
Boyd was interested in what lay behind the
explosion of self- expression on the sites. These included poems and
lists of favourite bands and movies. Users also posted songs, video
clips or photographs, often of themselves. It was one of the surprising
aspects of the social networks that people were ready to express
themselves so creatively and in such a public fashion. A survey last
year by the Pew Internet and American Life Project found that 35 per
cent of all internet users in the US, or 48 million people, have
generated content and posted it to the web to share with other users.
(The survey also found that poorer people were more likely to do this
than richer people).
"It has become about sharing content," said
Michael Birch, the British founder of Bebo. "Music has worked well. The
thing that has really happened is video. People are just going out
there and making funny videos. At the moment one of the popular ones is
a rap song about tea."
The networks have become a venue for new
art forms, some more interesting than others. YouTube is a site where
users post homemade short videos for their friends to see. It started
18 months ago and since then has become the mass-market rival to
MySpace: it says 100 million videos are watched each day. On YouTube,
you can see two boys reinterpret the Pokemon theme tune, or a
six-minute retelling of The Shining, this time with a happy ending, or
a compact splicing-together of The Lord of the Rings and Star Wars. The
creative urge goes beyond video. On Second Life, a 3-D online
networking game, one member has recreated the whole of the city of
Dublin for other members to see - including cafes, squares, bookshops
and streets.
What is going on? The willingness to express oneself
in public seems to mark a generational shift in attitudes to privacy.
Younger generations raised on the internet have fewer qualms about
revealing their secrets in public. "This is not happening in
isolation," said Judith Donath of the MIT Media Lab in Boston. "They
are arising in an era of reality TV and Paris Hilton, when one of the
metrics of success is how much attention you get regardless of for
what."
Part of it is the quest for celebrity. They want to be
discovered, and the sites have created new stars such as Christine
Dolce, aka ForBiddeN, a MySpace sex symbol, and Lonelygirl15, a young
girl who posted her video diary from her bedroom on YouTube, and last
month caused a storm in cyberspace when she was revealed as a fake
played by a New Zealand actress. These arrivistes have taken their
place alongside real world celebrities such as Bjork, Kiefer
Sutherland, Madonna and Billy Bragg, who have migrated into the social
networking arena and opened up MySpace profiles so they can be
"friends" with their fans.
But apart from a few intense
self-promoters, most people, Boyd found, were using the sites to
present themselves to a small group of friends and get their
recognition and feedback. The sites are an opportunity to define in
public who they are. By providing an audience, and the tools to
interact with that audience, the social networks are satisfying that
need. Boyd calls this behaviour "identity production" and, employing a
favourite phrase of hers, says that young people are trying to "write
themselves into being". The MySpace page is like an online version of a
teenager's or student's bedroom wall. "They are tuning into an
audience," said Fred Stutzman of the University of North Carolina at
Chapel Hill, who studies student behaviour on Facebook. "One of the
things students do at college is they test out identities. Maybe that
is one new thing we are seeing now - more rapid changes of identity.
Online you get feedback and you can change at a moment's notice."
Since
the social networks launched, a newer generation of sites has emerged
that on the surface seems to be about users doing something different
but which are fundamentally social and have the attributes of
networking sites - creating personal content and sharing it publicly
with others.
On Flickr, a site bought by Yahoo in 2005, members
show off their home photographs. On del.icio.us, also bought by Yahoo a
year ago and which has a million members, people share their favourite
online bookmarks and internet searches so that other people can use
them. On Digg, users post noteworthy news stories, compare them and
vote on them. Even Wikipedia, ostensibly about millions of ordinary
volunteers building a free online encyclopedia, has aspects of
belonging to a community of like-minded people.
The dynamics of
social networks are evident in some of the multiplayer online games,
such as World of Warcraft, owned by Vivendi, where players inhabit
characters in an animated world of orcs, dwarves and dragons. Launched
in November 2004, by May it said it had 6.5 million members. "It is
ultimately social," said Alice Taylor, 35, who works on digital content
for the BBC in Los Angeles and as part of her job researches online
games. She plays World of Warcraft under the name Crystaltips, and
writes an online gaming blog.
