Ditto! This blog is not dead! In fact, I have been having some very interesting discussions about management theories and I would really like to share them with the world. It's just that they've been discussions and not things that I've written, which makes it more difficult to gather it all.
Nevertheless, I think the Economics of life will change a bit its direction towards the Strategy of life, as I've started to learn I adore Strategy theories and the way everything interrelates. Spoiler alert: my thesys is going to be on how risk management can be a change management strategy. It hurts my brain to read articles and interrelate concepts, but I love it. I'm definitely going to write the summary of my findings here as well, but until then I promise an article on Steve Jobs and emergent strategy.
Thursday, 27 October 2011
Monday, 24 January 2011
The Return of Depression Economics and the Crisis of 2008
In what follows, I will be reviewing this book, written by the Nobel awarded economist, Paul Krugman. I will start with a short summary, I will continue with the main raised problems and then with a short reflection of my own on the book.
The main countries that Krugman focuses on are the following: Mexico (along with other Latin American countries), Japan, Thailand, Hong Kong and the USA.
Mexico
The emphasys of the book is on the "Tequila Effect". Just for the record, the name has nothing to do with tequila. What did lead Mexico into the crisis were the following factors:
The main countries that Krugman focuses on are the following: Mexico (along with other Latin American countries), Japan, Thailand, Hong Kong and the USA.
Mexico
The emphasys of the book is on the "Tequila Effect". Just for the record, the name has nothing to do with tequila. What did lead Mexico into the crisis were the following factors:
- the industry had been developed by national companies
- high tariffs
- high barriers for foreign companies
These policies are wrong because a country needs foreign investment to grow, the era of isolated economies has ended a long time ago, now all the countries are interrelated. After a few years, Mexico did set a free trade zone with the USA and Canada. However, this put the country to a disadvantage as its national currency, the "peso" was very strong, making its exports expensive and imports cheap.
Therefore, Mexico didn't manage to grow, although between 1990 and 1993 there were massive capital flows. In 1994, to go out of the crisis, the country decided to devaluate its currency. However, when doing so, two rules need to be obeyed to:
- making the devaluation large enough so that speculators wouldn't go for a bigger decrease and cause it to devaluate even more
- the goverment showing that it is in control of the situation so as to reinstall confidence in the economy
Mexico failed to obey to these two rules and as a consequence entered the crisis. It was saved by the USA, with a loan of 62 billion dollars.
Japan
Japan grew rapidly from 1953 to 1973, as it changed itself from an agricultural country to an industrial one. This was due to a good system of education, a superior form of capitalism, the establishment of keiretsus etc. However, they made the mistake of deregulating the banks more and more, which allowed them to take more risks. This wasn't the reason why Japan entered the crisis. It was because of over-investment, an ageing population and the liquidity trap. Japan's economy wasn't able to respond the growth it experienced in production capacity, it had a gap between the retired and the labour market and finally people weren't willing to spend, even with a null interest rate. In the end, Japan managed to go out of the crisis through its exports.
Thailand
The case of Thailand's crisis is yet another one of confidence and speculation. When it devaluated its currency as a solution to go out of the crisis, it only reduced it by 15%, the final reduction being 50%. As an additional factor, what made the country bankrupt was the fact that its debt was in dollars (same happened to Argentina). What it did was change its exchange system to variable exchange rates and increase the interest rates.
Hong Kong
In 1998, Hong Kong had an expensive currency, as Japan and China were in crisis. Obviously, the speculators thought it would devaluate and acted accordingly. However, Hong Kong made them lose their money on their bet by getting money from the Hong Kong Monetary Authority.
USA
Krugman develops here on two main aspects: the stock exchange boom, caused by the dot com boom and the real estate boom, caused by the rating agencies.
Problems and solutions
In the analysis of the above mentioned countries, two main causes appeared: the confidence loop and the necessity of more regulation. What the first one means is that if there is confidence that an economy is going well, the financial markets will respond positively and this will influence the growth of the economy, which will feed even more the confidence of the stakeholders. However, if there are signs of problems and the confidence disappears, the financial markets will respond and the economy will suffer causing even less confidence for the stakeholders.
The second cause is the lack of regulation of financial institutions that produced the crisis in the first place. The rating agencies took too much risk and led to the collapse of Lehman Brothers. Although it is difficult, it is essential to regulate whatever could lead to such an effect.
