Wednesday, December 28, 2011

Self deceit, self conceit in Chinese SOEs


For the first time in my professional career, I attended a Chinese state-owned public company's annual meeting last week. During that meeting, the chief executive briefed the audience (the senior management team and highest-ranked divisional managers across the country and overseas) on the overall performance of the company in the past year, described its challenges as well as opportunities ahead, and laid out its specific goals and targets for the coming year.

It's not surprising to hear both praises and criticism from the speech, but upon hearing one of the praises, I couldn't help myself drifting a bit far away because I really found that praise a little over the top and even somewhat disturbing. It went like this, "...our financing department has made marvelous achievement in the past year, having successfully secured large loans from major banks during the time of an extreme credit tightening". Interesting, huh? Is this really a marvelous achievement?! Or is it just something they are born with, something they are entitled to, or something they can easily do but others can't? Everyone knows that major SOEs in China could easily get cheap credit from big banks which, by the way, are also state owned. Sometimes the banks are even begging them to borrow money from them!

I know there could be some variation among SOEs themselves too in terms of the capacity to get cheap loans - scale, region, industry - all those things matter, but comparing to millions of small and medium sized firms in the private sector, that label, SOE, alone is like a golden pass to seemingly endless funding. Now this unfair ability somehow became a "marvelous achievement"?!

It's safe to say that this kind of image burnishing is not merely confined to this particular company. I certainly didn't see this as an achievement of Chinese SOEs at all, what I see from this specific case is management delusion, self deceit, self conceit, and maybe most important of all, a need to change.

Friday, December 23, 2011

Thursday, December 22, 2011

Paper on China's institution

The University of Hong Kong professor Xu Chenggang has written a paper about the fundamental institutions of China's economic reform and development. This over-70-page article provides one of the latest and most comprehensive analysis of the institutional account for China's miraculous economic development in the past three decades. He argued that it is China's regionally decentralized authoritarian system - a combination of political centralization and economic regional decentralization - that can explain the "China puzzle", i.e., why a seemingly ill-suited institution could achieve such spectacular growth and poverty reduction. In addition, he pointed out that grave social problems are also determined by this governance structure.

Here is the abstract:
China's economic reforms have resulted in spectacular growth and poverty reduction. However, China's institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the "China puzzle," this paper analyzes China's institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China's reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure.
Full text can be found here (log in needed) and here.

World democracy index 2011

25 nations are placed under "full democracies", most of which are in Europe. The U.S. ranks only 19th, falling from 17th last year. Hong Kong and Singapore are 80th and 81st, respectively, after Malaysia (71st), The Philippines (75th) and even Ghana (78th).

Among BRIC nations, India ranks highest, at 39th. Followed by Brazil (45th) and Russia (117th). China fell from last year's 136th place to 141st this year. North Korea is bottom.

See the full ranking here by the Economist Intelligence Unit.

Monday, December 19, 2011

Return on Luck


Jim Collins, the author of business megasellers Built to Last and Good to Great, wrote a new book recently with Prof. Morten Hansen of UC Berkeley and INSEAD, entitled Great by Choice, part of which tackles the long intriguing problem in business strategy  - Why do some people and their businesses thrive in uncertainty, even chaos and others don't? And what is the role luck plays in this context?

Luck is an abstract and elusive concept which is hard to quantify. However, Collins and Hansen tried to study it more systematically by defining luck as an event which satisfies some three basic criteria. Then they counted the number of "luck events" - good luck, bad luck, the timing of luck, and so on - for each subject across the window of the study. They found out that for enterprises that were eventually built into companies which outperformed their industries by a factor of 10, or 10Xers, as the authors dubbed, they weren't generally "luckier" than the rest. Then the question is, what on earth differentiates 10Xers from the comparison cases?

Their answer is that, luck - whether good or bad - is not the determining factor for a business to thrive in any circumstance, what really matters is how you manage luck and make choices in order to create a huge return on it, i.e., Return on Luck (ROL). To illustrate this, real world examples of how people choose differently when facing "luck events" are adopted, such as Bill Gates, Progressive insurance, Southwest Airlines among others, which are palatable and of course make their stories more compelling. But since choices are always made by people, does this mean different outcomes are in the end driven by different people? If so, unless clear links between the difference in people and difference in ROL are made explicit, it may still be hard to really opertionalize the notion of ROL.

