Shiny Link Dumping

Stuff that I've been reading:

• 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.]
  
• Startup Kids grow up to be millionaires so fast. (Washington Post)
• 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.]
  
• APL offers (fast) guaranteed full-container load American deliveries (or else they'll refund 20%, China Economic Review). [Undoubtedly at a price, but it's also long overdue. Hopefully others will follow.]
• 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?]
  
• Because survival skills matter. And what not to do about zombies. (H/T Instapundit)
  
• Biofuels and being, er... what's the opposite of green? (Reason Magazine)
• 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)
• Crazy China: Hair Salon scalps customers. (Yahoo News)
• Crazy China: Faking it. (Yahoo News) [At least he was fired.]
• The Democrats and Chile (National Review) [Playing politics with international relations and a misguided affinity to Hugo Chavez. Someone was even fired for doing the right thing.]
  
• Hating Powerpoint. But because it's a necessary evil, Powerpoint rules (Onstartup).
  

Pricing Strategy & the Science behind $19.99

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?

Change is the only Constant

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)

What Politicians Really Mean...

A few helpful translations from Joseph Sobran to help decipher what politicians really mean via the Adam Smith Institute Blog:

"Need" now means wanting someone else's money. "Greed" means wanting to keep your own. "Compassion" is when a politician arranges the transfer.

(H/T Greg Mankiw) Sadly, I was thinking of tagging it as being humour, but it's unfortunately all too true.

Why Small Teams are more Productive

myShoggoth is thinking about "why small nimble teams seem to outperform massive teams on a regular basis" at least as it relates to software development. I think there's wider relevance.

Understanding the Rise of the Renminbi (RMB)

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.

Shiny Link Dump

Some of the stuff I've been reading...

• 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)].
  
• Guy Kawasaki interviews Bill Price, a co-author of The Best Service is No Service. Pretty cool stuff about how better service can come with a cut in costs. Particularly relevant as we build our web platform that will interface with our clients.
  
• Textbook posted online of the US Patent System - its history, flaws and benefits. (MIT OpenCourseWare)
• Advice on dealing with VC's from the founder of theFunded - a controversial site where entrepreneurs gripe about venture capitalists. (TechCrunch)
• Salivating over the prospect that a pentabyte can be stored on the size of a DVD - or the equivalent of 20,000 Blu-ray DVD's or a quadrillion byes - with the help of nanotechnology (H/T Instapundit)
• What happens when a buyout goes bad. A story on what's happening at Freescale Semiconductor (H/T PEHub)
• Why aren't "progressive" bloggers up in arms over Zimbabwe (and the current attempts by Mugabe at really stealing the vote)? (CommentaryMagazine)
  
• Hillary Clinton's unintended lesson on economics. (Cafe Hayek)
• It wasn't genocide, it was 'just' mass murder [stunning] (H/T Instapundit)
  
• Where do budding capitalists go in San Francisco? Well, the local communist cafe of course. (New York Times)
  

Self Control is a Limited Resource...

Use it wisely (New York Times). This may actually explain a lot:

The brain has a limited capacity for self-regulation, so exerting willpower in one area often leads to backsliding in others. The good news, however, is that practice increases willpower capacity, so that in the long run, buying less now may improve our ability to achieve future goals — like losing those 10 pounds we gained when we weren’t out shopping. The brain’s store of willpower is depleted when people control their thoughts, feelings or impulses, or when they modify their behavior in pursuit of goals.

Update: Additional (and practical) thoughts here.

16 Things...

Usually I'm not a fan of lists like this as they tend to be way too wishy washy or obvious but I was pretty impressed with this one: "16 Things I Wish They Had Taught Me in School". A few highlights:

• 2. Parkinson’s Law. You can do things quicker than you think.
• 4. First, give value. Then, get value. Not the other way around.
• 8. Assume rapport. Meeting new people is fun. But it can also induce nervousness. [...] This means that you simply pretend that you are meeting one of your best friends.
  
• 13. 80-90% of what you fear will happen never really come into reality.
• 15. Write everything down.
  

Communicating in 'Tech-Savvy China'

From the Wall Street Journal: "Email Isn't a Natural Fit For Tech-Savvy Chinese". A highlight:

The vice mayor of a city of 5 million residents in central China uses a 126.com email address, offered by Chinese Web portal Netease.com. An editor at the official People's Daily uses an account from sina.com, another portal. The chief executive of a Beijing start-up lists a Hotmail address. A professor at China's top military university uses Yahoo email.

That's if they even bother using email at all. It's really bizarre that a number of our vendors don't even use e-mail in the entire company anywhere. They require us to fax technical drawings to them which in turn get redrawn in whatever format they use and put into their clunky ERP's. Part of it I think is a certain level of paranoia that either company secrets are going to be sent to competitors but another part is that they worry employees are going to spend all day playing online games on QQ, the ubiquitous Chinese instant messenger that causes security nightmares for IT people across China (from experience, this one isn't as much paranoia as near certainty).

The article makes other good points about why voicemail has never really caught on and the insane attachment people have with their cell phones and text messaging. On the other hand, the only way that you'll get me apart from my Blackberry is prying it from my cold dead hands.

Cool New Web Tools

If you check out my del.icio.us links there are a plethora of companies and utilities out there that I've tagged as potentially useful and often times potentially transformative to the way you/I do business. I like TechCrunch as it's a great way to follow new web-based businesses (or businesses that enable the web). There are two new web tools I'd highlight:

• Google's stockscreener is far overdue but it's pretty easy to use. (H/T: Paul Kedrosky), and
  
• PriorSmart - a pretty clean new interface to do patent search by country and a number of other criteria (H/T: TechCrunch & Hacker News). Given the business I'm in, I find trolling expired patents useful for fun and profit so this should prove quite useful.
  

Nanosolar's CEO on Competing with China

Given that I've been somewhat obsessing and in awe of the progress solar energy has made since I had last checked. Nanosolar in particular as noted earlier may be the first company to sell panels at an effective price of less $1/Watt of capital investment for a target cost in the 60 cent range. This would make it cheaper than gas/coal though their first plant still appears to be somewhat modest in capacity relative to other forms of energy (up to 430 MW versus a nuclear plant that may easily produce 800 MW+ though Nanosolar's 430 MW would represent a significant addition to global production capacity estimated at only 1000+MW/year). I came across a quote from a Q&A with CEO of Nanosolar did last September

Q). An analyst told me that thin film solar companies in the U.S. are worried about price competition with Chinese solar firms. . . .is that true and something Nanosolar thinks about competitively?

A). If I ran a company based on solar thin films deposited in high-vacuum chambers, I’d worry too. Because [Chinese market leader] Suntech achieves better capital efficiency today with conventional silicon-wafer based solar factories than a typical thin-film vacuum line. That’s a problem right there. At Nanosolar though, we have a nanoparticle-based printing process that is 5-10x more capital efficient on the total line. So we have a good delta.

All things being equal, given the $/kg economics of solar panels, I don’t think the competitive end game is to be shipping them from China. The end-game winners will be optimized for net working capital days and proximity to customers. (Btw, shipping from China costs ten times as much as shipping to China these days…) The middle game will be dominated by quality issues; this is a product that people expect to last for decades.

