Careers & Brands

Steve Shu has an interesting piece up over at his blog on the importance of brand name recognition in employing firms:

But fact of the matter in professional situations, like when I'm in a room introducing myself and there are brand names like Booz Allen and McKinsey at the top of people's minds and perhaps sitting at the same table, people will often give me less attention until I back up my pedigree with actual experiences. Only then am I able to get myself ahead or on level ground. In some ways, it's another level of explanation that I need to get through before I can get across the message of the "real me".... in things like startup and engineering environments, where relationships are more closely knit, organization structures are small, and where interactions are more frequent between people, the notion of brand name will not matter so much. In a larger company, however, there may be many more one-off interactions (in certain areas of a company like business development or consulting), and brand name of your past employers may matter "more".

This seems like a pretty fair summary to me of the importance of brand name recognition in the working environment - most notably, that it's impact and importance varies from situation to situation. I would also add that training in a brand name environment is great from an anlaytical point of view - if you're in something like analysis or consulting, perhaps - but probably not the best option if you are looking at a purely results-driven discipline such as sales. The problem with sales training in environments where there is large brand name recognition is that the recipient of the training tends to learn to rely on the brand name of the firm to do his/her job rather than foster real skills and relationship development: it is, after all, here that "backing up your pedigree with personal experience" is the object of the excercise. The best way to do this really effectively is by having to.

Shanghai Diary Part II: Population Explosion

This morning our MBA class from BI attended a presentation at Fudon University given by Professor Peng Xizhe called "The population factor: How China benefits from and controls its human capital. Consequences of the one child policy." Professor Peng outlined some fascinating insights into the Chinese population explosion, and the various controls the PRC are trying to put in place in order to manage it effectively. 

At the forefront of concerns is the consumption habit of citizens in cities like Shangahi: for every family of one child in the city, for example, the consumption is equal to a rural family of seven children. When you place this startling consumption pattern beside the demographic that there are 542 million Chinese living in urban conditions (41.76%) of the population, and that is only growing, ecological resources become a key issue for consideration. Indeed, China is  currently overproducing against its ecological resources by about 42% - in other words, there's a growing deficit of biological materials to feed the developing population. From this aspect, the value of raw commodities looks perhaps permanantly to have been raised at at the very least a benchmark level (commodity prices are probably overpriced though as some of the current value is undoubtedly created by fearful expectations of this shortage reflected in speculation).

Professor Peng aslo made some revealing clarifications about the widening male-female divide in the Chinese population. Wheras the average birth ratio of males/females in most developed countries
is around 106 males/100 females, in 1990 in China the figure was 111.42 males/100 females by the turn of the milennium it had risen to 119.92/100 males. Most of this was created, he conceded by "pre-birth selective abortion, particularly in rural areas. However, the Chinese government has passed rigid laws to punish doctors who use ultra-sound machines used to determine the sex of the child." Naturally too, the issue of sex education is difficult in a society where conservative values are  still the norm, and the government has struggled in the dilemma of whether to provide contraception to young girls - particularly in urban areas, where marriage tends to take place now in the late twenties.

The one child policy is not as universal across China as some might suppose either: in fact, there are five current policies which are mostly regionally applied. The first is - most obviously - the one child policy, which is common in urban areas, as well as the rural provinces of Jingsu and Sichuan. Most of western China is less developed than East China however, and here regional authorities tend to have a different set of priorities. The second and third policies are two child policies either if the first child is a girl, or if there is at least a four year space between children. The fourth is a 2 -3 child policy which is allowed where the minority in the countryside is of a minority autonomous region. And the last - no numerical regulation - is applied in Tibet, where China does not regulate the population growth as a result of criticism by native Tibetans of the shrinking ethinic population.

The most major concern however may not be the size of the population, which is now being kept under control (in 2030 India will surpass China in population size), but the extent of ageing in the population in China. Right now there are about 7 working-age people to every 1 retired person, but by 2030 this figure shrinks to 3 working-age people to every 1 person of retirement-age; by 2050, just 2 working-age people will support 1 elderly person. Here is the conundrum, because Chinese population growth will become less than or equal to zero (in line with developed countries) by 2030 - 2035, but by the same measure, this will reduce dramatically the number of people able to provide to state benefits systems, upon which many of those of my generation will rely.

A fascinating lecture: pictures following are of Fudan University and the conference.

