Monthly Archives: April 2015

Towering ‘Cristo Redentor’ (Christ the Redeemer) Gazes out upon Rio de Janeiro, Brazil

Enormous Christ the Redeemer Statue in Rio de Janeiro

The statue of Christ the Redeemer bestrides a 2,300-foot mountain named Corcovado (“Hunchback”), weighing 635 tons, standing 130 feet tall, and measuring 98 feet from the tip of one outstretched hand to the other. The statistics alone are awe-inspiring.

The striking figure of the enormous Christ the Redeemer statue can be seen from almost any point in the city of Rio de Janeiro. Christ the Redeemer gazes out upon a city celebrated more for the pleasures of its flesh than for the saintliness of its sculptures.

However, the unique place that Cristo Redentore occupies in the hearts of all Brazilians depends on its sheer visibility. There’s scarcely a sunlit beach or a shadowy favela (shanty town) in the entire city from which the massive, reinforced concrete and soapstone image of the Saviour cannot be seen, his arms held apart in distant benediction.

The absolute scale of the structure means that humans are dwarfed when they stand at its foot—only by leaning back at an impracticable angle can they glimpse the carved features of Christ. In addition, of course, while many choose to look upward to mull over the face of divine power, others direct their gaze downward, over the spectacular panorama that encompasses both the natural splendors of the nearby coastline and the rampant urban sprawl that characterizes the restlessness of Rio.

Cristo Redentore, Rio de Janeiro Given the difficulty in accessing the site, up torturous, twisting roads, it’s not hard to believe that the statue took nine years to build, between 1922 and 1931. Nor that in a intensely Catholic country, a small chapel should have been built within its base dedicated to the Marian apparition, Nossa Senhora Aparecida (“Our Lady of the Apparition”), patron saint of all Brazil.

Symbol of hope, constant reminder of God’s presence, Christ the Redeemer serves not just as the guardian of the people who live in its shadow, but also as a steady companion through all their joys and travails. Although it stands thousands of feet above sea level, the statue’s foundations are rooted in Brazil’s very soul.

Posted in Travels and Journeys

Turbocharge Your Value Creation to Build Market Value

Value Creation to Build Market Value

Earnings now make up comprise only 50 percent of the market value of publicly traded companies, down from 95 percent of market value in 1965.

What is the 45 to 50 percent of market value that is not earnings? Intangibles. Intangibles are not precisely related to earnings, but they boost or shrink the value of a business. Intangibles include reputation, brand, quality leaders, and other variables. Accountants who don’t like the word intangibles call these factors “future earnings.”

Two companies in the same industry with the same earnings can have very different market value, as the company with bigger intangibles is perceived by investors to do better in the future.

Accountants try to measure these intangibles, often using the Balanced Scorecard—a necessary but insufficient step. Leaders must learn how to build intangible value faster.

Build Intangible Value

Organizational Capabilities Building intangible value means creating real capability to keep promises about future growth. Leaders who can deliver on their promises are rewarded with a higher price: earnings ratio—the quality of their current earnings is worth more than the current earnings of their competitors.

Leaders can increase intangible value in four ways:

  1. Keep promises—deliver on earnings. In a public company, the most visible promise is to deliver quarterly earnings. Delivering a consistent and predictable pattern of earnings gives your company credibility. If you say you will deliver earnings but don’t, you lose credibility.
  2. Articulate a growth vision. Stakeholders want to know how your company will grow in the future. To grow, companies can sell more to existing customers, innovate around their products and services, or expand geographically. Pick one primary growth strategy with the other two supporting it.
  3. Match growth vision with supporting core competencies. Put your money where your mouth is. If you espouse product innovation, then investors and employees expect to see higher, investment spending in R&D and marketing. When there is a gap between the direction of future growth that is promised and how money, time, and attention are allocated, skepticism grows.
  4. Improve capabilities. Capabilities represent how the organization competes. Capabilities include: talent that is competent and committed; speed to make important changes happen fast; shared mindset to know and deliver what customers want; accountability that ensures that high performance counts; collaboration that ensures both efficiency and leverage; learning generates and generalizes ideas with impact; and leaders who deliver the right results the right way.