Quality is quite hard to do with the kinds of manual factories that are behind the capital efficiency of Chinese production lines. I see a lot of big customers in Europe quite unhappy with Chinese panels. That all said, my general rule on China is that one has to recheck all of one’s assumptions about China about once every three months.

A few points to highlight:

• China replaces capital costs by using cheap labor. By its nature, manual production however has more inherent quality problems.
• Some companies like Nanosolar in the US and Canada tend to have a technical / innovation advantage that allows them to use capital to produce products more cost effectively. Sustainable advantage is achieved through innovation. Others fail or ultimately need to rely on low labor cost environments in order to compete.
  
• Cost of shipping from China to North America is indeed about 5-10x the cost of shipping a container back. This friction is the hurdle the cost of labor must overcome in order to be cost effective (among others not mentioned like inventory costs while goods are travelling and trade risk between buyer and seller who sit on opposite continents)
  
• Finally, I like his final quote "my general rule on China is that one has to recheck all of one’s assumptions about China about once every three months." Quite true.
  

"The Masai Warrior Guide to England"

Heh. My encounter with the Masai in Kenya would suggest that they aren't anywhere as primitive as the guide makes them out to be - then again I wouldn't underestimate the ability of NGO's to be entirely condescending.

Rumour Mill: China to Shut Down Factories en Masse

Given All Roads Lead to China's record on the past and how much it makes sense, I think this rumour is a no-brainer. Apparently China is getting ready to shut down large energy consuming and/or polluting firms in and near Shanghai, Tianjin, and Beijing. This can only help in improving their image during the Olympics as they have stated in the past, not to mention cooling their economy albeit in a somewhat heavy handed way. Fortunately, we're currently based in the south - but one can't help but worry about the unintended consequences that will result.

"The Other Side"?

Apparently things on the Western front are not as clear cut as they might otherwise appear. Those who know me well know I enjoy being a contrarian - particularly when I'm right - particularly when it comes to issues of the environment and development. But on this one issue, I'm not so sure. The government has not however endeared themselves internationally or earned the benefit of the doubt by dealing so heavy handedly in the past. Things can only get worse in the run up to the Olympics when China will be the center of world attention - and apparently the Chinese government is claiming that suicide attacks are being planned. I remain skeptical.

A Few Basic Rules for Managing

Managing people is the toughest part of building a business (I was going to say being a boss but that would sort of be redundant?). There are some days when I wonder who the boss really is.

I think the difference between great managers and merely good ones is the ability to manage work to specific strengths and weaknesses of staff. Incentive Intelligence Blog however, has a great post that outlines starting points for managing people (just as useful and perhaps especially useful in China). It's a bit "monkey see, monkey do" and blunt (and to be fair, Incentive Intelligence acknowledges this), I think they're useful in providing a basic and initial framework:

• Focus your energy on the "stars" not the "duds"; it will raise the performance of everyone providing positive reinforcement of good employees.
• Every interaction is training/reinforcement. Paul Hebert of Incentive Intelligence phrased this particularly well: "Everything an organization in an organization communicates and reinforces what the company believes and values." Consider this.
• Reward the behaviour you want. 'Rewards should be specific, timely and valued.'
  

Ugh... Dang the Olympics

No more multiple entry visas to foreigners until October 17th. This is going to be really annoying. (H/T All Roads Lead to China)

Economics with a Heart

Or should that be charity with a brain?

• Do economists not "consider the value of community?" (Economist Blog)
• Are the poor actually different? (Economist Blog)
• Charity and Fraud. According to some estimates, fraud accounts for up to 13% of philanthropic giving. (New York Times, H/T Freakonomics Blog) [Not sure I agree with the methodology, but I do think it's something that most people don't pay enough attention to.]
• For those who worry about the rich getting richer and being an old boys network, apparently social networks might not matter so much - at least for the Freemasons. (Paul Kedrosky)
  
• Venture capitalist philanthropy (Enterprise Resilience Management Blog) [The better way to poverty alleviation? Profit seeking and poverty alleviation can be highly complementary in market based economies.]

Solar Power cheaper than Coal?

Apparently it's finally coming. Solar may become cheaper than coal thanks to a company called 1366 Technologies (H/T Paul Kedrosky). I did a quick search and found this from an entirely different company, Nanosolar. While I've no doubt that it will be a hard road to commercialization, proving that concepts can work in the lab is the first step.

While some people seem to believe that oil prices will continue upwards forever, cheap solar or any other form of alternative energy for that matter (or even dramatically more efficient internal combustion engines), will mean that prices will one day collapse. High prices are only driving the speed of investment. While neither company are public, trying to project which company ultimately wins the race will be difficult (particularly since Nanosolar and 1366 aren't the only ones). The companies that may benefit the most may be those like Applied Materials who build the equipment to make the solar cells, and also firms where the cost of energy is a material amount of their direct costs and who will benefit from cheap energy.

Given the coming energy requirements of India and China alone, this will be great news.

Democracy's role in China's brand of 'Capitalism'

An interesting column by Thomas Barnett. He pulls from "Good Capitalism, Bad Capitalism" by William Baumol, Robert Litan and Carl Schramm. They in turn note that market economies go through several evolutions with the American state being closest to ideal characterized by an entrepreneurial capitalism with leading industries dominated by large firms.

Barnett argues that China is moving closer to the American model and -

Entrepreneurs tend to be notoriously independent characters. If you don't give them the freedom they need, they tend to leave. [...] What comes next? More and more freedom if China hopes to hold onto those entrepreneurs.

I'm not sure that entrepreneurs really have that much mobility. I do however think that fears democracy will not come with increased wealth with respect to China are premature. There's already a lot of unhappiness with respect to the level of corruption of the political class and the policies they enact. Just wait for the next major recession - the economy can't continue to rise at the pace it has forever.

I think it's important to remember that China moved to a more market based model not because they wanted to, but rather, for self preservation. Making the economy more efficient by definition also means meeting the needs, wants and desires of people. At the margin it's entrepreneurs who make this happen - creating businesses that respond to needs and building wealth as a result. While I don't worry that entrepreneurs will leave, without the basic elements that make business work - key amongst them - stable government, rule of law and stable property rights, entrepreneurs just don't start businesses. Both buyers/consumers and sellers/entrepreneurs suffer as a result. Representative democracy and the pressure release valves that come with it, is a rather elegant solution to this problem.

Random and Shiny Linking

• Caring for the poor by smiting them. Both Clinton and Obama have made rather curious statements on trade on the election trail. Nevermind that there is a preponderance of evidence that trade creates jobs, and that this practically the only thing all economists across the political spectrum can agree on, if the Democrats win the presidency, this could bode rather ill for both US competitiveness and the global economy. Comments from the Club for Growth here. More here earlier from ChinaLawBlog.
• "It's not you, it's your books." I don't suppose business books count. (from the dreaded New York Times.) [For the record: I'm a fan of Ayn Rand.]
• Fall of newspaper revenues from advertising accelerating (TechCrunch)
• Amish Paradise: computers are no substitute for creative problem solving and quality thinking. Why a focus on putting computers in classrooms may be useless and wrongheaded. (PBS: Robert X Cringely)
• 50 free ways to get free advertising for your business/startup (InsideCRM)
• The hypocrisy of 'Earth Hour'. (TechCrunch, Samizdata) [I've suspected that environmentalists wouldn't be happy until we were living as if in the Dark Ages - now they've proven it - literally. It strikes me as a rather arrogant assumption that the lack of light offsets the benefit of whatever activity that required the electricity to begin with and that people are generally unable to make the tradeoff themselves as the advocacy of this token measure suggests.] Update: Earth Hour at the CBC (Canada's state owned broadcaster)
  

Factory Ownership Matters

David Dayton from Silk Road has a great post on the impact factory ownership has on how factories are run in China. While they tend to be broad generalizations, I find his observations to be very much in line with what I've seen and very much applicable in considering how one interacts with vendors and partners. Read it here.

