At the intersection of technology, finance and the Pacific Rim.

Friday, June 30, 2006


It stands for technology, entertainment and design. And it is one of the most anticipated and unique conferences of the year in the US. Why? Because it brings fresh ideas and speakers together on a broad range of topics--ecology, world health, technology, social development.

And it is now available via VoD for the 2006 Conference held earlier this year. Go to this link. You will see inspiring presentations, many from people who have made something out of nothing. Majora Carter started with $10K grant and leveraged it into a $3MM project that is changing the face of the South Bronx, one of the toughest, most depressed neighborhoods in the US--check out Tony Robbins who also started with very little, to become one of the leading personal coaches in the US to businesses (he is panned in the US for his commercialism, but after you see him you may feel differently); Hans Rolling who gives one of the best presentations ever on powerpoint; and more. It will make you think and hopefully you will come away with a sense of what is possible.

Thursday, June 29, 2006

For Every Bush there is a Buffett

As I noted earlier, Warren Buffett has chosen to turn over his most of his wealth to the Bill and Melinda Gates Foundation. He is interviewed on the Charlie Rose Show along with Bill and Melinda. Warren will become a trustee of the Gates Foundation and the Foundation itself doubles in size to over $60BN.

These three want to eradicate the top 20 diseases that afflict the developing world and help re-build a world with less social inequalities. This is thinking Big. As time goes on, I have become convinced that there must be a softer side of capitalism--that some of the profits need to be recycled to help the dispossessed and those who don't know how to get on the playing field must be shown the way. I have deep reservations about this push for "globalization" without this cushion underneath it. Hopefully as Gates has built one of the most profitable corporations that capitalism has seen, he will build one of the most of the most meaningful organizations that humankind has felt. I encourage you to watch the interview.

Wednesday, June 28, 2006

What Could Have Been

For a video interview with Al Gore, the Anti-Bush, go to this link.

Monica Lewinsky Affair paralyzes Clinton, which torpedoes Al Gore, which allows Bush to sneak in. The same works in business. How small indiscretions mushroom into big catastrophes. I am not sure I can adequately convey this concept but big problems start in small packages.

Tuesday, June 27, 2006

What's in the News?

There have been several events that have hit the press. The first is SK Telecom's $1BN investment for 6.6% of China Unicom. It will be interesting to see whether this pays off or not. I hope for SKT's sake it does. And a prime driver of the deal according to an SKT official is that the two parties will have an 18 month exclusivity period for "establishing a strategic alliance" with each other. Hmm..... What does a billion dollars buys you these days in China! Not much! No apparent board seat, 6.6% ownership, small fish in big pond. Prefer big fish in little pond as an investment strategy. Better control over your precious capital. Otherwise why not give cash back to the shareholders and let them invest as they see fit.

The second was the announcement by Warren Buffett that he would be donating $31BN to the Gates Foundation. Remember the money cycle of Learn, Earn and Burn. Clearly Buffett at 75 is in the Burn phase. some burn by buying 27 sports cars and 18 houses; others use it for fighting for genuine causes. With $60BN in Assets I would bet that Bill will be leading his second revolution.

Sunday, June 25, 2006

Career Advice

This is from Robert Schiller, Economist at Yale University. Quite insightful career advice:

In their recent book The New Division of Labor: How Computers Are Creating the Next Job Market, economists Frank Levy and Richard Murnane, using job descriptions that go back to 1960, carefully classify jobs according to the kinds of cognitive skills that they require. They were particularly interested in identifying jobs that were routine, even if complex and difficult, which could in principle be replaced by a sufficiently well-programmed computer. They then show evidence from the United States that jobs involving both routine manual work and routine cognitive work have become much less plentiful in recent decades, and that these jobs have indeed tended to be replaced by computers.

