Memories, Dreams, Reflections

Ai copilarit in anii 90 daca..

2009-12-16T01:22:00.000-08:00

Just found this on Facebook, reminded me of so many priceless memories from my childhood! I said I should save it down somewhere because it really feels like part of me, of my childhood, and I don't want to ever forget that. Sorry for the people that read this and don't speak Romanian - unfortunately it's very culture-specific anyways so it's pointless to translate it, you would only understand it if you had lived in Romania in the 90s.

So here it goes!

Ai copilarit in anii 90 daca..

...ai colectie de suprize de la guma Turbo
...te uitai zilnic la Captain Planet
...faceai robotei din pachete de tigari
...ascultai B.U.G. Mafia sau R.A.C.L.A. noaptea ca sa nu te auda parintii
...pierdeai noptile pe mIRC
...jucai elasticul si frunza in fata blocului
...ai fost fan Generatia PRO si Tip Top Minitop
...stiai toate versurile de la Genius pe de rost
...te uitai non-stop la Atomic TV
...te jucai Maroco cu vecina de deasupra
...mergeai cu parintii vara la Mamaia si stateati cate 10 zile cu bilete de la sindicat
...ai baut prima gura de vodca dintr-o sticla de plastic
...gestul maxim de rebeliune era sa fumezi in toaleta scolii
...te uitai cu parintii la Dallas si la RoBingo
...ii faceai mamei tale semne de carte din hartie glasata de 8 martie
...te jucai Tetris
...ai invatat engleza de la Cartoon Network
...te uitai la diapozitive cand nu erau desene animate ca lumea la televizor
...colectionai albume cu abtibilde cu fotbalisti
...ai avut Serbarea Abecedarului in clasa I
...ai tras cu cornete sau cu prastia cu invizoace dupa fete
...de Craciun iti doreai mereu Lego sau papusa Barbie
...cumparai casete video cu Frumoasa si Bestia sau Mica Sirena
...te jucai cu soldatei de plastic
...ai avut sau ti-ai dorit Nokia 5110 si i-ai invidiat pe altii care aveau Nokia 3310
...n-ai plans ca n-ai mers la concertul Michael Jackson decat dupa cativa ani
...stii ce este Center Shock si iti doresti sa mai gasesti
...ai baut sucuri in cutii de carton in forma de piramida
...mergeai cu parintii la teatrul de vara la spectacole cu Nae Lazarescu si Vasile Muraru
...iti aduci aminte ca, la inceput, Vacanta Mare avea 3 membri si erau chiar amuzanti
...nu exista petrecere la care sa nu se asculte Backstreet Boys
...inregistrai casete cu Spice Girls de la prieteni
...inca mai stii refrenurile de la melodiile Andre
...te uitai fascinat la KITT pe Tele 7 ABC
...scriai in oracolele colegilor de clasa
...tii minte cele 5 minute de desene animate dinainte de revolutie
...pronunti perfect "nu zaietz pagadi" desi nu stii o iota din limba aia
...te entuziasmezi daca o vezi pe strada pe Geanina Corondan
...aveai rigle chinezesti 3D si ascutitoare cu oglinda.

Steve Jobs' 2005 Stanford Commencement Address

2009-12-14T14:53:00.000-08:00

"So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever."

"You've got to find what you love. And that is as true for your work as it is for your lovers. If you haven't found it yet, keep looking. Don't settle."

"Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

"Stay Hungry. Stay Foolish."

Full speech here:
http://www.youtube.com/watch?gl=US&feature=player_embedded&v=UF8uR6Z6KLc

The Fringe Benefits of Failure and the Importance of Imagination

2009-10-25T15:21:00.000-07:00

JK Rowling's Commencement Address to the Harvard graduates of 2008.
I was skeptical at first but she really impressed me and her speech is actually so much more profound than it seems at first sight. I have a new found respect for this woman and the way she lived her life and I think there are really some valuable lessons to take from this speech. Below my favorite parts:

"So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life."

"So given a Time Turner, I would tell my 21-year-old self that personal happiness lies in knowing that life is not a check-list of acquisition or achievement. Your qualifications, your CV, are not your life, though you will meet many people of my age and older who confuse the two. Life is difficult, and complicated, and beyond anyone’s total control, and the humility to know that will enable you to survive its vicissitudes."

"Choosing to live in narrow spaces leads to a form of mental agoraphobia, and that brings its own terrors. I think the wilfully unimaginative see more monsters. They are often more afraid."

"What we achieve inwardly will change outer reality. " - Plutarch
"As is a tale, so is life: not how long it is, but how good it is, is what matters." - Seneca

If you want to see the full speech, it is here:
http://harvardmagazine.com/commencement/the-fringe-benefits-failure-the-importance-imagination

You know you're Romanian when....

2009-09-21T01:24:00.000-07:00

You know those Facebook groups "You know you're this or you've done that when..." - well there is one for Romania as well! Here are, in my opinion, the "best of"s of that group (the wordings belong to the author, Adrian Popescu):

You know you're Romanian when...