Of the four, improving capabilities as the most potential to provide a sustainable source of competitive advantage. Capabilities are the most difficult for a competitor to duplicate, and they delight customers.

By building intangibles, leaders turbo-charge the value creation process.

Posted in Management and Leadership

Prem Watsa’s Recommended Books for 2015

Prem Watsa of Fairfax Financial Holdings (Canada)

Legendary investor and philanthropist John Templeton was Prem Watsa’s mentor and was deeply interested in spiritual growth. In the past, Watsa has recurrently recommended Templeton’s “Riches for the Mind and Spirit”, “The Templeton Plan”, and “Discovering Laws of Life”.

Legendary investor and philanthropist John Templeton In the Fairfax Financial Holdings’ annual meetings in previous years, Watsa has also highlighted an inspirational movie called “The Little Red Wagon” that the Templeton Foundation supported. In an interview with online investment community Gurufocus, Watsa previously said,

But I try to be neutral, sometimes more short than long, but that’s John Templeton. So John, one of the key lessons he taught me was to be flexible. His investment philosophy was always value oriented, long term, buy at the point of maximum pessimism, but be flexible in your thinking, and that’s what we try to apply.

Books Recommended by Prem Watsa at Fairfax’s Annual Meeting on 16-Apr-2015

At the annual meeting of shareholders of Fairfax Financial Holdings Limited on 16-Apr-2015 at the Roy Thomson Hall in Toronto, Prem Watsa recommended the following books:

  1. John Templeton’s “Riches for the Mind and Spirit”. Watsa mentioned a quote about giving that he said Fairfax feels very strongly about: “Self-improvement comes mainly from trying to help others.” In speaking of Fairfax’s philanthropic efforts, Watsa also said it’s better to help the receivers grow.
  2. Stephen G. Post’s “Is Ultimate Reality Unlimited Love?” For fifteen years, Post held discussions with John Templeton on the topic of pure unlimited love. The book covers how John Templeton arrived at his philosophy as a youth growing up in Tennessee. This book draws from previously unpublished letters and interviews with physicists, theologians, and other close associates and family of John Templeton.
  3. Lauren Templeton and Scott Phillips’s “Investing the Templeton Way”. Lauren Templeton is the grand-niece of John Templeton and Scott Phillips is her husband. Together, they run Chattanooga, Tennessee-based Templeton & Phillips Capital Management. Investing the Templeton Way focuses on the critical role of temperament, and how mastering this element to investing equips the investor to succeed across the span of time and varying market circumstances.
  4. Louis V. Gerstner, Jr.’s “Who Says Elephants Can’t Dance?” This book is an account of IBM’s historic turnaround led by Gerstner during his tenure as chairman and CEO of IBM from April 1993 until March 2002. Gerstner led IBM from the brink of bankruptcy and mainframe obscurity back into the forefront of the technology business.
Posted in Investing and Finance

Enhance your Professional Presence in 10 Simple Steps

Enhance your Professional Presence

Professionals dedicate themselves to their careers and their companies. Amateurs are casual about their careers and often blind to advancement opportunities. Professionals also make more money.

In selling situations and in life, how you present yourself plays a big role in how people think of you and how much attention people pay to what you say. A dedicated professional commands more respect than a casual amateur does. Always.

How can you acquire professional presence? Take these 10 steps:

  1. Start with your attitude. Are you a professional? If so, why not let everyone know it. If not, maybe that is why you are not as successful as you would like to be. What adjustment in attitude do you need to make?
  2. Enhance your personal appearance. Are you really satisfied with your appearance? Grooming is important, good clothing is necessary, and how about your health? Shape up your body and it will shape up your attitude.
  3. Boost your business appearance. Your customers and clients relate financial success with competence. Does your car communicate financial success? How about your briefcase? Your organizer or planner? Do you appear to be well organized or stuffed to the gills with miscellany?
  4. Earn the confidence of others with your organization skills. Customers relate being organized to being competent. Organization is recognized as being on time, having a neat desk, being ready with the answers, and diligently following up on what you promised to deliver. All these things tell your people that you are a person worthy of their confidence and the confidence of their friends.
  5. Talk like a pro from the prospect’s point of view. Avoid slang and industry shoptalk. Some people think that using all kinds of fancy terms means that they are experts. A real expert can explain a complex, technological process in plain English. So ask questions. Choose your words carefully. Moreover, plan your presentation from the prospect’s point of view.
  6. Stay in tune. Every profession is changing, but none more than sales and marketing. Pushy, obnoxious salespeople are gone, along with the less competent. People demand excellence from sales and service people, and reward that excellence with referral after referral. Devote a regular part of your week to learning new skills and sharpening existing ones.
  7. Respect your fellow team members and salespeople. They have the same challenges as you do. They deserve the same credit and recognition when successful, the same help and encouragement when faltering. Everyone wins when the team gets stronger.
  8. Remember your family and friends. They want a high quality relationship, too. Plan time for family and social needs. This will assure you of their understanding and support when business takes you away evenings and weekends.
  9. See the people. There are thousands of people in your area who need and deserve the professional services and products that you provide. Make them aware of what you do. Be vocal about your abilities and qualifications. If you do not take it to them, they may be shortchanged by someone who is not as good as you are.
  10. Integrity keeps you there. Nearly every day an opportunity arises to take unfair advantage of someone. Stretching the truth, selling without the facts, omitting information, and avoiding present challenges by stalling or blaming someone else is not professional behavior.

It is important to look at the effect professional presence has on you and others. If you are not sure about how you come across to others, request feedback from people you trust and admire. Ask for feedback from people who will tell you the truth and give you insights into how you can improve your professional presence.

Posted in Education and Career Mental Models and Psychology

How Thailand and its Neighbors are Courting Foreign Investments

Thailand and its Neighbors are Courting Newcomers

Forty years ago, Thailand was known among foreigners as an idyllic beachfront tourist destination, rather than a lucrative investment destination. Fast-forward almost four decades, and Thailand’s Board of Investment is attracting foreign businesses looking for opportunities to tap into a growing list of manufacturing and service industries. Sectors including automotive, alternative energy, biotech, petrochemicals, food processing, and electronics are growing and attracting foreign attention. Investment applications have reached an all-time high in the last few years, with $33.5 billion invested in 2012 alone.

The Thailand Board of Investment (BoI), a government agency started in 1966, has helped spur innovation by decreasing the time of back-and-forth it takes for foreign businesses to operate in Thailand. Companies promoted by the BOI can obtain work permits or visa approval or renewals within three hours, in addition to tax and other incentives offered by the BOI, such as waived restrictions on foreign ownership and exemptions on import duties. For investors, including multinationals such as Dow Chemical Co., part of the draw is the tax incentives and a home base for expanding operations in a still-booming Southeast Asia. This year, Thailand was rated 18th on the World Bank’s Ease of Doing Business Index—out of 189 economies. The country has become the world’s largest producer of hard disk drives and the world’s 12th-largest exporter of food, and world’s 10th-largest automotive manufacturer, according to 2013 figures.

Thailand’s growing connectedness is becoming a draw. Infrastructure investment has helped connect Thailand to its neighbors via highways, making it a well-located home base for doing business in neighboring China, Laos, Cambodia, Vietnam, Myanmar and Malaysia. A high-speed rail network that reaches as far as southern China is due to open by 2022, and Bangkok’s Suvarnabhumi Airport, already Asia’s sixth-busiest, is in the midst of a $2 billion facelift to handle 60 million annual fliers by 2017.

Bangkok Thailand Skyline

The next two years will result in a major economic makeover for all of Southeast Asia. By late 2015, the Association of Southeast Asian Nations (ASEAN), which has 10 member countries, will form the ASEAN Economic Community (AEC). The AEC, a regional integration initiative similar to the EU, will encourage the flow of skilled labor, services, investment, capital and goods between member countries including Myanmar, Brunei, Cambodia, Indonesia, Laos, Thailand, Vietnam, Malaysia, Singapore and the Philippines.

