So squeezed they stopped squeaking to each other

22 Feb

Oft-lamented short-term pressures drive the search for ‘asset efficiencies’.   With the benefit of hindsight, the making of unforeseen consequences seems to be rooted in a disregard for fairly obvious but difficult-to-measure policy impacts.

In corporate careers, management brownie points seem often to be awarded for displays of macho discipline encouraged by ‘perverse incentives’. Whatever the motivations, it is surely a matter of good governance that that short-term wreckers are not allowed to destroy values that underpin future sustainability.

Question Marks And Man Showing Confusion Or Unsure

But still it happens. Whatever presentational flavor of austerity or efficiency or asset utilization is used to justify the squeeze, the consequences are inherited by the next generation – or at least the next elected set of policy makers.

Or is that really so?

A recent article in The Economist takes issue with the conventional theories around short-termism.  A McKinsey study had argued that 73% of firms were short-termist and the ‘elite’ 27% actually performed better. However, the Schumpeter columnist begged to differ; questioning the evidence and doubting both the causality and relevance of labelling firms as short-term or long-term actors in our very dynamic market environments.

The Economist writer does, however, point out that many big firms ‘wallow in lucrative stagnation’ where profits are high but investment seems not to be boosted by the currently low cost of capital. Rather than label them short-termist and urging them to invest, the real need is for more rigorous competition policy to target ‘fat’ incumbents and boost new market entrants.

Such competition policy rigour might not be immediately popular amongst the self-regarded leaders but it is evident, in one sector at least, that this strand of policy imagination has already taken root. Hence the Chancellor’s autumn statement to inject funding into new entrants deploying ‘full fibre’ networks and also the recent indications coming from Ofcom of an urgent need to deliver ‘at scale’ the sort of infrastructure required to sustain a post-Brexit economy and enable (beyond 2020) an entirely future-proof collaborative architecture to support 5G Mobile.

So despite the common interpretations of austerity, efficiency, cuts, the general woe around short-term follies, narrowband thinking, or ‘squeezing until the pips squeak’, the more mature lesson seems to have been learned that those who are ‘too big to fail’ probably should.

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One Response to “So squeezed they stopped squeaking to each other”

  1. walterwillcox February 22, 2017 at 12:44 pm #

    VERY well said ! There is, thankfully, the beginnings of realisation by Public Servants that they’d better grasp precisely how taxpayers’ cash is being utilised.

    After our independent Grant-approved Ewhurst Broadband project was destroyed in 2011 one of our parish councillors gave me a stern lecture, if not a severe reprimand, that I would never “get rid” of the BT Group. I had no wish to do so in any case; but we all now see the serious shortcomings of the substituted “SuperFARCE”.

    More generally, I wonder how many of “our” public servants have yet to grasp that all** the domestic shared asymmetric fibre deployed by the Incumbent must be replaced entirely if they are to retain any medium-term share of that market so they can compete with the Altnets who are already deploying diverse-routed true Point-to-Point symmetric FTTPremises ?

    ** If not all, at least that fibre provided under public subsidy.

    A similar situation might already be unfolding for the Virgin Media empire who could well embarrass themselves if they too don’t deploy true P2P everywhere.

    Gone are the days of near monopolies charging eye-watering amounts for symmetric “Private Fibre” when their new competitors eagerly deliver sustainable, expandable and fully future-proofed infrastructure from day one.

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