Emerging Markets

Last night I had the first session of my Emerging Markets class. Taught by Martin J. Siegel, formerly of LTCM, it promises to be a very real and interesting class.

Martin's an old salt, from the rag trade to being a forex arbitrageur to investing in emerging markets. This class is shaping up to be a series of war stories punctuated with real advice. It's interesting - he's interesting.

I also have to say that this continues my experience that upper-level courses are taught with more nerve and personality.

On the Road - with Google and Microsoft

Slate's The Big Money has an interesting article covering Apple and the automotive industry. Their verdict? Not a good idea. What I found interesting was the broader background of consumer technology with Big Three stalwarts GM and Ford.

Some of the Google products caught my eye. I am not clear on whether or not they are real, but put them together with some of Google's other privacy law skirmishes and I can put forward some interesting legal scenarios.

What if Google/OnStar reported back positioning of cars it was installed on to a central site that provided data for traffic management? Imaging a service that tracks the location of all Google/OnStar vehicles and extrapolates traffic conditions, then provides recommended alternate routes? Can drivers opt out?

What about a third-party service that pays both GM and Ford for this kind of information, then resells a service available to multiple platforms for drivers to use. Imagine installing a app on your 'smartcar' that gathers real time traffic data from a database generated by Sync and Android devices, maybe some free government public data as well?

What about telemetry? Black box technology that transmits your speed, mileage, road conditions, fuel consumption, and whatever else. how's that for privacy? What if the government started issuing tickets because your Android phone reported that you were doing 80 in a 65 for ten minutes?

Europe

I'm still digesting my recent two-week course in Germany, which mostly covered doing business in the European Union (EU).

The first couple of days focused on the structure and regulatory environment of the EU. The EU started as an international coal and steel agreement in the 1950s and later developed into a trade and tariff zone before becoming the modern EU.

The EU tends to have a heavier regulatory hand that the US, in particular with respect to competition. Their goal is to keep the playing field open; market dominance is permitted, but watched very, very carefully.

Europe tends to finance from banks more than markets. There is also a tendency in governance to focus on the success of the enterprise, as opposed to the primacy of enhancing shareholder value. I found this very interesting, after having the latter repeated in every other class at school. The notion that the employees, bank, and partners have a guiding stake in the enterprise is somewhat refreshing.

We discussed Eastern Europe; I was part of a team that presented a high-level plan for bringing a pet products retailer in through Slovenia (developed economy, on the Euro, burgeoning middle class). Having lived in Europe during the Cold War, I found this portion most interesting: the East is still different from the West, culturally and economically. It's a huge potential market, but it's not "business as usual" in any sense.

Relationships

So here is the position I've found myself in recently. I'm going to keep it as vague as possible wrt to details. This comes on the tail of discussions about agent duties in my law class.

One of the things I do is manage an enterprise support relationship with one of our vendors. We pay them a big sum of money, and in return we get access to a variety of support resources, including some guys who come in and help us out for a limited number of days. The latter are contracted by the vendor to provide support.

A couple of months ago, I had a couple of projects going. I talked to the vendor about one, and to the contractor about the other. Ultimately, we later learned that the second impacted the first. Unfortunately, neither party brought it up, and after completing the second project, we found that in order for the first to be completed, we would have to redo the second. This was all completed using days on that contract.

So, I'm asking for my days back. I've gone back through emails, stamped my feet, and said, basically, give me back my days, or I'll find someone else and next year, we won't use their services. But now the vendor is going back to the contractor and pressing them to cough up the days. I shouldn't care, but I do, because the contractor is who I work with regularly, and I also think that the communication and management is the vendor's responsibility.

So, now there's this tension as I go about my business. I don't doubt my position, but I need the help to get this all sorted before I can go any further.

Law

Well that was kind of a surprise. My law professor encouraged me to retake the LSAT up to two more times, with some prep, to get my score up. He said I could probably get in to a top 20 school. I'd love to but man, the opportunity cost, on top of an MBA.

In any case, the last two weeks of the semester is NOT the time to think about more school.

Round Two

The spring semester is drawing to a close, and I welcome it. While I have really enjoyed my classes this term, the combination of work, school, volunteer work and improving weather have steadily derailed my resolve. I need a break.

In some ways, I get that break either sooner or later. Classes end the first week of May, and in the third week of May I will be studying abroad in a program in Koblenz, Germany. It is a two week program that ultimately counts as a single course credit. Having lived in Germany as an adolescent, in the days before the Euro and the unification of Germany, I am truly looking forward to this opportunity to see firsthand how Europe has changed, and learn about Eurozone approaches to regulation, marketing, and monetary policy. Especially now, monetary policy.

I have greatly enjoyed my law class, though it has only clarified how deep the law goes, and how little we MBAs will understand it compared to a lawyer. Contracts, torts, Intellectual Property, and a bevy of legal terms (promissory estoppel and respondeat superior vie for my favorite) have been thrown at us for almost ten weeks now. Is it seeping in? Yes. Will it seep out? Yes, until of course it matters.

I have also enjoyed my strategy class, in particular the turn it took this week. After a semester of studying frameworks and case studies, this week we talked about how to engage non-market forces, such as the government and "activists". We studied the case of Shell's disposal of an oil terminal in the early nineties, and came up with a few alternate strategies that might have ended better for Shell and for the environment.

This summer, after a few weeks off after returning to the US, I'll be studying emerging markets. I notice a lot of references to the Long Term Capital Management crisis, and it turns out the prof worked for LTCM at the time of that event. Suggested reading includes FA Hayek, who is already on my long-term reading list. Maybe I'll catch up on the plane.

Too Big to Fail

Here is what I have learned from listening to the audiobook edition of Andrew Ross Sorkin's, "Too Big to Fail", along with continuing coverage of the financial apocalypse:

The use of "Fuck", "Asshole", and "Bullshit" are endemic to the profession.

Dick Fuld is alternately associated with one of the above three terms, and is, ultimately, a tragic figure.

People complain about the crisis for all the wrong reasons: Regulation, Hubris, Government Bailouts, Collusion.

I tend to favor regulation. At the very least, I tend to favor regulators doing their jobs. But as is becoming abundantly clear, no one was outright breaking any laws.

Lehman's own auditors signed off on the use of repurchasing agreements, whereby the firm basically sold obligations for cash on hand just before quarterly earnings report, knowing they would buy them back. This made their balance sheet look much stronger than it actually was.

Even mark-to-market accounting, which came out of the Enroll and Worldcom debacles, played a part. Mark-to-market basically means you have to value your assets at what you could get for them if you sold them right now, not further down the road. With housing, in particular, it means that if housing prices collapse you can't say, "yeah, but ten years from now the market will bounce".

Listening to the games of telephone between the government, the banks, and other banks, it's remarkable that everyone was doing their job. Maybe they were doing it badly (i.e. Fuld) but still - there wasn't any outright illegal behavior. There was no real malfeasance. Hubris, yes, incompetence, arguably, but the system was working the way it was set up to work.