For AEC nations, the hope is that unified economic goals can strengthen the region on an international scale. In the next two years, 14 million high-skilled jobs, 38 million medium-skilled jobs and 12 million low-skilled jobs are estimated to be added, according to a study from the International Labour Organization and the Asian Development Bank. When combined, ASEAN’s GDP tops $2.3 trillion and beats out the economies of Brazil, Russia and India, according to data from the IMF’s World Economic Outlook database.

With instability in parts of the Middle East and continuing conflict in Eastern Europe, emerging Southeast Asian economies are becoming even more important to investors, which is one reason why ASEAN 1s the top destination in Asia for U.S. foreign direct investment (FDI).

Southeast Asia is fast becoming a key location for the crossroads of global trade. Indeed, ASEAN’s many trade agreements give it access to India, China, Japan, South Korea and Australia. As the AEC deadline approaches, many multinational firms are crafting strategies to take advantage of the new opportunities. With varying stages of economic development and available workforce among these countries and their 620 million people, knowing how to tap into the region’s growing middle class can be especially difficult for companies looking to enter the region. And while there’s no one-size-fits-all approach, it’s a welcome challenge for companies taking advantage of Southeast Asia’s increasing integration.

Posted in Business and Strategy Global Business

Western Companies Face Food Adulteration Problem in China

China Bans Fonterra Milk-Powder Imports

Fonterra Co-operative Group faced protein adulteration in 2008

Controversy: New Zealand’s Fonterra owned 43 percent of China’s Sanlu Group when the mainland company was among many implicated in a scandal involving the addition of melamine to milk, making watered- down products appear to contain more protein. Six children died and 300,000 others became ill.

Outcome: Fonterra wrote down the $113 million value of its stake in Sanlu, which went bankrupt.

KFC Restaurants (Yum! Brands) supplied chicken supplied with excessive antibiotics in 2012

Controversy: A Chinese state television investigation found chicken suppliers had fed birds—including some sold at Yum’s KFC restaurants in China— large amounts of antibiotics and hormones to boost their weight.

Outcome: Yum in January 2013 apologized for lapses in its supply chain. Sales at KFC’s restaurants in China fell 20 percent in the first quarter of 2013.

Yum! Brands’s restaurants served adulterated lamb meat in 2013

Controversy: Yum’s Little Sheep Mongolian Hot Pot restaurants, the largest chain of Mongolian hot pot eateries in China, lost business after rival chains were found to be serving chicken, fox, and rat meat masquerading as lamb.

Outcome: Yum, whose restaurants were never accused of selling mislabeled meat, took a $258 million write-down of the value of the Little Sheep chain in 2013.

A Tesco Store in Guangzhou, China

Tesco was accused of selling adulterated mutton in 2013

Controversy: An undercover investigation by a Shanghai television station claimed the big British retailer’s stores in China were selling meat labeled as mutton that was actually 95 percent duck.

Outcome: Tesco quickly removed the meat from store shelves and said it was investigating the suspect product’s provenance with its supplier.

Carrefour was accused of selling adulterated beef balls in 2013

Controversy: The French supermarket operator took heat last year when state-controlled China National Radio reported that the “Juicy beef balls” sold in its Lishuiqiao store in Beijing contained no beef.

Outcome: The retailer, which has more than 200 outlets in Chinese cities, quickly pulled the products from stores and promised to investigate suppliers.

Wal-Mart was accused of selling contaminated meat in 2014

Controversy: Wal-Mart in January recalled its Five Spice donkey meat sold in some of its Chinese stores after the meat was found to contain the DNA of other animals, including fox.

Outcome: The U.S.-based retail giant, which recalled the products and is reimbursing customers, apologized and said it’s working with safety officials in Shandong to investigate suppliers.

Posted in Business and Strategy Global Business

Historic elegance and Fine English Hospitality of Bath’s Royal Crescent Hotel

Royal Crescent Hotel & Spa in Bath, England

Jane Austen fantasies come alive at this elegant hotel ideally situated in the middle of Bath’s architecturally celebrated Royal Crescent.