Another interesting and somewhat counterintuitive point the authors have raised is that people or companies that follow a disciplined approach in turbulent times often outperform those who constantly adjust to adapt to the environment. The metaphor is built around the story of two explorers who set out separately to reach the South Pole in 1911. The one who set ambitious goals for each day but never overshoot on good days or undershoots on bad ones eventually won the race. So are companies like Progressive Insurance, Intel and Southwest Airlines. But from a theoretical point of view, why and when does discipline trump adjustment and adaptation? Is it a result of some optimization process and how? Is discipline working more effectively as environment becomes more turbulent and chaotic? In industries that are less affected by disruptive and chaotic change, would companies with strict disciplines still outperform those without?

Here are some reviews and interviews from WSJ, FT, Forbes, Knowledge@Wharton (part 1, 2) and INSEAD Knowledge.

Sunday, December 18, 2011

The dismal and evil science

See the first NYTimes column from the Standup economist.

Well, it's not a more rigorous proof of how trade can make the society worse-off (some may have already seen his "constructive proof"), it's his empirical "proof" of how economics can make the society worse-off. In a nutshell, he basically summarized some key findings from his recent JEBO paper:

1. Econ majors donate less than non-econ majors; (well documented, though)
2. Selfishness is not nurtured via taking econ classes among econ majors - taking econ classes did not have a significant negative effect on later giving by these students; (the "selfish gene" may have guide them to choose econ as their major in the first place)
3. Selfishness can be nurtured via taking econ classes among non-econ majors - taking econ classes did have a significant negative effect on later giving by these students. (negative externality)

Conclusion. For the society as a whole, taking economics classes makes it more selfish. So is economics a dismal science? Yes indeed, but moreover, it's kind of evil too.

Friday, December 9, 2011

Papers to watch

2012 AEA Annual meeting is less than a month away. For organizational economists and strategy researchers, these following papers may merit your attention:

New Developments in the Organization of Firms
Scale, Scope, and Performance
RENATA KOSOVA (Cornell University)
FRANCINE LAFONTAINE (University of Michigan)
BO ZHAO (University of Michigan)
Organization and Information: Firms' Governance Choices in Rational-Expectations Equilibrium
ROBERT GIBBONS (Massachusetts Institute of Technology)
RICHARD HOLDEN (University of Chicago)
MICHAEL POWELL (Massachusetts Institute of Technology)
Organize to Compete
RICARDO ALONSO (University of Southern California)
WOUTER DESSEIN (Columbia University)
NIKO MATOUSCHEK (Northwestern University)
A Dynamic Approach to Span of Control: Theory and Evidence
VALERIE SMEETS (Aarhus University)
FREDERIC WARZYNSKI (Aarhus University)
MICHAEL WALDMAN (Cornell University)

Experiments in Firms
Once and Done: Leveraging Behavioral Economics to Increase the Bottom Line of Non-Profits
AMEE KAMDAR (University of Chicago)
STEVEN LEVITT (University of Chicago)
JOHN LIST (University of Chicago)
CHAD SYVERSON (University of Chicago)
Working from Home or Shirking from Home? Evidence from a Chinese Field Experiment
NICK BLOOM (Stanford University)
JAMES LIANG (CTrip)
JOHN ROBERTS (Stanford University)
JENNY YING (Stanford University)
Management, Capital and Firm Organization among Small-Scale Enterprises in Ghana
DEAN KARLAN (Yale University)
CHRIS UDRY (Yale University)
Ex Post (in)efficient Negotiation and Breakdown of Trade
ANTOINETTE SCHOAR (Massachusetts Institute of Technology)
RAJKAMAL IYER (Massachusetts Institute of Technology)

Contracts and Institutions
The Role of Contractual Publicity in Impersonal Trade
BENITO ARRUÑADA (Universitat Pompeu Fabra)
Relational Renegotiation: Theory and Evidence from the Movie Industry
ROBERT GIBBONS (Massachusetts Institute of Technology)
DANIEL BARRON (Massachusetts Institute of Technology)
RICARD GIL (Johns Hopkins University)
KEVIN J. MURPHY (University of Southern California)
Fixed versus Open Prices: A Choice between Countering Opportunism and Creating Value
GIORGIO ZANARONE (CUNEF)
DESMOND LO (Santa Clara University)
Business Associations and Private Ordering
JENS PRÜFER (Tilburg University)

Legal and Economic Foundations of Organization
What is Law? A Coordination Model of the Characteristics of Legal Order
GILLIAN K. HADFIELD (University of Southern California)
BARRY R. WEINGAST (Stanford University)
On the Evolution of Collective Enforcement Institutions: Communities and Courts
SCOTT E. MASTEN (University of Michigan)
JENS PRUFER (Tilburg University)
Focal Transactions and Theories of Firm and Market Organization
STEVEN TADELIS (University of California-Berkeley)
OLIVER E. WILLIAMSON (University of California-Berkeley)

Capital Structure and Firm Organization
Innovation, Capital Structure, and the Boundaries of the Firm
DIRK HACKBARTH (University of Illinois-Urbana-Champaign)
RICHMOND D. MATHEWS (Duke University)
   DAVID T. ROBINSON (Duke University)

Sunday, November 20, 2011

Becker and Posner on Occupy Wall Street

See here and here.

