Tuesday, December 31, 2013

Live Life Like Vanderbuilt - A New Year's Resolution

image of new year celebration fireworks with a legend "happy new year!" below
Happy New Year! 
In a day when one must conduct an inventory of old failures and accomplishments while finishing to write the plan for the new year, I would like to share a fantastic American story.

I recently finished the book The First Tycoon; The Epic Life of Cornelius Vanderbilt by T. J. Stiles. What a fantastic narrative!
Would you consider yourself to be both lucky and important to society if you:

  1. Met Lincoln
  2. Helped Lincoln win the civil war
  3. Donated the largest and most feared Union Navy vessel
  4. Fought for the union Navy
  5. Became a key player in helping New York become the economic center of the US
  6. Facilitated the migration of people to California during the Gold Rush
  7. Be a key player in the fight to create a shorter route through Panama and Nicaragua
  8. Be a pioneer in the idea that companies are entities
  9. Be a pioneer in the idea that markets should be free
  10. Be a pioneer in pushing the value of stock markets
  11. Be a pioneer in the deployment of steam engines
  12. Be a pioneer in the deployment of railroads
  13. Rescue the stock market more than once
  14. The builder of Grand Central in New York
  15. Did business with two youngsters: Rockefeller and Carnegie
  16. Being criticized by Mark Twain while the writer was alive
  17. Created the idea of luxury cruising
  18. Built comparable wealth to 20 times that of Bill Gates
  19. Accomplish all after starting from nothing and without any education
image of the cover of the book "The First Tycoon; The Epic Life of Cornelius Vanderbilt" by writer T. J. Stiles
The great story of C. Vanderbilt
That was Vanderbilt's life. Before him, Texas and California were part of Mexico. The US was just a bunch of disjointed groups trying to find their way. After his death, the US was much more like what we know today. This happened two centuries ago!
He lived to an extended age at a time when half as old was usually the end of one's life. It would be easy to rewrite history and be critical of such a man. But to do so would be to be blind to the fact that his accomplishments were larger than life. This is a highly recommended book for all and anyone.
I wish all that 2014 begins a better tomorrow.
Feliz Año Nuevo!

Wednesday, December 18, 2013

Great MIT Research - Free Access for a Limited Time

logo of MIT Sloan Executive Education
MIT Sloan
MIT is giving free access to a few of their incredibly valuable research papers to MIT Sloan Executives. It goes without saying that I feel that MIT is the absolute best school in the world. MIT researchers are the only ones that balance the art of business with the rigidity of data. I loved my marketing class because of this exact thing. As a result, their research is essential for all managers, from the middle to the top.
Make note of the fact that the availability is for a limited time. So hurry.
Below are the papers available. Otherwise follow the general link.

Articles by Deborah Ancona
Deborah Ancona is Professor of Organization Studies at MIT Sloan and Faculty Director of the MIT Leadership Center. She teaches in Transforming Your Leadership Strategy and the Advanced Management Program (AMP).
The Comparative Advantage of X-Teams

Articles by Erik Brynjolfsson
Erik Brynjolfsson is Professor of Information Technology and Director of The MIT Center for Digital Business. He teaches in Big Data 4Dx (online); Big Data: Making Complex Things Simpler; and Future of Manufacturing.
Winning the Race With Ever-Smarter Machines
Competing in the Age of Omnichannel Retailing
What the GDP Gets Wrong (Why Managers Should Care)

Articles by Steven Eppinger
Steven Eppinger is Professor of Management Science and Engineering Systems and Co-Director of the System Design and Management Program. He teaches in Managing Complex Technical Projectsand Systematic Innovation of Products, Processes, and Services.
How Sustainability Fuels Design Innovation

Articles by Tom Kochan
Tom Kochan is Professor of Work and Employment Research and Engineering Systems and Co-Director of MIT Sloan Institute for Work and Employment Research. He teaches in Strategies for Sustainable Business.
The Management Lessons of a Beleaguered Industry
Taking the High Road
MIT Executive MBA

Articles by Donald Lessard
Donald Lessard is Professor of Global Economics and Management and Professor of Engineering Systems. He teaches in Strategy in a Global World.
Building Your Company’s Capabilities Through Global Expansion

Articles by Fiona Murray
Fiona Murray is Associate Dean for Innovation. She is also Faculty Director of the Martin Trust Center for MIT Entrepreneurship. She teaches in the Entrepreneurship Development Program and the MIT Regional Entrepreneurship Acceleration Program (REAP).
Spurring Innovation Through Competitions

Articles by Alex Pentland
Alex ‘Sandy’ Pentland is the Toshiba Professor of Media Arts and Sciences, Director of Human Dynamics Lab, and Director of the MIT Media Lab Entrepreneurship Program. He teaches in Big Data 4Dx (online); Big Data: Making Complex Things Simpler; and Leading Change in Complex Organizations.
Understanding ‘Honest Signals’ in Business
Can High-Frequency Trading Drive the Stock Market Off a Cliff?

