探花直播 of Cambridge - market

Overcrowded Internet domain space is stifling demand, suggesting a future 鈥榥ot-com鈥� boom

fpjl2 — Tue, 01 Mar 2016 10:31:15 +0000

As the digital age dawned, pioneers successfully snapped up broad swathes of the most popular and memorable domain names, such as nouns, places and combinations thereof 鈥� claiming valuable 鈥榲irtual real estate鈥� under the top level domains such as dot-com, dot-co-dot-uk and so on.

Now, the first research to try and define current demand for Internet domain names suggests that the drying up of intuitive and familiar word combinations has seen domain registration drop far below the expected appetite, given the extent to which we now live online, with new entrepreneurs struggling to find 鈥渢heir slice鈥� of virtual space.

In fact, the study estimates that the lack of available high quality domains featuring popular names, locations and things could be stifling as much as a further 25% of the total current registered domains.

With the total standing at around 294 million as of summer 2015, this could mean over 73m potential domains stymied due to an inability to register relevant word combinations likely to drive traffic for personal or professional purposes.

However, as the Internet Corporation for Assigned Names and Numbers (ICANN) has begun to roll out the option to issue brand new top-level domains for almost any word, whether it鈥檚 dot-hotel, dot-books or dot-sex 鈥� dubbed the 鈥榥ot-coms鈥� 鈥� the research suggests there is substantial untapped demand that could fuel additional growth in the domain registrations.

Dr Thies Lindenthal from the 探花直播 of Cambridge, who conducted the study, says that 鈥� while the domain name market may be new 鈥� the economics is not. 探花直播market fits nicely onto classic models of urban economics, he says, and 鈥� as with property 鈥� a lot rides on location.聽聽聽

鈥淐yberspace is no different from traditional cities, at least in economic terms. In a basic city model, you have a business district to which all residents commute, and property value is determined by proximity to that hub,鈥� said Lindenthal, from Cambridge鈥檚 Department of Land Economy.

鈥淚t鈥檚 similar in cyberspace. 探花直播commute to, and consequent value of, virtual locations depend on linguistic attributes: familiarity, memorability and importantly length. A virtual commute is about the ease with which a domain name is remembered and the time it takes to type.

鈥� 探花直播snappier and more recognisable a domain, the more it is going to be worth. What I find fascinating is that the observed transaction prices of domain names reveal a free market valuation of linguistic characteristics and language itself,鈥� he said.

From 2007 onwards, annual additions to the domain stock began to lag, while between 2006 and 2012 re-sale prices of domain names already registered rose 63% 鈥� indicating a demand for virtual 鈥榣ocations鈥� outpacing the supply of available attractive names, with competition driving up prices.

Recently, ICANN began the release of 1,400 new top-level domains, the 鈥榥ot-coms鈥�, to expand current extensions such as dot-com, dot-org etc, with the aim of expanding the domain supply.聽

Google were one of the first to use a 鈥榥ot-com鈥� to get around the domain name shortage. Finding all obvious domains taken for its new parent company 鈥楢lphabet鈥�, the company acquired space on the new dot-xyz domain to create the canny web address: www.abc.xyz.聽

Serious money is currently being invested in 鈥榥ot-coms鈥�. With initial application fees around the $185k mark, Lindenthal says it could be as much as $2m before you have the necessary infrastructure to secure and manage your new top level domain, but, once owned, you are able to set prices for anyone who wants to acquire virtual real estate under that domain.

鈥淏y 2013, as much as $350m had already been put down in application fees alone, and further billions must have been invested. Clearly, corporations and entrepreneurs have trust in the new domains being able to serve a previously unmet demand, and from this research it appears some of them may be right,鈥� said Lindenthal.

探花直播set of catchy keywords that appeal to humans is still bound by the way we process language

For the study, published today in the Journal of Real Estate Finance & Economics, Lindenthal set out to get a rough idea of the demand for name registration not served by current top-level domains.

Looking at just dot-coms, he compared existing registrations with census data for popular family names in the US. 鈥淵ou have to assume someone called Miller is as likely to register a domain with their name in it as someone called Smith, for example. So, roughly speaking, if there are twice as many Millers, you would expect to see twice as many domains with that name in it.鈥�

Lindenthal found that the more prevalent the family name, the lower the number of domains featuring that name per head of population. Moreover, a one per cent increase in a surname pushes up domains featuring that name by only 0.74% 鈥� suggesting a substantial gap between likely demand and current domain registration.聽

Lindenthal also explored domain registration featuring city names compared to size of the population, and found a similar gap between expected demand and current domains.