Holdup Problem, Airline Version

It happened half way - in Vienna - through a flight from India to England. An airline took advantage of both time- and location-specificity to force its passengers to agree to pay $200 more for the service.

See here and here.

Friday, November 4, 2011

FT/Goldman Sachs Award

This annual best business book award goes to Abhijit Banerjee and Esther Duflo's book "Poor Economics" which describes radical new and sometimes ingenious ways of tackling global poverty. While previous research on ending poverty has debated heavily on whether foreign aid does more good than harm to poor nations (a la Jeffrey Sachs) or the other way around (a la William Easterly), the authors of this book - two MIT economists - by having conducted various randomized controlled trials on all kinds of aid programs all over the world (fighting AIDS, malaria, malnutrition, etc.), have offered a closer and more granular look at this problem, and find that whether these programs are effective really depends on how things are done. The reason behind this is that poor people often face very complicated situations that aid providers haven't fully considered but otherwise may completely alter their incentives to act "properly". If these constraints as well as many other important factors such as the local culture were taken into great consideration, things may well be moving in the right direction, and sometimes even in more cost efficient ways.

Five other shortlisted books are: Exorbitant Privilege by Berkeley economist Barry Eichengreen; Good Strategy/Bad Strategy by UCLA strategy guru Richard Rumelt; The Quest by energy expert Daniel Yergin; Triumph of the City by Harvard economist Edward Glaeser; and Wilful Blindess by Margaret Heffernan.

See some extracts from these books here.

Tuesday, October 25, 2011

A new book on Deng Xiaoping

Harvard professor Ezra Vogel has written a new book on Deng Xiaoping, the former Party leader and the chief architect of China's opening-up policy, entitled "Deng Xiaoping and the Transformation of China". According to former US National Security Advisor Zbigniew Brzezinski, this book is "not just a definitive biography of a world-class leader, but also the most authoritative and riveting account of the secretly contrived U.S.-Chinese strategic accommodation of 1978 and of how that in turn facilitated China's domestic transformation."

Here are three book reviews from The Wall Street Journal, The New York Times and The Economist.

Monday, October 24, 2011

Joking about bankers? Not really.


Blackstone co-founder Stephen Schwarzman joked about Brian Moynihan, CEO of Bank of America, by drawing a parallel between Mr. Moynihan and his brother, Patrick:

"Patrick runs a Catholic boarding school in Haiti,...,so their parents must be so proud to see two of their boys each running an underfunded, nonprofit, organization."

Of course, it's not just one banker - Brian Moynihan alone - who is facing tough times, they all are, apparently.

Saturday, October 15, 2011

China currency debate

Two voices on China's currency issue appeared in Wednesday's US republican presidential debate.

Jon Huntsman - "I don't subscribe to the Donald Trump school or the Mitt Romney school of international trade. I don't want to find ourselves in a trade war. With respect to China, if you start slapping penalties on them, based on countervailing duties, you are going to get the same thing in return because they are going to say 'because of Quantitative Easing part I and part II, you are doing a similar thing to your currency'. And you are going to find yourselves in a trade war very very quickly."

Mitt Romney - "I am afraid that people who've looked at this [China's currency issue] in the past have been played like a fiddle by the Chinese. And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future...You people say, well, we might have a trade war with China, and think about that, we buy this much stuff from China, they buy that much stuff from us. You think they want to have a trade war?...I mean, this is a time when we are being hollowed out by China, that is artificially holding down their prices, and that's having a MASSIVE impact on jobs here."

Romney's view is clearly not shared by Economists Nouriel Roubini and Richard McGregor.

Wednesday, October 12, 2011

Tribute? Anger?

Usually, those two don't mingle. But,

A tribute to Steve Jobs


Charlie Rose gave a tribute to Steve Jobs last week with Google chairman Eric Schmidt, Netscape co-founder Marc Andreessen, WSJ columnist Walter Mossberg, writer Walter Isaacson, CEOs Lawrence Ellison and Bob Iger, Apple co-founder Steve Wozniak and journalists Ken Auletta and David Carr.

iFans, you can watch the entire program here.

Be it resolved...

...North America faces a Japan-style era of economic stagnation.

