Waking Up on the Wrong Side of the Desk: The Effect of Mood on Work Performance
You know how it goes: A traffic jam blocks your way to work. A rude driver swerves in front of your car and you spill that just-purchased caf latte into your lap. You arrive late, in a lousy mood. From there, the day just goes downhill and your workplace performance falls to pieces.
Or does it? Everyone has bad mornings. But does a bad mood really color one's entire day and undermine productivity? Some people, after all, thrive on tension; for others, perhaps settling in to work helps them shake off the lousy mood they started with.
"I'm interested in what people bring with them to organizations," says Wharton management professor Nancy Rothbard. "In my experience, and in the experience of many others, people are not able to completely wall off and compartmentalize different parts of their lives. There is a spillover between the multiple roles that people inhabit."
A significant amount of research has been done in the past two decades on work-family conflicts, Rothbard notes, "but very few studies have actually looked at the effect on performance in the workplace." Specifically, Rothbard and Steffanie Wilk, a professor at the Fisher School of Business at Ohio State University, wanted to find out which mood-altering events have the biggest effect, if any -- those that influence one's outlook at the start of the day, or those that nudge one's mood up or down as the workday advances. The results of Rothbard and Wilk's study of call-center employees at a major insurance company are reported in their paper, "Walking in the Door: Sources and Consequences of Employee Mood on Work Performance."
The researchers found that both positive and negative moods affect employee productivity, but that positive moods are more potent. Most importantly, they discovered, the mood you bring with you to work has a stronger effect on the day's mood -- and on work performance -- than mood changes caused by events in the workplace. This finding, according to Rothbard, suggests that a business's performance might be enhanced by efforts to help employees cope with mood-affecting influences in their private lives -- including advising employees on how to best handle commuting hassles or offering counseling for family problems.
"The fact that start-of-the-day mood has such a strong and consistent effect is pretty powerful," she says. "It is something that organizations don't take seriously."
The Swerving Jerk or the Cranky Customer?
In tackling the effects of mood, Rothbard and Wilk write, their first question was "whether mood on arrival at work influences employee work mood during the day.... Second, we are interested in whether employee work mood is more or less influenced by the moods people start with than by the moods generated from the interactions they have during the rest of the work day."
In other words, which upsets you more: that swerving jerk on the road, or the cranky customer on the phone?
Rothbard and Wilk wanted to advance other researchers' findings on forms of "emotional contagion" -- occasions when one person's mood influences another's "through a process of observation, mimicry, and synchronization." The two researchers also wanted to sift out any effect from employees' underlying temperament -- the basic mood one tends to have until events change it. By removing this "trait affectivity on workplace outcomes," they hoped to determine the effect of the more ephemeral mood-changing events.
"Start-of-day mood may come from myriad sources including persistent life challenges and opportunities, positive or negative family experiences before leaving for work, or even the commute into work," they write. "Non-work and work domains are permeable, and research suggests that mood often spills over from one to the other.... Specifically, start-of-day-mood might affect one's appraisal of subsequent events."
Rothbard and Wilk studied employees in call centers operated by a large insurance company on the East and West coasts. The employees included customer service representatives, claims assistants and claims adjusters, as well as their supervisors and managers. The employees completed preliminary questionnaires "to get baseline information on their trait affectivity" -- a sense of each one's basic tendency to be happy, sad and so on. The baseline allowed the researchers to determine how the day's events changed employees' moods.
The 29 customer service representatives each fielded an average of 64 calls per day, and spent virtually their entire workday on the phone. By listening in on some of their calls, the researchers found that callers expressed emotions ranging from pleasant to neutral, angry to frustrated, scared to sad.
Over a three-week period, the researchers used questionnaires, which popped up on the reps' computer screens throughout the day, to sample their moods, as well as the reps' assessment of customer moods. Typical questionnaires asked for replies, on a scale of 1 to 5, to questions about whether reps started the day feeling excited and enthusiastic, or upset and irritable. At various points during the day they were asked to rate their own moods again, and to gauge those of individual customers -- whether they were rude, calm, hostile, insulting, cheerful, friendly or frustrated. At least twice a day the reps answered questions about how well they felt they had focused on the most recent customer call.
In addition, the researchers had access to the performance metrics used by the insurance company to assess the reps' work. This computerized data gauged factors such as the percentage of time each rep had during the workday to answer calls -- in essence, the time they were logged on and not taking breaks. It also counted the number of times each rep transferred a customer call to a supervisor, which was considered undesirable. The number of calls each rep handled per hour was also assessed, with higher numbers considered better.
After controlling for each rep's underlying temperament, Rothbard and Wilk found that reps who started the day in a good mood tended to stay that way. This was reflected in a strong correlation figure of 0.36 (with 1 being a perfect correlation) between start-of-day positive mood and positive mood during the day. Reps who started the day in a bad mood also tended to stay that way, with a correlation figure of 0.38.
"Start-of-day positive mood spills over and affects positive employee mood during the day," the researchers found, adding that "likewise, start-of-day negative mood spills over and affects negative employee mood during the day, even accounting for work-related contextual influences like customer interactions."
While those findings were not particularly surprising, the study uncovered a twist when it focused on how reps reacted to customers' moods. When reps believed their customers were in good moods, the reps' moods tended to get better, with a correlation of 0.25. But, the reps' moods did not tend to fall when they felt their customers were in bad moods. In these cases, the correlation was a mere 0.08.
When the rep's start-of-day mood was good, and the customer also was in a good mood, the rep's mood tended to remain good. But when the rep's starting mood was bad, it did not tend to get worse when the customer was also in a bad mood. Reps with less time on the job tended to be affected more by customers in bad moods. This suggests that negative customer moods have a less potent effect on reps' moods, or that reps get hardened to unpleasant interactions or leave the firm if they can't, Rothbard says.
"Overall, the combined analyses suggest that start-of-day mood had a more consistent effect on worker mood during the day than did perceived customer mood, because negative customer mood did not seem to consistently influence employee mood throughout the day," the researchers conclude.
The survey of worker performance revealed "partial" support for the hypothesis that workers perform better when they are in good moods. Those in good moods had more time to deal with customers, probably because they took fewer breaks. The happier reps also tended to transfer fewer calls. But being in a good mood did not cause them to field more calls per hour.
The effect of negative moods was slightly different. Reps in bad moods handled fewer calls per hour and were less engaged in their jobs. But bad moods did not significantly increase their phone transfers or reduce the time they had available for customers.
What does this boil down to?
"One of our findings shows that the mood people bring with them at the very start of the workday influenced employee mood more powerfully and consistently than any other variable," Rothbard and Wilk write. "We also found that for the most part, as expected, customer mood influenced employee mood. Interestingly, negative customer interactions only affected less experienced workers. Last, we show that daily mood at work can influence important work outcomes."
Start-of-day moods may be more potent because they are caused by events that are more important to workers than interactions with customers, the researchers note. It is also possible that workers are trained to handle customer moods but get no similar training on dealing with start-of-day moods. Future research, they suggest, should look at various events that influence those start-of-day moods.
"What I think is really interesting about these findings is that the positive mood that you bring to work is very strong," Rothbard says. "People actually do a pretty good job of walling off the negatives. What's interesting for organizations to understand is that what people bring with them to work is not all bad for the organization, and in fact can be quite positive."
Source : Wharton
A century after its characterisation by Alois Alzheimer, senile dementia remains almost untreatable. But there is hope
BETA or tau? That is the question. On it hang both the health of many of the baby-boomer generation as they reluctantly stare old age in the face and the financial health of rich countries' medical and social-security systems. For, as the 10th International Conference on Alzheimer's Disease and Related Disorders, held recently in Madrid, heard, the relentless growth in the number of people with Alzheimer's threatens health-care provision in the developed world.
Medical advance means that other diseases are failing to cull the population before Alzheimer's destroys people's minds. And Alzheimer's is both expensive and lingering. In America, the average cost of looking after someone with the disease between diagnosis and death is at least $174,000.
At the moment, 4.5m Americans have Alzheimer's. By 2050, if nothing changes, that number will have trebled. But if a treatment that delayed the disease's onset by seven years were to be available by the end of the decade, the number of sufferers would decline by 40% by the middle of the century. Hence the importance of understanding how Alzheimer's works, the better to devise a treatment.
Beta (in the form of beta-amyloid plaques) and tau (in the form of tau tangles) are the physical manifestations of Alzheimer's. The plaques are globs of rogue protein in the spaces between nerve cells. The tangles are made of a different rogue protein, and form inside nerve cells.
The smart money says that plaque formation triggers the disease, and that the tangles are a secondary effect. This is known as the amyloid-cascade hypothesis, and most searches for treatment are based on it. But there are dissenters who reckon that this is the wrong conclusion. Some think that the role of the tangles is being underplayed, others that something altogether different has gone wrong.
It's all Greek
Amyloid plaques form when a molecule called amyloid precursor protein (APP) is chopped up by two enzymes known as beta-secretase and gamma-secretase. One of the products, with the long-winded name amyloid beta-peptide 42, has the unfortunate property that its molecules like to stick to each other. The resulting plaques, reckon supporters of the cascade theory, trigger the brain damage that manifests itself as memory loss, behavioural and personality changes, and general and irreversible cognitive decline. So, stop the plaques formingor get rid of them once they have formedand you should be able to control the disease.
One way to do so might be to develop a vaccine that stimulates antibodies against amyloid beta-peptide 42. That is the path being pursued by Elan Pharmaceuticals and Wyeth Research. In 2000, these two firms began a clinical trial of such a vaccine. Unfortunately, they had to halt it when 18 of the 300 patients involved developed severe inflammation of the brain. In the time that the trial had run, however, the researchers noticed that those patients who had reacted to the vaccine, but whose brains had not swollen up, showed a marked slowing of cognitive decline. This suggested they were on the right track, and the companies are now testing what they hope is a less toxic vaccine.
An alternative to vaccination is to make the antibodies in a factory, and then inject them. This is called passive immunisation. Preliminary trials suggest it is safe, and a study carried out by Wyeth showed that treatment with a single dose of antibody produced significant cognitive improvements over the course of four months. In other words, the drug does not just slow the disease, it reverses it.
Nor is the immunological approach the only one under investigation. For the past decade there has been a lot of work on drugs called secretase inhibitors, which alter the activity of the enzymes that create amyloid beta-peptide 42.
Researchers have known for some time that the long-term use of aspirin and ibuprofen, which belong to a group of drugs called non-steroidal anti-inflammatories, roughly halves a person's risk of developing Alzheimer's. This has nothing to do with their anti-inflammatory properties, though. It is because they also act on gamma-secretase. They alter the way it cleaves amyloid precursor protein. Instead of producing amyloid beta-peptide 42 (so called because it has 42 of the amino-acid units of which proteins are composed), they make peptides 37 or 38 amino acids long. These do not stick to one another.
Kenton Zavitz and his colleagues at Myriad Genetics presented the firm's latest findings on a non-steroidal anti-inflammatory derivative called R-flurbiprofen. Like many other molecules, flurbiprofen has a left-handed and a right-handed form. Normally, when the drug is synthesised, these are made in equal numbers. But it is possible to separate them.
Right-handed flurbiprofen lacks the anti-inflammatory effects of the left-handed version. This means it is less likely to cause the gastrointestinal problems associated with non-steroidal anti-inflammatories, so it is safe for long-term use. It still retains its APP-cleaving properties, though. The results of a trial with 200 Alzheimer's patients are encouraging. Patients with a mild version of the disease who took a high dose of the drug had a slower rate of decline than those who did not.
Hedging bets
Not everybody believes that focusing on amyloid is the right way to go, however. That is because there is, in fact, no clear correlation between the deposition of the plaques and the development of cognitive problems. Some dissenters think that tau tangles play a more central role than the cascaders have been willing to admit. There are also those, like Larry Goldstein, a professor of cellular and molecular medicine at the University of California, San Diego, who believe the triggering event is unrelated to either beta or tau, and is, in fact, a defect in the way that materials are transported through the filamentary protrusions, known as axons, that connect nerve cells to each other in the brain and to other cells a long way away in the body.
For tau, at least one drug is being tried out. Memantine has been prescribed for more than 20 years for various brain disorders, including dementia, because it is believed to protect against high levels of a neurotransmitter called glutamate. But there is evidence from several animal studies that it also prevents the modification of tau protein that leads to the formation of intracellular tangles. Work by Malin Gunnarsson and her colleagues at Uppsala University in Sweden recently confirmed that this is true in people, too.
Such bet-hedging is sensible. Alois Alzheimer's original paper, identifying both plaques and tangles, was presented in November 1906. A century later, the disease that bears his name is still a mysteryas is the question of how to treat it.
Source : Economist
BETA or tau? That is the question. On it hang both the health of many of the baby-boomer generation as they reluctantly stare old age in the face and the financial health of rich countries' medical and social-security systems. For, as the 10th International Conference on Alzheimer's Disease and Related Disorders, held recently in Madrid, heard, the relentless growth in the number of people with Alzheimer's threatens health-care provision in the developed world.
Medical advance means that other diseases are failing to cull the population before Alzheimer's destroys people's minds. And Alzheimer's is both expensive and lingering. In America, the average cost of looking after someone with the disease between diagnosis and death is at least $174,000.
At the moment, 4.5m Americans have Alzheimer's. By 2050, if nothing changes, that number will have trebled. But if a treatment that delayed the disease's onset by seven years were to be available by the end of the decade, the number of sufferers would decline by 40% by the middle of the century. Hence the importance of understanding how Alzheimer's works, the better to devise a treatment.
Beta (in the form of beta-amyloid plaques) and tau (in the form of tau tangles) are the physical manifestations of Alzheimer's. The plaques are globs of rogue protein in the spaces between nerve cells. The tangles are made of a different rogue protein, and form inside nerve cells.
The smart money says that plaque formation triggers the disease, and that the tangles are a secondary effect. This is known as the amyloid-cascade hypothesis, and most searches for treatment are based on it. But there are dissenters who reckon that this is the wrong conclusion. Some think that the role of the tangles is being underplayed, others that something altogether different has gone wrong.
It's all Greek
Amyloid plaques form when a molecule called amyloid precursor protein (APP) is chopped up by two enzymes known as beta-secretase and gamma-secretase. One of the products, with the long-winded name amyloid beta-peptide 42, has the unfortunate property that its molecules like to stick to each other. The resulting plaques, reckon supporters of the cascade theory, trigger the brain damage that manifests itself as memory loss, behavioural and personality changes, and general and irreversible cognitive decline. So, stop the plaques formingor get rid of them once they have formedand you should be able to control the disease.