Articles by Douglas Ready
Douglas Ready is Senior Lecturer in Organization Effectiveness. He teaches in the new program,Building Game-Changing Organizations: Aligning Purpose, Performance, and People.
Enabling Bold Visions
Leading at the Enterprise Level
Why Leadership-Development Efforts Fail

Articles by Jeanne Ross
Jeanne Ross is Director and Principal Research Scientist at MIT Sloan’s Center for Information Systems Research (CISR). She teaches in Essential IT for Non-IT Executives and Revitalizing Your Digital Business Model.
Finding Value in the Information Explosion

Articles by José Santos
José F.P. dos Santos is Visiting Professor at MIT Sloan and Professor at INSEAD, Fontainebleau, France. He teaches in Strategy in a Global World.
Is Your Innovation Process Global?

Articles by Peter Senge
Peter Senge is Senior Lecturer in Leadership and Sustainability at MIT Sloan.
Collaborating for Systemic Change
Innovating Our Way to the Next Industrial Revolution

Articles by/featuring David Simchi-Levi
David Simchi-Levi is Professor of Engineering Systems at MIT. He teaches in Future of Manufacturing and Supply Chain Strategy and Management.
Is It Time to Rethink Your Manufacturing Strategy?
Your Next Supply Chain
When One Size Does Not Fit All

Articles by John Sterman
John Sterman is Professor of System Dynamics and Engineering Systems and Director of the MIT System Dynamics Group. He teaches in Business Dynamics: MIT's Approach to Diagnosing and Solving Complex Business Problems; Leading Change in Complex Organizations; Strategies for Sustainable Business; and Understanding and Solving Complex Business Problems.
What the Future May Bring

Articles by Scott Stern
Scott Stern is the School of Management Distinguished Professor and Chair of the Technological Innovation, Entrepreneurship, and Strategic Management Group at MIT Sloan. He teaches in theMIT Regional Entrepreneurship Acceleration Program (REAP).
Innovation: Location Matters

How Companies Can Avoid a
Midlife Crisis by Donald Sull
Articles by/featuring Donald Sull
Donald Sull is Senior Lecturer at MIT Sloan. He teaches in the new program, Building Game-Changing Organizations: Aligning Purpose, Performance, and People.
How Companies Can Avoid a Midlife Crisis
Closing the Gap Between Strategy and Execution
Using Commitments to Manage Across Units

Articles by Catherine Tucker
Catherine Tucker is the Mark Hyman Jr. Career Development Professor and Associate Professor of Marketing at MIT Sloan. She teaches in the Global Executive Academy; Strategic Marketing for the Technical Executive; Systematic Innovation of Products, Processes, and Services; and theEntrepreneurship Development Program.
Why Managing Consumer Privacy Can Be an Opportunity

Articles by/featuring Eric von Hippel
Eric von Hippel is Professor of Management of Innovation and Engineering Systems and the founder of the Entrepreneurship Program at MIT. He teaches in Building, Leading, and Sustaining the Innovative Organization and the Global Executive Academy.
The User Innovation Revolution
The Age of the Consumer-Innovator
Innovation by User Communities: Learning From Open-Source Software
Innovation Process Benefits: The Journey as Reward
The Benefits of Combining
Data With Empathy

Articles by Peter Weill
Peter Weill is Chairman of the Center for Information Systems Research (CISR) and MIT Sloan Senior Research Scientist. He teaches in Essential IT for Non-IT Executives and Revitalizing your Digital Business Model.
The Benefits of Combining Data With Empathy
The Business Models Investors Prefer

Articles by Peter Weill & Stephanie Woerner
Stephanie Woerner is Research Scientist at the MIT Sloan Center for Information Systems Research. She teaches in Revitalizing your Digital Business Model.
Optimizing Your Digital Business Model

Articles by Ezra Zuckerman
Ezra Zuckerman is Professor of Technological Innovation, Entrepreneurship, and Strategic Management and Chair of the MIT Sloan PhD Program. He teaches in Developing and Managing a Successful Technology and Product Strategy and the Advanced Management Program (AMP).
Improving Capabilities Through Industry Peer Networks