This is an upcoming event from the Munk Debate. The pro side of the debate: Paul Krugman and David Rosenberg. The con side: Larry Summers and Ian Bremmer.

Previous debates on the Munk Debate include topics like whether the 21st century belongs to China, is foreign aid to the developing countries doing more harm than good, whether the climate change is mankind's defining crisis, and more.

Tuesday, October 11, 2011

Battle against yuan

US Senate just passed a bill that would lead to trade sanctions against countries whose currencies are manipulated. One currency on the legislators' minds is, of course, the yuan. The past two weeks has witnessed China's currency moving in exact the opposite directions in the onshore and offshore markets. During such a bumpy ride, we already saw that Beijing has sent its goodwill to the US to avoid future diplomatic and trade conflicts, but the passing of such a bill could only make things worse - for both countries. The question here is that, is yuan being manipulated?

 
The chart in today's The Economist speaks far louder than politics does. It suggests, "the recent relationship between China's currency and America's trade deficit with China is not what China hawks in the Senate think it is. Rather than a cheap yuan leading to a flood of Chinese imports, the yuan has actually strengthened as the deficit has widened. There are many things American companies dislike about the way business is done in China: intellectual-property theft, the impossibility of winning government contracts, baffling rules on corporate ownership and so on. However the place for fixing these things is the World Trade Organisation, not Congress."

Will this bill alter anything in a significant way? No, says Wall Street Journal columnist Tom Orlik. He further suggests that neither US politics nor China's "narrower self interest" could derail the fundamental strategy on the yuan.

Monday, October 10, 2011

The Nobel goes to...

Thomas Sargent and Christopher Sims for "their empirical research on cause and effect in the macroeconomy".

I have only very limited knowledge on them, but surely Sargent is the most renowned scholar in the "rational expectation school" after Robert Lucas, and Sims has developed and promoted some important and widely used empirical methods in modern macroeconometrics, such as VAR (vector autoregression).

For those on the promising list but didn't get a phone call from Adam Smith or someone with a typical Swedish accent, nevermind, your chance is getting bigger.

update: Robert Lucas discusses both of the laureates here. He says while Sargent has put a lot of emphasis on policy analysis and the economics to build models, Sims is focusing exclusively on using econometric methods to do "economic forecasting without much economics".

Thursday, October 6, 2011

Few can...

...be remembered like this:

a "visionary leader", an "iconic legend", a "creative genius", "an original", the "most innovative entrepreneur", "a historical figure on the scale of a Thomas Edison or Henry Ford", "the greatest computer innovator in history", and simply, a "hero".

RIP, Steve Jobs (1955-2011).

Monday, September 19, 2011

A talk on democracy and economic growth

A nice talk of the subject from MIT Sloan professor Yasheng Huang. In it, he mainly argues that 1) better infrastructure and stronger government are not necessary for higher economic growth; 2) human capital (literacy rate, life expectancy, gender equality, etc.) is way more important in explaining China's economic miracle; and 3) it is the change/improvement in democracy that explains economic growth, not the mere dichotomy of a totalitarian or a democratic nation.


In the comments section, many have pointed out that Prof. Huang is in fact defending the Chinese authoritarian regime by using biased data and pictures (like showing pics of Shanghai's skyscrapers and Mumbai's slums at the same time). Not at all. On the contrary, he has questioned the contribution of infrastructure to economic growth in the first place. By doing so, he actually challenged the view that a strong government is a necessary condition for high economic growth. Later, he tries to establish his own argument that human capital is a more important factor in explaining China's economic miracle. In the end, he again became clear that it is the change/improvement in democracy that explains economic growth, not the mere dichotomy of a totalitarian or a democratic nation. He believes India will eventually benefit from its democratic momentum, and for China, he is hoping for a faster and more radical political reform because that's the "right direction".

Of course, he may have done these arguments in much greater detail instead of some two-country one-way comparisons, but given that talk's limited time frame, I think he has done a fairly good job in explaining himself.

Wednesday, August 31, 2011

Cash for clunkers architect named CEA Chairman

Princeton labor economist Alan Krueger was named as the new Chairman of the Council of Economic Advisors for President Obama. But some of his empirical studies don't quite go along with Mr. Obama's economic plans, particularly with respect to jobless benefits. It seems that Mr. Krueger is more of a "regular economist" in thinking about labor policies, but the real problem for him now is how to reconcile the difference.

Thursday, August 25, 2011

Would stimulus work?

