By Schumpeter via The Economist

EVER since the collapse of the Soviet Union ended the old, neat division between East and West, people have been inventing new ways of dividing up the world. In the 1990s it was fashionable to talk about America, Europe and Japan. Today pundits draw the line between emerged and the emerging markets.

Joel Kotkin, a geographer, suggests another frame of reference. In “The New World Order”, a paper for the Legatum Institute, a think-tank in London, he looks at the world through the prism of culture. The ties of history and habit—of shared experiences and common customs—can explain a lot about who does business with whom. Mr Kotkin quotes Ibn Khaldun, a 14th-century Arab historian: “Only tribes held together by a group feeling can survive in a desert.” Substitute “globalised economy” for “desert” and this describes the modern world quite well.

Mr Kotkin’s argument chimes with recent research. The World Values Survey divides the world into big cultural zones (the Confucian zone, the English-speaking zone, etc) on the basis of common values. These common values cannot be explained simply by income (eg, English-speaking countries tend to be rich, and rich countries tend to be liberal). Pankaj Ghemawat of IESE, a business school, calculates that two countries which share a common language trade 42% more with each other than two otherwise identical countries that lack that bond. Two countries that once shared imperial ties trade a startling 188% more. Imperial ties affect trade patterns more than membership of a common currency (which boosts trade by only 114%).  More…

From The Economist

Kodak is at death’s door; Fujifilm, its old rival, is thriving.  Why?

LENIN is said to have sneered that a capitalist will sell you the rope to hang him. The quote may be spurious, but it contains a grain of truth. Capitalists quite often invent the technology that destroys their own business.

Eastman Kodak is a picture-perfect example. It built one of the first digital cameras in 1975. That technology, followed by the development of smartphones that double as cameras, has battered Kodak’s old film- and camera-making business almost to death.

Strange to recall, Kodak was the Google of its day. Founded in 1880, it was known for its pioneering technology and innovative marketing. “You press the button, we do the rest,” was its slogan in 1888.

By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. Until the 1990s it was regularly rated one of the world’s five most valuable brands.

Then came digital photography to replace film, and smartphones to replace cameras. Kodak’s revenues peaked at nearly $16 billion in 1996 and its profits at $2.5 billion in 1999. The consensus forecast by analysts is that its revenues in 2011 were $6.2 billion. It recently reported a third-quarter loss of $222m, the ninth quarterly loss in three years. In 1988, Kodak employed over 145,000 workers worldwide; at the last count, barely one-tenth as many. Its share price has fallen by nearly 90% in the past year (see chart).  More…

From Charles Duhigg and Keith Bradsher in the New York Times:

When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

…

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

Apple’s manufacturing decisions exemplify the altered circumstances of high-technology commodity production in the contemporary world. The article describes the situation, but not the solution for regions and nations wishing to insure stable and remunerative work for their people. Note especially the conditions of daily life for product assembly workers sketched out in the article. The industrial revolution appears to be repeating itself yet again with similarities of both triumph and tragedy.

To read the article…

From J.L.H.D., The Economist…

Assuming you have largely recovered from holiday celebrating, you are now free to contemplate the coming of 2012 by mulling over this newspaper’s predictions. Granted, it does not make for the happiest of reading. “The world won’t end in 2012,” writes our editor. “But at times it will feel as if it is about to.” The fate of the euro is still in doubt; America, France, Russia, and China all face potential changes at the top; business confidence is down; and it may be best not to think too much about climate change, given the potential for collective inaction. As the song goes, we’ll have to muddle through somehow.

Perhaps fortunately, change comes more slowly to academia, and so the business-school world as a whole should see less upheaval. Applications will probably remain down, as potential students see less hope of studying out the recession and worry more about the loans required to take an MBA. Executive-education budgets will also suffer, with only the occasional CEO able to indulge in a high-ticket course. Expect a few curriculum reworkings along the lines of Harvard’s, and, in the wake of the Occupy movement, the incorporation of income inequality and taxation into discussions of corporate social responsibility. On a lighter note, the 2012 Olympics in London will provide the excuse—er, background—for many a discussion of the business of sport. More…