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Archive for the ‘Business’ Category

The Fall of the Wall and Zeiss

This week the world is remembering and once again celebrating the fall of the Berlin Wall. The BBC World Service has been broadcasting various reports over the week, and last night there was a wonderful piece about Carl Zeiss AG.  The BBC has made the podcast available so download and give it a listen!

Carl Zeiss is one of the premier lens makers in the world.  One can find Carl Zeiss lenses almost anywhere, even in modern Nokia mobile phones.  The audio report covers the history of the company, how it became a global name in optics, and how the company was split into two because of the iron curtain.  It was interesting to learn that the American and Russians, in their push to capture Germany, were strategically planning which towns they wanted to take based on the companies located there and their technologies.

The most interesting part, in my opinion, is the interview with a former Zeiss president who was in change when the wall came down.  While he was happy that Germany would be reunited, he realized the challenges of trying to unify the company once again.  After meetings with the Jena Zeiss, the company in Eastern Germany, he realized that Jena Zeiss had the following problems:

  • low productivity
  • 60,0000 vs. 18,000 workers, yet with the same turnover
  • no knowledge of balance sheets or PNL (profit and loss)
  • no knowledge of marketing and selling products
  • no business strategies

While it must have been hard to reunite the company, can you imagine how the leaders of Jena Zeiss and its workers must have felt?  They were from a world where the government gave them orders on what and how much to produce.  They were then thrown into a world that they had no clue about, and their skills were not needed by a capitalist organization trying to compete in the beginning of the global economy.

It is hard to believe just twenty years ago Germany was still split in two.  The challenge of reuniting not only the country at the governmental level, but also in the marketplace, must have been extremely challenging and trying.  Someday the challenge may surface again in Korea, and hopefully the Germans will be able to share what they learned in the reunification process.

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End of Suburbia?

The Economist and The Atlantic, my two favorite magazines–though one wishes to be called a newspaper–have published some very interesting articles on the housing crises in the US.  I thought I’d share them for anyone interested.

How the Crash Will Reshape America, by Richard Florida in the March 2009 issue of the Atlantic, describes how real estate and financials booms have created and leveled cities in North America since the Industrial Revolution.  The article argues for the reincarnation of New York, even though it is the home to American finance and the current recession.  The author argues that cities with one specialty are more likely to fail to make a come back after this recession, just like manufacturing towns in New England in the past.  It is a long article that covers the effects of globalization, labor movement, and regional industries.  It is an interesting read and I think it asks very important questions for all to think about, whether you live in the US or not.  Most likely these issues may also plague other countries too.  Japan is quite similar in this respect actually.

Labour Mobility: The Road Not Taken, from the Economist, analyzes the restrictions of home ownership from the mobility perspective.  The article argues that home ownership can often tie an employee to a certain region and employer, not allowing them to freely follow the labor markets as they move around a country or even the globe.  While owning a home can certainly tie one down, I had never really thought the health care aspect that the article raises:

The other threat to mobility is health insurance. A company can buy health insurance for its employees with pre-tax dollars; an individual can buy it only with after-tax dollars. So although soaring premiums are prompting many firms to drop or restrict coverage, most Americans still get their health insurance from their jobs.

Tying health care to a job can tie people to jobs they hate. Gerry Stover, who now runs a doctors’ group in West Virginia, recalls a time when his wife was pregnant and he couldn’t get health insurance at a private firm. He became a prison guard. As a public employee, his family was covered. But the job was neither pleasant nor a good use of his talents.

Imagine if you had a severe illness, or perhaps your child has a chronic illness.  If your current employer is the source of your health care plan, what happens if you voluntarily leave the employer for a better job with more pay or to improve your family’s future?  The health care provider at the next employer may not cover the existing condition, or they may require outrageous premiums to cover the condition.  I never really thought about this until now, having a baby opens your eyes to a lot of issues that you might not have thought about as a bachelor.

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Change?

