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.

  • Bullwhip effect aka Forrester effect

    Bullwhip effect

    I came across the bullwhip effect as a descriptor recently in discussions around the global chip shortage. Bullwhip effect is a concept that is well known in supply chain circles.

    The bullwhip effect is also known as the Forrester effect. Disruption ripples back from the retailer, through the wholesaler, manufacturer, on to their suppliers and so on.

    The usual causes for the effect are:

    • Demand forecast updating – this might be where a company might want to change their product mix to match consumer demand, if a product is very successful or grossly underperforms
    • Order batching – where members of the supply chain round up, or round down the quantity of orders. This happens with the periodic memory gluts or shortages affecting the technology sector
    • Price fluctuations – price discounts can encourage non-linear increases in purchases as it becomes worthwhile for customers to stock up, hedging against increased prices down the line. Oil reserves would be a classic example of this phenomenon
    • Rationing and gaming – buyers and sellers delivering over or under their order quantities. An example of this would be the actions of Enron in US electricity markets. This could be used in a positive way to promote changing the supply chain like renewable sources of electricity generation
    My, what a big holster you have.

    What caused the global chip shortage that is driving the bullwhip effect?

    There were three causes to the global chip shortage

    1. Partial shutdown – The semiconductor industry went through a partial shutdown because of the COVID-19 epidemic. This meant that there was a smaller supply of chips.
    2. Unusual increase in demand – Home working drove an increase in demand: increased sales in PCs, wi-fi routers, external hard drives, mice, keyboards, printers and so on. There was also a corresponding increase in home entertainment as consumers upgraded smart TVs, Apple and Roku set top boxes. This all coincided with the launch of the next generation of gaming consoles by Sony and Microsoft – which can usually drive a squeeze on their own
    3. Supply chain disruption – A fire in Japan at Renesas Electronics. A trade war affecting Chinese semiconductor manufacturers. Freezing winter weather in Texas disrupting employees and their businesses. Now there is a drought in Taiwan affecting TSMC – the world’s largest semiconductor foundries

    More related posts here.

    More information

    Chip shortage is starting to have major real-world consequences 

    Global chip shortage: everything you need to know | CAR Magazine

    The global semiconductor shortage can be explained by the bullwhip effect 

    Chip industry pressures spur Renesas to diversify | Financial Times

    Taiwan’s chip industry under threat as drought turns critical | Financial Times

    Texas winter storm blackouts hit chip production | Financial Times

  • OrCam + more things

    OrCam

    OrCam Read – Transform the Way You Read – YouTube – I watched this video and wondered if this was a sign of failure in the education sector in terms of literacy. As far as I can tell, OrCam is a dedicated OCR appliance that reads back the text to you. In essence it is playing the same role as a scribe to a medieval lord. I suspect that OrCam is a product looking for a market and this is a skewed pitch

    Business

    Chinese investment in UK assets estimated to be £135bn : CityAM 

    Another One Bites The Dust: Why Verizon’s Divestiture Of AOL And Yahoo Is No Surprise | Forrester – Verizon’s sale represents a giant write down. I remember the uproar when Tumblr got wrote down from $1Bn to zero. This is a greater write down in absolute value.

    Consumer behaviour

    Are some personalities just better? – All-blues might really be happier and healthier. If so, it could a result of late modernity, or it might have always been true. Still, that doesn’t mean that evolution will favor all-blues, or that all-blues are “more successful”

    Economics

    The Failed Promise of Malaysia’s New Economic Policy – Asia Sentinel – Malaysia’s 49 year affirmative action programme for the Malay majority failed and helped precipitate a brain drain of Malaysian Chinese overseas (paywall)

    Ideas

    How the U.S. Government Can Learn to See the Future – Lawfare – Research over the past decade funded by the U.S. government demonstrates that “keeping score” by quantifying the probability that a potential event will or will not happen leads to improved forecasting accuracy. This is especially true when that scorekeeping is paired with training to reduce cognitive biases, as well as tools that combine the forecasts of many people together, harnessing the “wisdom of crowds.” These methods are not just for carnival games and stock trading. They can provide clearer insight on national security questions – it looks like prediction markets might be getting their time in the sun again

    Security

    Sweden drops Russian hacking investigation due to legal complications | The Record by Recorded Future – Swedish government dropped today its investigation into the 2017 hack of its sports authority, citing the legal constraints that would have prevented prosecutors from charging the Russian hackers responsible for the intrusion, which officials claimed were mere pawns operating on behalf of a “foreign power.”

    China-linked hackers used VPN flaw to target U.S. defense industry -researchers | Reuters

    Chinese military unit accused of cyber-espionage bought multiple western antivirus products | The Record by Recorded Future 

    Apple brass discussed disclosing 128-million iPhone hack, then decided not to

    Wireless

    Opinion | Steve Jobs Never Wanted Us to Use Our iPhones Like This – The New York Times

  • Conglomerate discount

    Conglomerate discount wasn’t a concept that I was that familiar with. Conglomerates had gone out of style in the west during the 1960s to the 1990s.