The social networks are spreading
into business. Companies are using new types of software to map their
organisations electronically. By analysing who is working on what or
who is sending e-mails to whom they can locate experts or bring
likeminded workers together, says Nikos Drakos of Gartner, a business
consultancy.
Other companies are exploiting external networks of
freelance researchers. On InnoCentive.com, a site built by
pharmaceutical group Eli Lilly, companies post difficult research
problems and offer generous rewards to anyone who can solve them.
For
researchers like Stutzman and Boyd, all the new sites and games provide
an invaluable microscope on human behaviour. Academics have begun to
study how news spreads like ripples through these loose associations of
people and the way in which some people, "celebrities", become
particularly important disseminators of information with their regular
postings. Other categories are "newbies", young, low-status members;
"lurkers", who silently browse others' pages but don't participate
themselves; "trolls", deceivers who feign honesty to provoke, and
openly aggressive "flamers".
The millions of people on the
networks also hold vast potential for experimentation. In 2004, Duncan
Watts and two of his students in the sociology department at Columbia
University put a sign on bolt.com, a social network site, and managed
to corral 14,341 volunteers. He and his colleagues wanted to show how
much people are influenced by other people's choices - and came up with
a result that challenged the notion of causation.
The academics
divided the users into groups and asked them to rate a list of
previously unknown pop songs by unknown bands, steadily increasing the
amount of information the users had about what other people had chosen.
"You might expect the same songs to become popular under all
conditions," Watts said. "In fact, as the level of information that
people have about each other's decisions increases, things become more
unpredictable. Those that win are not necessarily the best - in fact
there is not necessarily such a thing as 'the best'. Things that are
popular tend to become more popular still, so that small, possibly
random, fluctuations early on can get 'locked in' and generate a large
difference in popularity over time. The potential to learn how people
behave and influence each other is really exciting."
Yet even as
the sites have grown and become funds of insight for researchers, there
are questions about their future. Last month, according to the Palm
Beach Post, police in Florida charged a 22- year-old single mother with
soliciting a minor and three counts of sexual battery after she left
messages for a 14-year-old boy on his MySpace page and went to meet him
for sex. As the sites have grown they have awakened fears that the
internet is unhealthy - why not socialise with real-world friends in
the fresh air? - and brings children into contact with adult culture
such as pornography. Worse, the social networks may be an unparalleled
tool for sexual predators. In June, a Texas woman and her daughter
filed a $30m lawsuit against MySpace, claiming the daughter was raped
by a 19- year-old man she exchanged her phone number with on the site.
MySpace would not comment on litigation matters.
"What we are
seeing is that there are many more offenders that are targeting kids
online than we ever dreamed was possible," said Ernie Allen, president
of the US National Centre for Missing and Exploited Children, which is
now working closely with sites such as MySpace.
A 2004 study by
NCMEC showed that 13 per cent of 10-17-year-olds received unwanted
online sexual solicitations. This was less than in 1999, but the
proportion of aggressive contacts had gone up. Allen said online social
networks were attracting the more determined predators. "These sites
were created for young adults and when young adults are doing something
it appeals to older teenagers and then young kids want to do it. The
challenge is how do you protect younger kids, and our strategy so far
has been to keep them off."
In May a US Republican senator,
Michael Fitzpatrick, proposed the Deleting Online Predators Act, which
(if passed) would in effect shut down access to social networks in US
public schools and libraries. The sites, however, want to head off any
backlash and are taking the online dangers seriously. Bebo hired Rachel
O'Connell, an expert on internet safety from the University of Central
Lancashire, as its chief safety officer and she has taken steps to stop
online bullying. On MySpace, the profiles of 14- and 15-year-olds are
automatically set to private so that only people on their list of
friends can view them or send them messages. (Boyd says many children
override this setting or register as 18 or over. But MySpace says it
has electronic algorithms that can detect if a child is not telling the
truth.) Users under 18 can't view content designated "mature". MySpace
hired Hemanshu Nigam, a former US federal prosecutor, who heads a team
of 150 that continuously monitors the site for hate speech, offensive
material or nudity. He removes more than 30,000 under-age profiles a
week. Quite a bit of bare flesh still gets through but Nigam insists
there is no pornography.
