Social networks and the global financial meltdown

The ongoing meltdown in the financial world is leading to a massive layoffs in the investment banking world, which are widely expected to spread to the economy generally. This will result in a make or break test of the value of business / career oriented social networking sites like Linked In and Xing.

If they really do help people find their next role faster, they will become a key way large numbers of people manage their careers (with consequences for search firms and HR recruitment teams in large corporations). Even more so if they are instrumental in people finding roles that better suit their talents and interests than the ones they've been tossed out of. At the extreme, this could be the time when there is a permanent shift in the mainstream mindset, and most employment relationships take on a significantly stronger "freelance" flavour. (Ah, don't you just love that phrase "at the extreme"? As if we have any sense of what that really means any more.)

On the other hand, if they fail to deliver value, with many users finding them a waste of time (if looking) or a major distraction (if one of the lucky still-employed), then the sites are likely to face any or all of the following: slowing membership growth, abandonment of profiles (which happens today more than is generally acknowledged), and - again, at the extreme - public vilification and negative user reaction to ads.

Personally, I hope they do work. So, if you're looking and I'm on your network, feel free to contact me.

There is no China after China

Does it happen to you that a thought sometimes just appears, and then won’t go away? That happened to me when the phrase “there is no China after China” flashed across my mind.

I’d been thinking about how low-cost labour in China has driven much of what’s been happening in the global economy: massive imports of low-priced goods dampening inflation leads to central banks allowing an excess of liquidity, then to a global asset price bubble, and then (eventually) to the inevitable re-pricing and the exposure of a growing number of financial institutions as bankrupt.

What struck me wasn’t the long chain of consequences with a disruptive ending. (It’s just one example of the intertwined and unexpected nature of our global economy - which creates what we call The Age of Discontinuity.) What struck me was that a key idea that has been true for a long time probably won’t be true in future: “there is always somewhere with cheaper labour”. Not just slightly cheaper – but lots cheaper; enough cheaper to drive major shifts in economies, enough cheaper (and enough of it) that businesses have to respond. This has been true for the last 20 years or longer, if not about China then about some “somewhere”. It’s been true for so long, it’s probably an unexamined part of the mindset of many business executives and a key part of the strategy of a growing number of businesses.

But, the real cost of labour in China has started to go up and there’s reason to believe that we aren’t far from the point where China’s labour surplus is effectively used up. “So what?” one might say: there’s always somewhere else – Indonesia, Peru, Nepal, somewhere. But, around the globe, there’s no labour market nearly the size of China’s. While there might be enough additional low-cost labour for any one company, here are lots of companies where a key element of the strategy is lower cost – ever lower cost, lower than competitors’ costs – and a large part of expected future profits are predicated on having this lower cost. And it can’t be that they all will get the low cost labour they expect – there just won’t be enough at low enough cost.

I can’t know what the full implications in will be as we reach the end of new pools of low-cost labour joining the global economy. At one level, it will probably be a great thing; it should mean the end of the massive unemployment so pervasive in the developing world with huge benefits in terms of length and quality of life. But, for business leaders in the developed world, it means a need for a major rethink about competitive advantage and growth plans – a rethink that won’t get started without a recognition that “there is no China after China”.

The difficult secret of out-performance

I'm no sports fan.  But recently I was flicking through The Week (www.theweek.co.uk) and saw a piece on Donald Bradman, described as "the greatest sportsman of all time": test average of 99.94, "a good 25 runs ahead of the rest." 

Now, I don't know the first thing about cricket (and not being native to these shores probably never really will).  But I do know that most business leaders would give almost anything for that level of performance above their competitors.  Without taking anything away from the gifts he was born with or the hard work he put in, there seems to be a consensus that a major part why he was able to do better is that he used a style that others didn't - in other words he did things differently. 

And that, in a nutshell, is the difficult secret of out-performance.  In today's world, just following the accepted wisdom is a recipe for mediocre performance.  If you want to out-perform, you have to be willing to step away from what the experts say (at least in selected areas) and find your own path.  Put starkly, the choice is between aiming for out-performance by trying something different (and potentially failing) or staying in the middle of the herd and guaranteeing at best average performance.