    Western conglomerates

    Classic conglomerate examples would be

    • GEC
    • ITT
    • Litton Industries
    • Lonhro
    • Teledyne
    • Textron

    Spivs and financiers bought in and broke them up into their constituent parts. Or a new CEO would do it themselves to focus on core competencies and release value for shareholders.

    Conglomerate discount

    A conglomerate discount is when the stock market values a diversified group of businesses and assets at less than the sum of its parts. This is because investors are worried about the management not being able to focus on improving the operational performance and figuring out a coherent strategic direction.

    Michael Milken moderating the panel on Investing African Prosperity - Los Angeles, 1 May 2013
    Michael Milken who was famous for financing leveraged buyout deals

    Taking advantage of a conglomerate discount

    So our spiv financier could borrow money, buy the company at a discount. Sell off parts to pay off the loan and be left with more money than they initially had to borrow. Many of the constituent companies couldn’t be sold quickly as a going concern. Instead they were shut, machines sold for scrap and their factory land sold for redevelopment.

    Asian conglomerates

    Asian business people, especially those running Hong Kong and Chinese companies don’t view conglomerates in quite the same way.

    Li Ka Shing 李嘉诚
    Li Ka shing

    The Li family manage two publicly listed companies in Hong Kong. They came out of the merger of Cheung Kong Holdings and Hutchison Whampoa.

    Cheung Kong

    Cheung Kong Industries was formed in the 1950s as a plastic flower manufacturer during the post-war industrialisation of Hong Kong. It evolved into a property investment company after the 1967 riots and Cheung Kong Holdings was established in 1971. Over the next decades it became one of Hong Kong’s largest developers and land owners.

    In 2015, the group went under a reorganisation, the groups property assets were spun off into what is now CK Asset Holdings.

    Hutchison Whampoa

    Hutchison Whampoa was bought in 1979. HSBC had a strategic holding in the company and sold that on to Cheung Kong. They also provided Cheung Kong with the loan to make the purchase. In 2015, Cheung Kong bought the parts of Hutchison Whampoa that it didn’t already own. It eventually became CK Hutchison Holdings, incorporating all the non-property aspects of the Cheung Kong – Hutchison Whampoa combine.

    In addition, the Li family have some of the shares in businesses that they own held in the Li Ka shing Foundation (LKSF).

    CK Hutchison and CK Asset Holdings

    CK Hutchison Holdings and CK Asset Holdings both trade at a conglomerate discount. However, the Li family has a controlling share in them. This probably explains why they haven’t come under attack by an activist shareholder from within China or abroad.

    In his article for Apple Daily Yeung Wai-hong explains how the Li family uses the concept of conglomerate discount to their advantage.

    The CK Hutchison Holdings and CK Asset Holdings creation allowed shareholders to see clearly delineated businesses. One focused on property, the other one on non-property assets in 2015.

    CK Asset Holdings started to blur the lines buying into businesses that more sensibly fit into CK Hutchison Holdings – aircraft leasing, pubs and utilities. Creating conditions for a conglomerate discount that is disadvantageous to non-family shareholders. The bigger business has a larger turnover. Even if the profit margin is lower, management still have an excuse to raise their salary and benefits.

    CK Asset Holdings has a large amount of cash on hand indicating a lack of investment opportunities. Recently CK Asset Holdings bought shares in utilities from LKSF in exchange for shares in CK Asset Holdings.

    I’ll let Yeung Wai-hong explain the next bit

    …CK Asset promised to buy back shares equivalent to the amount of HK$17 billion and cancel them. Whether the equity will be diluted is up to the minority shareholders. If they do not accept buyback, their equity will be diluted; if they do, then it won’t. The buyback price is about 10% more than the average share price of CK Asset, so the minority shareholders do have a chance to cash in at a “high price.” However, the buyback price of HK$51 per share is only 53% of the net asset value after deducting the debt. So accepting the buyback is like allowing Li’s family to grab a bargain at half price.

    Conglomerate discount by Yeung Wai-hong, Apple Daily Hong Kong (March 29, 2021)

    If that happened outside Hong Kong there would be shareholder class action suits. The theory goes that these trades slowly put the squeeze on minority shareholders at a discount. Transferring value to the Li family. Eventually allowing for a gradual privatisation of the business at the expense of retail shareholders.

    Once this has been done the value of the assets at their full price can be realised. More finance related content here.

    More information

    ‘Conglomerate discount’ | Yeung Wai-hong ｜ Apple Daily 

    Britannica, T. Editors of Encyclopaedia. “Conglomerate.” Encyclopedia Britannica, September 26, 2007.