...Everything you eat is savored in garlic and onions.
...You are standing next to the two largest suitcases at the airport.
...You talk for an hour at the front door when leaving someone's house.
...You can fit 10 people into a Dacia.
...Your mom tells you you're too skinny even though your 30 pounds overweight.
...Your dad ever butchered a pig or lamb. [or a chicken for that matter]
...Your mom ever chased you with a rolling pin or a broom telling you to stop so that she could hit you. [I couldnt say that's true for me but it's a funny one!]
...You don't use measuring cups when cooking.
...If you don't live at home, when your parents call, they ask if you've eaten, even if it's midnight.
...Your parents don't realize phone connections to foreign countries have improved in the last two decades, and still scream at the top of their lungs when making foreign calls.
...Your parents brew their own wine and ţuică
...You say "La Mulţi Ani" for every holiday.

Timing investments

2009-09-16T12:29:00.000-07:00

I was just reading this article about timing strategic moves and i think this is the key question on every CEO's lips nowadays. As the stock markets start to recover and investors slowly regain confidence, many companies predict a growth in earnings for the following year and start venturing into long term planning and strategic investments again. These strategic investments might be big investment projects or acquisitions of rivals or of complementary businesses. Indeed, there is a lot of value in M&A deals at the moment, as companies that have overcome the financial crisis and have a stable cash position can look into acquiring businesses at a discount of over 30% compared to 2007. Similarly, according to McKinsey Quarterly, some investment projects might be considerably cheaper now than they were before, although I am not sure we can say this is the case for most industries (I am inclined to believe it is more an effect in a specific sector/company than a generalized trend). In any case, investing now is a good move to secure a better competitive position, as it can give the company a headstart compared to its rivals that are cutting growth plans and focusing on the short term. Innovation will be key to get out of the slump, and developing new R&D projects is costly and time consuming - therefore there is a clear benefit for the companies that invest now and will be able to ripe the benefits of innovation much earlier than their rivals. However, we are talking about sizable investments which, if undertaken, can expose the company to a significant risk and maybe even weaken it completely. Therefore timing of these moves becomes key: executives should wait long enough to have some visibility on where the market is going, but not too long, because otherwise they will lose the inherent value in buying these projects now. If they wait too long, everybody will see the interest of these deals and will be willing to invest, the prices will go up and thus will eat up the perceived value. So how can one determine the right timing for these investments?

McKinsey Quarterly proposes scenario analysis, which, I believe can indeed be a good tool. In their case, a certain strategy was clearly superior to the others in all scenarios considered (i.e. invest now rather than wait, because the benefits of waiting are too low compared to the possible losses in the value of the projects). However, what happens if there is no such clear cut strategy emerging? Scenario analysis can give us an idea of where the value of the investment evolves depending on the direction of all the uncertain variables, but it is not always a decisional tool, as it does not offer a combined value for that opportunity on which to decide. It's not like the NPV, where you can clearly state that investing in this project is worth that much, and if it's bigger than this number, we should always go for it. With scenario analysis, you know that if scenario X happens, then your project is worth this much... in order to get a global value of the investment you need to assign probabilities to each scenario which, in my opinion, is impossible to do in the current economic context where any attempt at previsions is mere guess.

What companies need is a tool that allows them to integrate uncertainty, avoid making previsions and still help them decide whether to invest or not, and, most importantly, when is the right time to invest. For corporate internal projects, this is exactly what the Real Options method does. Based on the financial options pricing framework, namely binomial pricing , the Real Options approach considers that management has the option (the right, but not the obligation) to purchase a certain investment project by investing the required amount. This model allows companies to express the full range of the uncertainty in a binomial present value tree, avoiding the need to make predictions and commit to numbers which are impossible to get right. Real Options valuation considers that the project is actually an American call option, and so using financial options pricing allows management to identify the best timing for its exercise (i.e for making the investment). It also discounts into one single number all the possible values of the project, be they negative or positive NPVs, thus taking things one step further than scenario analysis, because it becomes a decision tool. The decision criterion is: if adjusted NPV with RO value > 0 we should invest in the project. Thus, this framework is a bit more standardized and rigorous than scenario analysis for timing investment projects and their phases. However, I have been thinking if this could also be applied to value companies for M&A?... I am not sure yet..i'm afraid I will leave this open for discussion for now.

Funny Dilbert

2009-09-09T03:01:00.000-07:00

A different view on strategy

2009-09-08T16:05:00.000-07:00

For those who know me for a longer time, you know that I have always been interested in business strategy and management, and that I wasn't much of a finance person. In fact I didn't like finance at all. But an interesting turn of events made me pursue a master's in corporate finance and I am surprised to see, that at the end of this year, my perception has changed dramatically. I now realize I had been looking at the wrong kind of finance - or rather looking at it in the wrong way. Now it's become my favorite subject and I understand, after putting myself in investors' shoes for the whole of last year, that any strategy that doesn't take into account finance is shallow and empty like an old coffer: you expect to find treasure but instead there's nothing but dust.

