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Rescuing the descent of nation-states: strong, weak, failed, and collapsed

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The successor to Global Trends 2015, authored before 11 September, is Mapping the Global Future for 2020, authored afterwards with a very different worldview. Global Future speaks more to themes rather than taking individual nations to task. (After all, we may need such a state as a valued ally tomorrow and require the papering over of its excesses, e.g., Uzbekistan.) It speaks of "pervasive insecurity" and an "arc of instability":

Lagging economies, ethnic affiliations, intense religious convictions, and youth bulges will align to create a "perfect storm," creating conditions likely to spawn internal conflict. The governing capacity of states, however, will determine whether and to what extent conflicts actually occur. Those states unable both to satisfy the expectations of their peoples and to resolve or quell conflicting demands among them are likely to encounter the most severe and most frequent outbreaks of violence. For the most part, those states most susceptible to violence are in a great arc of instability from Sub-Saharan Africa, through North Africa, into the Middle East, the Balkans, the Caucasus and South and Central Asia and through parts of Southeast Asia. Countries in these regions are generally those "behind" the globalization curve.

Terrorist groups (of which al Qaeda is merely one and not necessarily the most dangerous one in the longer term), criminal groups (which can include drugs but here is meant a broad-spectrum of criminal activities), and drug groups (entities devoted to production and distribution) have already hived off enclaves in all of these areas as well as significant outposts in the 'distribution targets' such as the US and Europe (often utilizing immigrant streams in mini-mart and gas stations). There is already co-opetition between these groups which we make easier by creating areas for them to establish operations and to secure documentation to sanitize people, tools (such as ships), and product. Disease (such as AIDS), natural disaster, and simple geography (as in out of the way places too hard to reach and police, e.g., Pacific islands, parts of PNG) make their contributions.

Rotberg proposes a useful taxonomy of nation-states: strong, weak, failed, and collapsed. While I will touch on some issues of the taxonomy, a weblog entry will not do this justice. See Rotberg's The Failure and Collapse of Nation-States: Breakdown, Prevention, and Repair, in Why States Fail: Causes and Consequences, Robert Rotberg (ed.), Look at the maps at the end of the PDF and you will see a depressing dispersed global supply chain that can conceive, manufacture, and delivery mayhem anywhere in the world. And since the following criteria are not about to receive redress anytime soon, we will be needing to predict and interdict state decline on a global basis:

Unless the developing world becomes much more stable, intercommunal (ethnic, linguistic, and religious) conflict is reduced or ceases altogether, corruption vanishes, good governance becomes common, or the war against terror is won conclusively, the propensity of nation-states to fail will be high and the policy consequences of that failure will correspondingly be serious and many.

I imagine that many readers will see 'interdict' in military terms which is actually too late, too costly, and too ineffective. My intent is commercial and political interdiction, but that is the very area that US nationals are the worst at. We love to be crisis managers and we too often reward and promote those in both commercial and diplomatic spheres for that ability while overlooking those who have vision and the ability to plan for the long-term, resolving problems before they mature. In this area we are at a significant disadvantage to, say, the Chinese.

Recent US actions have created in Iraq an especially potent node in this chain while depriving us of the attention, manpower, and monies needed to proactively deal with the entire chain. As I expect this chain to expand, not contract, the distraction has grave consequences.

At the taxonomy's core is governance capabilities, the "effective delivery by a nation-state of the most crucial political goods [which are] intangible and hard to quantify [and were a] claim that a citizen once made on a sovereign and now make on the state." The hierarchy of political goods starts with "the supply of security, especially human security" and proceeds to "predictable methods of adjudicating disputes and regulating both the norms and the mores of a society" and on to "medical and health care; schools and educational instruction; roads, railways, harbors and other arteries of commerce; a money and banking system," etc.

The signs of nation-state failure start with its leadership:

Preying on their own people is a sign; so is intensifying autocracy, the number of political prisoners, unexplained assassinations, and the denial of fundamental human rights and civil liberties. Judicial independence... massively declining GDPs per capita, soaring inflation, decreasing life expectancies, the growth of large-scale corruption, electoral fraud, border incursions, the rise of powerful nonstate actors, escalating rates of crime, desperately deteriorated roads, rises in the rates of emigration and smuggling, the informal adoption of outside currencies as acceptable tender, and the privatization of education and health services. [Often] present along with corruption and smuggling, are conditions conducive to terror.

The "delivery of political goods in sufficient quantity and quality to a substantial majority of citizens' can offset a level of internal strife, class conflict, insurgency, even civil war. We need to interdict here as weak states quickly become failed states. Later interdiction becomes costly even as it spawns new problems.

Gordon Housworth



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Open letter to KOS and Kossacks

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It is regrettable to see that dKOS has pulled down the counterattack thread which I recently cited in what I would respectfully submit to be a thoughtful and complementary review of dKOS' open source activity in F is for fake; P is for Propagannon.