Finally, as Krugman is pro-Keynes, he suggests that more goverment spending is needed, as part of demand-side macroeconomics. That is to say, he advocates for the use of tools like interest rates, taxation and public expenditure. The other side of the coin is supply-side macroeconomics, which advocates for lowering barriers for people to produce goods and services (by adjusting income tax and capital gains tax).
Own reflection
I enjoyed reading this book and I recommend it to anybody who wants to get general Economics knowledge. From a writing point of view, I wasn't too fond of its structure. I think I would have liked the contemporary crisis to be better linked with the reasons for past ones. A comparison of the causes and solutions would have offered the perfect ending to the book. However, the book remains a good read.
Personally, I don't know which is the best solution to solve the crisis. I think that the situation is too complex and the world completely different to have a right answer. I do not doubt the capacity of analysis of these renowned economists, but I wonder their capacity to adapt to the world as it is today. I don't think it's in their natural instinct to use the Internet or communicate through Twitter. These might be trivial examples, but they do show a radical change in the competencies required nowadays. In addition to this, I am sure that these competencies are accompanied by certain expectations and behaviours. Therefore, creative solutions need to be found.
Finally, I promise to give this more thought and come back with another post about the best solutions to the crisis from my point of view. This post was just to review a book that I read and about which I would like to keep a summary.
Sunday, 16 January 2011
Tasks for 2011
From now on, at every beginning of a new year, I shall be doing the following:
- Read the predictions of "The Economist" for the upcoming year.
- Read the book of the previously awarded Nobel prize winner, section Economics.
- Read the book of the previously awarded Nobel prize winner, section Literature.
- Set 2 target destinations to visit.
- Update recipe book.
- Update address book for sending postals.
Happy New Year, may all the worst be gone with 2010 and all the best greeted with 2011!!
Saturday, 15 January 2011
Capitalism and current trends
In what follows, I will be talking briefly about the history of capitalism (a theoretical basic approach), what it is and finally some current trends.
History
The capitalist system has around 250 years. It has started with the Industrial Revolution in Great Britain, when there was a big step in production, by automatization. The fact that production was greater than consumption and that there was a necessity of raw materials, led to exports of surplus and imports of deficit.
In 1776, Adam Smith saw the need for trade and global markets, in order to keep a certain type of dynamism in production. About a century later (1866), Karl Marx defined the world as an ocean of products, claiming that there already existed a global market. In 1936, John Keynes stated that the capitalist system was in crisis, as there was not enough demand for the production back then. That was because capitalism offered the biggest capacity of production that the world had ever seen.
Characteristics of capitalism
The two main tenets of capitalism are competition and markets. First of all, there is competition between the firms, which determines a certain dance between them. What this implies (as a novelty to prior currents) is that labour is yet another asset that is sold and bought, its price being the salary. Second of all, markets are the main mechanism of capitalism. It is where products are sold and bought, where prices are set and where finally it is decided what to produce and what not to produce; what can be bought will be produced.
The question now pending is why is it important to study capitalism? Well, because most of the countries have this system and the ones that don't, trade with the ones that do have it. In order to study its evolution, I will be developing on trade, finance and production, which are its main drivers.
Trade
As far as trade goes, I will stick to a very basic description of it. I will be developing more on its importance in future posts on my blog. For the moment being, I will describe it as the exchange of goods and services. Somebody buys products cheaply and then sells them at a higher price. It becomes international when there are imports and exports to other countries.
Finance
Financing allows people that have financial resources to borrow to the ones that are in need of them. This way, it is possible to produce and consume. If trading is done without resources, it will be just an economic activity. Finally, it becomes international when the financial source is international (loans, bonds) etc.
Production
Production refers to the process of buying raw materials and turning them into something more complex. However, in order to obtain profits, firms need to go outside their domestic countries. This way, they can take advantage of cheaper labour, transportation costs, legal barriers and others.
Trends
Internationalization
The three drivers of evolution previously described (trade, finance and production) obey to this trend. They become more and more international, which is why I developed a little bit on them.
Cyclical Evolution
The economy has a cyclical evolution. That is to say, it obeys to the following stages: growth, detachment, recession and recovery.
Business concentration
This trend is centered around the idea that there are fewer firms and a lot bigger. This happens through mergers, acquisitions, agreements etc.
