May 16, 2014

Perils of prediction: telephone industry

Regarding Nicholas Wade's speculations on future economic developments by regions of the world, I recall that when I was young, the United States had an expensive and inflexible but relatively terrific national telephone system. Before its antitrust breakup in 1984, the Bell System was a regulated monopoly that provided unstylish but high quality analog telephone service (sound quality was so good that teenagers were notorious for spending hours on the phone), from installation of landlines to long distance to Bell Labs, where Claude Shannon invented information theory and Arno Penzias and Robert Wilson stumbled upon the origin of the universe.

Only a few other cultures, mostly in Northwestern Europe could rival the quality, reliability, and convenience of American telephony. Getting a phone hooked up after moving in, say, Rome or Moscow was a bureaucratic nightmare, much less in Cairo. In Mogadishu? Don't ask.

Now, we could speculate about whether this grand achievement of American technology and, especially, organization was a matter of nature or nurture, but my point is that this is a case in which the past didn't predict the future well, at least regarding phones. The introduction of cell phones over the last 30 years has been a godsend for low trust cultures. They simply don't require the organizational coordination of the old landline technology.

Most famously, the cell phone industry flourished in Somalia even when there was no government. A typical Somali cell phone company would have 500 regular employees (salesmen, technicians, and managers) plus its own private army of 300 AK-47 wielding warriors. Now, that's a lot of overhead, but it's a price Somalis were willing to pay for cellphone service. 

So a prediction from the past about the economic future of telephone industry in Somalia would have gone askew because it pays to develop new technological workarounds for regional deficiencies. 

On the other hand, it's still more pleasant in general to live in the kind of place that could run an old-style landline phone service, like Minneapolis, than to live in Mogadishu, as attested to by the number of Somalis shivering in Minnesota.
      

19 comments:

Pseudoerasmus said...

Good post. I made a similar, though much more boringly expressed, thought buried in other nonsense, here.

Daniel said...

"The introduction of cell phones over the last 30 years has been a godsend for low trust cultures."

The introduction of cell phones has also been a godsend for low trust rulers, vis the NSA.

Anonymous said...

"A typical Somali cell phone company would have 500 regular employees (salesmen, technicians, and managers) plus its own private army of 300 AK-47 wielding warriors".

I must have been about 6 years old playing with plastic toy soldiers one day when I got bored with the usual matchups (Americans vs. Germans, Japanese, Russians, Vietnamese, etc.). Grasping for the wildest, most unusual combination I could think of, I dedided they were fighting a war between... two different phone companies. Yeah, that seemed far-fetched enough to be interesting. Apparently, it wasn't as far-fetched as I thought.

el supremo said...

The rise of mobile phone based banking in Africa is a similar phenomenon. The newly widespread mobile network in Africa has been the foundation for various mobile banking, pay by phone, and other crude banking forms bolted onto a cell phone payments and network system.

All of this is hailed in the media as "innovation", but the unasked question is that if every backwoods county seat in 1830s America had a number of actual physical banks with much less technology, why did African cities have to wait for mobile phones to have mass retail banking?

(Widespread retail banking and check payments was common in 18th century China and Japan as well in an even less favorable technological and regulatory environment than antebellum America)

How much of 3rd world growth is really just application of Western technology and cheap Chinese goods to provide duck-tape solutions to problems that the local society couldn't manage to solve in the proper way?

Anonymous said...

Don't forget that Bell Labs also came up with Unix, which begot Linux, which is the driving force of the Open Source movement, a shining beacon of reciprocal altruism if there ever was one.

Anonymous said...

All of this is hailed in the media as "innovation", but the unasked question is that if every backwoods county seat in 1830s America had a number of actual physical banks with much less technology, why did African cities have to wait for mobile phones to have mass retail banking?

True, and all these band-aid "innovations" make it less and less likely that the underlying problems will ever get solved; there remains no incentive to do so. And a few people laugh their way to the banks.

countenance said...

Any idiot can use a smartphone.

Lots of black people use smartphones.

It's quite a leap from using a smartphone to writing source code for Android, or trying to cram all the hardware specs that modern smartphone users demand into a fit-in-your-hand light thin device.

Whiskey said...

You have to ask yourself, which societies are resilient to outside shocks. The US, Chile, Japan, China, Italy, have all recovered from fairly massive earthquakes. The motto in the 1925 Tokyo earthquake was "steel stood" which referred to the modern, skyscraper buildings intact with a steel frame skeleton when nearly every other building was totaled. The San Francisco 1905 quake, the 1988 Loma Prieta quake, the recent massive quakes in Fukushima and Chile, all created massive damage as have many Chinese quakes but recovery was rapid, as it was with Kobe. That does not mean that people, lots of people, did not die but it does mean that the local population was able to rebuild, often better than before, rapidly.

Africa? Not able to recover. Nor is Africa robust against drought, plagues, wars, tsunamis, or any other disaster natural or man made, and be assured they will come. African society is basically, yes as posted above a band aid of western technology and cheap Chinese goods plus investment to keep things running, while Chinese (and French) companies extract massive resources.

