Minor update: Milestones reached...

It's been a few crazy weeks where I've just been too tired/frustrated to blog but the outcome has been quite positive for us. We're now able to offer credit to our clients without worrying about the risk of default (at a pretty cheap price I might add), I am consolidating my interest in my company, we're buying a decent car, we're finally getting a real accounting system (at a ginormous price) and we're starting to make headway at the process of rebranding / revamping our image.

Now as for this blog, I've been kind of at a cross roads. I'm not going to stop but I'm just trying to figure out how I want to organize it going forwards. I've basically got two passions - politics/economics/development (I see these things as highly related), and business. The latter I've really not really had an opportunity (or rather taken the time) to develop here. It's being overwhelmed by the former as I have a lot more online material that I'm able to exploit (particularly after discovering google reader).

I think of blogging as a bit of a dialogue or even a monologue - but I think I have to focus a bit better. Given the relative size and growth of our business, the numerous political and legal changes that seem to be happening in China, not to mention the speed that it's happening, I feel that a dedicated blog may help in making me focus and flush out my ideas - even if I'm only talking to myself.

I guess it comes back to why I am blogging - and hopefully it's not just an exercise in vanity. Do I want to be seen as a China blogger? An entrepreneur in China? or simply that scary right wing (though I think of myself more as a libertarian) ideologue? Anyway, that's what I'm thinking. It's true what they say though, the older you get, the more you realize what you don't/didn't know. I tend to see the world in black and white, but doing business - particularly here, one seems to always be left with choosing between various shades of grey. I want to talk about that - I just have to figure out how. Anyway, 'till next I blog.

Driving in China

So true... We're also in the process of buying a car in China. Just deciding how to structure it at the moment but there are few things that approach the bizarro world of driving in China.

Hmmmm... I guess I won't have the pork

Link here. "lurid accounts today of pigs staggering around with blood pouring from their bodies in Gaoyao and neighboring Yunfu, both in Guangdong Province. The Apple Daily newspaper said that as many as 80 percent of the pigs in the area had died, that panicky farmers were selling ailing animals at deep discounts and that pig carcasses were floating in a river." Yum.

For Instapundit, the story is that the government is suppressing the news. The funny/scary thing is that I was about to call my aunt about it and a colleague here stopped me saying that I had to be careful about what I say on the cell phone cuz they listen and will arrest people for that type of thing... he seemed serious... how one cannot get lost in the sea of millions of people beats me (I mean I should hope they would have more things to worry about than listening to my cell phone conversations - that must be an incredibly boring job).

Who to believe... According to HK colleagues these things and warnings happen all the time for stuff like fish, vegetables and meat. For contamination perhaps but epidemics? Staff here say that Apple Daily is "always lying" (or perhaps the more appropriate translation is that they're always trying to trick people). I think I'll just avoid the pork. Especially the cheap pork.

Update: Pig death identified.

Be a Happy Capitalist?

Interesting. I suppose it really shouldn't be so surprising that greater liberty for all translates into greater happiness... though I suppose for some, quite the opposite happens (whose numbers, I suspect, are probably overpopulated with elites). Quoting the National Review on the Economist's Free Exchange Blog:

Why so glum? The numbers show that high average incomes, a low unemployment rate, extensive economic freedom, and relatively open labor markets tend to boost happiness levels, while generous welfare handouts, lower levels of inequality, and bigger government have little or no positive effect. The areas where the French do relatively well, such as low inequality and size of government, tend not to make its people feel much better, while the areas where they do poorly, such as unemployment and economic freedom, take a real bite out of happiness.

Some fantastic photos of China

I've been in the process of considering how we want to redevelop our website so I've had stock photography on the brain. Here's a fantastic site of great photos 'humanizing' China (and lest anyone be concerned, no I'm not thinking of pawning of these). Hat tip: Hao Hao Report.

Acumen, Healthcare and Microfinance

Hat tip to my sister, Beata, for emailing me this one. I may have fallen in love (no, not with my sister). I am now following way too many blogs too many of whom post regularly with 3050 posts read in the last 30 days (I mean Instapundit alone posted 863 - which is a wonder that he gets anything done during the day). Anyway, just had to share this quickly as I am way behind on practically everything.