"Sorry. I can't seem to find that story," is not a sufficient replacement for a valid discussion thread of a legitimate issue.

It would appear that dKOS is guilty of the same actions that I have laid to your political opponents:

Their political opponents were tracking the research as revealed by the removal of embarrassing pages or sites soon after Kossacks reported them.  These passive countermeasures were fruitless as documented images were captured before reporting. To my mind, these after-the-fact removals were evidence of culpability and an acknowledgement of the merit of the discoveries.

I have an excerpt of that thread and post it here in the hopes that the original dKOS thread will reappear:

Excerpt:
 
* [new] Researchers (4.00 / 3)

check your spam blockers, firewalls, your cookies, your computer security systems. Protect yourself against tracking and invasion. Enjoy any hate mail.

Rolfyboy6
by Rolfyboy6 on Thu Feb 10th, 2005 at 01:17:52 PST
[ Reply to This | ]

* [new] IP address (4.00 / 2)

Also, a reminder to everyone that these mean, venomous, crazy, freeper people have access to logs.  So while you are researching, they can find out a lot about you (your IP & referrer & exit URL)

  • Use google cache & Internet Archive
  • Use a free proxy (JAP, proxify, the-cloak, anonymouse.ws, unlimited PHProxy)
  • Use your neighbor's 802.11 WLAN
  • Use coral cache (.nyud.net:8090) for downloads
  • Use mailinator.com for forum signup & validation

I've been considering setting up a progressive friendly web service (proxy, incoming email, webmail to POP, RSS aggregator)

by electiledisfunction on Thu Feb 10th, 2005 at 01:36:58 PST

Other than that, keep up the rigorous analytic process as evidenced in Plame & Propagannon: We've Only Just Begun.

To dKOS' political opponents: You may not like the message, but you would do well to adopt the medium and professional rigor.

The nation can only benefit from such a debate.

Gordon Housworth



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F is for fake; P is for Propagannon

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Agitprop has taken a leap with the addition of Propagannon, the "general tactic of a government or political party using a fake reporter to pollute the press pool."

Those expecting a polemic of any kind should move on. This note deals with the intersection of deception, national security breach, open source analysis, shadowing and passive countermeasures, power of weblogs, national security (again), political judgment, lapse of mission, and counterattacks. The locus of many of these threads pass through a single weblog.

When I spoke of the committed collector in Value from the fringe, I had not envisioned one as large, distributed, and committed as Daily KOS whose dKosopedia describes itself as a "collaborative project of the DailyKos community to build a political encyclopedia. The dKosopedia is written from a left/progressive/liberal/Democratic point of view while also attempting to fairly acknowledge the other side's take."

For an open source analyst, dKOS is remarkable rich resource by virtue of its management, rigor, enforcement control on contributors, frequent timelines, and features such as a political glossary Kossary. It's political adversaries appear to recognize the reach and diligence of dKOS by the attention that its opponents pay to the threads under development. Its threads are so enormous, so extensively researched, that I will merely cite some exemplars in the themes that I see interacting:

  1. Deception in the creation of a sham journalist of extraordinarily dubious professional and personal credentials.
  2. National security breach, laced with possible further deception in which said sham journalist may have been given the original Plame "leak" and that all subsequent investigative efforts were unfortunate red herrings.
  3. Extraordinary open source analysis by the Kossacks, a modern day Baker Street Irregulars, Sherlock Holmes' street urchins who aided Holmes and were paid a shilling a day (plus expenses), with a guinea prize (or one pound, one shilling) for a vital clue (Kossacks work for zeal, not money).
  4. Shadowing of Kossack research by political opponents employing near real-time, passive countermeasures.
  5. Power of weblogs and dedicated contributors that form a distributed, human parallel processor array -- call it the Sixth Estate.
  6. National security (again), this time for said dubious journalist, employing an alias, obtaining White House access, passing FBI background checks and repeatedly receiving press day passes from the White House press secretary.
  7. Political judgment of those who would initiate such shallow deceptions.
  8. Lapse of mission of both Fourth and Fifth Estates who appear omissive in the fulfillment of their charter.
  9. Counterattacks, a not unreasonable concern.

Kossacks were able to marshal assets as diverse as facial recognition analysis, website and network analysts, gophers (to verify addresses, most of which were bogus), specialist researchers, subscribers to paid research, etc. It was a massive human parallel array that often returned answers to questions posed within minutes.

Their political opponents were tracking the research as revealed by the removal of embarrassing pages or sites soon after Kossacks reported them.  These passive countermeasures were fruitless as documented images were captured before reporting. To my mind, these after-the-fact removals were evidence of culpability and an acknowledgement of the merit of the discoveries.

I find it appalling that these exposes were unimpeachably done by a blog while the highstreet press was shamefully missing in action. It fell to specialist journals such as Editor & Publisher to expose their miserable failures -- such as quashing well-researched analyses of the 'bulge.' Built largely on the back of work by Kossacks, Rep. Louise Slaughter was able to field an open letter "regarding James "JD" Guckert (AKA Jeff Gannon) of Talon News" that caused Guckert/Gannon to immediately close his website and leave the White House press corps.