In an important sense, their research confirms that my students are right to be worried. But these trends tended to persist within occupations, industries, and educational attainment levels, thus providing little guidance concerning what occupation to choose or how much education to pursue. The important issue, according to Levy and Murnane, is that the most promising future careers will be those grounded in either expert thinking or complex communication skills.
Expert thinking means understanding how to deal with new and different problems that do not fit the mold of past problems. Complex communications skills entail understanding ideas, how to evaluate their social significance, and how to persuade – tasks that no computer can accomplish.
As long as young people direct their efforts accordingly, they can acquire these skills in virtually any of the major courses of university study. Moreover, those who would like to devote their college years to acquiring technical skills in a narrow field that they love would be wrong to conclude that they must give up their dream. Specializing in business, finance, or law does not really protect one from commoditization. People in these fields are ultimately bought and sold by corporate managers as much as people in technical fields. Hardly anyone makes it all the way to the top in the business world.

The important point for students to bear in mind is that they should motivate themselves to attain deep understanding, not rote memorization, of the subjects that they study, in order to fulfill the role of a true expert in whatever field they ultimately choose to pursue. At the same time, they should invest in acquiring the communications skills that will be similarly crucial to a successful career.

To read the full article, go to this link.

These days it is commencement address season. This from Daniel Goldin who formerly ran NASA at the MIT Commencement:

"Not experiencing any failure in life is rarely a sign of perfection; rather it's a sign that your goals aren't bold enough."

Friday, June 23, 2006

Oh My God!

I had one of those "oh my god!" moments at the NTT DoCoMo booth at Communicasia in Singapore this week. Communicasia is the largest telecom exhibition in Asia and all of the key players display their wares.

Can you guess what this man is doing sticking his finger in his ear? He is listening to a cell phone call through his finger. I did it myself and it is weird hearing sound through your finger because your brain is tuned to not listen when you have your finger in your ear. So how does it work? The sound waves are transported from the phone in your pocket to the the ring like device on the finger that you see in the picture, then through your finger bone to your ear. There is also a microphone in the ring for speaking (and you can leave your finger in your ear and talk at the same time). I told the Docomo booth with astonishment "I salute you!" And then I began thinking--who would use such a device? There are blue tooth devices that are as small as big hearing aids that can fill the same function. Anyway, Docomo said that they are trying to shrink this device to make it more commercially feasible. Release date not known. Beware of engineers: they can come up with brilliant things with little use. Posted by Picasa

Monday, June 19, 2006

One of my idols when growing up was John Wooden, head basketball coach at UCLA. During his tenure, his teams won 10 college basketball championships in 12 years; at one time they won 89 straight games. This from the LA Times on Father's Day (in the USA):

In 1924, when John Wooden finished eighth grade, his father gave him a card. On one side was an inspirational verse by Rev. Henry van Dyke. On the other was a seven-point creed that included "Make each day your masterpiece," which Wooden later used in coaching

Sunday, June 18, 2006

More on Bill Gates Doesn't Matter

This from this week's Barron's:

The reaction on Wall Street early Friday to news of Bill Gates' plans to transition out of his daily duties at Microsoft was a bit ho-hum.

After Thursday's closing bell, Gates announced he would immediately leave the chief software architect's position, handing over those duties to Chief Technology Officer Ray Ozzie, and unveiled a two-year timetable to leave his day-to-day role at the world's largest software company.

The stock (MSFT) was down 11 cents at $21.92 as midday neared Friday.

J.P. Morgan maintained an overweight rating on the Dow component following the news, saying it recognizes the stock's prospects have turned into a longer term story now, but that it believes there will only be a modest impact, if any, on operations in the near term.

"Gates' withdrawal from MSFT's operations was widely anticipated and we believe the transition plans which led to [Thursday's] announcement first started back in September 2005 when MSFT reorganized the company into three divisions," J.P. Morgan told its clients.
As for where the stock will go from here, J.P. Morgan said it believes the next important catalysts are the fourth-quarter financial report, due July 20, and an analyst day July 27.

