Generation 40s – 四十世代

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Hong Kong has been left behind in China’s digital revolution

South China Morning Post
CommentInsight & Opinion

William Zheng

William Zheng says it’s time to admit the city is now lagging behind the mainland following the digital leap forward across the border. Hong Kong can catch up by seizing opportunities for both business and investment

Urban planning and social engineering have given Hongkongers and Singaporeans a modern lifestyle admired by many, including mainland Chinese. But after the great digital leap forward on the mainland over the past decade, this may no longer be the case.

My recent visit to Hangzhou (杭州) was eye-opening. At dinner at a restaurant, my companions and I were shown a QR code instead of a menu. We scanned the code and the system connected us to the restaurant’s WeChat mini app, where all guests could see one another’s order and add or delete items easily. For payment, Alipay or WeChat Pay was preferred to “troublesome” cash.

Over the next few days, my renminbi notes remained untouched in my pocket. Everywhere I went, I used Didi Dache or Uber for transport. Store owners, including those selling roasted sweet potatoes on trishaws, were happy to accept mobile payments, even for amounts below 1 yuan (HK$1.10).

While many Hongkongers use their Octopus cards for payment, chat with friends on WhatsApp and share their lives on Facebook and Twitter, mainland city dwellers are paying their bills through Alipay, talking on WeChat and sharing their lives on Weibo. The mainland’s great firewall has created an interesting digital divide across the Shenzhen River.

Nevertheless, censorship and tight internet controls have done little to dampen the spirit of start-ups on the mainland. Attend any start-up pitching session in Shenzhen and you will be amazed by the speed of learning, the passion and the ambition of young technopreneurs who dream big. And you will be impressed by the huge risk appetite and deep pockets of Chinese tech investors.

Projects abound in areas such as e-commerce, online payments, the sharing economy, artificial intelligence and virtual reality. Although some industries have fallen victim to the bullet-train speed of the Chinese internet economy, leading to empty malls, the efficiency and convenience brought to Chinese consumers is phenomenal.

Hong Kong, once the most modern city in China, has fallen behind. Many rightly point out that our education system is not promoting creativity, costs are too high for start-ups, and society’s tolerance of failure too low.

Furthermore, the ability to change in scale is a key factor in an internet economy, and many innovators in Hong Kong, who are not familiar with the environment and user habits on the mainland, find it hard to grow. Chinese technopreneurs, meanwhile, can easily replicate their services to over 660 Chinese cities, serving 700 million users.

Hong Kong could still benefit from the Chinese digital leap forward. Hong Kong merchants should work on WeChat and Weibo more and incorporate them into their marketing and mainland development strategies. If Hong Kong retailers could learn to use Alipay and WeChat Pay to serve mainland tourists, they would have fewer cash management problems.

The city could also learn to invest in the field. The city’s tycoons, who made their wealth in more traditional industries, should review their risk appetite and attend the pitching sessions in Silicon Valley, Shenzhen or Shanghai, listen well, and invest cleverly.

Hongkongers should ask themselves: do we want to admit that the mainland has overtaken us in internet development? And, how do we move out of our comfort zone and integrate into the fastest-growing part of the Chinese economy?

William Zheng is a veteran journalist who has served and led major Singapore and Hong Kong media organisations in his 20-year career

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Crackdown on tax havens is just another way to ensure citizens can’t escape the clutches of big data

South China Morning Post
Comment›Insight & Opinion

Niall Ferguson

Niall Ferguson says the trend of government and business tracking our every move – in some cases, in an attempt to deter crime – exposes us to another kind of danger, that of surveillance

In Notes from Underground, Dostoevsky fired a broadside against all the Victorian do-gooders who dreamt of a perfectly rational society. “You seem certain that man himself will give up erring of his own free will,” he fulminated. He foresaw a ghastly future in which “all human acts will be listed in something like logarithm tables … and transferred to a timetable … [that] will carry detailed calculations and exact forecasts of everything to come”. In such a world, his utilitarian contemporaries believed, there would be no wrongdoing. It would have been planned, legislated and regulated out of existence.

We are nearly there. Or so it seems.

Yes, I know. Corruption is impure. Crime is a felony. And illegal immigration is against the law. Altogether: Sin is wicked! So I should have cheered British Prime Minister David Cameron’s international anti-corruption summit last week. I should be a paid-up supporter of the campaign to close down tax havens. I should be glad to see the back of 500-euro bills. And I should feel a thrill of patriotic pride when I hear Boris Johnson pledge to regain control of Britain’s borders.

