An ongoing revolution in manufacturing

3D printing may not only change the way we make ordinary products, like a hammer, a toy, or even a stradivarius, it may reshape the industry spectra entirely and completely alter the way how everything is produced, from "growing" human organs to "building" new homes. Below is one example:

Some thoughts on Toyota Production System

In my last post, I mentioned my trip to Japan to learn the Toyota Production System, but I didn't offer any thoughts on it there. If you still have some interests, here is an article I recently wrote (in Chinese), titled "The Way Out of the Cargo Cult of the Toyota Production System", mainly targeted at Chinese companies. In this short article, I explained why there is a cargo-cult-style learning of TPS in Chinese firms and how to find a way out of it and even make it more suitable to these firms.

Nagoya, Toyota Production System, and Kaizen

I had a trip last month to Nagoya, Japan to get trained in Toyota Production System and its various tools and ramifications. Those lectures were, of course, useful and sometimes inspirational. I was even awed by the smart designs of some parts of Toyota's manufacturing system, like the use of various Kanban cards to coordinate material flows as well as to replenish supplies.

Eventually, I found that these methods and designs are not at all come about at once. Instead, most of them are the results of a methodology that Toyota called "Kaizen", which literally means continuous improvement. Even so, I still found that it's often hard to sustain such efforts to make improvements on some preexisting things over and over again. BUT, as I discovered this (see the pic below), I said to myself, "well, maybe there is nothing on this planet that the Japanese can't make improvements on..."

Interesting formula...and graph

Have you seen a mathematical formula, when graphed in two dimensions, can exactly reproduce the formula itself visually? Here is one:

                ,

where  denotes the floor function and mod is the modulo operation.

When proper parameters are chosen for x and y, which at the same time satisfy this inequality, the resulting graph will look like this:

             ,

which, as you can see, looks exactly the same as the original formula. Interesting, huh?

See more here. HT: Feng Dong.

Two books on power & prosperity

One is Why Nations Fail by Daron Acemoglu and James Robinson. In this book, the authors explain why some nations are rich and prosper and others poor and remain so. In contrast to contemporary theories made popular by journalists or economists, their explanation is that, it's neither geography or cultural factors, nor the policy makers' ignorance about what's best for the society as a whole that determine the wealth of nations. Instead, it's the nation's economic and political institutions that matter (in the authors' terms, "inclusive" vs. "extractive" institutions). The authors make the book extremely readable and engaging by using lots of compelling examples and putting together hundreds of years of historical accounts in a coherent and logical manner. Read a couple of book reviews here, here and here, or listen to one of the authors discussing it here. 

The other is Private Empire: ExxonMobil and American Power by Steve Coll. Unlike Acemoglu and Robinson's take on power and prosperity from the why perspective and at the national level, Coll's book reveals how power and prosperity can emerge and co-evolve via the private empire building process. Watch the author discussing the book here.

Spousal researchers: newcomer

Here is a list of spousal researchers in economics, management and related disciplines. Now the list should add two more prominent figures: Esther Duflo and Abhijit Banerjee.

From the FT:

What about her husband? Is he American? I ask. There is a pregnant pause. “It is Abhijit,” she exclaims. “He is not my husband but he is the father of the child. And he doesn’t speak French, so I don’t think he would like to go to France.”

This takes me by surprise. They have been colleagues since her arrival at MIT – he was one of her PhD supervisors before she became a professor. In 2003 they founded (and still co-head) the Abdul Latif Jameel Poverty Action Lab (J-Pal), the MIT centre where anti-poverty initiatives are studied. They have lived together for 18 months.

Aside from the child, their joint work also includes this amazing book.

HT: Feng Dong.

Are you Pinterested (aka getting old)?

According to this, Pinterest should be THE social site for adults, since over 70% of the users are between the age of 25 to 54. Indeed, I felt its power today by uploading my firstever "pin" (the pic is from the internet), which brought me 9 likes and 14 repins almost instantaneously. But the sad thing is, this also means that I am truly getting old now, or at least my taste is...

p.s. I got really excited when Pinterest's pinbot sent me emails notifying how many people likes my pin and repins it, but it won't take long to find this really annoying (yet another sign that I am getting old...)

Two reads on US manufacturing

For years, conventional wisdom has maintained that US manufacturing industry is on a permanent decline, so some people are arguing, for various reasons, that US government should intervene by either subsidizing the sector or offering tax benefits. Two recent articles I read this weekend offered some new perspectives on American manufacturing.

