The Spirit of Giving

Merry Christmas!

Joyeux Noël!

Sheng Dan Kuai Le! (圣诞快乐!)

Wishing you an enjoyable day, and a happy holiday season spent with good people, surplus amounts of food and drinks, and a large number of gifts!

One idea that is firmly associated with Christmas is gift giving. This is a central part of the Christian tradition, and also has an important place in broader Western culture, which retailers are obviously happy to encourage and embrace.

The festive season’s spirit of giving provides us with a nice opportunity to revisit basic notions of “value”, “price” and “cost”.

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We can think of “value” as the benefit provided by a good or service to the end user.

Economists typically interpret this as the consumer’s “willingness of pay“. That is, the maximum amount that a consumer would be willing and able to pay for a good or service. This allows them to introduce the idea of “consumer surplus“, which is the difference between willingness to pay and the actual price level. And the notion of consumer surplus leads to the idea of “gains from trade“; the idea that both consumers and producers can be made better off if they are allowed to trade freely.

Christmas gives us a chance to re-examine this mainstream interpretation of “value”.

It is evident at this time of year that a gift’s value is often totally disconnected with how much the recipient would have been willing or able to pay for it.

Factors that might affect the value of a gift include:

  1. The strength of the relationship between the giver and receiver of the gift;
  2. Whether or not the gift is a surprise;
  3. How well the gift matches the recipient’s needs and interests;
  4. The message on the card;
  5. The decorations surrounding the gift (Xmas tree, stockings, reindeer, Nativity scene);
  6. The colourfulness of the packaging;
  7. How fun or difficult the packaging is to rip open; and
  8. The atmosphere, experience and ritual of opening gifts together with family and friends.

Christmas is a time of year when people go to great lengths to maximise the value of what they give to others, so much so that it shatters mainstream Economists’ interpretation of “value” as “willingness to pay”.

Next we can consider “price” (what a firm receives from a customer (who may or may not be the end user) in exchange for a good or service) and “cost” (what the firm needs to pay for inputs that are used to produce it).

When I studied Economics as an undergraduate at Sydney University (under such luminaries as Kunal Sengupta, Tiho Ancev, and Don Wright) it was explained to me that firms aim to maximise profits. They can do this by adjusting price and quantity in order to increase the distance between total revenue and total cost. At a minimum, I was told, they will never set a price which is lower than the average cost of producing one extra unit (that is, price will never be lower than variable cost).

At Christmas, people spend significant resources (time, money, effort, imagination) to purchase or create gifts which they then give away for free. People tend to hunt for the best “value” gift that they can find within a given budget. That is, they seek to maximise the gap between “value” and “cost”, not “price” and “cost”.  Christmas shoppers will often hunt for a bargain, but if they stumble upon a remarkable gift which exceeds their budget they will often buy it anway.

“This is far too expensive! Meh, it’s Christmas! I’ll put it on my credit card!”

Your response might be that a firm is not a family, and so this Christmas analogy is invalid.

But is it?

What would the world be like if firms thought of consumers like family members?

And, more to the point, how did many of today’s most valuable technology firms become billion dollar companies? Think of Whatsapp, Twitter, WeChat, and Facebook. They did it by trying to provide value for as many end users as possible, and only afterwards did they find a business model to sustain and grow the firm.

Merry Christmas!

Joyeux Noël!

Sheng Dan Kuai Le! (圣诞快乐!)

Image: Tom Spencer

How to make yourself work when you’re not feeling it

This is a guest post from John Cole.

Being boss doesn’t mean you get to demand results – it means creating the conditions for those results to be achieved. If you’re running your own business and are responsible for a team, you’ve probably cast a judgmental eye over some of the trendy quirks and gimmicks that your contemporaries in some of the better-known start-ups have applied to their workspaces. Yet, these environments became famous because the businesses are successful. The management at Google, Vimeo et al. recognize that staff motivation is a complex beast. No matter how devoted your employees might be, there are certain mental and physical limits that affect us all.

At this time of year, when serotonin is scarce, it’s more important than ever to ensure that your team’s work environment is conducive to sustained motivation. Perhaps you already have some reward system in place for when projects are completed, but have you considered the idea of daily rewards – before work is begun? A morning morale-booster, be it a box of donuts, a shared video or song can actually provide a dopamine hit for your staff, so that they plunge into work all the more motivated.

