Is it Irrelevant that Rob Ford is a Conservative Politician?

You might have seen some funny clips about the hapless Toronto mayor Rob Ford.

He is the overweight politician who has a weakness for legal and illegal substances.

He was shown swearing obscenities, shouting death threats, smoking crack cocaine and doing an assortment of stupid things while completely drunk. He is out of control and so far no one seems to have the power to stop him or push him out of the office.

If you haven't seen the clips and are curious, feel free to Google them, I will not provide any links.

To me, he is just another bully fallen on hard times. And like all bullies, he thought he was untouchable and he lied for a long time to cover up his aberrant and at times illegal activities.

Also typical were his insincere apologies when he was caught and his subsequent threats against witnesses.

So far, there is nothing of interest for this blog.

What got my attention was the simple fact that none of the international news outlets I read reported his political affiliation. Even if I knew very little about him (and I don't know much, though enough to score 14 out of 16 in this quiz), I could guess from his "cutting taxes" platform that he was a conservative politician.

And to me this is a very salient fact: like all conservative politicians Rob Ford is big on law and order. Yet here he was buying crack cocaine, buying marijuana, driving under influence, making death threats.

How is that not part of the story?

I realize that Toronto requires mayoral candidates to run as nonpartisan individuals. But his previous political affiliation should have been relevant.

The BBC said nothing. Reuters had several pieces on him but never mentioned his party. New York Times was also silent.

Canadian media outlets seemed to know his affiliation but did not usually report it unless it had something to do with other parties. For instance, Globe and Mail mentioned his assumed political identity in relation with Ontario Liberals' posture in the scandal, but even then, it used a vague language:

One MPP acknowledged that the party appreciates the awkward position in which the scandal-prone mayor places the opposition Progressive Conservatives, the party with whom he is most closely identified and aligned.

His otherwise long and detailed entry in Wikipedia was also less than direct. It said:

After Ford Sr.'s death, Rob has maintained political connections with the provincial PC party and the federal Conservative Parties. A picture of former Ontario Premier Mike Harris with Ford's father adorns the mayor's office.

It is quite possible that he was not officially a member of the Progressive Conservative Party (the most oxymoronic conservative party name in history) but by all accounts he was affiliated with them.

Why not mention it?

My pet peeve is that when it comes to conservative politicians, like diaper man David Vitter, the contradiction between their beliefs and their actions (family values vs having sex with prostitutes in diaper) is downplayed and the situation is presented as a human drama.

When it comes to liberal politicians like the execrable misogynist Bob Filner, the underlying hypocrisy becomes the cornerstone of the story.

Rob Ford is a conservative.

Iran Is the Rising Star of the Middle East

I don't know if you have been paying attention but Iran has recently become the rising star of the Middle East. It was partly due to its own astute tactics and partly due to a fortuitous realignment of stars that led to important regional successes and new alliances.

Let's start with their successful moves.

Like some Americans who equate a Southern accent with lack of intelligence or worse, some Westerners equate mullah headgear with stupidity. In recent months, the Supreme Leader Khamenei and his posse proved that they are anything but.

Their brilliant move for the presidential elections is a case in point.

For years, they used Mahmoud Ahmadinejad as a perfect (and powerless) stooge who was basically good at shooting his mouth off. To borrow a phrase from Lenin, he was a useful idiot whose incendiary remarks, and the rebukes they garnered, helped the regime shore up domestic support. It was a classic Us vs Them strategy. Consequently, for these recent presidential elections, everyone expected the Ayatollah and Co. to field a clone of Ahmadinejad.

Instead, they opted for a smart new strategy. With tight sanctions contracting the economy and making life unbearable for ordinary Iranians, the ruling elite realized that, if the economy circles the drain, the Islamic Republic will quickly follow it down that same drain. They badly needed those sanctions lifted. And lifted quickly. Which meant that they had to find a candidate who could start negotiating with the West about Iran's nuclear program without making it look like the mullahs are giving in to the pressure created by the sanctions.

Enter Rouhani

Hassan Rouhani was the perfect dark horse candidate. He is a cleric. He has a reputation for being a moderate even though he has worked for the Islamic Republic all his life. More importantly, he was Iran's chief nuclear negotiator until 2005 so he was and is very familiar with the whole negotiation setup. Once in, it was easy to get the previous moderate presidents (Khatami and Rafsanjani) endorse him, as Rouhani had worked with both of them in recent years.

The whole thing was packaged so well that a week before the elections most observers assumed that Tehran mayor Ghalibaf was likely to win the first round. Rouhani was mentioned as a possible runner up (which would have made him one of the two candidates in the runoff elections) but he was not the obvious number 2.

But even then, if you looked up close, you could see that Rouhani was more than the candidate of the moderates and reformists. During the presidential debates, one of the candidates thought to have Supreme Leader's support, Saeed Jalili (the top nuclear negotiator until the elections) was attacked by Ali Akbar Velayati, one of the closest advisors of Khamenei, for his handling of the nuclear issue. This shocked the Iranian public at the time but it was a clear sign of where the mullahs were going with these elections.

As we now know, Rouhani won with 50% of the vote with no need for runoff elections. Tellingly, he performed very well in conservative rural regions. And we know from the 2009 elections that you need more than charisma to do well in those districts.

Early on in the campaign experts suggested Rouhani was not well enough known to win. But in the end he attracted support not only in Tehran but also in provincial towns where Ahmadinejad performed well in the disputed 2009 race.

Once elected, he immediately put together a very detailed and delicately balanced plan to get the sanctions removed.

First, he chose himself an unusual but brilliant Minister of Foreign Affairs.

The Elegant Mr. Zarif

Rouhani's Minister of Foreign Affairs, Javad Zarif is a well connected, Western educated career diplomat. Zarif means "elegant" in Arabic and by all accounts his diplomatic style is in line with his name.