I could start by giving all these arguments related to investor's motives for starting or financing a business, such as gaining a return higher than they would by putting their money into safe instruments like bonds or bank accounts...and how a company's strategy should be steered to achieve this goal and provide to investors (shareholders) the minimum rate of return that they expect. But there's nothing new here - we all understand this more or less intuitively. What I did not understand that well until this year is just how much corporate finance is a decision tool in setting and steering a company's strategy.

Although that might sound weird at first, by thinking that a company's strategy is in fact represented by its collection of investment projects it all starts to make more sense. Indeed, to see what a company's strategy is, look at its budget. Their investment decisions and the projects they pursue uncover the true direction in which they are heading. Of course, I am not trying to wipe out the entire strategic process - there is unquantifiable value added in setting the long term direction of the company, anticipating future trends in the industry and devising tactics for a better competitive positioning. But when it comes down to one step further towards the implementation of this long term vision, financial decision making is key. If strategy is a collection of investment projects, then project portfolio management and investment decisions are strategy's true drivers, so project valuation and considerations about profitability of investments are key tools used to set the strategy. A great vision about the future but with the bad investment decisions will definitely lead to catastrophic results.

In this context, an interesting question is the issue of cross-subsidizing, especially when we think about product portfolio management. Quite often, a company finds itself in the situation of evaluating a project which is of strategic importance but has a negative NPV so it is not profitable on its own (ex. keeping operations running in a certain country to maintain a position and avoid competitors taking over that market segment completely). Should the company pursue this project? If they believe that the loss they would make by not keeping these operations open is higher than what they lose by committing themselves to this project, then they probably should - based on the fact that the loss of this project will be subsidized by the earnings of another project. But what happens when there are more projects like this to consider? How many and up to what amounts should the company subsidize, to avoid eating down the profits from the other higher value added projects? This is an interesting question to look at in the context of strategy setting. (the Real Options method helps ease the decision making in this context but I will probably talk about that in more detail in a following post). So are mergers and acquisitions - essential growth possibilities for some companies, but which can lead to failure of the entire group if not performed correctly. And here the financial considerations are again extremely important, as there is a tendency to overpay the target thus eating out most or all possible synergies.

These are just a few examples and a few ideas that came to my mind now, but this master's degree has been full of such examples that drew my attention. It truly opened my eyes and gave me a new perspective. I think Porter is good. Porter is great! But if Porter is not backed by numbers, it is worthless, it cannot add value. And unfortunately as I look at the strategy consulting industry I see a lot of times (maybe more so in boutique companies?) that the recommendations are based on pure qualitative analysis, experience of the industry and market studies, but not enough on finance. What will the future look like? I'm curious to find out!

Market for innovation

2009-07-09T16:13:00.000-07:00

I stumbled upon a very interesting concept today while researching something at work: www.fluidinnovation.com. I think this is an amazing idea: it is in reality the equivalent of a market for innovation, as any company that created any kind of improvement, innovation, process etc that is protected by a patent can sell it to other interested parties through this intermediary. It probably exists for a long time, and I am sure this is not the only company of its type, but I must admit I have never wondered how companies go about selling licenses of their patents and capture the associated profits. Seeing this it all dawned on me. Indeed, it is pretty straightforward for example for a software development company to produce and sell licenses for its software, because this is their core competency and their business model relies on marketing these licenses. Thus is makes sense to keep this process in house.

However, when a company like Boeing develops a new method for valuing investment projects using Real Options, it cannot really go about trying to market this innovation and sell it to other companies that might be interested. Why not? Because it is not their business. Their business is to make and sell airplanes, not investment decision software, and they would have no interest to allocate internal resources to diversify in that area. As a result, they would own a sleeping patent, one which could generate revenues but does not because a sustained, coordinated internal effort to market it would not make much economic sense given the company's business model.

Also, another benefit I see for this initiative is that it helps innovation to develop even more. New knowledge builds on the existing stock of knowledge, and a market for innovation only allows to broadcast the new discoveries to a wider public and especially to the interested parties. This should facilitate related innovations in these companies and create a synergy effect.

Shareholder value

2009-05-15T12:58:00.000-07:00

Today’s ‘Strategy and Financial Policy’ class raised an interesting point regarding strategy and shareholder value creation. Over the 2000-2005 period while the world economy grew at about 3%, shareholders had set unrealistically high targets of, on average, 6% revenues growth and 12% earnings growth for their companies. Empirically, a study conducted by Bain & Co looking at 1,854 companies over the last 10 years finds that only 240 of them (13%!) actually managed to earn their cost of capital. Does this mean that the shareholders were over-demanding, or simply that the companies were bad?...

To answer this question, I would analyze the reasons that make us believe that shareholders might be asking too much of these companies. This issue is especially important nowadays, in a period of crisis, where shareholder demands put more pressure on companies to seek short-term, external growth through M&A rather than sustainable organic growth. At first glance, what strikes me is that shareholders set a target of 12% increase in earnings whereas they only demand a 6% increase in sales. This would mean that about half of the growth in profits should come from cost reductions and improved efficiency! This is obviously not sustainable over the longer term, especially if we look at the fact that the 6% growth target for sales is very ambitious as well (double that of the market).