Though my endless link surfing, I somehow found a link to a New York Times article on Japan’s Political Dynasties.  When I think of political dynasties, naturally, due to my background, I think of the Kennedy family,the Clinton family and especially the Bush family.  It seems Japan is no different in this aspect. However, one part of the article particularly struck a chord.

“Sure, we’re tired of all these brats,” said Keiko Nomura, 53, who owns a shoe shop in Yokosuka. “But Japan still has money, and Japanese basically hate change.”

I added emphasis as I’m not going to write about politics; rather I shall write about the change aspect.  Do read the article though, it is quite interesting. So about the change…if you’re going to live in Japan for any decent length of time, you simply have to get used to this aspect of the culture.

As much as C-levels (CEO, CFO, CTO, etc.) in the companies I have worked at talk about changing our work habits and increasing our productivity and efficiency and what not, the idea of change stops at the desks of the mid-level managers.  I imagine that this is just as frustrating for the C-levels as well as the general employees.   The C-levels were once sitting in the mid-level desks and don’t try to initiate change there, so perhaps they’ll all just blowing hot air?

I remember in a former job, all of the  employees were divided into teams called “QC circles”.  We would meet once and week, and the goal was to somehow improve some aspect of the way our company operated.  During one meeting, our QC circle leader came up with a great idea and we implemented it.  Our team was lauded by the CEO and we even won a prize, but when it came time to implement the change in the company, it stopped at our group manager’s desk.  Why change the status-quo?

I was reading about a very interesting development process for software that I think would work really great in a small company like the one I’m currently working for. I won’t go into the details though because I doubt anyone who might read this blog is interested in software processes. To get to the point, after reading about how one project manager implemented the process for his team in France–the process drastically improved the quality of their software while also allowing reducing the amount of overtime and extra-hour work required–I became quite interested in the process.  I would welcome any process that reduces the inefficiencies and long hours in my current job.

The company I am at now has small teams, very short and very tight schedules, and we have to provide multinational-level quality and support to large global companies. Amazingly,  at this time there really is no process at all, yet somehow the work gets done and the customers are (somewhat) happy.  However, because there is no process, an unbelievable amount of work is duplicated and the amount of overtime and weekend/holiday work is really quite astounding.  The team leaders work almost twice as much as regular engineers like myself, so I count myself lucky to be just a grunt!

While I would love to give the process a try, when I think about it more, such a software process would never really work in Japan.  The French, as a culture, generally value value their time away from work.  In fact, we can say the same thing about all of Western Europe and North America too.  In North America and Western Europe, new managers generally try to shake things up to make their mark on the organization, and the staff have come to expect such changes.  That culture does not exist in Japanese businesses, where continuity and loyalty are valued above all.  If I tried to present the process to my boss, he might be interested, perhaps even agree to some training seminars on the process, but I guarantee at the end of the day, we’ll stick to the status-quo.  I have a new-found respect for Carlos Ghosn (of Nissan) and Sir Howard Stringer (of Sony); they are operating in very large Japanese companies and I imagine their jobs are not easy at all.

I’m not trying to be judgmental at all.  The Japanese do business their way, and if it works for them and they’re happy with it then who I am to say anything?  In fact, I really find the dislike of change quite fascinating.  The last time I was apartment shopping I was explaining to a coworker how difficult it was.  He agreed and shared a similar story of difficulty in trying to rent a place.  When I asked him why there were no new businesses trying to challenge the established real-estate system and came up with novels ideas and what not, he replied, “Well, Japanese don’t like change.”

The other day I was talking with a friend about the new developments in his neighborhood.  He is hoping the rents will decrease due to the competition added in the neighborhood.  While that makes sense economically, I suspect that Japanese landlords hate change too.

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Shoot the math guy instead?

Over on Wired, Felix Salmon has an interesting article titled Recipe for Disaster: The Formula That Killed Wall Street.  Besides being a fascinating read about the work that “quants” (financial mathematicians) do, it also provides a very readable explanation on  the mechanics behind the mortgage-backed securities that exploded in our faces last year.