Zarif studied at San Fransisco State University and holds a Ph.D degree (International Law and Policy) from the University of Denver. Needless to add, he is fluent in English. He was also the Ambassador to UN until 2007. He is very well connected: at the time he privately met with various politicians including (then Senator) Joe Biden and Chuck Hagel to push the Grand Bargain, a comprehensive plan to normalize relations between the US and Iran.

You could say that he is not the kind of minister the conservative Iranian Parliament would confirm easily. They did (even though they rejected Rouhani's choice for Education, Science and Sport). Without the blessing of the Supreme Leader I doubt that Zarif would have made it.

This was in mid-August. On 5 September, Javad Zarif opened a Twitter account outside Iran. The following day, he tweeted "Happy Rosh Hashana" to celebrate the Jewish New Year. When Nancy Pelosi's daughter responded to his tweet with "The New Year would be even sweeter if you would end Iran's Holocaust denial, sir" he countered it with "Iran never denied it. The man who perceived to be denying it is now gone. Happy New Year."

You see what I mean by brilliant?

Then he appeared on ABC's This Week and said that "Holocaust is a heinous crime and a genocide." Very significantly, he dismissed the phrase "the myth of the massacre of Jews" that is on Ayatollah Khamenei's Web site as poor translation. I say significantly because Khamenei and his entourage did not contest his argument. And they would have done so in the past.

A few days earlier, Zarif pulled John Kerry aside to have a talk during a UN event. This may sound trivial to you and me but it was the first such encounter since 1979. Unsurprisingly, Zarif himself announced it to the media and he emphasized the fact that it was more than a casual encounter. He also said that his goal was to get nuclear talks underway and that, sooner rather than later.

Then, Zarif offered to help with Syria's weapons of mass destruction. He stated that Iran would be happy to participate in Geneva talks but would do so only if asked.  He also made it clear that Assad's pledge was not just Putin's victory and without Iran's vigorous push in the same direction things might not have gone as smoothly. (And I, for one, believe him)

While this was going on, Rouhani showed up in New York and gave an interview to Christiane Amanpour (who is of Iranian descent and presumably speaks Farsi). He made a carefully parsed statement about the Holocaust which was immediately hailed as a major turning point. It is true that the statement was a departure from the crude Ahmadinejad denials as it acknowledged that "crimes against humanity, including what the Nazis did to Jews and non-Jews are reprehensible." But it was also rather...what is the word...slippery. Yet, the following day, the headlines read "Iran's Rouhani Calls Holocaust Crimes Against Jews."

Immediately, the Pars News Agency (controlled by the Revolutionary Guards and hardliners) disputed the CNN translation and claimed that Rouhani did not make such a statement. The protest was obviously for domestic consumption but interestingly, all the usual suspects, who would normally pounce on such a vocal denial as proof of Iranian duplicity, were too busy to celebrate the new Iranian leader to notice.

While the back and forth on the meaning of the statement was preoccupying observers, Rouhani did something no other Iranian President did in thirty four years, he called the American President.

White House officials described the 15 minute conversation - apparently initiated by Mr Rouhani - as cordial, the BBC's Bridget Kendall reports from New York.

In the brouhaha that ensued, people began speculating whether Rouhani is the architect of a radically new policy towards the US. But the Supreme Leader intervened right away and put a stop to it:

"We support the diplomatic initiative of the government and attach importance to its activities in this trip," he said on his website.

If you remember that Rouhani was sacked as the top nuclear negotiator by the Supreme Leader for being too accommodating to the US you understand the significance of that simple sentence.

The other crucial Rouhani move was to take ownership of nuclear talks:

Earlier this month Mr Rouhani transferred responsibility for talks on the country's nuclear programme to the foreign ministry. 

Until now they had been conducted by the Supreme National Security Council, which is appointed by and answerable to the Supreme Leader, Ayatollah Khamenei.

If you know anything about Iranian system, you would know that you don't take that kind of office from the Supreme Leader without his acquiescence.

The two-day nuclear talks in Geneva with P5+1 (Permanent members of the Security Council plus Germany) began with low expectations. Yet, at the end of the first day, Iran had already agreed to the most detailed nuclear checks ever, according to Baroness Ashton speaking on behalf of the EU.

On the second day, Iran made a very comprehensive new proposal:

Iran has put forward a new proposal to resolve the nuclear crisis that includes a freeze on production of 20% enriched uranium, a pledge to convert its stockpile to fuel rods and an agreement to relinquish spent fuel for a still-to-be completed heavy water reactor, according to an Iranian source who has proven reliable in the past.

The talks will resume on 7 and 8 November and Javad Zarif made it clear that uranium enrichment freeze and spot checks were on the table.

Obama Administration: Iran's New BFF

In all this, Rouhani was not alone. In fact, you could say that he was actively aided and abetted by the White House.

First proof of that is the reaction to Rouhani's extremely parsed statement on genocide. As I noted above, normally, in mainstream media, such statements are reported with a mixture of indifference and sarcasm. This time, it was branded as "the truth" right away. In the same vein, Glenn Greenwald recently noted how Brian Williams, the NBC News anchor, stated that Iranian leaders "are suddenly claiming they don't want nuclear weapons" and even though (as Greenwald went on to quote) the same leaders were saying the same thing over and over again in recent years.

Clearly, the media narrative has shifted. And that doesn't happen by itself.

An even better sign of that unusual collaboration was how Netanyahu was sidelined in the process. Right after Rouhani, he went on to the UN to denounce Iranian regime:

Netanyahu called Rouhani a "wolf in sheep's clothing" saying his recent "charm offensive" with Western leaders is a "ruse and a ploy" to "fool the world" while Iran continues toward nuclear armament. He maintained that Israel would not permit Iran to develop nuclear weapons, even if it meant taking unilateral military action. He also accused Tehran of supporting terrorist attacks and fostering insecurity in other countries in the Middle East.