  • New Zealand + more news

    New Zealand

    An end to cigarettes? New Zealand aims to create smoke-free generation | New Zealand | The Guardian  – banning tobacco sales to people born after 2004, will drive illegal sales. New Zealand could quite easily have a prohibition type situation on his hands with rampant tobacco smuggling and organised crime. New Zealand has been a leader in tobacco legislation but replication of this in other countries could be challenged in courts on grounds of discrimination 

    Business

    The vanishing billionaire: how Jack Ma fell foul of Xi Jinping | Financial Times – the Yahoo! and Softbank Alipay ownership piece should be read by anyone looking to invest in Chinese stocks. Bilking the western investors was seen as a mark of loyalty by the Chinese government

    China

    Invisible China: How the Urban-Rural Divide Threatens China’s Rise – ChinaTalk – Xi Jinping just like two days ago was bragging about all these gangs that he’s been able to crack down on it. But the fact that he’s able to say he cracked down on [3,600 “mafia like groups] means that there were a whole lot more than [3,600 ganges- to crack down on in the first place. In the past few years, a few of the potential faults that you write about if China isn’t able to increase its workforce and find decent jobs for the common folk who haven’t made it to the cities yet is crime and social unrest. What are your thoughts about criminal enterprise in China and how it feeds into the themes that you talk about in your book? In the 1980s in Mexico, there was no crime. It wasn’t the Mexico that we know today. The Mexican government talked about what a safe place it was as they were growing very fast. Of course, everybody had a job. Everybody was employed. And that’s China today. China’s not a dangerous place, but Mexico wasn’t a dangerous place in the 1980s. What happened in Mexico, of course, is China happened, right? Wages in Mexico went up, as everybody got employed and the factories in Mexico decided to move. The maquiladoras moved to China. They moved back to the United States. They moved to elsewhere in the world and suddenly, within a couple years, 10 million people lost their jobs and that was 20% of the Mexican labor force – such a great interview

    Consumer behaviour

    Covid-19 and the rise in news misinformation – Press Gazette – “Our analysis of traffic to the top 100 global English-language news sites reveals that while news consumption soared overall in 2020, untrustworthy news sites saw bigger surges in readership” – Hat tip to Alan Morrison

    Finance

    How Dublin quietly became dumping ground for some of Europe’s riskiest corporate loans | Irish Times – shadow banking special purpose vehicles moved from Holland to Ireland

    Ideas

    Books that suck you in and books that spin you out – Austin Kleon 

    Systems Thinking in Seven (7) Images 

    Luxury

    Louis Vuitton joins China’s JD.com amid online luxury battle | Vogue Business – interesting move, is Tmall losing its grip?

    How Arnette Is Leading the Movement to Bio-Friendly Eyewear – bioplastics

    Gucci “Aria” Show Reveals Co-branded Balenciaga Pieces – SLN Official – this all looks like the the kind of shanzhai items I would have seen back when I first visited Shenzhen 15 years ago

    Marketing

    Browse our library of ebooks, webinars and videos – handy collection of resources by Meltwater

    Retailing

    What brands should know about Zhihu | Vogue Business – Initially invite-only, Zhihu has grown into an online content community of 75.7 million average monthly active users, who ask and answer questions and have access to in-depth articles, columns, videos and live-streaming sessions, often produced by the platform’s 43.1 million content creators… It makes most of its revenues through online advertising, but also offers a membership programme and online education to users, as well as content-commerce solutions to brands

    How the pandemic helped Walmart battle Amazon Marketplace for sellers | Reuters 

    The a16z Marketplace 100: 2021 

    Security

    Future Trends: Far-Right Terrorism in the UK – A Major Threat? | Global Risk Insights – there are also reasons to think that far-right terrorism may not develop into the major threat. Large ideological schisms exist within the far-right milieu (such as disagreements over anti-Semitism, capitalism, and violent vs democratic action) that keep far-right activity fractured. Far-right groups also tend to disintegrate due to infighting at a higher rate than Islamist groups do. Additionally, law enforcement may find far-right groups easier to infiltrate and monitor, as there would not be any linguistic or cultural barriers to surmount

    The $1 billion Russian cyber company that the US says hacks for Moscow | MIT Technology Review – One area that’s stood out is the firm’s work on SS7, a technology that’s critical to global telephone networks. In a public demonstration for Forbes, Positive showed how it can bypass encryption by exploiting weaknesses in SS7. Privately, the US has concluded that Positive did not just discover and publicize flaws in the system, but also developed offensive hacking capabilities to exploit security holes that were then used by Russian intelligence in cyber campaigns. 