Reading the FT, major mining firms like Anglo-American, Glencore/Xstrata, etc. are abandoning Africa because the turmoil and payoffs are too much as the commodities super-cycle winds down and China consumes less raw materials. This is already hammering South Africa which is basically one riot short of a total White purge and extermination, as their coal and other exports to China are dropping rapidly.

Oddly enough the mining companies are looking to Canada, the US, Chile, and a few other mostly first world nations with few people but capital investment to bring new capacity online, though such investment is contingent on prices picking up. Canada in particular seems an acquisition hotspot.

Anonymous said...

Don't forget that Bell Labs also came up with Unix, which begot Linux, which is the driving force of the Open Source movement, a shining beacon of reciprocal altruism if there ever was one.

With one flavor called Ubuntu so white folks can pretend we are all in together with Africans.

Anonymous said...

I remember as a kid back in the London of the 1970s that most of my friends did not have a land-line telephone installed in their houses. It was common to see lines forming outside public telephone boxes. I also well remember that there was a long 'waiting-list' for any wishing to get a home telephone installed from the former GPO - the waiting time, if I recall correctly, was measured in years rather than months.
This was all in relatively 'recent' times. No older than the 'Tomorrow People' being broadcast on Thames TV at 5:00pm Tuesday afternoons.

dearieme said...

There was a spell when one backward feature of US telephony astonished visiting Europeans. In an era when you could pick up your phone in London and dial direct to Edinburgh or Amsterdam or wherever, in the US long distance phone calls were a primitive business. This contrasted with the wonders of free local calls in the US.

Richard Brown said...

Anon,
I would say about 50% of workkng-class homes in London had a land-line by the mid 70s.
I am only basing this on my own family but there was, and is, a lot of us.








Anonymous said...

The US couldn't even recreate a land line system from scratch today.

It would be decades before environmental permits would be issued. And all those unsightly telephone poles.

The Bell System was incredibly innovative in its early days in political and financial realms.

This is a good article on Theodore Vail's management of the Bell System .. http://www.beatriceco.com/bti/porticus/bell/bellsystem_history.html

ATT or T was the first common stock that was considered conservative enough for widows and orphans.

Bell was fighting for a 'natural monopoly' in an era of antitrust.

The point of this, besides the interesting history, is that Bell was run like a purely private firm, including customer satisfaction, PR, continuous improvement, &c.

I am not aware of the development of national phone systems globally other than the fact that they tended to be nationalized and also has incomprehensible delays in establishing service. I double if any other country guaranteed new service within a week ... towards the end, it was 3 days maximum.

People's shock at the bad service of cable TV services was, to some extent, caused but the inevitable comparison with Telephone service. If Larry the Cable Guy worked at Bell beforehand, I never heard of it.

I am not surprised that Bell couldn't be copied by most other nations, and am not in the least upset with work arounds.

And even then, at least one (if not all) third world implementation of wireless phone service fail to guarantee the various carrier's systems link together. It isn't like they aren't legally required to .. it is that it simply doesn't work. And in those countries, some people need to own multiple phones to have universal service.

business is good said...

Just wait till Zuckerberg gets his wi-fi balloons/zeppelins online, so that goatherds in the Himalayas can watch Hollywood's latest blockbusters free off pirate streams. Then Facebook can coordinate the 2018 Save Kashmir From Starvation campaign

Dilbert said...

I think we still had our own regional challenges (if not necessarily at the Mogadishu level). There was an old essay that appeared in the Weekly Standard probably 2 decades back, "The Idiocy of Rural Telephony" by by Richard Starr; he wrote about the quality of service where he'd grown up in West Virginia(?)-- at that stage the town only had a "party line" so everyone on the street could listen to everyone else with or without permission. I was reflecting on that during the recent Snowden NSA contretemps.

Anonymous said...

With one flavor called Ubuntu so white folks can pretend we are all in together with Africans.

Programmers calling things by made-up Lion King names, or gibberish seemingly cribbed from a recent Afrika Center open house at the campus, is a curious fad dating back to the early 90s at least, when Diversity Inc. was still figuring out the whole computer biz phenomenon. For a brand/meme to be successful it must possess some deeper resonance in the cultural psyche, like the Quaker Oats guy or Mr. Clean-- but again, that's why they're programmers and not advertising execs...

Anonymous said...

Don't forget that Bell Labs also came up with Unix, which begot Linux, which is the driving force of the Open Source movement, a shining beacon of reciprocal altruism if there ever was one

Like saying St. Cyril came up with the alphabet that gave us "War and Peace," and also Jay Carney's living room decor.

Anonymous said...

Furthermore, in my particular district of London, back in the 1970s, a very hefty proportion of families did not even have a bath-tub or shower installed in their house/flat.
Most of the housing stock around those parts was built pre 1910, and back in the day, a bath-tub was regarded as an luxurious frippery.
Belive it or not, the now up-market district of Fulham, ('Chelsea south'), was the district of London with most households lacking a bath-tub/shower.

stari_momak said...

Doesn't the creation of a cell tower network require just about as much 'social trust'?

Indeed, what prevents factions in Somalia from taking out strategic towers?