Monday, December 9, 2013

Wealth Gap Simplified

Is there a simple way to understand how the wealth gap is created? 
image of a graph illustrating the exponentially growing wealth gap between the rich and everybody else.
Wealth is now the bad guy in the movie
Considering the latest wave of wealth-redistributionists lurking around every corner of the internet, this is an important question that should be addressed as succinctly as possible. So, let's take a shot at it.
Two people, Person A and Person B, get a job at company X. They make the same income. They both pay for the basics like housing and food.
Besides the basics, Person A prefers to buy things that loose value over time, like a new car. The car is, of course, bought with a loan.
Person B buys only the basics and accumulates any leftover as savings.
Over time, Person A continues to show a better standard of living but creates no wealth.
Meanwhile, Person B takes the accumulated savings and invests them into a machine that makes gizmos. She operates the machine after hours and sells the gizmos during weekends. There is decent demand for the gizmos and the machine is quickly paid for. Soon, a third person is hired to handle the machine and gizmo sales. All along both maintain their job at company X.
Person B continues to accumulate savings from her job plus the proceeds from the sales of the gizmos. These savings are later used to buy more machines, thus increasing the investable cash flows.
image of a lady investor next to the three gizmo making machines that she bought with her savings and which are operated by a the third person in the story.
Should entrepreneurs be punished?
Fast forward a few cycles and Person A continues to have a good standard of living from his job. Unfortunately he has also failed to accumulate wealth.
In comparison, Person B has invested in income generating machines and has accumulated great wealth thanks to the compounding effect of re-invested earnings.
The wealth gap is now massive, even when both have done their job at company X just as well.
No one acted badly at any moment. The only issue was that Person A did not know about the benefits from compounding savings through investing; but that could easily be solved with a little education.
The understanding that neither has been unfair with the other is what makes America what it is today. Here, our presidents don't discuss taking money from investors to give it to those who only spend. In other countries, on the other hand, people complain when others succeed. Not in America.

Thursday, December 5, 2013

Message to Houston: "Fail or Else"

Houston's Response: "Else" then. 
I just visited Houston and was blown away. I saw capital being deployed everywhere. Recession? What Recession?
color photo of construction cranes in Shanghai, China
Shanghai Construction Boom
While not quite the same as Shanghai, China at the turn of the century, there were construction cranes all around the I-45 corridor.
But how is this possible? I live in another large and powerful metropolitan area with lots of wealth and I have not seen a construction crane in years. How is it that two similar cities could be so different?
Moreover, why is Houston experiencing such great infrastructure boom; especially when it is the center of energy in the US and Obama, arguably the most powerful man in the world, has declared war on hydrocarbons?
black and white illustration of president Obama angrily pointing towards the phrase "Obama to Energy: Fail or Else"
Fail or Else Campaign
In economics, long term capital spending is a sign of business confidence. Most large projects require quite a bit of money to launch. Such large investments typically create returns only after decades. It is therefore paramount that businesses are confident in their projects' viability for management to want to part from money for such a long time. In this context, construction cranes symbolize long term capital spending because small projects do not usually call for their use.
In the United States, 20-year capital spending has dropped close to zero. While there is no public denouncement against any guilty party, it is my opinion that Obama's wealth redistribution threats have successfully scared businesses out of any notion of long term investment.
Photo Image of traders screaming their orders to buy and sell
All the capital in the markets today is being used for immediate gains. Starbucks borrowed money to buy back its stock and immediately improve earnings per share; thus increasing its valuation. Last year, Costco borrowed money against long term earnings to distribute an unusual dividend before tax increases started. Risk-adverse money is being deployed to buy volatile stocks everyday, in this way pushing the stock market to record levels. The signs are clear. Make money as fast as you can because there is no certainty that you may be able to keep any in the future.
But Houston seems to be different. Apparently, a confident outlook exists there. Could it be that American innovation has come to the rescue of our nation once again? After our energy resources were deemed to be in the path to extinction, we suddenly have the technology to extract oil and gas from previously unreachable places and at very competitive costs. In fact, it is now said that we are the Saudi Arabia of natural gas. We have so much gas that we do not know what to do with it... literally. In North Dakota, the excess of gas and the absence of a pipe to send it to the rest of the country means that enough energy to light up Chicago gets burned every night.
night time image of the US showing how the North Dakota gas facilities illuminate the sky
Click to enlarge map of US at night
Compare night-time satellite images of the US from just three years ago to today and you will see that suddenly a large metropolis much larger than Denver illuminates the skies above North Dakota. The issue is that there isn't a metropolis there. It is the gas being burned that creates the effect. Think about it. We have so much energy that we have to burn it.
Why not send it to the people who could use it around the country? Because there is no infrastructure to do it. Regardless of the jobs that such project would create, the President refuses to support the permits needed or anything else associated with hydrocarbons. So, North Dakota residents get their gas for free and the rest is used to increase the atmospheric carbon; a fantastically green solution.
By the way, next time that a hipster environmentalist accuses you of destroying the earth, ask them how exactly is it that they wash their fashionable clothing. Last I checked, environmentalists had not quite made it back to hand washing or hand drying their attire. They too have yet to go back to the old way to keep food refrigerated. So, to Mr. Obama and his environmentalist bodies who refuse to let the rest of the country get into the US energy boom, I say "stop moving your lips and get out of the way". "There is lots of work to get done!"
At least, this is exactly what Houston has replied to Obama.
black and white image of Houston's response to Obama: "Else" with construction cranes in the background.
Houston's Response: "Else" then
Even when North Dakota and Pennsylvania are also booming with all the new energy that has been found, Houston is the captain of this ship.
Since the beginning of the 80's, US energy production continuously dropped year after year. But in just three years, it is now up to levels from 1989. Considering the fact that California, a former juggernaut in energy, has continued to refuse to participate in the renaissance, it should be clear how magnificent Houston's feat has been. Even under threat from the most powerful man in the world, the city has pushed upward at a rate never again though possible in the US.
Things have moved so fast in Houston, that I had almost missed the changes. I constantly scan all sorts of economic data for signs of change but it was the cranes that made me come to my senses. If we could only replicate the effect around the US.
Capital spending means jobs. Jobs mean the end to the stagnation. The change would demonstrate once again that progress can be had without cheap labor. US inventiveness would save the day once again. But the president is lost in LA-LA-Land while the rest of his nation grows hungry.
image of luggage set for traveling
Moving to Houston
When will he learn that markets respond not to political-will but to consumer demand? When will he understand that jobs are the best kind of welfare? When will he capitulate and let the infrastructure needed around the country take place? Once out of the way, businesses would do the investing without a single dollar being taxed.
Until then, I am moving to Houston.