And this is how Bibi Netanyahu's UN speech was reported by Reuters:

Israeli Prime Minister Benjamin Netanyahu said this week that Iran's new president was a "wolf in sheep's clothing", but he himself looked increasingly like a lone wolf as his allies seek to bring Tehran into the fold.

Do you ever remember reading such a dismissive line about a sitting Israeli President in mainstream media?
He was not happy.

Israel was not the only regional player getting miffed by the US-Iran rapprochement. Saudi Arabia was furious. So much so that an Israeli analyst suggested that there was now a Israeli-Sunni coalition against Iran:

The recent events as well as America's waning resolve vis-à-vis Iranian President Hassan Rouhani's "charm offensive" have made the ties Israel has fostered with senior states from the Sunni axis much less secretive than they used to be. What we have here, in essence, is a quiet coalition between the Gulf countries and Israel versus America and Europe — with Iran being the only topic on the agenda.

Saudi Arabia also turned down a seat in the Security Council to protest the US handling of Syria's chemical weapons episode.

In fact, Saudi reaction was so public and undisguised that most regional observers were taken aback, especially since the Kingdom has no Plan B.

Why the US Has Become Iran's BFF?

There are three clear reasons.

First, Iran committed itself to serious negotiations over its nuclear facilities. This is very open and clear cut. This is how the chief US negotiator reacted to Javad Zarif's proposals:

Undersecretary of State Wendy Sherman, who is the chief US negotiator with Iran, told Christiane Amanpour of CNN, “Foreign Minister Zarif and his delegation came prepared for detailed, substantive discussion with a candor that I certainly have not heard in the two years I’ve been meeting with Iranians, and my P5+1 colleagues, some of whom have been doing this for quite some time, found quite new and different.”

Essentially, Iran showed its willingness to play a less menacing role in the region by agreeing to freeze its enrichment efforts and to allow extensive checks (potentially including spot checks). That certainly removed the urgency pushed by Israel and diffused the so-called Iranian threat.

Second, if you know the situation in Syria, President Assad has been making some gains on the ground. That is mostly because there were 8,000-10,000 Hezbollah fighters helping the regular Syrian army and the recent gains were all due to their presence.

Out of the blue, Iran has just asked Nasrallah to reduce this massive presence and now there are a "few thousand fighters" left in Syria. That will have a marked impact on the Syrian conflict.

Finally, and it may not seem much to you, Iran has agreed to take Hamas under its wings again.

Remember Meshaal Khaled's departure from Syria to open up office in Qatar? Or his reliance on Mursi and Muslim Brotherhood even though his rival, the West Bank Prime Minister Ismail Haniyeh remained Iran's point man?

When Khaled briefly returned to West Bank I reported it with the title "The Return of the Prodigal Son." Well, Khaled has now announced his decision to visit Iran and the new President, Hassan Rouhani, said that they would greet him with open arms. His visit was reported as "The Return of the Prodigal Son.

Why is this relevant?

That is for another post.

In the meantime, keep an eye on Iran and its President.

NSA: Keith Alexander as James T. Kirk

Sometimes a picture is worth a thousand words.

I came across these pictures of the NSA Situation Room. When I saw them, the NSA's ambitious grab for information made perfect sense.

The room is called Information Dominance Center.

Yes, Information Dominance.

These are eleven years old boys.

The person who dominates information (Information Dominatrix?) is sitting in the Captain James T. Kirk chair in the middle. Currently, that's General Keith Alexander.

He was not the person who designed the room (one of his predecessors did it but no one knows for sure).

Some Hollywood studios helped out, with Disney producing a custom graphics chip for the 22' screen in front of Kirk, I mean Alexander.

It has been reported that the doors to the Dominance Center open with a Start Trek whoosh. Nice.

While the center was called something else before (Land Information Warfare Activity) the chair has always been known as the Kirk Chair. Apparently, all the Congressmen who visited the facility demanded to sit in it (presumably to pretend shooting Klingons).

This is how the architect who designed the Dominance Center describes it.

I don't know about you but after seeing these pictures, I feel I can trust these people with my private information.

Air France vs Turkish Airlines: A Primer in Experience Economy

One of my pet peeves is the interminable refrain about the detrimental effects of labor cost for companies. Since the Reagan years (and the accompanying Mergers and Acquisitions (M&A) mania), it became the mantra of top CEOs that jobs are the main source of their economic woes. Business publications always describe corporate titans bravely slashing, cutting and shedding jobs.

The importance of achieving profitability through layoffs has been repeated so many times that, by now, everyone considers it a truism.

I don't. In fact, I believe that, in most cases, this is pure rubbish.

Recently, I came across of a perfect example to illustrate why I consider job slashing a self destructive action for most corporations.

Air France has just announced that, after six consecutive annual losses, they will be cutting 2800 jobs. This is their third round of reductions as they started the trend in 2009 with 2500 layoffs citing the economic crisis. A couple of years later, they followed through with another 5000 jobs. And now 2800 jobs. The most recent layoff plans are also accompanied by drastic fleet cuts.

Air France is not unique. Lufthansa has been in the red for some time and Iberia and British Airways are struggling as well.

The industry experts are offering several explanations for this state of affairs:

• Economic crisis and low demand environment
• High fuel cost
• Competition from low cost airlines like RyanAir, EasyJet and Vueling
• High labor cost

And they maintain that since the first three elements are beyond their control they have no option but reduce their labor cost.

The problem is that in the same time period, there is another European airline that continued to expand, to hire people and to enlarge its fleet. Moreover, that company managed to remain profitable. In other words, economic crisis, high fuel cost and competition from cheap airlines seemed to have very little effect on that other airline.

How could this be? Either the causes offered by the traditional airlines are invalid or this other company is doing something quite remarkable despite all these adverse elements.