Citigroup had a similar reaction, keeping a hold rating on the stock and a $27 price target.
"Given the two-year transition period and our belief that Gates has been preparing the organization for this through [the] previous reorganization and hiring of Ray Ozzie, we are only slightly concerned about the impact of this announcement," analyst Brent Thill said.
Thill said the beginning of the end of the Gates era at Microsoft may temper morale in the short term but noted that any vacuum created would "give a new generation of leaders a chance to step out of Bill's shadow, evolve new business models, and develop the software and services vision of Windows Live."

Friedman Billings Ramsey also left an outperform rating intact on Microsoft and kept a $32 price target on the shares, but it struck a more bullish note while forecasting just a slightly negative impact on the stock in the near term.

The firm said it sees "business as usual" at Microsoft in the wake of the announcement and looks ahead to the balance of the year, when it expects Microsoft to bring clarity to issues that have held the stock back of late, specifically the lack of a detailed strategy and uncertainty regarding the release of its Vista operating system.

"We are happy to see growth accelerating [from fiscal 2005 through fiscal 2007] and believe the decision to reinvest will cause margins to contract in the short term -- but reach an inflection within a year and resume expansion," Friedman said, adding that it expects the analyst day to shed more light on investment strategy.

The succession news prompted a reiteration of an outperform rating from RBC Capital Markets. The firm, which held its $32 price target static, said it continues to like the risk-reward ratio for Microsoft while the stock is sitting near a four-year low.

"With the stock stuck in neutral for some time, a change such as this may help paint a picture of new beginnings for investors," RBC told clients, adding later in its note, "as the company enters its large multiyear product-release cycle and takes market share in its emerging divisions, we believe Microsoft deserves to trade at a multiple near its peer group."

Saturday, June 17, 2006

Does Bill Gates Matter?

The financial investor says "probably not".

As you may know, Bill Gates announced that he will be giving up his day to day activities with Microsoft, though he will remain Chairman. The transition period is two years. Microsoft stock ended up slightly after the announcement in a down NASDAQ market. As you know, the stock is a prediction of the future cash flows to be derived from the stock, discounted based on the perceived stability of such predictions and the alternative sure return (US Treasuries). So the investor is saying that he does not matter financially--or just maybe the company is a bit better off. And of course he does matter. My hope is that he will have the same impact on the lives of the impoverished as has had on the lives of people who can afford a PC. And one day, for his work he will be awarded the Nobel Prize.

I never got to tell you my Bill Gates story in class but there is a lesson. A friend of mine was head of large enterprise and public sector business development for Microsoft in Japan. They had a meeting with the Prime Minister. Bill Gates during the meeting said to the PM that the Government of Japan should upgrade their PCs every three years instead of the current five year cycle. His talk was received "politely" with a smile though no real words were exchanged. The meeting finished and the three people from Microsoft (Bill, Japan head, my friend) headed off in different directions. Shortly afterwards, my friend gets a call on his mobile, "xxx-san, this is Bill. Your job is to get the Government of Japan to change its policy on PC upgrades to a three year cycle. You have one year." He had to report to Bill monthly on his progress. At the time, my firend thought it was impossible" and inconceivable. The Japanese government does not move that fast. But with this mission and a sharp focus, he got it done--meeting every single day with various government officials. Lesson: when leading set goals that stretch people's capabilities. By the way his work habits: start work at 9AM; work until 7PM, dinner/entertainment with clients until midnight; return to office until 4AM communicating with Microsoft HQ--go home to sleep; wake up and take his daughter to school and then get back to work.

Thursday, June 15, 2006

Final Exam

I want to congratulate all of you for finishing the final exam. I received some comments about the difficulty of the assignment. I have not yet had a look at the "results" but you can be rest assured that it is not just a test of your skills, but also my teaching!

Thinking holistically in a world of increasing specialization is a chore. The assignment that I gave you was our test on whether you are thinking of the business and seeing the interconnections. Also, most importantly, you must think of a business as a living organism--often times we view the strategy side of business as a chess match--moving pieces to counter competitive factors and make bold moves that throw the business off-balance. Things get "measured" in market share, revenue per employee, blah, blah, blah. We are looking down on the chess board as the CEO. Yet of course the pieces have hearts and minds of their own and the black pieces (your competitor) also have their own separate agendas--not just combating you.