Acumen is a charity that advocates entrepreneurial solutions. It linked to a speech by Laurie Garrett (a medical and sci fi writer for Newsday). Here are a few quotes (as chosen by Beata):

"For decades global health has been treated as a charity. Billions of people the world over have, for decades, been dependent on the kindness of strangers for their health and survival. While other fields of development may have encouraged capitalist solutions, health has been treated as if it were too sacred to be besmirched by profits. In the wealthy world every aspect of health, from record-keeping to pill-making; ambulance driving to hospitalization, is a profit center. We seem to feel that if you are living in France, Denmark, Canada, Japan – in those places it's ok for hundreds of companies and thousands of individuals to realize profits from the health enterprise. We just don't think that is ok in poor countries.

"I think it's time to tell truth to power: The charity model of global health is racist. It assumes that the health leaders of the poor nations of the world will endlessly get on bended knee, and with outstretched arms beg for alms. It doesn't matter to whom the begging is directed – the World Bank, USAID, Bill Gates, Bono – it is still begging. The charity model offers no supply or resources guarantees over time. Yet it expects targeted achievements, realized in very short time windows, allowing the donor to brag about the numbers of lives saved, thanks to his beneficence.

"I think it's time to get out of the charity model, and get serious about investment. My take-home message is this: Invest in small businesses, even micro-finance approaches to health. Do not invest in models that promote health by subsidizing outside corporate interests. Rather, build local economies and businesses, employ the unemployed, and do so aggressively."

Breathtaking. May many hear and heed her words.

"Simple Explanations"... for Stupid People?

I'm often accused of being overly defensive of Americans and overly cynical of the mainstream media. Perhaps somewhat foolishly, I poke fun at the nationalism of a few of my close colleagues at work by saying stuff like "I'm not Chinese, I'm from Hong Kong" or that kind of thing (the reality, is that I view myself as being Canadian first).

That said, in reading and watching the news abroad, you begin to get a greater appreciation for the level of quality that the Wall Street Journal strives for. Certainly their stories aren't always free of bias but at least they strive for accuracy and facts first versus the likes of the New York Times and to a lesser degree, the Washington Post who write stories framed within their world view and then arrange the facts accordingly (or even sometimes irrespective of the facts). I had a bit of a disagreement, not so long ago, with a China blogger / journalist over what constituted bias after a surprisingly inaccurate comment by a journalism professor no less.

But if you thought they were bad (and granted, many do not), the international press is far far worse. I figure it just comes down to plain jealousy - the US can do no right - as the world's only superpower, when it uses this power, it is accused of being imperialist, but when it does not, it is accused of being isolationist. Further, from the Chinese context, I have found that my one colleagues views are not that unique - that the reason China has not industrialized is because of "the man" in the form of Europe and the US (ok fine, he didn't really phrase it like that), keeping it down. My uncle even went so far as to suggest that the killings of Chinese workers recently in Ethiopia were the result of the CIA who were attempting to disrupt China's own imperialist ambitions in Africa - because of "jealousy" (i.e. if Halliburton can't have it, no one should).

This however really scrapes the bottom of the barrel. Milenio is a newspaper in Mexico that apparently put out an ad with the picture of Uncle Sam + Mirror = picture of crazed Seung-Hui Cho holding a gun (the mass killer at Virginia Tech). At the bottom is the text "Such a complex world needs a simple explanation" - to which I can only wonder, that if it's really that complex if you would really want stupid and possibly insane people to be interpreting it for you. Following his hate filled rant, I'm not clear whether Milenio is in fact suggesting that Cho was because of American values? Or perhaps it's about the US Military?

I mean, there were a number of articles easily debunked immediately following the massacre that proclaimed that this was uniquely American because of America's "gun culture" as if the US brought this on itself. Of what I saw of his diatribe from NBC's ill advised broadcast, (other than the fact that we know he was totally insane), it could have come from any number of unhinged "activists" decrying the corporatization of America, multinationals, race and class wars. Maybe that's what the Milenio was saying? As per usual, the Wall Street Journal did a decent piece on some of the numbers being pushed by both sides of the gun control debate (unfortunately on the other side of the pay wall).

Update: Fred Thompson makes some points on American popularity abroad. Why current American political leaders don't say stuff like this beats me. Hat Tip: Instapundit.

Yep, that's China...