The company in question is the Turkish Airlines. Since the 2008 crisis, its revenues went up, the number of passengers it carried increased and its operating profits soared almost every year:

In 2012, Turkish Airlines saw its operating profit grow almost threefold, with revenues up 26% on passenger capacity growth of 18%. It has the youngest fleet of any significant network carrier in Europe and its 7.0% operating margin puts it behind only Ryanair and easyJet. This financial success is built on one of Europe’s most efficient cost structures and a very productive work force. 

This is their basic statistics:

Year	Passengers carried	Growth	Revenue (billion)
2006	16,947,000	—	US$ 2.23
2007	19,636,000	15.9%	US$ 3.0
2008	22,597,000	15.1%	US$ 4.5
2009	25,102,000	11.1%	US$ 4.0
2010	29,119,000	16.0%	US$ 5.6
2011	32,648,000	12.1%	US$ 7.1
2012	39,045,000	19.6%	US$ 9.0

I will provide two reasons for the failure of Air France and the success of Turkish Airlines.

One is the traditional economics argument about productivity. And the other is a fairly new concept related to the Experience Economy.

Productivity

Let me put it boldly: the problem for Air France is not that its labor force is expensive. The problem is that Air France's operational and logistics infrastructure is so out of date and so badly designed that to function at a basic level it has to use too much of that expensive labor force.

I am not making this up. Here are the numbers: Take a look at where Air France stands.

Overall labour productivity ranking: 2012

Overall rank	Airline/group	Total points*
1	Wizzair	11
2	Ryanair	17
3	Vueling	23
4	easyJet	34
5	Aegean	43
6	Turkish Airlines	44
7	Norwegian	46
8	airberlin	53
9	Finnair	55
10	Lufthansa Flying Segments	58
11	Aer Lingus	67
12	British Airways	68
13	TAP Portugal	76
14	Flybe	80
15	IAG	82
16	Lufthansa Group	84
17	Air France-KLM Group	96
18	Iberia	101
19	SAS Group	102

*sum of rankings on six measures
Source: CAPA – Centre for Aviation

Let me illustrate this with some anecdotal evidence.

If you have ever flown with Air France you would know that the average airport check-in time is 10-15 minutes. Sometimes even longer. The uniformed person behind the counter furiously types things only to surface briefly to ask you some inane questions. Then they are gone again, typing away. All that time, you are there thinking why is this taking so long. It is one passenger, one seat. What is the big deal?

Wasting your time is not important from the corporate perspective. But the problem is that, at that pace, the company has to deploy more counter agents if they hope to check-in a 300-passenger flight within two hours.

The same goes for their Web site. It is not well designed. It is not easy to reserve a ticket. And check-ins are a pain. The system crashes all the time. It loses your frequent flyer information sporadically. And infuriatingly, sometimes it refuses to check you in for no apparent reason. In such situations, you have to call a live agent and explain your predicament. And more often than not they cannot help you, as the company has given them no authority to fix things. So you need to call someone else or go to the airport and extend your time at the counter.

The software system behind the Web site and the airport check-in process is simply archaic. Let me explain with an example: Recently, I tried to upgrade an economy ticket to business by paying the difference myself. No frequent flyer miles, just straight credit card transaction, nothing complicated. I couldn't do it on the Web site. I called their number, they told me that it couldn't be done on the phone. I had to go to the main Air France agency at Invalides in Paris. It took 45 minutes to complete the transaction and three agents had to get involved and several calls had to be made.

While sitting there helplessly, I glanced at their in-house screen and it looked like a combination of UNIX and OS2. The agent who was trying to help me kept repeating to herself the key combinations she was supposed to remember for various transactions. To scroll a three page document took her 20 seconds as she had to place her finger on the down arrow key to move the cursor line by line for three pages. It was unbelievable.

Inside the airplanes, it is the same situation. On a recent flight to New York, I was seated in the upper cabin of an Airbus 380. There were only two flight attendants for the entire upper deck. Clearly, labor cost reductions in action. As a result, even though they skipped a number of steps (like offering refreshments before the meal), the whole process took too long and at the end, the attendants were exhausted (I caught one of them napping sitting upright on a stool) and the passengers were unhappy.

Ground services are equally dismal. When you land in Paris, it takes 30 minutes or more for your luggage to arrive. Fortunately for Air France, French border police are set up in such a way that there are rarely more than two agents available for passport control, so the actual waiting time for your suitcase (i.e. by the conveyor belt) is ten to fifteen minutes.

You might think that these are not significant issues (if you are French you might think that this is the best there is) but each of these instances illustrate lack of productivity enhancing tools, techniques and training.

In contrast, let's take a look at that other airline. From the above table you already know that they are the most productive full service airline in Europe. There is a reason for that.

With Turkish Airlines, airport check-ins rarely take more than two minutes (I mean your time at the counter) as they allow all passengers to check-in at the same row of counters, regardless of their flights. They have a state of the art logistics system behind it and it sorts out luggage and destination. Which means that 15-20 counters could check-in the passengers of multiple planes leaving within a five-hour window.

Turkish Airlines Web site won several awards. It is well designed. It is fast. It almost never crashes. It retains your information, including previous multiple searches without you making an effort. It makes price comparisons easy and it gives you the option to reserve a ticket without actually buying it (almost no airline allows this anymore).

Online check-ins are a breeze and the system is advanced enough to let you get your boarding pass in your smart phone (iOS or Android). And you can use it to board the plane by simply showing the screen to the screen reader at the gate. (My French friends shrieked with horror when they heard that notion).

In the planes, the service proceeds at a much faster rate even though they offer you more choices. Flight attendants seem happy to be there. They encourage you to ask for stuff and bring those items to you with a smile.

When you land, your suitcase will be on the conveyor belt within exactly fifteen minutes of landing because the subcontractor who handles luggage will not get paid if they arrive one minute later. I am told that it is in their contract. So when you pass the border police, your suitcase is there waiting for you.

That is the productivity part.

