Happy New Year Management Talk - reaching out to stakeholder community via Weaponizing Price Opacity

http://macro-man.blogspot.com/2011/12/management-talk-awareness-week.html

10 - Internalise - As in "What you have all failed to internalise is that there has been a paradigm shift. As a result you are all now behind the curve when it comes to the multi-lateral interoperability needed to realise the supra-organisational mission statement”. Even though there is an awful lot to detest in that statement "Internalise" is the word we most object to. It appears to just mean learn or remember but as telling someone to learn or remember something appears instructive, suggesting they internalise it will sound more empathetic, but at the severe cost of sounding like a clone-monkey.

9 - Hi, I hope all is well - With the birth of the email there came an awkward period when the formality of letters, with their "Dear Sir / Yours sincerely" had to be detuned to fit in with the new immediacy and informality. After a stuttering start the world passed through an embarrassed joint squirm and settled on "Hi" for anything other than legal representations. But 2011 has seen a pernicious ingress of a new form of insincerity with the addition of "I hope all is well" to the "Hi". Rather than questioning either the validity or sincerity of that statement, we would just ask that the bulk senders of such missives consider where they are sent to, as for many recipients things are blindingly obviously not well. We suggest the only time this greeting is appropriate is when addressed to bore-hole companies.

8 - Weaponise price opacity - As the scarcity of new Himalayan Pink Salt in the financial market takes its toll on the bottom lines of financial institutions it is becoming more important for them to make sure that they maximise the profitability of existing basic products. Opacity of price is critical in this process but weaponising it? Wow.

7 - Ideation - What happened to good old "have a think" or "come up with some ideas"? Even running things up flag poles is less irksome than "ideation" which sounds as though it should involve radioactive iodine.

6 - Stakeholder Community - Not a Transylvanian village but the new plural of stakeholder. Theoretically a stakeholder is anyone who can affect or is impacted by your decisions and so could be a lowly minion in your company, but deference only ever seems to be made to "stakeholders" when they are either your bosses, investors or regulators. Please let's call them who they really are.

5 - Socialise - When issues got out of hand in the old days you would normally either just tell the boss or perhaps "take it upstairs". But now a cunning adaptation of the old mantra of "My profit, our loss" has invoked a caring sharing attitude to screw-ups by "socialising" them. As in "I think we should socialise this issue with senior management and the stakeholder community".

4 - Complementary - Odd one this, and it's really down to our own stupidity, but we have regularly opened emails this year expecting some nice free service only to re-read it and find it's not "complimentary" but something expensive and homeopathic. We expect the marketing world to soon be jumping on this and emailing multitudes of complementary not-at-all-free offers. Such as Ryan-Air offering "Complementary Flights" which sound as though they are free but are actually expensive and just "complement" what a decent service should be by being dreadful. Or have they done that already? "Complementary" should be banned from subject lines so that the vaguely dyslexic amongst us shouldn't be taken advantage of.

3 - Bandwidth - The adoption of IT geeky words into mainstream fashion is nothing new but the latest over-usage of "Bandwidth" by management is particularly grating. Just as "spending more time with my family" has become the acceptable expression of "Just been fired/stiffed/shafted/backstabbed/found out but have photos" so has "I'm sorry I can't action that, I don't have the bandwidth” become the generic replacement for "I don't have the time/resources/authority or inclination". But the saddest part is the way it's used under the false allusion that "bandwidth" is new and fashionable. Our grandmothers, thanks to broadband adverts and home routers, know what bandwidth is so please, unless you are the type of person who still uses "groovy" in the boardroom, please drop "bandwidth".

2 - Geosourcing - Why you lose your job to someone in a different part of the world. "The support function has been geosourced" or "How's the front office geosourcing project going?” It's the sharp end of a simple belief of ours that if there is someone able and willing to do your job for less than you, you are toast. But the use of "geo", which has connotations of environmental friendliness married to "source", which conjures images of babbling fresh springs in the mountains, results in a super-eco word which actually means "You're fired".