One way to do so might be to develop a vaccine that stimulates antibodies against amyloid beta-peptide 42. That is the path being pursued by Elan Pharmaceuticals and Wyeth Research. In 2000, these two firms began a clinical trial of such a vaccine. Unfortunately, they had to halt it when 18 of the 300 patients involved developed severe inflammation of the brain. In the time that the trial had run, however, the researchers noticed that those patients who had reacted to the vaccine, but whose brains had not swollen up, showed a marked slowing of cognitive decline. This suggested they were on the right track, and the companies are now testing what they hope is a less toxic vaccine.
An alternative to vaccination is to make the antibodies in a factory, and then inject them. This is called passive immunisation. Preliminary trials suggest it is safe, and a study carried out by Wyeth showed that treatment with a single dose of antibody produced significant cognitive improvements over the course of four months. In other words, the drug does not just slow the disease, it reverses it.
Nor is the immunological approach the only one under investigation. For the past decade there has been a lot of work on drugs called secretase inhibitors, which alter the activity of the enzymes that create amyloid beta-peptide 42.
Researchers have known for some time that the long-term use of aspirin and ibuprofen, which belong to a group of drugs called non-steroidal anti-inflammatories, roughly halves a person's risk of developing Alzheimer's. This has nothing to do with their anti-inflammatory properties, though. It is because they also act on gamma-secretase. They alter the way it cleaves amyloid precursor protein. Instead of producing amyloid beta-peptide 42 (so called because it has 42 of the amino-acid units of which proteins are composed), they make peptides 37 or 38 amino acids long. These do not stick to one another.
Kenton Zavitz and his colleagues at Myriad Genetics presented the firm's latest findings on a non-steroidal anti-inflammatory derivative called R-flurbiprofen. Like many other molecules, flurbiprofen has a left-handed and a right-handed form. Normally, when the drug is synthesised, these are made in equal numbers. But it is possible to separate them.
Right-handed flurbiprofen lacks the anti-inflammatory effects of the left-handed version. This means it is less likely to cause the gastrointestinal problems associated with non-steroidal anti-inflammatories, so it is safe for long-term use. It still retains its APP-cleaving properties, though. The results of a trial with 200 Alzheimer's patients are encouraging. Patients with a mild version of the disease who took a high dose of the drug had a slower rate of decline than those who did not.
Hedging bets
Not everybody believes that focusing on amyloid is the right way to go, however. That is because there is, in fact, no clear correlation between the deposition of the plaques and the development of cognitive problems. Some dissenters think that tau tangles play a more central role than the cascaders have been willing to admit. There are also those, like Larry Goldstein, a professor of cellular and molecular medicine at the University of California, San Diego, who believe the triggering event is unrelated to either beta or tau, and is, in fact, a defect in the way that materials are transported through the filamentary protrusions, known as axons, that connect nerve cells to each other in the brain and to other cells a long way away in the body.
For tau, at least one drug is being tried out. Memantine has been prescribed for more than 20 years for various brain disorders, including dementia, because it is believed to protect against high levels of a neurotransmitter called glutamate. But there is evidence from several animal studies that it also prevents the modification of tau protein that leads to the formation of intracellular tangles. Work by Malin Gunnarsson and her colleagues at Uppsala University in Sweden recently confirmed that this is true in people, too.
Such bet-hedging is sensible. Alois Alzheimer's original paper, identifying both plaques and tangles, was presented in November 1906. A century later, the disease that bears his name is still a mysteryas is the question of how to treat it.
Source : Economist
The pace of computing power gains is only getting faster and that means big changes in the way we live. Are you ready to become a mind-reader?
NEW YORK (Fortune) -- Just thinking about likely near-term innovations in computing is exciting, but slowly a longer-term vision is coming into focus.
Down the road we're probably going to have access to something approaching all information all the time. Our lives - much longer by then because of the implications of this for medical care - will be enriched, even as our behavior will be very unlike how we live today.
Already much of our software and data is moving to giant remote servers connected to the Internet. Our photos, music, software applications like Microsoft Word, and just about everything else we use a computer for will be accessible to us wherever we go.
The other huge, and related, move of the moment is toward ultimate mobility. Several trends are taking us there. The cellphone is becoming more like a PC while the PC is becoming more like a cellphone. In short, the next great era of computing - succeeding the PC one - will likely be about smaller, cheaper, more-powerful portable devices.
If you wonder how devices can get smaller and yet replace the PC, keep in mind that a major innovation we're seeing right now is vastly-improved voice-recognition software. While it only works on the fast processors of a PC today, the inexorable growth of computing power will soon take that kind of power into your cellphone. So long keyboard!
In the next phase, the devices essentially disappear. An article in the new issue of Fortune by Peter Schwartz and Rita Koselka describes the amazing coming world of quantum computing.
Forget the technical details - quantum computing is tough for non-engineers to grasp. Suffice it to say that if you thought the increase in computing power was impressive during the past 20 years, the pace will likely speed up radically as quantum computing takes hold within the next decade.
In a short piece I wrote as part of a broader look at the future last September, I speculated that in the future we would feel that everything in life had become like an open-book test. "Any kind of information is available anytime you want it," I wrote. "Simply speak a question, or even think it. You will always be connected wirelessly to the network, and an answer will return from a vast, collectively-produced data matrix. Google queries will seem quaint."
At the time, I thought I was being a little wild, but less than a year later such talk is almost routine in the futurist camp. Chris Taylor at Business 2.0 this week published "Surfing the Web with Nothing but Brainwaves." Taylor explains that already quadriplegics can play videogames, control robotic arms, and turn a TV on and off, using only their minds. They are connected to a computer with an implant that reads electrical patterns in the brain.
Sony has already patented a game system that beams data directly into the brain without implants, reports Taylor.
In the future quantum-computing world which Schwartz and Koselka describe, we'd go way further. Computing power would be so great that we could easily have "network-enabled telepathy." We'd wear headbands with unimaginable computing power.
It's fascinating to consider some of the potential social and even political ramifications of such a turn toward ubiquitous information availability. The necessity to learn languages might disappear. If the devices necessary to participate in this information revolution were cheap enough, and the network truly ubiquitous and global, the economic playing field could be leveled. If information is power, everyone would have it. That's the kind of breakthrough the developing world needs.
Even moral codes and behavior might alter, if all that available information led to a profound transparency in human conduct. One of my beliefs is that people will routinely record their entire lives on some equivalent of video.
Sharing your personal history - warts and all - might then become routine, in order to improve your perceived trustworthiness. Computing is now so important that to talk of its future is inevitably to consider the future fate of mankind.
Source: Fortune
Men and women think differently. But not that differently
IN THE 1970s there was a fad for giving dolls to baby boys and fire-engines to baby girls. The idea was that differences in behaviour between the sexes were solely the result of upbringing: culture turned women into ironers, knitters and chatterboxes, and men into hammerers, drillers and silent types. Switching toys would put an end to sexual sorting. Today, it is clear why it did not. When boys and girls are born, they are already different, and they favour different toys from the beginning.
That boys and girlsand men and womenare programmed by evolution to behave differently from one another is now widely accepted. Surely, no one today would think of doing what John Money, of Johns Hopkins University, did in 1967: amputating the genitalia of a boy who had suffered a botched circumcision, and advising the parents to bring him up as a girl. The experiment didn't work, and the consequences were tragic. But which of the differences between the sexes are "biological", in the sense that they have been honed by evolution, and which are "cultural" or "environmental" and might more easily be altered by changed circumstances, is still fiercely debated.
The sensitivity of the question was shown last year by a furore at Harvard University. Larry Summers, then Harvard's president, caused a storm when he suggested that innate ability could be an important reason why there were so few women in the top positions in mathematics, engineering and the physical sciences.
Baby blues and pinks
In the past, it was assumed that a female was simply a male with hormones, says Tracey Shors, a professor of neuroscience at Rutgers University. The truth is the exact opposite. Female is the default brain setting. Until the eighth week of gestation every human fetal brain looks female. The brain, like the rest of the human body, becomes male as a result of surges of testosteroneone during gestation and one shortly after birth.
This wash of hormones creates an organ that generates typically boyish behaviour, such as rough-and-tumble play. Behavioural differences appear early. For example, a one-day-old girl will look for longer at a face than at a mechanical mobile; a boy will prefer the mobile. That it is testosterone exposure which causes such preferences is suggested by two sorts of research. Several studies have shown that girls with a genetic disorder which exposes them to abnormally high prenatal levels of testosterone often develop boyish patterns of play.
Within a year of birth, boys and girls also prefer different toys. Boys prefer cars, trucks, balls and guns. Girls prefer dolls and tea sets. Although evolution has clearly not had the opportunity to mould a preference for tea sets, there is evidence from another species which suggests that human infants might be predisposed to prefer toys that have particular adaptive significance to their sex. Several years ago, Melissa Hines, of City University in London, and Gerianne Alexander, of Texas A&M; University, gave some vervet monkeys a selection of toys, including rag dolls, pans, balls and trucks. Male monkeys spent more time with the trucks and balls. Females played for longer with the dolls.
Obviously, cultural stereotyping is an improbable explanation for this. Nor could male monkeys have evolved a preference for fire engines. The theory put forward to explain what happenedand the similar innate preferences of human childrenis that the toys preferred by young females are objects that offer opportunities for expressing nurturing behaviour, something that will be useful to them later in life. Young males, whether simian or human, prefer toys that can be used actively or propelled in space, and which afford greater opportunities for rough play.
Just behave
For a start, men's brains are about 9% larger than those of women. That used to be cited as evidence of men's supposedly greater intelligence. Actually, the difference is largely (and probably completely) explained by the fact that men are bigger than women.
In recent years, more detailed examination has refined the picture. Female brains have a higher percentage of grey matter (the manifestation, en bloc, of the central bodies of nerve cells), and thus a lower percentage of white matter (the manifestation of the long, thin filaments that connect nerve cells together), than male brains. That, plus the fact that in some regions of the female brain, nerve cells are packed more densely than in men, means that the number of nerve cells in male and female brains may be similar.
Oddly, though, the main connection between the two hemispheres of the brain, which is known as the corpus callosum and is made of white matter, is proportionately smaller in men than women. This may explain why men use only one side of the brain to process some problems for which women employ both sides.
These differences in structure and wiring do not appear to have any influence on intelligence as measured by IQ tests. It does, however, seem that the sexes carry out these tests in different ways. In one example, where men and women perform equally well in a test that asks them to work out whether nonsense words rhyme, brain scanning shows that women use areas on both the right and the left sides of the brain to accomplish the task. Men, by contrast, use only areas on the left side. There is also a correlation between mathematical reasoning and temporal-lobe activity in menbut none in women. More generally, men seem to rely more on their grey matter for their IQ, whereas women rely more on their white matter.
These examples show how tricky it is to find correlations between behaviour and differences in brain structure and brain activity. And even if a connection to brain structure is found, that does not mean it is innate. Most of these studies are done on adults, so it is not clear when differences start to arise. The brain is by no means immutable, even in adulthood. In the hippocampus, an area thought to be involved in spatial learning, new nerve cells can be born in an adult and hormones influence their birth and survival. Dr Shors says that her work has shown that the female brain, at least, is very plastic, changing dramatically during life in response to pregnancy and menopause as well as puberty.
Dr Baron-Cohen suggests that innate preferences can be carried into adulthood, too. He studies autism and Asperger's syndrome, conditions that are far more common in boys than girls. His theory is that, from birth, female brains are hardwired for understanding emotions (empathising) and male brains for understanding and building systems (systemising). Hence the diverse preferences for toys. The notion is that autistic childrenand autistic adultshave extremely male brains. In other words, they are especially good at systemising and especially bad at empathising.
There are a number of problems with these studies. One, according to Dr Hines, is science's bias towards reporting positive results, so that research which shows no differences is likely to get lost. Another is that because differences between the sexes are so often popularised and played up in the popular media, people tend to pay them disproportionate attention.
For example, although it is commonly held that there are reliable differences between the verbal abilities of males and females, Dr Hines suggests this is not exactly correct. She says that the results of hundreds of tests of vocabulary and reading comprehension show there is almost no gap between the sexes. Though teenage girls are better at spelling than teenage boys, the only aspect of verbal ability that is known to show a sex difference in adults is verbal fluency (the ability to produce words rapidly). For example, when asked to list as many words as possible that start with a particular letter, women usually come up with more than men. Furthermore, even when there are differences in ability between the sexes, research suggests that the scale of these differences is often smaller than people generally believe.
Storm in a d cup
In comparing differences between the sexes, researchers use a statistical measure called d. This indicates how far apart the averages of two groups (in this case men and women) are, taking into account the range of values that contribute to each average. The value of d for adult height is around 2. There is no arguing that in any given population men, on average, are taller than women. For behavioural and psychological phenomena, a value of d greater than 0.8 is considered large, of 0.5, moderate, and of 0.2, small. Any d less than 0.2 is a negligible difference.
Equipped with this statistical tool, Janet Hyde of the University of Wisconsin-Madison decided to investigate just how different men and women are. She collected all the important meta-analyses that have been conducted on differences between the sexes. (A meta-analysis combines many studies by treating the result of each as a single piece of data for statistical purposes.) Given that most of the meta-analyses she looked at addressed questions where differences were reputed to be reliable (mathematical performance, verbal ability and aggressive behaviour, in particular) she feels her results were surprising. Of the 124 effect-sizes she calculated, 30% had a value of d close to zero and in a further 48% of cases, d was small. In other words, only 22% of reported behavioural differences between the sexes are worth raising an eyebrow over.
The largest gaps were, not surprisingly, in physical attributes such as throwing velocity (d=2.14) and throwing distance (d=1.9
. These closely reflect the difference in height between men and women. Another area where she found large differences was in some areas of sexualityfor example, frequency of masturbation (d=0.96) and attitudes about sex in a casual relationship (d=0.81). However, men and women reported the same degree of sexual satisfaction.
Not surprisingly, on average men were physically more aggressive (d=0.6). But in this case other work shows the danger of jumping too rapidly to a conclusion. A study done in 1994 hints that if women think nobody is watching and judging them, and there are no physical consequences, they might be more aggressive than men.
In this study, participants played a video game in which they defended themselves from attackers, and the number of bombs they chose to drop was a measure of aggression. When participants thought they were known to the experimenter and were having their performance assessed, men dropped more bombs than women did. But when those same participants were given the impression that they were anonymous, women became the more enthusiastic bombers.
A similar result on the greater intensity of female anger was reported earlier this year by Nicole Hess, of the Max Planck Institute in Berlin, and Edward Hagen, of the same city's Humboldt University. Dr Hess and Dr Hagen, however, took the matter one stage further by asking their participants what they wanted to do about it.
The researchers read the participants, who were undergraduate students, an "aggression-evoking scenario". They were told they had just overheard a physically smaller classmate of the same sex making false and serious attacks on their reputation to a teacher. Once again, the women were angrier than the men. The real difference between the sexes, though, was in the way they proposed to retaliate. Women usually said that they would get their own back with gossip. Men were more evenly divided, with roughly half wanting to punch the slanderous classmate.