What judgment would field such a shallow deception failing all four of deception's classic components: security, plausibility, adaptability, and integration?

Gordon Housworth



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Pan-industry “beggar/maker-prince/maker” initiatives in supply chains

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Part 1

Enter Intel, a chipset manufacturer that is promoting "white box" (generic PC) and "white book" (generic notebook) devices using generic designs, cases and hardware modules. Intel's intent is said to be the creation of a family of more compliant suppliers and so escape their current vulnerability to the two US giants - Dell and HP. 

Intel seems to be pursuing an approach that mimics the "beggar/maker-prince/maker" process that we see emerging among US automotive OEMs.  (As Intel provides roughly a fifth of the world's server products (at higher margins than PCs) and so competes with their server customers, it may be to Intel's advantage to suppress their current troublesome generic PC vendors while created a wider market for their chip sets.)

For those readers unfamiliar with beggar/maker-prince/maker, we see OEMs in a number of sectors, automotive included, that perceive themselves increasingly captive to powerful Tier One suppliers. To escape that burden, we believe that the OEMs are in the process of elevating smaller suppliers (making princes out of serfs) while taking business away from the leading suppliers for future models (making beggars out of kings).  The result in both automotive and electronic market sectors is to leave the top of the manufacturing tier in stronger control of its supply chains. 

Lenovo, then called Legend, abandoned their PC designs and subbed back to Taiwan (though manufacturing still occurred in China) in order to achieve greater price volume advantages.  While not an expert on the tax matters of foreign subsidiaries I am told that the formation of a new foreign subsidiary in China allows the foreign company to restart the clock on tax relief and other advantages offered to the foreign firm.  This may account for the growing number of subsidiaries formed in China by Taiwanese firms. This is likely one contribution to the significant overcapacity on the manufacturing side that has led to depressed margins for many of the Taiwanese OEMs and ODMs. I should think that Taiwanese manufacturers would look favorably on supporting Lenovo branded line of computers.

Lenovo may actually perceive themselves as a branded marketing channel akin to Dell and HP, taking advantage of excess "Taiwanese" manufacturing capacity and the white box and white book push by Intel.  An unintended consequence of Intel's action could be that Lenovo instantly harvests a world-class PC and laptop design and manufacturing capability that rivals Dell and HP.  The lengthy transition that the market had factored into Lenovo's acquisition of IBM's PC unit could thereby be collapsed into a process of well-under a year.

Extension to other segments: There is an interesting connection between laptop and supercomputer design.  It would appear that the technology in high-end density servers mimics that of laptops in that they all require means to deal with power efficiency, heat management and switching/docking mechanics.  This recognition of thermal efficiency indicates that the push for absolute power has shifted to efficient use of power.  This same skill in thermal efficiency may impact future supercomputer design.  If so, acquiring these skills in laptop design could allow Lenovo a leap into more efficient and smaller supercomputer designs.

Secondary implications: Taiwanese manufacturers have been aware of the coming shift to China as the principal manufacturing center and have been searching for ways to increase their price-volume curves as well as defining replacement industries to enter.  For a number of the major firms, that decision appears to have been made but that is the subject of a future note.

Globalization of knowledge work: Notebook PC design & development
Kenneth L. Kraemer, Jason Dedrick
Personal Computing Industry Center

Sloan Industry Studies Annual Meeting Sloan Industry Studies Annual Meeting

April 19, 2004

Taiwan's ODM/OEM Industry: A few snapshots
Jerome Fourel
22 Mar. 2004

IBM-Lenovo deal said to get national security review
By John G. Spooner
CNET News
January 24, 2005

Lenovo: The making of a legend?
Mary Hennock
BBC News
8 December, 2004

Gordon Housworth



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Lenovo's transition to Dell and HP peer competitor should be measured in months rather than years

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UPDATE: While this note was in development, the Committee on Foreign Investments in the United States (CFIUS) gave notice of review of Lenovo's purchase of IBM's PC unit on national security grounds over the "concern that Chinese operatives might use an IBM facility for industrial espionage." While that review may alter the timeline of Lenovo's international brand expansion, I do not think that it fundamentally alters the ability of Lenovo to quickly become a peer competitor to Dell and HP while it strengthens its market share in the Chinese and Asian market.

Market Assumption: The transition period between (1) Lenovo's purchase of IBM's PC group and (2) the appearance of robust Lenovo desktop and laptop products (products that challenge the likes of Dell and HP) is to be measured in terms of years.

Our Forecast: The transition period between Lenovo's purchase of IBM's PC group and the appearance of robust Lenovo products is far shorter than what the perceived wisdom (years) would indicate. The transition could easily be accomplished within twelve months, less with a more concerted effort, requiring little or no additional dependence on intellectual property (IP) diversion.