Wednesday, December 4, 2013

Confident Humility

Are confidence and humility dichotomic
I recently read the answer somewhere and, while I can't give adequate credit to the author for I don't remember who it was, I can at least share it with you.

"To be humble, don't think less of you, 
but think of you less instead" 
color image of stones in complete balance

It isn't necessary to think less of oneself in order to be humble; no need to devalue one's worth.
Instead, it's how often we think of ourselves that erodes humility.
Simple. To be a humble, yet confident leader just consider others more often every day. Yes, I have gone deep this time.

Tuesday, December 3, 2013

The Agenda: To Shield the Inept from Accountability

Is it just me or do you also get the feeling that President Obama has a deep dislike for businesses. Maybe I am a bit late but it just occurred to me why this may be the case. In business, failure is met with dismissal; and who likes to get fired? Certainly not the President of the most powerful nation in the world.
screen shot image of the Reuters headline of their article "Obama urges Americans not be discouraged by rocky healthcare rollout"
Obamacare Website Failures
What's the alternative? Well, most of us just try harder next time.
But there are those who probably wish that accountability seized to exist.
Wish granted.
...Today, if you royally fail, you get to be on TV. Again, the President tries to recover from his team's failure. In multiple television appearances, Obama has directly addressed the nation on the subject of the many problems associated with the implementation of his health bill. In my opinion, the continuous mishaps continue to demonstrate his lack of leadership.
Now that I am sure many feel that my comment is (1) unfair because the Obamacare website is surely (2) much more complex than I could ever imagine.
To the unfair part, I say that "I am not so sure I would agree". In any case, it is all about performance and not about fairness.
With regards to the website's complexity, I say "sure". Which is precisely why government should not had attempted it. You know, government should focus on what it does best like meaningless speeches for the uninformed and spending the money of those who pay taxes. But a complex website... I just don't think it was a good idea.
Case in point. If you want to sign up for Obamacara, whether you like the idea of it or not, you would be better served through a business site rather than the government's.
color illustration of the C. Vanderbilt from Wikipedia
The mighty C. Vanderbilt
"But", I hear, "businesses do not care about insuring for the under-insured"; a statement with which I disagree.
Business is all about finding an opportunity to do something better than others. In the past, when transportation was slow and expensive, those like Cornelius Vanderbilt created solutions by deploying new steam boats and railroads. Society has long benefited from their work; whether originally driven by greed or not.
Today, as the President publicly fumbles, there are those like Clint Jones, CEO of GoHealthInsurance.com, who continue to demonstrate that the free-market is ready to pick up the ball and run with it... literally. If you want to sign up for health insurance coverage under the Affordable Care Act, your experience will be fluid through this private website. On the other hand, signing up through the government's site runs the risk that you will not get coverage when you expect it due to one of many back-end problems.
By the way, Clint's website was created with the company's money. No taxes had to be confiscated for this superior interface; something interesting considering that tax-free is an idea which has proven to be foreign to our President.
image composed of two screen shots from Reuters article "Obama urges American's not be discouraged by rocky healthcare rollout" and CNBC onlive video interview of GoHealthInsurance CEO Clint Jones "Bypass Heathcare.gov to enroll in Obamacare".
Government Ineptitude vs. Business Drive
Also important, now that we are highlighting the power of free acting companies, is that businesses are agnostic about the merits of the product. GoHealthInsurance does not care if Obamacare is good or bad; it just knows that there is an opportunity. In the end, the public will decide the merits of Obamacare. If American citizens determine that Obamacare is not what they want, then GoHealthInsurance will fail as a business and no one will shed a tear. But if demand turns out to be strong, then they will do really well.
Why am I so sure they will do well even when the government is clearly their main competitor? Because launching a database is the easy part. Updating it is always the impossible task. Seeing the almighty American government fail in front of a global audience during launch time is just the start. As soon as congress changes even the smallest aspect of the law, the real complexity will begin.
I can't help but feel that Obama, who clearly thinks that he can just "will" progress for it to happen, has demonstrated an aversion to accountability. No wonder he continues to fight those that practice daily accountability: businesses. He has driven corporate long term capital investment to the lowest levels in memory. Companies are just not confident to expose their money to projects that will take more than 20 years to pay off. Perhaps the best solution would be for him to just get out of the way. He should stop protecting ineptitude. Instead, he should let businesses, the real accountable players, do their thing and score a few touchdowns. We surely need them.
color pencil sketch of a highschool touchdown
Mr. President: we need a few touchdowns

