Derek Chow's Blog

The greatest lesson I have ever learned is the value of being thrifty now so I can enjoy greater wealth in the future. Albert Einstein once remarked that compound interest was “the most powerful force in the universe”; the significance of compound interest is not one that we can ignore in a society of such superficiality and materialism. I realized that since I am still relatively young, I should take advantage of time’s being on my side and make the most of every dollar I earn now. The greatest lesson I have ever learned is the value of being thrifty now so I can enjoy greater wealth in the future. Albert Einstein once remarked that compound interest was “the most powerful force in the universe”; the significance of compound interest is not one that we can ignore in a society of such superficiality and materialism. I realized that since I am still relatively young, I should take advantage of time’s being on my side and make the most of every dollar I earn now.The greatest lesson I have ever learned is the value of being thrifty now so I can enjoy greater wealth in the future.

Albert Einstein once remarked that compound interest was “the most powerful force in the universe”; the significance of compound interest is not one that we can ignore in a society of such superficiality and materialism. I realized that since I am still relatively young, I should take advantage of time’s being on my side and make the most of every dollar I earn now.

When the word ‘entrepreneur ‘ is brought up, the first name that comes to my mind is Richard Branson, founder of Virgin Group. I believe that Richard Branson is one of the better representations of an entrepreneur. His accomplishments, skill, and experience are what make him a leading entrepreneurial figure.

Sir Richard Charles Nicholas Branson

Schumpeter placed emphasis on innovation when defining entrepreneurship, focusing on new products, new production methods, new markets, and new forms of organizations. Branson’s venture capital organization, Virgin Group Ltd., encompasses all of these ‘news’. From selling Christmas trees and birds to now owning a Formula One racing team, Branson’s Virgin Group really is everything. Its products include beverages, airlines, cosmetics, houseware, financial services, and obviously, music.

“On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population.”

I consider people like Richard Branson part of this small fraction. If you look at the Timeline of Richard Branson’s business ventures, you will see the diversity and success in his ventures. Like many other famous entrepreneurs, his adolescence foreshadowed his future career.

One thing that Branson stressed regarding entrepreneurs, is experience. I find it ironic that his brand, labeled Virgin, accumulated so much experience and is so successful.

In business, there is no substitute for experience. So if you’re an entrepreneur, get on with it. If you’ve achieved success in business, think about giving back to the community by mentoring some promising entrepreneurs. Who knows? They just might be the next Musa and Amos

Its ironic that his brand, labeled Virgin, accumulated so much experience and grew to what it is today.

Source:

http://www.entrepreneur.com/article/217567

http://www.quickmba.com/entre/definition/

In reference to my first blog post in September..

If you think Mark Hurd’s severance package was too much, take a look at these CEOs, or should I say ex-CEOs.

Stanley O’Neal, former CEO of Merrill Lynch, received a severance package worth $161.5 million.

Early in his tenure, O’Neal made few friends with his decision to fire upwards of 20,000 employees. By the time that the next bubble—the housing market—showed signs that it was ready to implode, he had even fewer allies left. In the third quarter of 2007, Merrill reported $2.24 billion in losses. The firm, which had billions of dollars’ worth of exposure to bad mortgages, was ultimately rescued by Bank of America.

Stanley O'Neal

Martin Sullivan, former CEO of AIG, received a severance package worth $47 million.

Insurer AIG, whose colossal struggles forced the government to step in with a massive rescue package, is one of the highest-profile examples of a company being run into the ground. The firm also earned a reputation for its overly generous executive compensation. Sullivan tapped into that, taking with him a package that at the time was valued at $47 million.

Martin Sullivan

The two of these men were CEOs of the major banks during financial crisis in 2007. While millions were finding themselves unemployed, some were finding themselves better off. I am still amazed at the way this system works. Both of these companies practiced high risk, sub-prime loaning which partly led to their downfall. In fact, Martin Sullivan was listed as, according to CNBC, one of the “Worst CEOs of All Time”.

A system like this may encourage a poor sense of responsibility in the top executives. From a very basic perspective, it is almost as if they do not have to clean up after their mess.

Whether or not something should be done about this, I will not question as I have no experience in large financial corporations like these. I have, however, gathered perspectives on this issue from older, more experienced sources. Some believe that this is unjust and reform is needed. I guess for now, I will side with the “reform is needed” opinion. After all, a title like “Worst CEO of all time makes $47 million” doesn’t make too much sense.

Sources:

http://money.usnews.com/money/business-economy/articles/2010/07/27/6-unpopular-ceos-who-still-collect-millions.html?PageNr=1

The way we work and manage employees in the workplace has altered due to new technology; to be more specific, surveillance and monitoring equipment and abilities.

This has been a topic of controversy in the last decade as technology has grown so advanced.

Increasingly, attacks, robberies, violence, workplace mishaps, other workplace safety issues, and associated liabilities and damages provide motivation for employers to monitor the workplace.