While the company became the fourth largest airline in the process, with 234 destinations in 103 countries, thanks to its high productivity, its cost profile is closer to Low Cost Airlines, as mentioned above. Interestingly, the company is employing some of those expensive labor elements from European airlines with no apparent ill effects:

The airline company currently employs 357 foreign pilots out of which 53 of them are Greek, 43 Spanish and 42 Italian. 

They are followed by 27 German, 17 English, 16 Austrian and 14 French pilots.

The other explanation I will offer is related to the Experience Economy.

Commoditization of Goods and Services

A product or a service becomes commoditized when they begin to be mass produced, contain no real distinguishing features from similar products and compete mainly on the basis of price. Since the Industrial Revolution countless segments of goods and services market became commoditized. What Henry Ford did to manufacturing, Ray Croc did to food. And with the massive corporate move to China in the last three decades, we can confidently maintain that most things we consume nowadays have been commoditized.

In 1999, two management consultants by the name of Joseph Pine and James Gilmore published a book called the Experience Economy. Their main argument was that unless you change your product or service to convey a specific experience to the client and immerse them in it, sooner or later your offering will become commoditized. And somebody will offer it at a lower price point and destroy your margins. If you are curious but do not wish to read about it, here is a short video clip summarizing their argument.

What they mean is better understood through a couple of example.

As you know, coffee beans are fairly cheap. The amount of beans for a cup of coffee is not worth more than 2-3 cents. If you get a cup of coffee in a gas station or a diner, it will never be priced for more 50 cents as it has no distinguishing features. But if you offer it in a specific environment like Starbucks, customers would be willing to pay $2-3 without blinking.

That's because Starbucks is more than a place you buy a cup of coffee, it is a designed experience. It has its own lingo, like Tall, Grande and Venti (which is a made up word, btw), its own interior design and color scheme; it suggests a certain lifestyle blending youthful intellectualism with refined taste and care for the environment. Those elements are insinuated by laptop carrying young clients, free Wi Fi, specially selected music you can download on the spot and signs to let you know that everything you consume comes from a Fair Trade source. There is a barista skillfully making your coffee to your exact speciications.

So having an espresso there is almost an immersion into a distinct culture.

Or they say, look at Apple, its stores and its products. Whereas all the brick and mortar computer stores went belly up (apparently because of low cost competition from Amazon and the likes), Apple stores are thriving. That's because, the authors argue, they offer you more than a product, they offer you an experience. They say that the store environment has been designed to give you the impression of a high end boutique hotel's lobby or bar. Salespeople are not salespeople. They are knowledgeable geeks walking around not pushing products. They are young and happy and pleasantly geeky. They can sell you stuff without taking you to a cash register: their iPhones will process credit cards and will email you your invoice.

Apple products also evoke a strong feeling. Most Apple computers are more expensive than PCs and in terms of specs, they are not as advanced. But they command a significant premium over those grey and black boxes. This is not just because Apple hardware is well designed but it is especially because their use provides the customer with a very special experience.

The point is that unless you redesign your product and service and turn it into a whole new experience, you will end up competing on the basis of price. And sooner or later your margins will erode and you will no longer be profitable.

Let's take a look at what Air France did when Low Cost Airlines commoditized air travel.

They tried cutting their cost by copying the Low Cost tactics. The first thing was to reduce the cost of food and beverages. Now in most short-haul destinations (in Economy) Air France will give you a stale sandwich in a Saran-wrap and water. In long-haul flights, it will offer two equally inedible choices, usually a piece of chicken or some soggy pasta.

This is from the national airline of a country famous for its refined cuisine.

Their in-flight entertainment is dismal. The screens are low resolution and they have terrible viewing angle: if the person in front of you moves slightly your movie becomes invisible.

The seats are cramped as their fleet mainly consists of ageing planes. Even in Business Class they are superseded by most other airlines in the world (their First Class is actually very good but for the price of a small car it should be).

Lately, they have been piloting a new idea: introducing a Low Cost alternative without creating a new brand: they now have flights out of Orly with no Business class and where checked-in luggage is an extra. The seat do not recline and the food is not part of the category of comestible things.

The Air France lounges for Business Class passengers are mediocre. While most of them are reasonably airy, the seating design is awkward, the service is lacking and the food is utterly unappetizing.

When you look at the other airline, things are much different.

In short haul flights (3-4 hours) in Economy class, they offer a choice of two hot meals and in most cases they are both quite good. Their menus have been created by famous Turkish chefs and they use their names to emphasize that even in in the back of the plane things are different.

In long flights, they have actual chefs in the plane with full kitchen outfits, going around in all cabins to check if people are happy with their meal. I went to Hong Kong with them and on the way in I was in Economy and on the way out I was in Premium (the class between Economy and Business) and in both cases, I was offered several choices, a chef asked my opinion about the food, flight attendants were happy to give me more wine with my meal. I felt like I was in a decent restaurant. I would take their Premium over Air France's Business class any day.

The seats were large and comfortable, they reclined quite well and the entertainment system was top-notch. The screens were high resolution and the programming was extensive. Film start times were fast and the sound was decent.

Finally, their lounge in Istanbul is simply spectacular and it is the embodiment of the Experience Economy concept.

It is immense but it is subtly divided using sphere-like structures. It has several live cooking areas, like a pizza oven, a kebab pit, a large pastry island, a salad bar and a huge buffet with various Turkish specialties.

In each case, there are chefs, rolling dough, barbecuing food and generally putting on a show.

There are fresh fruits everywhere, self-service drink carts with a large selection wine and alcohols.

There is movie theater, a flat panel TV wall with 9 screens, a billiard hall, a free locker for your hand luggage.

Google it and the first page will have several people claiming that it is the best lounge in the world.

Basically, the lounge exemplifies everything that Pine and Gilmore recommended that you do if you wish to de-commoditize your business. The whole strategy works.