One idea to explain this is that in animals such as humans, where there is a lot of maternal care, females find physical aggression less affordable. And just because a smear is not physical does not mean that it is less damaging than a punch. Indeed, research suggests that girls find such indirect or social aggression much more hurtful than boys do.
Does it add up?
Another behavioural difference that has borne a huge amount of scrutiny is in mathematics, particularly since Dr Summers's comments. The problem with trying to argue that the male tendency to systemise suggested by Dr Baron-Cohen might lead to greater mathematical ability is that, in fact, girls and boys are equally good at maths prior to puberty. Until recently, it was believed that males outperformed females in mathematics at all ages. Today, that picture has changed, and it appears that males and females of any age are equally good at computation and at understanding mathematical concepts. However, after their mid-teens, men are better at problem solving than women are.
Males also have better spatial abilities than females. If asked to imagine rotating a three-dimensional object, a skill useful in engineering, the difference is quite large (d=0.73 and 0.56 in different studies).
The question raised by Dr Summers does get to the heart of the matter. Over the past 50 years, women have made huge progress into academia and within it. Slowly, they have worked their way into the higher echelons of discipline after discipline. But some parts of the ivory tower have proved harder to occupy than others. The question remains, to what degree is the absence of women in science, mathematics and engineering caused by innate, immutable ability?
Innate it may well be. That does not mean it is immutable. Spatial ability is amenable to training in both sexes. And such training works. The difference between the trained and the untrained has a d value of 0.4, and one programme to teach spatial ability improved the retention rate of women in engineering courses from 47% to 77%. Biology may predispose, but even in the rugged world of metal bashing, it is not necessarily destiny.
Source : Economist
IN THE 1970s there was a fad for giving dolls to baby boys and fire-engines to baby girls. The idea was that differences in behaviour between the sexes were solely the result of upbringing: culture turned women into ironers, knitters and chatterboxes, and men into hammerers, drillers and silent types. Switching toys would put an end to sexual sorting. Today, it is clear why it did not. When boys and girls are born, they are already different, and they favour different toys from the beginning.
That boys and girlsand men and womenare programmed by evolution to behave differently from one another is now widely accepted. Surely, no one today would think of doing what John Money, of Johns Hopkins University, did in 1967: amputating the genitalia of a boy who had suffered a botched circumcision, and advising the parents to bring him up as a girl. The experiment didn't work, and the consequences were tragic. But which of the differences between the sexes are "biological", in the sense that they have been honed by evolution, and which are "cultural" or "environmental" and might more easily be altered by changed circumstances, is still fiercely debated.
The sensitivity of the question was shown last year by a furore at Harvard University. Larry Summers, then Harvard's president, caused a storm when he suggested that innate ability could be an important reason why there were so few women in the top positions in mathematics, engineering and the physical sciences.
Baby blues and pinks
In the past, it was assumed that a female was simply a male with hormones, says Tracey Shors, a professor of neuroscience at Rutgers University. The truth is the exact opposite. Female is the default brain setting. Until the eighth week of gestation every human fetal brain looks female. The brain, like the rest of the human body, becomes male as a result of surges of testosteroneone during gestation and one shortly after birth.
This wash of hormones creates an organ that generates typically boyish behaviour, such as rough-and-tumble play. Behavioural differences appear early. For example, a one-day-old girl will look for longer at a face than at a mechanical mobile; a boy will prefer the mobile. That it is testosterone exposure which causes such preferences is suggested by two sorts of research. Several studies have shown that girls with a genetic disorder which exposes them to abnormally high prenatal levels of testosterone often develop boyish patterns of play.
Within a year of birth, boys and girls also prefer different toys. Boys prefer cars, trucks, balls and guns. Girls prefer dolls and tea sets. Although evolution has clearly not had the opportunity to mould a preference for tea sets, there is evidence from another species which suggests that human infants might be predisposed to prefer toys that have particular adaptive significance to their sex. Several years ago, Melissa Hines, of City University in London, and Gerianne Alexander, of Texas A&M; University, gave some vervet monkeys a selection of toys, including rag dolls, pans, balls and trucks. Male monkeys spent more time with the trucks and balls. Females played for longer with the dolls.
Obviously, cultural stereotyping is an improbable explanation for this. Nor could male monkeys have evolved a preference for fire engines. The theory put forward to explain what happenedand the similar innate preferences of human childrenis that the toys preferred by young females are objects that offer opportunities for expressing nurturing behaviour, something that will be useful to them later in life. Young males, whether simian or human, prefer toys that can be used actively or propelled in space, and which afford greater opportunities for rough play.
Just behave
For a start, men's brains are about 9% larger than those of women. That used to be cited as evidence of men's supposedly greater intelligence. Actually, the difference is largely (and probably completely) explained by the fact that men are bigger than women.
In recent years, more detailed examination has refined the picture. Female brains have a higher percentage of grey matter (the manifestation, en bloc, of the central bodies of nerve cells), and thus a lower percentage of white matter (the manifestation of the long, thin filaments that connect nerve cells together), than male brains. That, plus the fact that in some regions of the female brain, nerve cells are packed more densely than in men, means that the number of nerve cells in male and female brains may be similar.
Oddly, though, the main connection between the two hemispheres of the brain, which is known as the corpus callosum and is made of white matter, is proportionately smaller in men than women. This may explain why men use only one side of the brain to process some problems for which women employ both sides.
These differences in structure and wiring do not appear to have any influence on intelligence as measured by IQ tests. It does, however, seem that the sexes carry out these tests in different ways. In one example, where men and women perform equally well in a test that asks them to work out whether nonsense words rhyme, brain scanning shows that women use areas on both the right and the left sides of the brain to accomplish the task. Men, by contrast, use only areas on the left side. There is also a correlation between mathematical reasoning and temporal-lobe activity in menbut none in women. More generally, men seem to rely more on their grey matter for their IQ, whereas women rely more on their white matter.
These examples show how tricky it is to find correlations between behaviour and differences in brain structure and brain activity. And even if a connection to brain structure is found, that does not mean it is innate. Most of these studies are done on adults, so it is not clear when differences start to arise. The brain is by no means immutable, even in adulthood. In the hippocampus, an area thought to be involved in spatial learning, new nerve cells can be born in an adult and hormones influence their birth and survival. Dr Shors says that her work has shown that the female brain, at least, is very plastic, changing dramatically during life in response to pregnancy and menopause as well as puberty.
Dr Baron-Cohen suggests that innate preferences can be carried into adulthood, too. He studies autism and Asperger's syndrome, conditions that are far more common in boys than girls. His theory is that, from birth, female brains are hardwired for understanding emotions (empathising) and male brains for understanding and building systems (systemising). Hence the diverse preferences for toys. The notion is that autistic childrenand autistic adultshave extremely male brains. In other words, they are especially good at systemising and especially bad at empathising.
There are a number of problems with these studies. One, according to Dr Hines, is science's bias towards reporting positive results, so that research which shows no differences is likely to get lost. Another is that because differences between the sexes are so often popularised and played up in the popular media, people tend to pay them disproportionate attention.
For example, although it is commonly held that there are reliable differences between the verbal abilities of males and females, Dr Hines suggests this is not exactly correct. She says that the results of hundreds of tests of vocabulary and reading comprehension show there is almost no gap between the sexes. Though teenage girls are better at spelling than teenage boys, the only aspect of verbal ability that is known to show a sex difference in adults is verbal fluency (the ability to produce words rapidly). For example, when asked to list as many words as possible that start with a particular letter, women usually come up with more than men. Furthermore, even when there are differences in ability between the sexes, research suggests that the scale of these differences is often smaller than people generally believe.
Storm in a d cup
In comparing differences between the sexes, researchers use a statistical measure called d. This indicates how far apart the averages of two groups (in this case men and women) are, taking into account the range of values that contribute to each average. The value of d for adult height is around 2. There is no arguing that in any given population men, on average, are taller than women. For behavioural and psychological phenomena, a value of d greater than 0.8 is considered large, of 0.5, moderate, and of 0.2, small. Any d less than 0.2 is a negligible difference.
Equipped with this statistical tool, Janet Hyde of the University of Wisconsin-Madison decided to investigate just how different men and women are. She collected all the important meta-analyses that have been conducted on differences between the sexes. (A meta-analysis combines many studies by treating the result of each as a single piece of data for statistical purposes.) Given that most of the meta-analyses she looked at addressed questions where differences were reputed to be reliable (mathematical performance, verbal ability and aggressive behaviour, in particular) she feels her results were surprising. Of the 124 effect-sizes she calculated, 30% had a value of d close to zero and in a further 48% of cases, d was small. In other words, only 22% of reported behavioural differences between the sexes are worth raising an eyebrow over.
The largest gaps were, not surprisingly, in physical attributes such as throwing velocity (d=2.14) and throwing distance (d=1.9
. These closely reflect the difference in height between men and women. Another area where she found large differences was in some areas of sexualityfor example, frequency of masturbation (d=0.96) and attitudes about sex in a casual relationship (d=0.81). However, men and women reported the same degree of sexual satisfaction. Not surprisingly, on average men were physically more aggressive (d=0.6). But in this case other work shows the danger of jumping too rapidly to a conclusion. A study done in 1994 hints that if women think nobody is watching and judging them, and there are no physical consequences, they might be more aggressive than men.
In this study, participants played a video game in which they defended themselves from attackers, and the number of bombs they chose to drop was a measure of aggression. When participants thought they were known to the experimenter and were having their performance assessed, men dropped more bombs than women did. But when those same participants were given the impression that they were anonymous, women became the more enthusiastic bombers.
A similar result on the greater intensity of female anger was reported earlier this year by Nicole Hess, of the Max Planck Institute in Berlin, and Edward Hagen, of the same city's Humboldt University. Dr Hess and Dr Hagen, however, took the matter one stage further by asking their participants what they wanted to do about it.
The researchers read the participants, who were undergraduate students, an "aggression-evoking scenario". They were told they had just overheard a physically smaller classmate of the same sex making false and serious attacks on their reputation to a teacher. Once again, the women were angrier than the men. The real difference between the sexes, though, was in the way they proposed to retaliate. Women usually said that they would get their own back with gossip. Men were more evenly divided, with roughly half wanting to punch the slanderous classmate.
One idea to explain this is that in animals such as humans, where there is a lot of maternal care, females find physical aggression less affordable. And just because a smear is not physical does not mean that it is less damaging than a punch. Indeed, research suggests that girls find such indirect or social aggression much more hurtful than boys do.
Does it add up?
Another behavioural difference that has borne a huge amount of scrutiny is in mathematics, particularly since Dr Summers's comments. The problem with trying to argue that the male tendency to systemise suggested by Dr Baron-Cohen might lead to greater mathematical ability is that, in fact, girls and boys are equally good at maths prior to puberty. Until recently, it was believed that males outperformed females in mathematics at all ages. Today, that picture has changed, and it appears that males and females of any age are equally good at computation and at understanding mathematical concepts. However, after their mid-teens, men are better at problem solving than women are.
Males also have better spatial abilities than females. If asked to imagine rotating a three-dimensional object, a skill useful in engineering, the difference is quite large (d=0.73 and 0.56 in different studies).
The question raised by Dr Summers does get to the heart of the matter. Over the past 50 years, women have made huge progress into academia and within it. Slowly, they have worked their way into the higher echelons of discipline after discipline. But some parts of the ivory tower have proved harder to occupy than others. The question remains, to what degree is the absence of women in science, mathematics and engineering caused by innate, immutable ability?
Innate it may well be. That does not mean it is immutable. Spatial ability is amenable to training in both sexes. And such training works. The difference between the trained and the untrained has a d value of 0.4, and one programme to teach spatial ability improved the retention rate of women in engineering courses from 47% to 77%. Biology may predispose, but even in the rugged world of metal bashing, it is not necessarily destiny.
Source : Economist
nebdy Having Some Insights Onf&o; ...plz Share
Having taught the world how to shop online, Amazon.com now finds the world shopping elsewhere on the internet. It is time to become a pioneer again
IN HIS most recent annual report, Jeff Bezos, the founder and chief executive of Amazon.com, reprints his letter to shareholders of 1997. It's all about the long term, he wrote then. The point he is making today is that nothing has changed: the pioneer of online retailing is still having to place big bets on the future, cutting into profit margins and unnerving some investors. Having established the internet as somewhere to buy things, Amazon is again spending heavily on development in anticipation of consumers wanting to download music, video and books instead of having them delivered in the post.
Amazon is highly secretive about its plans, but the online industry expects it soon to launch a service for downloading films and television shows. Amazon's investment in new technology and services helped slash net profit by 58% to $22m in its second quarter, compared with the same period a year earlier. This is despite a 22% increase in sales, which are expected to reach $10.6 billion for 2006 as a whole.
Boosting sales has been costly for Amazon, which appeared on the internet in July 1995 selling books. It has pumped money into discounted shipping and diversifying its merchandise away from books, to create what Mr Bezos likes to describe as Earth's biggest selection. Not just music and video discs have been added, but also consumer electronics, jewellery, clothing and, most recently, groceries (largely non-perishable packs of items).
Amazon's product range is expanding in much the same way as online sales are. As people become more accustomed to shopping on the internet, they are ordering a greater variety of goods and services from a wider range of websites. In America online sales were up by 25% in 2005 over the previous year, reckons Forrester, a research company. Travel is now by far the biggest category, worth some $63 billion last year, followed by computer equipment and software ($14 billion), cars ($13 billion), clothing ($11 billion) and home furnishings ($8 billion).
Amazon's challengers come from two directions. First, other online retailers are growing rapidly and appear in various forms. Many of the dotcoms are invading each others' turf. From auctioning people's old stuff, eBay now also hosts fixed-priced virtual shops offering new goods for sale. And Google is adding more shopping-type services, such as Froogle, a shopping-comparison service, and more recently its new Checkout payments system, which rivals eBay's PayPal.
Second, traditional retailers are rapidly getting their online acts together. This pits Amazon against giant retailers with huge purchasing power, like America's Wal-Mart and Britain's Tesco. These multichannel retailers make a virtue of their ability to offer both bricks and clicks. Many provide online customers with the option of picking up goods from the shop down the road. This is proving popular with web buyers who want things immediately or are keen to avoid shipping costs and staying in to accept a delivery. Circuit City, a big American electricals chain, expects in-store pick-ups to account for more than half its online sales this year.
Mr Bezos saw these threats coming and prepared for them. The internet provides consumers with near perfect product and price visibility. It does not take many clicks of a mouse to compare Amazon's prices. Mr Bezos decided there was no point trying to duck this and in 2000 invited other retailers to sell their goods on his website.
Many people, even some within the company, thought this would cannibalise Amazon's own sales. Yet as with many consumer innovations, Mr Bezos has said there was no way to know if the strategy would work other than to experiment.