However, this is not the main problem. The biggest question here is whether the shareholders are entitled to ask for a 12% return given the riskiness of the company’s activity or they are just setting an unrealistically high target. As we know, shareholders have the right to ask for the CAPM rate of return, which is basically the risk-free rate + the market risk premium adjusted for the riskiness of the company. Now, when we calculate the risk premium we basically look at the average return on the S&P over a very long period of time (ex 1926-2006) but in this way we dilute the impact of economic shocks, such as periods of crisis… whereas now we are precisely in such a period. Thus it becomes questionable whether the risk premium we should use during crisis should be the same, because when all markets collapse, demand falls and uncertainty rises we cannot expect the companies to earn the same returns as they did two or three years ago. If indeed the shareholders set their expectations according to the CAPM rate of return, then these might indeed be unrealistic and become a too high target for the company in the current conditions. It is very likely that this is what was also happening in the 2000/2001 crisis… and this is perhaps why many companies did not manage to meet their targets and earn the required return on equity capital after servicing their debt. This is in fact saying that the companies are not bad, but that, indeed, shareholders probably asked for a too high rate of return. How the shareholders should react is by adjusting their demands to more reasonable levels: seeing that only 13% of the companies were able to earn their cost of capital should send a clear signal to investors that they should lower their targets. All companies cannot be bad performers, and it is more likely that shareholder expectations lag behind new market developments.
I would say this situation is reinforced by the company’s managers as well. Even though it’s the shareholders, through their power to change the CEO, that decide on the revenue and earnings targets that the company should achieve, managers have an incentive to show a growth in earnings and profits as well. This is mainly because analysts and investors tend to look less at the company’s performance in that year in isolation or as compared to the competitors, than they do as a comparison to the previous years’ performance. Thus managers have a pressure to provide every year higher earnings (or at the very least, show no losses), be it through M&A or simply through questionable accounting practices such as earnings management.

However, what should be the appropriate return for the risk incurred in this case by the shareholders, and how the market risk premium should be assessed during a crisis period, remains an open question…

From "Kate and Leopold"

2009-01-15T06:11:00.000-08:00

I saw this movie the other night, and although it's supposed to be a light, romantic comedy with not much substance in it, there were some quotes which I thought were particularly witty and that stuck with me... I decided to write them down here so that I can refer to them later on, as they set me thinking for maybe future posts on here :)

I will now leave you in their company.

Roebling: Time. Time, it has been proposed, is the fourth dimension. And yet, for mortal man, time has no dimension at all. We are like horses with blinders, seeing only what lies before us. Forever guessing the future and fabricating the past.

Stuart (about him finding a doorway to time travel): It is no more crazy than a dog finding a rainbow. Dogs are colourblind, Gretchen. They don't see colour. Just like we don't see time. We can feel it, we can feel it passing, but we can't see it. It's just like a blur. It's like we're riding in a supersonic train and the world is just blowing by, but imagine if we could stop that train, eh, Gretchen? Imagine if we could stop that train, get out, look around, and see time for what it really is? A universe, a world, a thing as unimaginable as colour to a dog, and as real, as tangible as that chair you're sitting in. Now if we could see it like that, really look at it, then maybe we could see the flaws as well as the form. And that's it; it's that simple. That's all I discovered. I'm just a... a guy who saw a crack in a chair that no one else could see. I'm that dog who saw a rainbow, only none of the other dogs believed me.

Leopold: The brave are simply those with the clearest vision of what is before them - glory and danger alike and notwithstanding, go out to meet it.

Leopold: What has happened to the world? You have every convenience and comfort, yet no time for integrity.

Kate: Maybe [...] that whole love thing is just a grown-up version of Santa Claus; just a myth we've been fed since childhood. So, we keep buying magazines, joining clubs, and doing therapy and watching movies with hit pop songs played over love montages all in a pathetic attempt to explain why our love Santa keeps getting caught in the chimney.

About more ethereal things

2009-01-11T15:02:00.000-08:00

One of my favourite mythological stories is Oedip, because it speaks of the inescapability of destiny, and I think that seeing how somebody is doing everything he can to change its destiny, only to reinforce it even more makes for a good, though tragic story. Talking about this with a friend set me thinking... am I a predeterminist? I'd say not overall, though I am, up to an extent. More precisely, I think that the resources and the environment we are born in largely determine our capabilities afterwards, but I believe in those people that can challenge the odds and change their destiny. There is no "impossible" in my mind.. there is only "I don't want it hard enough". And I believe everyone can achieve whatever they set their mind to.

The only things I think are prederetmined in our lives are our family, out genetic inheritance from our parents, and the place and social environment we are born with. It has been proven that these factors affect the way our personality is shaped at a young age. At this early stage, they largely determine the opportunities which will be available to us in the future and our capability to seize these opportunities. A child born in Africa, in a family which lives with less than $1 per capita per day will clearly not have the same opportunities as a child born in a (even poor) family in Western Europe. Again, a child born with a physical handicap or a mental disability will enjoy fewer options than a healthy child. However, I think our true worth as human beings lies in being able to achieve more than our potentialities and overcoming our limits... achieving the things we really want even if everybody says they're impossible. This is what character is about: strong will, ambition, self-control, and a little bit of madness. Men should be visionaries and see ahead of others what they can do with the resources they've been endowed with, and do that better than most people would. It is a bit like management, and a bit like gambling.