Rationale: Lenovo has already positioned itself to climb out at the top of the electronics supply chain. It lacks only in brand and distribution (both of which it believes it has purchased). Pricing pressures in the electronics industry are no less fierce than those between automotive manufacturers (OEMs) and their Tier One suppliers.  Dell, HP, and IBM, among others, have placed unrelenting pressure on their Taiwanese suppliers for price reductions.  It is understood in the sector, but seems not to have reached the level of actionable risk analysis, that this pricing pressure has driven much "Taiwanese" electronics to China with supplier badging remaining in Taiwan. (See activity location 2003 versus 2006.) 

Those same pricing pressures have forced Taiwanese producers to make the calculation as to when they will drop, or "go direct" in competition with, their US customers who are, in effect, increasingly reduced to marketing organizations.  Unlike the automotive industry, where Tier One suppliers do not have a ready substitute for the current OEM customers, the Taiwanese firms (with much of their manufacturing already located in China) will now have Lenovo as an option, a fact not lost on Lenovo in its acquisition of IBM's PC marketing arm.  This "onshore" Taiwanese production in concert with other industry trends allows Lenovo to emerge as a competitor to Dell or HP without a lengthy transition time.

History: Some terms are in order when examining the Taiwanese electronics manufacturing hierarchy, especially as the term "OEM" means something very different there. Their manufacturing sweep is broad: servers, PCs, laptops (notebooks), phones, MP3 devices (iPod included), calculators, spelling devices, language translators, calculators.

In increasing level of integration:

  • "Manufacturing engineering" of simplistic components or subassemblies.
  • "OEM," or Original Equipment Manufacturer, indicating that the vendor has design capacity but provides sub-system design for a client who owns the design and its intellectual property.
  • "ODM," or Original Design Manufacturer, who own their own intellectual property and designs and can resell them at will.
  • "IDM," or Integrated Design Manufacturer, an emerging term for a manufacturer producing turnkey product ready for market in their customer's trade dress.

Firms like Cisco, however, perceive the first three tiers are contract manufacturers who give away engineering design in order to get the manufacturing follow-on.  The two largest Taiwanese manufacturers are ODM Quanta and Inventec that sell their designs and equipment on to the likes of Dell and Gateway.  (There was an interesting case in which an almost identical PC occurred under both the Dell and Gateway badge, both provided by Quanta.) Quanta and Compal are the largest laptop producers, with Inventec third, while Inventec leads in servers. Certain Inventec suppliers market direct to end-users. Colleagues in the segment describe a marketing spin back in the US is which Dell and HP represent these designs as their own. While that occurs with some products in the higher ranges, much of Dell and a significant amount of HP product are actually Taiwanese designs.

Part 2

Globalization of knowledge work: Notebook PC design & development
Kenneth L. Kraemer, Jason Dedrick
Personal Computing Industry Center

Sloan Industry Studies Annual Meeting Sloan Industry Studies Annual Meeting

April 19, 2004

Taiwan's ODM/OEM Industry: A few snapshots
Jerome Fourel
22 Mar. 2004

IBM-Lenovo deal said to get national security review
By John G. Spooner
CNET News
January 24, 2005

Lenovo: The making of a legend?
Mary Hennock
BBC News
8 December, 2004

Gordon Housworth



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Cost pressures on supply tiers prompt loss of supplier intellectual property

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Suppliers worry that design reviews by an OEM prior to contract award are efforts to extract price concessions, extracting information to compare (1) proprietary cost buildups and (2) ideas among competing suppliers. OEMs, for their part, may be mistaken in asking the supplier for full disclosure of the supply chain during this period of minimum trust and maximum fear, a more common occurrence among the three "US" OEMs than Toyota or Honda.

In reality, the supplier has often not gone to the cost and effort to fully detail the part. OEM staff profess outrage when they 'find out' this is the case. We ask them what they expected. Would they not do the same were circumstances reversed?

The following [sanitized] exchange involves AutoCo and CarCo, two automotive OEMs, MetalCo, a Tier One supplier, and MasterCo, a related subsidiary. AutoCo is under financial pressure to produce improved results. Such pressure always creates hot spots under excruciating demand, to the point of program cancellation and (participant) job loss.

This redacted segment illustrates how financial pressures on AutoCo were converted into a loss of intellectual property by the supplier (MetalCo). Once compromised, the intellectual property was transferred without controls, more easily coming to the attention of both competitors and collectors.

This example includes impacts from as yet unabsorbed mergers, resulting from suppliers' efforts to build capacity in the face of OEM requirements. Problems often extend beyond regularizing amortization when some suppliers fail to understand that the OEM had asked for increased capacity or capability, not increased cost, and thus have failed to restructure the acquisition. The supplier may be too distracted, may not know how to do the analysis, or did not want to interrupt its current relations with its subsuppliers to perform the streamlining. When we see a supplier that has not restructured its acquisition costs, we know that they have not restructured their supply chain's IP protection.