Using statistical modelling analysis, he concludes that 鈥� based on the available data 鈥� an estimate for domain name demand not met by available word combinations is as much as 25% of all currently registered Internet domains.

A shorter 鈥榗yber-commute鈥� was found to be more desirable. Increasing the length of a surname by just one character, from six to seven, reduces the number of registrations by a remarkable 24%.

探花直播shorter the better holds true for emerging 鈥榥ot-coms鈥�, says Lindenthal. 鈥淪horter names are more valuable and lead to greater registrations. With new top level domains named for cities, for example, it was the concise city names 鈥� dot-london; dot-miami; dot-berlin 鈥� that went first, and now anyone who wants to buy virtual space under those domains has to buy it from the new owner.

鈥淢ore cumbersome city names are not seen as a good investment. For example, despite being a global centre for Internet technology, dot-sanfranciso is still up for grabs. Do you want to be the digital mayor of a new San Francisco domain? $2 million and it鈥檚 yours!鈥�

However, while the new 鈥榥ot-com鈥� boom will open up huge new areas of the Internet, Lindenthal says that the overarching constraints will kick in again further down the line 鈥� which may be precisely what makes the new top level domains a worthy investment.

鈥� 探花直播set of catchy keywords that appeal to humans is still bound by the way we process language, even if we had unlimited choice in top level domains,鈥� he said.

鈥淟egend has it that Mark Twain advised to buy land, since 鈥榯hey have stopped making it鈥�. Similarly, one can argue that investing into top level domains is a promising business venture, since we have stopped inventing language, at least at a large scale.鈥澛�

New research suggests that a lack of remaining domain names with easy to remember 鈥� and consequently valuable 鈥� word combinations is restricting Internet growth, with an untapped demand of as much as 25% of all current domains being held back. 探花直播study鈥檚 author contends that the findings show ICANN鈥檚 release of new top level domains could prove a wise policy.

聽

What I find fascinating is that the observed transaction prices of domain names reveal a free market valuation of linguistic characteristics and language itself

Thies Lindenthal

Internet domains

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From Chinese milk to Indian chocolate, behind the world鈥檚 fast-expanding markets

Anonymous — Wed, 21 Oct 2015 10:31:23 +0000

It鈥檚 time to think small when it comes to identifying growth areas in the global economy.

For the past 15 years, since the BRIC acronym was coined for Brazil, Russia, India and China, the world鈥檚 biggest emerging economies have been the focus for discussion on growth opportunities outside of western developed markets. But with a slowdown in China and a credit downgrade for Brazil, it is getting harder to view the BRICs story as a simple, grand narrative of gilded opportunity for investors and businesses alike.

Those concerns are not confined to China and Brazil. Russia鈥檚 economy is contracting this year due to low energy prices; India鈥檚 economic recovery too has been slower than expected.

But these nations are not a busted flush; we just have to adjust our thinking. Real growth can be found in fast-expanding markets within those countries. It is a subject we have examined recently in a paper published in the Thunderbird International Business Review, seeking to understand these markets which transcend sectors as well as nations, and sometimes even confound conventional wisdom.

Milking it

While BRICs was useful shorthand for showing that a few populous countries would reshape the global economy this century, this macroeconomic lure has in fact been a microeconomic disappointment for some big companies. Home Depot had an emblematic experience, entering China in 2006 and pulling out completely in 2012. It didn鈥檛 anticipate that the do-it-yourself culture of the US wouldn鈥檛 translate into a country with abundant and relatively cheap labourers.

It is a story that illustrates the difficulty in using a top-down approach when operating in emerging markets. So rather than only taking a bird鈥檚-eye view of such populous countries, it is useful to also take a ground-up look at where highly specific opportunities lie in BRIC countries and beyond.

聽

探花直播heat is on. Fast expanding markets take flight. Will Murphy, CC BY-NC-ND

聽

In China, one of these fast-expanding markets is milk production and consumption. More people have been paying close attention to their health and to the role that milk can play in their basic diet. Other factors have included an upgrade to the supply chain, a relaxation of the country鈥檚 one-child policy and the continued westernisation of China as companies such as Starbucks grow popular.

From 2000 to 2006 alone, China鈥檚 raw milk consumption nearly quadrupled, and the country is now the world鈥檚 third-largest producer behind the US and India as agricultural infrastructure has improved.