On the basis of the previously explained, I will continue with further topics that I will be analysing in more depth.
History
The capitalist system has around 250 years. It has started with the Industrial Revolution in Great Britain, when there was a big step in production, by automatization. The fact that production was greater than consumption and that there was a necessity of raw materials, led to exports of surplus and imports of deficit.
In 1776, Adam Smith saw the need for trade and global markets, in order to keep a certain type of dynamism in production. About a century later (1866), Karl Marx defined the world as an ocean of products, claiming that there already existed a global market. In 1936, John Keynes stated that the capitalist system was in crisis, as there was not enough demand for the production back then. That was because capitalism offered the biggest capacity of production that the world had ever seen.
Characteristics of capitalism
The two main tenets of capitalism are competition and markets. First of all, there is competition between the firms, which determines a certain dance between them. What this implies (as a novelty to prior currents) is that labour is yet another asset that is sold and bought, its price being the salary. Second of all, markets are the main mechanism of capitalism. It is where products are sold and bought, where prices are set and where finally it is decided what to produce and what not to produce; what can be bought will be produced.
The question now pending is why is it important to study capitalism? Well, because most of the countries have this system and the ones that don't, trade with the ones that do have it. In order to study its evolution, I will be developing on trade, finance and production, which are its main drivers.
Trade
As far as trade goes, I will stick to a very basic description of it. I will be developing more on its importance in future posts on my blog. For the moment being, I will describe it as the exchange of goods and services. Somebody buys products cheaply and then sells them at a higher price. It becomes international when there are imports and exports to other countries.
Finance
Financing allows people that have financial resources to borrow to the ones that are in need of them. This way, it is possible to produce and consume. If trading is done without resources, it will be just an economic activity. Finally, it becomes international when the financial source is international (loans, bonds) etc.
Production
Production refers to the process of buying raw materials and turning them into something more complex. However, in order to obtain profits, firms need to go outside their domestic countries. This way, they can take advantage of cheaper labour, transportation costs, legal barriers and others.
Trends
Internationalization
The three drivers of evolution previously described (trade, finance and production) obey to this trend. They become more and more international, which is why I developed a little bit on them.
Cyclical Evolution
The economy has a cyclical evolution. That is to say, it obeys to the following stages: growth, detachment, recession and recovery.
Business concentration
This trend is centered around the idea that there are fewer firms and a lot bigger. This happens through mergers, acquisitions, agreements etc.
On the basis of the previously explained, I will continue with further topics that I will be analysing in more depth.
Friday, 14 January 2011
Keynes vs Friedman
This short article simply posts the contradicting theories of Friedman. I researched this yet again because I read the book of Paul Krugman (summarised here ), who is an advocate of keynesism.
In what way is contradicting Friedman Keynes' theories? His main concept is that the government should not intervene in the markets. He had many theories, but probably this is the one that opened a lot of debate. One of his other more famous policies was the monetary one. Based on the equation (MV=PT), he deduced that an increase in the money supply will result in an increase in prices. He is also famous for this phrase: "inflation is always and everywhere a monetary phenomenon."
Now, I think that inflation is not really a disaster. On the one hand, it helps labour market respond to the economy and on the other hand, it is a sign of progress.
In what way is contradicting Friedman Keynes' theories? His main concept is that the government should not intervene in the markets. He had many theories, but probably this is the one that opened a lot of debate. One of his other more famous policies was the monetary one. Based on the equation (MV=PT), he deduced that an increase in the money supply will result in an increase in prices. He is also famous for this phrase: "inflation is always and everywhere a monetary phenomenon."
Now, I think that inflation is not really a disaster. On the one hand, it helps labour market respond to the economy and on the other hand, it is a sign of progress.
Thursday, 23 December 2010
14th World Business Dialogue
In what follows, I will be talking about what the World Business Dialogue is, about the topic it brings forward this year and finally I uploaded a short video about myself.
What is the World Business Dialogue? Well, they present themselves as "the world's largest student-run business convention. Here, 60 top-class personalities from economy, science and politics enter a discussion about economically and socially relevant, future-oriented topics with 300 international students and just as many executives, notably from German companies."