In this case, pressure was transmitted from the OEM (AutoCo) to a specific program that was under threat of cancellation. As we so often see in such cases, loose corporate guidance and personal fear combine to put the supplier at maximum risk:

AutoCo Finance: I have checked your SEC 10K filing and it states that MetalCo uses a straight line, 10-yr. amortization of capital investment. Why are you using a 7-year amortization of capital investment with us in this quote?

MetalCo Controller: Were you looking at the 10K for MetalCo or for MasterCo?

AutoCo Finance: MetalCo.

MetalCo Controller: We are trying to commonize our accounting practices after the mergers and have yet to accomplish this.

AutoCo Finance: Can we assume then for this [part for model year 20XX] that you will have this straightened out and adjust the piece price down to reflect a 10-year amortization?

MetalCo Sales: We must weigh the risks we take on and make certain that we are acting responsibly for our health, for our shareholders. We have weighed our risk and feel that we must use this 7-year amortization. Can we be sure that AutoCo won't take the business elsewhere before ten years of production? Should we risk being stuck with this capitalization and no business to pay for it?

AutoCo Finance: I think that we are showing commitment to do business with you by continuing our discussion and calling for this session to spend two days trying to understand the best way to invest in this machine line and brainstorm ideas for leaning that process.

MetalCo Sales: I don't think we want to talk about this in this forum. Well, okay! Let's get it out on the table. We are all thinking about it. We are sharing information and cooperating despite the fact that you continue to market test and will probably source lowest price quote, no matter how cooperative we have been, how good our product is, how flexible our proposed process is to deal with your changing volumes. We are competitive.

AutoCo Buyer: I think you are talking about the past. It has been month's since we were market testing. Your quote has improved (reduced) since then. We are here to find the best way to design this line and help reduce capital, labor and tooling costs.

AutoCo Finance: I think the fact that we keep meeting with you and are hosting this session evidences that we are serious in pursuing you as the supplier.

MetalCo Sales: You are market testing right now and we know it. Where is your intent letter? We haven't received it!

AutoCo Buyer: There is no market testing currently.

MetalCo Sales: Unfortunately, our tool suppliers talk and we are aware that one of them is participating in a quote for a competitive supplier for this business. Of course, every idea that we have had for this part is explained to the machine supplier so that they can quote machinery for our line. Then, they incorporate that idea when they quote to our competitors in your market test.

AutoCo Finance: The only reason that we would seek other costs would be to try to understand if your costing is competitive. We feel that we are demonstrating our interest and probable commitment to you.

The AutoCo staff have now indirectly admitted that they bootlegged one supplier's data to a competitor(s) in order to secure a part at lower cost - either as price leverage upon MetalCo or by contracting to another supplier using MetalCo's IP.

Additionally, in a subsequent part of this meeting, the process of another OEM, CarCo, was mentioned as a possible solution. It would take little effort to identify the CarCo supplier whose IP was compromised.

It is an understatement to say that this is a typical instance in US automotive OEM-Supplier relationships, that these relationships are porous and that as a result their IP protection is poor.

The unintended consequence is that, unknown to AutoCo leadership, AutoCo staffers had broadcast MetalCo's information through a diffuse and uncontrolled network of suppliers and subsuppliers, a process that we see as more the norm than the exception. Unless the supplier puts in place workable security controls at the business level to deal with IP protection (such as probes from an alerted collector seeking further data on proprietary processes), MetalCo can only expect further losses through these 'normal' supply chain negotiations.

Postscript: The pressure on AutoCo continues to the point that, during piece part negotiations, suppliers are told when they cannot meet AutoCo's target price: "Meet this price or we take your [insert part name here] to China."

Gordon Housworth



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Emerging Information Technology (IT) themes in India and China

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Stepping out into prediction space on the Indo-Chinese IT sector:

  1. India will, for the foreseeable future, become the low-cost IT counterpart to China low-cost manufacturer
  2. India and China will complete a shift to Linux, of increasingly indigenous versions, that, given the region's user volume and technical expertise, could see the center of Linux development shift to Asia
  3. India will use its IT expertise to develop "asymmetrical" low-cost efficient computing devices driven by its 'disadvantaged' position on the Digital Divide. Much like Japanese vehicles in the 1960s, those devices will mature and expand out of Asia
  4. India's IT-based products will take advantage of both rising local manufacturing efficiency and Chinese low-cost manufacturing (rising price-volume efficiencies in both nations) along with their rising broad based consumerism
  5. India will increasingly outsource to, and acquire, IT/tech resources in China such that supply chain risks will reach similar proportions in both countries
  6. India will become the recipient of Chinese attentions in IT intellectual property (IP) much as have US and European firms in the heavy manufacturing segment

Acting as drivers, India and China, along with smaller Asian nations, acting as consumers, will invent new paradigms and take leaps unencumbered by legacy infrastructure. In 2002 for example, the third world explosion in wireless networks over traditional landlines was typified by this unacceptable cost fault line in both long line and last-mile connection:

"Unfortunately telecom networks are designed for people who can afford to pay around US$35 in monthly bills, and very few people in the rural areas can afford that," said Ashok Jhunjhunwalla, a professor at the prestigious Indian Institute of Technology (IIT).

