Archive for September, 2008

Random flotsam

September 29, 2008

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Bitter times make way for wry humor.  I can’t spend the rest of my life griping about deals that have slowed down, decision makers dragging feet.  It just is part of life. The other extreme is despair, clearly not an option for one with my supersized ego.  I have already taken three fortnightly vacations (to shake off the blues and to get some creative distraction) and the fourth is commencing by mid Oct and will last thro to its end.

 

Getting a lot of time to read and reflect.  Stock market, across sectors is going one way, that is down.  S&P Nifty closed 5% down today. Natural gas is puffing up, Steel is slimy. Paper is stationary. Retail is just left with a  tail. Pencils lost a few points. Power equipment is weak. Infrastructure is fluid, while refrigerators freeze. Light switches were off.  Iron ore mines turn empty craters. Diapers remained unchanged. Shipping lines stayed at an even keel. Consumer goods are bad because soaps don’t wash. And batteries exploded in an attempt to recharge the market.

 

I could focus a lot more on what’s happening around. Parents play a lot lesser role in bringing up kids. I see them bringing kids up only in elevators at the supermarket. In real life kids get what they want (unlike our times) and do what they like.  In effect, they raise themselves.  My daughter just got herself admitted to a keyboard class and asks me to finish the other formalities – to pay up !

 

So I settle down to talk to her about the importance of saving money early.  (No, she hasn’t shot back “Did you?”)  But how can I tell her to put her money in that big Bank because piggy banks don’t pay interest?  She reads newspapers and is already asking why big Banks go the Big Bang way?  Silly me, talking of trusting banks to the 13 year old that reads papers and watches TV.  She just told me her piggy bank will never go down with her money nor would she let Wall Street `uncles’ raid her nest.  I am buying her another piggy bank – capital protection comes first!

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Life in a crestfallen world

September 19, 2008

In the early 1960s, a Broadway musical called “Stop the World, I Want to Get Off” was all the rage. But you hear the sentiment of that title a lot these days.  Opinion polls show that Americans are both weary with and wary of the rest of the world. It’s as if they wish it would all just go away.

The increasing signs of anti-globalism sentiment are unsurprising given that the typical American got nothing out of the last economic expansion. Adjusted for inflation, the median wage is lower than it was in 2000, and jobs are less secure. Americans want to cast blame, and unfortunately, it’s always easiest to blame foreigners-the people who trade with them, and migrate to their country. This could be a large problem in the future. When isolationism last flourished there in the 1930s, it hurt the economy, and if it comes to dominate their thinking in the aftermath of financial crisis, it will hurt them again.

Globalization means freer markets and more political freedom worldwide; multinationals are businesses, large or small, that have operations in more than one country; and illegal aliens are people who want a better life so much that they are willing literally to risk everything for a chance at the worst jobs that developed economies offer. All three are major contributors to western prosperity, productivity and standard of living.

Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.  Wise after the calamity, central bankers, market regulators and the rest are already saying what are needed are tighter rules, closer oversight and a premium on sobriety. The rest of us may ask why it has taken so long for these guardians of the system to stir from their complacency. Doubtless we will be told in turn that this is no time for recriminations. The people who presided over this mess must now be trusted to save the global financial system from their past mistakes.  The fiendishly complex products that seemed for a time to define a new financial capitalism will be seen for what they properly are: instruments of deception as much as of innovative genius.

How much good all of this will do is an open question. To the interested observer, it looks that the big mistakes of recent years have not been so much about the absence of regulation, but a failure to act. The central bankers and the regulators were simply asleep on the job – something they will never admit while inventing jargons like `toxic instruments’ that wreaked havoc!

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Future is best left alone

September 17, 2008

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“The key to doing better is to “bring evolution inside” and get the wheels of differentiation, selection, and amplification spinning within a company’s four walls. Rather than thinking of strategy as a single plan built on predictions of the future, we should think of strategy as a portfolio of experiments, a population of competing Business Plans that evolves over time.” – says Eric D. Beinhocker, author of “The Origin of Wealth” and senior adviser Mckinsey & Co.

 

I tend to agree. Most strategies fail because they come with their own predictions of the future.  I think of Kellogs failing to make it to the Indian breakfast table despite their persistence over a couple decades now.  They are still bleeding.  While they relied on their experience in western markets where persistence paid off, they took the Asian palate for granted.  It is very difficult to please Asians with something as bland as cereals and cold milk. Asians love their spices; they know how to cook a delicious breakfast. They have variety practiced over the ages.  A cold bowl of cereals can never beat a steaming idly, sambar and chutney.  Never.  So has been the experience of Coke and Pepsi – they just can’t beat a fresh fruit juice, lassi or coconut water that are devoured in the region.