1 - Reaching out - TMM first came across 2011's winning term in July and since then it has spread like wildfire, which has us looking like Irish Riverdancers as we try to stamp it out as fast as we can. The origins and epidemiology of this disease has us suspecting it's the product of some Class of 2011 Management School somewhere. It really is complete and utter rubbish. If you are about to call an investor for some documents you don't "reach out to the client", you phone or mail them. If you want to know why a trade hasn't settled you don't "Reach out to Bangalore" you "call back-office". So let's just kill that one right now before someone gets accused of molestation.

And with that we open up "Management Talk Awareness Week". We are sure you all have your own experiences to share and we look forward to the comments column acting as a joint cognitive pan-cohesual empathy forum leading to textualisation of common goal and achievement recognition programs.

Happy New Year

Why Is Art So Expensive?

By Andrei Vazhnov 

http://www.thedailybeast.com/newsweek/2011/12/04/why-is-art-so-damned-expensive.html

1. Low Liquidity. A few players make the market in any given artist. Hence departures from rationality are common.

"The crowds lining up to see Lauder’s Klimt in 2006 must have figured that looking at the most expensive work in the world would also expose them to one of the greatest. They were wrong. Almost no one would say that Klimt is crucial to the history of art. As Glimcher, the dealer, put it, “all you need is two people to make a market”—and he doubts that, in another 50 years, we’ll find two more Klimt fans willing to break records for his art."

2. Hunting and Gathering. Modern Art tends to be more expensive because it is more fun to shop for.

"This idea of hunting and gathering—it’s not a new one.” And as de Pury, the auctioneer, explains, there’s no fun in hunting where there’s almost no game to be caught. That’s why the market for old masters has cooled down, he says, whereas certain later artists, such as Warhol and Picasso, produced so much art, in such a variety of styles and modes, that there’s still a thrill left in shopping for them."

3. Lack of Direct Utility. Since art does not have direct use, it makes it a perfect "positional good" (http://en.wikipedia.org/wiki/Positional_good).

"Buying a yacht is a tiny bit like buying a rowboat, and so retains a taint of practicality, but buying a great Picasso is like no other spending. Olav Velthuis, a Dutch sociologist who wrote Talking Prices, the best study of what art spending means, compares the top of the art market to the potlatches performed by the American Indians of the Pacific Northwest, where the goal was to ostentatiously give away, even destroy, as much of your wealth as possible—to show that you could. In the art-market equivalent, he says, prices keep mounting as collectors compete for this “super-status effect.”

4. Growing wealth of the BRICs. The "artigarchs" purchase art only on price in order to "westernize themselves."

"As money stacks up in the BRIC countries (Brazil, Russia, India, and China), their oligarchs are buying into the wealthy Western mainstream by forking out for its art, the way their poorer compatriots are buying into skinny jeans and Lady Gaga. Broad, a billionaire himself, says that for these new buyers “it seems money is no object.” It has come to the point where such “artigarchs” are pricing the normally rich out of the game."

5. You can party with the modern artists; hence it is more fun to buy modern art.

"If giant fairs like Miami Basel are lousy places to contemplate art—and they are—they continue to flourish because they are fabulous places for shopping. That, says Velthuis, may also account for why contemporary art has come to be the big-ticket item over the last five years or so: it’s simply way more fun to shop for works by artists you can still party with."

6. Price affirms cultural worth.

"I asked the great New York collector Agnes Gund how she would feel about her artworks if their value suddenly halved. “I wouldn’t feel they would have changed,” she said, explaining that most of her pictures are promised to museums. Then I asked how she’d feel if their value doubled instead, and her story changed. “Obviously, it’s wonderful to see the price rise,” she said, since that’s confirmation of the object’s cultural worth."

7. Chance to be tastemaker.

"Also, when you make headlines by spending vast sums on newcomers, you can become a tastemaker yourself, instead of having to wait for the art historians to sort matters out. Just by spending those sums you can launch a bandwagon your friends will jump on, soon confirming both your eye and your investment."