It did help to lift overall sales. Amazon says sales of third-party items, from which it takes a commission, have increased from 6% of all items sold in 2000 to 28% in 2005. Over that time, the company says its own retail revenues were up three-fold.
Amazon also runs the websites of other retailers, such as Target and Borders. Not all these arrangements are successful. Amazon used to have a joint webstore with Toys R Us, but earlier this year a court ruled that Toys R Us could end the deal because Amazon had breached an exclusivity agreement by allowing other merchants to sell their toys on the site.
Having other retailers competing with you so openly puts Amazon under pressure to make sure that it has the lowest prices. This can cut into margins, but the company hopes the payback will come from customers who want to buy something from a third party also acquiring goods that Amazon itself is selling.
To encourage this, Amazon provides the same checkout for both third-party sales and its own purchases. It also puts plenty of temptation in customers' way by recommending purchases. These are based on what other customers who have chosen the same product have bought and the buyer's own previous purchases. On August 10th Amazon expanded this with the launch of Search Suggestions, in which customers, sellers, authors and other users can make recommendations that are linked to search keywords.
Getting things quickly and cheaply to customers can be expensive. Amazon often subsidises shipping costs through special deals. The main one is Amazon Prime. In return for a fee of $79 a year, the company provides members of the programme with unlimited express shipping on most goods.
Movies to go
By building its brand and expanding its offerings, Amazon has done all the right things, says Safa Rashtchy, an analyst with Piper Jaffray, an investment bank. Free shipping should not be taken lightly, he adds. It is a major marketing tactic for them. But in the decade ahead, he wonders if Amazon will still be doing so well unless it can also offer delivery by download too. Mr Rashtchy thinks Amazon may have missed the boat with digital music, but could still have a chance to become a big online destination for digital video.
The battle for downloads is becoming more intense. The market for digital music is dominated by Apple's iTunes, which is also likely to expand into video. Microsoft is entering the music-download business with a digital player, called Zune. On August 8th Nokia bought an American digital-music distributor, Loudeye, to develop its own service for its music-enabled handsets. The Finnish telecoms-equipment company says these are now selling roughly twice as fast as Apple's iPods.
Video downloads are available online from some sites, such as Movielink.com, which is owned by five big film studios. News Corp's websites, including MySpace.com, are planning to sell films and shows from the group's Fox network.
Amazon does provide some digital downloads of music and video, although it is mainly promotional material. At heart the company remains primarily a purveyor of old-world media: some two-thirds of its sales are from books, CDs and DVDs. Whatever share of media ends up being downloaded, Amazon will miss out unless it introduces its own service. The one it is said to have in the pipeline has evolved in the past year from offering mostly music to concentrating more on films and television shows, according to Advertising Age. The trade publication says this is because Amazon's executives felt Apple's grip on the music market would be too difficult to break.
A video service could resemble a downloadable version of Netflix, a Californian company that pioneered online video rentals. Netflix's customers compile online lists of videos they want to see and receive them in the post. When the DVDs are returned in their pre-paid envelopes, the next titles are sent. With no late fees, Netflix has pummelled Blockbuster's store-based video-rental model.
Netflix is also exploring how to deliver movies online. Amazon has already copied the Netflix postal model in Britain and Germany and it has dropped hints that it may launch a postal service in America: Mr Bezos told Wired magazine last year that Amazon was well placed to do so ...and we wouldn't have to pay heavy marketing fees. The same could be said about video downloads. Although Mr Bezos has discussed his strategy in the past with The Economist, the company did not respond to requests for an interview.
How much media will move to online delivery is the subject of huge debate. Plenty of music is already delivered this way. Yet for three-quarters of internet users, CDs remain the most popular format for music, according to a big survey of the British music market by Nielsen//NetRatings. Internet users are more likely to buy music online, on average spending 59 ($107) a year downloading it. But the study found they also spend another 99 on CDs.
The need to own music in a physical form, whether it's to play in other music systems, to minimise the chances of losing it or just because they like to have a physical collection, remains very strong amongst internet users, says Alex Burmaster, the research company's European internet analyst. The same will be true for video, which in digital form is cumbersome and takes longer to download. Broadband-equipped televisions and personal video recorders will make the process easier. Reluctance to read books on digital devices could be even stronger.
The great disintermediator
Yet digital downloads of all types of media will be demanded by some customersperhaps too many to ignore. Amazon is already well placed to offer these, not least because of its high level of customer service. The company has been building up the capacity to store huge amounts of digital data: a subsidiary called Amazon S3 rents out temporary storage by the terabyte to other websites.
Some of this online equivalent to Amazon's physical warehouses is already being filled by digital copies of books. Another Amazon subsidiary, BookSurge, is busy courting publishers to have their works scanned into digital files. Modern printing techniques allow books to be printed relatively cheaply on demand, whether it's one copy or one thousand, Greg Greeley, head of media products at Amazon, said when BookSurge was acquired last April.
On-demand printing is particularly suited to lower-volume books and those that would ordinarily be out of print. Amazon already sells print-on-demand books, although that is invisible to consumers, Mr Bezos has said, because they look exactly like any other books.
Just as music and videos could be offered with the option of buying a downloadable version, so too could books. Many people are sceptical, yet devices for reading digital books and documents are rapidly improving. A new e-reader device from Sony has a special screen that mimics the way light falls on a printed page. The size of a paperback, it can store several hundred novels.
In a statement, Mr Bezos says he is looking forward to a slowdown in the company's rate of growth in technology spending later this year. That will cheer Amazon's patient investors. In the past year its share price has underperformed the NASDAQ. Unless the pioneer of online retailing can provide downloadable media it risks being disintermediatedrather as only a decade ago high-street bookshops, music and video stores were disintermediated by Amazon itself.
Source : Economist
IN HIS most recent annual report, Jeff Bezos, the founder and chief executive of Amazon.com, reprints his letter to shareholders of 1997. It's all about the long term, he wrote then. The point he is making today is that nothing has changed: the pioneer of online retailing is still having to place big bets on the future, cutting into profit margins and unnerving some investors. Having established the internet as somewhere to buy things, Amazon is again spending heavily on development in anticipation of consumers wanting to download music, video and books instead of having them delivered in the post.
Amazon is highly secretive about its plans, but the online industry expects it soon to launch a service for downloading films and television shows. Amazon's investment in new technology and services helped slash net profit by 58% to $22m in its second quarter, compared with the same period a year earlier. This is despite a 22% increase in sales, which are expected to reach $10.6 billion for 2006 as a whole.
Boosting sales has been costly for Amazon, which appeared on the internet in July 1995 selling books. It has pumped money into discounted shipping and diversifying its merchandise away from books, to create what Mr Bezos likes to describe as Earth's biggest selection. Not just music and video discs have been added, but also consumer electronics, jewellery, clothing and, most recently, groceries (largely non-perishable packs of items).
Amazon's product range is expanding in much the same way as online sales are. As people become more accustomed to shopping on the internet, they are ordering a greater variety of goods and services from a wider range of websites. In America online sales were up by 25% in 2005 over the previous year, reckons Forrester, a research company. Travel is now by far the biggest category, worth some $63 billion last year, followed by computer equipment and software ($14 billion), cars ($13 billion), clothing ($11 billion) and home furnishings ($8 billion).
Amazon's challengers come from two directions. First, other online retailers are growing rapidly and appear in various forms. Many of the dotcoms are invading each others' turf. From auctioning people's old stuff, eBay now also hosts fixed-priced virtual shops offering new goods for sale. And Google is adding more shopping-type services, such as Froogle, a shopping-comparison service, and more recently its new Checkout payments system, which rivals eBay's PayPal.
Second, traditional retailers are rapidly getting their online acts together. This pits Amazon against giant retailers with huge purchasing power, like America's Wal-Mart and Britain's Tesco. These multichannel retailers make a virtue of their ability to offer both bricks and clicks. Many provide online customers with the option of picking up goods from the shop down the road. This is proving popular with web buyers who want things immediately or are keen to avoid shipping costs and staying in to accept a delivery. Circuit City, a big American electricals chain, expects in-store pick-ups to account for more than half its online sales this year.
Mr Bezos saw these threats coming and prepared for them. The internet provides consumers with near perfect product and price visibility. It does not take many clicks of a mouse to compare Amazon's prices. Mr Bezos decided there was no point trying to duck this and in 2000 invited other retailers to sell their goods on his website.
Many people, even some within the company, thought this would cannibalise Amazon's own sales. Yet as with many consumer innovations, Mr Bezos has said there was no way to know if the strategy would work other than to experiment.
It did help to lift overall sales. Amazon says sales of third-party items, from which it takes a commission, have increased from 6% of all items sold in 2000 to 28% in 2005. Over that time, the company says its own retail revenues were up three-fold.
Amazon also runs the websites of other retailers, such as Target and Borders. Not all these arrangements are successful. Amazon used to have a joint webstore with Toys R Us, but earlier this year a court ruled that Toys R Us could end the deal because Amazon had breached an exclusivity agreement by allowing other merchants to sell their toys on the site.
Having other retailers competing with you so openly puts Amazon under pressure to make sure that it has the lowest prices. This can cut into margins, but the company hopes the payback will come from customers who want to buy something from a third party also acquiring goods that Amazon itself is selling.
To encourage this, Amazon provides the same checkout for both third-party sales and its own purchases. It also puts plenty of temptation in customers' way by recommending purchases. These are based on what other customers who have chosen the same product have bought and the buyer's own previous purchases. On August 10th Amazon expanded this with the launch of Search Suggestions, in which customers, sellers, authors and other users can make recommendations that are linked to search keywords.
Getting things quickly and cheaply to customers can be expensive. Amazon often subsidises shipping costs through special deals. The main one is Amazon Prime. In return for a fee of $79 a year, the company provides members of the programme with unlimited express shipping on most goods.
Movies to go
By building its brand and expanding its offerings, Amazon has done all the right things, says Safa Rashtchy, an analyst with Piper Jaffray, an investment bank. Free shipping should not be taken lightly, he adds. It is a major marketing tactic for them. But in the decade ahead, he wonders if Amazon will still be doing so well unless it can also offer delivery by download too. Mr Rashtchy thinks Amazon may have missed the boat with digital music, but could still have a chance to become a big online destination for digital video.
The battle for downloads is becoming more intense. The market for digital music is dominated by Apple's iTunes, which is also likely to expand into video. Microsoft is entering the music-download business with a digital player, called Zune. On August 8th Nokia bought an American digital-music distributor, Loudeye, to develop its own service for its music-enabled handsets. The Finnish telecoms-equipment company says these are now selling roughly twice as fast as Apple's iPods.
Video downloads are available online from some sites, such as Movielink.com, which is owned by five big film studios. News Corp's websites, including MySpace.com, are planning to sell films and shows from the group's Fox network.
Amazon does provide some digital downloads of music and video, although it is mainly promotional material. At heart the company remains primarily a purveyor of old-world media: some two-thirds of its sales are from books, CDs and DVDs. Whatever share of media ends up being downloaded, Amazon will miss out unless it introduces its own service. The one it is said to have in the pipeline has evolved in the past year from offering mostly music to concentrating more on films and television shows, according to Advertising Age. The trade publication says this is because Amazon's executives felt Apple's grip on the music market would be too difficult to break.
A video service could resemble a downloadable version of Netflix, a Californian company that pioneered online video rentals. Netflix's customers compile online lists of videos they want to see and receive them in the post. When the DVDs are returned in their pre-paid envelopes, the next titles are sent. With no late fees, Netflix has pummelled Blockbuster's store-based video-rental model.
Netflix is also exploring how to deliver movies online. Amazon has already copied the Netflix postal model in Britain and Germany and it has dropped hints that it may launch a postal service in America: Mr Bezos told Wired magazine last year that Amazon was well placed to do so ...and we wouldn't have to pay heavy marketing fees. The same could be said about video downloads. Although Mr Bezos has discussed his strategy in the past with The Economist, the company did not respond to requests for an interview.
How much media will move to online delivery is the subject of huge debate. Plenty of music is already delivered this way. Yet for three-quarters of internet users, CDs remain the most popular format for music, according to a big survey of the British music market by Nielsen//NetRatings. Internet users are more likely to buy music online, on average spending 59 ($107) a year downloading it. But the study found they also spend another 99 on CDs.
The need to own music in a physical form, whether it's to play in other music systems, to minimise the chances of losing it or just because they like to have a physical collection, remains very strong amongst internet users, says Alex Burmaster, the research company's European internet analyst. The same will be true for video, which in digital form is cumbersome and takes longer to download. Broadband-equipped televisions and personal video recorders will make the process easier. Reluctance to read books on digital devices could be even stronger.
The great disintermediator
Yet digital downloads of all types of media will be demanded by some customersperhaps too many to ignore. Amazon is already well placed to offer these, not least because of its high level of customer service. The company has been building up the capacity to store huge amounts of digital data: a subsidiary called Amazon S3 rents out temporary storage by the terabyte to other websites.
Some of this online equivalent to Amazon's physical warehouses is already being filled by digital copies of books. Another Amazon subsidiary, BookSurge, is busy courting publishers to have their works scanned into digital files. Modern printing techniques allow books to be printed relatively cheaply on demand, whether it's one copy or one thousand, Greg Greeley, head of media products at Amazon, said when BookSurge was acquired last April.
On-demand printing is particularly suited to lower-volume books and those that would ordinarily be out of print. Amazon already sells print-on-demand books, although that is invisible to consumers, Mr Bezos has said, because they look exactly like any other books.
Just as music and videos could be offered with the option of buying a downloadable version, so too could books. Many people are sceptical, yet devices for reading digital books and documents are rapidly improving. A new e-reader device from Sony has a special screen that mimics the way light falls on a printed page. The size of a paperback, it can store several hundred novels.
In a statement, Mr Bezos says he is looking forward to a slowdown in the company's rate of growth in technology spending later this year. That will cheer Amazon's patient investors. In the past year its share price has underperformed the NASDAQ. Unless the pioneer of online retailing can provide downloadable media it risks being disintermediatedrather as only a decade ago high-street bookshops, music and video stores were disintermediated by Amazon itself.
Source : Economist
Hi
I m posting one of my personal best article from Swaminathan Aiyer of Swaminomics fame.
It's the East India Company in reverse. Parts of Europe are in a funk about an Indian invasion says The Economist, the British financial magazine. Lakshmi Mittal has become the biggest steel producer in the world through a series of takeovers, and now bids to take over Arcelor, Europe's largest steel company. Vijay Mallya's bid for Taittinger, France's prestigious wine producers in Europe, has produced shrieks of wounded pride in France. Anil Aggarwal of Vedanta/Sterlite has taken over Konkola, Zambia's biggest copper mine, from Anglo American.
The Indian left claims that globalization means the takeover of the world by western multinational corporations. In fact Third World MNCs are rising, and are repeatedly beating and taking over Western MNCs.