Choc-alert

In India, fast-expanding markets include Western-style cheese, which saw sales growth of nearly 200% from 2008-2013; solar water heaters, with the area in square metres of instalments almost doubling between 2009 and 2011; and the chocolate industry may treble this year to more than $2 billion, as a rise in sugar prices has made traditional sweets more expensive.

聽

Object of desire. In Liechtenstein at least Partha S. Sahana, CC BY

聽

Beyond BRICs, fast-expanding markets include mobile money transfers in Kenya and video game production in Turkey, developing games which conform to Islamic values.

And we can even branch out beyond the developing world too. There are opportunities for entrepreneurs, investors and businesses in the Vitamin D testing market in Italy, benefitting from an increasing lack of direct sun exposure; in organic food production in Spain, linked to a downturn in the property market; in food trucks in the US, which have grown at a double-digit annual rate in recent years; and ceramic teeth in Liechtenstein, an industry which expanded in the past five years at a compound annual growth rate of 9.5%.

While overall growth is useful to know, an unquestioned loyalty to macroeconomic data misses much of the equation and loses most of the intelligence that can drive astute investment decisions. That鈥檚 partly because macroeconomic analysis often takes a linear look at the future, and this can often prove wrong. If you were to look at the US population statistics in the early 1900s, one could reach the conclusion that the country would have been 80% Italian and Polish by 1930 if trends had followed a linear progression.

Pocketing the wealth

探花直播central idea is that wealth can be found everywhere, even in countries that share gloomy macroeconomic data or prospects, like Bolivia, which is the country that has driven the quinoa revolution into the 鈥渞eady to eat鈥� industry in the US. With an annual growth rate of 26.5%, Bolivia has exploded its production of quinoa, to the benefits of the new dietary aspirations of Americans, who have integrated the super grain into the daily use of soups, salads and energy bars. This is a great example of an agricultural fast-expanding market, which stems from what many consider as the poorest economy in Latin America.

聽

Making the most of the boom. Bolivian quinoa farmers. Bioversity International, CC BY-NC-ND

聽

Sometimes, fast-emerging markets develop in unlikely settings. Italy has long had a reputation for high-quality food products and delicious wines, but in the midst of that, microbreweries are gaining a foothold. This is partly because the lack of a traditional beer culture in Italy means microbreweries can more readily experiment with flavours and ingredients. Another surprising expanding market in Italy: American-style bakery products such as chocolate chip cookies, cupcakes and donuts.

Some may scoff that craft beer in Italy or quinoa in Bolivia are pretty insignificant compared to major global industries such as automobiles or machine tools. But such a reaction risks blinding us to fresh insights that can lead to new pockets of excellence that, taken together, make a real difference to the world economy.

Khaled Soufani, Senior Faculty in Management Practice (Finance), 探花直播 of Cambridge; Mark Esposito, Professor of Business & Economics at Grenoble Ecole de Management and Harvard Extension School, Harvard 探花直播, and Terence Tse, Associate Professor of Finance / Head of Competitiveness Studies at i7 Institute for Innovation and Competitiveness, ESCP Europe

This article was originally published on 探花直播Conversation. Read the original article.

Khaled Soufani (Cambridge Judge Business School), Mark Esposito (Grenoble Ecole de Management and Harvard 探花直播) and Terence Tse (i7 Institute for Innovation and Competitiveness, ESCP Europe) discuss fast-expanding markets in the world's biggest emerging economies.

Gwendolyn Stansbury

Got milk? China joins the lactose lovers.

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Stress hormones in financial traders may trigger 鈥榬isk aversion鈥� and contribute to market crises

fpjl2 — Tue, 18 Feb 2014 09:27:09 +0000

High levels of the stress hormone cortisol may contribute to the risk aversion and 鈥榠rrational pessimism鈥� found among bankers and fund managers during financial crises, according to a new study.

探花直播study鈥檚 authors say that risk takers in the financial world exhibit risk averse behaviour during periods of extreme market volatility 鈥� just when a crashing market most needs them to take risks 鈥� and that this change in their appetite for risk may be 鈥減hysiologically-driven鈥�, specifically by the body鈥檚 response to cortisol. They suggest that stress could be an 鈥渦nder-appreciated鈥� cause of market instability.

Published today in the journal Proceedings of the National Academy of Sciences, the study conducted at the Cambridge Judge Business School and the 探花直播鈥檚 Institute of Metabolic Science is the first to show that personal financial risk preferences fluctuate substantially, and these fluctuations may be linked to hormone response.