When you’re done with the donut solution, you can also attack from the other direction: exercise! If you have team members who like to hit the gym in the morning, do what you can to facilitate it: allow them a bit of extra time to get to work, or even consider making a deal with the local gym to get memberships as a job perk. It’s not because you want a team of buff jocks, but because exercise in the morning can actually improve motivation to work. As long as they don’t overdo things, getting the blood pumping is a good idea. This is also why you should ensure your team have regular breaks, and do what you can to help them be active on these breaks. We’re back in quirky work environment territory here: think about making a small, private space for quick bursts of activity, for example with a ping-pong table or exercise bikes.

Getting results from your team requires the use of your imagination, but it also requires engaging with the basics of how we work as human beings. Check out this infographic which covers some great motivation tricks for individuals – they’ll work for you, and with some of that innovative thinking that got you where you are today, you can use them to motivate the whole office.

John Cole is a digital nomad and freelance writer. Specialising in leadership, digital media and personal growth, his passions include world cinema and biscuits. A native Englishman, he is always on the move, but can most commonly be spotted in Norway, the UK and the Balkans.

New Focus On Women In (Fintech) Start-ups

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This is a guest post from Marguerite Arnold.

It is not just the stunning reversal of fortune for Hillary Clinton at the beginning of November which has stimulated a renewed interest in more diversity in the world of start-ups, and FinTech in particular. The conversation has been underway for quite some time.

Part of the drive for diversity, to be honest, is caused by a failure of women to rise to the top in most large businesses – including the financial services, banking or tech industries, despite a generation (at least) of trying. However, the focus on gender diversity remains, just about everywhere there is a budding FinTech start-up community. And a lot of the calls for diversity are coming from not “just” women, but men.

In Frankfurt Germany, this conversation is absolutely at the front and centre of just about every FinTech gathering right now. The Frankfurt “scene” is absolutely poised to break out on to the global stage, just because of the presence of so many highly educated, financially savvy people –from all over the world. But, as is painfully obvious, at gathering after gathering, except those ostensibly “for women”, the faces are mostly white, and with very few exceptions, all male.

As a result, there is an increasingly dedicated push to change that and for reasons that extend far beyond “political correctness”. This being Germany, there is a push to fill at least 30% of management boards with women as required by new German law that came into effect earlier in the year.

FinTech and Insuretech, in particular benefit hugely from the presence of women in senior positions for many reasons. The first is that the most successful companies in the sector succeed because they are able to define niche markets and reach them in new and often more efficient ways. While men are not incapable of figuring out how to do this, of course, having a different perspective, including unique experience and gender diversity along for the ride, is one way to succeed at this even better (no matter the community being targeted or service on offer). However, beyond service provision itself, the promise of encouraging more women to enter the FinTech industry is the new range of products their insights and experience have the potential to create. Even in the ostensibly “established” world of financial services and banking, the idea of a company (or companies) that provide services tailored to what women want is absolutely exciting. Beyond this, of course, is a wide range of products that interact with the consumer in different ways. Women play a huge role in helping to define the consumer experience – from the services themselves to how users interact with the interfaces.

As a result, there is actually no better time to be a woman in the world of start-ups. And the women who are, despite speaking and pitching to audiences still mostly made up of men , are also finding that for the first time there is a new acceptance and eager willingness to welcome them into the ranks of one of the most exciting industries on the planet right now.

You go girl!

Marguerite Arnold is an entrepreneur, author and third semester EMBA candidate at the Frankfurt School of Finance and Management.

(Image Source: Bridging the Gender Gap)

Why Getting Your MBA Gives You Confidence

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This is a guest post from Marguerite Arnold.

One of the most enduring reasons to get your MBA (or even EMBA) goes far beyond the “so-called” traditional reasons for going back to grad school (starting with increasing your pay check). It also extends much further than your expanded business network and the knowledge that you pick up along the way, including bettering how you work in teams.

The MBA experience, where-ever you get one, is also structured very differently from other graduate degrees. That is why getting your MBA, whenever you obtain it, will almost undoubtedly enhance just about any other skill set that you have.

Beyond this, however, getting your MBA is one of the best ways of building confidence – and I would add, particularly for women. I know I am not the only woman who I have talked to recently that has specifically mentioned that getting the degree, no matter one’s professional background and track record, helps you understand that business is as much a “conversation” if not “communication” with the rest of the world as it is anything else.

Part of this, I think, is that the MBA experience creates a solid framework for knowing how to “think outside the box” and to express that in terms that other business people will understand. It is not just about creating pretty PowerPoints (although you will probably find yourself doing a lot of those). It is very much about learning how to express yourself in structured terms in order to summarize complicated concepts much more simply and effectively. The ability to “speak fluently” in any language and be much better understood is, in and of itself, a confidence builder.