Besides remaining profitable and expanding rapidly there is also this:

Turkish Airlines has thrice won the Skytrax awards for Europe's Best Airline, Southern Europe's Best Airline, and the World's Best Premium Economy Class Airline Seat for three consecutive years in 2011, 2012 and 2013. 

Additionally, Turkish Airlines has been selected the Airline of the Year by Air Transport News at the 2013 Air Transport News Awards Ceremony.

Next time you hear some company executives complain about their labor cost being too high, tell them to work on their productivity and to de-commoditize their business.

Syria: What's Next?

An unusually heavy work and travel schedule prevented me from standing on my soap box.

But in the case of Syria, my silence was partly caused by a desire to simply observe the recent events unfold. I have to admit that, for a while, it looked like my working hypothesis was incorrect and the region was going to hell in a hand basket.

I now believe that, at least as far as Syria is concerned, my earlier analyses were not that far off.

What were my main points?

No Military Intervention Is Feasible

To begin with, I always maintained that no one wanted to have a military intervention in Syria. It was always a fragmented society that was held together by Hafez al Assad's authoritarian policies. After a prolonged and bloody civil way, it is now a deeply fractured society and no one wants to be stuck with that particular Pottery Barn product.

And the recent events proved that: Even after the UN report strongly suggested that Assad might have used sarin gas against his own people the most obvious reaction was a desire to avoid any action. In fact, in a first for a US President, Obama denied executive privilege to act and asked Congress to clarify his own red line. The British Parliament told Cameron to stop talking about military option. And Hollande almost caused a constitutional crisis by trying to pretend that he has the power to participate in a military action against Syria.

The only leader who appeared to be itching to get into Syria was Erdogan. If you agreed with my Pipelineistan argument his zealous insistence might have looked rational to you. But in reality, Turkey has everything to lose if it tries to invade Syria. And I am sure Erdogan and his FM Davutoglu know this very well and never considered that option seriously.

(Incidentally, Erdogan's bluster led to a serious regional isolation. He first accused anyone and everyone in the Middle East and Europe for what he claimed to be their blatant hypocrisy first on Egypt then in Syria. Understandably, the regional folks took umbrage. He also hilariously accused Israel and its powerful deep cover agent Bernard Henry Levy of engineering the coup in Egypt. BHL and General Sisi. Right. As a result, in the region -from Iran to Israel- he is extremely unpopular. And he is simply hated in Egypt.)

Russia Benefits from the War of Attrition

I also maintained that a protracted civil war is in the interest of Russia as it delays the Qatar pipeline to Europe and keeps Gazprom the sole supplier to that market.

Putin and his FM Lavrov nicely manipulated the world's evident reluctance to intervene and introduced a nice face saving measure for them. They had Assad pledge the destruction of his weapons of mass destruction. The world exhaled.

The next day, Assad announced that it would take over a year to achieve his pledge. Since it is unlikely that the FSA and the rebel forces will be able to unseat him, Russia has just ensured that the civil war will continue for at least another year.

In the Current Equation all Likely Outcomes are Terrible

In the last few months, it was becoming increasingly clear that the only rebel forces that were capable of fighting effectively were the Jihadi brigades. In other words, it meant that the US and the regional players were faced with two equally unpalatable outcomes: One, Assad remains in power. Or, Al Qaeda and Salafist forces defeat him and they come to power. Since Syria borders Israel, Lebanon, Jordan and Turkey, you can imagine how desirable this latter outcome would be for the regional players.

In response, the CIA began shipping better weapons to the rebels, something they were previously somewhat reluctant to do. But this is clearly a case for too little too late. The day Kerry and Lavrov signed the Assad deal, fighters from the al Nusra Front and the interestingly named group Islamic State of Iraq and the Levant (ISIL) successfully attacked their former allies in Northern Syria and wiped them out. Their aim is to become the sole rebel force to fight Assad and therefore to claim the future of Syria.

The Kurds are the Key

So, when we look at the situation is such stark terms (i.e. no outside force can intervene and all eventual outcomes are equally bad) it becomes clearer why I always claimed that the most important actors in Syria were the Kurds and why I maintained that the Kurds hold the key to the Syrian denouement.

They will have to join the fight to preserve the territorial integrity of their region. And protect the oil reserves that are part of their region.

I am not sure if your major news outlet carried this piece of information.

Yesterday [Aug. 12], 3,000 people entered Turkey through the Akcakale border crossing between Turkey and Syria, following the intensification of artillery fire in clashes at Tel Abyad, a Syrian town directly facing the Turkish city of Akcakale.

A similar situation has been going on in Ras al-Ain, directly opposite the Turkish city of Ceylanpinar. Jabhat al-Nusra militants are fighting the Kurdish Democratic Union Party (PYD) for control of the region that has Syria’s oil and gas resources. Jabhat al-Nusra is the Syrian extension of al-Qaeda that has institutionalized terrorism internationally, while the PYD is the Syrian extension of the illegal PKK. In other words, al-Qaeda is fighting the PKK on the Turkish-Syrian border.

The main question in that regard is why it did not happen before.

The reason it took them this long to get involved was a cynical game that was being played by Erdogan and the imprisoned PKK leader Ocalan.

As Ocalan was negotiating a reform package that would give Kurds in Turkey some important freedoms and put them on a path towards greater autonomy, he asked PYD, the PKK's offshoot in Syria to side with Assad forces to put pressure on Turkey.  He was hoping that if rebel forces looked like they were losing ground, Turkey would have to ask Ocalan to order PYD to join the civil war against Assad.

Instead, Erdogan increased Turkey's covert support to Jihadi forces, including the notorious al Nusra Front. He was hoping that if they could become a significant threat for the PYD, Ocalan would have to ask for Turkey's help and soften his stance on the Kurdish peace initiative.

Ocalan countered this move by asking Masoud Barzani, the leader of the Iraqi Kurdistan to send his fighters to help PYD. Barzani is an important ally for Turkey and Erdogan has a lot to lose if he puts that relationship to jeopardy.

