This is my first blog post. It seems that the sound quality is bad – but im working on it for upcoming ones. Hopefully it is understandable atleast!
Enjoy
Video Post: My first attempt!
9
Category Archives: Books
Book Review: The Credit Crunch – Graham Turner
Recently on a long trip around South Africa, I bought a book by Graham Turner – “The Credit Crunch” (ISBN: 978-1-77009-687-5) which aims to talk about the housing bubbles, the effects of globalization and ultimately the worldwide economic crisis which has taken economy by storm. This book has a nice localized South African introduction which explains the global economic crisis in the South African context which shows us readers that we as the South African public in fact are barely being affected by the downturn on the economies.
The book does not deny the fact that South Africa is in a recession and this had recently been officially declared by the South African government. In South Africa, capital markets froze and most foreign investment in the economy stopped. This is attributed partially to the political environment in which South Africa has been in for the last year or so with the ousting of Thabo Mbeki and the speculation of Jacob Zuma taking control of the South African government as the President.
As with the other major economies of the world, much of the problem was caused by the outlandish lending of money to businesses and individuals. Within three years, South African lending had doubled. However, after the collapse of the Lehman Brother Bank in the United States, the rest of the world economies came to a holt and collapse was inevitable. So you may ask, why is South Africa in not as bad of a position as the rest of the western world? The answer is simple – good financial planning.
In the March of 2006, the South African government passed the National Credit Act. The purpose of the act was the promote a non-discriminatory marketplace in which the issuing of credit is regulated and black economic empowerment is encouraged.
I am a follower of the free market economy in which the government is not expected to intervene in the economy and which believes that industry in a country should be privately owned and run. Everything is run as a business as such and there is competition in the market which in theory drives prices down and efficiency up. This book carried what seemed to be a very strong socialist agenda, so I took this into account and was cautious about the concepts and suggested solutions that Turner mentioned in the book.
The book starts out with the Burberry case in which they moved their production location out of the United Kingdom into China because it was cheaper to produce out of China in comparison to production out of the UK. He suggests that this is abuse of the power of globalization.
With that in mind, this article will briefly summarize the book – The Credit Crunch (hopefully I will not give it away or stop you from buying the book – in the end it was a heavy, but brilliant read).
Chapter one was an introduction, so we will start with Chapter two.
Chapter 2: Global Contagion
This chapter starts off with a look back into past recessions and economic depression with a special highlight to the crash of 1929. It then proceeds to discuss how the government began to increase public programmes and ultimately improved the standard of living for many American people. In the past year or so, I have been doing extensive research into the Great Depression of 1929 in the United States of America. Many of the government programmes with special mention to Social Security will need to be privatized as it has become such a large burden and expense on the American economy. It then starts to talk about the first housing recession. What caused the housing bubble in the first price? Well, when problems begin, government brings the interest rate down which in a sense encourages lending. Banks become greedy and essentially, they offer loans to anyone essentially leading to a great increase in the amount of credit issued by the banking system.
This eventually becomes an issue as there is a massive excise of houses in the market leading to a state of deflation which has occurred in the United States recently and previously in Japan.
Chapter 3: Addicted to Debt
With special mention, the United Kingdom and the United States of America is considered to be “addicted to debt” according to the author. In the United Kingdom, under the leadership of the conservative party, the debt ratio increased by 49.8 per cent within 18 years. However it was much worse under the leadership of the Labour party under the financial guidance of Brown – in which it rose 71.5 per cent.
Even worse, in the United States of America, the person debt has risen by 159.1 per cent since the year 1997 (speaking numbers: from $5,547.1 billion to $14,374.5 billion).
Chapter 4: ‘Free Trade’ and Asset Bubbles
According to the author, wages would of fallen if United States and the United Kingdom had not of had the explosion of debt. This chapter talks of how China’s (in fact all low cost labour countries) contribute to the flattening of wage compensation.
Chapter 5: Dealing with the fallout
This chapter deals heavily with one of the biggest mistakes made by the government in a economic crisis – the slashing of interest rates which essentially encourages the usage of credit and this is what asset bubbles are made of. The author suggested that the United States and other western economies should of looked to the Asian crisis to learn from the mistake made there, however, he claims that they (the government) ignored the warnings.