I don't think there's anyway in getting around the fact that things happen a little different here in China. Check out Bill Dodson's post on what happened at his friend's factory. The ways that some people go about trying to make a buck around here is nutty enough to shake your head and think that if they put their minds to doing something productive, they'd be truly rich.

Much has been made of China's attempts at establishing rule of law, but the will of Beijing seems to be slower to reach some of the industrial areas of China. On one hand, I tend to agree with those who think that China's development isn't so much different than others - from Russia to other Asian Tigers and even to the West. I usually think of China as the wild wild East. There are however, three key differences I think: technology, population and speed. While I don't think this changes the substance of industrialization, it certainly makes things more interesting.

A Healthy Sense of Fear?

An article from TCSDaily exploring why Americans feel less secure economically despite very tangible evidence that they've never been better off. Is this uniquely American?

Convincing Americans that their economic security is actually embedded in a kind of economic insecurity is, admittedly, a tricky argument to make in the political arena. But it's made easier by the fact that America remains a genuinely entrepreneurial society. This is one of the things that distinguishes the US from continental Europe and other parts of the globe.

Fight or Flight in the Developed World

For all the fears that outsourcing will steal jobs, as previously noted, the easy counterpoint to make is the rock bottom low unemployment rates in the US (and Canada, though the same can't be said for most of Europe). That said, this only proves there are a lot of companies who "get it" and understand how to compete against their global competitors. Quoted in the Economist's Free Exchange Blog:

... if we're going to cost more here, then we'd damn well better have a reason for it. Deliver something that can't be had so easily in Hyderabad [insert any country, city or even company here], is my advice.

Too true.

Immigrants, Emigrants and Bigots

For those who bother to pay attention to the facts about immigration, it's sometimes difficult to not to believe the concerns of those who fight against it are based on something more than simply fear. In context, it's bizarre that the level of demagoguery over both trade and immigration resonate so strongly despite record low levels of unemployment. From Sebastian Mallaby in the Washington Post:

People accuse immigrants of gang violence, drunken driving and a general contempt for the law. But in 2000 the incarceration rate for immigrants was just one-fifth the rate for the population as a whole, according to Kristin Butcher of the Federal Reserve and Anne Morrison Piehl of Rutgers University.

People say immigrants are feckless and lazy. But in California in 2004, 94 percent of undocumented men ages 18 to 64 were in the workforce, compared with 82 percent of native-born men. Far from being part of a shiftless underclass, the act of coming to the United States makes immigrants among the most upwardly mobile groups in the nation, only a bit behind hedge-fund managers.

Hat Tip: Greg Mankiw. While I'd happily point to my parents and their respective siblings/siblings-in-law, as first generation immigrants who have done quite remarkably in aggregate as pretty much all accomplished professionals, there are inevitably those who cling to erroneous stereotypes.

Figuring out where to put the decimal place...

Talking numbers here, as it's not enough to try to figure out where all the conversions are, but the Chinese think in increments of 10,000 - not thousands. So to say to someone something's one hundred thousand dollars, you would actually say that something is 10 'ten thousands'. If you said it the other way around - that it's 100 thousands, they would just look at you funny, giggle and think it was the most ridiculous thing they'd heard in a while.

This isn't so much of a problem when you're talking one number or two, but when you're working on quotes and estimates and then throwing in currency conversions, it's not something you want to screw up being off by a factor of 10 - far worse than a mere metric-imperial conversion error. We've had near heart attacks in running jobs and then wondering after the fact if we'd done it properly. It's been 3 years since I started working on production in China and I'm still not used to it. This may say more about me than the job, but I digress.

Debunking Lou Dobbs

Now known more for his anti-trade anti-immigration screeds than any business acumen he once seemed to have, Lou Dobbs recently testified before Congress. Donald Luskin does a thorough debunking. I can't say, given Dobbs' history of "finding isolationism" (not unlike seemingly finding God for the man) not to mention sporting a new hairdo while he stared into the depths of plummeting ratings, that it seems to have been much of a difficult task.

Update: Club for Growth quotes Luskin as being funny but true:

"The advocates of free trade have on their side over 200 years of settled science in economics, going all the way back to Adam Smith. The advocates of protectionism have Lou Dobbs." -- Don Luskin

The Point of Globalization?

Christopher Sciacca of the "Who says Supply Chains are boring?" Blog, says:

I would prefer to be called "an emerging market" or "a cool, hip country with really smart people that want to work". Because if you are outsourcing simply for the lower wages you are missing the point of globalization in the first place.

