I've been catching up with overflowing blog feeds so here are a bunch of links that I thought were interesting for those interested in startups:
A few of the "real" numbers on startup survival rates (Small Biz Trends). Just a few notes that the author hasn't gotten into yet - just because a startup no longer exists, doesn't mean it failed - it can also mean that it was acquired or that the owners decided to go on to other things including retirement.
Making long distance partnerships work (New York Times). Since I've gotten into business myself, I've seen a number of businesses fall apart because the partners no longer seemed to get along. Partnership agreements are a must - because it's about planning for the worst and hoping for the best. I'd also figure out a way to resolve disputes if a majority owner isn't possible. It doesn't matter if business is doing well or poorly, I've heard it said that partnerships are like marriage without the makeup sex. Doing well just means fighting over more money, doing poorly has a way of creating paranoia.
What they don't tell you about starting a startup (Adeologue): "they never tell you - how painful it is." Too true.
8 ways to destroy a startup (mytton.net). I'd add a few other suggestions: keep costs as variable as possible. If the service you need isn't core, pay a little more incrementally and don't hope that you'll see all this success that you'll save all these costs by buying expensive equipment or adding fixed costs.
Not really so much advice for startups, but businesses in general: how to pretend you care (Seth Godin) even when you don't.
Just more proof that it's the idea that's becoming more important than the noise like relationships and inertia. It's an incredible time for entrepreneurs and creatives. I came across 99designs.com the other day which I thought was pretty cool. I'm also a big fan of iStockphoto.com (cheap professional stock photography that can be submitted by anyone). While some people call this crowdsourcing, it's really just about creating new more efficient markets for amateurs - markets that happen to have been enabled by the web.
I'm almost afraid to ask what that makes me. There are some remarkably silly things (Commentary Magazine, h/t Instapundit) that a few of the candidates for the US presidency are saying.
A few interesting links on the brain that I came across over the past few days. Managers take note: status is more important than cash (Scientific American). The developing science of thinking smarter and how managers can use it to improve productivity (HBR). Simple brain exercises that can improve your IQ (New Scientist).
update: for an open source version of the program for improving your IQ reported in New Scientist, have a look here.
I'm still trying to stay away from too much political commentary on this blog but this is too funny/scary. Be forwarned... be afraid... because she could eat you (h/t Donald Luskin)
PS. fwiw I'm not particularly enamored by any of the American Presidential candidates which is fortunate I suppose, since I'm not American. It's also nearly impossible to notice though how the media swings its support between different candidates... I remember seeing a few of these pics from the AP recently.
Filed under the category of 'stuff you should know but won't hear from the media or Presidential candidates', well except for maybe John McCain. China gets vilified for a lot of things. Helping to improve the standard of living of the poor shouldn't be one of them. From Christian Broda and John Romalis (h/t Greg Mankiw)
We document that much of the rise of income inequality has been offset by a relative decline in the price index of the poor [....]
We find that inflation for households in the lowest tenth percentile of income has been 6 percentage points smaller than inflation for the upper tenth percentile over this period. The lower inflation at low income levels can be explained by three factors: 1) The poor consume a higher share of non-durable goods —whose prices have fallen relative to services over this period; 2) the prices of the set of non-durable goods consumed by the poor has fallen relative to that of the rich; and 3) a higher proportion of the new goods are purchased by the poor.
We examine the role played by Chinese exports in explaining the lower inflation of the poor. Since Chinese exports are concentrated in low-quality non-durable products that are heavily purchased by poorer Americans, we find that about one third of the relative price drops faced by the poor are associated with rising Chinese imports.
A 3-year Fortune-500 study conducted by research firm Peer Insight found companies focused on customer-experience design outperformed the S&P 500 by 10-to-1 from 2000-2005. One more time for those in the back: that was 10-1. Your customers care about design; a lot; ten-to-one a lot. Even if they don’t (know it).
Design as a concept should be applied to all aspects of how a customer or client both interact with a product and from the business itself. So why don't so many businesses bother? Whatever the reason it's fortunate for competitors, startups and entrepreneurs.
Added bonus (not particularly related to anything in particulary): Instapundit calls it a crime against nature. Introducing the Uno: a 'Unicycle-Motorbike-Segway Hybrid'. I think it's pretty cool. I just wonder how it handles potholes - cuz that's what it'd be up against if the target market is developing countries.
PETA co-founder Ingrid Newkirk tells the New York Times that the prize offer caused "a near civil war in our office" and that "we will have members leave us over this." Newkirk observes, "In any social cause community, there are people who strive for purity." [...]
Purists see it as a moral surrender. "It's our job to introduce the philosophy and hammer it home that animals are not ours to eat," a dissident PETA official tells the Times. Purists also point out that carnivores suffer more obesity, diabetes, heart disease, cancer, and other diseases. Getting your meat from stem cells might not change that.
Pragmatists point to all the issues lab meat would resolve. No more cages. No more body-inflating drugs. No more slaughter. Less environmental harm. "We don't mind taking uncomfortable positions if it means that fewer animals suffer," Newkirk concludes.