The upshot was Wireless in Local Loop (WiLL) technology, rugged electronic switches that need no air conditioning, and solar-powered relay stations providing both voice and data. The Simputer (from "simple computer") followed at $250 on the back of Linux SW and a simplified design using low cost components. A "WiLL kiosk with a personal computer, printer, telephone, and power source" fetched about $900, which compared quite favorably with the Indian government's $800 cost of a telephone line.

Fast forward to 2005 and the Linux-powered, hand-held tactical battlefield C2 SATHI (Situational Awareness and Tactical Hand-held Information), or 'buddy' in Hindi, whose commercial versions sell for some $200. (One would expect such devices to enter terrorist inventories for similar purposes.) Indians value Linux's cost, ease of installation, and security (open source over proprietary code with possible trap doors) for both military and commercial apps:

Officially, India's strategy is to make Linux the standard for students in all academic institutions while the government trains employees to help them work in a Linux environment with support from IBM. In Bangalore, a global information-technology hub, Linux now runs a Center of Competency (CoC), equipped with IBM hardware, that offers consulting, education and certification and allows users to test and gain insights into how Linux can help them. Jyoti Satyanathan, general manager for Linux-IBM in South and Southeast Asia, believes that the CoC is set to play a "significant role in the worldwide Linux community". Red Hat, a leading purveyor of Linux, now has offices in several Indian cities.

We can expect to see IBM repatriate code and devices here. On the high end, that can be a C-DAC (Center for Development of Advanced Computing) supercomputer built after the US halted supercomputer shipments to India due to diversion to weapons and nuclear programs. Now making teraflop machines, C-DAC differentiates themselves from English or Romance language-centric devices in that they design to enable nationals of many countries to "use computers while working in their own languages." That is a powerful advantage among the largely double-byte character languages of Asia. Another interesting item, equally at home in rich areas or poor, is the Amida, a Simputer variant that is a hybrid PDA, hand-held, and phone that includes a smart card reader so that rural poor can buy a card and rent an Amida for a short period. Indians are designing for a broad use spectrum of developed world to third world.

Such advances will draw the attention of those interested in the code and architecture embedded in Indian devices, especially as Indian firms move through increasingly more complex devices while they expand their outsourcing to China and other low cost countries, retaining BPO (business and process outsourcing) from the US while outsourcing the IT/technical services that do not require English proficiency to China. As Indian firms expand both outsourcing to, and acquisition within, China, it will be increasingly impossible from the client's viewpoint to distinguish supply chain risk between India and China. One wonders how clients and end-users will evaluate the critical path of risk.

Bridging India's digital divide with Linux
By Ranjit Devraj
Asia Times
Jan 28, 2005

China no threat to India's IT industry - just yet
By Priyanka Bhardwaj
Asia Times
Feb 2, 2005

Gordon Housworth



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Iraq's 72-hour lockdown ends tomorrow

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Permit me to puncture the unremitting boosterism and cheerleading by US news sources with regards to the 30 January Iraqi vote. Yes there is sense of spirit, of nationhood (but whose 'nation' remains to be seen), or the mere ability to independently vote, period, but the 30 January event was not an uniformly nationwide election on its face, but more a referendum along parochial interests. (Kurds not only voted for the Iraqi Transnational assembly and a Voter's Provincial, but an Autonomous Kurdish Parliament and a federalism referendum that voted overwhelmingly for independence - something that will trouble the Shias.)

All the boosterism has a kernel of truth to it, of course. Iraqis hadn't been able to choose their leaders at all in recent decades, even by some strange process where they chose unknown leaders. But this process is not a model for anything, and would not willingly be imitated by anyone else in the region.

What is also not properly covered is the slow windup of the voting and the near-hit that insurgents almost landed against it. I know as, at 8-hours offset, I was up at night to watch (but then I stayed up for the 1993 Russian coup attempt, the shelling of the "White House" (parliament building) in Moscow, and Yeltsin's ultimate appearance atop the tank). Only a few sources note that the insurgents launched the highest one-day volume of attacks in the war (US officials recorded more than 175 attacks), but they appear to have surged early in the morning, and with their bolt shot, allowed a relative calm to appear. Noting the growing silence, Iraqis began to explore, often sending out a male family elder with a cellphone to make a reconnaissance (and the US after having debating shutting down the cellphone network did not and so allowed an impromptu comm network to spread the news) in combination with reinforcing video reports. Had the insurgents focused their attacks, say on pivotal Baghdad, and staggered them though the day, things might have turned out differently.