I want to encourage all of you to expand your human horizons--not just your business techniques. It is important to understand models and algorithms, yet it is more important for the international businessman or public servant to understand human behavior within the cultural context. Read a good, soulful novel about the place with whom your are interacting. I have found this very useful now that I have been dealing with Bengalis. This can lead to a certain soft power, a sense of touch, that will put a glow over the "hard" knowledge or information gleaned from your methodologies that you have learned at KDI.

Tuesday, June 13, 2006


Sam Palmisano, CEO of IBM remarked that globally integrated enterprises and their leaders will need to reinforce trust. He writes in FT, "We need new ways of establishing trust based on shared values that cross borders and formal organizations." As companies increasingly partner for competitive advantage, the trust issue arises time and again between them.

About ten years ago I was a banker to a fast growing semiconductor company; their motto was "Say what you do, Do what you say". Take the words you say as commitments. This is the foundation of trust and as you enter or continue your business career you may find this hard to do. I say this having worked in two of the most "hyped" industries, technology and investment banking. Not easy to do but you need to stay on this course as it works in the long run.

Monday, June 12, 2006

I read with interest in a recent WSJ article the way in which Richard Waggoner, CEO of GM, had to change his nature to save his job--to become more conscious of the outside since "perceptions are reality". Also interesting was the way Ken Fisher, Board Member of GM and former CEO of Motorola handled the critical board meeting. I have "preached" in many of my classes the importance of preparation. What is it? It is being prepared for all possible contingencies or situations through forward thought and planning--especially in important meetings or events. If you confront a situation where there are multiple potential outcomes, think through each one and figure out how you should respond in advance. Too often, people go in with their "gut" and rely on "intuition" to make a snap decision. But your gut can be swayed by your heart/emotion and is usually one sided--i.e., does not consider all potential alternatives.

At a critical board meeting where the performance of Richard Waggoner was discussed openly by the Board, Fisher was able to control the meeting through his preparation. The Board was trying to decide whether to endorse Mr. Waggoner or not. This is a demonstration of how you get things done in a fast way with precision.

(Addressing the Board) the planned April 9 meeting put him in a precarious position, Waggoner said. He requested a strong and unified expression of support. Without it, he added, in a matter-of-fact tone, he couldn't continue as chief executive.

Mr. Wagoner then left the call. Mr. Fisher asked that directors issue a "reaffirmation" of their confidence in Mr. Wagoner and his turnaround strategy. It was clear the board wasn't eager to face the crisis of a suddenly vanished CEO without a clear successor lined up. "If not Wagoner, who?" asked one director.

Some said Mr. Wagoner was making progress on the strategy they all had approved. Director Armando Codina, according to a person familiar with the meeting, said that labor relations were a critical issue, and that Mr. Wagoner had unions' respect to work out a labor pact without a debilitating strike. Through a GM spokesman, Mr. Codina declined to comment.
Several directors voiced concerns about parts of Mr. Wagoner's strategy, such as his focus on large sport-utility vehicles. Mr. Wagoner had moved up the timetable to unveil a redesigned Tahoe, a big SUV, during the first quarter. Its sales popped at first, but the move also turned out to be just before a spike in fuel prices that hurt all car makers' SUV sales.
Avoiding a Vote

Some directors indicated they were uneasy going public with a show of support they might wish to withdraw in the future. But Mr. Fisher urged fellow directors to consider what was "in the best interest of GM right now." Then, avoiding a vote, he called for a consensus that the auto maker under Mr. Wagoner's leadership was moving in the right direction.
Mr. Fisher had come equipped with three possible wordings for such a statement, varying in the strength of their endorsement. Despite reservations by some, the directors finally agreed on a relatively strong statement from his list.


Sunday, June 11, 2006

Business Tips

Howard Stringer is the new CEO at Sony and is in charge of their turn around. He was interviewed by the WSJ's Walt Mossberg. Note the importance of controlling the software--it is the means by which you control the customer experience. Here are some excerpts which further expound on the theme of our course:

Mr. Mossberg: Consumer electronics in his [Jobs's] mind can be thought of as software in a box, and that has not been your strength. You've been primarily a hardware company. What have you done about this problem?