The author suggests that interest rate cuts are not good enough in order to bench the economic crisis, however, the author says that this can assist insuring that the slump is not prolonged. However, it is essential that the these cuts in the interest rates are made at the right stage and the government is notorious in failing in this regard.
Chapter 6: A Global Credit Bubble
This chapter talks yet again about bubbles in the market and “reassures” that they are not isolated events and that it has happened on a number of occasions – but surely then should we not not by now know as to how to avoid them from happening? It brings to light the possibility that emerging economies may be artificially keeping there currency value down in order to remain competitive. It suggests that developing countries see a rise in living standards during times of contraction and crisis in the markets. Finally, this book introduces the concept of “too much intervention” – briefly, this book seems to suggest that inappropriate intervention in the economy can be the fuel which worsens credit bubbles.
Chapter 7: This chapter simply revisits Japans crisis – I will not summarize this chapter for that reason.
Policy Failures in a Liquidity Trap
The introduction into this chapter starts suggesting what could of been done in order to prevent the rise in real borrowing costs. It discusses the reasons as to why the Keynesian policies failed and also the causes of a “liquidity trap”.
The book then ends in a chapter discussing the way forward and what we can perhaps expect in the future. I enjoyed this book, however – it is packed with economics concepts – but it has an explanation of them before the start of the actual book. This book does carry what seems to be a socialist agenda and I took that into account while reading – and even though I may not agree with all that was said in the book, he successfully backed all his concepts and theories up.
Its a recommended read,
Noel Harrison
Capitalism in a Cup – Noel Harrison
The following is a speech that I gave to my matric class on Starbucks. I titled the article “Capitalism in a cup”. I am sure this blog post will make is clear as to why I called it this. It has been published on;
- noelharrison.net
- sweetbru.com
Enjoy!
This December I was reading one of Taylor Clarks books. The title of this book is Starbucked. Its sub title is a double tall tale of caffeine, commerce and culture. If you have not yet worked out what this is about – its about Starbucks – the global coffee giant.
I think that it is important to understand exactly how large Starbucks is to fully understand the power that Starbucks has over consumers and competitors. In 1987, Howard Shultz bought Starbucks. At this point there were only eleven Starbucks stores, within three years, Shultz had grown the number of stores to 85. Now, every year, Starbucks opens approximately two thousands stores world wide, that is an average of six new stores every single day around the globe.
At this point in time they have around thirteen thousand stores. In 1989 (two years after Shultz bought Starbucks), the United States only had 585 coffee shops. That is around 4.5% of the total number of stores that Starbucks had in 2007. That is However, they do not believe that they have yet hit the point of market saturation and they plan to have approximately 40 000 stores in the future of which 50% will be outside the borders of Northern America. This will make Starbucks the largest chain on the face of the planet.
Scientists have identified caffeine in lakes, bays and rivers in the United States of America which is an indication of the amount of coffee (or other caffeinated drinks) Americans consume daily. Starbucks has a habit of building stores within very close proximity to each other. A mall in Portland, Oregon is an example of this. There are two Starbucks stores within twelve feet of each other.
This is however not the first time Starbucks has done something of the sort. When Starbucks was still a small company, one of their stores in Vancouver was serving ten thousand customers a week and that was only customers that were able to make it into the doors of the shops. The lines were so long that they began to look for a location to place a second store. According to Shultz, as long as their are lines, it means that they need more stores, in the end they opened a store right across the road from another Starbucks. When questioned about this acquisition, The CEO who was Howard Shultz at the time said that this would get people talking about Starbucks – the shop that opens stores right across the road from each other. At the time, due to the size of the company, it helped to have any free advertising.
The interesting thing was that the new store did not cause any financial damage to the older one and in time these two stores became the top two preforming Starbucks stores.
Today Starbucks’ annual revenue is sitting around $7.8 billion. Starbucks serves an average of forty million customers every week. It has become more like a production line than a personal service. Due to the rapid expansion, shops come in a “mold” which make it easy to setup within a few days. The baristas need no experience as the machines do all the work now. All they have to do is know the menu, know the right questions to ask and the right buttons to press. As far as the stores go, they are designed to get people in and out. They need to be turning customers out at a every growing pace.
