Ged Carroll

Category: business | 商業 | 상업 | ビジネス

My interest in business or commercial activity first started when a work friend of my Mum visited our family. She brought a book on commerce which is what business studies would have been called decades earlier. I read the book and that piqued my interest.

At the end of your third year in secondary school you are allowed to pick optional classes that you will take exams in. this is supposed to be something that you’re free to chose.

I was interested in business studies (partly because my friend Joe was doing it). But the school decided that they wanted me to do physics and chemistry instead and they did the same for my advanced level exams because I had done well in the normal level ones. School had a lot to answer for, but fortunately I managed to get back on track with college.

Eventually I finally managed to do pass a foundational course at night school whilst working in industry. I used that to then help me go and study for a degree in marketing.

I work in advertising now. And had previously worked in petrochemicals, plastics and optical fibre manfacture. All of which revolve around business. That’s why you find a business section here on my blog.

Business tends to cover a wide range of sectors that catch my eye over time. Business usually covers sectors that I don’t write about that much, but that have an outside impact on wider economics. So real estate would have been on my radar during the 2008 recession.

  • Product design stalemate?

    Kurt Anderson wrote an essay in Vanity Fair where he argued that product design in everything from fashion to homewares has stood still over the past two decades. It was an interesting that got me thinking about hypothetical reasons why his theory maybe true.
    Why hasn't design changed
    There were a number of possible factors that I came up with:

    Design – product design education has gone global – design professionals now know more about product design than they ever have done before. You now have product designers who can access the same influences from all over the world from the same place. The design computerised tools haven’t changed radically from the early 1990s but they have become more pervasive. Product design and culture are inextricably linked and culture as we previously knew it has been disrupted.

    Culture – The structure of culture has changed. Where the mass-media, publishers like Taschen and (often hard-to-get) style magazines or fanzines were the arbitors of the latest tribe, high and low culture trends, now Google is likely to turn up images and blogs about what whatever you want. This has meant that fashion is no longer linear in its timeline, but massively parallel: from cosplay and rockabilly  to ‘rugged’ style – fashion sensibilities resonates around the world in a self-sustaining loop with more power than previously.

    The pressures on culture have also changed; in the west there is no longer a sense that progress is inevitable. Even up to the 1990s with the Hubble space telescope and the Channel tunnel; big exciting things were being done and aspects of technology were interesting or exciting. You still have this; only its in China, Brazil and India. Environmental concerns and a wider anti-science movement that has gained momentum have squeezed the joy out of progress.

    Societal change – seems on some levels to be going at an ever faster pace, which means that culture values things like authenticity, by looking to simpler times in the near past. Authenticity comes from:

    • Simplicity
    • Heritage
    • Esoterism
    • Quality

    Globalisation – Autenticity can also be seen to be a backlash against the tyranny of choice that globalsiation has provided. Retailers in the west have created giant sheds to handle their massively expanded but similar product lines. This has promoted a homogeneity in many product lines and product design in those product categories. It has also promoted a throwaway culture: H&M clothing for instance – which is at odds with environmental concerns, particularly when you think about what goes into growing cotton. On the plus side it has also created opportunities for mass bespoke manufacture – supporting various subcultures through ecommerce and better logistics.

    Marketing – finally marketing has changed from being intuitative and demand-driven to being much more data and insights driven in nature and this has affected the product development process with every aspect of it undergoing scrutiny. The key challenge is that often people don’t really know that they want, but the space for vision is now lacking.

    You can find more design related content here.

  • Zynga and the IPO

    I had held off writing on the ‘failed’ Zynga’s IPO at the end of last year. I am not going to say that Zynga is a great business; in many respects I don’t think it is, without even looking at its numbers I think that Zynga has three big challenges:

    • Facebook owns their customer base
    • Facebook owns their payment system
    • Facebook owns their customer acquisition strategy

    But was the Zynga IPO really a failure? Before I answer that I wanted to talk about another IPO.

    VA Linux IPO case study

    Back in 2000, I had the experience agencyside running the European launch of a company called VA Linux and took its then CEO Larry Augustin around the media. At the time VA Linux’s primary busness was building specialist workstations and servers were optimised for Linux and had Linux pre-installed. This meant that they thought carefully about component choices for instance the ethernet card (network interface card or NIC) in the computer was from Intel rather than 3Com because Intel did a better job in supporting Linux  in terms of the quality of its drivers.

    My experience of Augustin was of someone who was whip smart, with a dry wit and a genuinely nice guy – which made my job a hell of a lot easier to do. Life was good, Augustin gave good copy on the Judge Jackson finding of fact that had happened the previous November, Linux was building momentum in the enterprise and with web servers because it performed better than Windows, required less skill than the BSD distributions and was more of an entry level product than Sun Microsystems, SGI or IBM Unix hardware on specialised RISC architectures. One of the things that audiences wanted to talk about was VA Linux’s at the time record-breaking IPO.