Why is it relevant? The website answers this question as well: "The World Business Dialogue's singularity and relevance are supported by a large number of well-known speakers that have participated in past conventions; among these are Josef Ackermann, CEO of Deutsche Bank, Bill Gates, co-founder of Microsoft, and Michael Bloomberg, governing mayor of New York, who made use of the convention as a platform for discussion and exchange and appreciated the student's commitment."
What makes the World Business Dialogue different from the regular conferences aimed at gathering students and employers? From what I´ve seen and read, there are three main things: its relevance in the economy, the international aspect that it promotes and the professionalism with which everything is managed.
As far as its relevance in the economy goes, this year´s topic is "Managing Complexity". I was positively surprised to find out about this. I think that this is a particularly relevant topic, as the world and alongside businesses evolve to more and more complex structures. People passed from interchanging goods to having services outsourced and goods produced in dozens of countries. What this involves is a complex network and a necessity of managers that can deal with it. Therefore, I am highly interested to find out what economists think about this.
I have never considered attending a conference outside the country where I lived/studied/worked. Why? Because I felt that domestic participants were preferred over foreigners and I believed that the conference itself wouldn't really help my development as a professional and thus my career, or at least not more than the local conferences that I already had the chance to attend. However, the World Business Dialogue is different. It aims to the most international participation as possible, offering equal opportunities for the candidates. The networking events are incredible and the speakers that attend the event are highly respectable.
Finally, professionalism. I could feel this from the very beginning, when filling in all the information from the application form. While answering the questions about complexity, I can say that I truly stopped for a moment and started thinking about what it actually means, why it is so relevant and what I can do to prepare myself for complex situations in the future. That is to say, I managed to analyse the concept and form an opinion. This application was another brick to the development of my views. However, I am still interested in polishing this brick, with the World Business Dialogue paint.
With best regards,
The Girl that Wants and Needs a Sponsorship
What is the World Business Dialogue? Well, they present themselves as "the world's largest student-run business convention. Here, 60 top-class personalities from economy, science and politics enter a discussion about economically and socially relevant, future-oriented topics with 300 international students and just as many executives, notably from German companies."
Why is it relevant? The website answers this question as well: "The World Business Dialogue's singularity and relevance are supported by a large number of well-known speakers that have participated in past conventions; among these are Josef Ackermann, CEO of Deutsche Bank, Bill Gates, co-founder of Microsoft, and Michael Bloomberg, governing mayor of New York, who made use of the convention as a platform for discussion and exchange and appreciated the student's commitment."
What makes the World Business Dialogue different from the regular conferences aimed at gathering students and employers? From what I´ve seen and read, there are three main things: its relevance in the economy, the international aspect that it promotes and the professionalism with which everything is managed.
As far as its relevance in the economy goes, this year´s topic is "Managing Complexity". I was positively surprised to find out about this. I think that this is a particularly relevant topic, as the world and alongside businesses evolve to more and more complex structures. People passed from interchanging goods to having services outsourced and goods produced in dozens of countries. What this involves is a complex network and a necessity of managers that can deal with it. Therefore, I am highly interested to find out what economists think about this.
I have never considered attending a conference outside the country where I lived/studied/worked. Why? Because I felt that domestic participants were preferred over foreigners and I believed that the conference itself wouldn't really help my development as a professional and thus my career, or at least not more than the local conferences that I already had the chance to attend. However, the World Business Dialogue is different. It aims to the most international participation as possible, offering equal opportunities for the candidates. The networking events are incredible and the speakers that attend the event are highly respectable.
Finally, professionalism. I could feel this from the very beginning, when filling in all the information from the application form. While answering the questions about complexity, I can say that I truly stopped for a moment and started thinking about what it actually means, why it is so relevant and what I can do to prepare myself for complex situations in the future. That is to say, I managed to analyse the concept and form an opinion. This application was another brick to the development of my views. However, I am still interested in polishing this brick, with the World Business Dialogue paint.
With best regards,
The Girl that Wants and Needs a Sponsorship
Saturday, 11 December 2010
The Apprentice
After watching The Apprentice for years in different countries and at different ages, I can see a lot of difference in cultures, period of time and myself. This is what this short analysis is all about.
I have been watching this show since I was sixteen, seventeen. First, it's interesting how my analysis has changed throughout these five years and then, it's interesting how the show has changed. When I left to England, I started watching the British version and now I'm back to the American one.