Not only is safety an issue, but employee productivity has sadly proven itself to be a key factor. The survey found that Canadian employees with Internet access at work averaged eight hours online per week, of which at least two hours were for personal reasons. Another survey claimed that 25% of employees admitted spending 10-30 minutes each workday surfing non-related work sites. A further 22% admitted spending 30-60 minutes each workday surfing non-related work sites. Astonishingly, 12% admitted spending one to two hours and 13% admitted spending more than two hours each workday surfing Internet sites unrelated to their jobs. In 2000, the Angus Reid Group reported that Canadian employees spent about 800 million work hours each year on personal Internet use.

Hearing these statistics, it feels reasonable for employers to support implementation of higher level surveillance. I do not think it is reasonable for employees to be performing at this level. It is shocking.

However, with this comes surveillance of your every move.

The problem that exists here is that employees have certain rights to privacy and the monitoring of every single action made may be a violation of that. In North America, we live in a society where ethics holds great importance, especially in the workplace. Therefore, privacy and personal space must be considered of the employees must be considered.

The issue is whether, and to what degree employees are entitled to privacy in the workplace.

Source:

http://www.google.ca/url?sa=t&source=web&cd=1&ved=0CBkQFjAA&url=http%3A%2F%2Fwww.mccarthy.ca%2Fpubs%2FMonitoring_and_Surveillance.pdf&ei=6HX3TNLpHoj2tgP-oqSnAg&usg=AFQjCNGr9UPWbc1YS8wDUAf7QbOZHl7UlQ&sig2=nS7brsicjxvCypcC81oMig

When choosing a product such as a laptop, I put a few things into consideration before making a purchase. The price, performance, and reliability.

As discussed in class today, one of Dell’s unique benefits is the level of customization offered. Having the power to pick and choose specific details of your laptop allows your utility per dollar to be maximized. In other words, your money is going towards exactly what you want. Also, the fact that Dell uses mass customization and does not require a middle man, provides customers with low, affordable prices for what they want.

Dell Computer has changed the competitive landscape by:

• Offering customized products directly to customers on demand without premiums in either price or lead time
• Minimizing inventory to unthinkable levels
• Being agile—quickly responding to the market/technology changes
• Eliminating the cost and risk of finished goods inventory
• Successfully executing a mass customization strategy quarter after quarter, year after year

If you were to purchase a stock laptop from Future Shop, for the same price, you would probably get a lower quality laptop, satisfying only a few of your needs with extra components that you do not even want. Thus, reducing your utility per dollar.

Apple some how uses euphemism, extremely well, to advertise its low-customized products.

Much of their success lies in their targeted market, I believe. It seems Apple ‘customized’ their look to fit a large targeted market, rather than having a small market, customize their own product, like Dell.

This seems like a good reflection of our society. What this means, is up to you to interpret…

Sources:

http://www.mass-customization-expert.com/21%20Century%20Manufacturers.htm

“We’re rooting for you @LindseyVonn @Shaun_White @GregBretzz and @Drahlves in the 2010 Winter #Olympics!”

– Red Bull

“Guess what? Team USA is rockin’ out the #Olympic medal count in 1st place with (drumroll, please) 18!”

– Verizon

These seemingly harmless tweets by Red Bull and Verizon are, in fact, quite a problem in the marketing sector for the Winter 2010 Olympics. Because neither Red Bull nor Verizon signed a contract with the Olympic sponsorship committee, any posts or statements made to the public are NOT allowed to incorporate any language that is associated with the Winter Games. This unofficial type of marketing is noted as ambush marketing.

“When people partake in this kind of ambush behavior, it hurts American athletes,” says Lisa Baird, chief marketing officer of the U.S. Olympic Committee.

Lisa Baird

It seems Red Bull and Verizon both understand their actions were not permitted; however, because of the nature of the medium they used, they were able to cover up their intentions with a simple, but defendable argument.

Red Bull argues that “the dynamic and consumer-driven nature” of social media make it tricky to “stay within guidelines as they are defined.” The company says it has not been contacted by the International Olympic Committee or the USOC with any concerns. By Friday morning, its Olympics-related Twitter postings had been deleted.

Verizon says its Twitter postings aren’t part of its marketing, but rather a company effort to post news stories.

A reasonable response to this type of marketing, would be a punishment of some sort. However,  the penalties for such marketing are vague. To me, this is completely understandable because it is difficult to create a penalty when the perpetrator uses ignorance and misinterpretation as a defence. The one measure mentioned they are taking, is to educate marketers on the rules. The disappointing fact is that it is hard to believe that this will help at all. Instead, it would clearly outline the rules and regulations a marketing committee must work around to create an effective and defendable ‘ambush’ .

Now with highly developed internet services, the ability to post something and delete it when desired, makes the problem of stopping ambush marketing even greater.

So I wonder...What new measures will be taken, if any?

Source:

http://blogs.wsj.com/digits/2010/02/22/red-bull-verizon-tweets-run-afoul-of-olympics-rules/

“Bank of Nova Scotia expects short-term borrowing costs to remain at ultra-low levels well into next year as the global economy moves into a slower lane of growth.”

According to the monetary policy (on Wikipedia), there are two ways to apply this policy, either through ‘expansion’ or ‘contraction’.