And yet every one of these steps towards a more perfect world makes me feel Dostoevsky’s disquiet.

Now, I do not condone corruption, tax evasion, organised crime or unregulated migration. Nevertheless, I am deeply suspicious of the concerted effort to address all these problems in ways that markedly increase the power of states – and not just any states but specifically the world’s big states – at the expense of both small states and the individual. What makes me especially wary is that today, unlike in Dostoevsky’s time, the technology exists to give those big states, along with a few private companies, just the kind of control he dreaded.

Consider some of the most recent encroachments on liberty. The British government announced it will set up a publicly accessible register of beneficial owners (the individuals behind shell companies). In addition, offshore shell companies and other foreign entities that buy or own British property will henceforth be obliged to declare their owners in the new register. No doubt these measures will flush out or deter some villains. But there are perfectly legitimate reasons for a foreign national to want to own a property in Britain without having his or her name made public. Suppose you were an apostate from Islam threatened with death by jihadists, for example.

Or consider the phasing out of the 500-euro bill, fondly known in the underworld as the “bin Laden”. I have little doubt that when someone elects to transfer one million dollars by putting the equivalent in “bin Ladens” into a small bag and handing it to someone else, both parties are up to no good. Yet getting rid of bin Ladens is the thin end of a monetary wedge.

Economist Ken Rogoff is one of a number of economists who want to get rid of banknotes altogether. They argue cash is an anachronism, heavily used in the black and grey economy, and easily replaced in an age of credit cards and electronic payments. But their motive is not just to shut down the mafia. It is also to increase the power of government. Without cash, no payment can be made without being recorded and potentially coming under official scrutiny. Without cash, central banks can much more easily impose negative interest rates, without fearing that bank customers may withdraw their money.

The state wants data. What you earn. What you spend. Where you are. But what the state knows is just a fraction of what Facebook knows about you. The reason Mark Zuckerberg is a billionaire is that, as you blithely share your likes and dislikes with family and friends, you tell Facebook almost everything there is to know about you. Advertisers will pay Facebook vast sums for that information. But do you really think advertisers are the only people who want Facebook’s data? (Fact: it was one of the internet companies named as collaborators in the US National Security Agency’s leaked Prism surveillance programme.)

We thought it was Big Brother we had to worry about. It turned out to be Big Data.

Niall Ferguson is Laurence A Tisch professor of history at Harvard and a senior fellow of the Hoover Institution, Stanford

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From VW to HSBC, there’s a simple reason why so many CEOs fail to spot rogue behaviour

South China Morning Post

Stephen Vines

Information overload is making us oblivious to what’s often in plain sight

In the wake of practically every corporate or political crisis two questions are asked: First, was the person at the top aware of the problem and second, if so, what did they do about it?

The person at the top is key because there was a time when the “buck stops here” principal was thought to prevail. In other words someone was prepared to assume ultimate responsibility.

Nowadays the great panjandrums who run the world’s biggest companies get visibly agitated when asked to explain why things occurred on their watch. A case in point was the response of Stuart Gulliver, HSBC’s chief, when he was hauled before a British parliamentary committee looking into the banking crisis. Gulliver argued that he could not be held responsible for everything that went on in his bank: “Can I know what everyone of 257,000 people is doing?” he asked, concluding, “Cleary I can’t”.

More specifically questions were asked about whether Martin Winterkorn, the former Chief Executive of Volkswagen, was aware of an email dated May 24 2014, that specified “irregularities” with US emissions tests for two VW diesel vehicles. This memo was part of what VW described as Winterkorn’s “extensive weekend email”; one of the reasons proffered for why he may have overlooked it. Other internal documents, that subsequently came to light, suggest that VW went to some efforts to cover its tracks as the vehicle testing scandal mushroomed.

Responsibility is being dodged because those at the top insist they are suffering from information overload. This affects everyone, as the days are long gone when information distribution was more restricted and far lower in volume, consisting mainly of phone calls, possibly faxes and telegrams and big piles of documents. We are now bombarded by emails and other electronic messaging which, in theory, is more convenient and efficient but in practise may be producing a volume of information that is too vast to absorb.