Mr. Stringer: I spent a lot of my first year pushing on software. Now, Sony makes 3,000 stand-alone products and 50,000 SKUs, so part of our problem is we're this giant department store, ostensibly an analog department store, cranking out all these things that the world wants but for which we don't always get credit in the stock market. We actually have a lot of brilliant software engineers, but they create embedded software. We have had a great problem with application software. We never did it, as you know, with a digital Walkman, which we didn't even release here because we actually didn't want to give it to you.

Mr. Mossberg: Oh, thanks.

Mr. Stringer: We gave it to the rest of the world and retailers were very upset with it. It was a beautiful product, a purple device, wonderful-looking information on it. Very elegant in software and the two doormen in my building think it's absolutely great. But it's limited because we didn't sit down and have a systematic plan to build applications across the software-development program or software platform and furthermore, it's a weakness of Sony's ... Why am I confessing?

Mr. Mossberg: Good, keep it coming.

Mr. Stringer: We didn't bring software engineers into the product development at the beginning. The engineers would begin the product and then software would come after the fact. And that's because in a company that has jobs for life, the older people are at the top and the younger software engineers, of which there are many, are on the bottom, pushing up. So there's a kind of a generation gap, which we've worked really hard to eliminate in the last four months. We're going to transform Sony quite radically in the next 12 months.

Mr. Mossberg: Let's talk about the Sony Reader, which is a new and quite different e-book device. ... This is not just a device. You have to pull off something sort of akin to iPod and iTunes with this, where you have a device people like, at a price they will pay, and very good software on the computer to handle it and then a good service with a lot of content where the DRM [digital rights management] isn't too intrusive.

Mr. Stringer: You're right, that's a lot of pieces to put [together], that sort of end-to-end model that Gates was saying no one wants, but everyone does, actually. I've put my name on this damn thing. I'm a reader. I know that's an odd phenomenon these days, but I carry books all around the world, so when I saw this I fell in love with this device. The fact that you can store 80 books on this and more on the memory stick, the fact that its battery life is seven-and-a-half thousand pages, which means about 25 books. ... The publishers love this ... Dan Brown [author of "The Da Vinci Code"] endorsed this at the Consumer Electronics

Mossberg: You are in so many businesses that clearly you have a wide variety of competitors.
Does Samsung [Electronics Co.] rank as a particularly important competitor?

Mr. Stringer: Samsung is a first rate company and they have a wealth of revenue coming from other areas. But I think in the high-definition world, which is clearly our strategy for this year, we have still an advantage. Blu-ray is part of the high-definition strategy and then we have the 4K projector [called SXRD], which we're demonstrating in California this week. We have the digital camera, which we make with Panavision. We have high-definition Bravia [TVs], high-definition rear projectors, and we have a high-definition camcorder which is the world's best selling camera. So our strategy is sort of circling the globe with high definition -- we think we're poised for the high-definition miracle.
Sony is a target for everybody. We have more competitors than you've had hot dinners. ... The truth is, one of the things I did ... was eliminate some of those SKU's because it's exhausting trying to win on every front. Every engineer loves his own product, so if you have an electronic toothbrush with a camera, we would give the same amount of marketing to that as everything else. After awhile the company sinks, exhausted, to its knees. Well, we've changed that.

Thursday, June 08, 2006

More on Google's Spreadsheet

Nicholas Carr, who wrote a well-known IT pundit and author of a controversial article in HBR "IT Doesn't Matter", had an interesting point of view of Google's move into spreadsheets.

Tuesday, June 06, 2006

Microsoft vs. Google

The below article is from today's WSJ. Outlook vs. gmail and Google Calendar; Word vs. Writely and now spreadsheets. You can see the encroachment by Google and the question is whether it will stick to the market. For Wednesday, please read the Ray Ozzie and Bill Gates email to MSFT employees. We will discuss Microsoft, in light of the Google challenge, in detail.