In other words, Ocalan got the upper hand and put Erdogan in an untenable situation. If he continues to help Jihadi forces, he will have a problem in Northern Iraq and the Turkish Kurdistan. Perhaps more importantly, he will also alienate the United States as it is clear that the Obama Administration would hate to see ISIL and al Nusra Front to become the rulers of Syria. And, needless to add, they would not allow that.

Consequently, the only play Erdogan has left is to renew the peace initiative with the PKK in the coming weeks. When that happens, the Syrian Kurds would join the fight against the Jihadi brigades and Assad forces with US supplied weapons moved through Turkey.

As the Pipelinistan argument goes, the goal is not to have the Kurds defeat both Assad's forces and the Jihadi groups. Realistically, I doubt that they would capable to achieve that even if they agreed to try. And I am sure they didn't. The actual goal is to secure their region and therefore prevent Syria from remaining a unified entity under either Assad or Jihadi forces.

They have every incentive to achieve that goal and with US weapons and PKK forces and Barzani's peshmerges involvement they have a very decent shot to realize it.

The unknown in all this is whether Erdogan will do the rational thing. If the domestic situation in Turkey becomes tense and polarized (as most observers expect) with the revival of Gezi events in early October, he might feel that he could no longer pursue a peace initiative with the PKK.

The combined push coming from the nationalist discourse of the recently unified opposition and the harsh criticism of the nationalist fractions within his own party might provide him with enough incentive to turn his back to the Kurds.

But for the time being, I continue to doubt that.

---------------

UPDATE

This is what I read today. I am just relaying it with no comments:

Fighters from the Islamic State of Iraq and the Levant (ISIS), an Iraqi Al-Qaeda branch that has expanded into Syria, attacked the headquarters of Al-Nusra Front in Shadadi, the Syrian Observatory for Human Rights said. 

"ISIS fighters on Saturday attacked the Nusra Front regional headquarters in Shadadi, taking control of the headquarters and seizing weapons and oil production equipment," the group said.

The two sides clashed, but the Observatory said Al-Nusra had relatively few fighters at the headquarters because they are currently battling Kurdish forces elsewhere in the region.

Interesting, don't you think?

Incidentally, today was election day in Iraqi Kurdistan.

In recent years, the Kurdish government has warned it is prepared to divorce Arab Iraq, and is now laying the final stretch of an oil export pipeline to Turkey that could in theory give the region the financial means to stand alone.

Was the Egyptian Coup a Secular Reaction to an Islamist Administration?

If you have been following the events in Egypt from a distance, you probably have the impression that the army intervened to prevent the Islamists from consolidating their power.

You may recall that, immediately after the coup, they claimed to be on the side of democracy. General Abdel Fattah al-Sisi maintained that he was fighting to stop terrorists, which, these days, is a code word for Islamists. Tellingly, in this instance, the fight against terrorists was also a sentiment expressed by non other than King Abdullah of Saudi Arabia.

Europe and the US have been muted in their criticism (even after the mass slaughter of Brotherhood supporters) and their relative acquiescence seemed to suggest that indeed the army had stopped a terrible regime from taking deeper roots.

But is this impression really accurate?

As the resident contrarian, I am here to dispute this notion.

It is easy to assume that the Egyptian army has been a secular force because of the constant persecution of Muslim Brotherhood under successive military strongmen, like Gamal Abdel Nasser, Anwar Sadat and Hosni Mubarak. But this is not a correct impression. The Egyptian army has always had a problem with the Brotherhood as they saw them a very powerful rival within the social and political order. But they rarely had a problem with Islamists in general.

In fact, under Hosni Mubarak, the Egyptian army turned away from the pan-Arab nationalism of his predecessors (especially Nasser) and allowed conservative Muslim organizations (other than the Brotherhood) to establish a new social order.

If you look at photos of Cairo from the early seventies you will notice the absence of head scarves, let alone niqabs and other Islamist garbs. Mubarak slowly encouraged the Islamists (but not the Brotherhood) to change the Egyptian identity from an Arab nation who was also descendants of Pharaohs to a devoutly Muslim society.

Their goal was to pacify the Egyptian society, stifle discontent and prevent uprisings.

And it worked.

The Egyptian army is not a secular force and its actions against Mursi was not motivated by the perceived dangers of an Islamist social order.

Its primary motivation was to preserve its economic, social and political privileges.

What privileges you may ask. As I noted two years ago:

Its economic activities started under Nasser and expanded hugely after the peace treaty with Israel:

Now, military-run firms hold strong positions in a wide range of key industries, including food (olive oil, milk, bread and water); cement and gasoline; vehicle production (joint ventures with Jeep to produce Cherokees and Wranglers); and construction, in which it benefits being able to deploy conscripts during their last six months of service.

How big is that empire?

Paul Sullivan, a National Defense University professor who has spent years in Egypt, says it is huge, probably accounting for 10% to 15% of Egypt's $210 billion economy.

The low end of that estimate is $20 billion. Plus, the army pays no taxes and it benefits from the free labor of conscripts. On top of that, it has vast land holdings from earlier era that it has recently been converting into valuable real estate plots. The officer corps, especially the generals, enjoy a much better life than the austere and nomadic existence of traditional soldiers.

The army believed that Mursi was following the Turkish example and its goal was to place the army under civilian tutelage and remove all these special entitlements. In fact, Erdogan's support for Mursi and his rather vociferous criticisms of the military intervention tend to lend support to that idea.

But, you may ask, how do we know that they were motivated by self interest and not a desire to stop Islamist encroachment?

There are several reasons.

First off, General al-Sisi is a devout Muslim. So much so that Mursi ignored the warnings of the Obama administration as he was convinced that such a pious man would never work against another Muslim. In that sense, until he got worried, he had no problem with the regime Mursi was trying to establish.