At the beginning of the 20 th century, the biggest company in the world was US Steel. Today US Steel is a minor player. Among nations, China dominates. Among companies, Mittal dominates. No Western steelmaker is big enough save Areclor from Mittal's embrace, so the company has sought refuge in the arms of Russia's Severstal.
Jindal Steel and Power Ltd (JSPL) has won a contract to mine Bolivia's huge El Mutun iron ore deposit, and convert part of it into steel. This is part of a trend: Hindalco has taken over two copper mines in Australia. Remarkably, all five bidders in Bolivia were Third World MNCs. Jindal's rival bidders were Mittal Steel; China's Shandong Luneng Hengyuan Trading Group; Brazil's EBX Group; and a joint venture of two Argentinean companies. No Western MNCs was in sight.
Possibly Western MNCs were reluctant to bid after Bolivia's nationalization of oil and gas companies. Yet even that event has a Third World twist. The biggest foreign oil company to be nationalized by Bolivia was Petrobras, a Brazilian MNC.
Exxon is the biggest US company by far. Yet Exxon's global oil production is only 4.1 m.b.d. of oil. Russia's mostly public sector companies produce 9.3 m.bd , and Saudi Arabia's Aramco produces almost 10 m.b.d.
Now, Western MNCs are and will continue to be clear leaders in many areas. Boeing and Airbus look unbeatable in passenger planes. Car manufacturing is still dominated by US MNCs, although Japan is gaining ground fast. High-tech manufacturing like pharmaceuticals, microprocessors and mainframe computers are dominated by the West. So are financial services: banking, insurance, merchant banking, and stockbroking.
Yet in all these areas Third World MNCs are gaining ground. IBM invented the personal computer, but after losing money for several years it sold its PC business to Lenovo of China. All leading Indian pharma companiesRanbaxy, Dr Reddy's Labs, Wockhardt et al--have become MNC s, taking over foreign companies.
Indeed, Malvinder Singh, CEO of Ranbaxy, felt compelled to write an article in The Financial Times recently assuring the western public that Indian companies did not seek conquest, but merely wanted a partnership. This sort of soft diplomacy was once practiced by Western MNCs entering Third World markets.
The biggest computer-related giants such as Microsoft, IBM, EDS and Oracle remain formidable world players, joined by new internet giants such as Google, Yahoo and e-Bay. But note that all these companies have been obliged to invest hugely in India in order to meet competition from Indian companies. IBM now employs over 40,000 people in India.
Yet Indian software companies are a rising and probably unstoppable force in this area. TCS, Infosys and Wipro are the stars of the future, with far higher P-E ratios than many Western rivals. They have rightly refused to buy many western MNCs available for sale. As Azim Premji puts it, Why buy yesterday?
Air services have long been dominated by the West, but its biggest carriers are in trouble. In 2005, United Airlines lost $ 21 billion, Delta 3.8 billion, and American Airlines $ 861 million. But Dubai's Emirates chalked up a record profit of $ 708 million. Emirates has ordered more than 100 new planes, and aims to become the world's biggest airline.
Port services used to be dominated by Western companies like P&O.; Yet P&O; was put up for sale last year and the two top biddersDubai Ports and PSA of Singaporewere both Third World MNCs. Americans were so terrified of Dubai Ports taking over six US ports (which had been run by P&O;) that politicians squeaked with rage, and Dubai Ports finally bought peace by agreeing to sell the US operations it had acquired.
Indian MNCs have had a late start and are still finding their feet. Yet they are doing well in autos and auto ancillaries. The biggest auto ancillary giantsDelphi, Visteon, Dana, Federal Mogullost billions last year, and are relocating in fair measure to India for survival. Meanwhile Indian auto ancillary companies are soaring. .Bharat Forge has become the second largest producer of forgings in the world, having taken over six plants abroad, and looks set to become numero uno.
Tata Motors has acquired Daewoo's truck assets in Korea, a bus company in Spain, and is starting a joint venture with Brazilian giant Marcopolo. The Tata group has also paid $239 million for Teleglobe, $431 million for Tetley Tea of Britain; $286 million for NatSteel of Singapore; $118 million for the truck operations in South Korea of Daewoo; and $130 million for the undersea cable network of Tyco.
Indian banks are pygmies by world standards. Yet a recent survey in The Economist pointed out that banking was mostly a commodity service, where Indian companies could replicate the success already demonstrated in computer software and BPO. In which case ICICI Bank, HDFC Bank and others have a big global future.
Standard ad Poor's has outsourced many of its global services to Crisil, its Indian subsidiary. JP Morgan Chase aims to shift 9,000 jobs to India.
The bottom line is clear. Globalisation does not ensure the takeover of the world economy by western MNCs. On the contrary, it enables Third World companies to become global giants, thrashing western MNCs. In this manner, globalisation is creating a more equitable spread of world economic power.
Hi everyone
Can anyone help me with a report on the "recent Oil Crisis" throughout the world.
'Clickprint'?
On August 21, 2006, Time Warner's America Online revealed that it had severed ties with its chief technology officer after the online service released three months of search queries from 658,000 subscribers which, although "anonymized" by removing user account details, still contained enough data to possibly identify some of the users. The privacy breach underscored the perils of supposedly "anonymous" Internet profiling and raised the hackles of privacy advocates such as the Electronic Frontier Foundation. The EFF, a week earlier, had urged the Federal Trade Commission to investigate AOL and force the company to change its privacy practices.
A different type of anonymous Internet profiling is highlighted by Wharton operations and information management professor Balaji Padmanabhan in a working paper -- co-authored with Catherine Yang, a professor at the Graduate School of Management at the University of California, Davis -- titled, "Clickprints on the Web: Are There Signatures in Web Browsing Data?" Although the authors don't focus specifically on the AOL incident, the paper highlights how it is possible to identify unique users based merely on their browsing behavior.
Padmanabhan and Yang find that each individual may have a "clickprint" -- a unique pattern of web surfing behavior based on actions such as the number of pages viewed per session, the number of minutes spent on each web page, the time or day of the week the page is visited, and so on. The authors conclude that by observing these patterns, an e-commerce company can distinguish between two individuals with nearly 100% accuracy, sometimes with as few as three Internet sessions, and potentially use that information to deter fraud. The number of sessions needed to identify an individual rises with the number of unique users a site has because there are more people to differentiate.
While Padmanabhan and Yang focus on whether individuals have clickprints, the number of sessions needed to identify a unique individual, and potential fraud prevention applications, the paper also shows how companies can track users just by watching behavior. "Our main finding is that even trivial features in an Internet session can distinguish users," says Padmanabhan. "People do seem to have individual browsing behaviors."
Padmanabhan and Yang found that it takes anywhere from 3 to 16 Internet sessions to identify the behavior of a unique individual. "The paper is really a proof of concept that behavior and minimal information can be used to ID users," says Yang.
There is an important difference, though, between the AOL incident and the setting addressed in the research paper. The AOL incident highlights how data captured by search engine companies may be (inappropriately) used to (1) build profiles of users based on what they search for on the Internet or (2) even identify them by name.
In contrast, the setting addressed by Padmanabhan and Yang is one where an online retailer observes an anonymous user browsing on its web site. The authors suggest that -- based on clickprints learned from web browsing data -- the retailer may then be able to match this anonymous user to a previous user who visited its web site in some prior session. Also unlike the AOL incident, the user profiles implicit in the clickprints relate to basic browsing characteristics of users, such as how many pages they view or how long they spend on the site.
The real trick is finding the right balance between gathering customer data and providing benefits. According to Padmanabhan, that conversation is just beginning. His research focused only on gathering data for internal use by a single site so that a company can suggest products, prevent fraud and tailor information for individual customers. The type of data released by AOL oversteps privacy bounds "because a list of all searches can be used to paint a picture that may not be accurate," says Padmanabhan.
Tracking a Clickprint
The theory that web surfers have unique clickprints is based on the idea that humans all have "signatures," such as fingerprints or handwriting styles that uniquely differentiate each person. Padmanabhan and Yang adapt those concepts to web surfing by observing characteristics that are behavioral (such as visiting the same four pages at 8:15 p.m.) rather than physiological (such as a person's appearance).
The clickprint effort, the authors write, is really a first foray into the field of identifying web users' behavior, and more research is required. Furthermore, each web site that attempts to use clickprint analysis would have slight variations in what data is collected and how it is used. For an e-commerce company, clickprints could be used to customize shopping recommendations and help prevent fraud. A large site like Yahoo could analyze different variables with a goal of customizing content.
Padmanabhan says the main goal was to find an efficient way to sort through aggregated data and to find the least number of sessions necessary to get a valid result. As the authors note in their paper, "A news event may prompt an individual to visit a web site and read an article and perhaps watch a related video. If the news event is of wide interest, there may be several, even millions, of sessions that 'look similar.' However over time -- across many sessions -- an individual may implicitly reveal more information that may then enable unique identification. In other words, we do not assume that every web session has information to uniquely identify individuals. In fact, the examples offered above suggest otherwise. What we do assume is that there is some level of aggregation enough information to uniquely distinguish individuals." The authors also show that the number of sessions analyzed improves the accuracy. For instance, one example found that 51 aggregated sessions yielded accuracy of 99.4%. With seven sessions analyzed, individuals could be identified with 86.7% accuracy.
Applications of Clickprints
The big question raised by all this data mining is how clickprints will be used. In their paper, Padmanabhan and Yang focus on the positive applications by noting how clickprints could mitigate identity theft and e-commerce fraud. The importance of clickprints "can be significant, given applications to electronic commerce in general and, in particular, online fraud detection, a major problem in electronic commerce costing the economy billions of dollars annually," they write.
For instance, an e-commerce company could use clickprints to recognize that a person is using a stolen credit card based on differences in browsing behavior from the card's true owner. "If who I think it is enters a different credit card, I can either ask for more information or investigate," Padmanabhan says. Of course, there is a flip side, he adds. "If you ID anonymously, it raises privacy concerns.... Using clickstream information inappropriately can pose a danger to both users and a company's reputation." The authors, however, point out that their current work mainly shows that users have unique clickprints, and stops short of exactly addressing how this can be employed in fraud detection.
Clickprints can also help customer service, the authors add. "Having a method for detection could help online merchants customize content and recommendations much earlier in a user session than they might otherwise be able to do (since they will not have to require a sign-on before implementing strategies to better serve this customer). Implemented appropriately, such customized online storefronts have been shown to increase customer satisfaction."
However, there are limitations and challenges to using clickprints to profile customers. Among the challenges outlined by Padmanabhan:
It is unclear whether clickprints can be applied on a massive scale such as 100 million unique users; effective fraud detection may require methods that work at such a scale.
Companies will have to discover unique characteristics to their customers, and sometime distinguishing characteristics may well not exist.
Online companies will have to experiment to see what specific browsing behavior(s) need to be tracked to build unique profiles.
The Privacy Conversation
While, in theory, clickprints may have promising applications, Padmanabhan acknowledges that the AOL incident could hamper further development. Internet companies and their customers will need to discuss the privacy implications and benefits of using clickprints and anonymous data to identify individual browsing patterns. Ultimately, communications, perception and expectations all play a role in the privacy debate, says Padmanabhan.
For instance, web users don't expect to be identified if they are only searching for information, he notes, which explains why the AOL leak caused such outrage. "However, if Amazon or a credit card company that can track everything you do uses clickprints, the perception is different because you expect it," he adds. "Perception is a big factor."
As is the benefit to the customer. If clickprints are used as a way to prevent fraud on an individual site, it's highly unlikely there will be an uproar over privacy, says Padmanabhan. "If you are identified in a way that will provide substantial benefits, it makes sense. If the benefit is not clear, it's a recipe for a bad reaction."
The major takeaway from Padmanabhan's finding is that "this (privacy vs. benefit) doesn't have to be a zero sum game." In other words, some profiling is good if done carefully and used for a legitimate purpose with tangible benefits.
The evolution of clickprints is likely to be an ongoing issue for content companies that mine user data but fail to communicate privacy policies or demonstrate any tangible user benefits, Padmanabhan notes. While the value of the appropriate use of clickprints is clear for e-commerce companies, content firms are going to have to figure out how to handle customer tracking. Padmanabhan suggests that communicating expectations to users is critical and that companies should have the privacy conversation in the context of his clickprint findings.
Source: Wharton
On August 21, 2006, Time Warner's America Online revealed that it had severed ties with its chief technology officer after the online service released three months of search queries from 658,000 subscribers which, although "anonymized" by removing user account details, still contained enough data to possibly identify some of the users. The privacy breach underscored the perils of supposedly "anonymous" Internet profiling and raised the hackles of privacy advocates such as the Electronic Frontier Foundation. The EFF, a week earlier, had urged the Federal Trade Commission to investigate AOL and force the company to change its privacy practices.
A different type of anonymous Internet profiling is highlighted by Wharton operations and information management professor Balaji Padmanabhan in a working paper -- co-authored with Catherine Yang, a professor at the Graduate School of Management at the University of California, Davis -- titled, "Clickprints on the Web: Are There Signatures in Web Browsing Data?" Although the authors don't focus specifically on the AOL incident, the paper highlights how it is possible to identify unique users based merely on their browsing behavior.
Padmanabhan and Yang find that each individual may have a "clickprint" -- a unique pattern of web surfing behavior based on actions such as the number of pages viewed per session, the number of minutes spent on each web page, the time or day of the week the page is visited, and so on. The authors conclude that by observing these patterns, an e-commerce company can distinguish between two individuals with nearly 100% accuracy, sometimes with as few as three Internet sessions, and potentially use that information to deter fraud. The number of sessions needed to identify an individual rises with the number of unique users a site has because there are more people to differentiate.
While Padmanabhan and Yang focus on whether individuals have clickprints, the number of sessions needed to identify a unique individual, and potential fraud prevention applications, the paper also shows how companies can track users just by watching behavior. "Our main finding is that even trivial features in an Internet session can distinguish users," says Padmanabhan. "People do seem to have individual browsing behaviors."
Padmanabhan and Yang found that it takes anywhere from 3 to 16 Internet sessions to identify the behavior of a unique individual. "The paper is really a proof of concept that behavior and minimal information can be used to ID users," says Yang.
There is an important difference, though, between the AOL incident and the setting addressed in the research paper. The AOL incident highlights how data captured by search engine companies may be (inappropriately) used to (1) build profiles of users based on what they search for on the Internet or (2) even identify them by name.
In contrast, the setting addressed by Padmanabhan and Yang is one where an online retailer observes an anonymous user browsing on its web site. The authors suggest that -- based on clickprints learned from web browsing data -- the retailer may then be able to match this anonymous user to a previous user who visited its web site in some prior session. Also unlike the AOL incident, the user profiles implicit in the clickprints relate to basic browsing characteristics of users, such as how many pages they view or how long they spend on the site.