Presentations and team work are a big part of what you learn (or learn how to do better) – and there is no better way to learn than to try and fail. While this may not sound ideal, it is in fact a vital part of any entrepreneurial story. The skills gained from experiencing both successful and unsuccessful attempts to deal with leadership, management challenges, product launches and marketing if not defining a market itself are invaluable. The only way to understand business is to live it, and I am starting to see a difference in my classmates, and already in myself.

Part of it, I think, is that the MBA experience gives you a framework to look at your own life in a different way – in all its aspects even beyond business. It allows you to separate the idea of “failure” and “success” from personal traits and better define a life path – no matter where you find yourself on it. It certainly allows you to use different benchmarks.

As a relatively “late bloomer”, I can definitely say that the program I attended, at the Frankfurt School of Finance and Management, has allowed me to define myself differently. In one way, getting an MBA is almost like learning to tell the story better – whether it is a story about yourself or a story about a business idea, concept or initiative.

One thing I do know after a very hard year and as I head into delivering my final presentation. The process of getting my MBA has changed me, for the better. I am a more confident and capable woman, and this is an asset I can lean on no matter where, in the future, my personal and professional journey may end up taking me.

Marguerite Arnold is an entrepreneur, author and third semester EMBA candidate at the Frankfurt School of Finance and Management.

(Image Source: Frankfurt School of Finance and Management)

Why International Business Degrees Are So Important

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This is a guest post from Marguerite Arnold.

International business degrees, in particular the MBA, are of increasing importance in a world where globalization (no matter how you define it) is here to stay. If anything, despite the recent backlash against globalisation, international business people who have an understanding of different business cultures are far better prepared for the world that lies ahead.

Call it Globalization 2.0.

Getting an international business degree is important because it exposes you to different people and ideas in your classes that open your mind to how diverse individuals and teams organise themselves and get work done, which is inevitably influenced by different national cultures. Beyond that, an international business degree also opens ones eyes to new and creative approaches available for structuring companies, launching new products, and reaching consumers in new and more effective ways.

On another level, international business degrees are important because of their focus on real sustainability and how it can be achieved. This is not limited to so-called “green” sustainability (although this is an increasingly important aspect). It is understanding, quite literally, how your business translates into different languages, needs, markets, market structures and regulations.

This is even more true if you work for a global technology company.

Two recent examples: AirBNB and Uber.

Both businesses are American and, while expanding rapidly at first, they have both quickly found that the disruption they caused has eventually created huge roadblocks. In Germany, for example, both have been banned outright. As much as their business models were good at “disrupting” two very traditional industries in almost every country they entered, it was precisely this feature of both companies that caused their eventual banning in more than one market.

The export of American innovation absolutely is hitting its limits right now as national governments realize that, despite all the conveniences, there are significant negatives that come with the same that their economies just cannot absorb. And as a result, the US tech firms end up destroying the very innovation that they created in the first place. That is nowhere more obvious than in America itself right now.

Part of this conversation has been underway for decades. American companies (in particular) have found a home in almost every country. But with technology, market entry has never been easier.

In the U.S., the focus on deregulation since the 1980’s, and the ability of firms to create new technology faster than the ability of regulators to understand and regulate it is widely accepted (or at least has been up until now). How this will continue in the future, however, particularly combined with the rise of automation, is yet to be seen. To date, the ability of firms with hugely disruptive business models to change the game has been accepted domestically as a mark of American entrepreneurialism if not exceptionalism.

As the backlash against technology firms has reared its head, it is highly likely that this will be felt elsewhere, and in many places far beyond the boardroom. While misinformation is the focus of the current debate – starting with the algorithm-controlled world of editor-free curation of blogs and Facebook’s role in the distribution of “fake news” prior to the U.S. election – the broader issue is a backlash against the role of tech firms in society overall . Uber, AirBnB and the many digital work platforms for freelancers are all tech enabled business models spawned beyond the clutches of regulation – and which are now facing a global backlash.

For precisely the reason that “American innovation” has been resisted around the world and now even domestically, it is important to understand the current playing field and how things are rapidly changing. This is one of the most invaluable lessons an international business student can learn.

Marguerite Arnold is an entrepreneur, author and third semester EMBA candidate at the Frankfurt School of Finance and Management.

(Image Source: Global Business Technology)