China moving upmarket?

ChinaLawBlog highlights the move of some manufacturers to produce high end and even luxury goods in China (as illustrated by an article in the WSJ). The article notes:

In light of the strong euro and steep prices for Italian suits, Jhane Barnes is touting the suits' provenance as an advantage. [...] While Mr. Burke acknowledges that there is still some stigma associated with suits made in China, he can already see men's resistance softening.

While I can agree with the general idea that like Japan, which up until the 70s was seen as manufacturers of junk, China too will move upmarket at some point into products and services that have greater value added to them. But I tend to agree more with Paul Midler at The China Game who notes:

I’m not so sure much has changed. Manufacturers have for some time now been in the position to make a product at virtually any quality level. The bigger variable is whether the customer is getting what has been ordered.

I think we are quite a ways away from anyone associating the China "brand" with high levels of perceived quality. Even amongst seemingly established firms, the variance in managerial thinking of what is acceptable to ship ranges drastically. While I don't doubt that the front line skill base and even the capital base with high end precision equipment exists in China, there remains significant managerial and process gaps that can result in large variances in both what a firm is really capable of (versus what they should be capable of) and more importantly between what is specified and what is produced.

As Mr. Midler further points out, unless you don't really care what gets made, generally speaking, when working with Chinese vendors - particularly those based in China, there's no substitute to adding safeguards to ensure that goods are produced to specification. This will also come at a cost - particularly as your vendors realize that you're planning to check.

Credibility and admitting that "I don't know"

Building credibility means having the intelligence to know when to say "I don't know." (Great advice from the Redeye VC). While often a case of misplaced pride, bluffing wastes a great deal of time and when you're inevitably caught, destroys trust that may not be recoverable in the future.

Another Dump of Shiny Links

• People are people everywhere, even in China. HR thoughts in China. (ChinaLawBlog)
  
• Political correctness kills. African tyrants withhold GMO food from starving citizens with the support of environmental activists. (Instapundit)
• Using economics to tame traffic. (FreakonomicsBlog)
• Remembering John Kenneth Galbraith: A "so-so theorist and brilliant communicator". (EconomistBlog)
• Interview by Conde Naste's Portfolio with Pete Peterson, founder of Blackstone. (H/T: PE Hub) [Fascinating interview. A billionaire who monetized most of his wealth after age 60 and how he sees the world today.]
  

Links Roundup, Some of them Shiny

As I wait with bated breath on the status of a number of contracts out there, here are a few of the links that I've been reading:

• Malthus lives? (WSJ) [When it comes to resource scarcity, the people who bet against technology and human innovation are the ones who have consistently been on the wrong side of history. It takes the heavy hand of government to screw things up.]
• Returning product to China? "In Another Lifetime, Brother" (ChinaLawBlog) [I tend to agree with the general thrust of the post - the key being that an ounce of prevention is worth probably more than a pound of cure.]
• China M&A done right. (ChinaLawBlog)
• Why Vietnam won't replace China. (ChinaLawBlog) [Beyond the noise of exchange rates, etc. - the core value that China continues to offer is labour arbitrage. Cheap, largely unskilled labour that isn't going to disappear anytime soon given the sheer size of the population.]
• The War against Sugar Claims 8th Grade Political Figure. (FreakonomicsBlog) [Apparently he was caught "buying an illicit packet of Skittles from a classmate" - because there really aren't any other pressing issues facing education...]
• The Most Entertaining Trial Ever. (H/T Instapundit) [A bit of an old link but funny nonetheless.]
  

Time to Hunker Down...

Four mistakes entrepreneurs make in a recession... (H/T: Businomics Blog):

1. Failing to take advantage of decreasing costs.
2. Thinking the only way to increase demand is to cut price.
3. Failing to recognize increased competition.
   
4. Forgetting that some products, or even whole businesses, are counter cyclical.
   

Read the whole thing.

Lower Shipping Prices on the Horizon?

"Sharp Fall in Transpacific Cargo"(China Economic Review). With a potentially severe recession in the US, it's not surprising the amount of cargo shipped to the US has fallen nearly 9%. Add the significant increase in transpacific ocean capacity and ocean rates are probably about to get a lot more competitive.

Whether or not these reduced loads will impact inland shipping costs - which can account for almost half of overall shipping costs from China to the east coast in North America is a more open question given higher fuel costs make costs in general more variable in nature (versus fixed for ocean freight). Unfortunately this respite may be temporary in the deluge of overall cost pressures from China - from reporting requirements, energy costs, currency appreciation, to local inflation.

Race for 100mpg car begins

The Progressive Auto X-Prize for a car that gets a minimum of 100 mpg and is available for purchase for a purse of $10 M , was officially announced yesterday. Rules here. As covered by Popular Science (h/t Instapundit). Apparently by the time testing begins in the spring there will be a few cars that already meet at least the first requirement. With motor gasoline consumption taking up nearly 45% of total oil consumption in the US, this could be a real solution to high oil prices.

Links, Links, Links

Some of them Quirky:

• Turning Criminals into Businesspeople (guffaws aside), "Her premise is that many criminals are intelligent people with good heads for business and healthy appetites for risk, and that these traits can be put to productive use." (The Economist)
• It's also good advice for anyone who designs business systems: It's always your fault. (Coding Horror Blog)
  
• If you didn't know the origins of the word "tip" was "To Insure Promptness", according to some, it should be renamed to "To Insure Prejudice". (Freakonomics Blog)
• For the jaded (and there are a lot of you out there): Nice guys finish first. Apparently we are happiest when we spend money on others, and those who punish others the least earn the biggest rewards. (Freakonomics Blog)

Why I don't read BusinessWeek

I don't know if it's because I'm getting older, but I find my patience for advocacy parading as "journalism" has diminished substantially over time. I read this article on "Why Exxon won't produce more" and left wondering who this guy's editors were. The "journalist" makes the argument that Exxon has few incentives to produce more and that greedy Wall Street continues to reward it for limiting production (ok that last bit was my editorial). Says the "journalist":

"It really goes back to what is an acceptable investment return for us," Tillerson said. In other words, producing incremental barrels just to ease prices for consumers is not part of the company's calculations.

His "in other words" makes a rather silly assumption that Exxon's greater investments in production would ease prices or as a corollary, Exxon is withholding investment to prop up prices. The reality is that Exxon's oil production is only the 12th largest oil producer in the world - a fraction of the size of its state owned competitors, and can no more affect oil prices/abundance than I can flap my wings and fly.

Branch Plant Economy not such a Bad thing?