Currently, the whole world is working to fight through this recession. How? Simply by implementing the expansionary monetary policy.

“Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates.” This is achieved through increasing the size of the money supply.

“Japan recently lowered its benchmark rate to ‘zero’, and undertook another round of government bond purchases. Similar stories are likely to play out in the United States and the United Kingdom where stumbling economies, fiscal restraint, and deflationary concerns have surfaced.”

The Scotiabank economists describe the monetary policy as “exceptionally accommodative” because it promotes short-term borrowing. Now with low interest rates and more money available, more people are able to borrow more money to purchase more goods.

Economists predict that these low rates will be maintained through 2011, however these rates cannot stay this low for too long. They must find a balance, or equilibrium. Over time, the interest rates will slowly increase, thus demonstrating the different stages in a cycle.

I find the monetary policy an extremely intriguing topic. Learning and understanding it is made easier and more interesting through examples of current events.

Sources:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/why-interest-rates-are-going-nowhere-fast/article1749111/

http://en.wikipedia.org/wiki/Monetary_policy

Today in class, the topic of business tactics and strategies was the focus. We carefully defined both and used examples to better our understanding of them. What is important to acknowledge is that the significance of business tactics and strategies are growing fast. 30 – 40 years ago, a company could grow and do well after thinking of a smart tactic, applying it, and reusing it over and over. However, today, companies cannot be doing that anymore, unless they are constantly inventing unique and ingenious tactics, they will be left in the dust. Now, it’s all about adapting.

A recent article informs the public of Amazon’s new strategy. In the recent years, Apple has become Amazon’s direct competitor. Before, buying online books and music would mostly be done through Amazon. However, Apple’s iTunes took over the music, and now the iPad reigns over the Kindle. It’s amazing how Apple’s brand is so powerful that even though it entered the competition after Amazon, in both music and books, and it still seems to come out victorious. After years of being pushed around, Amazon is deciding to stand up and attempt to play in the same battlefield as both Apple and Google now. Crazy? Maybe.

Amazon has decided to create an App-Store for smartphones running on Google’s Android software. Google has the second largest App-Store next to Apple’s. Is it possible that Amazon has accepted defeat from Apple and is going for the number two spot now?

Amazon is now targeting the “young but booming mobile-apps market”. Google’s Android market may be young, but Apple’s is now more than a few years old. Because of Apple’s age in the market, it has experienced all the new inventions and breakthroughs. It may seem that Google’s app-store is simply a mirror image of Apple’s now-somewhat-stale app idea. Considering how fast things change, I’m somewhat skeptical of Amazon’s decision to enter this ‘growing’ market.

Source:

http://online.wsj.com/article/SB10001424052748704696304575538273116222304.html?KEYWORDS=strategy

Is that a thunderstorm I hear? A chainsaw? A baby crying? No, my buddy just grabbed some Sun Chips.

The snack giant, Frito-Lay, has spent several years finding and testing biodegradable material to replace the non-degradable packaging. They have created the world’s first 100% biodegradable chip bag.

However, that is not what they are now known for. Their bags have become notorious for being unbelievably deafening and I speak with only a hint of sarcasm here.

Since being implemented in January, sales of Sun Chips have dropped each month. When i first read this article I was in disbelief and shock when i read that customers were making noise complaints to PepsiCo (owner of Frito-Lay) and the sales were actually falling. After further investigation, through various videos, I realized how noisy the packaging actually is. Although I agree with the general public, I find it somewhat disappointing that we are willing to sacrifice, in essence, a healthier planet for temporary noise pollution.

Many videos have been posted on the internet demonstrating the severity of the bag’s noise. Companies in the present and future have to be extremely careful with products they present to the public. Any small mistake could spread instantly and cause the company a fortune.

Source:

http://online.wsj.com/article/SB10001424052748703843804575534182403878708.html?mod=WSJ_hp_mostpop_read#

“I don’t have time to learn, I’ll let the broker handle it.”

If this is in your mind, you may want to rethink that.

A recent article on YahooFinance discusses an issue that has been around throughout the history of the stock market. The issue, your benefits are not at the top of your broker’s priority list. When I read this article, it made perfect sense to me and I think brokers should not be attacked for what they do.

5 Things Your Broker Won't Tell You

Everybody wants to make money, especially brokers and financial advisors. Investors(you) are simply a tool for them to make money. Even if you lose money, your broker will have somehow profited off your loss. Some may say this is unethical and be disgusted by how the world of finance operates. But it has been like this for so many years, and in the end, money continues to flow into the hands of these “unethical” people.

A broker in midst of his diabolical laugh

In class, Murray mentioned, but disagreed with, the phrase “finance is evil”. I have to agree with him. Finance is not ‘evil’; most of the people who think it is evil are either financially illiterate or unwilling to learn the ways of finance.  Having said that, I encourage everyone to read this article as I am not able to fully explain it in this brief blog.

Source:

http://finance.yahoo.com/news/5-Things-Your-Broker-Wont-usnews-4082745709.html?x=0