Since the publication of the General Theory by John Maynard Keynes, modern macroeconomics has long been criticized for a lack of strong micro-foundations. Chicago and Austrian school economists, for instance, claimed that there is too much aggregation in the Keynesian perspective which unfortunately ignores the basic drivers behind all economic activities, i.e., human incentives. Without a clear understanding of incentives behind human action and how these incentives interact and properly "aggregate", economic facts could be misinterpreted and wrongly theorized, and policy based on its prescription could be dangerous and disastrous.

In his WSJ op-ed today, Harvard economist Robert Barro revisits this decades-old topic. He firmly supports the view of what he calls "regular economics", where incentives play a central role in shaping overall economic activities.

Professor Barro, once a follower of Keynes, argues in this short essay that Keynesian stimulus transfer programs, such as food stamps, will not lead to an expansion of the overall economy - that one could get back more than one puts in - as Keynesian economists have long believed. The reason why stimulus transfer won't work is two folds. One, these transfers to the people with earnings below designated levels would motivate less work effort by reducing their reward from working; and two, more taxes are needed to finance these transfers. And these added tax burdens may not only reduce the work effort of taxpayers, but also lower overall investment levels since returns after taxes could be diminished. The consequence? The overall GDP pie would be reduced, rather than enlarged.

Although little empirical evidence exists in favor of either school, some scattered evidence could well support the view of "regular economics": an increase in unemployment insurance eligibility to 99 weeks in 2009 would have an adverse effects on unemployment - the fraction of the long-term unemployed (more than 26 weeks) has jumped since 2009 - to over 44% today, whereas the previous peak had been only 26% during the 1982-83 recession. However, as Barro suggests, more empirical evidence of this type is needed to get more reliable conclusions.

Debate could heat up, again (see here).

Sunday, August 21, 2011

I, pencil

...modern version:


Here to (re-)read the famous essay by Leonard Read.

Thursday, August 18, 2011

CNBC classroom

Even for the savviest among the financial professionals, it is challenging to be well versed in each and every complexity contained. CNBC Explains, a new section within CNBC.com, gives users the opportunity to learn more about key economic topics and concepts through original, three-minute videos and text-based transcripts and information pages.

Wednesday, August 17, 2011

Female employees benefit if the boss has a daughter

Empirical studies abound regarding the existence of gender gap in the workplace all over the world, but we still have fairly limited understandings about the possible origins of this wage gap and other gender-related workplace discrimination, and under what circumstances will the gap be widened or reduced. A recent study of Danish workforce suggests an interesting but intuitive answer to fill the void: whether the boss has a daughter.

Using a 12-year panel of Danish workforce data, they found that "conditional on the number of children a CEO already has, the birth of a daughter to a male CEO resulted in an approximately 0.5% reduction of the gender wage gap. The effect was significantly stronger for the first daughter, resulting in a 0.8% reduction of the gender wage gap, compared to a statistically insignificant 0.4% reduction after the birth of a second daughter. In addition, if the first daughter was also the first child, the effect was stronger still, with the gender wage gap decreasing by roughly 2.8%."

Here is the entire abstract:
Drawing on research in sociology and economics suggesting that fathers' gender-related attitudes and behaviors are shaped by the gender of their children, we hypothesize that having daughters prompts male CEOs to implement wage policies that are more equitable to female employees. To test this hypothesis, we use a 12-year panel of Danish workforce data and an empirical specification with CEO-employee fixed effects, creating a quasi-experimental setting whereby the gender of a CEO's child is effectively exogenous. We observe that when a daughter was born to a male CEO, wages paid to the CEO's female employees rose relative to the wages paid to male employees. The effect was stronger for the first daughter, and stronger still if the first daughter was also the first child. The birth of a daughter to a male CEO particularly benefited women who were more educated or who worked for smaller firms. These results have implications for our understanding not only of the origins of discrimination and the gender gap in wages but also of social preferences and the influence of managerial style on firm policies.

Celebrating 20 years of Linux

Here (20 years in 4 minutes), here (South Park version) and here (12 things that wouldn't exist without Linux).

Thursday, August 11, 2011

A Book on Somalia Pirates

Jay Bahadur (blog), a Canadian journalist, has written a book about Somalia pirates, titled "The Pirates of Somalia: Inside Their Hidden World". According to NYTimes Sunday book review:

"Bahadur has gone deep in exploring the causes of this seaborne crime wave, charting its explosive growth and humanizing the brigands who have eluded some of the world’s most powerful navies...Bahadur captures the inner workings of Somali piracy in extraordinary detail. The organizational structure of typical pirate cells, he explains, includes not just attackers, interpreters, accountants and cooks: almost every group also has its supplier of khat, a plant flown into Somalia by the ton every day from Kenya and Ethiopia and chewed for an addictive high. Like low-level urban crack dealers, the pirates at the bottom rung of the hierarchy make barely enough to survive. But, high or low, these brigands practice some peculiar rituals. After receiving his cut of the ransom on the captured ship, one pirate tells Bahadur, each man must toss his mobile phone into the ocean - a precaution to make sure no one can call ahead to his kin to arrange an ambush of his fellow cell members."