My favorite subject in microfinance obviously happens to be its most controversial one: commercialization. While I'm not sure I would characterize the statist position in microfinance as being pure (simply given the often pervasive inefficiencies and poor business practices), those who object to commercialization and (unlimited) profitability lose sight of the end goal. For microfinance, it's about helping the poor make money to get out of poverty. For PETA it's about killing fewer animals. In the battle of ideas, both use economics as their weapons and as a result, both are considerably more sustainable. Then again, never one to shy away from controversy, proving others wrong (or being proven right depending on your point of view) over time just makes winning that much more satisfying.
The Freakonomics Blog has a great albeit lengthy roundup of how innovation can be measured. Practical advice on a fairly squishy subject that is fundamental to the profitability of nearly every business.
It's no secret that I'm a big fan of economics but I think many people mistake my enthusiasm as a belief that I only think about money. Personally I think it's a common error that people think that considering economic choices is "selling out". You often this idea in microfinance or any form of 'social activism'. The reality is that economics is an attempt to understand how people are influenced by incentives. No one has ever said that incentives must be in the form of money alone.
Money and markets are the needs, wants and desires of society quantified. Prices are the intersection where scarcity / abundance and need meet - which in turn help society to most efficiently allocate resources. The elegance and simplicity amidst complexity is very zen imho. While cash incentives obviously have their place, when it comes to reinforcing values, I personally feel that they can do more harm than good - for the simple reason that cash is only one way to motivate. Sometimes all it takes is recognition.
In the last few days I've heard the words "as long as they do something" at least 3 times in response to some blather about saving the world. The news cycle moves us from "crisis" to "crisis" - it's little wonder that a lot of us seem to be in a constant state of fear. But here's a reality check (from Motor Trend no less):
In 1900, the average life expectancy for an American was 47 years. In 2004, according to the National Center for Health Statistics, it was 78. In 1900, Americans devoted 50 percent of their incomes to putting food on the table. In the late 1990s, that figure had dropped to 10 percent. By the end of the 20th century, despite a five-fold increase in the U.S. population, forests continued to cover one-third of our land space (the world's forests have actually increased in size since the 1940s). Americans have three times more leisure hours over their lifetimes than did their ancestors in the late 19th century. I could go on and on.
So how does it make sense that we're sacrificing lives here and now (or in the very least making life a lot more miserable) for events that may or may not happen in the future? This is the nutty world we live in:
(3) Let's not forget the manufactured "crisis" in gas prices. Buried for instance in this older article, the Washington Post reports: "U.S. refining capacity today is about 16 million barrels a day, about the same as it was in 1983". And why haven't we built new refinery capacity? Government policy.
(4) In the meantime, protectionists bar cheap, cost effective and environmentally ethanol from entering the US. From Roger Cohen (h/t Instapundit):
Right now, the biofuel market is being grossly distorted by subsidies and trade barriers in the United States and the European Union. . . . What sense does it make to have a surplus of environmentally friendly Brazilian sugar-based ethanol with a yield eight times higher than U.S. corn ethanol and zero impact on food prices being kept from an American market by a tariff of 54 cents on a gallon while Iowan corn ethanol gets a subsidy?
Forget crosswords: mental exercise doesn't necessarily help slow or reverse cognitive decline. Forget fish - they might actually poison your mind. A bunch of other points: 6 Intelligence Myths Exposed.
All students are required to take courses in contracts and in torts, and they're randomly assigned to an instructor for each class. Some of these teachers have Ph.D.s in economics, some in philosophy and other humanities, and some have no strong disciplinary allegiances at all. Professors are encouraged to design their courses as they see fit. Instructors from economics may emphasize the role of contracts in making possible the efficiency gains of the marketplace, while philosophers may emphasize equal outcomes for contracting parties. So economists teach about efficiency and philosophers teach about equality.
It turns out that exposure to economics makes a big difference in how students split the pie, in terms of both efficiency and outright selfishness. Students assigned to classes taught by economists were more likely to give a lot when it was cheap to do so. But they were also much more likely to take the whole pie for themselves.
Greg Mankiw baits: "Does economics make you selfish?". A few thoughts: first, I wonder what happens for those who have a background in both philosophy and economics. The fact though that these are courses towards law degrees would suggest that most people have taken some form of philosophy... (law tends to attract those social justice folks who eventually become ambulance chasers of one type or another) so wouldn't the better question to ask then be 'does economics make you more rational?'. Of course this may also say something about the Finns who Ray Fisman, the author, point out value equality over efficiency.
Research by the Federation estimated that Chinese companies raised some 800 billion yuan through informal channels last year, among which researcher Chen Yongjie said over 20 billion yuan likely came from Wenzhou.
Businesses that raised money in this fashion would likely be charged a 5% monthly interest rate, amounting to around 60% in one year.
While China hasn't opted for an outright cap on interest rates, their restrictions and regulations on banking have forced people to borrow privately - at far higher interest rates and lesser efficiency. The irony is that this results in the implemented banking regulations having less influence - with their current attempts aimed at controlling inflation and coolling the market - than intended as the black market for loans grows.
