Rethinking power generation

Excellent article on reinventing generators for using ocean currents for power generation here.

Next generation multinationals

Schumpeter in The Economist states, "The golden age of the Western corporation may be coming to an end."

"The golden age of the Western corporation, [McKinsey Global Institute] argue, was the product of two benign developments: the globalisation of markets and, as a result, the reduction of costs. The global labour force has expanded by some 1.2 billion since 1980, with the new workers largely coming from emerging economies. Corporate-tax rates across the OECD, a club of mostly rich countries, have fallen by as much as half in that period. And the price of most commodities is down in real terms."

The world is flattened a la Mr. Thomas Friedman. The results have been corporate growth of existing multinationals to new ones from emerging markets growing fast:

"Two things in particular are shaking up the comfortable world of the old imperial multinationals. The first is the rise of emerging-market competitors. The share of Fortune 500 companies based in emerging markets has increased from 5% in 1980-2000 to 26% today."

The power of technology, and its democratization has been the other significant change:

"The second factor is the rise of high-tech companies in both the West and the East. These firms have acquired large numbers of customers in the blink of an eye."

The article offers a solution for the current multinationals, based on the concept that all innovation is preceded by invention:

"How can Western companies navigate these threats to their rule? MGI advises them to focus on the one realm where they continue to have a comparative advantage—the realm of ideas. Many companies in labour- and capital-intensive industries have been slaughtered by foreign competitors, whereas idea-intensive firms—not just companies in obvious markets such as the media, finance and pharmaceuticals, but in areas such as logistics and luxury cars—continue to flourish. The “idea sector”, as MGI defines it, accounts for 31% of profits generated by Western companies, compared with 17% in 1999."

Unfortunately, the larger the corporation, the lesser it is capable of creating and nurturing "ideas".  Ideas require a desire "to be something" more in the future, and then nurturing them, allowing them to fail.  Rare is a corporate that is capable of such, handcuffed to quarterly earnings.  Tools of the corporations to capture innovations versus "creating" via M&A, divestures for streamlining and growing the balance sheet, etc.

Yet, does a new model emerge for the ones who will last?

"The cult of quarterly earnings may lose more of its following. A striking number of the new corporate champions have dominant owners in the form of powerful founders. They are willing to eschew short-term results in order to build a durable business, such as Mark Zuckerberg at Facebook, the Mahindras and other assiduous families in India, and private-equity firms. Gibbon’s great work was a tale of decline and fall, as classical civilisation gave way to barbarism and self-indulgence. With luck, the tale of the relative decline of the Western corporation will also be a tale of the reinvention of capitalism as new forms of companies arise to seize opportunities from the old."

National productivity

From The Economist:

"The productivity gap, an indicator of a country’s output capabilities, is the ratio between the productivity of a benchmark country (such as the United States) and that of a less developed economy. The latest Latin America Outlook from the OECD, a think-tank, compared the productivity gaps of selected countries in the region with those of economies in Asia. In general, productivity gaps in Asian countries have narrowed significantly over the past three decades. America’s productivity in 1980 was 125 times that of China; by 2011 the gulf had come down to 17 times. In Latin America and the Caribbean, however, not only was there a much smaller reduction, in many cases the gap had grown."

Corporate partnerships with non-profits

"Partnerships between the two have become like off-site team-building exercises: they were once slightly exotic, but now no self-respecting firm does without them. A survey of European multinationals and British charities by C&E Advisory Services found that over a third of the firms invest £10m or more in their charitable alliances and almost two-thirds classify the partnerships as “strategic” (whatever that means)."

States the article "The butterfly effect" in The Economist. Non-profit engagements for multinationals today are windows into perspectives and insights that enable them to comprehend the globe from a cultural and social, to a education and scientific perspective, if they choose to. Though:

"But these are partnerships of opposites. Businesses tend to think they discharge their duty to society by obeying the law. Charities want to do the right thing. Indeed, charities like rights in general: the right to food, the right to clean water, and so on. Businesses think in terms of markets, not rights.

The gap is widening. The share of firms that told C&E they are “very confident” that their partnership with NGOs will meet its aims has fallen by nearly half over the past year. Only 40% of NGOs say partnerships have changed companies’ behaviour for the better—down ten points in a year."

Read the complete article here.

Corporate and scale

The season for mergers, and acquisitions is in full swing.  Economics of current time and markets are forcing it.  The Economist states in "Land of the corporate giants":

"Some things only get bigger. From boats and planes to skyscrapers and shopping malls, size records are routinely broken. Companies are operating at record scale, too. But if the trend towards growing ever larger is clear, the economics of bigness are far murkier. In some cases, like boats, greater size still promises greater efficiency, as fixed costs are spread over higher output. In others, like buildings, the gains from scale may be running out. Where do firms lie on this spectrum?"

The article states two key realities:

"If size does not keep driving down costs, why do big firms keep expanding? One possibility is that they are seeking to boost profits not by driving down costs but by raising prices. Buying up rivals softens competition and enables firms to charge more. American antitrust regulators recently looked back at past health-care mergers, and found that prices rose significantly after some deals. Another view is that mergers are driven by something other than profit. The “empire-building” theory holds that managers are out to increase the scale of their business whatever the cost in terms of creeping inefficiencies."

"A 2011 paper by Federal Reserve staff supports this conclusion, suggesting banks pay a premium to merge if the tie-up gives them “too-big-to-fail” status."

Read the complete article here.