探花直播finding could fundamentally alter our understanding of risk as, up until now, almost every model in finance and economics 鈥� even those used by banks and central banks 鈥� rested on the assumption that traders鈥� personal risk preferences stay consistent across the market cycle, say the authors.

In a previous study conducted with real traders in the City of London, researchers observed that cortisol levels rose 68% over a two week period when market volatility increased. In the latest study they combined field work with lab work, a rare approach in economics, to test for the effects of this elevated cortisol on financial risk-taking.

探花直播researchers administered hydrocortisone 鈥� the pharmaceutical form of cortisol 鈥� to 36 volunteers, 20 men and 16 women, aged 20 to 36 years, over an eight day period, raising their cortisol levels 69%: almost exactly the levels seen in the traders.

探花直播volunteers took part in lottery-style financial risk-taking tasks with real monetary pay-offs, designed to measure the preferences for risky gambles and the judgments of probability underlying their risk taking. While initial spikes of cortisol had little effect on behaviour, chronically high and sustained levels, as seen in traders, led to a dramatic drop in participants鈥� willingness to take risks, with the 鈥榬isk premium鈥� 鈥� the amount of extra risk someone will tolerate for the possibility of higher return 鈥� falling by 44%.

鈥淎ny trader knows that their body is taken on a rollercoaster ride by the markets. What we haven鈥檛 known until this study was that these physiological changes - the sub-clinical levels of stress of which we are only dimly aware - are actually altering our ability to take risk,鈥� said Dr John Coates, co-lead of the study from the Cambridge Judge Business School, and a former Wall Street derivatives trader himself.聽

鈥淚t is frightening to realise that no one in the financial world 鈥� not the traders, not the risk managers, not the central bankers 鈥� knows that these subterranean shifts in risk appetite are taking place.鈥�

Cortisol is a hormone secreted by the adrenal glands in response to moments of high physical stress, such as 鈥榝ight or flight鈥�. Importantly, cortisol also rises powerfully in situations of uncertainty, such as volatility in the financial markets. Cortisol prepares us for possible action by releasing glucose and free fatty acids into the blood. It also suppresses any bodily functions not needed during a crisis - such as the digestive, reproductive, and immune systems.

However, should this stress become chronic, as it might during a prolonged financial crisis, the elevated cortisol can contribute to impaired learning, heightened anxiety, and eventually depression. 探花直播current study has now shown that in addition to these known pathologies, chronic stress can also lead to a substantial decrease in the willingness to take financial risks, say the researchers.

They also suggest that an unsuspected side effect of anti-inflammatory treatments such as prednisone may be financial risk aversion.

探花直播study鈥檚 authors also looked for differences between men and women. While other researchers have argued that women are more risk averse than men, the current study found no differences between the sexes under normal circumstances. However, the study did find that, when exposed to chronically-raised levels of cortisol, men placed too much importance on smaller risks, while women did not.

探花直播authors point out that during the Credit Crisis of 2007 to 2009 volatility in US equities spiked from 12% to over 70%. They argue that it is reasonable to assume that such historically high levels of uncertainty would have caused stress hormones to rise far higher and longer than the team had been able to observe in their study.

Chronic stress may therefore have decreased risk taking just when the economy needed it most 鈥� when markets were crashing and needed traders and investors to buy distressed assets, they say.

Physiologically-driven shifts in risk preferences may be a source of financial market instability that hasn鈥檛 been considered by economists, risk managers and central bankers alike.

Added Coates: 鈥淭raders, risk managers, and central banks cannot hope to manage risk if they do not understand that the drivers of risk taking lurk deep in our bodies. Risk managers who fail to understand this will have as little success as fire fighters spraying water at the tips of flames.鈥�

New study鈥檚 findings overturn theory of personal risk preference as a 鈥榮table trait鈥�, and show that real source of instability in risk behaviour 鈥渓urks deep in the physiology of traders and investors鈥�.

It is frightening to realise that no one in the financial world 鈥� not the traders, not the risk managers, not the central bankers 鈥� knows that these subterranean shifts in risk appetite are taking place

John Coates

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That was supposed to be going up, wasn't it?

