It was an honour to have Nolan Watson, president, CEO, and chairman of Sandstorm, talking to us in class via Skype. Through a combination of his short introduction of Sandstorm in class, and a formal interview Mr. Watson conducted with The Street, I have noticed a few points of parallel between the various business concepts we discussed in class, and Sandstorm’s operating principles.

In an effort to explain the advantage of investing in gold streaming over an exchange-traded fund (ETF), which essentially describes a tradable security that tracks numerous assets, Mr. Watson mentioned that the money value of an ETF shrinks overtime. This is possibly due to management costs and inflation. On the other hand, the stock price of Sandstorm fluctuates along the price of gold, this minimizes the effect of inflation and have proved to be a more sustainable investment for investor.

As far as the industry goes, gold streaming has little risks, as Sandstorm is not exposed to the actual operational cost associated with exploiting the mine. Mr. Watson also explains that instead of viewing the investment of private equities (PE) as direct competitor, he rather partners with them to co-finance great projects.

http://www.sandstormgold.com/media/

The Canadian federal government has switched the production of medical marijuana from a monopoly to a relatively free market as it opens up a new commercial industry for entrepreneurs. This is a precious opportunity for new entrants, as it is rare to have a brand new market.

Just like what Ries and Trout stated, being the first in an industry is the easiest way to make the customers remember you. Since June, 171 parties have applied for a licence, which opens the door to the industry that is expected to worth $1.3 billion by 2024. Other than being the first, the producers are also establishing the point of difference by personalizing the cannabis’ contents through different tetrahydrocannabinol (THC) concentration for different customers.

Economically speaking, surplus will be maximized with the combined effect of a free market and economies of scale. However, the estimated high price of $7.60/gram might become a burden on the users in the short run, and ultimately lead to  black market behaviours or the illegal action of home growers.

Source:

http://www.cbc.ca/news/canada/canadian-pot-growers-eyeing-medical-marijuana-free-market-1.1894621

One of my fellow classmates, Zilue, has posted a blog regarding a popular business ethic problem–are CEOs paid too much? Recently this debate was also brought up in my Comm 292 course as we studied the chapter on motivation among organizational behaviors.

Zilue argues that excessive executive compensation causes “harm to the corporation in the long run by cultivating a culture that is driven solely by numbers.” Some of his arguments include the questionable performance of the CEO, the arousal of dissatisfaction among employees and the shareholders.

I would take a different side from Zilue. During an interview, Pfzer’s Hank McKinnell admits that the CEOs are being paid very well, but since “nobody has any idea what the right level should be,” such debates should be minimized to prevent any government intervention in the market. A CEO is responsible for setting direction of operation for the corporation.  Theoretically, as a result, money acts as an extrinsic value to retain the CEOs’ high level of loyalty and motivation. Just like the saying “all that glitters is not gold, but gold will glitter forever,”  it is not difficult for a CEO with high level of self-efficacy to play job-hopping and serve for another more competitive company. Rather than discouraging the employees with the income gap, CEOs compensation should act as an incentive for the employees to strive better. Last but not least, what would the shareholders of a corporation think if the CEO’s compensation is suddenly halved? They are likely to loose confident in that company and ultimately result in a devastating fall in stock price.

Links from Zilue’s blog:

Do CEOs Get Paid Too Much?

http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380799/

CEO Pay: ‘Time to Retire the Rock Star Messiah Myth’

Book:

ORGANIZATIONAL BEHAVIOUR CDN 5/E