But if we can carve our own destiny.. then how come some things can be predicted beforehand? Things which are, by no means, mere coincidences? I am pretty skeptical about this to be honest, but some things make me wonder. A few well-done TV shows on Discovery, some stories from people around me about premonition-like dreams, and recently, talking to a friend who actually saw some of the things predicted to him happen, with little chance of that being mere coincidence... To what extent can our lives, be predicted then, if our destiny is dynamic? We change it every second by the choices we make, and by choosing one path we completely forego so many others... And if it can be predicted, to what extent can it be changed?

I watched "If Only" about a week ago, which made me ponder more on this theme. It's a movie about a businessman who, after his girlfriend dies in an accident shortly after they had a fight, gets the chance to relive the day all over again, in the hope of changing the events that led up to her getting killed. (source Wikipedia) During the movie, everybody, even him, seems to believe the first day was more like a premonitory dream. But did he get this dream in order to change things, or was it more so that he'll do everything to fulfill what should, in fact, have happened from the very beginning? Did he manage to change anything, by the fact that she did not die, or did he only follow his destiny? Perhaps it was him who should have died from the very beginning... and this dream was sent to him only to help him tell her how much he loved her, before he left. I tend to interpret the movie more like this... but in this case, destiny would be a closed circle, we would live in a sphere and we could have different roads to get from one end to another, but the final destination would always be the same. And I do not want to believe that.

PS. For a beautiful story about harshly changing one's destiny, even if for a short while, read "Flowers for Algernon" :)

The future of capitalism

2008-12-15T15:51:00.000-08:00

From a McKinsey Quarterly interview ... one of the best articles i've read in a long while:

The Quarterly: Capitalism has just taken a beating. What will the future look like?

Richard Foster: The essence of capitalism is capitalizing—bringing forward the future value of cash to the present so that society can grow more quickly by taking risks. It goes back to the Dutchmen in the 16th century, sitting at their coffeehouses in Amsterdam and Leiden, loaning each other money for a guaranteed return. Someone said, “I’ll give you a little higher return if you give me a piece of the action”—and equity was invented. That had the effect of bringing forward, into real cash today, the net present value of future earnings. That levered society and allowed it to grow at a much higher rate than it would otherwise have. Equity was a very clever invention, and we are not going to give it up. This is the way people are. This is the way commerce works and will continue to work unless capitalism ends. And that won’t happen, regardless of what you read in the press.

Special dedication....

2008-12-15T14:11:00.000-08:00

.. to the readers of the previous post: I know for sure some of you will enjoy this:

French "workaholism"

2008-12-09T16:21:00.000-08:00

For quite some time now there is a debate in France about whether or not people should be allowed to work on Sundays. According to the current law (adopted in 1906!!), working on Sundays is forbidden, so as to ensure any employee a minimum of 24 consecutive hours of rest during the week. However, certain derogations are possible: for example, companies producing perishable goods or working with perishable inventories are allowed not to interrupt their production cycle; hotels, museums, other leisure companies, hospitals and a number of pharmacies to ensure minimum service can also work on Sundays. Little grocery shops can only stay open until noon, and big supermarkets have the right to stay open 5 Sundays per year. However, a new law is waiting to be passed this month or beginning 2009, which aims to relax this system a little, though clearly stating that its purpose is "not to generalize working on Sundays".

This regime is actually pretty strict as it is. I remember this was one of the things that shocked me the most when I first started to live in France: when you go out on a Sunday, everything is closed, the streets are deserted and you can't even go shopping because all the stores are closed. About the only things open are pubs (in the evening.. and still, some of the good ones are closed on Sundays!) and cinemas. Coming from a city where I had grocery shops open 24/7 at the corner of my street, I was used to just go out and buy ice cream at midnight if I felt like it. I was also used to everybody being outside, shopping, going out, roaming the city streets on Sundays. Adaptation took me a while, since I'm not a very organized person by nature, and more than once I was left with nothing in the fridge on a Sunday, and I had to wait until the next day to do my shopping. Eventually, with a little organization, one can manage, but I'm straying away from my point with this post.

I am actually writing this because I find it funny and quite unbelievable that people can talk over such a law: I thought one of the constitutional rights of the citizens was the right to work. Indeed, they also have the right to rest. These should however remain rights, not obligations, and every person should make this decision by his/her self, as opposed to things being settled through a law. Imposing people not to work on Sundays is equivalent to violating their right to work. Take for example a souvenir shop: its revenues are dependent on tourism and tourism usually occurs during weekends. Not allowing its owner to work on Sundays automatically cuts its revenues in half, because he cannot take advantage of one day out of two which are profitable for his business. I bet he would prefer to rest on Mondays instead, and I bet he would prefer to have that choice, and not leave the French state decide for him.