Shanghai Diary Part I: Lost in The Future

The past two days have felt like weeks since I have arrived here in Shanghai. The jetlag hasn't set in too badly since I tend to ajust fairly well to that sort of temporal departure (years of being brought up as an expat and travelling around lots as well as the fact that I don't tend to keep a particularly regulated clock wherever I am anyway), but still Shanghai feels a little like a dream right now. And a dream which is on sale.

China is a dream which is sold well, and sold hard to foreigners, and I defy anyone who visits not to get caught up in the excitement. Just as for the eighteenth century American settlers, one starts to feel well-studied economic rationale and all one's faculties of sensible analysis yield to a much more powerful, overwhelming force upon arrival, one in which there is no room for the cool and collected state of academic bypartisanship.

The following is the first part of my picture diary  from Shanghai.

In the Air!

Courtesy of SAS and Boeing, I actually have wireless internet at the moment, so I'm therefore this about thirty thousand feet above North Beijing (we are making our way down towards Shanghai now). For $26 for the whole flight it comes at a remarkable value too! Now that's what I call in-flight entertainment! What it does mean of course is that phoning from the air has just got about 1000% cheaper too, since you can presumably hook a mic up to your laptop (I don't have one here) and Skype out for very little now!

Anyway, battery limitations prevent substantial size of this post, but I thought these five personally selected Chinese proverbs would be appropriate considering the occasion and provocative from an organisational standpoint:

• An ant may well destroy a whole dam. This in my mind goes to the heart of business: the small-sized competitorslowly but methodically chips away at the large, static bureaucracy.

• Crows everywhere are equally black. I like this since it says to me two things: one, there are some things in business that come around again and again, and they always spell the same thing, and two, unless you redesign yourself, you merge into the sea of your competitors like one crow amongst many.

• A flea on the top of a bald head. i.e. know your market and make sure you are in it!

• No wind, no waves.

• An overcrowded chicken farm produce fewer eggs. This runs a bit against the grain of modern strategic theory. Ooooops, it looks like we better redesign our thinking!

See you in Shanghai!

Time Warner Can Win Big But Exxon Can't

Here is a great observation by Brian Pickrell over at Iowa Voice:

Interesting how the media reports that Time Warner's profits have risen, and don't have a problem with it at all ... Where's Chuck Schumer bitching that they must be gouging the consumer? Where are the proposed taxes on Time Warner? Because after all, Time Warner is a big company, and any profits made by them MUST be because they're taking advantage of the consumer!

My question is, why is it ok for some companies to make a profit and the media reports that as a good thing, yet another company (Exxon) makes a profit and it's pure evil?  Pretty sure I already know the answer to that.

Indeed. It's hypocracy all around when the media come to celebrating their own success stories while in the same breath lambasting those in other industries which are pulling in good earnings. Most journalists miss the hypocracy however, simply because they don't understand the functions of capital markets.

Celebrating gains by oil companies doesn't help sell papers much, either.

Where Media is More Trusted Than Government ...

Editor's Weblog reports on a poll conducted by Globescan, the BBC, Reuters and The Media Center which apparently "reveals that people around the world trust the media more than they trust their governments":

A recent international poll reveals that people around the world trust the media more than they trust their governments ... On average 61% said they trusted the media, compared to 52% who believed their government's explanations ... Trust in journalists was highest in Nigeria (88%, with 34% trusting the government), Indonesia (86% v 71%), India (82% v 66%) and Egypt (74%; government question not asked) ... Only in three countries did governments score higher than the media. In the US, 67% said they trusted the government compared with 59% prepared to put their trust in the media ... In the UK 51% trusted their government (media 47%) and in Germany 48% trusted officials (media 43%) ... The three other countries surveyed were Russia, South Korea and Brazil, where just 30% said they trusted the government version of events.

Upon closer analysis, it's difficult to see why Editor's Weblog are shouting so loudly about this one. Journalists usually love this kind of poll since it gives them perceived credibility where usually they only encounter ethical conspicuity, but look at the data of the poll closely and it reads almost like a satire. For a start, Nigeria, Indonesia, India and Egypt are hardly world centres of compassionate governence; indeed it would probably be hard in all these countries to find anyone more unpopular than the national government, since the populations have suffered decades of restrictions and supressions on issues of basic human rights or extremely corrupt and haphazard governence at the very least. The poll even admits that "the government question" was exempt in the case of Egypt.