"The fears are so painfully overblown,"
said Boyd. "Is there porn on MySpace? Of course. And bullying, sexual
teasing and harassment are rampant among teenagers. It is how you learn
to make meaning, cultural roles, norms. These kids need to explore
their life among strangers. Teach them how to negotiate this new world.
They need these public spaces now that other public spaces are closed
to them. They need a place that is theirs. We should not always be
chasing them and stopping them from growing up."
While the safety
issue rumbles on, a second question that will determine whether the
networks have a sustainable future is whether they can begin to make
money. The sites have remained free to users, while several are trying
to sell their audiences to advertisers. But many companies have been
reluctant to feature their products on pages where the rest of the
content is unpredictable and, well, teenage.
MySpace has begun to
get around this by helping companies to set up profile pages for their
products - in effect, they become a member of the social network. This
gives companies control over the content associated with their brand
and it has been popular. In January, the Wendy's hamburger chain
introduced a MySpace profile for its square hamburger. (A hundred
thousand "friends" linked to it.) Adidas and Honda have MySpace
profiles. Volkswagen set up a page for Miss Helga, the short-skirted
star of one of its commercials (who now has 9,000 "friends"). Profiles
have become a popular way to promote movies. Paramount introduced a
page for Ricky Bobby, the hapless hero of its film Talladega Nights.
"News Corp doesn't say but it is more than likely that MySpace is very
profitable given the amount of advertising already sold against this
audience," said Joe Laszlo, an analyst at JupiterResearch in New York.
Boyd
fears that this sort of commercialisation will alienate teenagers.
"Everybody and their mother are trying to sell things," she said. "They
are turning the public space into a public market place." She said the
increased parental surveillance and commercial intrusion is already
causing kids to leave; you just don't notice because they don't delete
their profiles.
The sites recognise that it is not in their
interest to drive away users and have so far tried to keep advertising
on the periphery of the pages and make it relevant to users' interests.
(In August, Google and News Corp agreed a $900m three-year deal under
which Google will sell advertising on MySpace that is linked to what
people search for on the site.) The sites are also promoting activities
that teenagers find cool and then getting sponsorship for them. YouTube
is holding a battle of the bands competition sponsored by Cingular and
ABC. MySpace runs secret music concerts for select members, sponsored
by Chili's, and exclusive movie screenings. Its first screening, last
month, was for Borat, a film from 20th Century Fox, part of News Corp.
It
is not altogether clear whether MySpace kids dislike commercial
culture. The popularity of Wendy's square hamburger attests to that,
and millions have become "friends" of bands such as Oasis or of
Hollywood movies. The biggest MySpace user-group is a fan club for
Abercrombie & Fitch, the clothing line. On the virtual network game
Second Life, which has about one million "residents", users can now use
their Second Life dollars to buy Adidas shoes for their "avatar"
character to wear, or a 3-D customised Toyota Scion car to drive in the
virtual landscape. The companies exploit information from this online
behaviour, such as what colour most prefer, to develop products in the
real world. "Companies want to engage with these networks of cultural
tastemakers," said Reuben Steiger, founder of Millions of us, which
helps businesses market themselves on Second Life.
A further
threat to the sites is posed by big media companies that have started
to assert ownership over the video or music clips uploaded by users to
sites such as YouTube and MySpace. The clips are often taken from
television, movies or commercial music without permission. In February,
NBC forced YouTube to take down "Lazy Sunday", a rap spoof from its
Saturday Night Live show after the sketch was uploaded to the site and
viewed by more than five million people. Last month, Mark Cuban, an
influential US technology blogger, said publicly he thought that
YouTube could one day be "sued into oblivion" because of copyright
violations.
The way that millions of young people have seized on
online social networks and embedded them in their lives suggest they
will survive. Their rise is a function of the availability of cheap
internet access and technology such as web cams, and they are likely to
be transformed further, probably beyond recognition, as these trends
accelerate.