Throughout the 80s and 90s there was a fear that Canada was turning into a branch plant economy to the US. The fear was Canadian companies were selling out to foreign competitors gutting the Canadian industrial base and less control/research and development happening in Canada. According to a recent study, those fears may have been unjustified. H/T: Paul Kedrosky

Big business turnover correlates with rising income, productivity, and (in high income countries) faster capital accumulation; consistent with Schumpeter's (1912) creative destruction and recent formalizations like Aghion and Howitt (1992). Turnover appears to "cause" growth; and disappearing behemoths, more than rising stars, drive our results.

Maybe politicians should be less concerned that companies are too big to fail but rather that because they are big, they should be allowed like any other company to fail.

Questioning Work

From the blog of 37Signals - questions to ask:

Why are we doing this?
What problem are we solving?
Is this actually useful?
Are we adding value?
Will this change behavior?
Is there an easier way?
What can’t we do because we’re doing this?
Ask this all the time. Is it really worth it?

It's too easy to get caught up in the monotony of the day to day without really challenging whether or not what's being done should be done at all.

Quirky: Important questions are asked by Academics all the time...

These probably aren't among them: Can we do business with space aliens? or Calculating interest on goods traveling at close to the speed of light (a paper written by Paul Krugman of all people)

PS - I'm trying to figure out a rhythm/focus for my blog so please bear with me as I figure out how to organize my seriously random thoughts and inspiration amongst the dozens of blogs I follow. I've noticed the stuff I find funny tends to be of the 'quirky' (or deliciously macabre - but out of deference to my sister who feels that this would poorly represent me, I'll try not to post too many of those) variety and hence the label that I'll try using from now on.

Keeping the Momentum Going

Projects midway through sometimes need a shot of adrenaline. Definitely applicable to ours (and probably most) firms, it's not so easy to keep the momentum when you inevitably run into barriers, miss targets or are just midway through a long term project. While it may seem somewhat obvious, this research, according to Incentive Intelligence suggests that key to building on the momentum is reminding the key people involved the time and effort they've put into a project, and those less related to the project what's left and recommunicating the goals/benefits of the project. The message has to be personalized and specific to that individual. Nothing particularly new here, but a useful reminder nonetheless.

Early Spring Cleaning

Like spring cleaning, I think most companies would be better off with periodic reviews of processes and procedures to clean out the "gunk", re-evaluating what's critical, figuring out what information is necessary (what's not) and the shortest distance that information needs to travel. Essentially, starting with a blank page figuring out what the "ideal" is for each of the major players, and figuring out how the current system measures up. For us, the starting point is understanding the value we offer to our clients and trying to design processes to reinforce and add to that value.

Our growth has meant that we have always been focusing on that one emergency - battling one fire after another. To move to the next level it's pretty clear what we need to do and yet - between finding the time and motivation to do it, it can be a struggle. To some, this could is the ideal - we're almost starting from scratch. Where other companies need to unlearn bad habits but the move towards the formalization of processes does not seem any easier.

Quirky: All it needs now is Skynet

"Creepy Robot... frantically scrabbles to regain its footing with the grotesque urgency of a locomoting cockroach" H/T: Core77

China as Mercantilist

Interesting overview in the Economist. Not sure it breaks new ground, but it takes the position that China is recognizing that it can't and shouldn't simply deal with anyone who will sell it much needed resources. This, I think, is in fact in China's best interest in the long run as these are the same countries whose governments are most likely to change. Like Eastern Europe, the general population tends to remember who their friends were and weren't.

Thanking their lucky stars...

... That it didn't happen on a weeknight. From the WSJ:

Federal Reserve officials insisted that the firm complete a deal that weekend...Their priority was that Bear's counterparties -- the parties that stood on the other side of its trades -- would be able to arrive at work Monday knowing their contracts were good, minimizing the risk of a generalized flight from the markets.

Haven't had much to say about the stunning demise of Bear Stearns - surprising on several levels. Those who tend to be further from the markets and of a certain ideological persuasion see this as a bailout of rich fatcats, while those pro-markets see it for what it is - an "orderly liquidation" (at least as orderly as it can be). Play by play of what happened here.

I have no direct interest in the events beyond friends who still work in investment banking (which is now a lot more limited), but the effects will be felt for some time to come. The world is deleveraging (or at least leveraging to reflect revalued assets) and the US is almost certainly in a recession. There has been significant growth in newer and useful tools that have been able to help businesses create liquidity in their businesses - particularly in the area of asset backed securities (e.g. loans against inventory or receivables). With the Americans often pioneering - or at least popularizing products like these, the rigor of these products will be tested and with even greater certainty, it will be more difficult to get almost any type of loan.

Update from a WSJ Editorial: "There's no joy in seeing a venerable firm expire, but it has to happen if financial markets are going to have any discipline going forward."

Somewhat frightening/funny from Paul Kedrosky: "The U.S. financial crises is newly making African debt seem like a (relative) safe haven."

They're on to me.

I'm still in denial.

What will Google Do?

Link to here (TechCrunch). It's more than an academic question as I have been talking with a few people in the development space about this. Do you ignore it? Currently for us, this has no direct operational impact and as such, we have few choices to make but it does reinforce the level of political vulnerability of doing business in China.

For our clients, the primary driving force continues to be about staying competitive. We continue to create jobs in what is one of the largest wealth creation projects ever for a people who were amongst the poorest (and populous) in the world. At what cost this comes at remains to be seen, but for the meantime, I strongly believe our work today will help mitigate any future pain. In the meantime I can't help but watch feeling somewhat helpless.

Quotes from and for Entrepreneurs

From YCombinator's Hacker News - a few highlights:

• Antoine de Saint-Exupery: If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.
  
• Henry Ford: If I had asked my customers what they wanted, they'd have asked for a faster horse.
  
• William Shakespeare: Our doubts are traitors, and make us lose the good we might oft win, by fearing to attempt.
  
• Winston Churchill: Success is the ability to go from one failure to another with no loss of enthusiasm.
  
• Eliot Carver: The difference between genius and insanity is measured only by success.
• Albert Einstein: Great spirits have always encountered violent opposition from mediocre minds.
  

Productivity Tip: Sharing Ideas Internally

When I was in university, I had a great Organizational Behaviour prof who pointed out that managers are not in control of what people think and how they react so we can only control such things as culture through seemingly mundane tools as policy and meetings. While I think not for profit generally plays catchup to business when it comes to productivity and best practices, Friday Fury: "a rapid-fire team discussion of a hot investment topic, a new sector that we might want to explore, or a question that is troubling a team member about how the work we do can definitely improve people’s lives" is a great idea.

Productivity Tip: Making Your Product/Service Easier to Use

I agree with the commentary on this. I think the easiest thing any business can do to improve the customer experience is pretend to be a customer and fill out all the forms and documents and follow the paperwork chain through the organization to get rid of what doesn't get used and what isn't necessary (not the same thing). As Google and Apple show, simplicity and good design has value.

China as Political/Economic Anomaly

It's a bit of a related idea that good governance is good business - or at least wealthier citizens: countries that have rule of law have higher incomes as measured by GDP. Implications:;

• Governments in poor countries should be held increasingly accountable
  
• More care should be given as to the disbursement of investment dollars and charity (otherwise we create a perverse cycle - governments in bad countries are incentivized to abuse their people to get more money)

Events in the west show that while China has been exceedingly fortunate in their policies that have allowed for wealth creation for their people, they have a long ways to go.