Russia, South Korea and Brasil again are extremely dubious polling choices: democratic governments there are either only effective in an official capacity (in the case of Brasil) or relatively recently established (South Korea and Russia). So: in countries where most of the population has suffered or is still suffering the effects of brutal repression and corruption, journalists are more trusted than government ministers? On the other hand, in places where democracy has flourished to the prosperity of many, such as in the U.S.A. and the U.K., the reverse is true.

What does this say about the media?

Geopolitical WHAT?

From The Street:

Wednesday's drop in crude oil -- and the metals -- came after the Energy Department reported an unexpected rise in U.S. inventories of gasoline and oil in the latest week. In recent action, crude oil for June delivery was dropping $1.46 at $73.15 a barrel.

But the standoff between Western countries and Iran, the world's fourth-largest producer of crude oil, continue to provide support both for crude oil and gold. The precious metal acts as a hedge against inflation and as a safe-haven asset amid geopolitical uncertainties.

Someone tell me, WHAT genuine geopolitical uncertainty is there in the world today that hasn't been around for the last fifty or so years, since the Iran-contra affair? It's not as if the world is any less safe today because of terrorism: terrorist networks have just been replaced by other terrorist networks which have become dormant. Has everyone forgotten about the USSR "standoff" too? This was a lot more serious than the standoff between Iran and the west: if western countries really needed to, they have the military power to shut Tehran down overnight.

All-time-high commodity prices in light of geopolitical uncertainty is ludicrous when you think about the reality of it. If this is genuinely a major driver for the rally in commodity prices (and I don't think it is as much as China's growth, and even here there are strong signs that this is only being kept at its current rate by foreign investment) then it's only a matter of time before we'll start seeing bargain-basement prices for raw metals and oil.

Off To Shanghai!

I'm off to Shanghai for a week on Friday, on a study tour with my MBA programme to Fudon University. Apparently the hotel we're staying in has a wireless internet, so I'll be posting photos of my visit there and the various places I see.

 I'm hoping to get a good marketing campaign underway for this blog while I'm in Shanghai, so, all subject to everything going according to plan, I'll be sharing an account of that too. Shanghai seems like a neat place to conduct a marketing experiment: with twenty million people inside just under six and a half thousand square kilometers (that's less than one third of a square meter per person!), the word of mouth potential of a marketing campaign has to be one of the biggest in the world.

It's going to be fun!

Flying High, Long Haul

Via New York Times Dealbook, British Airports Authority (BAA) chief executive Mike Clasper advises shareholders not to accept an  £8.75 billion bid from Spanish operator Grupo Ferrovial:

"My message to shareholders is: Don't sell your shares. It's not the right time. It's not the right price," BAA Chief Executive Mike Clasper said in a statement.

BAA said it planned to spend 9.5 billion pounds on its London airports over the next 10 years and expected passenger traffic to increase 3 percent a year at these airports over the next decade.

BAA has hardly inspired confidence or trustworthiness in anyone over the past decade, but Clasper is probably right here. One of the ironies with the airline industry is that, despite all its woes, it shows no long-term shortage of growth in customer demand. BAA's figures are also compatible with independent research carried out which shows a growth last year in frequency and capacity of three and five percent respectively - which amounts to more than 920,000 fights and 146 million passanger seats.

This kind of growth is impressive in light of the troubles the industry has experienced with high fuel prices and terrorism scares: taking into account that confidence is picking up again in global security and oil prices are now starting to look inflated, as well as the fact that airports are not really affected by airline price wars if there's still a high demand and necessity for flights, and this could start to look like a very healthy business again fairly soon.

"Technical" Creative Accounting & Investment Psychology

From Enron Trial Watch:

Call it an Enron "metadata" moment -- that's when the testimony gets so dull the courtroom clears. In the Nigerian barge case an expert testifying on metadata -- the stuff encoded on computer files that show its origins and other details -- set the standard for dullness. Eyes glazed and attorneys joked about it the rest of the trial.

Accounting professor and million-dollar consultant Jerry Arnold rivaled that this afternoon. The guy's an easy act to follow. His discussion of accounting rules and opinions FAS 121, FAS 5 and APB 18 left only one journalist in the courtroom that typically has one dozen to two dozen. The jury panel, a remarkably alert bunch as always, did spend some time pulling on their lips, checking their nails, staring at the ceiling, staring at the wall and staring into space.