The real trick is finding the right balance between gathering customer data and providing benefits. According to Padmanabhan, that conversation is just beginning. His research focused only on gathering data for internal use by a single site so that a company can suggest products, prevent fraud and tailor information for individual customers. The type of data released by AOL oversteps privacy bounds "because a list of all searches can be used to paint a picture that may not be accurate," says Padmanabhan.
Tracking a Clickprint
The theory that web surfers have unique clickprints is based on the idea that humans all have "signatures," such as fingerprints or handwriting styles that uniquely differentiate each person. Padmanabhan and Yang adapt those concepts to web surfing by observing characteristics that are behavioral (such as visiting the same four pages at 8:15 p.m.) rather than physiological (such as a person's appearance).
The clickprint effort, the authors write, is really a first foray into the field of identifying web users' behavior, and more research is required. Furthermore, each web site that attempts to use clickprint analysis would have slight variations in what data is collected and how it is used. For an e-commerce company, clickprints could be used to customize shopping recommendations and help prevent fraud. A large site like Yahoo could analyze different variables with a goal of customizing content.
Padmanabhan says the main goal was to find an efficient way to sort through aggregated data and to find the least number of sessions necessary to get a valid result. As the authors note in their paper, "A news event may prompt an individual to visit a web site and read an article and perhaps watch a related video. If the news event is of wide interest, there may be several, even millions, of sessions that 'look similar.' However over time -- across many sessions -- an individual may implicitly reveal more information that may then enable unique identification. In other words, we do not assume that every web session has information to uniquely identify individuals. In fact, the examples offered above suggest otherwise. What we do assume is that there is some level of aggregation enough information to uniquely distinguish individuals." The authors also show that the number of sessions analyzed improves the accuracy. For instance, one example found that 51 aggregated sessions yielded accuracy of 99.4%. With seven sessions analyzed, individuals could be identified with 86.7% accuracy.
Applications of Clickprints
The big question raised by all this data mining is how clickprints will be used. In their paper, Padmanabhan and Yang focus on the positive applications by noting how clickprints could mitigate identity theft and e-commerce fraud. The importance of clickprints "can be significant, given applications to electronic commerce in general and, in particular, online fraud detection, a major problem in electronic commerce costing the economy billions of dollars annually," they write.
For instance, an e-commerce company could use clickprints to recognize that a person is using a stolen credit card based on differences in browsing behavior from the card's true owner. "If who I think it is enters a different credit card, I can either ask for more information or investigate," Padmanabhan says. Of course, there is a flip side, he adds. "If you ID anonymously, it raises privacy concerns.... Using clickstream information inappropriately can pose a danger to both users and a company's reputation." The authors, however, point out that their current work mainly shows that users have unique clickprints, and stops short of exactly addressing how this can be employed in fraud detection.
Clickprints can also help customer service, the authors add. "Having a method for detection could help online merchants customize content and recommendations much earlier in a user session than they might otherwise be able to do (since they will not have to require a sign-on before implementing strategies to better serve this customer). Implemented appropriately, such customized online storefronts have been shown to increase customer satisfaction."
However, there are limitations and challenges to using clickprints to profile customers. Among the challenges outlined by Padmanabhan:
It is unclear whether clickprints can be applied on a massive scale such as 100 million unique users; effective fraud detection may require methods that work at such a scale.
Companies will have to discover unique characteristics to their customers, and sometime distinguishing characteristics may well not exist.
Online companies will have to experiment to see what specific browsing behavior(s) need to be tracked to build unique profiles.
The Privacy Conversation
While, in theory, clickprints may have promising applications, Padmanabhan acknowledges that the AOL incident could hamper further development. Internet companies and their customers will need to discuss the privacy implications and benefits of using clickprints and anonymous data to identify individual browsing patterns. Ultimately, communications, perception and expectations all play a role in the privacy debate, says Padmanabhan.
For instance, web users don't expect to be identified if they are only searching for information, he notes, which explains why the AOL leak caused such outrage. "However, if Amazon or a credit card company that can track everything you do uses clickprints, the perception is different because you expect it," he adds. "Perception is a big factor."
As is the benefit to the customer. If clickprints are used as a way to prevent fraud on an individual site, it's highly unlikely there will be an uproar over privacy, says Padmanabhan. "If you are identified in a way that will provide substantial benefits, it makes sense. If the benefit is not clear, it's a recipe for a bad reaction."
The major takeaway from Padmanabhan's finding is that "this (privacy vs. benefit) doesn't have to be a zero sum game." In other words, some profiling is good if done carefully and used for a legitimate purpose with tangible benefits.
The evolution of clickprints is likely to be an ongoing issue for content companies that mine user data but fail to communicate privacy policies or demonstrate any tangible user benefits, Padmanabhan notes. While the value of the appropriate use of clickprints is clear for e-commerce companies, content firms are going to have to figure out how to handle customer tracking. Padmanabhan suggests that communicating expectations to users is critical and that companies should have the privacy conversation in the context of his clickprint findings.
Source: Wharton
This year's Nobel science prizes have been awarded for cosmology and two sorts of genetics
WELL, the waiting is over for another year. The great and good of Sweden's Royal Academy of Science and of the country's principal medical school, the Karolinska Institute, have deliberated. The laurels have been assigned, if not yet awarded (that happens in December). And the disappointed will no longer have to cling to their telephones like politicians hoping for a ministerial posting. With much fanfare, the Nobel science prizes have been announced.
This year, the prize committees have done well. They have managed to pick winners who, if not exactly household names, have at least done work that has had some resonance in the wider world. The physics prize is for a piece of research that has enabled cosmologists to map the universe as it was before the first star formed. The physiology prize (or prize for physiology or medicine, as it is known in the citation) is for the discovery of a phenomenon called RNA interference, which helps cells fight off viral infections and is widely touted as a possible basis for a new class of drugs. The chemistry prize is for a piece of X-ray crystallography, a favourite subject of the academy's prize committees over the decades, and a way of awarding an extra physiology prize (since X-ray crystallography is used mainly to examine large biological molecules) without confessing that much of the intellectual oomph has gone out of chemistry in the century since Alfred Nobel, himself a chemist, drew up his will.
And the winners are
The physics prize went to John Mather of America's National Aeronautics and Space Administration (NASA) and George Smoot of the University of California, Berkeley. Together, they were responsible for discovering irregularities in the microwave radiation formed soon after the beginning of the universe, and which bathes the universe to this day.
The cosmic microwave background, as this radiation is known, began its journey about 300,000 years after the Big Bang in which everything started. When discovered, it appeared to be perfectly uniform. Some researchers, however, reasoned that it ought to carry imprints of the slight concentrations of matter that must have existed in the early universe if structures such as galaxiesand eventually stars and planetswere going to form. These concentrations would have acted as gravitational nuclei, drawing in gas from their surroundings and thus forming galaxies.
To test this idea, NASA built and launched a satellite called the Cosmic Background Explorer. Dr Mather ran the instrument on this satellite that looked for telltale variations in the microwave background, and Dr Smoot analysed the results, which were published in 1992. Their work, and subsequent refinements of it using a second satellite called the Wilkinson Microwave Anisotropy Probe, not only showed the ultimate roots of galaxies, it also provided evidence that the early universe underwent a sudden, massive expansion known as inflation.
Andrew Fire, of Stanford University, and Craig Mello, of the University of Massachusetts, were not the first people to notice the phenomenon now known as RNA interference, but they were the first to have an inkling about what was happening. The observation they built on, first made in plants, and then extended to animals, was that the activity of individual genes can be silenced by versions of a molecule called RNA. This substance is similar to DNA (the chemical difference is in the group of atoms employed to stand as one of the four chemical letters of the genetic alphabet). The main physical difference is that RNA's molecules usually come in single strands, unlike those of DNA, the material of the genes, which are usually double-stranded (the famous double helix).
One of RNA's jobs in the cell is to act as a messenger: RNA copies of DNA genes are translated into protein molecules in cellular structures called ribosomes. In a nutshell, what Dr Fire and Dr Mello found, in 1998, was that what silences genes is adding double-stranded versions of their RNA messengers to the mix. This stimulates the formation of what are known as RISC complexes, which carry part of the double-stranded RNA around as a reference, and destroy any RNA that matches it.
The reason, from the cell's point of view, for doing this, is that healthy animal and plant cells never make double-stranded RNA. On the other hand, many viruses do. Recognising and destroying double-stranded RNA is thus a safe way of attacking infection. Whether that insight can be turned into drugs remains to be seen. But many are trying, and billions of dollars rest on their success.
Roger Kornberg, the winner of the chemistry prize, and another member of the faculty of Stanford University, studied the process by which genes are copied into RNA in the first place. This is done by an enzyme called RNA polymerase, which binds to the DNA and runs along one of the strands of the double helix. Each time it comes to a new chemical letter on the strand it is reading, it reconfigures itself to add a complementary letter to the RNA molecule it is creating.
Dr Kornberg worked out the details by crystallising the complex of DNA, RNA and polymerase at various stages of the process. He then photographed each version of the complex with X-rays.
That process of X-ray crystallography, which calls for a lot of complex mathematics rather than the mere creation of a photographic image, was invented by two Britons, Sir William Bragg and his son Lawrence. They jointly won the Nobel prize for physics in 1915. Coincidentally, Dr Kornberg's father, Arthur, is also a Nobel laureate. He won the physiology prize in 1959 for working out the details of how DNA is synthesised. Whether such familial talent is a matter of nature or nurture will, no doubt, be the subject of a future prize.
Source : Economist
WELL, the waiting is over for another year. The great and good of Sweden's Royal Academy of Science and of the country's principal medical school, the Karolinska Institute, have deliberated. The laurels have been assigned, if not yet awarded (that happens in December). And the disappointed will no longer have to cling to their telephones like politicians hoping for a ministerial posting. With much fanfare, the Nobel science prizes have been announced.
This year, the prize committees have done well. They have managed to pick winners who, if not exactly household names, have at least done work that has had some resonance in the wider world. The physics prize is for a piece of research that has enabled cosmologists to map the universe as it was before the first star formed. The physiology prize (or prize for physiology or medicine, as it is known in the citation) is for the discovery of a phenomenon called RNA interference, which helps cells fight off viral infections and is widely touted as a possible basis for a new class of drugs. The chemistry prize is for a piece of X-ray crystallography, a favourite subject of the academy's prize committees over the decades, and a way of awarding an extra physiology prize (since X-ray crystallography is used mainly to examine large biological molecules) without confessing that much of the intellectual oomph has gone out of chemistry in the century since Alfred Nobel, himself a chemist, drew up his will.
And the winners are
The physics prize went to John Mather of America's National Aeronautics and Space Administration (NASA) and George Smoot of the University of California, Berkeley. Together, they were responsible for discovering irregularities in the microwave radiation formed soon after the beginning of the universe, and which bathes the universe to this day.
The cosmic microwave background, as this radiation is known, began its journey about 300,000 years after the Big Bang in which everything started. When discovered, it appeared to be perfectly uniform. Some researchers, however, reasoned that it ought to carry imprints of the slight concentrations of matter that must have existed in the early universe if structures such as galaxiesand eventually stars and planetswere going to form. These concentrations would have acted as gravitational nuclei, drawing in gas from their surroundings and thus forming galaxies.
To test this idea, NASA built and launched a satellite called the Cosmic Background Explorer. Dr Mather ran the instrument on this satellite that looked for telltale variations in the microwave background, and Dr Smoot analysed the results, which were published in 1992. Their work, and subsequent refinements of it using a second satellite called the Wilkinson Microwave Anisotropy Probe, not only showed the ultimate roots of galaxies, it also provided evidence that the early universe underwent a sudden, massive expansion known as inflation.
Andrew Fire, of Stanford University, and Craig Mello, of the University of Massachusetts, were not the first people to notice the phenomenon now known as RNA interference, but they were the first to have an inkling about what was happening. The observation they built on, first made in plants, and then extended to animals, was that the activity of individual genes can be silenced by versions of a molecule called RNA. This substance is similar to DNA (the chemical difference is in the group of atoms employed to stand as one of the four chemical letters of the genetic alphabet). The main physical difference is that RNA's molecules usually come in single strands, unlike those of DNA, the material of the genes, which are usually double-stranded (the famous double helix).
One of RNA's jobs in the cell is to act as a messenger: RNA copies of DNA genes are translated into protein molecules in cellular structures called ribosomes. In a nutshell, what Dr Fire and Dr Mello found, in 1998, was that what silences genes is adding double-stranded versions of their RNA messengers to the mix. This stimulates the formation of what are known as RISC complexes, which carry part of the double-stranded RNA around as a reference, and destroy any RNA that matches it.
The reason, from the cell's point of view, for doing this, is that healthy animal and plant cells never make double-stranded RNA. On the other hand, many viruses do. Recognising and destroying double-stranded RNA is thus a safe way of attacking infection. Whether that insight can be turned into drugs remains to be seen. But many are trying, and billions of dollars rest on their success.
Roger Kornberg, the winner of the chemistry prize, and another member of the faculty of Stanford University, studied the process by which genes are copied into RNA in the first place. This is done by an enzyme called RNA polymerase, which binds to the DNA and runs along one of the strands of the double helix. Each time it comes to a new chemical letter on the strand it is reading, it reconfigures itself to add a complementary letter to the RNA molecule it is creating.
Dr Kornberg worked out the details by crystallising the complex of DNA, RNA and polymerase at various stages of the process. He then photographed each version of the complex with X-rays.
That process of X-ray crystallography, which calls for a lot of complex mathematics rather than the mere creation of a photographic image, was invented by two Britons, Sir William Bragg and his son Lawrence. They jointly won the Nobel prize for physics in 1915. Coincidentally, Dr Kornberg's father, Arthur, is also a Nobel laureate. He won the physiology prize in 1959 for working out the details of how DNA is synthesised. Whether such familial talent is a matter of nature or nurture will, no doubt, be the subject of a future prize.
Source : Economist
why don't we just put the site's link
it saves both u n others a lot of pain to actually copy n paste the articles from the site.
Economist.com
best of luck
why don't we just put the site's link
it saves both u n others a lot of pain to actually copy n paste the articles from the site.
Economist.com
best of luck
Buddy !!
In that case why is there a need of even putting the site's link. Everyone is aware of Economist.com, Fortune 500, news, interviews - FORTUNE Magazine on CNNMoney.com etc etc, so they can go and read whatever they want !!! Isnt it ???
I guess u missing the purpose of this thread, its kinda ready reference of good articles and readily available to read at one place..
Do u still have any objection ??
Buddy !!
In that case why is there a need of even putting the site's link. Everyone is aware of Economist.com, Fortune 500, news, interviews - FORTUNE Magazine on CNNMoney.com etc etc, so they can go and read whatever they want !!! Isnt it ???
I guess u missing the purpose of this thread, its kinda ready reference of good articles and readily available to read at one place..
Do u still have any objection ??
