The cargo cult is still growing strong

Melbourne Herald Sun, Friday January 6,2012.

It has become a tradition for this column to start the new year by surveying how we are progressing with what I call our “cargo cult economics”.

You remember cargo cults? The natives of New Guinea watched the American planes come in during World War II and unload guns and jeeps, tools and clothes, PX Stores full of groceries.

After the war the planes stopped and witch-doctors told the people they could start things up again if they built airports and conning towers and radar scanners. This they did, from bamboo and straw and coconut shells. But somehow these didn’t work.

This caused years of unrest because the villagers did not understand that behind the goods there had to be an underlying economy of funding, planning, work and building.

Well we in Australia and the western world are not so different really. We’ve seen our wealth delivered by ship and plane for half a century, from America and Europe and particularly China, and today we’re getting more than ever. All they ask for is a few shiploads of dirt from our backyards, and our signatures on some IOUs.

But lately the cargo cult has been getting a big shaky. Over in America when some of their bamboo and coconut airports collapsed three years ago, it took them a long time to recover. In fact there are still clans of natives sitting around waiting to get back to work again.

Of course this causes unrest and their leaders have been blamed and chased around the political jungle with machetes. Just this week in Iowa the bosses of several clans were arguing over who will fight to become the new chief of the tribe. Each one promised more goods, more wealth, less work.

Europe was so solid and confident but now the tribes have all fallen into argumentative conflicts over who has the most pigs and whether they will pass them on to the poorer tribes.

The Greeks are not so worried. Two and a half thousand years ago they had a very successful economy where slaves did all the work and the citizens sat around the agora arguing philosophy and creating democracy - for those who were not slaves. Old habits die hard and they still confidently expect their daily wine and olives.

The Italians are another ancient race. They have not had a strong central government since Mussolini made the trains run on time, so they don’t see much point in paying taxes. As always the gods will provide, it’s not my problem they say.

As you’d imagine, their straw and copra airports are stunningly designed and exquisitely crafted. But they are not much better at generating magic wealth.

Any suggestion that they should contribute their share of pigs and bananas to the communal kitchen is rejected with horror. Though their refusal is mild when compared to the cries of outrage from the rich Americans if asked to give the tribe more of their pigs. They’d rather cut back on their medicine men.

And so all over the world we, the wealthy tribes, sit around waiting for the cargo planes to fly in more and more goods, as our right. Where they come from doesn’t seem to trouble anyone; who will pay is a problem for later on; the fact that the sea is slowly swallowing the tropical paradise is no worry for those of us in the highlands.

Down here in Australia there’s nothing to worry about so long as there is someone willing to pay for our dirt. We don’t even have to make any goods any more so we can shut all those tiresome factories.

Instead let’s sit back, fire up the barbie, and build another grass and bamboo airport. Look, they’ve worked so far, why not for ever?

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com

China Dictates Entertainment

Melbourne Herald Sun, Friday November 11, 2011

There are certain advantages to dictatorship. Take China, where authorities have instructed TV stations to sharply cut back on shows that are "overly entertaining and of low taste," according to a spokesman with China’s State Administration of Radio, Film and Television last week.

When we look at the hit list and see dating shows, talent contests, talk shows and reality shows, we have to register some sympathy. There are a couple of quiz and reality shows here which would not be missed if dropped into the China Sea.

The statement said, “A number of entertainment programs are simple reproductions of other popular shows and some have tried to attract audiences through vulgar content such as gossip and exposure of privacy”. Well that does sound familiar.

I’ve found that many Australians still don’t understand how big and modern China is. Did you know the country has 34 satellite channels at the centre of a vast media network? The stations will be limited to broadcasting two “entertaining” programs each week, with a maximum of 90 minutes every day between 7:30 pm and 10:00 pm.

But one part of the statement spells problems for advertisers: "All broadcasting, TV and relevant organizations are not allowed to conduct ratings rankings.” So how do you evaluate a program without ratings?

Well for a start, commercials will increase in cost as marketers chase a smaller number of popular shows.

Just this week the bids were in for advertising on China Central Television, the country’s national broadcaster. The system is, you bid for ad spots for the coming 2012 year. In recent times, the prices have increased by double digit percentages each year. Last year advertisers pledged nearly two billion dollars.

The audiences are big, and so are the rates. A thirty second spot on a good show can cost $60,000. Come to think of it, on a per capita basis, that could be a lot cheaper than Australia.

In the bidding are multi-nationals like KFC and Kraft, and the big media buyers like Starcom MediaVest Group and Aegis Media’s Carat.

London-based Aegis is one of the world’s biggest media agencies, turning over $1.5 billion a year. Just last year Australia’s Harold Mitchell merged his Mitchell media group into the organisation making him their second-biggest shareholder and a member of the international board.

These days business success is so much harder if you don’t have solid ties to China, so all the big advertising agencies are there and many are flourishing.

The analysts do see some positives come out of the new regulations. For one thing, the stations may be forced to produce more quality programming rather than endless copies of copies of overseas shows.

The directive specifies scripted programmes, concerts, events and quiz shows that rely on knowledge rather than pure luck.

Of course in China the political cadres are never far away. A Chinese ‘Idol’ type of show was enormously popular with the singers attracting audiences of 400 million, when all of a sudden the plug was pulled and the mikes went dead.

It was found to be too entertaining, though speculation said the real reason was that the popular voting for winners was a bit too close to democracy for the Party’s liking.

There are difficult choices for Chinese authorities, if people watched less TV they might do more blogging or tweeting - much harder to control.

As an example of popular tastes, a year ago a Japanese porn star called Sora Aoi went to Shanghai and opened her microblogging account. Within a day she had 220,000 followers and now she is a celebrated personality - a sort of Kim Kardashian of the Middle Kingdom.