Secondly, as I outlined a few weeks ago, the main force behind the coup was Saudi Arabia. Whatever you may think of Saudi Arabia, the country is hardly a bastion of liberal Islam.

Sisi is well known in Riyadh, where he served as military attaché before being promoted to chief of Egyptian military intelligence. He is said to be a favorite of Prince Muqrin, third in line to the throne. There are widespread rumors in the Middle East that Saudi intelligence provided funding and support for the downfall of Morsi’s government and encouraged the growing popular opposition to his government. The Saudis are also reported to have promised Sisi that they would replace any military or economic aid cut off by Washington in the aftermath of the regime change (they did so in Pakistan in 1998 when it tested nuclear weapons and Washington cut aid).

Thirdly, the coup was supported by the Salafist al-Nour party.You may be aware of the fact that Salafists represent the most radical interpretation of Islam and they consider most Islamist regimes and organizations (including the Muslim Brotherhood) as too liberal, lax and hedonistic.

Fourth, a new draft constitution is being prepared to replace the controversial and deeply Islamist draft hastily put together by the Brotherhood. It is now being re-written by a ten-person committee of experts chosen by the military.

And -this is the clincher- it is hardly different from the previous one.

Here are some of the highlights:

Article 2 and Sharia: The famous Article 2, mainly stating that the “principles of Islamic Sharia” are the main sources of legislation, remains unchanged. (...)

Personal status code: Article 3 retains the 2012 stipulation that Egyptian Christians and Jews should refer to their own religious laws on personal status issues. Some welcomed the article at its inception, while others were concerned it might mean further distance from the potential for a secular civil code, at least as an alternative alongside a religious code. (...)

 Al-Azhar: Article 4 removes the 2012 stipulation that Al-Azhar be consulted on matters pertaining to Sharia and that the state assist Al-Azhar financially. Otherwise, the Al-Azhar article, which initially aimed to establish its independence as an organization, is largely intact, and still remarkably remains at the beginning of the constitution in Article 4. The original article, though essentially formalizing a consultative role that had already been in effect for some time, raised fears that it would herald the move toward a more theocratic approach to legislation, and even the grand imam of Al-Azhar had opposed it. (...)

Gender equality: The updated text in Article 11 features relatively more direct wording on gender equality, but also qualifies that by an adherence to the principles of Sharia. (...)

Syndicates: Article 56 retains the controversial stipulation that there be only one syndicate for each profession. This was the cause of much uproar in the 2012 constitution.

 Military and the defense minister: The military and defense articles remain largely unchanged, including the stipulation that the military budget be entered as a single figure in the national budget. Only the National Defense Council, which also includes the prime minister and the head of parliament, gets to review the budget in detail.

One interesting note: Article 170 now adds upon the 2012 stipulation that the defense minister must be an officer (i.e., not a civilian) by explicitly saying that the Supreme Council of the Armed Forces must approve the nominee, further solidifying the army’s independence.

 End of Mubarak-era political isolation: The new draft also controversially removes Article 232 of the original, which stipulated the political isolation (i.e., a ban on running for political office) of the leadership of the former National Democratic Party for a period of 10 years.

As you can see, this is a slightly re-worded version of the previous draft. 

Nothing against Islamist principles. Sharia is still the main legal source of inspiration. Gender equality is conditional upon Sharia. Trade unions still follow the corporatist (not to say fascist) arrangement. 

And finally the status of the military and its budget are very well protected indeed.

All of this suggests that Mursi, who believed that a devout Muslim would not overthrow a fellow Muslim, should have read Machiavelli: in politics, protecting material benefits always trumps piety. 

Regardless of religion.

About the Israeli-Palestinian Peace Process

If you belong to the tiny but exceptionally brilliant group of people who have been following this humble soapbox from the beginning, you might remember that my starting premise was the critical need for and the strong likelihood of a peace accord between Israelis and Palestinians on the one hand and between Turks and Kurds on the other.

In that sense, you would think that the newly announced negotiations to reach a comprehensive agreement should make me happy. After all, I ventured a hypothesis and stood by my prediction through thick and thin and it happened. Who cares if only a handful of people know about it, right?

Normally, I would be tempted to gloat. Almost. But not now, as I am somewhat worried. The Saudis changed the regional equation by convincing General al-Sisi to oust Egypt's democratically elected president.

You see, previously, the setting was of a Muslim Brotherhood president trying very hard to contain his rank and file from who are vociferously asking the rejection of Camp David accords. This setup is what tilted the balance of power between Israel and Palestinians a little bit. Accordingly, throughout the process, every time Netanyahu behaved in an intransigent manner, you could get Mursi to act like he was unable to contain the hostile masses. As I mentioned before, the army was there as a security switch, in case Mursi decided to give in to those masses.

Now that the army is in power, there is no such scenario. Egypt is back to Mubarak era -minus Mubarak- and I am sure that the army will not lift a finger to elevate the Palestinian negotiating positions. Livni is the chief negotiator but Bennett is a more powerful figure in cabinet. The settlers in Israel are like tea party folks in the US: their hold over power is disproportionate to their numbers. I don't think that Yesh Atid is an effective counter balance.

The other problem is Hamas. Now that General Sisi decided to charge Mursi with the crime of colluding with Hamas, they know that their interlocutors in Egypt are hostile to them. What is their motivation to participate in a process that largely excludes them? And from the Israeli perspective, before the coup in Egypt, Hamas was an important entity that they needed to include because they were supported by Mursi. Now Hamas is in the wilderness as their only patron is Iran.

Meshaal's patron Qatar is also out of the picture. Which means that Haniyeh has now the upper hand within Hamas. But Haniyeh has no desire to have peace with Israel. He wants Israel to disappear.

So, you can see that, in its current form the process is doomed. And this is from the only person who predicted its occurrence almost three years ago.

Unless the situation in Syria and Egypt unfolds in a different direction, I am not holding my breath.