Additional Comment:

On LinkedIn, A consumer electronics expert raised two very valuable points, which I would like to address here..
  • First, he stressed the fact that my article seems right-biased as he feels that republicans were much more disruptive to the economy. To this I offer that the article is biased for sure. But it aims to argue for less government rather than either side of the isle. Everybody knows that both parties have had pro-growth presidents as well as anti-growth ones. Unfortunately, this time it was Obama's opportunity to act against two hundred years of great American experience. Because bureaucrats fail to have any skin in my game, it is difficult for me to get too excited about any of them regardless of their party affiliation.
  • This gentleman's second point was that the stock market is at all-time highs. While I understand the fact that viewing things through the prism of stock market valuation  places doubt on any assertion that the economy is not well, it is important to make sure that the facts are better understood. It is correct that the stock market measures corporate profits. The part that's missing is that prices are on a per-share basis. This means that with less shares, earnings go up on a relative bases and stock prices follow. This without any improvement within the company. This is what we now have. Companies have been borrowing against future earnings to buy back substantial amounts of shares from the market. The net result is that low cost of capital for big companies indirectly increased stock prices. Higher S&P prices must therefore not necessarily result from a better economy. Let's also remember that stocks are an asset class just as housing. Like with housing in 2007, higher prices do not imply any degree of improved economic health. 
    Chart from the Federal Reserve Bank of Saint Louis showing the correlation between the unsustainable US monetary base and stock market prices
    St Louis Fed's Report on the Monetary Base and Stock Prices
Bernanke's monetary easing and the glut in global savings are behind the effect rather than white house brilliance. High levels of available capital, in a high risk environment, where American blue chips are viewed as offering lower relative risk, and depressed cash flows from competing low-risk asset classes like bonds, all easily result in a Dow boom. But reduce availability of capital, change the risk balance or increase interest rates, and the S&P's valuation crumbles. A recent quick test by the Open Markets Committee demonstrated this point with plenty of force. 
But that is the economic side. How about the political one? If anything, higher stock prices have benefited those with the liquidity to speculate on them and not the rest of the country; a fact that I am sure upsets Obama. He has seen the fat cats get fatter under his watch. I doubt he intended it to happen. Otherwise he would be talking it up at every TV opportunity he gets. It would become his best tool against anything thrown his way. Bit it isn't. A higher S&P is clearly painful to him.
Getting back to the main goal of the article, no one can deny that a simple website has turned into a nightmare for Obama. Meanwhile, a previously unrecognized company came out of nowhere to get it done right, on their own and without excuses or taxes. The article is about the great nature of American businesses when compared to clumsy government. 
For four years now, I have seen small businesses struggle to gain access to any of the supposedly plentiful low-cost capital and strain as regulations continue to make operations much more complex. 
Small banks continue to disappear at a dramatic rate. In the health industry, the same thing is happening with small institutions. But in industries with lesser access to capital things are much worse. For many, the alternatives are bleak. 
Today, Obamacare has created such business pressures that if you are a CFO with a deep understanding of it you can get a job anywhere and at whatever price you want. A cursory exploration of any of the online job boards will demonstrate this. About 30% of the openings are for them. This is unusually high demand under any circumstances. To compound the problems, our small businesses can't afford to hire any of these stars. Without the money, what are they to do? 
Through the article, all I ask is for small businesses to get a break.

