Archive for the ‘Business’ Category

Iraq Stock Exchange Starts Electronic Trading

April 20, 2009

A signal day.  Without fanfare, the ISX has opened electronic trading in five companies, with more to follow.  Here are Reuters and USA Today.

“This is an important step to opening ourselves up to foreign investment,” said Taha Ahmed Abdul Salam, chief executive of the exchange. “We are starting to create the transparency and systems that will make Iraq attractive to investors outside of Iraq.”  [That’s from USA Today.  The AP got the CEO mixed up with the head regulator.]

Congratulations.

A Modest Proposal for the Prevention of Stock Price Bubbles

February 19, 2009

A modest proposal to reduce the probability of future stock bubbles.

This is inspired by commenter sociologicalimagination on this post by Tyler Cowen:

mid-term question: how many NBER papers on the efficient market hypothesis could I print out every week (with my stimulus money) that have been proven utterly false in the past 6 months?

The efficient-market hypothesis comes in three flavors: strong, semi-strong, and weak.  Strong says that prices reflect all information, public and private, so no one can earn “excess returns” (better-than-average returns gained by crafty trading).  Semi-strong says that prices adjust rapidly and completely to newly-available public information, so no one can earn excess returns by analyzing public information or past prices.  Weak says only that future prices cannot be predicted from past prices.

I take sociologicalimagination’s comment to mean that the strong form is certainly false.  A lot of firms took on risk that very few recognized or understood.  What could protect us from future emperor-has-no-clothes moments with the likes of Bear, Lehman, AIG, and Countrywide?

We need a better way to let the people inside those firms let us know when something bad (or good) is happening.  Let’s legalize insider trading so they can send us price signals.  And to be safe, let’s let them short their employers’ stocks too.  That would get us closer to an efficient market.

I don’t know whether insiders could have sent a strong enough signal to head off the crashes of 2008.  (If they did, we wouldn’t know we had dodged a bullet.)  Insiders can herd just like independent investors.  Maybe the risks were too systemic, and simply not visible from the perspective of any one firm.  Some insiders will probably make unfair profits by selling ahead of bad news.  And we’ll have to appologize to Martha Stewart.  But think of how much we’re going to pay for extra enforcement over the next few years.  Wouldn’t it be better to give millions of dollars over years to insiders, in exchange for braking the market, rather than losing hundreds of billions in destroyed market value and future taxation?

(Brief sojourn into non-Iraq economics blogging.  As always, not the opinion of the U.S. Dept. of State or any other entity.  Semi-regular Iraq blogging to return soon, I hope.)

Quick Links

August 14, 2007

Here are a couple of interesting economic links:

Inside the Trek Factory

August 11, 2007

For any of you who may be cyclists or manufacturing fans, here is a fun post from Guy Kawasaki: a visit to the Trek bicycle R&D and frame manufacturing facility in Waterloo, Wisconsin.

Maybe not the leanest shop I’ve ever seen, but there is not a ton of inventory in those pictures.  There are hints of build-to-order, at least in the paint line (“Project One”).  This facility makes frames which are assembled elsewhere, and there are some shots of finished goods.  If they fill that truck up in a day, we see maybe just a few hours worth of FGI.

Trust and Value

July 24, 2007

A value proposition is a short statement of “why customers should buy your product.” A good value proposition can help your organization to focus on “how we win” and avoid wasting time on features and projects that don’t matter to the customer.

If your business relies on customers sharing personal data (Web 2.0), then, in addition to a great product, you need to telegraph reliability and integrity every time you touch a user. You could benefit by developing an explicit “trust proposition,” a concise statement of why customers should trust your business.

Despite my concerns, Wesabe has done an outstanding job of this. They know that impregnable security is the minimum requirement for anyone to put personal financial data into a social network. They know that security depends on internal culture and practices as much as on technology. So the whole user experience – at least on the acquisition side – is designed to make the emotional argument for their culture.

Wesabe hammers home the “community” angle – other users are people just like you. They won’t advertise because it conflicts with the Wesabe aspiration of thriftiness. Lest anyone’s experience or data be compromised due to employees’ poor incentives, users can directly contact the CEO. Commitments to maintain privacy are public and unequivocal. Data can be freely exported or deleted.

In aggregate, all these cues convince me, intellectually and emotionally, that Wesabe knows it lives and dies with users’ trust. It isn’t about to release a slew of user data like AOL with those search results. I have my doubts about the ability of Wesabe’s culture to survive acquisition, but today they have done a great job.

If user trust is mission-critical, consider putting together a trust proposition to keep your guiding principles in front of your organization. Your value proposition still tells you what to build and how to sell. A trust proposition will help your organization focus on acceptable practices and user perceptions (while supplementing your value proposition).