With the economic success of Compartamos in microfinance, this has only added to calls by some to cap interest rates in the interest of the poor. Economics and public policy are bizarre beasts in that most gut reactions on "what we should do" turn out to be wrong. They're wrong because they're short term and short sighted. It's one of the major reasons there's an upswing in protectionism in this year's US elections. Gut reactions feel good politically and may even result in short term gains, but it's in the aftermath when the costs often far more substantial than the initial crisis to begin with, really start adding up.
I find it bizarre though that there are enough people who enjoy learning the same lessons over and over again... then again this is a testament to the progress the US has made. It's probably one of those 'two steps forward, one step back' sorts of things.
Build a detailed model of cash flow so you can test every decision against it and manage the business for cash conservation.
Push out accounts payable as long as you can. This takes a tough CFO or controller.
Structure deals to be paid up front. Resist payment terms as much as you can and negotiate discounts to get paid up front if you have to (we were very successful with this strategy with all but our largest customer).
Don’t destroy your market but do some aggressive deals if you need to in order to keep the top line and your market share growing. If you slow down it’s a self fulfilling prophesy and you’ll run out of money – which leads to loss of control of your destiny.
Spend in sales to keep growth up. Sales and R&D are the critical value creation points of a software business, focus on them and tighten your belt everywhere else
Manage performance aggressively. If someone isn’t performing let them go quickly and only replace them if you absolutely have to (see prior point).
Squeeze into your space. Put off taking on new rent obligations as long as you possibly can.
Get a line of credit and draw it down before you need it. By the time you need it you won’t be able to get it, so get it while you can.
Likewise if you need to raise venture capital do it well before you need it , and don’t get greedy on valuation. A successful company makes everyone money, don’t risk long term success for valuation or your percentage.
If you have to, take the company through a pay cut.As CEO cut your pay first, cut all bonuses and consultants, cut executive pay and when you have no choice cut everyone’s pay to make it through. Believers will stick with you, and they are the ones you want."
All the while of course, I think a firm can't lose sight of the core value they provide to customers while continually trying to cut costs and add to that value. On a marginally related note, while economic cycles tend to be a fact of life, Bernard Moon seems to be worried that the US is becoming a nation of nontrepreneurs based on the school system and standards that have become too accommodating. I'm not so pessimistic. It's sort of funny but the the same characteristics that he seems to be concerned about are also different sides of the same coins of characteristics that USA Today considers to be driving entrepreneurship in greater numbers amongst Generation Y. As I noted on his blog, I would be far more concerned that governments reduce the barriers to entrepreneurs and businesses to generate wealth. Once the incentives are in place, entrepreneurs will come.
With wealth in large part the result of innovation, I'd be a bit more concerned about this: according to the US PTO Director believes that while applications for patents are up, quality is down. I say that I'd only "maybe" concerned just only because I wonder how one distinguishes between a high quality and low quality patent. Insofar as innovation goes, the US still leads and seems to have the knack for developing technologies far faster than anywhere else in the world from idea to financing to execution. Patent reform though will be something to watch in coming years and will have an impact far longer than what looks to be a recession coming up.
I think the appropriate response to people who worry about global warming and ramble on about how "we have to do something" is to ask them when they gave up meat for gaia. From the Guardian:
Producing 1kg of beef results in more CO2 emissions than going for a three-hour drive while leaving all the lights on at home, scientists said today.
Glenn Reynolds' perspective has it right - I'll believe it's a crisis when the people who say it's a crisis start acting like there's a crisis. Further, with this initiative, similar to the X-prizes, PETA gets it - the route to change isn't about restraining or depriving people of goods and services they want. Real and sustainable change will come from markets and ideas. If their prize really achieves their goal of spurring the research to manufacture meat that's indistinguishable from the real thing they will do more for the environment and for animals than any initiative they've had before.
While Lenin definitely wasn't a great environmentalist, in celebration of his birthday Earth Day here are a few points from Glenn Reynolds (of Instapundit) to keep in mind (New York Post) - they'll either give you conniptions or comfort:
"Reducing carbon emissions by making people poorer will never happen. Just ask people in China - now the world's No. 1 carbon emitter - how interested they are in returning to the economic conditions they suffered a few decades ago when their carbon emissions were lower."
"Burning fossil fuels is a lousy idea for reasons that have nothing to do with global warming. These hydrocarbons offer important applications as fertilizers and chemical feedstocks, making it foolish to burn them for fuel."
"New technologies are generally cleaner, safer and more efficient than old ones."
I was having lunch with a friend over the weekend and server overheard us arguing over the merits of a carbon tax as opposed to a carbon trading (yes, I really am this boring even in real life). He argued for the merits of carbon trading though ended up concluding "as long as 'they' do something." While I am a realist recognizing that something is probably going to happen even if it's not necessary, the reality is that 'they' already are. Let's forget for a moment that the world has been cooling since 1998 (ref: BBC! also see controversy here). It's just that the difference is that 'they' for me means markets. Central planning is no friend to the environment.
Update: Something you don't normally associate with either Lenin's birthday and Earth Day - Capitalism Day?