Clay Shirky, a US technology consultant and academic,
thinks that businesses' ability to use networks to reach customers and
suppliers will become a recognised part of their corporate value, just
as goodwill is marked on balance sheets today. "The big change is that
social networks are becoming visible and therefore manageable in ways
that they have never been before."
Social networks are likely to
change the way we present ourselves. It may become a matter of course
to have an online public web page where people we want to deal with
will turn to find out more about us, in the same way that having a
telephone number or e-mail address is routine today. Otherwise we will
not exist. We will be part of a network with links to trusted figures
and recommendations and testimonials that bear out our claims about who
we say we are. I will declare who I am by the people I am holding hands
with on my network.
They are likely to change the way we learn
things. People will get information and news not from one news source
but many. We may be amazed in the future that we ever chose to buy
anything, go anywhere or do anything without the chain of
recommendations that online networks make possible.
For their
critics, they have started an impossible conversation, a cacophony of
views that never go anywhere or get close to some underlying truth. But
for Boyd the conversation is the whole point. "I genuinely think it is
helpful," she said. "It helps people connect and learn from one
another. It is all about tolerance. One of the best things you can do
is get people to learn about people who are not like them."
WHAT ARE SOCIAL NETWORKS?
On
an online social network, you register to join the community and are
given your own personal web page. This is your profile. It's what
everyone else sees when they look you up. Your profile shows your name,
age, a few personal details and a picture of yourself.
You may
choose to list some of the things you like doing, your favourite music
or films. You can write an online diary (blog) about what you are up to
in your life. There is also space for other members to leave messages
for you, or about you, for other people to read.
Other users in
the community might notice your profile and ask if they can become your
friend. If you say yes, their pictures appear on your profile. If you
click on one, it will immediately take you to your new friend's profile
where you can learn more about them and see their list of friends.
Millions
of people have joined the new sites. They have been hugely popular
among young teenagers, although MySpace, the biggest US site, says 86
per cent of its members are 18 or over.
DO THE SITES MAKE MONEY?
Most
of the big online social networks were just small loss-making start-up
companies two or three years ago. YouTube was founded in February 2005
in a garage. Facebook was started a year earlier by a student at
Harvard.
But as users flocked to them by the millions, the sites
began to attract the attention of bigger, more established companies.
Media businesses in particular were anxious that they were losing their
young audiences to this new medium. MySpace was the first one to be
snapped up - in July 2005 by Rupert Murdoch's News Corp for $580m.
No
one really knows how much the sites are worth, or whether they will
produce any lasting revenues. Still, YouTube was bought by Google this
month for $1.65bn in stock, transforming YouTube's twentysomething
founders into instant millionaires.
The sites are generally free
to join, so they rely on advertising to turn a profit. They are working
hard to make nervous advertisers feel comfortable enough to put up ads
for their goods in an unpredictable environment where teenagers create
most of the content.
The other challenge is to avoid scaring away the young audiences with too much commercialisation.
PLUGGED INTO SOCIAL NETWORKING
"It
hit me that the way people interacted on the internet was very random
and anonymous. I wanted to bring the real life social context that
people have offline to the online world"
Jonathan Abrams, Friendster's creator
"It
has become about sharing content. Music has worked well. The thing that
has really happened is video. People are just going out there and
making funny videos, like at the moment one of the popular ones is a
rap song about tea"
Michael Birch, British founder of Bebo
"Companies want to engage with these networks of people who are cultural tastemakers"
Reuben Steiger, founder of Millions of us, a company that helps businesses market themselves online
"One
of the things students do at college is they test out identities. Maybe
that is one new thing we are seeing now - more rapid changes of
identity. Online you get feedback and you can change at a moment's
notice"
Fred Stutzman, University of North Carolina
"What we are seeing is that there are many more offenders that are targeting kids online than we ever dreamed was possible"
Ernie Allen, president of the US National Centre for Missing and Exploited Children
President Eisenhower was far more
worried about the simultaneous Suez crisis. But even before Suez, he
had decided Washington’s oft-stated moral backing for the liberation of
eastern Europe would not extend to supporting would-be liberators. It
was a painful lesson for the Hungarians, especially those who had
listened to the pro-liberation broadcasts of the US-backed Radio Free
Europe. They felt betrayed - and rightly so.
