Tag Archives: economics

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Why hasn’t mobile banking spread out from Africa?

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Kenyan woman with mobile phoneIf there’s been one good thing to come out of the global financial shitstorm, it’s that all of a sudden we’re looking afresh at established institutions and questioning whether, actually, there aren’t much better ways we could be doing things.

Point in case: mobile peer-to-peer banking, which is going gangbusters in parts of Africa but has yet to make much of a splash beyond that continent. The Guardian‘s Victor Keegan takes a closer look, and wonders whether it might be the key to saving the UK’s continually beleagured, semi-nationalised and utterly mismanaged postal service:

If you want to see pioneering experiments in banking you will have to go to a surprising place – Africa. And the question is, why can’t we do the same here? If the Post Office is looking for a new role, it need look no farther. In Kenya, customers of M-Pesa can send money to each other from around the country in 14 seconds flat using their mobiles. In the UK it takes three days, thereby endowing the banks with a huge float of money in transit on which they can earn interest. In Kenya, people leave their money at a trusted outlet such as a shop or pharmacy, where it is loaded into their sim cards.

At a Forum Oxford future technologies conference at the weekend we were updated on the startling success of the operation. It is reckoned that 17% of the Kenyan population is on M-Pesa. As a result they don’t need to carry cash any more, as everything from a can of Coke to your funeral can be paid for by phone. It works because the cash is held centrally by the bank, thereby enabling transactions to take place at very fast speeds. The average transaction is $30 (£20) because people trust it to do big ticket items.

Of course, there is always PayPal (which offers a mobile-linked transfer system as well), but finding a business that will accept PayPal that isn’t internet based is a big challenge. So, why hasn’t the idea caught on in more developed nations? [image by whiteafrican]

Maybe it is because we are not used to the idea of technology transfer coming from poorer to richer nations that industrialised nations have been so slow to realise not only that Africa is leading the world in mobile banking, but that it has big lessons for us.

Call me cynical (O RLY?), but I suspect it has a lot more to do with the fact that banks have no need to sell their services to us in a manner that emphasises our convenience, because our lives are so inextricably entangled in their profit generation systems already. Just like a drug dealer, they like to keep you waiting so as to remind you whose bitch you are…

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Web2.0’s international profit paradox

internet cafe sign - Varkala, IndiaSlowly but steadily, the world is becoming wired; internet penetration in developing countries is growing at a surprising rate, and the residents of said countries are taking to Web2.0 like ducks to water. Great news for start-up entrepreneurs, right? [image by piccadillywilson]

Well, not entirely. Citizens of developing nations are providing a huge influx of users to Web2.0 platforms, certainly, but the problem is that they chew up a lot of expensive bandwidth without returning much in advertising revenue:

Web companies that rely on advertising are enjoying some of their most vibrant growth in developing countries. But those are also the same places where it can be the most expensive to operate, since Web companies often need more servers to make content available to parts of the world with limited bandwidth. And in those countries, online display advertising is least likely to translate into results.

This intractable contradiction has become a serious drag on the bottom lines of photo-sharing sites, social networks and video distributors like YouTube. It is also threatening the fervent idealism of Internet entrepreneurs, who hoped to unite the world in a single online village but are increasingly finding that the economics of that vision just do not work.

I imagine this problem has been magnified recently by the economic slump; the pricing of online ads everywhere has taken a nosedive in the last year or so. That may be temporary, though, as print media venues close their doors in response to the same pressures. [via SlashDot]

What’s most likely, as the NYT article points out, is a sort of tiered service; MySpace is allegedly planning to serve its Indian userbase with a stripped down page design to save bandwidth (a course of action that, if deployed globally a few years ago, might have stopped people from abandoning it in droves for Facebook), while Veoh has entirely blocked users from many developing regions from watching videos on its service.

A big outfit like Google can afford to bleed money on this sort of thing (and indeed it is – some people estimate YouTube is costing them $1.65million every single day), but not forever. Which means that, if things continue in the same vein, the internet may become the latest frontier where the omnipresent (and ever-growing) gap between the haves and the have-nots makes itself manifest.

It’s a bit of a Catch-22 situation: ad revenue in developing countries is low, but it will only increase at a decent rate if the internet in those areas doesn’t become a second-rate ghetto with limited services. It’s the ages-old battle between idealism and profit margins… and a crucible test for Google’s “don’t be evil” manifesto.

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Upsides to the downturn – work less, die later

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Chinese card playersPeriods of economic recession are bound to affect your health negatively, right? Well, not according to Christopher Ruhm, economics professor, whose research suggests that health actually improves in recessions:

In studies over the past 10 years, Ruhm has consistently found death rates decline during recessions and rise when the economy expands. If unemployment rises 1 percent, he estimates the death rate will fall by about half a percent.

“I tracked things like unemployment and mortality and found that they were almost a mirror image of each other,” Ruhm said.