The Royal Crescent Hotel is situated in the middle of Bath’s beautiful eighteenth-century Royal Crescent. The Royal Crescent Hotel occupies two remarkable buildings virtually untouched since the eighteenth-century when the landed gentry of the day would visit Bath during the “season” for the water’s health-giving properties.

The exterior of the hotel looks much as it did 250 years ago, whereas inside, huge vases of fragrant lilies perfume the air, a fire crackles in the drawing room, and inconspicuous staff appears as if from nowhere precisely when you need them. The bedrooms have been lovingly restored to make certain they are just as they were in the eighteenth century. Carpets, color schemes, and furniture have all been meticulously chosen to ensure genuineness, but not at the expense or comfort.

Dower House, Royal Crescent Hotel, Bath The ideal magnitude of the Royal Crescent Hotel in Bath’s architecture, the cobblestones underfoot and the views of the hills around Bath and honey-colored municipality characterize English sophistication. The hotel, bang in the middle of this iconic-terraced Royal Crescent, is a neoclassical enchantment inside and out, as comfortable as can be, with fine dining, an even finer spa and unswervingly old-fashioned, first-class service.

For a spa, head to the Bath House, which offers a variety of treatments including a warm relaxation pool where gothic windows let natural light to flood in. After a few unhurried lengths, soak in one of the toasty hot tubs prior to steeling yourself for an stimulating plunge in one of the icy tubs of cold water, a practice said to do wonders for the blood circulation.

Of course, you do not need to stay for long to enjoy the best of the hotel: Do not give up eating at the Royal Crescent’s restaurant, the Dower House, which overlooks the garden. Alternatively, on a sunny day, find yourself a seat under a flower-adorned magnolia tree in the peaceful and secluded garden, listen to the birdsong, and enjoy an self-indulgent afternoon tea just like those elite Georgians did back in Bath’s heyday.

Posted in Music, Arts, and Culture Travels and Journeys

Few Professional Investors, Hedge Funds, and Mutual Funds Routinely Beat the Market

Wall Street, New York

Vanguard founder John Bogle, Warren Buffett, Charlie Munger, and many wise people have, with plenty of persuasive evidence, adviced that most people shouldn’t even try to beat the market or attempt to manage their investments actively. Instead, they should just pick low-cost index funds and assemble a balanced and portfolio based on their specific risk profiles and financial goals.

Few professional investors have actually managed to outperform the rising market consistently over those years. A study quoted in the New York Times indicates that perhaps only two mutual fund managers have beat the broad stock market indices: the Hodges Small Cap Fund and the AMG SouthernSun Small Cap Fund.

In other words, if all of the managers of the 2,862 funds hadn’t bothered to try to pick stocks at all—if they had merely flipped coins—they would, as a group, probably have produced better numbers. Instead of two funds at the end of five years, basic probability theory tells us there should have been three. (If you’re curious, I explained how the math works in a subsequent column, “Heads or Tails? Either Way, You Might Beat a Stock Picker.”

Warren Buffet’s The Million-Dollar Bet

In 2008, Warren Buffett bet that over a 10-year period the S&P 500 would outperform a sampling of hedge funds. Buffett’s The Million-Dollar Bet with was New York money manager Protege Partners pits the S&P 500, as represented by the Vanguard 500 Index Fund Admiral Shares, against five funds of hedge funds chosen by Protege Partners, the names of which have never been disclosed. A charity of the winner’s choice will receive $1 million or more at the end of the wager.

Fortune’s Carol Loomis mentions that, during the seven years through the end of 2014, the Vanguard 500 Fund is up 63.5% compared 19.6% for the Protege hedge funds of funds. Not all of the five funds had their final figures for 2014, when the Fortune article was published.

Posted in Investing and Finance

World Economic Forum 2015: 10 Global Challenges and Expert Views

World Economic Forum: Annual Meeting 2015

From climate change to gender parity, the World Economic Forum 2015 held in Davos, Switzerland, identified ten significant global challenges that require collaboration across different sectors to solve.

These ten can be summed up as: ignorance, greed, religions, regionalism, rituals, poverty, education, health, leadership, and gender.