Iraqis know deeply what seems to have slipped off the radar of most US polity, that the US had intended either a "soft dictatorship under Chalabi, or would have had stage-managed elections with an electorate consisting of a handful of pro-American notables":

[the US] opposed one-person, one-vote elections of this sort. First they were going to turn Iraq over to Chalabi within six months. Then Bremer was going to be MacArthur in Baghdad for years. Then on November 15, 2003, Bremer announced a plan to have council-based elections in May of 2004. The US and the UK had somehow massaged into being provincial and municipal governing councils, the members of which were pro-American. Bremer was going to restrict the electorate to this small, elite group. Grand Ayatollah Ali Sistani immediately gave a fatwa denouncing this plan and demanding free elections mandated by a UN Security Council resolution.

I believe that Baghdad was the most courageous spot as it has so much at risk in comparison to the Sunnis who boycotted, the Kurds who were committed and armed, and the Shias who were more distant.

The voting has had no impact on the Baathists and insurgents, save that they might reasonably be alarmed at the outcome and so double their efforts to destabilize the country and kill a nascent political class. The insurgency remains widely popular in the Sunni community and while the politically astute Shias will attempt an outreach, I do not see it as being successful for a civil war in Iraq is already in progress and still hold to the October forecast:

Barring an intervention that I cannot yet see, I expect jihadists and fundamentalists to continue to gain sway through their marriage of convenience with the Baathists and mercenaries running around the Sunni heartland. The "King of the Green Zone," Allawi, will either be killed or join the Sunnis in the death struggle of a unified secular Iraq against the Shias. (Those with good memories know that Allawi was a Baathist before he fell from favor and went into exile.) Neither Turkey nor Iran will sit idly by watching the further isolation of US forces -- dispense with any fiction of a meaningful coalition -- diplomatically and on the ground. Ever the survivors, the Kurds may cut a deal with the Turks before they move on Kirkuk.

In meantime, Sunni insurgents will hammer away at the thin supporting infrastructure of cooks, drivers, barbers, and translators, not to mention the security forces -- who, by the way, primarily take up this line of work because the economy has collapsed and there are no jobs to speak of. We may not wait 12 to 18 months to depart, but what we leave behind will make Taliban Afghanistan look like children's day care.

The 72-hour lockdown ends tomorrow and it is hard to believe that the insurgents will not reaffirm their presence, degrading a making sense of the vote, attempting to blunt the rise of Shia power thereby allaying the fear of a US-Shia alliance (an opinion held in other frontline Sunni states), and derailing, or tilting in their favor, the writing of a Constitution and its subsequent referendum.

It is hard to imagine a spirit of negotiation when the Muqawama al-Iraqi al-Islamiya (Iraqi Islamic Resistance) general command issues a communiqué by broadcast and leaflet calling for a new offensive, the "Operations of the Children of Mohammed the Messenger of God to Break the Back of God's Enemies." Still, patronage is a powerful lure and refusing to join, or later withdrawing from, a ruling coalition would deny that faction billions, unless, of course, they thought that you could get it all.

Gordon Housworth



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A tipping point in intellectual property protection?

  #

It would appear that the US is at a turning point in its treatment, or tolerance, of global intellectual property (IP) theft, although it is fair to say that our process is flawed:

  • Too much of the Administration's focus is on on-line piracy and counterfeit parts, often sold as unbadged copies of the original and where the impact is seen to go no farther than direct revenue loss, liability over presumed 'faulty' parts, and impact to the producers' reputations.
  • Too much of the Administration's approach is devoted to ineffective, and even counterproductive means, primarily legal remedies and policy guidance buttressed by industry lobbying to influence legal and policy changes.

It is revealing that the recent report that is underpinning the renewed Dept of Justice interest in IP, and is the report that AG Ashcroft reviewed with MEMA (Motor & Equipment Manufacturers Association), Congressman Knollenberg, and other US manufacturers is principally devoted to legal and criminal investigative remedies. Reading the AG's announced recommendations of that report reflects the same legal and policy approach. Although these remedies will not work, and will actually backfire, as Cisco discovered in its tiff with Huawei, there are quite workable alternatives.

What seems to be missing, or has been missing, is the understanding that:

  • The real problem of counterfeit parts is that the counterfeiters will gradually uncloak to produce badged products that directly compete with the producers from which they had expropriated intellectual property, and thus can undercut the original producers' pricing, i.e., the endgame is being driven from the market, not mere revenue dilution or 'faulty' parts.
  • Counterfeits pale in comparison to foreign competitors expropriating intellectual property specifically to produce badged parts that build an independent brand awareness for price and quality that quickly drive the original producer from the market.
  • The principal remedies on offer presume a working legal framework in the expropriating nations that reciprocate the legal protections that we have come to expect, and depend upon, in our Anglo-European legal systems, i.e., without this reciprocation, our legal remedies for adjudication and redress are ineffectual in the country where the expropriation occurs.