Google Plans to ReleaseSpreadsheet Application
By KEVIN J. DELANEYJune 5, 2006 8:03 p.m.
SAN FRANCISCO -- Google Inc. plans Tuesday to release a Web-based spreadsheet application, in a further foray into Microsoft Corp.'s traditional turf.
Google Spreadsheets follows Google's March purchase of a company offering Web- based word processor Writely. The two free Web-based Google services overlap with Microsoft's core Excel spreadsheet and Word word processing software. Google's offerings highlight a nascent challenge to such traditional software applications by a range of Web-based services.
Consumers will access Google Spreadsheets through Web browsers, rather than having to install any software on their computer hard drives, in contrast with Excel. Spreadsheet documents users create will be saved on Google computers. That will allow consumers to give other users access to view and edit them over the Web. Multiple users will be able to simultaneously edit the same spreadsheet, and type messages to each other in a separate window. Consumers will be able to import to and export from the service spreadsheets that are formatted as Microsoft Excel documents or comma-separated-value files.
Google said the new offering was a simple, early release that lacked some sophisticated features such as the ability to create charts or drag and drop data within a spreadsheet. The company will release the service to an unspecified number of users who add their names to a waiting list. Each user will be able to store up to 50 spreadsheets initially.
Google played down any rivalry with Microsoft Excel. "I see them as complementary," said Jonathan Rochelle, product manager for Google Spreadsheets. "I know a lot of users will use both."
Microsoft General Manager Alan Yates said that the new Google offering is one of a field of similar products competitive with Microsoft's Office and Works productivity applications. "There's nothing new here really," Mr.Yates said. "Microsoft Office is the clear leader in what's always been a really competitive space."

Sunday, June 04, 2006

Further indication of the movement toward emerging markets in telecom, the NTT DoCoMo CEO recently indicated their interest in expanding into Asia. While DoCoMo is formidable in its own market and is a pacesetter within the industry (having been the first to build a large mobile data business) it has been substantially less successful in its overseas investments. In fact, the same could be said for the entire NTT group. At the height of the bubble NTT bought Verio for over $10 BN--only to see it evaporate to perhaps a few hundred million in value terms. And DoCoMo wrote off billions a few years ago for its investments in KPN, AT&T and others (believe the figure was $10Bn but need to check the facts). Their strategy at the time was to globalize i-Mode, and they made a string of investments in other mobile operators--putting in cash but not having control. This was similar to Microsofts failed investment scheme in broadband operators in the late 90s early 2000--again writing off billions. If you invest large sums, better to have control.

Movie Beam

The NY Times reviews the new service called Movie Beam which has been launched by Disney, Intel, and others. I would like to hear your comments in class as to whether you think this kind of service is commercially viable. Would you consider using the service? Why or why not? What would be the key buy decision factors?

Saturday, June 03, 2006

Last wednesday we discussed the financial performance of Apple. And it became clear how leadership and market position lead to strong financial performance, especially in the key indicator of ROI. I am sure that Steve Jobs does not sit around thinking too much about ROI though as an investor you should since Book based ROIC, I believe, is correlated with stock price. And as you listen to Steve Ballmer next week, you should reach a similar conclusion.

ROI is the sum of a company's activities and not an end in itself. Of course mature companies operating in mature spaces focus much of the energy in determining capital allocation and expected ROIC. But this is less of an issue for innovation-based companies. Rather the key is people -- their recruitment, direction, and engagement. By engagement I mean their involvement with and for the Company.

Take a look at the interview with the CEO of Nokia in 2004 and his financial management philosophy.

On the internet side, our principal topic for next week, there is no doubt that the capabilities provided by the on-line world are changing consumer behaviour and, accordingly, competive positioning. See how online payments are changing the banking industry. And one last article on how EBay could be getting into the blog and wiki side of net publishing as a way of tieing their auction/commerce activities with social media. Give some thought to this.

And as one last addendum to our Apple session, please take a look at Apple and gaming.