Here are expert opinions on the ten global challenges.

  1. Agriculture and food security: How to help smallholder farmers feed the world. “To sustain a population of 9 billion people by 2050, we’ll need to produce 60% more food. We can only do this if small farms flourish,” writes Gerda Verburg, Chair of the Committee on World Food Security.
  2. Economic growth and social inclusion: Why 2015 is a make-or-break year for the economy. “The global recovery remains weak and uneven. Accepting stagnation is not an option,” writes Christine Lagarde, Managing Director of the International Monetary Fund.
  3. Employment, skills and human capital: Three forces shaping the university of the future. “Technology is changing the nature of higher education—but not its underlying value,” writes Drew Faust, President of Harvard.
  4. Environment and resource security: “From all corners I heard increased commitment to action on climate change.” The UN’s Christiana Figueres draws four conclusions from Davos.
  5. Future of the global financial system: Why we need institutions to solve the world’s problems. “Monetary policy alone cannot provide stability and avert crises,” writes Professor Klaus Schwab, Executive Chairman of the World Economic Forum.
  6. Future of the internet: There are two types of companies. Those who have been hacked, and those who don’t yet know they have been hacked. “The internet of everything has changed security forever,” writes John Chambers, CEO of Cisco.
  7. Gender parity: Empowering girls in the worst countries for gender equality. “Invest in a woman and she will invest in her community,” writes Lebogang Keolebogile Maruapula, a Global Shaper.
  8. Global crime and anti-corruption: Want to end poverty? Start with corruption. “Graft has thwarted four out of the eight Millennium Development Goals. We cannot allow it to blight our future,” writes Cobus de Swardt, Managing Director of Transparency International.
  9. Infrastructure, long-term investing and development: Are we too slow to innovate in infrastructure? “Our industry finds change too difficult. We should be experimenting with 3D-printed homes and super materials,” writes James Stewart, KPMG’s Chairman of Global Infrastructure.
  10. International trade and investment: How will China’s next steps affect Brazil? “The Asian giant’s economic rebalancing will play out in the market for steel and soybeans,” the economist Ilan Goldfajn.
Posted in Global Business

How are Contrails Formed?

How are Contrails Formed

A contrail is an artificial cloud created by an aircraft. It’s akin to the fact that, when you are outside on a cold day, you can see your breath. Why? Because your moist warm breath condenses in the cold air.

The only ingredient necessary for a contrail to form is water vapor. The warm exhaust is full of water vapor. The warmth allows the vapor to form liquid droplets. As the surrounding cooler air chills those droplets, they freeze into crystals. Aircraft emissions are composed of water vapor and carbon dioxide, with trace amounts of sulfurs, nitrous oxide, carbon monoxide, hydrocarbons, and soot. Only the water vapor and sulfur contribute to contrails. The sulfur particles (less than 0.05% of the exhaust) can serve as sites for water droplets to adhere, enhancing the contrail.

A contrail lasts a long time (is persistent) if the atmospheric humidity is high. The ice crystals that form the contrail will absorb moisture from the air and become larger, rather than dissipating. It is perfectly normal for those crystals to last for hours and for the contrail to actually become thicker and longer.

The National Geographic notes,

When water vapor in hot aircraft exhaust hits very cold, moist air, it freezes. That creates white contrails, which can spread into wispy cirrus clouds with climate change potential. Some reflect the sun’s heat before it reaches Earth’s surface, for a cooling effect. But overall, contrail cirrus clouds trap heat and, by one estimate, contribute more to warming than aircraft carbon dioxide emissions do.

Planes could be rerouted to avoid contrail-inducing weather, a study in Environmental Research Letters found. In one case, a 13.7-mile detour in a transatlantic flight eliminated a contrail 62 miles long and the clouds it would have spurred—so even counting extra emissions from the detour, the flight resulted in less warming. Nonetheless, no one suggests rerouting planes yet. Forecasters can predict contrail formation, says study author Emma Irvine—but whether the forecasts are accurate enough to justify flight adjustments is still up in the air.

Posted in Airlines and Airliners