Is that what the authorities envisaged?

ray@ebeatty.com

Our happy isle basks in the cargo cult economy

Melbourne Herald Sun, Friday December 31, 2010
It's a new year tomorrow, so how are things with the cargo cult economy?

You might remember from past New Year Marketeer columns that I recalled how the natives of New Guinea believed that the material goods brought to them by allied troops in WWII were gifts from the gods.

Food, machines, weapons, motor cars all appeared magically from the belly of cargo planes. After the war ended the gifts stopped. Then movements grew up to encourage the gods to restart their largesse - "cargo cults".

So they built air ports out of straw, planes of bamboo, radios from coconuts - to encourage the return of these magical goods. And even when repeatedly the cargo did not materialise, they blamed sorcerers and crooks, but continued to believe.

In much the same way, in the western world, for years investors believed stocks would always go up, wealth would always grow, goods would always flow, donated cheaply by the goodwill of China, and that economies never needed to balance.

Then two years ago the GFC blew down the straw airports and banana-leaf control towers leaving us all much poorer, sitting on a pile of straw.

So of course we have now learned our lesson and started building some substance, right? Developing new industries and infrastructure and manufacturing so that we will once again produce real products, instead of inflating share prices?

Well, er, no. You see the natives of this happy isle have indeed been blessed by the gods. We are being showered with cars, clothing, wide-screen TVs, flown in from overseas in cargo containers.

We can sit back in our deck chairs or our computer desks knowing that all these luxuries and goodies are being supplied by the world, and all they want in return is a few rocks from our gardens.

Well we have such big gardens and so many rocks that we will never have to worry about working again, will we?

I mean they are already paying us twice as much for our rocks than last year and even while the world was in crisis, our plane loads of cargo kept landing like clockwork.

Now some pessimists are calling out, what happens if the world doesn't want our rocks any more? Or how come the rest keep getting smarter and developing their science and industry, while we are re-arranging our stacks of straw?

For all the sarcasm we pour on the times, the 1950s and 60s wealth was used to give us the industries and infrastructure that allowed us to grow into a leading economy. Today we see any such initiatives maligned at both federal and state level.

A broadband network? "We can't afford it". But if we can't afford it now, when will we ever get up to world speed?

Desalination? "A waste of money". But what happens when the next ten-year drought hits our expanding cities?

"Universities should work on a user-pays system". This said by politicians who were themselves able to advance in life because of free education.

Investing our good fortune on the future, rather than buying yet more throw-away consumer goods, is not fanciful idealism, it's good sense.

We need to plan the use of all that money that's pouring in. Because sure as eggs, some day those cargo planes will stop landing, and so will those happy new years.

China rules through our Cargo Cult addiction

Melbourne Herald Sun, 3rd January 2010

On New Year 2008 I described the state of world business as “Cargo Cult Economics”. Remember those natives of war-time New Guinea who believed that wealth was delivered by the gods? The planes would always land, bringing them food, clothing, machines - it was magic, they came out of thin air.

But once the war was over, the goods stopped coming. So the natives made gifts to appease the gods. They built aeroplanes out of straw and copra, radios out of coconuts, control towers out of bamboo poles. They believed that the cargo would always come.

So in our cities and Wall Street we believed that income would continue to grow, share prices would never fall, houses were solid investments.

By New Year 2009 the economic tsunami had demonstrated the flimsiness of our beliefs. Superannuation was supposed to be rock solid but it dissolved like sand. Banks crashed. Share prices crumbled, much of the world went into recession. At last we could see through all these financial facades and concentrate on building something real.

But wait a minute - here’s New Year 2010 and what do we see? All those coconut and banana structures are being rebuilt. Everybody is triumphant at having successfully saved our sacred cargo cult. The control towers are still built of bamboo and straw, the radar is a spinning gourd shell.

But the natives are living well. We have ample supplies of any goods we fancy. Beautifully made and very cheap, kindly provided by the hard working gods from Beijing.

These generous souls also allow us to continue our extravagant lifestyle, by giving us money whenever we need it. Currently America owes China about a trillion dollars for government securities alone. Whenever Uncle Sam needs a buck, Uncle Hu Jintao delivers.

Then last month we saw vividly where it was leading. China decided it did not want to be restricted by a Copenhagen treaty. So it told Obama, Brown, Sarkozy, Merkel, Rudd and the rest of our leaders to shut up and sign what it dictated. The world was going to play by China’s rules or not at all. After some vain protests, our leaders meekly signed the filleted accord.

China learned the lessons of world diplomacy from the best teachers. The British Empire fought the Opium Wars between 1839 and 1860 so they could feed the Chinese people constant supplies of opium. We knew an addicted people was in our power.

Well now the West are the addicts. Dependent on China for their tellies, iPods, clothing and - soon - cars. We’re also addicted to money. Where do you think all these billions spent on financial bail-out schemes will come from, ultimately? More loans from Uncle Hu?

Those of us in marketing are just the front-end of the process. We sell the products, wherever they were made. We build the straw and bamboo store fronts, and stand there handing out the toys and gadgets made afar. We don’t create the goods, our tools are smoke and mirrors.

The world has very little time to get real. We’ll never cure the addiction so at least let’s make more of the dope ourselves. Like adding value to the minerals we’re feeding into the furnaces of Asia’s industry.

Trouble is, our politicians have seen what happens to those who try to expose the cargo cult or preach reality. They are ripped apart by a raging mob. (Here we call this an election.)

Whatever persuasion you are, it’s time to stop berating our politicians and start encouraging them to be brave. It’s going to take some tough decisions if we’re to break the addiction of cargo cult economics. Happy New Year.

Ray@ebeatty.com