1. Christina Romer of Berkeley argued that, even if the US manufacturing sector is on the decline, there is little reason that the government should offer the manufacturers a "special treatment".
2. Hal Sirkin of BCG, a consultancy, is bullish, rather than bearish, on the future of American manufacturing.

China 2030: How to get there?

World Bank Group President Robert Zoellick visits Beijing today to launch a report on China's strategic directions in the next two decades.

The report, China 2030: Building a Modern, Harmonious, and Creative High-Income Society, a collaborative work between the World Bank and the Development Research Center (DRC) of the State Council, recommends steps to deal with the risks facing China over the next 20 years, including the risk of a hard landing in the short term, as well as challenges posed by an ageing and shrinking workforce, rising inequality, environmental stresses, and external imbalances.

Six strategic directions for China’s future are laid out specifically:

• Completing the transition to a market economy;
• Accelerating the pace of open innovation;
• Going “green” to transform environmental stresses into green growth as a driver for development;
• Expanding opportunities and services such as health, education and access to jobs for all people;
• Modernizing and strengthening its domestic fiscal system;
• Seeking mutually beneficial relations with the world by connecting China’s structural reforms to the changing international economy.

Some steps are hard to push further, such as the reform and restructure of state-owned enterprises (SOEs) and banks, since such steps could face fierce resistance from bureaucrats who manage or supervise these enterprises. It's not about "what" to do but "how" to get things done. When it comes to "how", it's not easy to find common ground for all parties to resolve some of the most contentious issues - like personnel arrangements. For instance, surrounding the topic of state enterprise reform, neither the World Bank nor DRC has proposed privatization of state enterprises because they both know it's politically infeasible, instead, they argue that SOEs should be overseen by asset management firms and even lay out some specific steps to do so. But, the proposal is still bitterly criticized by the current SOE regulatory agency, the State-owned Assets Supervision and Administrative Commission. Contentious issues were still debated until the last hour of the release of the report.

Visualize US exports to China, 2002-2011

The US exported 103.88 billion dollars worth of goods to China in 2011. On top of that list is neither civilian aircrafts, engines and parts, nor semiconductors, as it once was in the early 2000s, but...soybeans (also see here for some recent implications). Indeed, in terms of dollar value, soybeans have been the top US exports to China since 2008, and peaked in 2010 at $10.8 billion. In 2011, the amount slipped a little bit to $10.5 billion, but still took over 10% of the entire worth of exports to China. The next in line under the "Foods, feeds, and beverages" category is Fish and Shellfish, but it only contributed $1.2 billion. Civilian aircrafts, engines and parts came in 2nd overall with a total of $6.5 billion. Cars, semiconductors, and copper ranked 3rd to 5th, respectively. In aggregation, the top 10 exports totaled $49.15 billion, nearly half of the entire worth of exports. Here is an interactive chart that gives you better visualization of the data:

But what about the export pattern for product categories rather than for specific goods? How about their pattern over time? Does each category's relative position change a lot both in dollar terms and percentage-wise or does it remain stable? Not hard to tell if you use the interactive chart below:

A look back at Facebook

A 3-minute video clip tells us all.

Overoptimistic company disclosures increase litigation risks

Firms always choose rosy terms in their disclosure to please the shareholders or at least make them believe that the company is right on track, but could that optimitism go too far? A recent paper from The Accounting Review (here - subscription needed or here - working paper version) found evidence that firms that use unusually optimistic language in their disclosures to shareholders are more likely to be sued than similarly performing peer companies. Specifically, overly positive statements in earnings announcements - whether in press releases, conference calls, media interviews, or meetings with investors - are most often cited in plaintiffs’ complaints.

The authors found that in 91 percent of the earnings announcements that were analyzed, the portion quoted by plaintiffs was much more optimistic than the non-quoted portion, which, according to the authors, is the first concrete evidence for the intuition that plaintiffs target optimistic language when bringing actions against [a] firm. Since every firm is likely to make some optimistic statements, the authors have to further determine whether unusually optimistic tones lead to a higher risk of litigation, controlling for industry, size and performance-related effects. They did the comparison and found that sued firms used substantially more optimistic language in their announcements. They also found that, more specifically, a change of just one standard deviation in the “optimism score” given to each earnings announcement translated into a 75.9 percent increase in the likelihood of being sued.

HT: strategy+business.

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.

11 Groundbreaking Inventions of 2011

See the list from BusinessInsider. Siri, Kinect 2, and the Medical Mirror have made onto this list.

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.