6.6 Degrees of Separation

This should interest the marketers. A study that appears to show based on who we talk to on MSN, that we are all on average about 6.6 degrees of separation making books like The Tipping Point more relevant in thinking about how ideas spread.

More than just a PR problem

Here. Background here.

Update: A blogger's dilemma - "I want to keep this blog online in China". At what cost? Perhaps it's a flippant question but that was the gut reaction I had. I'm a hypocrite in that I'm not sure what to say about it myself and as someone who believes quite strongly in libertarian principles when it comes to governance - free markets and free people, this development in Western China and the resulting authoritarian reaction is obviously not good and I fear will not end well.

What they don't tell you about being an Entrepreneur

Too true. I think this is one of those universally shared experiences of entrepreneurs all over the world. This is how Marc Andreessen (of Netscape fame) has described it:

First, and most importantly, realize that a startup puts you on an emotional rollercoaster unlike anything you have ever experienced.You will flip rapidly from a day in which you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again. Over and over and over. And I'm talking about what happens to stable entrepreneurs.

Meeting Westernized Expectations

The difficulties in communication because of differing life contexts is a concept that isn't easy to convey. Despite how difficult it is to outsource any project outside your company, to do so half a world away requires even greater care and precision. Like programming, GIGO (garbage in, garbage out) applies. But even when you do that, ensuring that people care about the details isn't easy for staff who most of their lives were concerned far more about bigger life issues impoverished outside of the cities. And then you have the clients who seem to be concerned only about price assuming quality will be there. This post from All Roads Lead to China is pretty accurate.

One good traffic idea from China/Taiwan

I notice they do this in China as well (which may very well be the ONLY good idea that they use when it comes to traffic management). I don't really understand why we don't have countdowns at most traffic lights here in North America. It makes perfect sense. As the link does point out however, the countdown should be on the green (or on the crosswalk) rather than than the red. They do it on the red in HK, and with the way the cabs drive there at night, it's sort of like what I would imagine sitting in the passenger seat of a race car might be like - something definitely to be experienced.

What perhaps irks me the most is how most people seem totally unprepared when the light turns green. They don't even care to anticipate it. I notice that the lag to response time is definitely longer where I live in Canada versus a place like New York or Boston. A little impatience and consideration for the time of all the people behind you isn't such a bad thing.

Of course another way of dealing with things (including China where they put these cameras up all over the place). I've always suspected that it's more about revenues than it is about safety.

Apple's Design Process

Pretty interesting. Companies that are able to consistently create great designs fascinate me. I think it's easy enough to "buy" a few creative people who drive innovation but to be able to institutionalize and implement good design is definitely not easy though definitely to be admired.

Paradox of Labour?

"Cheap Labor is Very Expensive, Expensive Labor Very Cheap". Sometimes you just get what you pay for. (Though redundant, it should be pointed out that sometimes you don't - particularly given the range/state of factories on both sides of the Pacific). Markets for labor are generally inefficient in the short run like most other products, services and inputs.

Playing Chicken Little

Some of the usual suspects seem genuinely alarmed about China's development - not so much within a political /military context but because they worry the world is running out of resources or food. 'Can you imagine', they exclaim almost breathless, 'if 1.4 billion people in China had the same environmental footprint as us'?

I've heard the same argument being made about people in Africa. It's similar to somewhat unrealistic views that we in the west have polluted the rich cultures of developing countries to the point that they crave to become more like our recklessly consumer driven society. It befuddles me as it would seem the alternative they suggest is that we keep those in developing countries poor, starving and technologically backwards. For some fleeting moments I wonder if such views are motivated in some small way by racism.

Malthus is long dead. It is a wonder that respectability for his ideas haven't died with him.

Which comes first?

Which should come first? Representative democracy or economic development? That's what a recent article in Foreign Affairs explores - and while it focuses on Russia, I think some of the points being made are very relevant to China today not to mention many developing countries around the world.

They really do think differently

It couldn't have happened to a nicer guy though I feel sorry for his family. What is perhaps more interesting about the Eliot Spitzer debacle is how it's being viewed from China and elsewhere. The Chinese press (and/or foreign press) is pretty predictable criticising American decadence and hypocrisy and my sense is that they've been to a degree successful at creating the impression that Americans really aren't much different than how the Chinese government works.

Of course, I'm not sure any foreigners know what to make of Barack Obama - a black man (ignoring for a moment his mother was white) with the middle name of - gasp, Hussein who could actually become President. When I first started making friends with people who were born and raised in China, it was almost an assumed that I was discriminated against (in the negative sense) growing up (generally not the case).

Then there's this. The post captures it perfectly. The Chinese are truly fantastic at backhanded compliments.

The Benefits of Trade

Requires a bit of a warped sense of humour.

Report: Many U.S. Parents Outsourcing Child Care Overseas

H/T: Greg Mankiw

Building a Startup

Successful web entrepreneur Jason Calacanis wrote a recent note on his blog about what it takes to build a startup that has even the remotest chance of surviving. In doing so, he generated a firestorm. As Michael Arrington, founder of TechCruch points out, it comes down to two basic requirements: you have to hire the right people and you have to watch every penny. I think both posts are a must read even if you're in China.

I think being at a start up - or small organization, or even as part of a highly leveraged buyout is similar - limited resources help to quickly prioritize and clarify what is important or else you fail. I personally think of my business and those like mine as not being too unlike many tech businesses in that we are tools for other businesses to improve productivity and competitiveness. But getting started isn't easy. It's far better to ask for more money than you think you need because you'll likely end up needing anyway - along the same lines of thought, it's not a bad idea to try to maintain a certain cash reserve for emergencies or to survive and keep valued resources during slower periods.

When it comes to Asia and specifically China, it's a bit different and I think hiring the right people becomes even more important. Displays of wealth seem to be ever more important than here in West. Not everyone will understand why they can't get that raise or recognize what the problem is with clocking out at 5 or 6 pm on the dot - given family pressures, and seeing wages continually on the uptick for classmates, and what has only until recently been a more parochial attitude taken by many firms. But I think you can find them. I'm intensely proud and also protective of the team we've built. We're far from perfect, but for the most part, we are almost always trying to work to get there and do right by our clients.

Update 08.03.13: TechCruch linked to another pretty good but older post on succeeding at a startup.

Proving once again the Bladder Theory of Finance

The Bladder Theory of Finance goes something like this: the more cash you have, the greater the pressure there is to piss it all away. I first heard of it from one of Peter Lynch's books. I should note that Lynch is a person whom I hold in very high regard particularly given his books were what turned me onto finance in the first place (dwarf tossing-related scandal notwithstanding).

China has no small amount of cash. I hope that these returns will help to calm protectionist fears of Sovereign funds (funds invested by governments - particularly given the most recent success of China's government).

Because it's a strategy that's worked so well everywhere else...