 

So how useful are the tools of conventional strategy analysis to make crystal-ball predictions about the future? Rather, they are best used to prepare minds, provide context for making real-time decisions and to help teams deal with all the uncertainties they knew would come their way. The strategic planning exercise purely for devising a forward strategy is wasted effort; it can be a critical way to get your senior team to communicate, to give them a common frame of reference, a shared understanding of the facts, and a language for talking to each other.

 

In the end, the Guru gives some broad outlines –

First, the process should be focused on structuring in-depth discussion and debate among principal decision makers. Typical planning processes result in underlings presenting slides to senior decision makers in precooked dog-and-pony shows—very little learning goes on in such meetings. Instead, the focus should be on creating a forum in which senior decision makers meet to roll up their sleeves and wrestle intensely with the issues (and sometimes each other). Such forums need to be small (if too many lieutenants are in the room, the senior people won’t speak openly) and have adequate time—a full day per business unit per year for the CEO and top team is a good rule of thumb, versus the hour or two typical in most company off-sites.

Second, the process must be fueled by facts and analysis. If only opinions are brought to the table, chances are that everyone will leave the room with the same mental models he or she walked in with. This means intense preparation in the months leading up to the strategy conversation, and while staff and consultants can help, the senior principals need to be fully engaged in the preparation as well. A shared understanding of a common fact base is the single most valuable outcome of the process.

Third, there must be other forums clearly designated for decision making. If the strategy process becomes overburdened with near-term decisions on budgets, setting targets, and allocating capital, then learning goes out the window. The decision-making forums should be linked to, but separate from, the strategic learning process.

Let future unravel upon us.  If it’s unknowable, why waste energies predicting it?  Chance favors the prepared mind, after all!

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How about a large wall street collider?

September 10, 2008

Over to the Big Bang research. The Large Hadron Collider is designed to accelerate protons to energies of 7 trillion electron volts and then smash them together, recreating conditions in the primordial fireball only a trillionth of a second after the Big Bang.

Many physicists hope to materialize a hypothetical particle called the Higgs boson, which according to theory endows other particles with mass, or identify the nature of the mysterious invisible dark matter that makes up 25 percent of the universe and provides the scaffolding for galaxies. Some dream of revealing new dimensions of space-time.

As I understand, those discoveries are in the future. If the new collider is a car, then what physicists did today was turn on an engine, that will now sit and warm up for a couple of months before anybody drives it anywhere. The first meaningful collisions, at an energy of 5 trillion electron volts, will not happen until a few months down the line.  Nevertheless, the symbolism of the moment was not lost on the experts and non-experts gathered there.

Wish they invent some ingenious machine to do some predictive analytics at the Wall Street as well to see what will be left there after the big crunch that started off since september last – a Large Wall Street Collider?  But I won’t bet they’ll ever learn.  They hardly did from LTCM debacle. As striking as the parallel is to Bear Stearns, Long-Term Capital’s echo is far more profound. Its strategy was grounded in the notion that markets could be modeled. Thus, in August 1998, the hedge fund calculated that its daily “value at risk” — meaning the total it could lose — was only $35 million. Later that month, it dropped $550 million in a day. I hope the scientists are a different breed, and hope they learn a few things from this new `why machine’ 😉

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Junk’em !!!

September 1, 2008

The irrepressible urge to do justice to one’s own intellect differentiates the great from the good.  It’s like that inner voice that won’t leave us alone.  Something that tells us from deep inside that we are cut for a higher purpose that is being currently denied unjustly.  Go, get it!

To know that purpose, we will have to cut through a lot of clutter.  There is way too much garbage – in the form of irrelevant information – that clogs our minds. Sherlock Holmes’ concept of not allowing even particular knowledge, which may not be useful, to be accumulated needlessly, is a guideline.  Then there is Lin Yutang: “Besides the noble art of getting things done, there is the noble art of leaving things undone. The wisdom of life consists in the elimination of non-essentials”.  Free up memory to store much needed stuff.


Those of us who dare to be different and desire to rise above mediocrity, would also not fight shy of side-stepping from and eliminating needless relationships, commitments, transactions, social visits and such issues that are no longer meaningful, once the vision is set clear.  It’s likely that this approach may meet with hostility, scorn or even ridicule. The spirit of the injunction in Taittiriya Upanishad is to be involved only with those which are necessary and not any other.  Learn to junk stuff and just deal with essentials – what is to be done today. Knocking stuff off relieves a lot of you.

When you’re done, see whether the sky has fallen. See whether you’ve terminally fallen behind competition or lost ground in your career progression.  Check out if your worst fears have come to pass. 

They must have.

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