Jon Stewart of the Daily Show also interviewed Bahadur this past Tuesday about his endeavor and the writings of the book.

Saturday, August 6, 2011

Saturday, July 30, 2011

Kenneth Arrow on Greece and US debt limit

Nobel laureate Kenneth Arrow shares his views on Greece and European economy and also on US debt limit imbroglio.

As to Greece and the European soverign debt crisis, he suggest that "Greece should default", and that "the leaders in Europe allow the market to operate to some extent which gets the burden of political decision-making off the backs of the leaders. The idea of avoiding all defaults is, in his opinion", "an unsustainable ideal".

As to the possible consequences of failing to raise the debt limit or an actual US default, his opinion is that, the American and European economies may suffer somewhat and China, will probably be the net gainer in all of this due to future rise of interest rates.

Thursday, July 28, 2011

Tribute to the high-speed rail

- How long is forever?
- From the day the train started to run until it crashed.
- I am confused, really...but how long is that?
- I don't know...umm, maybe four years one hundred and twenty-six days...

"Quote" of the day...

"To be and not to be, that is a miracle..."
"I believe therefore I am..."
                                                                           
                                                                          -- Great philosophers in the Chinese Railway Ministry

Some background information:

On 23 July 2011, two high-speed trains collided and derailed in the Lucheng District of Wenzhou, Zhejiang Province, China. The trains were on the Ningbo–Taizhou–Wenzhou railway line when the incident occurred. State-run Chinese media have confirmed 39 deaths, and at least 192 people were hospitalised, including 12 who were severely injured (see here and here).

When a spokesman of the Ministry of Railways was asked about the rescue of a two-year old girl from the about-to-bury wreckage, he said, "...it was a miracle...". Later when was asked why Wenzhou trains were instantly buried, he said the following, "...during the emergency rescue operations, the area was very complex, and there was a marsh below, so it was very difficult to do our best job. We also had to deal with all the other train cars, so (the earth-moving equipment operator) buried the front car below, covering it with earth, and it was mainly just a case of dealing with the emergency. This was the explanation he was offered. Whether you believe it or not, I certainly do..."

Wednesday, July 27, 2011

Charlie Rose talks with Chinese entrepreneurs

Jack Ma, founder of Alibaba.com - China's largest e-commerce group, and Zhang Xin, CEO of SOHO China - one of the largest Chinese real estate developers, sat down with Charlie Rose, sharing their knowledge and experience on how they started their own businesses, and what is unique about Chinese people, its economy and its culture.

Thursday, July 21, 2011

Growth: A Demographic Measure

In predicting growth, demographers like to look at a country's "dependency ratio," a measure of how many old people there are, and how many young working people there are to support them. The particular ratio in the chart below measures how many old people there are in a certain country who are at least 65 years old per 100 people who aged between 15 and 64. If a country has a higher dependency ratio, then it means it has a more aging population relative to the young people.


In theory, the more young people there are, relative to old people, the better. From the chart, it is clear that emerging economies still have large room to grow.

From BusinessInsider.

Thursday, July 14, 2011

China's economic facts

See here. Although China's GDP growth maintained 9.6% in the first half of 2011, the rising price levels driven by foodstuff and the unbridled property market are still two big headaches for the policy makers in Beijing.

Sunday, July 10, 2011

Facebook faces problems

Facebook is surely under huge pressure right now as Google is actively testing its newly-launched social networking service Google+ among invited users. Some have revealed that Google+ offers more desirable features for users to better manage their social ties, like the circles feature, and the multiperson video chatting.

Here comes a little bit more disturbing news for Facebook. Accoring to the special report from this week's Economist, Facebook's international expansion strategy may well face some challenges in the future (see the chart below, click to enlarge). More competition? Well, that's for sure. But what is more important is whether Facebook could (or is willing to) adjust its conventional business model to fit the social norms and the culture in its new intended territories.