I tend to agree - I'd even include lowest sticker price to the lower wages bit. The point of globalization is lower overall costs through comparative advantage. In working with new clients, I get two sides - there's one set that have heard of all these benefits to sourcing from China and want to jump on the outsourcing bandwagon expecting savings to simply fall like mana from the sky, but then there's the other side, a more skeptical bunch who have heard the horror stories or experienced them themselves. The same is true for some foreign manufacturers who expect to open a factory in China with ridiculous expectations and ultimately get robbed blind - especially when it comes down to day to day management. One client would used to repeatedly order from the suppliers that priced cheapest despite knowing that there would be rework in the US (I suspect it had to do with poor project accounting since they weren't the ones responsible for the cost of the rework and simply for getting the best price).

Now more than a few years ago, I encounter far more of the latter who have experienced challenges first hand. It's these clients that I hope for, since they're far "stickier" and have far more grounded expectations. On the flip side of it, it's a far longer (and sometimes frustrating) sales cycle, but all things considered, I wouldn't have it any other way - especially given the impatience it would seem of many Chinese suppliers who think they want to begin supplying overseas.

The relationship between intelligence and wealth

This is the relationship between intelligence and wealth:

Says Paul Kedrosky:

While it doesn't stand up to statistical scrutiny, an eyeball check of the above figure does make it look like there is a soft inverse relationship. In other words, maybe we should be accusing random foolish sorts among us of being smarter than they're acting: Hey, if you're so dumb, how come you're not rich?!

I think it's one of the best lessons I got from investment banking and to a lesser degree, auditing/accounting. Rich people really aren't that much different than the rest of us - I think it's a combination of luck, recognizing an opportunity, going after it in a meaningful way and then a great deal of persistance.

Business Cards for Accounts Receivable Clerk?

This is pretty cool (at least for those with a somewhat warped sense of humour).

Paul Wolfowitz at the World Bank

A few people have asked me what I think about what's been happening at the World Bank. When the story first broke, I was quite disappointed given the facts that were being disseminated given Wolfowitz's strong anti-corruption push. I was though somewhat skeptical given the number of people who have it in for the guy who seemed to advocate such radical ideas as accountability and good governance. The media seemed entirely complicit and continues to be - pushing the story that Wolfowitz intervened, giving his girlfriend a nearly 50% raise.

It turns out that he was setup:

The World Bank released its files in the case of President Paul Wolfowitz's ethics on Friday, and what a revealing download it is. On the evidence in these 109 pages, it is clearer than ever that this flap is a political hit based on highly selective leaks to a willfully gullible press corps.

Mr. Wolfowitz asked the World Bank board to release the documents, after it became possible the 24 executive directors would adjourn early Friday morning without taking any action in the case. This would have allowed Mr. Wolfowitz's anonymous bank enemies to further spin their narrative that he had taken it upon himself to work out a sweetheart deal for his girlfriend and hide it from everyone.

The documents tell a very different story--one that makes us wonder if some bank officials weren't trying to ambush Mr. Wolfowitz from the start. Bear with us as we report the details, because this is a case study in the lack of accountability at these international satrapies.

On the other hand, another man who I respect greatly given his books, William Easterly faults Wolfowitz for other issues entirely. I can't say that I've followed what's been happening at the World Bank beyond knowing that Wolfowitz has been challenging the status quo. While Easterly makes a good argument that his approach has lacked consistency and a focus on simplicity, I wonder if the effect of decentralizing what he describes as "the world's largest repository of development knowledge and experience", would help to develop more local organizations in a better position to fight poverty than the large behemoth the World Bank has become. Further, in carrying forward his comparison to the Iraq war, I'm not sure that Paul Wolfowitz's departure is the message to send to nations who have been dead set against even the idea that the institution requires any sort of any reform.

Lying in Chinese

Bill Dodson @ This is China! has a great series on the specific characteristics of lying in China. This has got to be one of the most frustrating aspects of working in China. It sometimes feels like everyone is lying to you - either out of sympathy, protection or deliberately with malicious intent - and it's not always easy to sort out which is which.