The world unshaken
By Stefan Wagstyl
Published: October 27 2006 14:55 | Last updated: October 27 2006 14:55
Twelve Days: Revolution 1956 by Victor Sebestyen Weidenfeld & Nicolson ₤20, 320 pages FT bookshopprice: ₤18
The Will to Survive: A History of Hungary by Bryan Cartledge Timewell Press ₤25, 624 pages FT bookshopprice: ₤23
The Hungarians: A Thousand Years of Victory in Defeat by Paul Lendvai Princeton University Press ₤32.50, 608 pages
“It was such an eerie sound; several thousand people sighing with joy... We thought the whole world is looking at us.”
So
said student Stephen Vicinczey, recalling the moment when demonstrators
destroyed the huge statue of Stalin in central Budapest. It was October
23 1956, the first day of what became known as the Hungarian
revolution. Hungarians declared their freedom from Soviet rule - only
to see their hopes crushed within a fortnight when the Red Army
ruthlessly suppressed the rebellion, killing 2,700 people and injuring
20,000 others. It was the first serious uprising against Soviet rule in
eastern Europe - and the last until the Prague Spring of 1968.
Vicinczey
was right that the world was watching. For a few days, the unbelievable
seemed to be happening: the Red Army was humbled by workers, students
and schoolchildren. But as Victor Sebestyen argues in Twelve Days, the
uprising prompted contradictory reactions. It still does - and
Hungarians remain divided about its legacy.
Sebestyen
succinctly describes the Revolution’s antecedents in the ruthless
imposition of Communist rule and the brutal regime of Matyas Rakosi,
under whom 2,350 Hungarians were executed and more than 1.3 million
prosecuted.
After Stalin’s death in 1953, sullen hatred of
communism turned increasingly into vocal discontent, culminating in the
events of October 23: a peaceful pro-reform demonstration ended in a
spontaneous mass protest. As Sebestyen says, there was no premeditated
plan. The revolution just happened.
The following day,
Soviet troops failed in a half-hearted attempt to suppress the revolt
and it seemed that the rebels had won. The Communist leadership brought
Imre Nagy back into office, who embarked on an increasingly desperate
effort to secure a compromise between the authorities and the
revolution. He failed. Two weeks later the Soviets returned, with
overwhelming force.
We now know that this was not
inevitable. Documents released after 1991 show that the Kremlin
considered pulling its troops out of Hungary, as long as it stayed
communist. But Khrushchev decided withdrawal would open the door to
western “imperialists”. His decision was made easier by the knowledge
that the US would not intervene. President Eisenhower was far more
worried about the simultaneous Suez crisis. But even before Suez, he
had decided Washington’s oft-stated moral backing for the liberation of
eastern Europe would not extend to supporting would-be liberators. It
was a painful lesson for the Hungarians, especially those who had
listened to the pro-liberation broadcasts of the US-backed Radio Free
Europe. They felt betrayed - and rightly so.
After the
revolution, Janos Kadar was installed as leader and held office until
1988, almost until the fall of communism. He started by exacting brutal
revenge against Nagy and his associates but later developed eastern
Europe’s most liberal communist regime. After he died, most Hungarians
remembered him as a benevolent ruler, but for a minority he will always
be Nagy’s executioner. The argument over his legacy is one of the deep
divides of Hungarian politics.
Sebestyen is excellent at
bringing to life the revolutionary moment. Personalities leap from his
pages - the brutal Rakosi, the vacillating Nagy, the brave Pal Maleter
(the revolution’s military commander) and the cunning Soviet ambassador
Yuri Andropov, who won Nagy’s trust while plotting to destroy him.