Take Japan as a typical example. Although in most countries, the number of Facebook users far exceeds that of the users of Twitter, 5 times more or in some cases, even 6 to 8 times. However, in Japan, this ratio is less than one-third. Some analysts believe that the unpopularity of Facebook in Japan is mainly due to its late entry into the market since earlier entrant and large incumbent like Mixi, has already grasped nearly 80% of the market share. But, still this could not explain the growth discrepancies between Facebook and Twitter. Facebook Japan was launched in May 2008, while the Japanese version of twitter was introduced only a month earlier. How could the difference be so large? Moreover, according to the latest Alexa ranking of top sites in Japan, Facebook is high on top 10, while twitter and mixi are ranked 13 and 14, respectively. How could this happen at the same time when facebook users in Japan are only one-third of the twitter users? It might be the case that the English version of facebook is far more popular in Japan than its Japanese version, and even twitter.

Others argue the unpopularity of Facebook in Japan is because of the real name policy. But how big is this issue? Are there any other factors that may better explain the facebook problem in Japan? Is it due to any further risks of using facebook in Japan, or is it because of a deep culture clash? Here is a post which offers a somewhat more in-depth look.

Selective blog entries...and short comments

1. The educational value of creative disobedience ( ..which may turn into a spiral of creative destruction);
2. Immigrant moms typically have lower infant mortality rates than U.S.-born mothers, and the single biggest factor, by far, to reduce infant deaths is the mom's years of education (alright then, it seems we need a universal coverage of college education for women);
3. 18 attributes of highly effective liars (oops, I might only have 12, six to go!!)
4. Does debt boost young people's morale? (c'mon, only young people? Give us an inverted-U for everyone pls...)
5. Nudged and stuck: a response to Thaler (who said nudge one time would be enough?)
6. The bribery of Chinese characteristics (when there is a will, there is a better way...)

Saturday, July 9, 2011

Thursday, July 7, 2011

Sector-specific performance measures

Revenue, profits and many more generic financial returns and earnings measures (e.g., ROE, ROA, EBITDA, EPS etc.) are used pervasively in practice as well as in business research. This article however suggests, in some business sectors, practioners often create simple yet more specific measures of performance or growth which could better capture the essence and subtlety of the sectors' operational traits than the ordinary measures.

For example, railroad operators use "intermodal volume" and "number of containers shipped" to measure their shipping volumes; steelmakers use "operating profit per ton" to show whether the companies' productivity has improved while energy, labor and raw-materials have been properly managed; and the key performance measure in hotel chains is the so-called "revenue per available room", which reflects average room rates and daily occupancy.

Monday, July 4, 2011

Jokes about Goldman Sachs

I was reading the piece on BusinessInsider about Coca Cola's accuse of Goldman on its restrictions of aluminum release (also here), but a quick link diverted my attention, which was a collection of best of worst jokes about Goldman Sachs during the financial crisis (somewhat outdated, but still funny indeed):
  • "By the way, all of the jokes here tonight are brought to you by our friends at Goldman Sachs. So you don't have to worry, they make money whether you laugh or not . . ." (President Obama)
  • "Why are government employees filing a civil suit against Goldman Sachs? That's just going to be embarrassing in a few years when they all go back to work at Goldman Sachs." (Stephen Colbert)
  • Goldman Sachs Top Ten Excuses (from David Letterman)
  • "$8.7 billion of our money has gone missing in Iraq! I didn't even know they had a Goldman Sachs over there." (Jay Leno)
  • "While testifying before Congress yesterday, BP CEO Tony Hayward called the oil spill a 'complex accident caused by an unprecedented combination of failures.' Then he realized he was reading notes left on the stand by a Goldman Sachs executive." (Jimmy Fallon)
  • Upon hearing that Goldman Sachs was handing out $16 billion in bonuses, after the $5.4 billion in bonuses from January, "That was January... It's only April... Was this their daylight savings time bonus? Groundhog didn't see its shadow bonus. Do you give that bonus to the bonus in January so the other bonuses don't get lonely?" (Jon Stewart)
  • After the SEC announced the Goldman investigation, the popular joke, "A man is only as faithful as his options" (Chris Rock)
Here for more.

Joking aside, if I had only one takeaway from the whole financial meltdown, it is that large investment banks, like Goldman, will not only survive, but also thrive in years to come, not because it is "too big" per se, but more importantly because its clients are no less greedy than its operators.

How much do you know about the internet, really?

Like me, if you really don't have a definitive answer to this, here is a cooler and state-of-the-art version of The Internet for Dummies.

The Economist Launches Quarterly Business Books Review

See the first episode here. Six books are briefly discussed, including My Years with General Motors (1964) by Henry Ford, William Whyte’s The Organisation Man (1956), the classic text Management: Tasks, Responsibilities, Practices (1973) by Peter Drucker, bestseller In Search of Excellence (1982) by Tom Peters and Robert Waterman, Clayton Christensen’s The Innovator’s Dilemma (1997) which introduced the notion of disruptive innovation and C.K. Prahalad’s The Fortune at the Bottom of the Pyramid (2004).