Advice for the entreprenuer from Mr. Amarillo Slim

While reading the obituary of Mr. Amarillo Slim in The Economist here, the following paragraph on how to play poker from Mr. Slim seems like good advice for an entrepreneur as well:

"... Play the players, not the cards, he would say. Watch them from the minute you sit down. Play fast in a slow game, slow in a fast one. Never get out when you're winning. Look for the sucker and, if you can't see one, get up and leave, because the sucker is you."

And the translation is:

• Beat the competition not the market.
• Attack the competition from day one.
• When generating revenue, keep generating revenue (you won't be able to time the market anyways).
• When everyone is evaluating, go on the offensive (grab the customers, talent, funding, new pricing of goods, etc.), and when everyone attacks, step back (go in after the malay, remember supply and demand?).
• If everyone in your area of business seems to be doing great, much better than you (in generating revenue), there is a problem with your company (you should be the one with the most revenue generation).

My question is: Is being an entrepreneur like playing poker?!

Combating poverty: Analytical approach

Dr. Esther Duflo, detailed information on her background here, is a well known figure in data-driven analysis of poverty.  See her TED Talk on the impact of anti-poverty efforts, their unintended consequences, and what can be learned to create the desired actions.

Electricity and radio waves

From Dr. Colleen Barton, in The Telegraph, "Electricity harvested from radio waves could power the smart home of the future"

"A new method of harvesting electricity from unused radio frequency waves has been unveiled today by Lord Paul Drayson, the former minister for science and chief executive of Drayson Technologies, at The Royal Institution in London.

The patented technology, known as Freevolt, turns ambient radio frequency waves into usable electricity to charge low-power electronic devices, such as sensors and beacons used in smart connected homes, wearable devices like the Fitbit or Jawbone UP, and the broader "internet of things"."

Read the complete article here.

Six rules of departure for CEOs

Schumpeter's article "The last 90 days" in The Economist "... [drafts] six rules to govern bosses' departures":

1. The wise executive is neither tardy nor rushed. Sometimes he has no choice in the matter. Hopeless bosses may be forced out fast. Great leaders may be ambushed by fate. ... for those with the luxury of choosing when to go, timing is everything.


2. Whether wicked or glorious, all leaders must steel themselves for the emotional shock of their abdication. This is the second rule and the most easily ignored. The unlucky will find that investors cheer.


3. ... resolute executives are as unsentimental in their last 90 days as in their first. They retain the counsel of trusted outsiders and focus on the important things, especially themselves. They obey the third rule; to keep a beady eye on their compensation.


4. Glory is just as important as treasure and so the fourth rule is to create a narrative about the future and past. Leaders must be seen to be leaving for another great and noble task, and must mythologise their legacy.


5. The wise chief will grit his teeth and commit to the fifth rule: do not make big decisions in the last 90 days.


6. Their legend secure and treasure-chest full, cunning leaders should obey a final rule: ensuring that the next occupant of the job does not outshine them.

Read the complete article here.

Impact of education on individual beliefs

The Economist put me onto "Compulsory schooling laws and formation of beliefs: education, religion and superstition", by Nanci Mocan and Luiza Pogorelova, published in the National Bureau of Economic Research, October 2014.  The magazine's article "Falling away" states:

"Just one extra year of schooling makes someone 10% less likely to attend a church, mosque or temple, pray alone or describe himself as religious, concludes a paper* published on October 6th that looks at the relationship between religiosity and the length of time spent in school. It uses changes in the compulsory school-leaving age in 11 European countries between 1960 and 1985 to tease out the impact of time spent in school on belief and practice among respondents to the European Social Survey, a long-running research project."

The paper is an interesting read from the perspective of the impacts of education on the transformation of societies for the future, how they behalf and how they will evolve culturally.  This is of value to consumer driven organizations.

You can download the copy of the above mentioned paper here.

PE & Africa

"In the rich world private equity is often accused of enriching investors at the expense of the firms they buy. In Africa, the reverse seems to hold."

States The Economist in "Climbing aboard the African train".  Private equity like any other for revenue investment looks to maximize value, hopefully both through productivity and top line growth.  Turning a profit is an essential ingredient of all capitalist ventures.  For Africa, it seems to have been a good thing so far:

"Consider the example of Umeme, which runs Uganda’s power-distribution grid. When Actis, a British investment firm, bought a stake, power losses consumed 40% of the electricity generated. By making some simple changes, such as replacing old insulators on its cables and reducing the theft of electricity by dismantling illegal connections, it has cut those losses in half."

Yet, the returns for the PE firms remains in low two digit percentages versus the factors they expect in the emerging markets:

"In the ten years to September 2014, South African private-equity firms, for instance, delivered returns that, although seemingly juicy at 18.5% a year (in local currency), were less than their investors would have earned simply by betting on stockmarkets.

Data on other firms and other countries are sparse, but industry insiders reckon that African deals had annual returns of only about 11% for the decade to 2012."

Read the complete article here.

Oil & Gas: Technology Opportunities

Please see an exceptional panel discussion highlighting the opportunities for technology and its applications in the oil and gas sector. I am confident that this was one of a handful of panel discussions to date that was candid, and cut out the noise to provide the facts.

This panel was conducted at TIECON 2015, which I moderated.  The panelist were:

• Issam Dairanieh (Managing Director, BP Ventures)
• Kemal Farid (Founder and CEO, Farid Ventures) 
• Neal Dikeman (Senior Venture Principal, Shell Technology Ventures) 
• Ricardo Angel (Managing Director, GE Ventures) 
• Shantanu Agarwal (Partner, Energy Ventures) 

The main topics covered as they apply to oil and gas included big data, predictive analytics, communications, internet of things, sensors, and processing.