Working with suppliers this can be of particular annoyance because you're not quite sure what to believe - especially when goods aren't being produced on time or attempt to pass a large price increase down to you. Suppliers can come up with the most fantastical stories - but fortunately as Dodson notes, most of them aren't particularly clever about their lies that are easily resolved with better information. Of course, once you have that information and you know someone is lying, it's another issue altogether as "face" is truly a big thing and you don't want to antagonize anyone to the breaking point because you really don't know what might happen especially depending on who you're dealing with (seriously).

An employee of mine told a big lie. He did it in the attempt of hiding something that was no fault of his own but that he hoped to correct quickly and easily on his own (sorry about being vague). I can't say that I was particularly proud of myself afterwards, but I entirely blew up and publicly berated him over what I saw as a betrayal (apparently a standard western response as Dodson later points out. On the other hand, if culture is the result of both what is said, and what is not said, while I think what I did was directionally correct, the execution could have used some work. In that respect, I guess I'm somewhat fortunate in that we're a fairly young company and are able to correct some bad habits.

The implications of lying however, are somewhat far reaching - and I would argue, extend to such things as corruption (here, some are absolutely brazen in the lies they tell to coverup self dealings) and more likely than not, to financial reporting. This, I think, does not bode well for the stability of the securities industry that hasn't gone in many directions other than up in recent years.

Happy Birthday Lenin... err... I mean Earth Day

When it comes to their records on population control, Lenin or Stalin are mere footnotes compared to Rachel Carson's success at getting DDT banned. A quote from Club of Rome's co-founder Alexander King:

In Guyana, within almost two years, it had almost eliminated malaria, but at the same time the birth rate had doubled. So my chief quarrel with DDT in hindsight is that it greatly added to the population problem.

While this might be a shocking revelation to the average humanitarian, I guess that's the point, ardent environmentalists can't also be humanitarians. Environmentalists must make an implicit or explicit choice of what they value more - humanity or "the environment". I was at a meeting of donors where a radical proposal for market based primary heathcare was being proposed for East Africa and a donor asked in all serious, "what if you're really successful? what about the impact of overpopulation to the environment?" After having discussed the impact this could have on kids - especially targeted group for the intervention, I think the rest of us sat stunned for a few moments.

As a bit of disclosure on my dark descent into economic libertarianism and media skepticism, it was my interest in the environment that did me in. I began with the premise that no, not all business people are evil and that there exist rational reasons for opposing measures to save the environment. I started out pretty good, even being the co-chair of the environment club in Grade 8 (yeah I am/was a geek). In high school, with an interest in business, it became a somewhat uncomfortable point that my interests were on a collision course for what I thought seemed and felt morally right. Then I discovered Julian Simon.

I'd suggest getting acquainted with a few more environmentalists as quoted by John Berlau at Open Market to see how much you really agree with. Then consider Ron Bailey's Earth Day article on the environment from 2000 on why the state of the Earth's environment has never been better.

Then reconsider one of the first leaders of the environmental movement, a woman who some say started it all - Rachel Carson who got DDT banned and if not, severely restricted:

The World Health Organization now estimates that there are between 300 and 500 million cases of malaria annually, causing approximately one million deaths. About 80% of those are young children, millions of whom could have been saved over the years with the regular application of DDT to their environments.

In a world where lying is defined to include statements made in ignorance though one may have been intentionally deceived, what does this make environmentalists who continue to support the ban on DDT? What of environmentalists who oppose industrialization and economic liberty for fear of the mass consumerism that it would bring while intentionally ignorant of the mass poverty, hunger and strife without it?

"Sales Eats First"

I've been following this blog for a while now. This post brought something of an epiphany describing a scenario where "two senior execs at Honeywells Building Solutions group execute a turnaround that increased sales 70%." From the cited article:

It all changed the day the president of the organization stood up and told everyone that sales eats first." Madden says that one statement has allowed his salespeople to drop the baggage and stop feeling like victims of all those things that they could not control. At that point, every single sales rep knew where he stood.

Operations serves at the pleasure of sales, and sales advocates on behalf of their clients and customers. As long sales incentives are aligned with corporate goals, that's the way it ought to be. Working with Chinese manufacturers can be highly rewarding until problems arise but this lack of client focus is quite common amongst the industrial manufacturers we work with. While this is frustrating, I also recognize it is one of the reasons businesses like ours thrive. When it comes to our own organization however, while we have a long ways to go in building a truly client focused organization, I do feel we have been making progress.