Salmon is incredibly harsh on David Li, the quant who developed the formula that would set the foundation for this eventual fall of the mortgage-backed securities market.

It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number—one clean, simple, all-sufficient figure that sums up everything.

So perhaps Li was wrong, but he published his work in an academic journal.  An academic journal is for publishing new ideas and facing the scrutiny of your peers.  It is part of the Socratic method, the basis for academia in western civilization.  So while blame does lie on the shoulders of the quants who decided to apply the formula on their financial products, I do not think Li can be held responsible for the current market mess because of his formula.

Salmon eventually comes around on the issue and states the obvious.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.

I emphasized the line that should stick out, just in case.  Just like when engineers at NASA warned of danger and were ignored, management makes the final calls and management holds the final responsibility.   Partners and Vice Presidents alike balked at the risk as long as they were turning a profit.  No one thought it was odd that junk could be coupled together and sold without risk.

In hindsight, ignoring those warnings looks foolhardy. But at the time, it was easy. Banks dismissed them, partly because the managers empowered to apply the brakes didn’t understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.

Yes it does look foolhardy.  But then again when the stock market was climbing with dividends being paid out to investors and record profits for the partners, we couldn’t hit the brakes then could we?  I find it amazing that some are trying to place the blame on a formula.

I have to say I don’t blame Li for getting out of North America either.  The media and its “journalists” are on a man-hunt to hold a select few responsible for the transgressions of a an entire industry.  I’m sure they would have loved to have feasted on a foreign-born quant who went and caused started it all by publishing a paper.

(on a personal note, back in mid-2006 I interviewed for a position responsible for implementing software trading systems based on the work of quants–I didn’t get the job, but if I did, I’d probably be out of a job right now!)

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Obama-mania in Japan?

After work I stopped in at the local book shop to pick up the March issue of “Listening Chinese” magazine.  In the center of the store there was a huge display with all sorts of books with President Obama on the cover.  Now the Japanese are mostly apolitical, so this struck me as something quite odd.  After all, most Japanese have little interest in politics in their own country, so what gives with the US President?

It turns out that these books are study resources with speeches recorded on CD and then transcribed in English with the Japanese translation on the opposite page.  It struck me a really good idea too.  Unlike Bush Jr. and Clinton, Obama does not have a strong accent and is a very strong orator, making it quite easy to understand.  Apparently these books are popular with businessmen and managerial types.  It is popular to alude to “change” in speeches by managers–it happens in my office too.  I suppose the managers just want to try and get everyone’s spirits up about the economic conundrum we’re all treading through.

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Bask in the glory!

China has been developing its own radio access standard for mobile wireless networks.  The name of the technology is TD-SCDMA, and what it stands for is irrelevant.  I just like the banner ad on the technology forum web page.

I have always been fascinated by the propaganda posters from the early days of the revolutions in the USSR and China, and for some reason the tone of this advert strikes a chord.

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I have a dream one day I will be able to go to a  job where the following things are considered normal and sensible.

  • So I need to be working at a work bench.  I need a computer to do my job.  What I need is a notebook computer instead of a stupid budget desktop PC–I hate having to walk across the room every five minutes to to flip a switch.  Damn you forever, Remote Desktop and all of the IT monkeys who champion it as the cost saving solution!  I’d rather just go sit at my workbench and–wait for it–do work at my workbench instead of having to remotely connect from my cubicle.
  • More than one test environment so that when we’re getting ready to ship a product, different teams can perform this amazing concept called “working in parallel.”
  • Being able to know that when I approach my workbench, I’d know if anyone borrowed anything because they’d have sent me an e-mail letting me know that need something, and when I might be able to get it back.  If I had a voice mail-box that would be fine too.  Just let me know before I get ready to start where I left out and find out all of my preparation was for naught.
  • When I’m supposed to build my work on top of someone’s prior work, it would be nice if they made the a list of the things I need to make their crap work.  I grow tired of trying to use their work, only to find it is depending on X, Y and Z, which are dependent on A, B, and C, respectively.

The list is much longer, but I die a little when I start to think about it.

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