Other than being a sheer violation of a basic human right, I also feel this outdated law pulls French economy down, in a time of harsh economic conditions when what business needs most is flexibility to quickly adapt to the market. Liberalizing work on Sundays would actually reduce unemployment, raise household's revenues, increase the GDP and the state's budget and re-launch the economy's dynamics. How? Well, to start with, it will help lower unemployment (or at least partly offset the negative trend as a result of the current crisis) because 1) having the right to open on Sundays might make profitable some businesses that weren't before, and thus there will be new business creation and the entrepreneurs will either leave their current jobs to start-up a company, or they will come directly from the ranks of the unemployed and 2) it will create new jobs because of the need to work in shifts, or because businesses make more money and can expand their activities by hiring extra people in other departments.

Secondly, it raises household's revenues because as we have seen with the example of the souvenir shop, some people may make extra profits, and also because people can choose to work an extra day if they need it. Not only this, but it will also have a positive effect on their revenues due to the multiplier effect in the economy.. but I will talk about this later.

Thirdly, opening businesses on Sundays means making available an extra day for consumption. This is even more relevant as we see Sunday as a day of relaxation, when people are likely to make discretionary purchases. This would thus allow businesses to tap more into the revenues of consumers, as the latter will have more time to spend in their shops and more opportunities to buy. Just as a simple example, I might be very busy during the week and work long hours, so I will probably not have time to shop, or go to the hairstylist, or go out in a pub during the week. On Saturday, since it is my only free day when some boutiques are open, I'll probably run all my errands and fill up my frigde.. and do some clean up around the house as I don't like to do that on Sunday (since I see it as a day of relaxation). Therefore I probably won't have much time to do these things on Saturdays either... or if I do, then I'll have to give up on something else, like doing my shopping or posting a letter. In this way I am actually limited in my consumption by time, and not by my budgetary constraints or my willingness to purchase. This is obviously a sub-optimal situation, as I would have more utility from being able to consume all I had planned to, and as the overall business might benefit more from fully tapping into my available budget. This is where the multiplier effect comes in: the more money circulates in the economy, the greater the wealth created due to the multiplier effect . If money rotates slower, for example because I cannot spend everything I planned to in a certain time frame, then part of this effect is lost. As businesses would increase their revenues by working on Sundays, this will contribute to a higher GDP. Also, as more transactions would be made if Sundays were also available for work and therefore, for consumption, the state budget would also benefit because more VAT will be paid. Businesses will be able to keep producing on Sundays to better meet demand, even if they are not part of the currently exonerated categories. As they'll become more profitable, they'll either hire more people or raise the salaries or their current employees, which again would lead to an increase in household revenues.

Now, to answer the socialists defending the current status quo... I feel that by liberalizing work on Sundays the changes on the say to day social life will not be that dramatic. There will most likely be a reorganization of activities and a shift in the patterns of consumption: some people (but not everybody!) will probably start shopping on Sundays and take advantage of their Saturday to go out. Businesses will not generalize working on Sundays, firstly because for most businesses this doesn't make economic sense. If they do not have a strong enough rationale (such as lost revenues or lower competitiveness due to not working one day) they will not open on Sunday. Especially since an important part of transactions are B2B and overall the consensus in society is that Sundays are the days for rest, companies which do not offer services directly to the customer will probably not open because they would not have who to do business with. This is how, actually, the right to rest on Sunday is protected by society itself, without the need for a law that induces even more rigidity in an economy that is already too regulated as it is.

Not to forget that people deciding to work on a Sunday will most likely get another day of rest during the week, which might actually be an interesting agreement for families with children for example, allowing one of the parents to stay at home while the other one is at work, and thus spend more time with the child. This is also what i would use to counter the left parties' argument that working on Sundays and leaving children at home alone would lead to a surge in juvenile delinquency ...

All in all, I feel that it would be beneficial to completely abandon this 100-year old law altogether, but adopting the changes proposed (which are actually only allowing more derogations) is a step forward... especially since in today's dynamic world, both businesses and individuals are seeking flexible schedules and work arrangements. So, why shouldn't one have the right to work on Sundays, as long as it stays a right and not an obligation?...

To Blame Or Not To Blame... The Beggar

2008-12-01T11:13:00.000-08:00

Last night it rained again, reminding me of the two weeks of rain we had at the beginning of November. As I was walking home on my boulevard, under my umbrella, an image came back to my mind, from a couple of weeks ago. I was at that time pretty moved to see a beggar sit in the pouring rain against the wall, bare-feet, on the wet sidewalk.. hiding himself and all his possessions under a ragged umbrella, the only thing he could call "home". I can only remember how eager I was to get home and sip a hot tea that day... It is in times like these that you realize the importance of having a roof to hide under, and a place to call home.

I keep wondering since that moment what makes him stay on the streets and face such a rough existence. Is it a choice, or does he, in fact, have no alternative? Did he personally make the choice not to work or was he forced to become a beggar because the labor system could not integrate him?

As an economist, I stick to the libertarian principles and believe in the power of "the invisible hand". But in this case, I wonder... can, at least, an almost-efficient labor market exist? Or is it doomed to inefficiency, by its inherent nature? Could my friend there, the beggar, find a job if he really wanted one? Or, if not, what can he do when confronted with such structurally inefficient labor markets?...