"I'm surprised there are as many people still in the courtroom," said Arnold, who has done this 50 times and knows the mesmerizing power of accounting rules.

There have been other Enron-related low points in trials. The Arthur Andersen case had some dull moments. There were a lot of accountants talking about accounting. But they did talk about shredding too.

The first Broadband trial was so tedious for weeks on end the judge said she started drinking coffee and jurors, lawyers and journalists alike napped.
One jargon-prone witness in that case actually enthusiastically said "Whether it be MPLS over ATM, whether it be precedent bit over IP..." Believe me, you don't want to know.

Lay lawyer Shawn Cleveland Tuesday gave a nod to the lack of excitement. "I'm sure they're enjoying your fine work," Cleveland said to Arnold of the jury's pleasure. Arnold's experienced response: "Thank you counselor but I'm not sure I'd use the word enjoy."

This type of testimony bodes well for the defense of Ken Lay and Jeff Skilling. In cases of immense technical complexity, unless there's a strong emotional reason for people to care, much of the time the jury feel they either do not understand the case well enough to pass a guilty verdict or that the nature of the case is so obscure it would be unjust to pass one.

Had the prosecution been able to try Lay and Skilling four years ago, with the crash of the equity markets still very fresh in the mind of many people, the above testimony would not have seemed nearly as boring - instead, most would be trying to make sense of it, picking it apart and analysing what they could.

But there has been a critical change in the mindset of many over the last five years: wheras previously the mentality was very much that it was the fault of chief executives of bankrupt companies for losing their many shareholders' once multitudinous paper net worths, there is almost a resignation today in public thinking that everyone, in some way or another, ended up getting a little to greedy and that we all got what we deserved.

This subtle transfer and sharing of the blame could well end up being the wild card for Lay and Skilling.

Norwegian and Global Equity Markets: Heating Up

Last Wednesday I gave a presentation to Norway Business Club (Norway BC) in Oslo. I have been meaning to put it up, but I've been busy with various things (like going to see Norwegian demonstrations). Open BC is basically an online business networking service, which began in Germany but now encompasses a large group of entrepreneurs, venture capitalists, academics and consultants all over the world. This was the first meeting ever of the Norwegian Business Club, and it was my priviledge to be presenting at this prestigious event.

Here is a summary of my presentation, titled "Norwegian and Global Equity Markets: Heating Up", with some additional commentary presented under each slide.

Sources of Innovation

From a class I'm sitting in on at my MBA at the BI, here are some interesting suggestions on sources of innovation for consideration:

• Unexpected occurrences

• Incongruities

• Process needs

• Industry and market changes

• Demographic changes

• Changes in perception

I would add that there's a difficult paradox inherent here: innovation usually comes along not when one or two of these sources appears statically, but when two or more of them are present and interactive with one another, and that the more sources and the higher the interactivity, the greater the environment for innovation. Indeed, this is what usually makes innovation so difficult: the sources are commonly reflexive, and influence the process and outcome of one another. Success in innovation however comes out of managing these components individually once they take on this reflexive relationship.

Standard & Poors: low on growth, high on value

There's a fascinating quick-and-dirty piece of anlaysis up over at Ticker Sense, illustrating just how undervalued the U.S. equity market is right now:

... of the seven recoveries since 1962, corporate profits have risen at a faster pace than any other recovery since 1962. Clearly investors should be bullish, right? ... investors must have gotten up on the wrong side of the bed at the start of this recovery, and have been in a sour mood ever since. Since November 2001, the P/E ratio on the S&P 500 has not only grown at a slower pace than any other expansion, but it has actually declined!

Illustrated with charts, and well worth checking out. One possible explanation for the undervaluation of such apparently profit-rich markets right now is that the money is geared towards growth, and despite the fact that the S&P seems to be recovering well, the general perception is that there's not a lot of potential growth when compared alongside other, more exotic markets like China. Bear in mind too that in the 1970's many of the companies listed on the S&P 500 were actually growth companies back then, and by implication merited higher P/E ratios.

Taking into account the fundamental changes in the dynamics of the S&P then, the key question is probably not when S&P stocks will pick up but where all those excess recovery profits are re-invested: it's all about capitalising off innovation as a value company.