    VA Linux’s underwriters had priced its IPO at US$30 per share, on the first day of trading the price topped US$320 per share. It was described as a stunning success but that success was double-edged. In economic terms, the bank staff working on the IPO had obviously under-priced it because the price had surged so much – depriving the company of a substantial amount of potential capital that it could have raised. Admittedly it was crazy times and VA Linux wasn’t worth the absurdly high valuation in the end, as businesses like Dell started competing with them head-on. But one has to ask what difference would the extra capital have made? How big does the pop have to be to go beyond rewarding initial investors and become negligent underpricing of a company’s stock?

    The Zynga comparison

    Back to Zynga, which had the opposite challenge, the bank staff working on the IPO had optimally priced the stock so that the company got pretty much the full amount that at least some people were prepared to pay. Rather than a pop, a price decline occurred which investors got upset about as late arrivals to the Zynga party made a financial loss. The underwriters for the IPO earned their money on this occasion. If you want to be the first kid on the block in a new set of the latest Nike Air Jordans, the latest gadget or the season’s must-have handbag, you have two choice get in early enough or pay over the odds. Who is to say if you’ve overpaid, once the heat goes those items are then likely to become cheaper again. And so it goes with Zynga, this shouldn’t be your pension fund; it is part of the new hotness, a fashion stock if you will and was priced and paid for as such.

    Disclaimer: this doesn’t constitute investment advice or a recommendation to buy stocks. I am not a financial services professional nor do I profess to be. If you want investment advice, pay someone who does this for a living for it.

    More information

    THE TRUTH ABOUT ZYNGA: The Only Reason The IPO ‘Flopped’ Is Because Idiot Investors Paid Too Much

  • Workampers

    The Wall Street Journal had an article that introduced me to the idea of workampers. The article was on the seasonal workers that Amazon.com uses in the US to help it with the surge in demand in the run up to Christmas.

    Who were these elves to Amazon’s Santa Claus?

    The article describes them as workampers. Older retired people who live a transient lifestyle by choice in an RV (recreational vehicle) for at least part of the year.
    CIMG1091
    Their motivations were diverse in nature. Some of the workers are similar to their ancestors during the Great Depression, who moved across the country following work were it was available.

    For others the reasons are diverse, from money to help with expenses to camaraderie with similarly nomadic peers or proving to themselves that they could still hack a task. A mix of forced earlier retirement and improvements in health mean that many seniors still have decades of potential work still in them that they want to take advantage of.

    A mix of ageism and globalisation have meant that there is a growing body of workampers. Future workampers might be in a worse financial state due to less generous pensions and health insurance, higher personal debt and automation. The move to a lower carbon economy will also impact the ability of a workampers to live out of an RV and transverse large distances at a reasonable cost.

    Workamper futures

    With an aging population and the decimation of working class communities due to the opioid epidemic we are likely to see more demographics like workampers as companies adapt to tap into an older work pool. With Amazon in particular, one has to wonder if more of their warehouse and logistics work can be automated and how it will be affected by a low carbon future.

    More explanations of of jargon terms can be found here.

    More information

    Seasonal Amazon ‘Workampers’ Flock to Remote Towns for Temporary Gigs – WSJ.com (paywall)

  • Barusch gets story wrong

    Last week I commented on a blog post by Ronald Barusch called Dealpolitik: Yahoo!’s survival plan. In his post Barusch critiques Yahoo! Inc.’s pursuit of different options for the company. Part of his critique reflected on Microsoft’s hostile takeover bid for the company three years ago:

    True, with hindsight the Yahoo board made a world-class blunder in turning down the Microsoft $33 per share bid over three years ago. But the board has to make the best of today’s situation.

    Whilst I agree with the Barusch central thesis that the company needs a new direction or possibly a new owner, and don’t have any particular sympathy for the board, I don’t think that the argument for new management at Yahoo! should centre around the Microsoft takeover bid.

    I explained in my comment to the Barusch article that whilst I didn’t have sympathy for the Yahoo! board, I also didn’t think that the whole picture of the Microsoft deal was reflected in the article. I think that there is a serious argument to be made for the Microsoft deal being a flawed structure, with a distinct possibility of it not a viable deal in the first place. There are two main strands to my thinking:

    • First of all the destruction of value meant that many Microsoft shareholders were opposed to the deal, but that doesn’t necessarily mean that it was a bad deal for all Yahoo! shareholders. (Only the ones that initially opposed the deal. Since the Microsoft deal at the time offered cash for the first 50 per cent of shares and Microsoft shares for the last 50 per cent shares. Given the state of Microsoft’s share price over the past decade or so and the state of the Microsoft online services line, cash would be preferable.)
    • The second and more important strand is that the deal had a number of antitrust roadblocks to cross. Whilst Microsoft is a bit player in the search engine advertising market, it is already a convicted monopolist in its server and tools business. This important because Yahoo! is not only a media company; but also a key contributor to a number of critical open source projects; having contributed to PHP, the Debian Linux distribution and Hadoop. Given this, the deal would have been exposed to antitrust risk in the EU. A second risk of antitrust would have come from the Japanese and Chinese markets were you have national internet champions in Softbank (majority owner of Yahoo! Japan) and Alibaba trying to escape the clutches of Yahoo! instead being acquired by Microsoft

    It was interesting that neither Microsoft, the media or Yahoo! broached the likely antitrust implications publicly at that time. Which I suspect is partly a credit to good execution by Microsoft’s corporate communications team.