Let's look at the situation more closely. I now live in France, a very developed country where people are usually nice and helpful to each other in public, regardless of circumstances, social differences, sex, handicap, etc. However, its labor system is highly discriminative: even smaller things, like not being French (even if you are European!) will play against you in the recruitment process (this, despite the fact thatUE is supposed to stand for free labor mobility and a unique labor market for the member countries). Therefore, it's no wonder that discrimination based on nationality, skin colour, name (yes you read that right.. recruiters look at your family name when they decide whether to invite you to an interview or not), the reputation on the schools you graduated, and what not, are common. Given this situation, I can't help but wonder: how can my friend there get a job when the market discriminates so heavily on criteria which have nothing to do with actual performance on the job? How many cases aren't there, especially in France, of families moving in and not being able to get a job because of this? Thus, not being able to get a job, not having enough money to go back home, they end up on the streets.. the French state, desiring to ensure a minimum level of life for everyone, will start subsidizing their existence, which will have a negative impact on the perception of the population regarding these "street people". This, in turn, will only increase discrimination... creating a vicious circle.

I'm not saying that there are no beggars by choice - sure there are... I am not saying that what the French state does by subsidizing everyone is good.. far from it. I am just wondering whether a free (or at least pretty much liberalized) market, not sustained by government through unemployment payments, can have the means to deal with such structural deficiency. This market failure has nothing to do with information asymmetry, nor with externalities, nor with problems of supply and demand.. it is founded on irrational behaviours embedded in the conscience of economic agents. Can the free market devise a mechanism to interfere with this irrational behaviour and bring it on the right track?

*** This view might also explain why some countries have more efficient labor markets than others. For example, the unemployment level in the US (pre-crisis) was rather low because the population is very diversified and therefore there is less discrimination, whereas in France where people are very nationalist and protectionist, the unemployment is one of the biggest in Europe.

Le Classique Dans La Rue

2008-11-12T12:16:00.001-08:00

Today Massena greeted me in a special way: not with break-dancers, not with street commerce, not with arts people... but with music. The clear, subtle yet powerful sound of a piano filled up the air, drowning in its music thee sounds of everyday life. The usual cars driving by, the noise of the workers revamping the facades, the familiar bell of the tram, the continuous buzz of people talking to each other... these were no longer simple sounds, they were part of a classical music concert. Music that a very talented young man was playing passionately on an old piano that he had installed on the square.

I don't know how much it lasted, nor how much I stayed there, mesmerized, listening to him; all I know is that when I left I was smiling, feeling invigorated, at peace with myself. This is why I love Nice -- for the sweet improvised surprises like this that you get every day.

[written on Nov 10th.]

Children of Fate

2008-10-31T03:03:00.000-07:00

When I was in high school, I once asked my math teacher, who was extremely demanding (he was training the Romanian Olympic team) what he appreciated more: gifted children, with a natural talent for math and superior intelligence, or hard-working students who achieve results through relentless exercise. He answered he would always appreciate the latter, because they spare no effort to achieve results, while for the others, this comes more or less naturally.

I still think about that now, and it holds true for me too. I think it is to those that through their own efforts and against all odds, manage to outperform their potentialities, that this world should belong. And instead, we often value more the others, gifted by nature, which is remarkable indeed, but that are not necessarily as motivated or do not necessarily pursue their dreams with such fervor... They, the ones that overcome their chances, that fight with all they have to achieve their dreams, are the true winners of this world, because they prove to us that nothing is impossible.

I just watched Gattaca. The message that this movie conveys is much more profound than what can be presented in 1h45, still I think the film is remarkable. The passion with which Vincent pursues his goal and is ready to risk everything to be even "5cm closer to the stars" is what determined that 1% chance of success to come true. And at the end, when I saw him actually climbing in the spaceship, I could still not believe that he actually succeeded.

It's the children of fate, the children of chance, the imperfect ones, that are to be admired - not programmed perfection... with it, you have no more surprises, you cancel out nature's sparkle, you kill evolution. If everything is given, then what more could you achieve, as a human? Where would be your merit for all these achievements, your satisfaction once you made your dream come true? I always felt that our humanity is in our aspirations, ideals and goals, and in the endeavors that we are ready to spare to accomplish them.

"Consider God's handiwork, who can straighten what He hath made crooked?"

I say Man, because God gave him the means.

Money or Power?

2008-10-29T12:59:00.000-07:00

Money or Power, which would you choose?
This was a very interesting question that our strategy teacher asked us, which made me ponder. The point was to determine what kind of shareholders we would be: those that are interested in voting rights in a company, or those that are interested in dividends. I chose the latter category. But, in the absolute, which is more desirable, money or power? In a true economic spirit I tend to say money, because money can ultimately buy you power. But, on the other hand, once you have power, you can generate money. Which was exactly why the answers in the class were about 50-50. But let's make a pure analytic exercise and look at this in more depth:

How can we decide which of the two is the most desirable? If one can bring you the other, then the only relevant criterion is the sustainability of the respective positions. If by having power you can ultimately get money, and if by having money, you can ultimately get power, in the end you will achieve the same benefits. Therefore the only thing that can distinguish between the two is sustainability: for how long can you hold that position? Is any of the positions invulnerable, or less vulnerable?