Other researchers have found evidence of improved health during economic downturns in Cuba, Germany, Japan and Spain. Think of it as a silver lining — and perhaps a measure of how much our unhealthy lifestyles and workaholic tendencies can get the best of us during boom times.

[…]

Some experts remain skeptical, in part because of overwhelming evidence that people who lose jobs suffer poor health because of it. Depression, anxiety, drug and alcohol abuse, and anti-social behavior become significantly more likely after a person gets laid off.

As with so many articles of this type, there’s actually no conclusive proof either way. The causality of changes in the death rates is going to be affected by a multitude of interdependent factors, of which the state of the economy is just one (albeit a fairly significant and influential one). [via MetaFilter; image by SocTech]

That said, there’s a nugget of appealing logic at the core of Ruhm’s research. How much does the amount we work (and what we get paid for that work) really compensate us for the loss of what might be a somewhat spartan but more leisurely lifestyle? If the link was found to be explicit, what trappings of your current life would you be willing to sacrifice in exchange for a happier, healthier life? Or is this just another rehashing of Walden Pond for the modern age, a desperate grab for a silver lining in a cloudy sky?

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“Good enough” computing – will the recession kill off Microsoft?

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laptop and netbookThis speculative futurism thing is starting to spread! Keir Thomas, Linux columnist for PC World, has posted a future retrospective piece that looks back from 2025 to the present day as the dawn of “good enough” computing… and the beginning of the end for Microsoft.

The lack of desire to relinquish XP by users was part of what became known as the “Good Enough” revolution in both software and hardware. At the beginning of the 21st century, computing hardware had evolved sufficiently to reach a level of performance that allowed for speedy execution of virtually all common computing tasks. Prior to this, the only way to guarantee good performance was to buy expensive cutting-edge hardware. But now chips costing just a few dollars offered more performance than most people would ever need.

Upgrading became less a matter of getting a better PC than about simply replacing old and broken computers with newer models. Ever resourceful during the Great Recession that struck in the early 21st century, PC manufacturers responded with ultra-cheap but “good enough” computers (both laptops and desktops) that were designed to be simple slot-in replacements for existing computers. PC manufacturers had already carved this route with netbook computers, where the goal was to be cheap and usable, with little if any frills.

Obviously there’s an element of fun-poking to Thomas’s piece (alongside the enduring positivity of the committed Linux evangelist) but as a piece of speculative futurism it’s a solid and plausible job. The details may well work out differently – and I’d be surprised to see even the recently-beleaguered Microsoft drop out of the game quite that easily – but the idea of computing as commodity was raised by Charlie Stross a year and a half ago, and many others since. As the line between mobile devices and ‘proper’ computers continues to blur (and convergence with phone handsets accelerates), Thomas’s future doesn’t look too fictional at all. [via the spiritual home of the Linux-takes-all story, SlashDot; image by Matthew Verso]

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Writing the mega-corporation realistically

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corporate headquartersJason Stoddard has gotten tired of stories and novels featuring shadowy and nefarious mega-corporations seeking to enslave the globe, and with good reason – it’s just not a realistic or logical thing for a corporation to do, and it’s becoming a modern iteration of the moustache-twirling Snidely Whiplash villain cliché. [image by victoriapeckham]

A corporation doesn’t care if you’re living in a 300 square foot studio apartment or a 6000 square foot McMansion. They don’t want to wipe out the McMansion dwellers, or elevate the studio apartment owners. They only care about one thing: that you buy their stuff.

For everything they do, they’ll have justification. There’s no hidden business plan with a top-line mission statement of “Destroying Civilization As We Know It.”

But there will be hundreds or thousands of decisions, all based on maximizing profit. Substituting cheaper ingredients: maximize profit. Use low-income countries for labor: maximizing profit. Driving smaller competitors out of business: ensuring growth, which maximizes profit. Extending credit to anyone: maximizes profit.

If they can make a bigger profit selling you a “green” condo and a Prius rather than a McMansion and an Escalade, that’s exactly what they’ll do. If they think they’ll make an even larger profit renting you an apartment and leasing you a bike, that’s what they’ll do.

While we’re on the subject of capitalist economics, ethics and prosperity, here’s Matt Ridley at Wired UK explaining why robber barons always end up on top – it’s because they find ways to make things cheaper for you, the consumer:

It’s still happening today. Wal-Mart, Aldi and Ryanair won their market shares by ruthlessly charging us viciously lower prices. And here lies a cause for optimism in the midst of this recession. Even though jobs are being lost, houses repossessed and firms bankrupted, the underlying deflation caused by innovation is still going on – indeed, on the web, it’s accelerating. All over the internet, people are dreaming up ways of making things available to you more cheaply, more conveniently, more copiously and more quickly. That is what will cause prosperity to return one day.

That’s a brave op-ed, given the current econo-political climate, but I suspect he’s at least half right. However, I was somewhat amused to note that Ridley’s masthead note says he was a non-executive chairman for Northern Rock for three years; make of that what you will. 😉