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Friday, November 16, 2012

The story behind my book "Understanding Firms"

From tomorrow my book "Understanding Firms - A Manager's Model of the Firm" is available free for kindle users (Saturday 17th to 19th) for three days. So I thought let me share the story behind this book.

In my initial days, I was ready to work on any types of projects. I worked in warehouses, factory floors, maintenance shops etc. I was ready to take risks, but my supervisors were not. I found this to be one ridiculous problem. A person who was ready to work on diverse roles, who admittedly had done great work was not allowed to work. Initially I thought may be I did not do good work and supervisors were just being polite. But I realized that was not the case. Sadly, I realized this after I left the company and some of them told be the real reasons.

Then, I have agonized over loosing people who were such spectacular talents that losing them should be criminal. Yet, the company I worked for could not find a way to monetize the talent we had. Nor could they simply block this talent from leaving by paying them their worth. Watching them go to other companies was horrible experience.

I have lost many customers who were ready to take risk with us so that we could develop new products at their expense fully aware of the risks involved. But my firm backed out from such promising opportunities. It happened so many times that I became jaded and moved to other team. 

Then, my experience with cost managers is no less spectacular. I have seen managers approve of TV commercials scheduled at the time when the target audience was away at work on their farms far away from TV. At the same time, travel budgets were hard to come by for my team. I have seen cab bills being questions while the company was splurging on parties to build team spirit. I wanted to tell the bosses, if you don't trust your employees you are not going build team spirit by mandatory partying.

I know one firm was paying $1000 to shift desk three feet apart when all you needed to do was plug the computer in the next socket. I do not see any reason why this change should be classified as "desk change" and deserve $1000 for the shift. If this is not waste then I don't know what is. In the same company I have seen managers ask their employees if they indeed ate as much as the bill they submitted when the bill was within allowance limits. I thought managers existed to reduce cost by reducing wasteful expenditures.

I have seen many companies sitting on gold-mine of products they just don't want to make. Trust me they don't want to make those products, I have tried breaking my head. I once asked a company will they take it up if I make a prototype with my own money and prove that it works. 

I have spent ages trying to rectify atrocious designs, seen compromised product specifications that don't solve customer's problem, good products priced out of customer's budget, bad products sold free, softwares that made the customer's cry (literally). Man-years spent on designing ERP systems that have no relationship with reality etc. I can go on but you get the drift. 

The problem is not that these companies do such things. The problem is that these are very very successful companies, so imagine what happens at the unsuccessful ones. The problem is also that this is very widespread. So I thought, something more than pure economics is at work here. One thing led to another and another and soon here we are. 

These negative energies were the force that pushed me to explore. I write them here because you may have seen some of them. You may have also wondered why people do things they do. You may have also thought how come your very decent friend is hated as a boss. I hope to answer some of these questions. In the book I don't directly explain the above behaviors but I explain why some companies get away with it. I explain when these behaviors become threatening. 

I hope you enjoy the book and make your firm a better place, a more successful place. And if you need to discuss any thing with me, you can email me at rahuldeodhar [at] gmail [dot] com.

Tuesday, November 06, 2012

Yen Vs. RMB - China crippling Japanese companies?

Yves Smith asked "Has Chinese Currency Manipulation Succeeded in Breaking Japanese Manufacturers?" bringing out the effects of currency management. You can read the sorry strategic choices facing the Japanese regulators.

China is buying yen forcing appreciation that renders Japanese companies less competitive. China is also buying Japanese bonds. Now Japan must buy US Dollar to keep their exports competitive. Now, both countries are dependent on US/EU/developed world demand and hence they are fighting amongst themselves to capture the reducing developed world consumption share.

This is a problem you face when the market country undertakes QE. The supplier country has no choice but to undertake its own QE without which it suffers loss in competitiveness. The quantum of QE the supplier country must undertake is not merely equivalent to QE undertaken by market country but must also adjust for QE by other supplier countries and relative competitiveness between suppliers inter se. Thus, the supplier countries must do a lot more and therefore must face correspondingly lot more risks.

Thus, my advice to Japan would be to print till balance is restored. (This is not my optimal recommendation but I believe this will be best way to achieve their intent.