The question may be, why is Starbucks so appealing to people? According to the British Economic and Social Research Council, coffee houses are comforting and welcoming places which are suitable for groups or individuals. Other things that attract the masses to Starbucks is the carefully selected music for the different times of the day, the selection of tables and chairs. So the British Economic and Social Research Council concluded by stating that coffee houses appeal to a deeper level than it may appear. Another aspect which is true with just about all large chains is the fact that the products taste the same in the United States as they taste in Japan and China. Taylor Clark attributes the love for coffee on the fact that Americans now work approximately one hundred and twenty hours more a year then they did thirty five years ago. Americans are also getting around 20% less sleep per night than Americans a century ago. This leads to the feeling of the need of Caffeine and coffee is this in its most popular form.
As far as marketing goes, Starbucks has a brilliant setup. Every single cup of take away coffee that they sell is a piece of walking marketing. It holds the Starbucks design and logo on. The extent of this marketing is demonstrated when a women who had never drank Starbucks coffee said that Starbucks has really good coffee – the best you can get. The answer is simple, No, Starbucks does not have the best coffee, in fact they are making use of the cheap robusta beans. They then burn the beans to such an extent and that is why Starbucks is often referred to as Charbucks. In short their roast is very dark which makes the coffee very bitter.
However, one of the things that Starbucks does not advertise or market, is the way in which they treat the coffee bean farmers in Brazil, Ethiopia and Vietnam to name a few locations. Due to the American war on Communism in Vietnam, the Americans thought it necessary to pay of the moral debt. They did this by funding agriculture. The Vietnamese were encouraged to farm robusta trees. They were a lot cheaper to maintain and were really low quality. The Vietnamese market was so over loaded with bad quality beans that the large America companies – such as Starbucks were willing to pay very low prices to buy the beans cheap. This basically means that the large coffee companies are becoming richer while keeping the Vietnamese in poverty. Vietnam is now the worlds second largest producer behind Brazil.
Some of America’s plantations are bad, but Brazil has swiftly risen as the market leader, not only in the amounts produced, but also in the brutality towards the plantation workers. Starbucks very seldom voluntarily does much to help the struggling coffee farmers, but on rare occasions they have taken steps to try to help improve the lives of coffee farmers, but only when consumer groups begin to prepare for boycotts and protests.
According to one of the former Starbucks CEO’s, Orin Smith said, and I quote “We changed the way people live their lives, what they do when they get up in the morning, how the reward themselves, and where they meet”. Starbucks continues to grow exponentially according to Shultz and he says that they see no slow down in this as it is growing faster than ever before.
Starbucks often uses the “avalanche” effect in order to scare competitors. What this basically means is that Starbucks might open five new stores in a city in the period of one day in order to show their power to competitors.
There is a general misconception that big stores such as Starbucks put smaller family businesses out of business. This is however not true and according to the research and reports, they in fact stimulate growth.
Starbucks fights and they dont like to loose. This is evident when they approached a small Los Angeles coffee house owner and said flat out that if he did not sell out to Starbucks, that they would surround all of his stores. This coffee shop owner declined and refused to sell out. He says that Starbucks moving in next door to his shop was the best thing that could of happened to his business. Starbucks creates a buzz which brings people from all over to the area of the shop. This boosted the small privately owned coffee houses sales dramatically.
Here’s an interesting statistic considering the Starbucks empire in the United States, 57% of American coffee houses are family owned.
Coffee is the worlds second most traded commodity. However when you add the Starbucks brand, experience and feeling, Coffee is no longer just a commodity. The United States, Starbucks’ largest market consumes approximately one third of the worlds supply of coffee (thats around 110 billion cups a year).
In closing, I would like to share a question that was asked in the Starbucked book; and it goes; which of the following locations does not have a Starbucks; a. Guantanamo Bay Naval Base in Cuba, b. A Christian church in Indiana, c. Beirut, Lebanon, d. The town of Starbuck in Washington or e. The Great Wall of China
The answer is the town of Starbuck in Washington. It is in fact a location. It is a tiny eastern town in Washington which lies 40 miles away from the closest Starbucks.
Noel Harrison
Book Review: Business the Richard Branson Way
The book – Business the Richard Branson Way (by Des Dearlove – ISBN: 978-1-841-12764-4) is a short, but never the less a great read. Its tag line is “10 secrets of the world’s greatest brand builder”.
Richard Branson is supposedly Britain’s best known entrepreneur, what is his secret? “In the modern world of business, Richard Branson stands alone. In a era dominated by strategists, he is a opportunist” Branson who is now in his fifty’s has been in many issues of the Forbes magazine which is the list of the worlds richest men. His personal wealth has been said to be estimated at over $3 billion.