No body has objection.... but i like readin the articles in the html format than the monotonous lengthy format in here, in the forum... so if u can post a link that will be nice... also we can read related articles in that... am not telling that post links as economist.com... but as The Nobel prize for economics A natural choice Economist.com
because i had to go to the site and i searched for the article there, and read it...
I guess many PGs do that...
So post the links... if so much interested, can post the article along with the link... unless u are getting and posting a paid article. What say guys?
Cheers,
Cruise.
u plzzz keep posting and keep on sharing ur resourses
CARRY ON WITH THE GOOD WORK
One Billion, Three Hundred Thousand: The New Chinese Consumer
One billion, three hundred thousand customers: It's a number that has captured the attention of every company in the world that wants to do business in China, hoping to market everything from toothpaste to financial services to luxury cars. But once multinational companies get past the excitement of imagining the opportunities offered by the world's largest consumer market -- growing richer and more status conscious with each passing year -- there is the sobering thought of figuring out how to go about unlocking the secrets to selling to all of these people. Who are they? How much money do they have? What do they want to buy? What motivates their purchases? What are the peculiarities of the Chinese consumer?
Experts at Wharton, the Boston Consulting Group and elsewhere say China's consumers are at a crossroads. They are embracing new economic ideas and habits, and devouring goods that have long been unavailable, unaffordable or forbidden. At the same time, they are part of a consumer culture and an economic system that remain quite different from those of developed countries. In broad terms, there are multiple Chinas -- the old and the new, the urban and rural, dirt-poor peasants and multimillionaires, a land of freedom and authoritarianism whose world outlook and savings and buying preferences reflect the traditions of both East and West.
A Country of Extremes
China is rapidly urbanizing but it is still a "country of extremes," says Hong Kong-based Hubert Hsu, vice president and leader of BCG's consumer goods and retail practice for the Asia Pacific region. China is home to 1.3 billion people, but only about 400 million are in urban areas. In urban areas, incomes have been growing at the same rate as GDP -- about 10% annually, adjusted for inflation -- in recent years, while incomes of rural people rise only 1% a year. Says Hsu: "It's a land of haves and have-nots."
Wharton marketing professor Z. John Zhang agrees. "The distribution of income is very uneven," he says. "There still is a tremendous difference in wealth between people in the city and the countryside.
Even within cities you find huge disparities in income. This is a phenomenon you can't lose sight of if you're selling consumer goods. You have a billion customers, but they're not all the same." If China is a country of extremes, it is also a "country of contradictions," notes Harjot Singh, ad agency BBDO's strategic planning director for China. Consumers want products that are practical and work well, but they also covet brands that convey images of success. "Functionality of products still commands a premium," he says. "Yet Chinese consumers also want products that make them unique."
"It's difficult to generalize overall about Chinese consumers," says Joseph Wan, director and vice president of BCG in Hong Kong. "Companies are only beginning to realize the differences among consumers. In terms of geographical segmentation, most companies are pretty good at understanding that consumers in the western versus eastern parts of China are different. But there are so many intricate nuances that it's almost impossible to generalize -- and things can change so rapidly."
At the same time, a strong middle class is emerging. BCG estimates that there are 25 million to 30 million middle-class households in China, compared with 8 million affluent homes. "More people are moving into the middle class every year than into the affluent class," according to Hsu. "In general, the growth in middle-class incomes has been one of the key drivers behind the growth in a lot of consumer categories: color TVs, beer, mobile phones, personal computers. These are categories that enjoy high penetration in China."
A BCG report published in December 2005 -- titled "Wealth Markets in China: Exciting Times Ahead" -- shows that wealth in China is highly concentrated. Less than one half of 1% of Chinese households holds more than 60% of the nation's personal wealth. Among these rich households, about 70% of the wealth is held by households with more than $500,000 in assets under management.
In all, 1.59 million households have $500,000 or more in assets under management, according to the report, prepared by BCG consultants Tjun Tang, Thomas Klotz and Thomas Achhorner. Some 250 million households have $100,000 to $500,000 in assets under management, and 527 million "non-wealthy" homes have less than $100,000 in assets under management.
In recent years, the richest Chinese have gotten richer -- a trend that shows no sign of abating. "There is a polarization of wealth taking place," says Tjun. "The Chinese say, 'the two poles are separating.'"
But, significantly, the report also notes that the non-wealthy households are not getting poorer. Since 1999, households with assets under management of more than $5 million have grown from a 14.3% share to a 16.6% share of China's personal wealth. During that same period, non-wealthy households have accounted for a steady 36.6% of all wealth.
"China is going through an economic boom period and that's driving a lot of consumer behavior changes," says Hsu. "And this boom has been going on for 25 years now."
Since 1980, Chinese GDP has been growing 10% a year, on average, after adjusting for inflation. Per capita income in China has grown by a factor of seven during this period, a pace greater than that enjoyed by Japan in the quarter century following World War II. Still, it is important to note that most Chinese are very poor, and even many working couples strain to make ends meet, according to Wharton management professor Marshall Meyer.
"At the top, there's a lot of wealth," says Meyer. "Folks engaged in entrepreneurial ventures, particularly ventures where they connect MNCs (multinational corporations) with the large state enterprises, have been able to make money. But the average family probably feels like the average family in the U.S. -- less well off today than a few years ago. Now, people are optimistic in China, but there's a tremendous squeeze on family budgets, and the squeeze is due to medical and education costs and the skyrocketing cost of housing. Combine these with the need for families to save for retirement. Under the one-child policy, you've got an inverted pyramid with one child supporting four grandparents, in principle. People have to sock away a lot of money for retirement. And returns on savings are extremely low in China, so people have to sock away more."
Middle-Class Growth
Nonetheless, the growth of the middle class is good news for companies selling in China. The Chinese middle class numbers 25 million to 30 million households, according to BCG. BCG defines the "middle class" as those households with an annual income of $4,300 to $8,700. "Mass affluent" households are those with incomes of $8,700 to $11,600. "Affluent" households earn at least $11,600 a year.
Middle-class Chinese are both savers and spenders. Since China's financial-services sector remains relatively primitive, and consumer credit is still virtually non-existent, consumers squirrel away money for long periods of time so that they will have enough to purchase the highest quality products and services they can afford.
Noting that the personal savings rate in China represents a whopping 50% of GDP, BCG's Hsu calls China "a culture of extremely frugal people. They've gone through hard times, starting with the Cultural Revolution in just the last generation. Most never went to university."
On the whole, Chinese have more money than ever before. But because the days of harsh poverty are not that far behind them, many middle-class consumers insist that products be practical in nature and function well, according to Hsu.
At the same time, however, people are beginning to look beyond the functionality of goods. Middle-class and affluent consumers spend much of their discretionary income on items that will help them rise in stature compared to their neighbors. "Incomes have increased so much that some people have already taken care of their basic needs," according to Wharton's Zhang. "Their aspirational level is much higher now. They're looking to consume things that are not entirely necessary. Yet the Chinese are also frugal and will reject products they see as impractical or of low quality."
Some of the most popular products among the middle class and affluent are color televisions, mobile phones and personal computers, according to BCG consultants. Providing schooling for children is also vital. "Education is always a priority, since Chinese couples can only have one child ," Zhang notes. "Parents are always concerned that they don't spend enough to give their kids a head start."
People with the means to do so also tend to spend a lot on real estate, an outgrowth of the importance that the Chinese, in what is still a largely agricultural nation, have always placed on land. It is not unusual for wealthier city dwellers to have multiple apartments or houses, Zhang says. Affluent Chinese also enjoy traveling in Asia and around the world. China has become one of the largest tourist-originating countries in the world, adds Zhang.
Eye-Opening Behavior
Hsu says a visit to a middle-class Chinese home can be an eye opener into the idiosyncratic behavior of consumers. "You see amazingly insightful things -- where consumers trade up and trade down. Actually, they do both at the same time because there are not enough dollars to go around. A couple with a child
will spend a lot on that child. If you go into homes without kids, you see that people spend their money on products that make them feel and look good or give them social status. It can be clothes, mobile phones, fragrances or skin-care products. They don't spend money on products their friends and neighbors can't see. They may not be willing to pay premium prices for brands like Windex window cleaner or Kiwi shoe polish.
"It's important for companies to segment consumers and understand where they're willing to trade up and trade down," Hsu says. "Chinese consumers are experimental. They will pay a premium price for a new brand to try it. But if it's not better, they won't buy it again."
Instead, the buyer will go back to using his or her local brand of laundry soap or dish detergent. Brands like Safeguard soap and Tide detergent are national brands, and they are so popular now that they dominate their share of the market. But many local brands exist in China, especially in less cosmopolitan
regions where many of today's city dwellers grew up. In local or regional markets these homegrown products offer consumers choices that can compete strongly with global brands.
Companies must also pay attention to how the Chinese shop. "For some items they go to the store more often but spend less, and vice versa," says BCG's Wan. "It's a very complicated picture. The rate at which they adopt certain products will also change by demographics, and they have different behaviors
across price points and brands."
By way of further explanation, Wan echoes Hsu's comments about the unpredictable, ever-changing way in which Chinese consumers trade up and trade down. This is one key difference, by and large, between Chinese and American consumers and it is the kind of behavior that can make life challenging for corporate marketers. Says Wan: "A Chinese consumer may say, 'I can trade down on my car.' He may decide that a car is no longer important, even if he is making more money than he ever has before. If he has additional savings or income, he might decide to buy better kinds of wine
and spend less on a car. He is balancing his portfolio, so to speak. This happens all the time, across demographics and incomes."
One billion, three hundred thousand customers: It's a number that has captured the attention of every company in the world that wants to do business in China, hoping to market everything from toothpaste to financial services to luxury cars. But once multinational companies get past the excitement of imagining the opportunities offered by the world's largest consumer market -- growing richer and more status conscious with each passing year -- there is the sobering thought of figuring out how to go about unlocking the secrets to selling to all of these people. Who are they? How much money do they have? What do they want to buy? What motivates their purchases? What are the peculiarities of the Chinese consumer?
Experts at Wharton, the Boston Consulting Group and elsewhere say China's consumers are at a crossroads. They are embracing new economic ideas and habits, and devouring goods that have long been unavailable, unaffordable or forbidden. At the same time, they are part of a consumer culture and an economic system that remain quite different from those of developed countries. In broad terms, there are multiple Chinas -- the old and the new, the urban and rural, dirt-poor peasants and multimillionaires, a land of freedom and authoritarianism whose world outlook and savings and buying preferences reflect the traditions of both East and West.
A Country of Extremes
China is rapidly urbanizing but it is still a "country of extremes," says Hong Kong-based Hubert Hsu, vice president and leader of BCG's consumer goods and retail practice for the Asia Pacific region. China is home to 1.3 billion people, but only about 400 million are in urban areas. In urban areas, incomes have been growing at the same rate as GDP -- about 10% annually, adjusted for inflation -- in recent years, while incomes of rural people rise only 1% a year. Says Hsu: "It's a land of haves and have-nots."
Wharton marketing professor Z. John Zhang agrees. "The distribution of income is very uneven," he says. "There still is a tremendous difference in wealth between people in the city and the countryside.
Even within cities you find huge disparities in income. This is a phenomenon you can't lose sight of if you're selling consumer goods. You have a billion customers, but they're not all the same." If China is a country of extremes, it is also a "country of contradictions," notes Harjot Singh, ad agency BBDO's strategic planning director for China. Consumers want products that are practical and work well, but they also covet brands that convey images of success. "Functionality of products still commands a premium," he says. "Yet Chinese consumers also want products that make them unique."
"It's difficult to generalize overall about Chinese consumers," says Joseph Wan, director and vice president of BCG in Hong Kong. "Companies are only beginning to realize the differences among consumers. In terms of geographical segmentation, most companies are pretty good at understanding that consumers in the western versus eastern parts of China are different. But there are so many intricate nuances that it's almost impossible to generalize -- and things can change so rapidly."
At the same time, a strong middle class is emerging. BCG estimates that there are 25 million to 30 million middle-class households in China, compared with 8 million affluent homes. "More people are moving into the middle class every year than into the affluent class," according to Hsu. "In general, the growth in middle-class incomes has been one of the key drivers behind the growth in a lot of consumer categories: color TVs, beer, mobile phones, personal computers. These are categories that enjoy high penetration in China."
A BCG report published in December 2005 -- titled "Wealth Markets in China: Exciting Times Ahead" -- shows that wealth in China is highly concentrated. Less than one half of 1% of Chinese households holds more than 60% of the nation's personal wealth. Among these rich households, about 70% of the wealth is held by households with more than $500,000 in assets under management.
In all, 1.59 million households have $500,000 or more in assets under management, according to the report, prepared by BCG consultants Tjun Tang, Thomas Klotz and Thomas Achhorner. Some 250 million households have $100,000 to $500,000 in assets under management, and 527 million "non-wealthy" homes have less than $100,000 in assets under management.
In recent years, the richest Chinese have gotten richer -- a trend that shows no sign of abating. "There is a polarization of wealth taking place," says Tjun. "The Chinese say, 'the two poles are separating.'"
But, significantly, the report also notes that the non-wealthy households are not getting poorer. Since 1999, households with assets under management of more than $5 million have grown from a 14.3% share to a 16.6% share of China's personal wealth. During that same period, non-wealthy households have accounted for a steady 36.6% of all wealth.
"China is going through an economic boom period and that's driving a lot of consumer behavior changes," says Hsu. "And this boom has been going on for 25 years now."
Since 1980, Chinese GDP has been growing 10% a year, on average, after adjusting for inflation. Per capita income in China has grown by a factor of seven during this period, a pace greater than that enjoyed by Japan in the quarter century following World War II. Still, it is important to note that most Chinese are very poor, and even many working couples strain to make ends meet, according to Wharton management professor Marshall Meyer.
"At the top, there's a lot of wealth," says Meyer. "Folks engaged in entrepreneurial ventures, particularly ventures where they connect MNCs (multinational corporations) with the large state enterprises, have been able to make money. But the average family probably feels like the average family in the U.S. -- less well off today than a few years ago. Now, people are optimistic in China, but there's a tremendous squeeze on family budgets, and the squeeze is due to medical and education costs and the skyrocketing cost of housing. Combine these with the need for families to save for retirement. Under the one-child policy, you've got an inverted pyramid with one child supporting four grandparents, in principle. People have to sock away a lot of money for retirement. And returns on savings are extremely low in China, so people have to sock away more."
Middle-Class Growth
Nonetheless, the growth of the middle class is good news for companies selling in China. The Chinese middle class numbers 25 million to 30 million households, according to BCG. BCG defines the "middle class" as those households with an annual income of $4,300 to $8,700. "Mass affluent" households are those with incomes of $8,700 to $11,600. "Affluent" households earn at least $11,600 a year.