Wednesday, November 13, 2013

No More Snooze Button for You

Want to succeed in life? How about letting a fresh morning-mind guide you through the most important tasks of life. 
illustration of book What the Most Successful People Do Before Breakfast: And Two Other Short Guides to Achieving More at Work and at Home by author Laura Vanderkam over a wooden surface
What the Most Successful
People Do Before Breakfast
I just read What the Most Successful People Do Before Breakfast: And Two Other Short Guides to Achieving More at Work and at Home. by author Laura Vanderkam. The book is very short; yet interesting.
On the negative side, it appears to me as if the book isn't the best researched written work. In fact, it feels as if it was written to satisfy a writing commitment by the author.
Image of the four-quadrant matrix for importance and urgency.
First things first
In any case, it still addresses something I find to be essential: there is nothing like starting the day with a clear idea of what's important to accomplish and what's not. It's all about knowing what the "A" priorities are. "B" and "C" tasks should be labelled as being less important. The mindless activity of checking the e-mail inbox as soon as one arrives to the office, for example, should be left for later; after the important stuff gets done. Besides, reactively reading e-mails is a good way to let others control our day. Think of it. We are surely in trouble if we leave the responsibility of what to do next to third parties sending the e-mails. What do they know about what is important to us?
Because of its short length, this is a perfect book for those just starting.

Tuesday, November 12, 2013

China Pushes U.S. Out of the Way

First Car Sales, Now China's Online Sales Break All Records During Single's Day. 

Do you look at the relentless marketing efforts behind Valentine's Day with suspicion? I do. But no matter what we think, we are still obligated to spend money on our significant-other every year or else risk being placed in the dog house.
Colorful Image of a banner ad for the Cinco de Mayo celebrations with two Corona beers in between the Corona logo
Cinco de Mayo Celebration
Then, how about the fact that Cinco de Mayo celebrates a scrimmage between the Mexican and French armies of no more relevance than the battle of El Alamo? Yet, Cinco de Mayo is now marketed as Independence Day and a great opportunity to consume Corona, the Mexican beer.
But have you heard about Single's Day? I guess that in the absence of a "Couple's Day", also known as Valentine's Day here in the US, the Chinese have opted for a more appropriate form of celebrating consumption. It is all about loving thyself and showing it with a purchase of say sneakers.
This last November 11, the Chinese celebrated Single's Day by shattering all online sales records for a single day. To put this in perspective, by midday sales had already doubled the highest Cyber Monday record from the US. Yes, our best attempt at consuming stuff online, Cyber Monday, was no match for this year's flock of single Chinese looking to show themselves some love.
For those unsure about what Cyber Monday is, simply look at it as the Monday after Black Friday when shoppers go online rather than the stores to buy Christmas presents.
As if this was not impressive enough, consider the fact that China hovers closely behind the US on yearly online sales. This creates a feeling of having to constantly look at the rear-view mirror, which is reminiscent of 2009 when the US finally gave up the lead in new car sales to the eastern powerhouse.
Aerial photo of a traffic jam on a roundabout in a Chinese city
China Leads in Car Sales
So what's next? We are no longer the same fat cats who showed the Mini Cooper driving Europeans what the pleasure of rushing through the open road without limitations was like. Now, the Chinese are the leaders. While they have chosen to mostly create traffic jams rather than to hit US Route 66, they are consuming more cars than even the mighty US.
Now, we are also close to no longer being kings of shopping. Within a year, we will lose the online crown. Soon after, we shall give up our lead on total retail sales. But for the latter, we still have a few months to enjoy the top.
The Chinese call themselves communists but behave more like capitalists than the Obama administration or the state of California. This has truly been an incredible performance by a country with lots of upside left since there are millions in China who still live under the poverty level. Over the next few decades, China will continue to gain at every metric. The US on the other hand, will probably have to sit watching from the sidelines as our baby boomers reduce their economic footprint. Keep an eye on the events and remain aware that this is a historic moment.

Wednesday, October 2, 2013

Borrower Blames Others - Default Near

Let's make one thing clear; what places a debtor at risk of default is excessive and irresponsible borrowing. After borrowing runs out of control, almost anything can trigger a default. Do you think that Japan, Korea, Singapore or China are at risk of defaulting?
They would first have to borrow more than the cash they hold for this to be the case. But this isn't so, no matter how crazy their political infighting may get. It is a case of living within one's means.
Picture of Obama speaking with Boehner
Obama blames Boehner
Picture a college student who just received her first credit card. She then charges everything under the sky as if the card held some sort of free money. Without sufficient income for even the minimum payment, she asks her parents for help. She is at risk of default. They then take the credit card away. Next, she blames them for not being able to pay the card. Does this make sense? So what if the parents approved the credit card? Being ultimately responsible for their daughter, should they allow more spending or should they remove the card? The answer is clear: remove the card. Yes, the student will be embarrassed. I guess that she will learn the lesson. Alternatively, she can just get a job. Likewise, the US government can get a j.... Wait! The US government can't earn any money. It must either borrow it or confiscate it through taxation. Since borrowing is at the heart of the problem, then the only viable way to save face is to charge taxes to all citizens. But then again, maybe the best thing is to just spend less. That is better than taxing everyone, including the poor.
We can try to blame anyone for a US default, but the problem is rather at the spending side.