Something about this headline makes me want to giggle: China will form 'super-ministries' to reduce red tape

Warren Buffet's Letter to Shareholders

Sorry I haven't been posting. I've been particularly busy doing unfortunate but necessary administrative tasks for work. I think anyone interested in business including how great businesses are run, how great businesses look and how great businesses react should read this year's letter to the shareholders from Warren Buffett:
http://www.berkshirehathaway.com/letters/letters.html

While I don't think that there's that much new from previous years, I thought his focus on how he thinks of competitive advantage (or moats around the castle of superior returns as he calls them) to be inspired. With the continual barrage of faddish ideas - particularly as it relates to China, it's particularly refreshing to get a pretty humble perspective and see that there are certain business principles that are timeless.

Green Screens

You'd think that we've become a trading desk at our China offices what with practically all my staff watching their stocks "plummet" these last few days in China. I say "plummet" because stocks here aren't allowed to drop more than 10% before they are halted until the next day - so it seems on average the markets have dropped about 5% each of the past three trading days. Having lived nearly all my life in North America, it's sort of weird getting the color relationships right - here in China, green is bad/down, and red is good/up (associated with good luck in the Chinese culture).

I'm not sure what other managers doing about the time spent on this, since gambling in stocks seems to be a national past time here. I figure if it doesn't affect their capacity to process work, I don't really care. Don't tell my employees, but not so secretly, I'm kind of happy that they're finally falling. Means they know they need to work harder in the next year. So here's to green screens :)!

China's IP Problem

The lack of respect of intellectual property rights by Chinese governments particularly at the local level and in many respects of many locals, probably already costs China a lot of money. I can understand where it comes from - being dirt poor as much of the country has been, it's difficult to convince people in China (let alone from any developing country) that something as intangible as intellectual property rights have value. They just want things cheap.

This however is beyond appalling. Completely brazen, the counterfeiting of ABRO adhesives is frightening in how much support the counterfeiter has received from within China and how much success he has had in rallying nationalist sentiment when it seems absolutely clear that what he has done is wrong. What is particularly remarkable is that the fight isn't over a consumer brand. Because of the industrial nature of the product, it surprises me that presumably more sophisticated buyers aren't fighting back against distributors of the fake product (but maybe they are?). Also covered here.

American History as China's Prologue

China's rapid industrialization, while remarkable, is hardly new - and I'm far from the first to realize this. It's sometimes easy to forget that the US was a third world country only a century ago. Check out some of these photos from the US Library of Congress. From Core77 (a design blog I follow):

The Library of Congress is now sharing 1,600 color images from the Farm Security Administration/Office of War Information and about 1,500 images from the George Grantham Bain News Service on Flickr! These particular photos have been extremely popular with visitors of the Library, are available at high resolutions, and have no known restrictions on publication or distribution.

It's nearly impossible not to see at least some similarities in comparing Chinese industrialization to American industrialization.

Tale of Two Factories

While I'm of the view that incentives ought to reinforce goals rather than drive them, either way it doesn't take a genius to realize that incentives can have a significant impact on results. So it is with our manufacturing partners.

The nature of aluminum extrusions is that it's a capital intensive business. Machines require cash, inventory uses a lot of cash (and you won't find any aluminum smelters offering credit), and you tend to need a lot of space if you want to offer finishing services. Companies that are able to manage rapid growth against these capital constraints are as much fascinating as they are unusual. Progressive incentive structures are difficult to come by anywhere in the world but surprisingly I've come across a number of companies in China that reward based on profitability instead of some arbitrary figure (or the traditional 13th month of salary).

As an example, one rapidly growing factory distributes 8% of profits to managers and directors. While the company probably pays below average for its managers, the profit share means that many of them can make as much if not even more than their annual salaries paid just before Chinese New Year's. Of the remaining 92%, 70% gets distributed amongst the partners and the residual is reinvested.

Interestingly, they also have a borrowing mechanism that allows managers, directors and also shareholders to lend funds back to the company where the company pays interest on those "deposits" at a similar cost to what they would get from the bank. I suspect that like microfinance, where voluntary savings are often an indicator of the trust that borrowers have in their institution/borrowing group, "deposits" here can be used as an indicator for senior managers as an indication of the level of trust and optimism that employees feel for the success of the organization over at least the term. Of course this can also be dangerous depending on the liquidity of the company should one day the level of optimism/appearance of security be less so.

Let's call this Factory A. Now let's compare it to Factory B - with a much more of a command and control type structure, Factory B was purchased from the state by a technocrat at rumoured wholesale prices. About 5-6 years ago both companies were the same size with 8-10 extrusion presses. Now Factory A has over 50 presses while Factory B has 14. While there is undoubtedly more to it, there's little doubt in my mind that culture reinforced by incentives have played a large part.

There is one caveat that may be masked by the rapid growth of the company. The number of people employed per machine is nearly double in Company A versus Company B - which is a little counter intuitive. Within the Chinese context, and this is an area I think culture has played a role - managers are given hiring power and often want to hire more people from their own villages which to my mind somewhat ego driven in that I suspect that the profit that they are awarded is disconnected enough that the trade off in lower profitability for them specifically is offset by the increased stature of having more employees.

As a result, Company A is a little more expensive than Company B in pricing but my confidence in Company A being able to produce consistently to our requirements especially when aesthetic finishes are a concern is significantly higher. I am also told that the books are still rather opaque at both institutions. I've yet to hear of any Chinese companies that practice open book management (I suspect in part because of, er, "tax management") - thus Company A requires that its employees and culture has a great deal of trust in order for the incentive structure to work.

I think smart managers/entrepreneurs realize that while incentives are a cost, managed properly they can also become investments in culture that pay for themselves many times over.

Mind Games

I'm not sure that I'm built to do business with and like your typical homegrown local (and I'm not sure that's a bad thing). Though perhaps not as despairing as "This is China's" experience, the games that are played are somewhat frightening when you step back to think about it.

For the level of ingenuity being used to cheat and fool each other, you would think that China should be one of the most innovative nations in the world. It has been pointed out to me that even in some of China's largest companies, they keep the books numerous sets of books in enclosed rooms that require going through the General Manager's office to reach - such that if the government comes knocking, the computer can be quickly burnt to a crisp. One of the last people you also want to cheat is your accountant because they will simply submit your books to the government (and apparently this is not that uncommon).

That said, not paying your taxes here in China are the rule rather than the exception. Further, 'not paying your taxes is neither unethical nor does it set a bad example for employees'. It has been argued to me that this wasn't "cheating" given how much government officials have been "cheating" the country themselves.

Closer to home, I know of a factory where a trusted employee found all sorts of ways to cash in. From "entertaining" clients/local government officials, buying "official receipts" on the cheap, to pocketing the rent on the factory that was initially comped by the landlord in exchange for signing the lease, to chintzing on the food budgeted for factory workers for meals whenever the owners were not around (which was a lot). Finally, he even held documentation hostage threatening to submit it to the government because of tax evasion. It made me completely rethink the utility of encouraging employees to refer friends and family as most of this was accomplished through the hiring associates who came from his village. Indeed, because of the way the factory was managed different directors/managers attempted to build their own little fiefdoms each with the intention of cooperating to cash as much out of the factory as possible.

Which brings me to my latest adventure. As noted, we are going through the machinations of buying a vendor. One of my associates has taken the lead on the specifics and explained to me what was necessary since we still wanted one of the owners to remain and manage the company. One of our controls will be the hiring of an accountant who will report directly to us. It was like it was straight from the Godfather. He explained the risk that the accountant could eventually conspire with the owner. The associate explained to me that we would hire someone locally (the owner is from a different "village" (of a few million people) entirely) so that we could know where that person's wife, kid(s), brother/sister, grandparents lived so we could "deal with them if anything went wrong." I'm a little worried by what he means by that.