Just more proof. If you haven't heard of them, Amazon Web Services (AWS) is basically a computing platform for online applications that basically rents out its data centers on an as needed basis much like in the same way you might buy gas or electricity without actually having to own a electrical generating plant or gas refinery. Small firms can have the benefits of a large scale operation and not worry about the costs and headaches of building a data center (AWS is a something that I'm considering for our own web app). It turns out though that despite its original target market, the biggest users of AWS aren't small firms: "the biggest customers in both number and amount of computing resources consumed are divisions of banks, pharmaceuticals companies and other large corporations who try AWS once for a temporary project, and then get hooked."
It's also more proof that technology is really leveling the playing field reducing transactional costs enough that companies like Amazon's S3 can offer its services to small and large firms at not too dissimilar costs and still make money. It's part of that theme I like so much - the need for capital in capitalism is slowly being chipped away. It's all about the idea.
For a bit of a more serious post... After having the Olympic flame snuffed out and French President Sarkozy declaring that he would not be attending the games, there's a great deal of anger in China - here's a picture of a cab in Qingdao, posted by Time Magazine from a popular Chinese site:
The irony is that as of 6 months ago, if you had asked the average Chinese person which country they preferred - the US or France, they would have said France without a doubt. France because they've historically had a policy of appeasing China in return for economic advantage. Ironically I've disliked France for those very same reasons - particularly because I believe they bear a significant responsibility for formenting the hate that resulted in massacres in Rwanda.
Nationalism is not in short supply in China. My msn is lit up with almost all my contacts/friends in Hong Kong and China with a heart and the word "China". TechCrunch notes that China hackers have taken down a sports site - sportsnetwork.com speculating that they could have even been hackers sponsored by the government. Frankly, I don't think the government would need to - but I suspect they generally look the other way given the less than optimal ways these people could spend their time from within China. And unless you've had your head in the sand, you know that there's a lot of CNN-hating going - Imagethief's posting a banner ad with bullets going through the CNN logo. It's not going to be a fun-filled few months in China (and that's just adding to the already sweltering polluted air and the throngs of people). China Confidential makes a post about Chinese authorities seemingly concerned about the direction the outbursts are going saying that people ought to 'harness their patriotic feelings for the purposes of economic development'.
Personally, I think that there's a great deal of overreaction. To quote Hamlet: "The lady doth protest too much, methinks." But in a way China has gotten what it's wanted - having invested so greatly in the Olympics. Is it any surprise that anyone who has grievances against Chinese rule would act now? I even got a pretty lengthy email from a family friend (who has lived in Canada for decades) who hasn't ever sent anything like that to me before questioning the western bias on China and Tibet. While I would tend to agree that there is this silly attempt to deify the Dalai Lama and whitewash Tibet's sordid past not to mention the Dalai Lama's acceptance of tyrants and feudal lords, China's often heavy handed reactions have not won them friends. Free speech and democracy are rather difficult concepts that I don't think that we in the West always get it right either (look what happens to anyone who thinks that global warming is anything but anthropogenically caused).
If the mark of maturity is that the first reaction to dissent and disagreement is to use words and reason, China (and many of its people) seem to be quite content in the throes of puberty if not even adolescence. And lest there be any doubt, I don't think there is anything that the government in China wouldn't do in order to maintain power and political stability. For this reason, while I acknowledge that it's also self serving, I don't think the appropriate reaction would be to shut China out but rather to engage but respectfully disagree. The Chinese government has drilled the idea of nationalism into the heads of its people for at least two generations now - and it doesn't seem to take much to get them whipped up into a frenzy (witness the manufactured "spontaneous" riots over Japan a few years ago). But if the choice is to have anger directed outwards to what has been a friendly ally or inwards, I have no doubt which way the Chinese government would push. Not that I think anything will happen, I would not want to be part of the French delegation in China during the Olympics.
I seem to have let in a nasty piece of spyware. It has sort of crippled my laptop which has been down for the past 48 hours - which in my world is considerably longer. Quite frustrating. Hopefully, I'll be back up and running shortly.
In the meantime - I thought this ecard was semi-appropriate for the occasion (but it's not the reason my computer is down - honest!)
I'm still a bit skeptical but on its face of the idea of "libertarian paternalism" makes sense provided all the options are presented clearly. The authors of Nudge have written an editorial in the LA Times. The basic premise is this: we make decisions based on how information is presented to us and how choices are structured. So from a public policy perspective, the authors make the argument that those who provide services should structure the "beneficial" ones in such a way that buyers must opt out and make it more difficult to choose inertia versus making changes that are presumably good for them:
We find ourselves these days mired in political battles that pit laissez faire capitalism, with its reliance on unrestricted free markets, against heavily regulated capitalism, which favors government mandates and bans in an effort to ensure "good" outcomes. But this opposition is false and misleading. Any system of free markets will include some kind of choice architecture, and that means libertarian paternalism can offer a real "third way" around the battleground.
The most important social goals are often best achieved not through mandates and bans but with gentle nudges. In countless domains, applying libertarian paternalism offers the most promising alternative to the tired skirmishing in the increasingly unproductive fight between the left and the right.