Friday, September 6, 2013

Economists' Myopia Ends with Euphoric Fist Pumping

Surreal! Earlier today, the latest Employment Situation report saw CNBC's guest economists figuratively-high-fiving each other for nailing the headline number. In anticipation to the release, guesses ranged between 170 thousand and 181 thousand. The final number was a seemingly adequate 169 thousand in additional payrolls for the month of August.
Screen shot of CNBC's website
CNBC Economists Panel after the Employment Data
What's the problem then? Well, that none of these math experts could see the proverbial book cooking by the government. The fact that last month's data was over stated by a massive 58 thousand and that June's data was revised down by another 16 thousand seem to make no difference to them. In a surreal way, the headline number's proximity to expectations was all that was required for the celebratory euphoria to begin.
Only perpetual-realist Rick Santelli could see the miss. I sometimes wonder the kind of KoolAid economists drink that turns garbage into beautiful data.
To see what's bothering me, let's take the same total change while allocating the changes differently. Let's just say that the prior two months had remained unadjusted while the latest month was instead reported as 96 thousand for August. Would they had displayed the same sense of accomplishment? While talking about equal total changes, the headline would be much worse.
At some point during their conversation, they even seemed ready to accept a theory that August will be revised up by about 50 thousand next month. First, such is simple speculation. Second, even a speculative 50 thousand in additional payrolls would only take our 96 thousand August up to 146 thousand; which is still a very bad number.
In a nutshell, the employment numbers continue to be bad. Moreover, the economic reporting agencies continue to make the headline numbers look better than reality. They just wait a month before reporting the real number. After all, most people find it hard to read past headlines. Yes, we are witnessing the ugliest pig with the most lipstick in a long time.
Black and white photo image of Che Guevara's face
Perhaps one of these days we will stop blaming the Bush administration or even greedy bankers for the bad economic environment. Perhaps at some point we will see that our pseudo-communist president has taken us a route of stagnation thanks to plain economic ignorance.
I just finished reading a fantastic book about the charismatic revolutionary Che Guevara. What the book left me was an understanding that Che had deep convictions that were wrong on economics while also being quite damaging to the people he tried to help. He spent his whole life unsuccessfully attempting to make his model work. But this was something that no one, including Lenin, Trotsky, Mao or Marx, could make succeed. The inevitable failures made him depressed and later forced him into badly planned battles. In a way, the book depicts a sad story of misguided intentions.
If you are like me, the fact that history brings us plenty of examples of what not-to-do should be enough to keep us from repeating past mistakes.
I can't wait until economic sanity comes back to markets.

Monday, August 12, 2013

Letting a Cartoon Explain Obamacare

Screenshot image of Visual Stories' page hosting the video explaining Obamacare
As I came across the No Highs, No Lows, Must be Bose animation I included at the end of my last post, I also found this very simple explanation of Health Insurance and the Affordable Care Act.
The video presents what would otherwise be a complex concept within an accessible context. It compares health insurance with auto insurance. It also explains why Obama must force low risk citizens to participate. The angle is based on economics. Thus, it reflects my beliefs on the matter. I hope that you find it helpful.

Saturday, August 10, 2013

Increase Your Creativity - A Tail of Failed Promises

Beauty shot image of "Increase Creativity", "Ignite Imagination and Insight" by Kelly Howell
THIS WILL MAKE YOU CREATIVE. Well, at least that is what Increase Your Creativity by Kelly Howell seems to promise. From its title, one would think that this recording shares the hidden secrets of the art of being creative. Unfortunately, this was not to be.
As a voracious business information consumer, I often supplement hard books with audio books. In general, I find audio books to be just as good as those of the regular page-turning kind with the added benefit that they can be consumed while driving. Thus, I do not think twice about buying anything from the business or self-help section in the bookstore in either form. Boy, was I disappointed this time.
As I begun to play what I thought was an audio book, it took me several minutes to get past the shock that the narrator was notably absent. After I realized that the terrible introductory music that's generally used to start audio books was in this case the main course, I was dumbfounded.
As someone who has been extensively linked to music at both personal and professional levels, it is very difficult for me to get past the point that the long notes contained in this recording would have a different impact on my brain than music from an improvised Jazz quintet, for example.
How was I to get to a creative state? For one, I have always found it much easier to day dream or enter a state of trance when listening to "real' instruments. Hearing synthesized or fake music, which is what this recording packs, is rather distracting to me.
Moreover, it is my empirical conclusion that tonality is inversely related to the state of detachment from reality when listening to music. Let me explain.
There is a fantastic saxophone quartet from San Francisco, California called Rova. All their music is completely improvised. While the musicians start and end together, not one of them follows any other during the song. They all fall on their own unrecognizable dissonance as each saxophone jumps from note to note. To me, Rova defines cacophony.
Yet, listening to their music live immediately takes me into LALA land. Endorphins kick in so rapidly that I begin to drift into a day dream almost as soon as they start playing.