There is a thin line between what those at the top need to know and what they are capable of knowing. However and understandably those at the top rarely get the benefit of the doubt when the brown stuff hits the fan and questions are asked about why nothing was done on the basis of previous information.

Why, for example did the Belgium authorities seemingly ignore specific warnings from Turkey about the terrorists responsible for the recent Brussels airport and subway atrocities? Did US President George W Bush read the 2001 security briefing warning about Osama Bin Laden’s determination to launch a direct attack on the American homeland, an attack realised in the 9/11 events?

It is always easier with hindsight to pontificate on what should or should not have been done. But, in this case, for example, was the Central Intelligence Agency warning sufficiently specific to provide a basis for action?

And what happens when more junior officials deliberately withhold information from their bosses? Tidjane Thiam, the relatively new broom at the top of Credit Suisse, says that staff in his bank’s market’s division deliberately withheld information about risky bets. No doubt his anger is genuine but there are questions to be asked about whether more probing questions should have been asked by the bank.

In almost all instances of vital information not being acted on in a timely fashion there is evidence that the information was sitting there waiting to be read but either as a result of incompetence, arrogance or straightforward neglect that information lay dormant.

The excuse of information overload is plausible but it seems to be part of that dreaded syndrome where people complain of being too busy to do this or that. The reality is not that they are busy but incapable of organising and prioritising their work. It may be a bit of a cliché but, in my experience, it sure as hell is the case that if you want to get something done, ask a genuinely busy person to do it.

There are many excuses for ignoring information or failing to take account of it but most of them come down to poor organisation. Just because we all suffer from information overload does not mean throwing up your hands and declaring, “I give up”.

On the contrary this proliferation of information is useful but will only be valuable to those who succeed in sorting out their priorities.

Sometimes there are good reasons why the person at the top is not informed of some vital matter but the health of all organisations rests on the idea that the buck stops somewhere. Life is not fair, so there will inevitably be a degree of unfairness when bosses are compelled to fall on their swords for events beyond their control. Yet fall they must because information overload is no excuse for ducking responsibility.

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ATV’s collapse exposes Hong Kong-China cultural divide of the type that breeds localism

South China Morning Post
Comment›Insight & Opinion

Yonden Lhatoo

Yonden Lhatoo says mainland investors drove the city’s oldest television station into the ground because of management styles that just don’t work on this side of the border

I thought I’d seen it all until I visited ATV’s headquarters in Tai Po last Friday, expecting court-appointed liquidators to shut down the cash-strapped station where I got my break in broadcast journalism many years ago.

I wanted to extend some moral support to the last of my former comrades-in-arms still there, but soon found myself in the middle of the media circus parked outside the building. We were all ushered inside for a press conference by representatives of Si Rongbin (司榮彬), the mainland investor trying to keep the station on air until April 1, when its much-abused free-to-air licence finally expires.

We watched, incredulous, as Jan He, Si’s point woman at ATV, put on a bizarre show for the media featuring a cheque and a briefcase full of cash – HK$10 million in all, if she was telling the truth – that were brought out on stage.

I had to pick my jaw off the floor when she calmly announced that the money was not for settling outstanding wages owed to staff for January and February, but would instead be offered to those willing to sign a new contract only for March so the station wouldn’t have to close down early.

This from the same woman who, in early February, sparked a mass walkout when she informed unpaid staff they would have to work for a third month without getting a cent, and that their salaries were not as important as the survival of the station. She had the temerity to say this to a bunch of long-suffering employees who were counting on the new investor she represented to keep his promise to pump billions of dollars into the ailing company.

They had already endured months of late payments and uncertainty under the previous mainland investor, Wong Ching, the man who precipitated the collapse of the world’s first Chinese-language television station.

Now that’s a name that has become synonymous with public hate and ridicule in this town. The previously obscure businessman came onto the scene six years ago with lofty promises of turning ATV into “Asia’s CNN”, only to plunge the company into one crisis after another. He finally ended up selling his controlling stake to Si and then going to court to have the company liquidated – remaining staff be damned – to recoup his losses.

No one will forget how he orchestrated what was arguably the most cringeworthy moment in Hong Kong’s broadcasting history with his knock-kneed version of Korean rapper Psy’s Gangnam Style dance outside government headquarters to protest against the opening up of the city’s television market to competition.