There is the opportunity in developing countries to build entire healthcare systems from scratch - and therefore you don't need to work around entrenched groups who actively fight change and to maintain their privileged positions. A pretty inspirational presentation of someone who is attempting to build a first class healthcare network with third world costs here:
In many ways I think growth in healthcare will mirror that of microfinance (making loans to the poor mostly to build their own businesses and mostly in developing countries). Both have the potential to be transformative for the clients they serve. It is however microfinance that is seeing the first glimmers of real economic success for some of their largest and fastest growing players. This success however has not come without controversy.
I've made my views known on another site which is one of the reasons I haven't talked about it as much here. I hold the minority view amongst the pre-existing interested parties in the field (with my views being seen as unwelcome by some). I personally don't have any issues with the wealth Compartamos has created its shareholders for a few fundamental reasons:
Profits were directly reinvested into the organization. They weren't paid out in the form of dividends. Thus the tradeoff was had the firm lowered interest rates from the beginning this would have resulted in fewer people getting access to funds.
Further, I think what gets left out is the goods and services that borrowers create with the funds they get. Someone who is able to make more money means by economic definition that they will have a bigger impact on the local society because they are serving a more needed demand. As a result, by artificially dropping prices on loans, you have too many people to serve initially and you may not have enough funds to lend to the most promising businesses. So there is also a little self selection here.
That I am in the minority in this view isn't surprising given the historical not for profit roots under which microfinance developed (many see even the concept of profits unseemly andn vulgar). So now you're more or less caught up (I purposely have tried to stay away from talking about too much microfinance on this blog for the simple reason that I've been trying to avoid making it too eclectic in terms of the subject it covers but I think that you can't really talk about microfinance without talking about entrepreneurship at the same time). There was a great summary of an event hosted by the Council on Foreign Relations posted by Rob Katz at the Acumen Fund's Blog. It's a bit long but if you have the time read the whole thing if you're interested in development in the third world - it's quite remarkable for the calibre of people in the field and you'll probably learn something. A few of Katz's notes:
" 82 percent of all microfinance clients worldwide are being served by just 2 percent of the MFIs ... The vast majority of MFIs have 3,000 borrowers or fewer – and WWB believes that you need to have at least 5,000 to really be sustainable"
"I was especially struck at how easily Iskendarian and Zafar can move from discussing the business aspects of microfinance to the social aspects. Their organizations seem to have been able to merge these two goals – financial sustainability and poverty alleviation – without compromising either."
Update (April 20): For the "other side" - have a look here (Enterprise Resilience Management Blog). While consistent with the criticism of Compartamos, as a personal note, I would have expected more from Enterprise Resilience which bills itself as something of a development focused consultancy that supposedly recognizes the role markets play. It's something that I've often wondered about the bulk of people who are currently in microfinance - whether they understand the role that financial services play in markets and why microfinance has worked when other interventions have failed so miserably.
Or just plain awesome tunes depending on how you look at it. Overclocked Remix bills itself as the "unofficial game music arrangement community" - yes, it does indeed take all kinds. I've always had a soft spot for Lemmings... something about animated lemmings rhythmically leaping to their deaths choreographed to uplifting music makes me happy.
From Krugman: "“It's no longer safe to assert that trade's impact on the income distribution in wealthy countries is fairly minor,” he wrote on the VoxEU blog last year. “There's a good case that it is big and getting bigger.” He offered two reasons why. First, more of America's trade is with poor countries, such as China. Second, the growing fragmentation of production means more tasks have become tradable, increasing the universe of labour-intensive jobs in which Chinese workers compete with Americans."
Responds the Economist: "[These two points] proved hard [to prove]. Certainly, America's trade patterns have changed. Poor countries' share of commerce in manufactured goods has doubled. In contrast to the 1980s, the average wage of America's top-ten trading partners has fallen since 1990. All of which, you might think, would increase the impact of trade on wage inequality. But by how much?"
"“How can we quantify the actual effect of rising trade on wages?” Mr Krugman asked at the end of his paper. “The answer, given the current state of the data, is that we can't.”"
Krugman himself acknowledges the difficulty in quantifying the effect is of trade. Color me skeptical as I'm still not convinced that inequality in itself is undesirable provided that there is income mobility. As small manufacturers and designers know, it's increasingly easier through firms like my own to avoid making substantial capital investments and outsourcing production. Real wealth is therefore achieved by great ideas - those who innovate and can create new products that people want. Further, technology means that for every dollar people earn, they can afford a lot more today than they could only a decade or two ago.
After pointing out the New York Times' coverage of a study on happiness and wealth, the last two installments from the Freaknonomics blog here and here. More from the Economist here. The Economist notes:
It may not be the wealth that makes us happy, but rather being successful. Living in rich county may not be so important so much as being somewhere that provides opportunities to improve your financial well being.
Including a funny point by a commenter:
Natural selection, I would think, would have prevented any linkage between laziness and happiness.
I saw The Forbidden Kingdom today on a bit of a whim. A few points - the first being that digital projection/filming made the cinematography amazing. It's one of the things that can work both for a movie (e.g. Yifei Liu) or really against it (making what might have been slightly unrealistic backdrops into obviously fake ones or Michael Angarano's skin).