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Lessons from history: how Europe did (and didn鈥檛) grow rich

amb206 — Sun, 24 Mar 2013 08:00:00 +0000

In the modern world, we take for granted the fact that our economies become richer and more sophisticated decade-on-decade 鈥� and that our grandchildren will live a better life than our own, just as we live a better life than our grandparents. However, for the greatest part of human history, the standard of living was low and subject to little improvement.

One of the most important questions that economists seek to answer is how we made the shift from stagnation to continued growth, a shift commonly thought to have occurred with the Industrial Revolution in late 18th-century Britain. 探花直播stakes are clearly high: being able to answer this significant question would give us the potential to unlock millions of people from poverty across the world today.

探花直播most popular answer to the question of who or what created lasting growth can be found on the reverse side of the British 拢20 note, which bears the face of Adam Smith, champion of the free market. Following Smith鈥檚 Wealth of Nations, published in 1776, liberalisation and free trade have become familiar to us all, and the state and the market are commonly seen in opposition, with the release of the market requiring reining in the state through privatisation and deregulation.

In the tradition of Smith, modern day economists argue that the reason why economies were poor in the past was that absolutist monarchs undermined property rights (reneging on debt and forcibly extracting wealth from minority groups), and that the state too heavily regulated the economy, including granting monopoly privileges to guilds and international trading companies, all of which limited the incentives and ability of people to buy and sell goods freely. 探花直播result was that people lacked the incentive to produce, invest and invent 鈥� economic growth was thereby hampered.

Only with the onset of the Glorious Revolution in Britain in 1688, which transferred power from the monarch to an elected parliament, were markets supposedly set free, culminating in the Industrial Revolution a century later. In the century which followed, the collapse of the Communist regime in Russia and the success of market liberalisation in China, seemed to add credence to this free-market led view of growth. By 2003, following decades of market liberalisation across the globe, the President of the American Economic Association stood up and publicly announced that the future was bright for the global economy. Instead, what happened was the very opposite: we now stand in the middle of the greatest global economic crisis since the Great Depression.

So, with the economic crisis in mind, what evidence is there to support the claim that markets really do deliver in the long term? As my recent book Markets and Growth in Early Modern Europe has uncovered, very little historical evidence exists to support this claim, despite its power and influence on policy-making over the last two centuries.

Looking at evidence from as far back as ancient Babylonia and through to medieval, early-modern and modern Europe, my research has built a picture of the evolution of markets across the long span of human history using one particularly abundant historical data source 鈥� the prices of goods. 探花直播prices originate from sources as wide as the clay tablets of ancient Babylonia to the account books of Oxbridge Colleges, and include those for a number of commonly consumed goods (such as candles, soap and linen), with the most abundant being for cereals (which provided around 80 per cent of calorie intake in pre-modern Europe).

Where markets became more developed, one should find that in response to trade flows, prices became less volatile and, for the same good, converged across different locations. By applying statistical techniques to measure price behaviour, I have been able to measure market development in a consistent and comparable way across different parts of Europe and across many hundreds of years.聽

If the free-market view were correct, the picture revealed should have been very simple: poorly-developed markets throughout history until the 17th and 18th centuries, at which point new previously unseen levels of market development were achieved (particularly in Britain), culminating in the Industrial Revolution and the birth of modern economic growth. Instead, the picture I found was very different indeed: markets were certainly not a 鈥榤odern invention鈥�.

Indeed, the presence of markets in Europe as far back as Roman times would not surprise any visitor to museums, many of which have on display a great abundance of coins indicative of market-exchange, together with artifacts such as vases which had been traded across hundreds of miles to the point at which they were unearthed in an archaeological dig. Such markets were supported by the vast state infrastructure for which the Romans are famous 鈥� a stable coinage system, a taxation system that funded transport and utilities, and a common legal system to uphold contracts.

Once the Roman state began to crumble, so did the markets it supported, leaving Europe in what was once called the 鈥楧ark Ages鈥�, falling behind Byzantium and the Orient. Indeed, it was only with the development of institutions in medieval Europe which substituted for the state (such as the Church, guilds and city-states) that markets began to recover 鈥� a process which took many centuries.

My research shows that, by the end of the medieval period, markets were around two or three times as developed as in the early ancient period and were highly active throughout Europe. At this time, Venice was the leading long-distance trader on the continent, sourcing exotic silks and spices that had travelled along the 鈥榮ilk road鈥� from the Orient and Middle East all the way to Constantinople. In an effort to sell their goods to European customers, the Italians carved out and linked themselves into trade routes across Europe, exchanging the exotic goods from the East together with the produce of the Mediterranean (oil, soap and wine) for the woolen cloth of north-western Europe (where 45 per cent of the residents of Bruges worked manufacturing cloth in the early 14th century), and the grain, metals, amber and furs of central and eastern Europe.