In a way, their atonality is unpleasant. Yet, my subjective visceral response is fantastically vivid. It would seem as if the disorderly nature of my body's activity would resonate with the unlistenable noises they make. The experience is pleasurable in a odd sort of way.
On the other hand, Increase Your Creativity has a very tonal, albeit slow; a character that immediately annoyed me. It was not engaging at all. I know that it could be argued that it is not my kind of music. Nonetheless, I remain with the impression that the recording would exclusively provide its alleged benefits of boosting creativity on those who have just consumed illicit drugs. But for someone in the hyper aware state I live in, the recording seems like pure hype. I hated it as much as I can't stand people who waste their life consuming such drugs.
If this recording is a serious attempt at creating a tool that delivers its stated promise, I certainly doubt it. While I am happy being the statistical outlier, I revert to feeling that the recording is rather a piece of garbage. I would instead suggest that you enrich your collection of music and that you invest on a very good audio system. In that way, if your creativity doesn't improve along the way, you would at least enjoy the ride.
Photo image of two cartoon characters at the high end audio shop discussing the problems with Bose
Must Be Bose

On a separate note and while I am on my ass-kicking mode, I will end by suggesting to stay away from Bose. In the professional audio world, everybody has a saying: "No highs, no lows, must be Bose". To insiders, Bose is for the ignorant wealthy who prefers to impress their friends over listening to real music. There, I said it. I have knocked two ugly birds with one post.

Book Title: Increase Creativity
Book Subtitle: Ignite Imagination and Insight
Author: Kelly Howell
Publisher: Brain Sync
ISBN: 978-1881451501

Sunday, August 4, 2013

The Tragic Story of a Great In-N-Out Burger

Photo of IN-N-OUT BURGER's outdoor sign as visible from a highway exit
The Sign
IF YOU HAVEN'T ALREADY, TRY AN IN-N-OUT BURGER ASAP. YOU WILL LOVE IT. Unfortunately, In-N-Out Burger, the book by Stacy Perman, is not quite as tasty.
I very much looked forward to reading about this company. As the purveyors of fantastic and savory burgers, I was hoping to find a few great lessons from the narrative of the business story behind the company. Instead, I found a terrible tail that started with laborious stubbornness and ended with pure greed. I was probably better off not finding out.
While the big fast food names were being built, In-N-Out Burger refused to grow. The author claims that this was due to some ethereal commitment to quality. To someone like myself, a professional who believes that growth from such minuscule market share does not have to be tainted by poor quality, it looks as if the founders were incompetent at managing their dilemma. After all, today they are much bigger than they originally were; all while still keeping product quality robust. The same could have been achieved much sooner, had they been either more ambitious or smarter. After all, they were neither the first, nor the last managers to face a growth constraint.
I am not saying that, as a society, we need another large fast food restaurant. What I am saying is that we need one of much better quality than the others. In a way, In-N-Out Burger let their fans down due to poor leadership.
beauty shot of the In-N-Out Burger Book by author Stacey Perman
In-N-Out Burger by Stacy Perman
The author also demonstrated her lack of business acumen as she tried to hype the company's story. At one point, Stacy Perman clarified that founder Harry Snyder was a micromanager before anyone knew what the word meant. Just a few paragraphs later, she described how he too was great at empowering employees. Unfortunately, this is not what micromanagers do. By using the micromanager description she was attempting to depict a leader with passion and confidence. But such managers micromanage because they second guess everybody else's decisions. They feel to be the only ones who have any sort of knowledge or understanding of business. Thus, employees end up having to double check every decision they make to safeguard their head. Rather than being empowered, these employees are terrified by a larger than life tyrant; which is not uncommon in family owned businesses.
At another point of the narration, the author tries to suggest that the company had a culture of hard work and simplicity which were reflected in the stores. Yet, Rich Snyder, the founder's son and company president after 1976, turned their headquarters into an overstated expression of luxury. Sorry but there was no Wal-Mart story of austere headquarters here.
Photo of a DoubleDouble In-N-Out Burger over the company's red serving tray and next to french fries
A DoubleDouble
Finally, the book fails by getting stuck with the usual platitudes about what's generally claimed as the essential ingredients that make a business good.
While it is a great recollection of the beginning of Californian suburbia and the start of those American icons like the NHRA and the many fast food restaurants from the time, it is of very little added value to any business leader.
Besides, even the author struggled to match the tragic family infighting lead by Burger Princes Lynsi Torres that occurred at the end of the book with the rosy picture she was portraying at the beginning. This was not a good business book. Stick to their burgers.

Book Title: In-N-Out Burger
Book Subtitle: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules
Author: Stacy Perman
Publisher: HarperBusiness
ISBN: 978-0061346729