The fight scenes are generally brilliant as one might expect despite (or possibly especially because of) their ability to defy the laws of physics and a few initial awkward moments. The one thing that bugs me about movies like this, is the bad Chinese accents (whoever thought that Jet Li or Jackie Chan could handle more than a few lines in English - especially when talking to each other should be fired). It would have been far better had they used subtitles. Otherwise, while it wasn't worth $10 bucks, I was entertained - and because it was highly predictable I did go in entirely unworried that there would be a happy ending.
There's a sort of urban myth that companies spend millions designing products that will fall apart or otherwise cease to function just three days after their warranty expires. This would cost extra, be difficult to achieve, and would probably result in customers buying a rival's product next time because the first one turned out to be no good.
The Adam Smith Institute's blog is quickly becoming one of my favorites. When it comes to the 'corporations are liars' meme, this conspiracy is usually followed quickly by the idea that oil companies are keeping 100 mpg cars from us.
In an American election year, this is a useful reminder (Adam Smith Institute Blog):
Unless you realize how wealth is created, you’ll fret about how to distribute it more equally, thinking the only way the poor can become richer is by receiving some of the wealth the rich have.
A recent WSJ article "U.S. Upstart Takes On TV Giants in Price War" illustrates a few trends well. First is that the ability to compete is not dependent on the amount of money you have. Which leads to the second and third themes - separating manufacturing/marketing and as a result, leveraging manufacturing resources in China/Asia. In this case, Visio, a recent startup, has been flourishing in what has traditionally been a highly capital intensive business, while the established players have been struggling:
Rather than sell the sleek sets as luxury items, he figured he could make flat-panel TVs that were affordable to average consumers. Vizio's CEO, William Wang poses for a picture at the company's headquarters in Irvine, Calif., in August 2007.Back then, the computer-monitor business had largely transitioned from clunky cathode-ray tubes to flat panels. Mr. Wang knew many of the parts in flat computer screens were used in flat-panel TVs. Tapping his computer contacts in Taiwan, he calculated he could get enough parts to qualify for a bulk discount and use them to make inexpensive TVs.
[...] Mr. Wang sees no disadvantage to not owning factories. So far, Vizio has largely made products based on existing technology, although the CEO does have ambitions to dream up new products. "R&D is the key for innovation, not manufacturing," he says.
The basic idea is Vizio handles the design and manufacturing of flat panel sets. Working with and even taking on their primary vendor as an investor based in Taiwan, Vizio has been producing at prices far cheaper than established players. To date, they've been able to produce at targeted volumes despite sometimes difficult to find components.
This is sort of random but it goes with the idea that these days ideas matter more than money. Also speaks to the Medici effect - using ideas from one industry to solve problems in another. It'll be amazing if it turns out to work:
Kanzius has developed a machine that uses radio waves and nanoparticles to destroy cancer cells in a way that leaves the surround tissue spotless. That means cancer treatment with zero side effects.
The treatment is remarkable in that many scientists are saying it’s the most exciting treatment they’ve seen in twenty years, and because Kanzius isn’t a scientist, he’s a radio hobbyist.
I think the key difference is that elsewhere around the world, the asset bubble wasn't fueled by credit though I could be wrong. From what I understand Shenzhen's property values have been falling and across China, they could be set to fall further (though this is more the result of an aggressive attempt to cool property prices in China). The thesis is that the US decline in property values have triggered the fall elsewhere. I'm not so sure - a graph of foreign markets vs the US here. This is what I think some are trying to say.
Too tired to separate everything and I want to clear out my tabs so here's a bunch of links that I've been reading, as usual they're heavily tilted towards business/entrepreneurship (most culled from Hacker News):
Entrepreneurship: 10 businesses facing extinction in 10 years (Entrepreneur, H/T Club for Growth) [Am not sure about arcades. They might not be coin operated but I think they'll morph since at it's core it's about figuring out how to provide group entertainment and doing it at home might not always be appropriate or have all the equipment needed... sort of like movie theaters]
Economics: Reconsidering Milton Friedman (New York Times) [That incidentally would be the New York Times reconsidering Milton Friedman, and remembering him for almost everyone else]
A 'Personal Finance columnist' in the Washington Post explores what she sees as the "next generation of markets" (H/T Paul Kedrosky). Her observations ignore why these countries are undeveloped in the first place. There are a few basic determinants for development (as paraphrased from Brink Lindsey's Against the Dead Hand):
Stable government (of which democracies provide the most peaceful transitions and in which countries in civil war have none)
Private property rights
Free trade
Availability of foreign investment
To assume that the countries she cites in the Middle East and Africa will result in growth simply as a result of time would be foolish. A better starting point would be to look at the Heritage Institute's Economic Freedom Index or the World Bank's Doing Business guides. While I think it's clear that there are some pretty interesting developments in a few specific countries, the dangers of investing in them should not be discounted as development at its core creates turbulence and therefore politically can result in a two steps forward, one step back type progress. On the other hand, it also seems pretty clear that some countries have only stepped back for the past few decades - Zimbabwe being an obvious case in point. If Zimbabwe and Venezuela prove anything at all, it is that countries do have a choice of whether or not to integrate with the world economy. With oil at a historical high, it is also dangerous to believe that this bonanza will go on forever.