探花直播customs records of Southampton reveal a constant battle between the English authorities and the Italians, with one official refusing in 1423 to disembark an Italian ship on which customs duties were owed, only for the captain stubbornly to set sail, with the official eventually having to give in and disembark on the Isle of Wight.

Not only were markets for goods advancing in the medieval period, but so were those for finance, as along with the medieval trading boom came a demand for credit. It was in medieval Italy that Europe鈥檚 financial markets first began to develop, benefiting from the mathematical techniques which flowed from the East alongside the spices and silks. For this reason, many modern day banking terms have their origins in the Italian language, including the old symbols for the British currency (L, s and d), and, more generally, why the 鈥榠ntellectual fizz鈥� that was the Renaissance originated in the part of Europe most closely tied with the East.

Looking in envy at the wealth created by the Italian cities through trade with the East, other parts of Europe soon started to take advantage of developments in trading technology (such as sturdier ships, navigation and maps) to search for their own route to the Middle East and Orient. In the late 15th century, Christopher Columbus sailed across the Atlantic to find a 鈥榖ack door鈥�, stumbling on the Americas along the way (some say that he took some convincing that he was not on Chinese soil). 探花直播result was the birth of the Atlantic economy, and the first major globalisation of the world economy: as calculated by O鈥橰ourke and Williamson, world trade in the first half of the 16th century grew at a rate of 2.4 per cent a year, a figure not far off that in the twentieth century.

探花直播level of market development achieved by the end of the medieval period was already so advanced that, as my book argues, it was barely surpassed by the time of the Industrial Revolution three centuries later, only after which did markets witness a second phase of significant improvement. This is evident in the reduction in the disparity of wheat prices across Europe in the course of the 19th聽 century, when the average price-gap fell from 45 per cent to only 4 per cent, indicating significantly more connected markets. This second major phase of improvement was an outgrowth of the Industrial Revolution itself, based on the application of the steam engine to ships and rail, which drastically cut transport costs, making the world 鈥榮maller and flatter鈥�.

With these greater flows of goods came significant flows of people 鈥� around 30 million people emigrated from Europe to the USA in the century after 1820. This was a process of globalisation that worked on all levels: goods, people and money, and it was not surpassed until towards the end of the 20th century. As with that most recent round of globalisation, it was economic growth itself (or the technologies it brings) that enables markets to reach a new level of development.

In sum, what my research has shown is that the two most significant phases of market development occurred either side of the period traditionally emphasised聽 - and that they took place well before the Industrial Revolution, and then subsequent to it, as opposed to during the 17th and 18th centuries. 探花直播idea that markets are at the root of the modern age of sustained economic growth is therefore seriously in doubt when we look at the historical evidence. Instead, it makes much more sense to argue that markets, while necessary, are both insufficient for growth and are as much a consequence as a cause.

If we want to understand why the Industrial Revolution occurred and so how Europe and the West grew rich, we need to continue to pursue this long-span historical approach; looking back at economies throughout the past to work out in which ways they were similar and, more importantly, in which ways they truly were different to those of the modern age.

For economists immersing themselves in theory and models, economic history provides a wealth of evidence that is yet to be fully exploited 鈥� and which has the potential for revolutionising economic policy and, with it, the lives of many people in the present and future. Until the lessons of history are learned and we realise that more than markets were required to light the fire of continued growth, we may find it difficult to escape the current economic crisis and return to the sustained growth we had begun to take for granted.

Dr Victoria Bateman is Fellow and College Lecturer in Economics at Gonville and Caius College, Cambridge. She is author of Markets and Growth in Early Modern Europe (Pickering and Chatto, 2012) and contributor to RJ Van der Spek, Jan Luiten van Zanden and ES van Leeuwen (eds), A History of Market Performance: From Ancient Babylonia to the Modern World (Routledge, forthcoming).

聽

探花直播Industrial Revolution is seen as the spark that lit Europe鈥檚 economic prosperity.聽 In her analysis of markets over many hundreds of years, economist Dr Victoria Bateman presents a compelling argument for a broader global perspective.聽

My research has built a picture of the evolution of markets across the long span of history using one particularly abundant data source 鈥� the prices of goods.