Richard Branso at one stage floated his company on the stock market decided that he did not like this, so he went to a massive effort to re-privatise his company, which was a great cost to him, but it gave him back the control that he desired over his company.
His company has been called the worlds first universal brand and Branson has been tagged – The Corporate Rock star.
Branson has put much emphasis on the following four competencies;
- The ability to identify appropriate growth opportunities
- The ability to move quickly
- The Willingness to give daily management control to relatively small teams
- The ability to manage and create effective joint ventures
So here we go, Im going to give the points (very briefly though) that the book highlights as his 10 secrets to great brand building;
- Pick on someone bigger than you: “At Virgin, we have a strategy of using the credibility of our brand to challenge the dominant players in a range of industries where we believe that consumers are not getting value for money” – Richard Branson
- “Picking on the big guys is almost an article of faith for Virgin”
- The big guys are in the high profit zones, so if you pick on them, and pick at their market, there is usually big money to be made
- Virgin very often will play the under dog as it gets Virgin the positive media and the competition the big bad guys image
- Although they “fight”, Virgin does say that it is important to choose your battles
- Hit them where it hurts (use guerrilla tactics against the bigger players in the market)
- Do the hippy, hippy shake:
“Staff should come first; if it means making” 5 million euros “less, then its the right decision to make” – Richard Branson- There is more to business than just money
- Don’t dress up, rather dress down – Branson very seldom will be seen in a suit and tie, he prefers to be dressed informally
- Put the people first
- Rather than imitating, innovate
- Shake up markets that you enter - Everything is negotiable:“Anyone who thinks Virgin is a charity should think again. Branson may not be an accountant, but he has always surrounded himself with people who can do sums”
- Nice guys finish first – Bransons negotiating skills are backed by his “charm” which has been known to put the most hardend negotiators of guard
- Never take no for an answer – words such as no, never and impossible are not words that Branson will be heard saying all that often
- Talk softly, but carry a big stick – He may look nice on the outside, but apparently when you come down to doing business with him, it is not all that pleasant - Make work fun:“He captivates the pubic and employees by the unexpected prospect of making the grey world of work sparkle with fun and excitement” – Alan Mitchell
- It pays to play
- Let the employees loose – Branson has always surrounded himself with clever people (which some claim makes up for his lack of it). Branson also gives people freedom, and this has paid back well in the past
- Encourage informality
- Enthusiasm is contagious
- Make business and adventure - Do right by your brand:“I believe there is almost no limit to what a brand can do, but only if used properly” – Richard Branson
- A good brand travels
- Brand elasticity is infinite
- Love, honour and cherish your brand - Smile for the cameras:“There are some people who believe in his own charmingly haphazard way, Branson runs the slickest public relations operation in Britain” – Andrew Davidson
- Understand what the media is wanting, then give it to them
- Think in pictures
- Pop up at un-expected moments of public drama
- Be involved in public enhancement projects / philanthropy
- Know when to duck under the radar - Don’t lead sheep, herd cats:“Virgin staff are not mere hired hands. They are not managerial pawns in some gigantic chess game. They are entrepeneurs in their own right” – Richard Branson
- Be a back seat leader
- Act as a catalyst
- Surround yourself with talented people
- Encourage Chaos
- Constantly keep an eye open for new opportunities - Move faster than a speeding bullet:
“He just says Yes or No. He doesn’t spend valuable time farting about trying to convince a bunch of middle managers it’s a good idea. “ – Rowan Gormley- Avoid paralysis by analysis
- Leap before you look
- Streamline decision making
- Get plenty of help
- Don’t be afraid of making mistakes - Size does matter:“Every time a business gets too big, we start a new one. Keeping things small means keeping things personal” – Richard Branson
- Grow your own business. Branson is a builder not a buyer
- Keep it simple
- Keep HQ’s to a minimum (HQ = Headquaters)
- Ensure that the sum of the parts makes a greater whole
- Run each business as a seperate entity - Never loose the common touch:“There’s this approachability about him, not like a pop star or other business men” - Mick Brown
- Listen to people
- Don’t let sucsess go to your head
- Use your customers as consultants
- Treat everyone as a equal
- Be what people want you to be
So thats my brief summary of the book. I would reccommend that you go and buy the book, it is not expensive and is a great read for just about anyone, hopefully I did not give to much of the book away for you.