The obvious (though possibly not to Absolut where they aren't quite familiar with that thing called the "Internet"): "Don’t run ad campaigns that depend on nationalist sentiments at the expense of other nationalities."
About damage control: "Stop Digging! Anytime anyone, whether politician, public figure, or commercial enterprise, has to issue multiple apologies, including apologies for the previous apologies, then you know they have committed cardinal sin number one: Don’t piss off a bunch of people who have the power to affect your cash flow."
Yeah it's probably a bit idealistic of me, but I don't think it makes it any less true. For companies to succeed, they have to be more than what others offer. More importantly, I think passion is infectious. While I think infusing values into your product is sometimes dangerous, it also depends on what those values are. On that meme, consider Chipotle:
Good food wrapped in a socially responsible message has created legions of Chipotle fans -- and a superhot business. Acquired by McDonald's in 1998 when there were only 14 Chipotles, the company went public in 2006 with 500 stores and watched its stock rise from $22 to $110 in 18 months. The now-independent outfit is enjoying an 80% revenue run-up over three years, and by year's end, it will have 840 stores and top $1 billion in annual sales.
That said, a p/e multiple of nearly 52 is a bit rich for my blood at a price of $110 according to Google Finance. An alternative is their B class shares which have 10x the voting power (a class of shares formerly owned by McDonald's and then spun off), though not cheaper at a price of $97 and p/e multiple of 47. There's gotta be an arbitrage opportunity in there though.
I've been following the problems in Zimbabwe with considerable interest. From an economics perspective, like Venezuela, it provides an excellent example of what not to do. But as a humanitarian crisis, this is one of the cases that I can't help but feel considerable empathy for their plight against an overwhelmingly corrupt military supported "leader".
It's interesting though that it's a British legacy that has resulted in the fact that there's any opposition at all which gave the junta a peaceful way out which they have less than politely declined. Now there's this. According to the New York Times:
“I wouldn’t describe that as a crisis,” Mr. Mbeki told reporters after his discussions with Mr. Mugabe and before the summit meeting began. “It’s a normal electoral process in Zimbabwe.”
But let's remember that Thabo Mbeki, while the President of South Africa, is the same man who only recently subscribed to the possibility that AIDS was related to HIV to avoid having to deal with the crisis which only got worse under his watch. Since his Presidency, he has been a reliable supporter of dictators and despots - or in his view: 'African self determination.' I genuinely wonder if it's because he's staggeringly corrupt or inept. Mr. Tsvangirai, I hope you burn down that bridge.
I hope this proves instructive for China: oppressed people tend to remember who their friends are.
Update: The state of Zimbabwe gives credence to studies like this: "A country whose autocrat is assassinated is 13 percentage points more likely to move toward democracy in the following year than a country where the assassination attempt on the autocrat failed."
I've generally had positive views of the Olympics - on the other hand, I've also thought of myself as an environmentalist and a bit of a socialist but I've outgrown that. In any event, here's a different view of the Olympics: "The Olympics are a vulgar, ruinous hullabaloo the chief functions of which are to facilitate graft on a spectacular scale and to act as a vehicle for the promotion of despotic values. They are, at best, unedifying and, at worst, intolerable." (Samizdata, H/T Instapundit)
Glenn Reynolds highlights one of the comments: "I think you're being entirely too kind."
Ideas of what motivate people / turn them off, or even influence them have always interested me... hopefully it doesn't have much to do with the megalomaniac side of me:
You may not be procrastinating for the reasons you thought: "for Steel, procrastination can be explained by an insight borrowed from behavioural economics called hyperbolic discounting. This is the tendency to value near-term rewards more than long-term ones. For instance, some people will choose a payoff of $50 today over $100 tomorrow." (Toronto Star)
Some thoughts on why stories matter to the work a business does - both in marketing and motivating employees (Seth Godin Blog)
Steven Levitt, an author of Freakonomics, reviewsNudge, a book that explores behavioural economics (something he is skeptical of, which actually surprises me given his own book). Nudge is described as: "Since people don’t think very hard about the choices they make, it is a lot easier to trick them into doing what you want than to try to educate them or incentivize them to change their behavior. There are many ways to trick people, but one of the easiest is simply by giving thought to the way choices are arrayed to them, or what they call “choice architecture.”"
The world according to the official world of Xinhua - perhaps more revealing in what they don't tell you. While I'm all prepared to accept the argument the foreign press is biased, China's attempts to control information really haven't done themselves any favors.
The Art of the Start by Marketing Evangelist & Venture Capitalist Guy Kawasaki is a presentation worth listening to. The idealist in me was drawn to this point: "I found out that the companies that are successful start out to make meaning, not money"
Seth Godin, has a Bootstrapper's Bible: "The e-book Bootstrapper’s Bible is a must-read for any entrepreneur. It’s a 100 page ebook that takes about 2 hours to read, but it’s time well spent."