Tuesday, June 28, 2011

TCE and PRT: Compare, Contrast and Critique

A group of organizational economists have just celebrated the 25th anniversary of the groundbreaking work of Grossman and Hart (1986) (HT to Peter Klein). As a strategy student and a great admirer of the property rights school, I myself also have written a small essay to celebrate this day, where I bring two closely related and widely influential theories namely, PRT and Transaction Cost Economics (TCE) together and offered a brief comparison of the two schools, their critiques, and how they have and may futher shed great light on the future of strategy research.
TCE and PRT: Compare, Contrast and Critique

Four commencement speeches

All four speeches were given by famous TV talkshow hosts. Hilarious in their own styles and contents, they were nevertheless all truly entertaining and engaging, and has successfully left the audience with not only laughter, but also with sweet memories and valuable reflections.

1. Oprah Winfrey's 2008 Stanford University Commencement Address.


2. Ellen DeGeneres's 2009 Commencement Speech at Tulane University.


3. Conan O'Brien's 2011 Dartmouth College Commencement Address.


4. Stephen Colbert's 2011 Commencement Speech at Northwestern University.

Sunday, April 24, 2011

Are you a jerk in the workplace?

In his book The No Asshole Rule, Stanford business professor Robert I. Sutton pointed out that, jerks in your workplace not only worsen morale and productivity but also impose huge costs to the company as a whole. Readers can also take a self-rating questionnaire to see whether they themselves are "certified" assholes or not.

To me, I think it is also interesting to ask, whether assholes at the top of the corporate ladder have more negative impacts on the company than those at the middle or the bottom? Are there certain traits or charateristics to a boss that are more likely to attract (expel) jerks to (away from) his/her leadership? If so, what are those traits? Moreover, the author has dealt a lot with bullying behavior in the workplace, but such behavior is mostly explicit, jerks and assholes sometimes do more harm to their coworkers by stabbing them in the back, stirring things up or setting people at loggerheads, which are more implicit and hard to detect. Then does the specified rule in the book apply to these activities also? Or how can we do about them?

Saturday, April 16, 2011

Jonathan Levin wins Clark Medal

The American Economic Association has announced that this year's John Bates Clark medal was awarded to Stanford University economist Jonathan Levin for his "influential research on the economics of contracting, the organization and design of markets, subprime lending, and on empirical methods for studying imperfect competition."

Also see here, here and here.

Friday, April 15, 2011

Friday, March 18, 2011

Dan Ariely takes on Malcolm Gladwell

Dan Ariely, author of Predictably Irrational, recently turned himself into a podcaster for his own channel, Arming the Donkeys. This week, he had a conversation with the best selling author, Malcolm Gladwell, discussing about social science, storytelling and how to write bestselling books.

Check it out on iTunes.

Wednesday, March 9, 2011

Behavior on two sinking ships

Imagine you were on a sinking ship, people around you were running, screaming and crying. A great panic was clearly underway and you soon realized this was a life-or-death situation and of course, you, like anybody else, want to survive. Now what would you do? Will you fight your way through to reach the lifeboat or will you be such a gentleman and follow the norm of letting the women and children go first? A recent study shows that, this really depends.

Using two datasets from two real accidents, the sinking of Titanic and Lusitania, researchers found out that under extreme conditions, people may behave drastically different. One critical factor is the scarcity of time.

"...differences in context are likely to matter in life-or-death situations. The comparison between the Titanic and the Lusitania suggests that when time is scarce, individual self-interested flight behavior predominates, while altruism and social norms and power through social status become more important if there is suffificient time for them to evolve..."

Sounds plausible, but a more myterious question is further imposed, how long will be sufficient enough to develop an altruistic norm? Aren't there always people with quite stable altruistic preferences? Why wouldn't these preferences take over instantly? What's the relationship between the severity of the situation and the time we need to develop an altruistic norm?

Also, there could be other important but untouched factors, one of which is the cause of the disaster. Whether the situation is totally man-made or largely natural may have direct effects on people's behavior.

Tuesday, March 8, 2011

Shoe thrower index

The Economist has come up with an unrest ranking for the Arab world. They weighted-averaged a couple of key indicators to get the vulnerability indices for each Arabian country. The key factors include, years in power for the current ruler (15%), population that are under 25 (5%), percentage of this population to the whole (35%), GDP per capita (PPP, 10%), democracy level (15%), corruption index (15%), and finally, an index of censorship that proxies the freedom of speech (5%). Guess who is up on the front?