    Much of what Positive does for the Russian government’s hacking operations is similar to what American security contractors do for United States agencies. But there are major differences. One former American intelligence official, who requested anonymity because they are not authorized to discuss classified material, described the relationship between companies like Positive and their Russian intelligence counterparts as “complex” and even “abusive.” The pay is relatively low, the demands are one-sided, the power dynamic is skewed, and the implicit threat for non-cooperation can loom large

    US Senator Who Served as Ambassador to Japan Lauds Closer Ties but Issues Warning | Voice of America – English – American concern about technology transfers extends beyond its relationship with Japan. “When the U.S. shares its cutting-edge technology with allies, it runs the risk that some of what is shared ends up in the hands of adversaries,” she said. For his part, Hagerty says that compared with four years ago, when he first took up the post as U.S. ambassador to Japan, the strategic challenge facing America “continues to get more serious, particularly with respect to China.”

    Technology

    Designed by Apple in California, Not Assembled in China | Above Avalon – Apple’s brand is less dependent on where its assembled

    Logic Chip Teardown From Early 1990s IBM ES/9000 Mainframe | Hackaday – The 1980s and early 1990s were a bit of an odd time for semiconductor technology, with the various transistor technologies that had been used over the decades slowly making way for CMOS technology. The 1991-vintage IBM ES/9000 mainframe was one of the last systems to be built around bipolar transistor technology, with [Ken Shirriff] tearing into one of the processor modules (TCM) that made up one of these mainframes – I remember when I was at college that bipolar / CMOS hybrid chips were touted to provide a radically faster computer chip

    2102.12627] How to represent part-whole hierarchies in a neural network – This paper does not describe a working system. Instead, it presents a single idea about representation which allows advances made by several different groups to be combined into an imaginary system called GLOM. The advances include transformers, neural fields, contrastive representation learning, distillation and capsules. GLOM answers the question: How can a neural network with a fixed architecture parse an image into a part-whole hierarchy which has a different structure for each image? The idea is simply to use islands of identical vectors to represent the nodes in the parse tree. If GLOM can be made to work, it should significantly improve the interpretability of the representations produced by transformer-like systems when applied to vision or language

  • Beauty calendars of China + more things

    Chinese beauty calendars

    How China’s Beauty Calendars Defined an Era’s Aesthetics | SixthTone – the history of China’s beauty calendars is the history of China opening up and closing back down again. The beauty calendars aren’t high art or pornography like the Perelli calendar of old. But for the time, they were at the bleeding edge of changing social norms after Mau. The calendars declined when the Xi administration stopped state owned enterprises giving or receiving calendars.

    Business

    ‘Chinese Antitrust Exceptionalism’: a book by Angela Zhang | Chillin’Competition – fascinating read on Chinese corporates the Chinese antitrust system

    Consumer behaviour

    Children Beating Up Robot Inspires New Escape Maneuver System – IEEE Spectrum – children are monsters at times. Really interesting article

    Legal

    Former Tencent employee ordered to pay US$167,000 for breaching non-compete pact after joining TikTok owner ByteDance | South China Morning Post – shocking. I hope ByteDance are picking up the tab for him. I am surprised that he lost, generally these contracts are hard to enforce. Secondly, the case wasn’t in Shenzhen where Tencent would win because that’s where their headquarters are, but in Beijing. Finally, the damages were surprisingly high

    Luxury

    Queen of the Night: One-of-a-Kind Porsche Taycan 4S Artcar by Richard Phillips Blossoms in Switzerland | Automobiles | RM Sotheby’s – Sotherby’s sees this as a direct line descendant of Janis Joplin’s painted Porsche 356; but given that this a brand art collaboration I see it more as a copy of the BMW Art Car project

    Why Gold Watches Are Increasing in Value and Demand – Robb Report – more of a opinion piece on why gold watches are have never had a better change of success than now due to increased market share

    Information security

    The UK Is Trying to Stop Facebook’s End-to-End Encryption  | WIRED – THE UK IS planning a new attack on end-to-end encryption, with the Home Office set to spearhead efforts designed to discourage Facebook from further rolling out the technology to its messaging apps. – Unsurprisingly Patel is using child molestors as its excuse. No words about how metadata and good police work can get around the limitations of encryption. When you take this in account with the new police bill going through parliament, it all looks exceptionally authoritarian in nature

    Suspected Chinese spies cover tracks in efforts to breach Vietnamese government | CyberScoop – more security related content here.

    UK

    Elite wars – The Ruffian – I understand why campaigners and commentators are upset by Sewell’s tone and by the over-managed press launch. But loudly complaining about this kind of thing while refusing to engage constructively with the arguments of the report seems irresponsibly trivial. After all, what’s at stake here is far more important than a dispute between elites over tone, terminology and media management. Everyone is in agreement that racism is a serious problem in Britain. Shouldn’t we focus our disagreements on what to do about it? – well worth reading the whole article and the reports that it links to. The Conversation covered most of the opposing views high points here: Race commission report: the rights and wrongs | The Conversation