5by5 | The Critical Path #42: Full Circle

Having just returned from China, Horace gives his impressions which leads to a discussion about industrialization and innovation and how countries “mature” and what is Apple doing in China and the new relationship between Apple and strategic partnerships and the new stats from WWDC 2012 about developer revenues and how that differs from Android and the 400 million Android devices activated vs. 400 million iOS devices built, in China.

via 5by5 | The Critical Path #42: Full Circle.

  • Mike Wren

    Research shows that lower socio-economic classes including those in emerging economies engage in conspicuous consumption of visible luxury items to fend off the negative perception that the consumer is poor. In order to afford the luxury goods, the consumer will cut back in areas like housing, furnishings and food which are only visible to family and close friends and not acquaintances. So emerging market consumers are more likely to buy Apple products because of its luxury brand image.

    Source: Wikipedia Conspicuous_consumption and reference [2].

  • Kizedek

    It’s interesting to think about the accelerated rate at which each succeeding example of industrialization takes place. You allude to countries having the example of those who have industrialized earlier.

    By the same token, I think those industrializing later have the opportunity to “skip” costly and time-consuming “steps” in the process of becoming industrialized. They can avoid certain mistakes or avenues that other countries are kind of stuck with and find costly to change, by taking into account in advance issues that were unforeseen or ignored by the other countries — like your discussion of road systems and bicycles.

    For example (and this might tie into other discussion about how the app economy moves forward into emerging markets), I noticed this article on Ars Technica this week: How Africa is embracing “the Cloud” on its own terms. (

    It cites that there are 600 million mobile connections among 1 billion people, but very little landline and internet infrastructure. The kind of services we enjoy over Wifi could leverage the mobile network instead with some innovations in that space, which might come out of Africa first as that is where necessity would be the mother of invention.

    So, this may tell us that Africa (and India) could be a bigger market sooner than many analysts would have imagined, as they only consider what route other regions have taken, and how Africa and India have yet to follow those paths.

    And as Apple develops its mobile hardware, software and services, one could speculate that even more growth could be rapidly achieved by Apple in emerging markets — those that worry about Apple’s luxury status are perhaps not thinking of the jobs to be done and how Apple can match them more effectively than most.

    • Jon

      “By the same token, I think those industrializing later
      have the opportunity to “skip” costly and time-consuming
      “steps” in the process of becoming industrialized.”

      On the other hand, industrializing states are expected to
      avoid the environmental and human cost deficits experienced by earlier
      industrialized nations (like Britain and the United States, in particular).

      These burdens
      will surely have some negative effect on the growth rate of industrializing
      states. Overall, though, I agree with your premise (and with your other points).

  • kankerot

    Quite a few “points” that need to be addressed.
    VAT is not a sales tax as it is collected and remitted to the government multiple times within the supply chan.
    japan growth hasn’t been flat in the last 2 decades.
    Free capital markets- I suggest you read about fractional reserve banking. Property rights and unfettered access requires instiutions like a properly functioning legal system, police force etc.
    The book you mention is light on economics and analysis but provides a good read if you come to the topic first time.
    A better book is Stiglitz – globalization and it’s discontents. essentially China turned its nose up at the World bank policy prescriptions.
    I think your view on capitalism is naive and the effects on developing economies by IMF and World Bank.
    Well the auto industry is subject to the 50:50 rule. The requirement that foreign vehicle manufacturers enter 50:50 joint ventures.

  • Japanese fashion and household goods are popular in China and some Southeast Asia countries because of some geo-specific reasons (1)similar weathers and living styles, (2)brand & quality awareness, (3)price competitiveness (when compared to similar products from US/Europe), etc. There are a lot of Japanese living in Shanghai is another reasons why Japanese goods are easy to find in the city. By the way, there are a lot of European luxury retail shops in Shanghai too for some other reasons.

    Regarding toys, besides US as the major country which developed many famous characters from Disney, Marvels, DC Comics, Japan is another major source of popular images such as Gundam, Hello Kit and Dragon Balls. In fact it is said that Japan is the second largest comics market in the world.

    One major challenge for China to move up the value chain is brand building. We need more companies to make long-term investment & development and to commit in quality and customer services. Well, then we need free market and customer right protection too.

    • Anders Brownworth

      IMHO chinese companies like Huawei are already investing heavily, at least in the mobile space.

    • Anders Brownworth

      IMHO chinese companies like Huawei are already investing heavily, at least in the mobile space.

    • Dave Stern

      High-end Japanese fashion, particularly in menswear, is also actually increasingly popular in Europe and the Americas.

      I’m not an expert in this area, but it’s a pretty fascinating story. On the menswear side, rather than just inventing uniquely Japanese fashion, they have also become the finest makers of mid-century American workwear and “preppy” style clothes as well.

      As the American clothes market went through changes in the low-end (foreign production, increased mechanization, etc.), many Japanese companies and artisans actually would buy out the looms and other tools from American factories that no longer needed them, and now using those mid-century American techniques, refined with some of their own notions of craftsmanship, they’ve got a significant presence in the markets for high end men’s fashion.

    • af

      “By the way, there are a lot of European luxury retail shops in Shanghai too for some other reasons.” The reason(s) is that people with money like to spend it on fancy things – and – there is also a huge expatriate population in a city the size of Shanghai.

  • Camden

    That’s one heck of a sentence used to describe CP#42.

    • Consciously breaking grammatical rules for effect. Guilty as charged.

  • af

    I was in Shanghai for a couple of weeks in 2010 for the World’s Fair (Horace sort of surprised you didn’t know what this event was – it was a huge deal for the Chinese). The sun did not come out for the first 10 days – it was about 100 degrees F and often raining. The strangest weather I have experienced in my life. Supposedly for the World’s Fair a lot of the neighborhoods and industrial areas around the site were razed, people and businesses relocated, etc. You can see some pictures similar to what you probably experienced here

    It seems that Japanese fashion and style is growing throughout the world – the Japanese definitely love “craft” and emulate the Italians in many ways with their attention to detail and manufacturing. There are many Japanese people here in Florence working in high end hand made shoe and clothing production, and the Chinese population in Prato makes probably most of the leather jackets and bags you see in Italy.

    Uniqlo is a growing brand and they have stores in many places around the world – There is also a Japanese retailer here in Italy (they have shops in at least Rome and Bologna but I can’t remember the name) with all kinds of housewares, some clothes, and other small gifts and trinkets.

    Something else I never realized before moving to Italy is the obsession many Asian people (especially the Japanese) have with fashion and brands. They simple love Italian names like Gucci, Prada, D&G, etc.

    I have also blogged a bit about China & Japan here – there are some good links to real estate stories – I really think that we (Westerners) have no idea what actually goes on inside China. We can see things, we can be told things, but what is really driving the economy, how stable (or unstable it is) etc. is definitely a mystery.

    My favorite (but sort of saddest) anecdote of my couple of weeks there was when I was left outside a gift shop with two of our young female colleagues (all of the rest of the team, all Italian, was inside shopping for spouses). I was working with a group of Italians, and the two Chinese women were part of the Italian regional office in Shanghai. They spoke perfect Italian and English – but of course had never left China. During the week we had been having some lunches and dinner with them and I had shared many stories of my travels as an American, about living in the Caribbean, living in Italy, etc. At this moment when we were alone they both turned to me and very animatedly start peppering me with many questions about what it was like to have such freedom, and how difficult it would ever be for them to travel, etc. Very striking and insightful moment, and a reminder that you are not in a free country – sort of like she your twitter wouldn’t work.