My Pro Forma Life

My Pro Forma Life
By Rob Walker
Posted Tuesday, April 2, 2002, at 12:10 PM ET
Xerox has agreed to restate several years' worth of its financials and pay a record-shattering $10 million penalty. Meanwhile, the SEC now seems likely to go after Qwest. Months after Enron, in other words, accounting scandals flourish. But while others may criticize, and seek restrictions on, the clever ways that public companies have found to polish up reality on a quarterly basis, I choose to embrace those practices. Consider "Pro forma results." Pro forma literally means "for the sake of form," but the Wall Street Journal sheds light on what the phrase means to corporations in America when it explains that "a growing number present their earnings on a 'pro forma' basis, 'as if' certain expenses didn't exist." This is not a scandalous idea; it's a delightful one.

On a pro forma basis, I'm having an outstanding year. In calendar 2002 I've gone to the gym on a regular basis and expect this trend to continue and to have a material impact on my health going forward. Year-to-date, my health has improved by a solid 15 percent on an annualized basis.

These results do not reflect certain items. Loss of good health and potential mortality stemming from 62 consecutive quarters of above-plan intake of assorted spirits, tobacco, and other substances reliant on mouth-to-lung delivery systems, and miscellaneous off-book chemical and pharmaceutical substances, are addressed in a one-time write-down. Results also include the application of "good will" regarding those days, and in some cases weeks, when actual gym attendance was negatively impacted or curtailed by visits to the racetrack, where I ate oysters and drank Budweiser. Finally, a recent post-workout lunch of a 22-ounce, bone-in rib steak at Smith & Wollensky and three shots of bourbon is treated here as a non-recurring expense. I'll never do that again! I encourage you to focus on these pro forma results as a truer portrait of the state of my health than "traditional measures," which suggest that I have been dead for at least a year.

In an unrelated one-time charge, pro forma results do not include a restatement of costs associated with the acquisition during the last calendar year of a " SlamMan" computerized boxing workout partner. My revised forecast includes no expectation that previously anticipated benefits to cardiovascular function or muscle tone will materialize in the foreseeable future, apart from those that may result from transporting SlamMan, ideally by aerial means, from my second-floor office to the sidewalk. However, there is a current lack of visibility regarding the timing of that event.

Next I'd like to address the "work" portion of my life. Again, results are gangbusters, pro forma-wise, and are in line with recent guidance. Basically, I've never been so productive, and all key internal efficiency metrics are through the roof.

These work results include certain items not recognized by traditional standards of accounting for what it is I do all day. Hours and full days previously recognized as losses due to apparently "wasted" time have been recategorized. In some cases (staring off into space, quietly weeping with the office door closed), these activities now count toward "research and development," and their cost will be depreciated over a span of 79 years. This adjustment recognizes a shift in market conditions (and a recent rise in the number of years that have elapsed since my birth) affecting the time horizon for an anticipated "big success." The 79-year time frame assumes that I will continue working, productively, until I am 112 years old. (See health results above.) I remain confident that the market is undervaluing my "work" and that additional, carefully targeted R&D efforts (including a "guerrilla" rebranding campaign conducted aggressively at parties, bars, and other gathering points of key "influentials," such as various editors who tend not to return my phone calls) over the course of that revised time frame will stoke demand and help unlock this hidden value.

The remaining "wasted time" losses have been recategorized as unrealized, non-cash gains, associated with the anticipated completion, at an undetermined time, of a comic novel on the theme of procrastination, which certain indicators suggest should have massive upside potential. Current regulations offer little guidance and give much leeway in placing a value on contracts for books that have not been written, pitched, or even mentioned to an agent. This is a relief because I have a feeling that strict oversight might have discouraged me.

That brings me to the final item on the agenda: my love life. I remain in a long-term relationship with a significant other, and as in prior quarters, my love grows and grows.