When I first watched it, it was more entertainment, it was about people doing interesting things. When I got to England, it was about me understading how they do things, I think it was more the learning of different techniques, rather than anything else. Now? Now I analyse. I analyse behaviours, people, strategies. That is not to say that it's not entertainment anymore or that I don't find some ideas really innovative. It's just about the way my inner motivation to watch it has changed.
From my perspective, what Donald Trump is looking for has changed a lot, and so have the candidates. If now a more autocratic style is appreciated, in the first seasons, the participative one was more appreciated. This is very interesting. The autocrative style of leadership was the popular one before the participative style and now it seems like the employers and people are going back to the autocrative one. In the last season at least, this phrase has come out quite a lot: "You're the project manager so you tell me what to do". In my opinion, it's not the right approach. You are a team member, you should know what needs to be done as well. This is actually a surprising thing for me, because as China is becoming more and more powerful, i would expect a more delegative style to be popular. It is known that this is how Chinese work, they don't really digest the notion of leadership.
I would also like to talk about the personality that usually wins The Apprentice. Contrary to how a lot of participants are acting, it's never the agressive ones that win. It's the composed candidates, that do their job right, talk when they need to and express their opinions in a very substantiated way. Thus, Brandy in the last season.
As a final observation, I would also like to make a comparison between the same show in the UK and in the US. I prefer the British version. It is more businessy, people know how to behave themselves, it's not a continous circus and the candidates are supposed to make money on a lot smaller budgets, which is definitely harder than with a big one. On the other hand, The Trump Organisation does deal with a lot of money, so maybe Donald Trump is going for the kind of premium products strategy, rather than cost leader product one.
Finally, I would like to conclude with a little reflection about leadership. It's supposed to be focused on two aspects: task and people. The right balance of skills between the two is what makes a leader great. If a person is too much people-focused and is not a serious worker that can offer a direction and a structure, it will never be a good leader. On the other hand, if one is task-oriented, too autonomous, cannot take other people's opinion into account, cannot manage conflicts and cannot influence people, one won't be able to control the team. Where am I? Now, what would be the fun of that, if I'd tell you already?
I have been watching this show since I was sixteen, seventeen. First, it's interesting how my analysis has changed throughout these five years and then, it's interesting how the show has changed. When I left to England, I started watching the British version and now I'm back to the American one.
When I first watched it, it was more entertainment, it was about people doing interesting things. When I got to England, it was about me understading how they do things, I think it was more the learning of different techniques, rather than anything else. Now? Now I analyse. I analyse behaviours, people, strategies. That is not to say that it's not entertainment anymore or that I don't find some ideas really innovative. It's just about the way my inner motivation to watch it has changed.
From my perspective, what Donald Trump is looking for has changed a lot, and so have the candidates. If now a more autocratic style is appreciated, in the first seasons, the participative one was more appreciated. This is very interesting. The autocrative style of leadership was the popular one before the participative style and now it seems like the employers and people are going back to the autocrative one. In the last season at least, this phrase has come out quite a lot: "You're the project manager so you tell me what to do". In my opinion, it's not the right approach. You are a team member, you should know what needs to be done as well. This is actually a surprising thing for me, because as China is becoming more and more powerful, i would expect a more delegative style to be popular. It is known that this is how Chinese work, they don't really digest the notion of leadership.
I would also like to talk about the personality that usually wins The Apprentice. Contrary to how a lot of participants are acting, it's never the agressive ones that win. It's the composed candidates, that do their job right, talk when they need to and express their opinions in a very substantiated way. Thus, Brandy in the last season.
As a final observation, I would also like to make a comparison between the same show in the UK and in the US. I prefer the British version. It is more businessy, people know how to behave themselves, it's not a continous circus and the candidates are supposed to make money on a lot smaller budgets, which is definitely harder than with a big one. On the other hand, The Trump Organisation does deal with a lot of money, so maybe Donald Trump is going for the kind of premium products strategy, rather than cost leader product one.
Finally, I would like to conclude with a little reflection about leadership. It's supposed to be focused on two aspects: task and people. The right balance of skills between the two is what makes a leader great. If a person is too much people-focused and is not a serious worker that can offer a direction and a structure, it will never be a good leader. On the other hand, if one is task-oriented, too autonomous, cannot take other people's opinion into account, cannot manage conflicts and cannot influence people, one won't be able to control the team. Where am I? Now, what would be the fun of that, if I'd tell you already?
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