May Day In Norway (in pictures)

A-list bloggers Glenn Reynolds, Michelle Malkin and Bill Quick have been breathless in coverage today over protests by immigrants in the United States to coincide with the internationally celebrated (with varying degrees) May Day. CNN has a pretty good account of the extent of the strikes, which have made immigration once again the big issue in the Untied States:

The immigration debate has split Republicans as midterm elections approach. President Bush, taking pains to woo Latino voters to the GOP, has called for a guest-worker program and a way to legalize the status of people in the United States illegally. A bipartisan measure backed by Sens. John McCain, R-Arizona, and Edward Kennedy, D-Massachusetts, would include the proposals Bush has advanced. Critics have denounced any legalization plan as "amnesty" and vowed to oppose it.

The demonstrations have impacted organisations all over the country, most notably Tyson, which was forced to shut operations today as a result. Via Instapundit, this report  over at Pajamas Media exemplifies the extent of the strikes in L.A., which is always a point of contention:

With large crowds of illegal immigrants gathering at two locations in Los Angeles, extensive backroom planning to avoid offending U.S. citizens appeared to have failed: crowds are carrying about 60% Mexican flags, just 40% U.S. or other flags. KABC TalkRadio reported “there’s not a sign out there saying they want a ‘guest worker’ program — they all say they want full amnesty.”

Indeed, there is so much going on it's easy to forget May Day in other parts of the world! So what was happening elsewhere? Here in Oslo, Norway, the world capital of social democracies, demonstrations were startlingly socialist, even by U.K. and U.S. left-wing standards. What is more, the demonstrations here are a cultural thing: almost the entire city seemed to be involved in one way or another. What follows is a photographic account of today's parades in the city centre.

Chinese Charades

The Stalwart has an excellent explanation up of the over-heating of Far Eastern emerging equity markets in light of institutional  funds which have promised investors continual investment in these markets no matter what the cost:

But then you have to remember that once again, when money is allocated to funds which have a strict mandate, it needs to be invested no matter what. Thing is, who says these countries have enough listed companies in order to accommodate this sudden shift in funds? Perhaps they're already fully valued. Perhaps an emerging market is only US$200bn in total. What then happens when suddenly a few billion dollars needs a home within 6 months?

Basically, one has to imagine that fund flows can change in magnitude by large, say 20%, increments per year. But on the flip side, an economy can supply only so many new businesses for sale per year. Economies build value in smaller, more steady increments. Without a boom of truly valuable IPO's, we're asking for trouble when suddenly a ton of americans decide they need a re-allocation to Asia. The result? Expensive emerging market stocks get bought just because they have to be and get ever more expensive. Small market + big foreign flows mandated for rapid allocation = bad companies in volatile economies rise to valuations at or above larger, stronger, more stable ones back in the US.  You pay the portfolio manager big bucks to be smart, but then he is forced to just invest along a mandate and buy his index.

This is an exact replay of what happened pre-1997 in Asia, except that time round it was in the private equity sector. In the early 1990's funds began promising multi-millions of dollars returns by buying into South East Asian (and in particular Chinese) private equity, only to find that most of the equity just wasn't there after they had found a place for the first 10% or so. The private equity funds were then forced into commiting their capital at no matter what cost. Instead of turning the funds away empty-handed, emerging economies made the situation worse by manufacturing private equity deals which could be legislatively contsrued as reasonable private equity investments, but which were in fact, not worth the paper they were written on.

China's continued encouragement of foreign investment should sound warning bells to anyone thinking of joining the Eastern rush at this stage, for this time round, the situation is potentially more perilous. Since this is publicly tradeable - and therefore quoted - equity which is being sold hard to emerging market investment funds, it adds another dimension to the boom-bust factor. At least last time round there was a limit to how much private equity could be sold to foreign funds before the game was up and investors realised what they owned was worthless, since there is no speculative capital gain to be derived from private equity unless you can source another buyer. In the case of this publicly tradeable equity however, funds are showing worthless paper capital gains on these foul investments, giving investors in the funds the impression that performance could not be better, and this in turn only encourages more good money to follow the bad.

Of course the governments of these emerging economies are only too aware that as long as they keep encouraging more foreign investment into the region, the game is not up. Unfortuneately for foreign investors, the longer this charade goes on, the more are going to feel even heavier consequences.