Do We Want China to Fail?

In the past 30 years the Chinese economic miracle has raised 500 million people from below the poverty line to above it. Our economy is stuck in the mud and theirs is seemingly growing at whatever number they want. There is a very good article in the New York Times outlining how China's growing economy is impacting its domestic markets. The article states that the average annual income in the cities in China is still under $3,000, and under $1,000 in the rural areas. Despite this, the Chinese now buy more cars, more home appliances and bigger TVs than we do here in the US.

The China story is truly amazing -- after all, they have not had a losing year since 1976 and in those three decades, only two years had GDP growth of under 5%. In 1976 China's economy was 5% the size of ours, now it is 50%. Economists may have differing opinions on many things, but they all agree that markets have cycles. Thirty years without an economic reset in China does imply that one of these days, their economy is going to have a bad patch. When it happens, we will be able to say that even the Chinese markets reset every once in a while, and some people will feel better about themselves. I would argue that it is not in our best interest for the following three reasons:

Life or Death

The delicate balance of the Chinese economy still has more than 600 million people living very close to starvation. China is extremely focussed on growth because without it millions of people starve. And if that is not enough motivation, with starvation comes political unrest -- so a downturn in China would also start a revolution intent on replacing the government. With the recent build up in Chinese military capability, such a change would include the current government turning on its own people -- also devastating.

Keep us Honest

Honesty is in short supply in our country these days, but it would be even less so without a strong competitor. On some days it is nice to be alone on top of the world economic heap, but I would argue that since the fall of the Berlin Wall, we have been without competition, and lack of competition gives us nothing to focus on but gaming our own system. The last twenty years has seen our smartest math and science minds put to use creating financial products on Wall Street, and engineering quadruple razor blades we will never need. A growing and vibrant China motivates us to fix our own country.

Share the Load

A successful China may not get around to helping other nations for fifty years. Just taking care of themselves however, will free the rest of the developed nations to work to solve the other terrible problems facing our world. Who knows, if China continues on its path to prosperity they may even decide they have a responsibility to help others. And we could use all of the help we can get.

So even though we may feel badly that the Chinese are now buying all of the Hummers -- hey, they even bought that company -- and soon will be buying many more of our assets, I would encourage you to join me in pulling for China to succeed. If they do we will all be better off.

Predictions

No better way to jump into blogging than with a piece predicting the future.  It seems that years cannot start or end without lists of past events or lists of predictions about the future. I do love lists -- so this is a great time for me. Other than everyone's cheap attempts to crank up their pageviews by hiding the lists behind slideshows -- this has been a great year for lists.

I am going to resist the urge to create a list of my own. Here are a few thoughts about the things I have read.  The ideas in this posting are taken largely from the lists cited at the bottom.  So allow me to give credit to the authors by posting links to their posts.

Line Between Consumer and Business

The most important trend in the technology industry right now is the rise in importance of the consumer, and the resulting line that divides consumer and business. Not long ago the consumer technology market was only a fraction of the size of the business market. 2009 marks the first year that more computers were sold to consumers than to businesses. Admittedly the dollar volume to consumers is still less than to business, but the trend is unmistakable. The vendors are lining up on either side of the line with Microsoft, IBM, and HP largely on the business side, and Apple, Google, and Amazon on the other. Sure, these companies all want to be on both sides of the line, but wanting and doing are different things. But what makes a business a business? Is a one person business a consumer or a business? How about a 2 person business? 50 persons? It is an interesting exercise to consider where the line between the business market and the consumer market falls. Watch this page for a future article on the data supporting this thought. No matter where the line is now, it is clearly moving up in 2010 - making the consumer market even bigger and faster growing and the business market smaller. This will be a defining issue in our industry.

Social Networking and Media

Twitter and Facebook will not be the stars of 2010. Twitter will be purchased by someone, and Facebook may even have a wildly successful IPO. Twitter will start advertising and in 140 characters, we are not going to be able to tell the adds from the tweets, and we are going to lose interest in Twitter fast. Someone will then roll out a new thing or add the functionality like Linked In and Facebook did this year and boom -- Twitter will be last year's story. Someone else will come along and be the new star in 2010, and likely another new star in the year after. Facebook will continue to grow users but at a slower pace. At the same time, Facebook will fail to recognize the tipping point against it on privacy related issues and people will stop using the service. So Twitter and Facebook are to 2009 what AOL was to to 2000. We all still want a simpler internet existence without intrusive advertising, pirates or spammers. The very success of these services has brought in the advertisers, pirates and spammers already -- so we are going to be looking for other new new things in 2010.

The Bicycle Will Be Fine, Thanks

For several years we have built more and more features into products that only a fraction of customers have needed. From suburban dwellers buying giant Suburbans they don't really need to consumers buying Microsoft Office, we have foolishly overspent for features we never even intended to use. Many people have said that new simple services offered on the web are bicycles (Google Docs) trying to compete with Ferraris (MS Excel). 2010 will be the year that most of the world will convincingly say - The Bicycle is all that I need. This will stall the overall economic recovery because the dollars spent on the high end products are just not going to come back. It also presents many opportunities for the makers of the bicycles.

All Kinds of Noise -- No Real Change at Microsoft AND Google

In 2010 the competition between Google and Microsoft will get even more intense. The competition will drive all kinds of high profile activities -- mostly personnel changes at Microsoft and acquisitions at Google -- but by the end of the year Google will still get all of its revenue from search, and Microsoft will still make software for big businesses. So lots of action, not much real change.

Here are some of the lists I liked the the most so you can check them out and form your own opinions about what will happen in 2010.

eMarketer

Strategic News Service 

PC World

Read Write Web

Newsweek

The stage is set for 2010 to be a very interesting year.  Your comments are welcome.

Sign Me Up

Today I join the ranks of the blogging.  And choosing to do so during the first week of the year makes me even less unique!  I will do my best to post interesting things and craft them well.  I look forward to your comments.