At
times the account is almost too fast and cries out for considered
reflection. The story moves so rapidly that the text of the Sixteen
Points - demands passed at a student meeting on the eve of the
revolution - is relegated to an appendix, even though Sebestyen rightly
describes it as “one of Hungary’s most historic documents”. However, as
an introduction to one of the most significant events in post-war
Europe, this book has much to recommend it.
For those in
search of the long view, there are Bryan Cartledge’s The Will to
Survive and Paul Lendvai’s The Hungarians, both exploring Hungary’s
survival in a sea of adversity. Cartledge, a former British diplomat
and academic, brings the dispassionate view of a non-Hungarian to his
history. Lendvai, a Hungarian refugee and former FT correspondent, has
written a passionate work filled with anecdote and personality. He ends
with a chapter on Hungarian geniuses entitled “Everyone is a
Hungarian”. Lendvai comments wryly that this “insatiable appetite for
recognition abroad” reflects “deep-rooted uncertainty and fear” about
Hungary’s survival.
Published: October 28 2006 03:00 | Last updated: October 28 2006 03:00
For
as long as I can remember, I have been spellbound by second-hand
clothing, convinced every piece of cloth holds undiscovered revelations
about past lives. When I was 12, my friends and I started wearing
thrift-shop clothes; as teenagers, we wore 1940s housedresses, 1950s
prom attire and, of course, vintage Levi's; but it was when I was 18
that I developed an obsession with burlesque costumes that would
forever change the way I thought about dress.
It started with two
20th-century burlesque costumes found in a stall cluttered with
bric-a-brac at the 26th Street flea market in New York: a leotard in
hot pink lace with nude net inserts, lined with rhinestone piping and
with black fishnet stockings attached at the bottom; and a black
jet-beaded number on black-lace overlay with a flesh-coloured corset
underneath. Clutching my purchases in a flimsy plastic bag, I left the
market wondering who had worn them. What did she look like? How old was
she? At home, I tried them on and was not surprised at the perfect fit.
Whoever the previous owner had been, I felt a connection with her.
Turning the costumes inside out, I was intrigued by the meticulously
handcrafted lining: hand-stitched, darned and darned again.
At
the time, I was working in Sotheby's fashion department, cataloguing
and studying exceptional textiles and garments such as Dior "New Look"
couture ballgowns with Lesage embroidery and Madame Grès jersey gowns
with boned inner corsets. While the rarefied world of couture seems a
far cry from a stripper's wardrobe, both featured a concealed internal
structure created to manipulate clients' bodies into that of a
"perfect" woman.
For the past decade I have been studying and
documenting burlesque costumes and the women who wore them. Like the
style icons swathed in Balenciaga, Mainbocher and Dior, the great
burlesque queens became legendary for their wardrobes. Just as women
pored over photographs of Mona Bismarck and Babe Paley in Vogue
magazine, so they bought tickets to see Gypsy Rose Lee and Betty
Rowland, instructing their dressmakers afterwards to translate their
outfits into streetwear.
A standard burlesque costume began with
an outer garment resembling a floor-length evening gown, often covered
with a long cape or opera coat. Beneath this were an outer and inner
bra, outer "pants" cut like bikini bottoms and, finally, g-string and
pasties. Because the lining of the costumes became visible to the
audience as layers were peeled off, their inside was extremely
important. The late burlesque costume designer Gussie Gross once told
me that her costumes "were as pretty inside as they were outside . . .
To me, unfinished work was deplorable".
What is hidden rather
than revealed by a garment - the secret known only to the creator and
wearer - is the mark of artistry and craftsmanship in all kinds of
clothing: vintage, ready-to-wear and couture. Collecting burlesque
costumesinfluenced how I saw modern clothing. The cuffs and hems of a
Chanel suit weighted with chain, the red soles of Louboutin shoes and
the four corner stitches of a Margiela label - these are all details
visible only to the initiated.
Extraordinary attention to detail
comes with extraordinary price tags, however. Just as the biggest
burlesque stars spent $400-$600 ($2,600-$3,600 today) per gown - or
half a top-billing queen's monthly salary - ready-to-wear coats by the
Los Angeles-based label Rodarte are priced from $10,000 due to the hand
pleating and finishing involved.