The problem is certainly enormous, and growing more so. I am already on-record with the following predictions:

  • Emerging Asian suppliers will displace less efficient US suppliers in US supply chains
  • US OEMs will continue their pursuit of lowest cost suppliers, abandoning historic 'domestic' suppliers in favor of new Asian suppliers

And if it is not too late:

  • After enduring growing losses, US OEMs and major manufacturers will use IP security as a key selector for suppliers in the critical path of their supply chains
  • Protective IP programs will be essential to a supply chain's critical path, and so the health of the supply chain. (The trajectory of IP protection will mimic that of the rise of part quality as a mandatory selection criterion.)

Two remarkable events have put intellectual property squarely in the limelight, GM's accusations of a Chinese automaker using stolen design data, and the national security review of Lenovo's purchase of IBM's PC unit by the Committee on Foreign Investments in the United States (CFIUS).

US Commerce Secretary Donald Evans publicly accused the Chinese automaker, Chery, of "using stolen design information from GM Daewoo Auto & Technology Co." to produce Chery's QQ minicar. The target was the Chevy Spark/Daewoo Matiz which cost GM $500 million to develop. Mathdata and 'other design information' of the Chevy Spark "were simply stolen from GM Daewoo." The impact was riveting as the QQ:

  • Reached market before Spark
  • Costs 33 % less than Spark
  • Outsells Spark by 6:1 in Chinese market
  • Has identical body structures, exterior and interior designs

Chery was then 20% owned by Shanghai Automotive Industry Corp - GM's main joint venture partner.

The Committee on Foreign Investments in the United States (CFIUS), an interagency M&A review panel on national security grounds has given notice of review of Lenovo's purchase of IBM's PC unit over the "concern that Chinese operatives might use an IBM facility for industrial espionage."

There is recent CFIUS precedent in the 2003 review of the bid by Hong Kong's Hutchison Whampoa for bankrupt Global Crossing, owner of one of the world's largest fiber optic networks. That review, which causes HW to withdraw, was based upon concerns "about control of a key telecom provider by a firm with close ties to the Chinese government."

IBM-Lenovo deal said to get national security review
By John G. Spooner
CNET News
January 24, 2005

US lashes out at Chinese piracy
(Asia Pulse/Yonhap)
Asia Times
Jan 15, 2005

Report of the Department of Justice's Task Force on Intellectual Property
Department of Justice
October 2004

Gordon Housworth



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Using SARS to predict H5N1 Avian Flu impacts on regional & global supply chains, Part 2

  #

Part 1

Host nation (PRC and HK) "Public" or core event hierarchy:

  • Restaurant activity
  • Public small to medium group activities
  • Mass transit
  • Tourism revenue
  • Airline revenue
  • Service industries (restaurants, hotels, airlines, cinemas, and theaters)
  • Host nation quarantine commences
  • Service industries suppliers (air navigation services, wholesalers, food providers)
  • Discretionary products (notably luxury goods)
  • Global airport sales of all items
  • Foreign (offshore) quarantine rises
  • Host nation quarantine methods increase in intensity
  • Host nation (PRC) mismanagement of news/story continues
  • 'Phonecam nation' collects and provides data about virus spread to unofficial databases beyond government control
  • Asian markets/indices
  • Trade fairs and commercial events
  • Manufacturing transportation (truck, ship, air)
  • Healthcare response and availability (including health providers)
  • Light industrial orders (new business replenishment)
  • Light industry investment
  • Financial services companies (commercial banks, investment banks, and brokerages)
  • Financial services staff relocations
  • Expatriate employee recalls/returns
  • Host nation admission of prior news management, relative, but transitory, transparency
  • Military mobilization to support containment
  • Draconian mandatory healthcare incarceration
  • Increasing toll on available healthcare providers
  • Tideside/port impacts
  • Heavy industrial orders (new business replenishment) (Plants in this segment were more isolated)
  • Heavy industry investment
  • Regional economic contraction (Hong Kong, Singaporean and Taiwanese economies had begun shrinking; Malaysian and Thai economies slowed with expectation of shrinking; PRC's industrial expansion slowed)

SARS' modest transmission rates allow relative containment, interrupting the event hierarchy:

  • Global economic integration (notably outsourcing to low cost producers and related SG&A procurement, tracking, and IT activities)
  • Global supply chain interruptions
  • Overwhelmed health system
  • Civil unrest
  • Martial law
  • Rural and urban migration
  • Regional economic collapse

"Post-event" hierarchy:

  • WHO certifies global hotspots as free from contagion
  • New case/suspected case disclosure cause minor economic ripples
  • Economic activity recovers
  • Host nation acknowledgment of news suppression to 'prevent' immediate/local impacts to revenue, trade, tourism, and bureaucrat reputations
  • Promise of future immediate transparency and cooperation
  • Recidivism commences
  • Host nation punishment of "whistle blower" citizens

A bit of light humor. As thieves will always prosper in troubled times, LVMH Moët Hennessy Louis Vuitton was upset by photos showing Hong Kong residents wearing SARS masks bearing counterfeit Louis Vuitton logos.

An Avian Flu pandemic will not allow time for humor.

Gordon Housworth



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