Dr Victoria Bateman

漏探花直播Fitzwilliam Museum, Cambridge

Bernardo Bellotto (Canaletto) A View at the Entrance of the Grand Canal, Venice, c.1741 Oil on canvas, 59.3 cm x 94.9 cm (detail)

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探花直播rise and fall of Kodak's moment

bjb42 — Wed, 14 Mar 2012 21:00:19 +0000

Earlier this year, Kodak filed for Chapter 11 bankruptcy protection. But when Kamal's camera was made, the company bestrode the world of amateur photography 鈥� a world Kodak itself had created.

Established by George Eastman in the 1880s, by the 1950s Kodak had the lion's share of the US amateur film market. 鈥淜odak was a company at the top of its game,鈥� says Kamal, who has studied the Rochester-based business for more than a decade.

鈥淜odak controlled almost 70% of the highly lucrative US film market. Gross margins on film ran close to 70%, and its success was further underpinned by a massive distribution network and one of the strongest brands in the world. 探花直播company completely dominated its industry,鈥� he says. 鈥淎nd then, in 1981, along came digital.鈥�

Thousands of words have been written recently seeking to explain Kodak's failure. 探花直播company, all agree, was slow to adapt to digital, its executives suffered from a mentality of 鈥減erfect products鈥�, its venture-capital arm never made big enough bets to create breakthroughs, and its leadership lacked vision and consistency.

None of this analysis, however, fully explains why digital 鈥� a technology Kodak pioneered 鈥� did for the company. Understanding that, Kamal argues, requires a deeper historical and social approach.

鈥淧hotography is very much a social activity. You can't really understand how people relate to their pictures 鈥� why people take pictures 鈥� unless you do a social analysis which is more anthropological or sociological,鈥� he explains.

鈥淲henever I ask why a certain company that has fallen on hard times is doing badly, I always start by asking why it was successful in the first place. That is where the answer lies.鈥�

For three-quarters of the twentieth century, Kodak's supreme success was not only developing a new technology 鈥� the film camera 鈥� but creating a completely new mass market.

During the nineteenth century, photography had been the exclusive preserve of a small number of professionals, with their large-format cameras and glass plates. So when Kodak invented the film camera, it needed to teach people how and what to photograph, as well as persuading them why they needed to do so.

鈥淜odak is the company that made photography a popular pastime around the world. It made a tremendous contribution to how we see things,鈥� Kamal says.

探花直播Kodak moment

Kodak's high-profile advertising campaigns established the need to preserve 'significant' occasions such as family events and holidays. These were labelled 'Kodak moments', a concept that became part of everyday life.

And it was women Kodak cast in the leading role. In its advertisements, women held the cameras, busy preserving moments of domestic bliss for posterity: 鈥淜odak knew how to market to women. If you wanted to be seen as a caring mother and responsible housewife, then you needed to record your family's evolution and growth,鈥� he says.

But women were only part of the story. It was they who took the photographs, but the other half of the Kodak moment required a subject 鈥� birthday parties, sporting success and, crucially, family holidays.

鈥淜odak also played a big role in converting travel to tourism. 探花直播idea was that if you hadn't brought back pictures from your vacation you might as well not have gone,鈥� says Kamal. 鈥淔or them, photography was all about preserving memories for posterity, photography was all about sentiment, and it was women who were doing this.鈥�

By the 1970s, more than 60% of pictures in the US 鈥� the world's largest photography market 鈥� were being taken by women. And it was partly how men 鈥� rather than women 鈥� responded to the digital revolution that Kodak couldn't cope with.

Digital disrupted the company's equilibrium in two crucial respects. Firstly, it shifted meaning associated with cameras and secondly, digital devices allowed newcomers such as Sony to bypass one of Kodak's huge strengths 鈥� its distribution network.

Gadget man

探花直播knock-on effects of this shift were enormous. Digital cameras came to be viewed as electronic gadgets, rather than pieces of purely photographic equipment. As a result, he explains: 鈥� 探花直播identification of cameras as gadgets brought about another significant change: women were no longer the main customers, men were.鈥�

探花直播gender shift led to the third source of disruption for the photographic industry in general, and for Kodak in particular. With digital cameras, images could be viewed on cameras, mobile phones or computers without the need for hard prints. And with women giving way to men as primary users of cameras, printing plummeted.