    The Microsoft bid was a powerful lever that helped Microsoft secure the search deal it wanted with Yahoo!. Though Microsoft has failed to reap the full commercial gains partly because it’s AdCenter technology wasn’t as good as the Yahoo! Panama project it replaced – and neither were as good as Google’s own advertising technology.

    What should the Yahoo! board have done, and what should it do next probably has more options in it than football fans arguing over the performance of their team manager and I don’t have the definitive answer.

    But I suspect my comment may have been bounced from the Wall Street Journal Online site because it throws a spanner in the works of the Mr Barusch. His nice, neat storyline with the Microsoft deal opportunity as an inciting incident into a downward spiral of a digital greek tragedy. Mr Barusch and his colleagues don’t want the evidence to get in the way of a good story

    As an aside, it also shows how powerful storytelling is as a way to game media | public relations in favour of the PR over the journalist. People like stories, they think in stories and it makes it easier to efficiently and effectively file easy copy or blog posts.

    So if the Microsoft hostile takeover bid wasn’t the inciting incident what was?

    My own personal opinion is that spiral probably goes at least as far back as Yahoo! overpaying for its purchase of Broadcast.com – a business that had some 13.5 million USD in revenue per quarter, acquired for 5.9 billion USD in Yahoo! stock back in 1999. It was a bad deal, and it adversely affected Yahoo!’s approach to strategy, risk-taking, decision-making and speed of execution. This is likely to affected Yahoo!’s thinking on its attempted acquisition of a young Google.

    I believe that the damaged approach to strategy was a major factor in Brad Garlinghouse’s famous peanut butter memo from 2006 (though as Techcrunch summised it was also a political power-play and as I mentioned at the time, Garlinghouse was as much to blame in many respects as other senior executives.)

    Investor Paul Graham thought that Yahoo! was screwed by cultural traits baked into the organisation’s cultural DNA as far back as 1998:

    • Less interested in innovating in advertising, because this would expose customers to the reality that they were overpaying for their inventory.Yahoo! was build on brand advertising driven by reach not by targeted ads so they missed why search advertising (and a good search engine was so important)
    • Yahoo! thought of itself as a media company rather than a technology innovator; back then technology companies sold software rather than advertising, so by default they must be a media business
    • Fear of Microsoft – whilst Microsoft is a big ugly mean company now, it is nothing compared to the beast it was before the internet became mainstream and the Judge Jackson trial. Graham thought that Yahoo! tried to define itself out of the footprint of Microsoft. All of this meant that Yahoo! wasn’t a Google, Facebook or Twitter-style technical talent magnet

  • Mr Pizza in Korea

    Pizza in Korea is a unique experience compared to other countries. Pizzas in Hong Kong were generally more premium and had more of a focus on sea food. Pizza in Korea was remarkably different:

    • Packaging – unlike the UK or most other countries I have been to for that matter, pizza can come in a four-colour patterned box. Part of the reason for this is cultural, Korea like Japan puts a lot of emphasis on presentation of products from product packaging design to the fit and finish of clothing. A second reason for the quality of the packaging is intense domestic competition: in addition to food mega-corporations Dominos Korea and similar brands also has its own giant brand: Mr Pizza with 350 branches in South Korea
    Mr. Pizza
    • Product – whilst UK pizzas follow US influences at the low end of the market and faux foodie Italian accents for ‘posh’ pizzas, Korean pizza options incorporate local foods including kimchi and bulgogi on the menu. This is especially true for this brand, though foreign brands like Pizza Hut try to adapt to local tastes too.

    About the company

    Mr. Pizza was founded in 1990. They have one branch in the US, one in Vietnam, 15 in China and some 350 branches in South Korea.

    They created a mockumentary  video The true origins of pizza as a satirical viral campaign to promote their brand, (presumably internationally). It considers the dish to be a Korean national treasure. However it did touch a nerve amongst other Asian countries as it’s similarity to Korean nationalist fringes meant that some of the film’s satire was lost to the audience.

    The company looked to further differentiate itself to eat-in diners by developing a new store format and sub-brand called MIPIHAUS. The concept of MIPIHAUS is to mix an art gallery environment with their restaurant. MIPI is a contraction of Mr. Pizza and the HAUS is a reference to the Bauhaus art movement.