To address some concerns regarding transparency in this area, I wish to disclose at this time that I have in recent years, as a hedge against the volatile nature of love, entered into approximately 913 discrete partnerships with entities. A number of these relationships were formed "off-shore" in the Caribbean, where they are less taxing to maintain. The details are complex (see footnotes), but each of my "special purpose entities" (as I like to call them) is distinct. Extensive measures have been taken to prevent their recognition by my significant other and our pro forma relationship.

Some of these ventures may be categorized as high risk, and indeed I am currently in the process of unwinding a number of them, as quickly as I possibly can. If everything works out, the impact on affection flow and the day-to-day operations of my love life (and indeed my health) should be immaterial. Knock wood.

In summary, then, everything is great, and the future is full of limitless possibilities. However, please note that some of the statements made by me in this report are forward-looking in nature, and actual results may differ materially from those projected in forward-looking statements. On the other hand, these pro forma results have been reviewed and certified by my longtime accountant, so there's probably nothing to worry about

Another McKinsey client bites the dust

I think this would be a very successful shorting strategy for stocks - find out who McK is advising and buy very long-dated puts (I say this as a former McK summer intern where I did case studies on Enron as the outperforming strategic company...)

And these days it's relatively easy to find out via LinkedIn which companies have McK alumni…

So on AMR:

http://dealbook.nytimes.com/2011/11/29/american-airlines-parent-files-for-bankruptcy/

Practice Case 42: American Airlines (Mckinsey - Round 2)

Guess who was on AMR board...

McKinsey's global head
Gupta was global head of McKinsey for nine years until he retired in 2007. He won a seat on the board of directors of powerful Wall Street bank Goldman in 2006 and left in May 2010, seven months after Rajaratnam's arrest. He was also a director at P&G and American Airlines Corp.

Of course, nothing is wrong with the strategy and strategic advice, it's always the execution that's wrong...

This is a nice summary - UBS is missing from the list (McK advised UBS on getting into structured credit):

http://www.ritholtz.com/blog/2011/03/is-mckinsey-co-the-root-of-all-evil/

• Advocating side pockets and off balance sheet accounting to Enron, it became known as “the firm that built Enron” (Guardian, BusinessWeek)

• Argued that NY was losing Derivative business to London, and should more aggressively pursue derivative underwriting  (Investment Dealers’ Digest)

• General Electric lost over $1 billion after following McKinsey’s advice in 2007 — just before the financial crisis hit. (The Ledger)

• Advising AT&T (Bell Labs invented cellphones) that there wasn’t much future to mobile phones (WaPo)

• Allstate reduced legitimate Auto claims payouts in a McK&Co strategem (Bloomberg, CNN NLB)

• Swissair went into bankruptcy after implementing a McKinsey strategy (BusinessWeek)

• British railway company Railtrack was advised to “reduce spending on infrastructure” — leading to a number of fatal accidents, and a subsequent collapse of Railtrack. (Property Week, the Independent)

Network of Global Corporate Control

The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic "super-entity" that raises new important issues both for researchers and policy makers.


Article:

http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0025995

Socialbots - Facebook Bots

Yazan Boshmaf and colleagues at the University of British Columbia in Vancouver, Canada, have exploited this and eluded the system by creating "socialbots" – software that can pose as a human and control a Facebook account.

It's possible to elude Facebook's defences with software that poses as a human and has an account

The bots began by sending friend requests to random users, around 1 in 5 of whom accepted. They then sent requests to the friends of the people they had connected with, and the acceptance rate jumped to almost 60 per cent. After seven weeks the team's 102 bots had made a combined 3000 friends.

Facebook's privacy settings allow users to shield personal information from public view. But because the socialbots posed as friends, they were able to extract some 46,500 email addresses and 14,500 physical addresses from users' profiles – information that could be used to launch phishing attacks or aid in identity theft. "An attacker could do many things with this data," says Boshmaf, who will present the team's work at the Annual Computer Security Applications Conference in Orlando, Florida, next month.

Long term solvency of European countries visualised

Paris  hea pilt - Eesti on sealsamas kandis kus Luxembourg ja Shveitsi selle nn long-term solvency indeksi jargi

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