As I amassed a growing
collection of burlesque costumes, I became more refined in my vintage
and "streetwear" tastes, saving up money for purchases. I found that
clothes from certain eras suited my own body best and trawled Ebay
looking for Ceil Chapman and Pauline Trigere dresses with small waists
and full skirts.
Now, my burlesque collection is catalogued and
stored in acid-free boxes and I hope to exhibit and donate the archive.
Instead, I'm collecting vintage and contemporary "costumes": an
hourglass-shaped cocktail dress by Nicolas Ghesquière for Balenciaga;
Sophia Kokosalaki's custom-fit draped jersey dresses; a Jeremy Scott
apricot silk dressing gown with a lace back reminiscent of the
cover-ups burlesque queens wore backstage.
At the recent
ready-to-wear shows in New York, I found another item I am waiting to
add to my collection: a black silk dress by Proenza Schouler with hints
of caviar beading on the back straps and bodice. I asked designer
Lazaro Hernandez about the inner construction. He told me "the beads
show somewhat on the outside only as a suggestion to what lies beneath,
a subtle invitation to look inside".
Liz Goldwyn's book 'Pretty Things: The Last Generation of American Burlesque Queens' is published by Regan Books/Harper Collins.
Local companies get lion's share in outsourcing by banks, wealth firms
Strong spillover from financial to business services
By
ANNA TEO
(SINGAPORE) For every dollar Singapore banks spent outsourcing non-core
activities in the past five years, 93 cents went to local firms and
only seven cents flowed overseas.
A similarly high proportion of the wealth
advisory industry's outsourcing expenditure has gone to Singapore firms - 74 cents per dollar of spending.
This trend reflects the strong spillover - in terms of income and
employment - from financial services to the business services sector,
the Monetary Authority of Singapore (MAS) says in its latest
Macroeconomic Review.
Financial institutions typically engage advertising companies for
promotional activities, while accounting, legal and IT functions have -
increasingly in recent years - been outsourced to external specialists.
Official surveys found that banks and advisory firms - the two
financial services with the biggest positive spin-offs to support
services - spent respective averages of S$1.2 billion and S$86 million
each year between 2001 and 2005 on business services.
About a third of banks' business-related expenditure, for instance,
went to outsourced data processing, consulting & research, and
accounting & audit services.
And growth of the banks' domestic outsourcing has outpaced that of
their offshore activities in recent years, boosted by a sharp rise in
management consulting activity, the MAS report notes.
This reflects in part the engagement of consultants for new regulatory
initiatives, and for market research amid growing industry competition,
it adds.
In the wealth advisory industry, management consulting and market
research appear to be increasingly outsourced offshore, while
accounting and secretarial work are still predominantly outsourced
locally.
MAS economists estimate that every S$1 billion increase in final demand
in financial services generates 920 jobs in business services.
In all, financial services 'contributed' an average of around 1,100
jobs a year in business services - or about 8 per cent of total jobs
created - between 2001 and 2006.
And Singapore's input-output data shows that a dollar increase in
financial sector final demand generates 27 cents of spillover to the
rest of the economy, with business services, the biggest beneficiary,
receiving 11 cents - or 40 per cent of the total spin-offs.
Meanwhile, a new 'financial development index' constructed by MAS economists suggests that the domestic financial sector
made 'steady progress' over the past 15 years, with the pace of development picking up particularly since the late 1990s.
The emergence of an 'affluent class' in various Asian markets has
boosted demand for specialty financial services and presented
opportunities for Singapore to play a hub role in asset management,
private banking, brokerage and treasury services - segments that are
expected to play a growing role in the country's financial industry in
the years ahead.
Is
small still beautiful? Over the summer, shares in big companies did
noticeably better than those of small capitalisation stocks, which had
made the running for at least five years. This month, the minnows are
back on top in spite of strong gains by individual blue chips such as IBM.
The total return on the Russell 2000 small cap index has beaten the
Russell 1000 index of big companies this month, in the year to date and
over three and five years.
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