PREVIOUSLY on Zeal and Activity: Why Wesabe is Trouble

Why Wesabe is Trouble

July 23, 2007

Dave Winer has raised a kerfluffle with his post Why Feedburner is Trouble. He never liked “giving so much power to one company,” especially now that they’ve sold to a bigger company. Fred Wilson, whose Union Square Ventures invested in Feedburner, says Mr. Winer shouldn’t be concerned because it’s so easy to leave. Robert Scoble says that the real issue is big companies messing around with standards. Donna Bogatin says that the real issue is Google hoovering up everyone’s proprietary data.

I have some of the same concerns about Wesabe.

I’ve been ogling Wesabe since Fred Wilson’s first post three months ago. I crave its streamlined data entry, tagging, and web access. I buy the extravagant privacy and security measures. I understand the benefits of anonymously aggregated data and the possibilities for social networking around personal finance.

But it’s one thing to open up your credit card, checkbook, taxes, bills, investments, and tags to a small, independent company whose CEO sets aside 2 hours a day to talk with customers, and another to open them to Google, Yahoo, ACNielsen, or Equifax.

Union Square Ventures led the Series A round for Wesabe. When the number is right, Wesabe will sell to a bigger company. No complaints; that’s how VC works. But there’s no way for Wesabe to bind its eventual acquirer not to be evil. Who wants to see this announcement?

If you take no action by June 15, 2010, the rights to your data will transfer from Wesabe to [Google].

Wesabe insists that its users still own their data, but it’s already slicing and dicing for their benefit. It’s a small step from there to mining for salable data. Sending aggregated data outside the community would violate the Wesabe ethos, but maybe not the Google ethos.

If Wesabe were acquired, I could always pull my data. But that kind of disruption built in 3 or 4 years from now is a huge flaw for a financial service (especially a really good one). So, unless I can be convinced that Wesabe will “sit tight,” it has yet to cross the chasm for me.

UPDATE: More thoughts on what Wesabe has done well.

Welcome New Readers

July 16, 2007

Welcome, first-time visitors to Zeal and Activity. If you are here from Evolving Excellence, you might be interested in the following:

Looking back at these manufacturing-related posts, it’s surprising how many were prompted by Evolving Excellence. Kevin and his co-bloggers do a great job bringing lean manufacturing to the blogosphere.

Mind the Gap

June 24, 2007

Gap Inc. is going to close some stores. Seth Godin says:

They should close 200 or even 500 stores and keep the very best people from each store, redeploying them to their best stores. They should invest in those great stores, invest in design, in targeted marketing. … [T]hey ought to avoid the nickel and diming and go back to what made them great in the first place.

Gap’s board might also consider revisiting its manufacturing strategy. Product cycles are getting shorter and shorter in the fashion industry, and domestic producers like American Apparel can react much more quickly to changing tastes, with less inventory at risk.

Free Music

June 14, 2007

Fred Wilson at A VC has been outlining his vision for the future of music marketing and distribution (short version: music will be free). He is a maven for rock and pop and a regular commentator on technology and venture capital, so I listen to him.

I think free music can be a great business. In this post, I’d like to make explicit something Fred is leaving implicit, a key feature that I think is necessary for mass adoption. The payment model itself has to respond to consumer preferences. There is too much variation in taste for “one-size” monetization.

First, it’s worth reading all of Fred’s posts:

Here’s the core of Fred’s idea, from the original post, The Free Music Business: (more…)

Dabbawallas of Mumbai

June 12, 2007

Evolving Excellence points to a New York Times article on the amazing dabbawallas of Mumbai, the lunch-pail delivery service that uses the Mumbai municipal rail network.  The dabbawallas, in operation since 1890, are the topic of a 2004 Harvard Business School case study.  I also found a case from the Indian Institute of Management in Ahmedabad, which is the source for the data below.

The dabbawallas have achieved stupendous quality using low-tech visual management (colored symbols and numbers painted on the pails).  The 5000 dabbawallas deliver 150,000 lunch pails every morning, six days a week, and return them in the evening.  They report “less than six errors in 13 million transactions,” – about 48 errors per year, or 0.5 errors per million.  For comparison, Six Sigma quality is achieved at 3.4 errors per million.  (Note however that the second article linked above, which appears older, puts the error rate higher, between 33 and 50 per million, due to theft.)

Here’s to the dabbawallas – a testament to what can be done with determination and a little ingenuity, and a challenge for all of us struggling with yield loss in the 0.1%, 1%, or 5% range.

MORE: An article from MidDay newspaper, putting the error rate at better than 1 part per 6 million, and describing how the dabbawallas work as a group to solve problems and provide one another with credit.