When you look at what happened at ATV, it’s not hard to imagine how this sort of thing feeds into the bias and suspicion among Hongkongers regarding the mainland. I don’t for a moment condone those reprehensible protests against mainland visitors featuring racist abuse and even violence, but I’m beginning to understand why “localism” is not a dirty word any more.

I suppose that’s why we have prominent pro-establishment figures coming out openly these days to defend those who are getting increasingly assertive about Hong Kong’s distinct identity and culture, even though it’s an inalienable part of China.

Of course, there are far better mainland employers running successful businesses in Hong Kong who could show people like Wong and Si that their obtuse management styles might make sense across the border but just won’t work here.

The death of ATV is a quid pro quo lesson for those from the other side to understand and appreciate Hong Kong’s way of life.

Integration is a two-way street.

Yonden Lhatoo is a senior editor at the Post

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With companies in Asia easy targets for cyberattacks, they must get their responses right when security is breached

South China Morning Post
Comment›Insight & Opinion

Charles Lankester

Charles Lankester says the attack on Hong Kong toy company VTech should be a reminder to corporations that planning ahead and investing in cybersecurity are vital to build trust

It has been a tough few weeks for Hong Kong-listed educational toy maker VTech. Five million customer details were hacked last November through the company’s Learning Lodge app. The attack included the theft of thousands of photos of children. So far, so bad. But cyberbreaches happen all the time and there seems to be a growing resignation to this fact.

What made the VTech situation different? After the breach, the company changed its terms and conditions of use last December, shifting data theft liability away from the company and onto its customers.

In fairness to VTech, they made a call and I respect them for that. Nothing online can be 100 per cent secure. But, looking at the global social media storm that arose in response to their approach, I believe their decision will have implications beyond a few nasty headlines.

There are two questions about cyber risk that every management team must be able to answer in 2016. First, did they do everything they could to prevent the cyberattack they are experiencing? And, second, do they have the resources to fix it fast?

Cyber risk is insidiously becoming one of the greatest corporate vulnerabilities out there. It is an existential threat going to the heart of trust in business through the theft of customers’ personal data, money, or both.

As you are reading this, your company is likely to be under attack. Whether you know it or not. Cyberbreaches tend not to be of the “smash, grab, alarm bells ringing” type. Instead, they often take place stealthily, over long periods of time, with the attacked company being unaware of a breach. That is until it’s too late and the international news media is on the phone.

Corporates in Asia are targeted 40 per cent more than the global average, according to FireEye Inc, a cybersecurity specialist. Law firm DLA Piper estimates that Asian institutions are twice as likely to be targeted. A recent Bloomberg article noted that corporations and governments in the Asia-Pacific region are easier targets because they “invest less in security and share less with regulators and other countries when victimised”. Looking ahead, I’d suggest three priorities for any management team considering cyber risk in 2016.

First, have a game plan. It is vital that a company has prepared for these kinds of incidents and does not “learn by doing”. There should be the means to quickly answer questions such as, a) are you still under attack, b) are you subject to any ransom demands and, c) what actions should your customers (and partners) be taking now? There will also be great interest in the company’s preparedness. It should be ready to answer questions regarding its preparation for an attack and whether it is (or has been) working with cybersecurity experts to contain and investigate the breach.

[VTech chairman and group CEO Allan Wong highlights some of the company’s products at the Mandarin Oriental hotel in 2012. Photo: David Wong] VTech chairman and group CEO Allan Wong highlights some of the company’s products at the Mandarin Oriental hotel in 2012. Photo: David WongSecond, the company should get ready to answer tough questions. It’s virtually impossible to keep anything secret in this day and age, so executives should always take the stance that any attack will be public, and soon. They should also keep in mind that a cybercrime is still a crime. It is not the company that has broken the law; they are the victim. So, when are the media, customers and regulators unsympathetic? Where there is evidence management did not invest suitable time, attention or money in keeping their data and networks as secure as possible. Less than optimal security levels will not be treated kindly.

Third, cyber risk should be at the top of the management’s agenda. There is really no way to stop a dedicated hacker, just as there is no way to stop a dedicated thief. VTech was absolutely right about this. Management must then ask themselves whether they did everything possible to stop the thieves. Or did they leave the doors (and customers’ data and wallets) wide open to attack?

Ultimately, it is about trust. And being on your customers’ side. VTech clearly needs to work on both.

Charles Lankester is senior vice-president, reputation management, at Ruder Finn Asia