Middle-class Chinese are both savers and spenders. Since China's financial-services sector remains relatively primitive, and consumer credit is still virtually non-existent, consumers squirrel away money for long periods of time so that they will have enough to purchase the highest quality products and services they can afford.
Noting that the personal savings rate in China represents a whopping 50% of GDP, BCG's Hsu calls China "a culture of extremely frugal people. They've gone through hard times, starting with the Cultural Revolution in just the last generation. Most never went to university."
On the whole, Chinese have more money than ever before. But because the days of harsh poverty are not that far behind them, many middle-class consumers insist that products be practical in nature and function well, according to Hsu.
At the same time, however, people are beginning to look beyond the functionality of goods. Middle-class and affluent consumers spend much of their discretionary income on items that will help them rise in stature compared to their neighbors. "Incomes have increased so much that some people have already taken care of their basic needs," according to Wharton's Zhang. "Their aspirational level is much higher now. They're looking to consume things that are not entirely necessary. Yet the Chinese are also frugal and will reject products they see as impractical or of low quality."
Some of the most popular products among the middle class and affluent are color televisions, mobile phones and personal computers, according to BCG consultants. Providing schooling for children is also vital. "Education is always a priority, since Chinese couples can only have one child ," Zhang notes. "Parents are always concerned that they don't spend enough to give their kids a head start."
People with the means to do so also tend to spend a lot on real estate, an outgrowth of the importance that the Chinese, in what is still a largely agricultural nation, have always placed on land. It is not unusual for wealthier city dwellers to have multiple apartments or houses, Zhang says. Affluent Chinese also enjoy traveling in Asia and around the world. China has become one of the largest tourist-originating countries in the world, adds Zhang.
Eye-Opening Behavior
Hsu says a visit to a middle-class Chinese home can be an eye opener into the idiosyncratic behavior of consumers. "You see amazingly insightful things -- where consumers trade up and trade down. Actually, they do both at the same time because there are not enough dollars to go around. A couple with a child
will spend a lot on that child. If you go into homes without kids, you see that people spend their money on products that make them feel and look good or give them social status. It can be clothes, mobile phones, fragrances or skin-care products. They don't spend money on products their friends and neighbors can't see. They may not be willing to pay premium prices for brands like Windex window cleaner or Kiwi shoe polish.
"It's important for companies to segment consumers and understand where they're willing to trade up and trade down," Hsu says. "Chinese consumers are experimental. They will pay a premium price for a new brand to try it. But if it's not better, they won't buy it again."
Instead, the buyer will go back to using his or her local brand of laundry soap or dish detergent. Brands like Safeguard soap and Tide detergent are national brands, and they are so popular now that they dominate their share of the market. But many local brands exist in China, especially in less cosmopolitan
regions where many of today's city dwellers grew up. In local or regional markets these homegrown products offer consumers choices that can compete strongly with global brands.
Companies must also pay attention to how the Chinese shop. "For some items they go to the store more often but spend less, and vice versa," says BCG's Wan. "It's a very complicated picture. The rate at which they adopt certain products will also change by demographics, and they have different behaviors
across price points and brands."
By way of further explanation, Wan echoes Hsu's comments about the unpredictable, ever-changing way in which Chinese consumers trade up and trade down. This is one key difference, by and large, between Chinese and American consumers and it is the kind of behavior that can make life challenging for corporate marketers. Says Wan: "A Chinese consumer may say, 'I can trade down on my car.' He may decide that a car is no longer important, even if he is making more money than he ever has before. If he has additional savings or income, he might decide to buy better kinds of wine
and spend less on a car. He is balancing his portfolio, so to speak. This happens all the time, across demographics and incomes."
Continued...
Selling to the Affluent
Some MNCs, such as Procter & Gamble, General Motors and Carrefour, have had success in penetrating China's mass market. But makers of luxury goods have yet to fully exploit China's growing affluent class.
"There is no way that luxury companies are paving the way in China in terms of penetration," according to Hsu. "Because luxury-goods companies are not doing a very good job of presenting their products in China, customers go to London or New York to spend money. In China, a lot of these companies give what I call a 'constrained offer.' If you go into a store, the amount of merchandise is a third of what you see in same store in New York or Hong Kong. Of course, luxury-goods companies are glad people are spending money in New York, but they can't target them and get information on them or send them brochures and so forth. They're missing opportunities."
Hsu estimates that there are at least one million Chinese with access to $1 million in cash. He adds that Bentley sold more cars in China than any other country in 2004.
Even though practicality still reigns when it comes to product choice among Chinese consumers, the emotional and social benefits derived from shopping, so well known to Western consumers, are growing in importance, says Singh, the strategic planning director for China for BBDO. The growth of the economy is changing "the way people look at buying brands and the way they look at themselves as people with money," he says. Even in the years immediately following the economic liberalization begun by Deng Xiaoping in 1978, people viewed money exclusively as a means of security and a "protector," giving little thought to luxury. In recent years, however, Chinese have come to see that money can be an "enabler" and that economic freedom means, in part, the "freedom to be wooed by brands."
Many Chinese citizens, especially the affluent, "have become extremely aggressive, demanding, high-maintenance consumers," explains Singh. "Instead of controlled consumption restraint and denial, there is much more affluence. There's this need to seek some form of expression by buying brands and
wearing them as a badge."
But Singh puts a different twist on the need by affluent Chinese to buy brands. Brands are important -- not necessarily because people need the esteem and want to stand out, but because they actually want to fit in with everyone else who buys brand-name goods. This has led to a form of anxiety heretofore unknown in China. "It's been called 'consumptive anxiety,'" says Singh, who defines the term as the need for people to buy products so as "not to be left behind."
Citing the work of Helmut Schutte, professor of international management at INSEAD in France, Singh notes that the "hierarchy of acceptance and belonging" is inverted in China when contrasted with the West. "The higher-order needs in China are still collective rather than individualistic. Everyone in China
wants to conform to standards in a way that gives them social acceptance. Therefore, symbols become important. People want to subscribe to success. For brands to make a dent over here, it's no longer a game about creating esteem, it's a game about creating popularity."
According to Singh, some of the most popular luxury brands in China -- not only in the largest, so-called "tier one" cities like Shanghai and Beijing, but also in tier two cities in the interior of the country are BMW, Giorgio Armani, Rolex and Louis Vuitton. "Vuitton is trying to open a least three stores a year in China," says Singh. "The number-one brand of clothing is Armani, and not just in the tier one cities."
De Beers is another popular brand. Its diamond engagement rings are big sellers, even though the concept of Western-style engagement prior to marriage does not exist in China. A De Beers ring is not a gift from a man to his fiancee; it is a symbol of love and commitment. "People understand that wearing those engagement rings gives them 'face' outside -- acceptance and validation."
Another well-known brand with an unusual image in China is Procter & Gamble's Oil of Olay. Oil of Olay, the top advertiser in China, is an aspirational brand, not a common drug-store brand as in the United States. "In the West, Oil of Olay is about telling women to love their skin," Singh notes. "Here, the ads say, 'Oil of Olay will get you a handsome husband.'"
What makes China a complex challenge for marketers is the need to position products so that they are accepted by the largest number of consumers yet are still differentiated, according to Singh. Oil of Olay does just that. "The number-one challenge in this market is to achieve consistency of brand communication, yet permit sufficient flexibility to meet specific needs of individual markets within the bigger China market. For different targets there are different products and for different products there are different tasks."
Beginning in December 2006, foreign financial services companies will enjoy some of the most exceptional business opportunities in China, and Chinese institutions will be pressed to respond to the competitive pressure. That is when the Chinese banking industry will be fully liberalized, allowing foreign institutions to serve individual customers in businesses using the renminbi.
In the report "Wealth Markets in China," the BCG authors say China represents the second largest wealth market in Asia (after Japan), with $1.44 trillion in assets being managed for wealthy people. BCG projects annual asset growth among the wealthy of 13% over the next several years, with assets under
management reaching $2.63 trillion by 2009. "BCG expects foreign banks to create some tough competition in the wealth-management market, as they enter the retail market and attempt to cherry pick the most attractive customers," the report states. "Unless Chinese banks can respond, there is a real and significant threat that many wealthy customers will be lured away by the highly evolved products and services that foreign banks can offer."
Straddling the Fence
As China's economy continues to grow, consumerism will become more prevalent. But it will not be a smooth transition from communism to capitalism. Wharton's Zhang, who was raised in poverty in China, lived much of his life under an authoritarian regime and says those days are far from completely gone.
Chinese citizens today straddle a fence dividing the old times from the new, and are never certain where freedom begins and ends.
Says Zhang: "When I was a boy, was a totally different world. Everybody grew up wearing exactly the same clothes and doing the same things. Now there is more wealth in the country and aspiration is high."
"The country is moving very fast," he adds. "Never in my dreams could I imagine that a country this big with this many people could move so fast. It's astonishing to me, and probably astonishing to most people in the world."
Source:Wharton
Selling to the Affluent
Some MNCs, such as Procter & Gamble, General Motors and Carrefour, have had success in penetrating China's mass market. But makers of luxury goods have yet to fully exploit China's growing affluent class.
"There is no way that luxury companies are paving the way in China in terms of penetration," according to Hsu. "Because luxury-goods companies are not doing a very good job of presenting their products in China, customers go to London or New York to spend money. In China, a lot of these companies give what I call a 'constrained offer.' If you go into a store, the amount of merchandise is a third of what you see in same store in New York or Hong Kong. Of course, luxury-goods companies are glad people are spending money in New York, but they can't target them and get information on them or send them brochures and so forth. They're missing opportunities."
Hsu estimates that there are at least one million Chinese with access to $1 million in cash. He adds that Bentley sold more cars in China than any other country in 2004.
Even though practicality still reigns when it comes to product choice among Chinese consumers, the emotional and social benefits derived from shopping, so well known to Western consumers, are growing in importance, says Singh, the strategic planning director for China for BBDO. The growth of the economy is changing "the way people look at buying brands and the way they look at themselves as people with money," he says. Even in the years immediately following the economic liberalization begun by Deng Xiaoping in 1978, people viewed money exclusively as a means of security and a "protector," giving little thought to luxury. In recent years, however, Chinese have come to see that money can be an "enabler" and that economic freedom means, in part, the "freedom to be wooed by brands."
Many Chinese citizens, especially the affluent, "have become extremely aggressive, demanding, high-maintenance consumers," explains Singh. "Instead of controlled consumption restraint and denial, there is much more affluence. There's this need to seek some form of expression by buying brands and
wearing them as a badge."
But Singh puts a different twist on the need by affluent Chinese to buy brands. Brands are important -- not necessarily because people need the esteem and want to stand out, but because they actually want to fit in with everyone else who buys brand-name goods. This has led to a form of anxiety heretofore unknown in China. "It's been called 'consumptive anxiety,'" says Singh, who defines the term as the need for people to buy products so as "not to be left behind."
Citing the work of Helmut Schutte, professor of international management at INSEAD in France, Singh notes that the "hierarchy of acceptance and belonging" is inverted in China when contrasted with the West. "The higher-order needs in China are still collective rather than individualistic. Everyone in China
wants to conform to standards in a way that gives them social acceptance. Therefore, symbols become important. People want to subscribe to success. For brands to make a dent over here, it's no longer a game about creating esteem, it's a game about creating popularity."
According to Singh, some of the most popular luxury brands in China -- not only in the largest, so-called "tier one" cities like Shanghai and Beijing, but also in tier two cities in the interior of the country are BMW, Giorgio Armani, Rolex and Louis Vuitton. "Vuitton is trying to open a least three stores a year in China," says Singh. "The number-one brand of clothing is Armani, and not just in the tier one cities."
De Beers is another popular brand. Its diamond engagement rings are big sellers, even though the concept of Western-style engagement prior to marriage does not exist in China. A De Beers ring is not a gift from a man to his fiancee; it is a symbol of love and commitment. "People understand that wearing those engagement rings gives them 'face' outside -- acceptance and validation."
Another well-known brand with an unusual image in China is Procter & Gamble's Oil of Olay. Oil of Olay, the top advertiser in China, is an aspirational brand, not a common drug-store brand as in the United States. "In the West, Oil of Olay is about telling women to love their skin," Singh notes. "Here, the ads say, 'Oil of Olay will get you a handsome husband.'"
What makes China a complex challenge for marketers is the need to position products so that they are accepted by the largest number of consumers yet are still differentiated, according to Singh. Oil of Olay does just that. "The number-one challenge in this market is to achieve consistency of brand communication, yet permit sufficient flexibility to meet specific needs of individual markets within the bigger China market. For different targets there are different products and for different products there are different tasks."
Beginning in December 2006, foreign financial services companies will enjoy some of the most exceptional business opportunities in China, and Chinese institutions will be pressed to respond to the competitive pressure. That is when the Chinese banking industry will be fully liberalized, allowing foreign institutions to serve individual customers in businesses using the renminbi.
In the report "Wealth Markets in China," the BCG authors say China represents the second largest wealth market in Asia (after Japan), with $1.44 trillion in assets being managed for wealthy people. BCG projects annual asset growth among the wealthy of 13% over the next several years, with assets under
management reaching $2.63 trillion by 2009. "BCG expects foreign banks to create some tough competition in the wealth-management market, as they enter the retail market and attempt to cherry pick the most attractive customers," the report states. "Unless Chinese banks can respond, there is a real and significant threat that many wealthy customers will be lured away by the highly evolved products and services that foreign banks can offer."
Straddling the Fence
As China's economy continues to grow, consumerism will become more prevalent. But it will not be a smooth transition from communism to capitalism. Wharton's Zhang, who was raised in poverty in China, lived much of his life under an authoritarian regime and says those days are far from completely gone.
Chinese citizens today straddle a fence dividing the old times from the new, and are never certain where freedom begins and ends.
Says Zhang: "When I was a boy, was a totally different world. Everybody grew up wearing exactly the same clothes and doing the same things. Now there is more wealth in the country and aspiration is high."
"The country is moving very fast," he adds. "Never in my dreams could I imagine that a country this big with this many people could move so fast. It's astonishing to me, and probably astonishing to most people in the world."
Source:Wharton
hard to believe......one of the best thread i hv ever seen!!!:shocked:
kudos to moderater>>>>>>>
but we have to carry it forward,so i want to come with ideaz of newly budget 2010 to be presented by our hon'ble finance minister pranab mukherjee......
on 26th of this feb......(2010)
so friend gear all for this,and start disscusing on new terminology to be introduced in this budget!!!!!
which may be{GST tax,LESS Subsidy on fertilizer,service tax return to 12.5%} and much more.......
:clap:but till then keep a look at a nice informative blog http://btech-mba.blogspot.com/
Hi all,
Hope this is the right place to shoot my doubts at. If not, please let me know.
Anyone please help me.
1) Where can I get the very basic info relating to Forex reserves, EXIM policies, GDP ?
2) What does MATURITY mean when we speak about loans ?