Let's look at power first.
We'll assume you have absolute power over a rather large group of people, for example the power of a king over his people. The highest power you can have is to be the kind of the most populous nation, because a position of "king of the world" would not be sustainable on the long term. (Because one individual cannot hold this power for a long time due to limited rationality and huge control costs that the very large number of subordinates would imply. Eventually he would lose this power to newly formed groups of interest).
Therefore, as king, you have unlimited power over your subjects: you can make them do whatever you want them to do, you can take away from them anything they have (no property rights) and you have the right of life and death over them.

Under these circumstances, your power basically derives from 3 sources:
a) from fear: your subjects submit to your will because they fear you and the repercussions they might face if they disobey;
b) from love and respect: there will always be that group of people who are attached to the monarchy institution itself and therefore respect you as the king;
c) from interest: the other groups of power in your state have an interest in you being the king, and they allow you to have this power momentarily.

(Of course, you could have power over a small group of people through other means too, like physical strength, superior intelligence, seduction, etc.. but these do not hold for a much larger group.)

This leads us to believe that there are also three main ways in which you could lose power, corresponding to these sources of power:
a) if you fail to enforce your laws and punishments, people will stop fearing you, but in order to do this you need money to pay policemen and other law enforcers;
b) if there is a riot or a social movement against the monarchy, or if people start believing you are not worthy of being king, they will not love or respect you anymore and will try to overthrow you. In order to keep the power in this case you need to have money to pay a group to re-establish order and silence the rioters. This group should be large enough to stand up against all the crowd, and its members motivated enough (through money or interest) not to change sides;
c) if the interests of the other groups of power change and they no longer support you or want to overthrow you. The other groups of power can be thought of as the kings of the other smaller states, which, even if smaller, could rally to create a force bigger than yours. If they invade your country, you need to have sufficient money to pay an army large enough to stand against the enemy and well-enough equipped to win. (It is common knowledge that even since the middle ages, armies were made of paid mercenaries, and peasants were not usually called to arms except in the worst of cases.)

So basically there are several factors or changes in environment that could make you lose power, and in every case, the crucial factor that will help you keep your position is to have money.

Power needs money to be sustainable.

But, of course, power can be used to make money, for example by taxing your subjects or expropriating their valuable goods. But the amount that you can gather is limited to the total wealth of your people. Therefore, you are still vulnerable to those external groups who are richer than you.

Now, let's look at money.
Just like we did for power, we will assume you are, in the absolute, rich. You may or may not be the richest person on the planet, but you have access to an immensely huge amount of money. The question that arises is, therefore, whether money needs power to be sustainable. Can we make money and keep money without power? Luckily, the answer is simpler: YES. In order to make new money and keep the value of what you now have, it is sufficient to manufacture and sell a desirable good or product, have market share and make profits. You can even start at the very bottom of the social pyramid and still make huge money (look at Bill Gates or the Larry Page and Sergey Brin - perfectly normal citizens that now count among the richest people worldwide). In fact, in order to make money you require power at company level (ex: voting & management power) but you are not dependent on power at such a big scale as discussed above.

How can you lose money?
There are several major ways in which you can lose money:
a) your business loses clients, becomes unprofitable and runs into bankruptcy: in this case, in order to keep from losing money you need to change strategy, management or redirect your investment in another, more productive area;
b) somebody steals part of your money: but it can't steal all your money because normally you would keep at least part of your money well guarded in a secret account in the Cayman Islands :)
c) the government expropriates your assets and nationalizes your investment : to prevent this all you need to do though, is to diversify your investments geographically.
d) the economy in which you invested your money turns from a free market economy into a centrally planned economy. In this case no one can make any more profits. Here, so that you can stop losing the money, you need power, because it is the only way in which you can prevent this from happening or change back the system.

But the advantage of money is that it's free to move worldwide, and even if you might lose some money because you don't have power, you can still invest the remaining sum elsewhere and gain profits.

Therefore, money can be sustainable even without power.

Plus, money will allow you to gain power. By being able to finance your own political campaigns or to pay / offer benefits to the key groups of power, you can gain the power of president or even that of king (if you have enough money to pay for a "coup d'etat".)

So which would you choose now, money or power? And by the way any insights/additional comments are welcome; I'd love to get your opinion about this, it's one of those endless subjects for discussion that I love so much :)

About

2008-10-29T12:51:00.000-07:00

For a very long time I wanted to start blogging, more exactly to resurrect my old blog, which was basically for pieces of fantasy writing. But I feel the need to start from scratch, because this time, it's going to be different. I plan to write more about real life issues, economics, my view on the world, so that I can give whoever takes the time to read this an insight into "andreea-ish" philosophy, and also to document my thoughts and ideas. I often find myself wishing we could have a "brain-recorder", so that we can keep the good ideas without having to write down everything every time. Especially since I often think while walking, so it's not easy to walk and write at the same time! :)

This having been said, let us proceed...