Later during the day, I sat through what I thought was an entirely casual conversation picking up completely different meanings than the associate. The level subtext could require a cultural interpreter. My associate pointed to everything from questioning one of the owner's motivations, to what was being implied. While the specifics are relatively unimportant, in frustration I couldn't help but ask why this guy didn't just come out and say what he meant - to which my associate sighed that I just didn't understand, saying I'm not Chinese and that this is the way things are. Of course going into this, at least I am doing it with eyes (relatively) wide open.

Exclusion

The last two posts reminded me of Seth Godin's recent post on exclusion (that I still haven't decided if I agree with), and my own experience as a co-op student. While I'm sure the idea of avoiding exclusion is generally practical from a general marketing perspective, I wonder what Seth Godin would have to say about hiring co-op students?

Clarification: for most companies that consider hiring students, there is a certain expectation that there can be high turnover and in this light, many professional services firm view the hiring of co-ops and the expense of training them as part of marketing to future buyers of their services. Can the feeling of rejection of those who you don't hire really be avoided?

Hiring Interns

As a follow up to my last post, we hired 11 students and they'll all be working at our vendors and (hopefully) soon to be manufacturing subsidiary. In mid December, I came out of the process of interviewing/hiring them a little shell shocked (and probably breaking every best practice ever taught). My China colleague apparently had maintained very good relations with his profs so we were talked up during classes. We came late to the process but we showed up not being told what to prepare (actually we were even told not to prepare anything) and then we had over 200 people come to our seminar and no forethought of how to sort them!

Imagine this: you're chatting merrily along, taken to an unremarkable door around a corner, you thank the escort and then when you turn around, you have 200+ pairs of eyes staring at you and the room is dead silent. After seeing them, the professor who kindly told you that you need not prepare, asks you - "oh by the way, do you have a power point presentation of your company that you could show"?

After I got over my wave of panic, over my inclination to take a picture of the red clothbound Communist book of Mao sitting on the prof's desk and finally incredulity that even here, in the middle of nowhere (probably a "small town" of a half million at least), Chinese professors are using Powerpoint on computer consoles, my time served in investment banking finally came up useful and I whipped up a presentation in 5 minutes. My colleague ad libbed droning on about what we did (quite impressive, though I guess he did also used to be class president). We ultimately sorted people by having them all speak and say a few sentences about themselves in front of everyone and what their expectations might be while collecting the standardized forms (which I confess we didn't have time to read) making remarkably subjective decisions on our picks. It was somewhat uncomfortable as I still haven't taken those Mandarin lessons yet so my colleague talked on pointing me who inevitably would stand from time to time with a forced smile waving like the Queen.

It's (almost) scandalous how little we need to pay these people. If you thought co-op students are cheap labor in the US/Canada, when we were discussing pay I suggested a number and I was scolded (yes, I get no respect) by my colleague as being crazy and how they were lucky they didn't have to pay us to learn! Given that these students must find placements for 6 months the starting number proposed by his former professor was 250-300 RMB/month plus room and board! (at today's dollars 7.4:1 that means $34-40 USD per month) .

Apparently we can be cheaper than average $400-500 RMB/month because we are foreign and not from Taiwan (apparently managers from China and - or as my China colleague might say quite indignantly - including - Taiwan can be quite the tyrants). I think they're sort of taken advantage of since these "kids" (my colleague in HK gets offended at my calling them this since I'm young enough to be her kid), have to have 6 months of experience before they graduate.

Fortunately, they do have choices. They can work for a larger company like Haier (company that tried to buy Maytag) or Huawei (company that's often referred to in China as "China's Cisco" or is more appropriately company that often "borrows" from Cisco) doing mind numbing but relatively well paid QC jobs (on the production line) for 2000+ RMB/month, or they can work for companies like us for diddles but get more useful experience with greater opportunities. It seems to work the opposite way in the West. For me, it was the choice between smaller companies that had to pay higher to attract talent of snot nosed arrogant kids like myself versus big name professional services firms that paid less but offered great training and a great name when you left (which I still think is somewhat bizarre).

Ultimately, seeing as I have little to no fear that they will be reading this, I decided that we ought to pay average (500 RMB/month) and in addition we will withhold an amount per month that we will give them when they leave (with the malicious intent that they will in fact be quite surprised and tell all their friends and we will have the pick of the litter next year). I have high hopes and am optimistic. Truth be told, I'm actually a little afraid of hiring more senior people in China. Because of things like this. Students, beyond being ridiculously energetic tend to also come uncorrupted. This internship process can be like a 6 month job interview (not fun for them but fun for us).

We also had quite a debate internally about how to properly welcome them. My China colleague, cheap bastard that he is (I say that affectionately of course), thought we shouldn't be too generous and nice to bring up expectations. Even making the decision to pay for the train tickets in sleeper cars no less was a debate since no one does that. (Side note: traveling on trains in China is an interesting experience especially with my colleague continually whispering in my ear not to fall asleep or else you will be robbed of everything. But it's sitting in this cramped room with 40-50 people that rumbles with everyone staring at each other suspiciously for however long the train ride is).

The train ride direct from the school is 18 hours and the cost of a sleeper car is only 15-20 USD (with seats in the hellish room about half that price)! The rationale of other companies is apparently that there's no point in paying for these kids when they haven't done anything yet (no, they wouldn't even pay for seats in that hellish little room). We also paid for them to have a a decent lunch and dinner, and to spend one night in Guangzhou to tour around before taking them to the factories the next day. I also suggested bringing them to go see a movie (and you should have heard the crap I got into for that - "what, you think these things don't cost money?" still echo in my head though I get that a lot). They ended up being too tired from their trip, but I think we will take them to karaoke and maybe an extra day in Guangzhou at the end of their internships.

I've come away from the process fairly excited and I think I will abscond a kid for a few administrative tasks to report directly to me within the next few weeks at our offices in Guangzhou (they're all currently with vendors now). In the future I hope to develop more of a strategy to hiring interns and cultivating a better relationship with that university through things like competitions, developing case studies, scholarships, and hiring over the course of a few days instead of one.

Oh, did I mention that we only need to actually pay for half of those interns and the other half plus the room and board for everyone get paid for by our vendors/subsidiary? Sure we will be spending a bit of money sending our managers over to train and work with them but any way I look at it, this is a definite score that even if it doesn't pan out, it will be a lot cheaper than many of my other mistakes.

The Real Elixir of Youth

Our co-op students started two days ago. I'd have to say that the boundless energy is both energizing and exhausting. I guess I've been procrastinating about this post since we first went just north of Wuhan to visit a colleague's alma matter (actually I've been procrastinating about a great deal many things).

So there are a few questions that I've thought about in the past but never really had much of a resolution - is it better to hire students straight out of school and be the first to inevitably jade their sense of idealism and purpose and who ultimately run away bitter after spending countless hours on training (hey, we all know lots of people who that's happened to), or is it better to hire older mature workers who cost more but who can also be stuck in their ways - or worse, add negatively to culture? Another problem is that I suspect you're probably more likely to get things like this. Maybe it's not an either/or but combination of. This is ever more complicated by China (and even Hong Kong) and the very rapid change that nearly everyone has seen.