Noel Harrison
Book Review: How Toyota Became #1
The book - How Toyota became #1 (by David Magee; ISBN: 978-1-59184-179-1) in my opinion is a great book for students and business leaders and anyone else who is interested in Toyota’s amazing results over the last 70+ years (UPDATE: Toyota has just reported their first loss in approximately 70 years).
This book covers many of the Toyota systems such as the TPS (Toyota Production System) and their continuous improvement policies which include the following; (Edited from the actual book)
- Challenge: we form long-term vision, meeting challenges with courage and creativity to realise our dreams;- Values through manufacturing and delivery of products and services
- Spirit of challenge
- Long-range perspective
- Consideration in decision making - Kaizen: We improve our business operations continuously, always driving for innovation and evolution; (Kaizen: Japanese for improvement)- Kaizen mind and innovative thinking
- Building lean systems and structures
- Promoting organizational learning - Genchi Genbutsu: We practice Genchi Genbutsu (Definition: Go to the source to find the facts and make correct decisions, build consensus, and achieve goals at our best speed)- Genchi Genbutsu
- Effective consensus building
- Commitment to achievement
Another important part of their company is respect. According the the book, it is said that no matter how important you are in the company (or un-important) you are still treated with respect. So with that in mind, the following two points are made;
- Respect: We respect others, make every effort to understand each other, take responsibility, and do our best to build mutual trust;- Respect for stakeholders
- Mutual trust and mutual responsibility
- Sincere communication - Teamwork: We stimulate personal and proffesional growth, share the opportunities of development, and maximise individual and team preformance ;- Commitment to education and development
- Respect for the individual; realising consolidated power as a team
This book also talks about Toyota’s introduction into the American market (with its competitors such as Ford and General Motors.) It was an initial struggle, but once in, Toyota has become unstopable, trumping (in wonder if that phrase comes from Donald Trump? 
just joking ) both Ford, General Motors and just about any other motor car company on the planet.
It mentions how Ford and or General Motors executives make use of private jets to fly around and still recieve large (really large) bonuses, while their companies are making huge losses. Compare this to Toyota, which located their office blocks near a train station (The Japanese Head Office) so that employees can catcg the train to work, why? Because it is one of the most effecient methods of transport in Japan, and they do not believe that they should live extragantly.
Lastly, it was interesting. The executives / management do not make decisions depending on their figures of the stock exchange, they say that the the figures are a result of what they do, so they dont watch their figures as closely as Ford or General Motors might. That is when bad decisions are made in their opinion.
Anyway, I would reccommend that you buy the book and read it, it has many great principles (one that I have forgot to mention is the elimination of waste – a huge thing at Toyota, but you will have to read the book to find out more about this) which anyone can apply to their businesses, no matter how great or small.
My next book that I am reading is Choice, not Fate – The life and Times of Trevor Manuel
Noel Harrison
Book Review: Starbucked (Taylor Clark)
So I just recently finnished the book Starbucked (ISBN-10: 0-316-01348-X) by Taylor Clark who is a former alt-week writer. This book in my opinion was very interesting and showed how Starbucks did its global expansion and how they continue to grow. For those who are now thinking, “How can they grow more?” the answer is that they intent on opening approximately three times more stores than they allready have. There goal is to reach 40000 Starbucks stores of which they allready have around 13000.
One of the top guys at Starbucks says that as long as there are lines in the shops, there is enough demand to have more shops, and he suggest that the customer should not have to wait more than 3 minutes to recieve his or her order.
According to Tim Harford, “Coffee is, of course, the most important subject in the world. Taylor Clark loves it, and his witty, skeptical, and evenhanded take on the world’s most famous coffee chain is as pleasuable and addictive as an espresso.”
On the back cover of the book, they included the following interesting facts; [not quoted]
- Starbucks now opens more than 2000 coffee houses per year
- Americans drink so much coffee that scientists have detected caffeine in many of the nations rivers, lakes and bays
- Starbucks builds coffeehouses in such close proximity to each other that they can be as little as 12 feet apart
All in all, I would suggest that you read this book. Although I purchased it whilst I was in the United States, I have seen it avaliable at Wordsworth and Exclusive books in paperback.