And while I can't say I'm generally fan of the guy, "grand strategist" Thomas Barnett raises an eyebrow of disbelief over the academic view that discounts the role of business in society.
Somewhat questionable, apparently some journalist thinks that there's merit to learning business secrets of the Mafia (figures that it's the Guardian)
Picking the right partner is definitely not an easy thing (speaking from unfortunate experience). David Alison, an entrepreneur offers his thoughts. My personal advice? There's no such a thing as an equal partnership - make sure that ownership structures also reflect this. Disagreement is inevitable - just make sure there are clear paths to resolution.
Another note of caution, Fred Wilson, a VC laments the broken paths to "liquidity" and longs for another way. I don't agree but it's an interesting point of view particularly from a VC. On a somewhat related note, some additional ideas to how a web based startup can make money other than advertising.
Let's not forget that a wave of protectionism led to the Great Depression. Maybe it's just part of the Democrats' continuing descent into insanity. It would seem bizarre that given the fairly broad base of support (and funding) to Hillary Clinton and Barack Obama that both have now become beholden to special interest groups. By fighting trade, they condemn developing countries to poverty while reducing the standards of living of the poor in the US. Even forgetting for a moment the merits of economic liberty, there's little to no evidence that trade causes a net decline in jobs (and in fact quite the opposite, consider the record low unemployment in recent years despite a growing population). Meanwhile politicians and demagogues perpetuate the myth that manufacturing is dead.
While protectionism is on the rise - particularly against highly educated foreign workers (and more here) who contribute significantly to the wealth creation on which US prosperity depends, maybe the good news is that the Department of Homeland Security has quietly relaxed rules that allow more foreign workers without congressional approvals (disclosure: I used to hold an H1-B visa though this rule wouldn't have helped me).
But it's the Columbian Free Trade Agreement that's been most in the news, from the Boston Globe:
The agreement, which President Bush sent this week to Congress for an up or down vote, essentially makes permanent the trade preferences that Colombia has had for 17 years. What is new is that the treaty opens the Colombian market to US exports.
Latin America is following this issue intently. Spurning Colombia undermines an ally in a dangerous part of the world and hands Venezuela's Hugo Chávez a victory. It sends a message that the United States doesn't know who its friends are -- or doesn't value them.
I thought Democrats were supposed to build on international goodwill - not destroy it. May Hispanics take note and serve notice that they represent a far larger and more dynamic group than dying unions gasping in vain to show their relevance. And we haven't even started talking about trade and China...
Good News/Bad News: 1996 vs 2008 (The National Review). [Ever since a Republican came to the White House, it's seemed as if the press have been falling over themselves predicting the coming of the next recession. While I don't doubt that the US may well be in a recession as a result of the credit and real estate bubble bursting, things may not be as bad as proclaimed.]
Good News: The US isn't falling behind in Internet infrastructure, after all. (New York Times, of all people). [I've never bought the claim that American unilateralism has alienated Americans from the rest of the world. Just like environmental technologies (see solar). But that's the power of American markets - market incentives are far more powerful than the subjective preferences of jealous and petty politicians in foreign nations.]
China and India collide in Burma (Wall Street Journal). [While China is often seen as an American rival, much closer geographically, India is a far too often overlooked counterweight.]
What happens when "overall energy policies are dictated by imbeciles, lackwits, and lawyers". A study of South Africa and their energy troubles (Instapundit). [Coming to a country near you?]
Misplaced priorities: "[fears of] the loss of a million or three lives from bombing admittedly pales, of course... [to a hole in the ozone layer, of course]. (Paul Kedrosky)
I've often wondered if pricing so obviously off really works. Apparently it does (Scientific American). Lesson: consumers are less likely to bargain down on an uneven number (possibly because they think a number has been less arbitrarily generated which is curious given that presumably would negate the idea that $19.99 works). I wonder if it's the same for B2B?
Sorry, i really couldn't think of a better title. I had a talk with good friends a few days ago about closing a relatively unsuccessful segment of a business they were involved with. They made the case that their mistake was in not properly framing their business as one that is about pursuing profits versus the specifics of the business itself (a profitable segment had carried the business for quite some time until they abandoned the money-losing segment - sorry for being vague, but I'm trying to protect the innocent).
Point being that I wouldn't be so broad as to define a business as merely about the pursuit of profit versus for instance, the pursuit of value. That said, the need to constantly consider changes and transformation when your core business isn't profitable definitely isn't in doubt. I'd bet few people know Lamborghini started out as a tractor manufacturer or that Wrigley's gum started out making soap. Read on here (H/T Paul Kedrosky)
A discussion of why the RMB will continue to appreciate (H/T ChinaLawBlog). Personally I think that the review doesn't properly account for the questionable state of banks in China but it does present a pretty good case for what the pressures for upward momentum are.
Are poor people poor ... because they're poor? (NYSun) [My gut says no - though I think there's merit to the argument that the level of bureaucracy to getting government handouts actually breeds more poverty, but then there's this, the lasting effect of Clinton's welfare reform plan (Boston Globe)].