I haven't been having much success at hiring younger staff in Hong Kong. By younger I optimistically mean people even my age (at the ripe age of nearly 30). If it isn't the experience, it's the lack of enthusiasm and lack of stability. My colleague in Hong Kong says that it's about "young people today" which I suppose I should act all offended. Fortunately I have now delegated full responsibility for supervision, hiring and firing to her (though it makes sense since I am never there).

I believe culture matters. I believe it matters a lot. It doesn't take much to poison the pool. Younger workers more easily drink the kool-aid but that isn't to say that there aren't those older and more experienced who won't either. We'll see. Personally my initial thoughts are that students just out of uni are fantastic if given the proper guidance and structure while given the liberty to perform (but isn't that the key for all employees?). The thing I think most companies neglect is the resources for the adequate coaching. Hopefully I'll be ebullient (always wanted to use that word) in the future and have much to report.

Oops

Just a forty percent rounding error. China is a little smaller than previously thought. Off by about the size of Japan's economy as previously covered here. More thoughts on American security implications (or lack thereof here).

That doesn't mean that there isn't still a bubble. As a friend notes: "whenever there is too much money in an economy two things happen: inflation and bad capital allocation." As Tom Burnett, a policy analyst notes in his Foreign Policy Wish List for 2008, #1: "What goes up too fast must come down even faster. This is a question of when, not if. The real uncertainty is how locals will handle the setback. If the G-8 doesn't have a plan, it should get one fast."

It's like some sort of weird Vulcan 3D chess. With the political appetite cooling for global trade, the push to pop the bubble through currency revaluation, and the solvency of China's financial institutions still questionable, China prices could get a lot cheaper after they get a bit more expensive if some American policymakers get their wish.

Details Matter

Just before New Year's I had lunch with a good friend. He came out of the washroom eyes as wide as saucers (ok maybe that's a bit of an exaggeration) and he said excitedly "they use 3-ply". It was a higher end restaurant in a relatively small city but he seemed genuinely surprised that such places existed outside Toronto.

OK so not everyone reacts that way but for the difference in the cost between 2 and 3 ply toilet paper, (regardless of what others might think), wouldn't it be worth it? Details matter - and it's one of those things that are difficult to communicate with my China colleagues probably because they've never had to value those differences. Every point of interaction with clients says something about you as Seth Godin also recently pointed out. It's been excruciatingly difficult in developing the forms just the way I like them for our new ERP system, but fortunately I think attitudes are changing. Though to be fair, it's a point that not only Chinese people struggle with.

Making Incentives Work

Leading up to the holiday season, posting is still going to probably be light (not to mention hoping to close all the loops to get the Getting Things Done methodology going. Here's a short guide to planning compensation plans. Comp plans are one of those things that make a big difference (good and bad) to culture - but I think the key is to realize that compensation isn't just monetary. More on the topic later and some interesting models that I've come across in China.

Couldn't help myself.

Heh.

Keeping Meetings on Track

Factoring in the cost of time (let alone in China where I often have to ask what someone meant) and travel multiplied by the number of participants, meetings are expensive. One of the many things I'm thankful for at least internally is that we get some productive discussion and that staff aren't so afraid of me that they remain silent throughout (discussion for another day).

I've been listening to an audio seminar called "Getting Things Done" by David Allen and it has been quite invaluable with innumerable "aha" moments. One of his tips has been to always start meetings off stating what that meeting is supposed to accomplish and before the meeting ends, establish specific next action steps.

What You Need to Know about US-China Relations

From Kiplinger but summarized by All Roads Lead to China. The original title in Kiplinger's specifically relates to investors, but this article applies to a much broader audience dispelling some of the many myths out there.

Does being Happy make you Productive?

Maybe not. Of course I suspect that the best type of an environment is a results-driven workplace where workers are happy not because of the perks but because employers don't get in their way (yes, far easier said than done). Not sure how this ultimately applies in China but where perks don't cost too much and can result in a modicum of dignity and comfort, I'm game. While keeping good employees is common sense, I do think I also fall into the trap that it ultimately just comes down to money. Perhaps the greater lesson from the authors of Freakonomics is that performance is more about who you hire than how they feel. Quoted from psychologist Nathan Bowling:

My study shows that a cause and effect relationship does not exist between job satisfaction and performance. Instead, the two are related because both satisfaction and performance are the result of employee personality characteristics, such as self-esteem, emotional stability, extroversion and conscientiousness.

Mysteries of Travel

I'm waiting to board a flight that's 1.5 hours late. On the way in, I invariably always stop at the local relay/book store to pick up some reading material on the transpacific flight. While I'll grant you that reading business rags can almost be like porn to me, there are two sets of questions that I have to be asked:

• Who buys porn on the airport? And why at the airport? Does this mean I should be even more concerned about the cleanliness factor in the bathrooms? (it's quite the long flight after all)
  
• Why do airline lounges insist on serving foods that cause flatulence?

"Keep Moving Forward"

I was recently reminded of Disney's "Meet the Robinsons" after hearing Rob Thomas's "Little Wonders" (great song by the way) played in the hotel's gym. Hollywood doesn't make enough movies about entrepreneurship let alone inspirational ones. If he were alive today, I believe Walt Disney, one of America's greatest entrepreneurs, would have very much approved.

Truth be told, I don't really like calling myself an entrepreneur as it seems to have a sort of transient type connotation to it (though perhaps those who know me well might think this is why the description might be apt). Entrepreneurship isn't celebrated nearly as much as it should be.

Working for yourself and building something from scratch takes a lot of discipline but most of all I think it takes a near inhuman amount of persistence and to be unafraid of failure. I suspect like many forms of leadership, do it long enough and it can be lonely without the ability to talk to people you think can relate to you and you can trust. I don't doubt that there are many entrepreneurs out there who are building businesses that have little to no chance of real viability. I do suspect however, that most successful entrepreneurs would also tell you that part of the trick is believing in yourself and sticking it out long enough for luck to pay off - whether it be having the opportunities to present your ideas to the right connections or clients to developing the idea that finally catches fire. Until that time you have to find a way to let the optimism vanquish the doubts along the way. This movie illustrated this perfectly.

Keep moving forward!

Long Hiatus. Fresh Start.

Ok. Now that I have gotten rid of what few readers I had, I am back. In the journey to figuring what what's important to me, I have determined that scratching that annoying itch to blog is one of them. I am going to try to keep posts simple and focused on one thought at a time - but I aim to reduce my political rants further though I cannot imagine I will be able to entirely resist. I do think as well that I have figured out what I want to focus on: building a business where a large part of what we do happens to be in China.

Like the now somewhat arcane term 'e-business', I believe the novelty of doing business in China will wear off (if it has not already) into simply a part of doing business. The topics I hope to primarily cover include recruiting/hr, productivity, and legal/tax/regulatory issues with a few random thoughts mixed in.

I do have a few ideas for coming posts including a trip to recruit interns near Wuhan (hiring 11), sniffing around a small potential acquisition and my introduction to the byzantine Chinese legal system, and my journey to "getting things done" having been recently introduced to it by a friend in China.