According to Kamal: 鈥� 探花直播people taking pictures suddenly changed, from 60% women to 70% men. Kodak didn't know how to market to men. But even if they could get them to buy, they didn't want to, because men don't print. Unlike women, they hadn't been socialised in the role of family archivist.鈥�

Faced with such an enormous threat to its business, Kodak did what many companies do in similar circumstances 鈥� ignore the problem in the hope it goes away, and when it doesn't, deride the new-comer.

鈥淪ome things do go away 鈥� not all technology gets diffused,鈥� he says. 鈥淲hen that fails, the second reaction is usually derision 鈥� it'll never take off, it's too expensive, it's too difficult, the print quality is too bad, people will never part with hard prints. When I talked to Kodak executives they would always cite the same example 鈥� if someone's house catches fire, the first thing they rescue is their photographs.鈥�

From preserving memories to sharing experiences

Having played such a central role in creating meaning for photography, the company failed to believe that meaning had changed, from memories printed on paper to transient images shared by email or on Facebook.

鈥� 探花直播change from preserving memories to sharing experiences, and from women to men 鈥� these were things Kodak simply couldn't handle,鈥� says Kamal, who saw the writing on the wall when he visited the company's senior management in Rochester a decade ago. 鈥淏y the end of the day I was convinced the company was not going to be around much longer.鈥�

In 2006, Kamal sent a letter to the Financial Times, pointing out that Kodak's strategy was fundamentally flawed. 鈥淜odak is better off taking a leaf out of Lou Gerstner鈥檚 strategy for re-inventing IBM 鈥� from a manufacturer to a service-provider,鈥� he wrote.

鈥淜odak needs to disassociate itself from its traditional strengths and come to terms with the fact that this technology will be commoditised sooner or later. What they need is a new business model for an environment in which people do not 鈥榩reserve memories鈥� but 鈥榮hare experiences鈥� ... I am afraid Mr Perez's [Kodak CEO] strategy of engulfing the consumer in the Kodak universe has a low likelihood of success."

But rather than a new business model, what Kamal had seen in Rochester was a digital imaging division under pressure from its consumer imaging counterpart, and a company unable to shake-off a corporate mindset that had developed over more than a century.

鈥淚ts focus on retail printing, investing in inkjet printing research and development, and selling sensors to mobile manufacturers 鈥� altogether, these never added up to a coherent, sustainable business model. And the digital guys were always under pressure because they were seen to be cannibalising sales of much more lucrative products,鈥� says Kamal, who thinks Kodak should have cut the digital business loose and freed it from the Rochester mindset.

Learning from history

In his view, Kodak needed to let a new generation of users and entrepreneurs take charge 鈥� people who could embrace uncertainty and were prepared to be driven in unforeseen directions 鈥� a far cry from how the company had spent its life.

鈥淚t's important for companies to reinvent themselves. Kodak had tremendous market power 鈥� one of the things that allowed it to survive thus far. But for this kind of reinvention, where you're faced with a technological discontinuity which has little in common with what you've been doing, you need to radically alter your mindset or world-view and emerge as a completely different company. IBM is a good example of this kind of reinvention, which was a huge cultural shift and took several years. But Kodak wasn't willing to part with their legacy.鈥�

探花直播challenges Kodak faced are not unique, so what can other businesses learn from its failure? Clearly companies that derive a large proportion of their profit from a single product 鈥� in Kodak's case film 鈥� are more vulnerable. But having a corporate mindset open to new ideas and able to embrace uncertainty is essential.

According to Kamal: 鈥� 探花直播important things are not to tie the weight of legacy assets onto new ventures; to refrain from prolonging the life of existing product lines, while trying to create false synergies between the old and the new; and, most of all, to base strategy around users, rather than the existing business model.鈥�

As the company approaches its 130^th birthday, what will be its legacy? Those precious family albums, perhaps, and our enduring passion for photography. But its impact could have been even greater, and longer-lasting.

鈥淭here was a time when photography was known as 'kodaking',鈥� he concludes. 鈥淚 don't think Kodak will survive. Someone might buy the brand and its assets, but Kodak is never going to be Kodak again.鈥�

On a shelf in his office in Cambridge Judge Business School, Dr Kamal Munir keeps a Kodak Brownie 127. Manufactured in the 1950s, the small Bakelite camera is a powerful reminder of the rise and fall of a global brand 鈥� and of lessons other businesses would do well to learn.

Whenever I ask why a certain company that has fallen on hard times is doing badly, I always start by asking why it was successful in the first place. That is where the answer lies.

Kamal Munir.

Dok 1 from Flickr.

Kodak Color Film.

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