Facebook Censors Free Speech?

On Friday, 22 September at 11.25pm, I shared the article below on Facebook.  It attracted one like and a comment, to which I replied. I thought nothing further of it.

The next day, I happened to glance at my Facebook page. The post had vanished! How strange.

On closer enquiry, I found that the post still existed on Facebook, but it had just disappeared from my Facebook page, which meant any visitors to my page would not be able to see it. Why might this have happened?

Well, take a look at the title of the article: “Artificial Intelligence Pioneer Calls for the Breakup of Big Tech”.

Had Facebook just censored a post which was critical to its own interests?

Facebook, along with Amazon, Apple, Google, Microsoft, and Netflix, are Big Tech. They have extensive power to shape and control the information that we share and consume. And Facebook appears to have used this power to hide a post it didn’t like. 

My blog has a limited following, so the impact of this one incident is small. But is the same thing happening elsewhere to bigger media outlets? How are the biases and priorities at Facebook shaping the way we think about the world? How authentic is the information we find on Facebook? And who may have paid to place it there?

In the context of Facebook allowing Russian fake news to influence the course of the American election, these are not hypothetical questions.

The free market usually works best, but what happens when it fails due to excessive concentration of power?

Has the same thing ever happened to you?  Please share your thoughts in the comments below.

Bitcoin Remains Resilient Despite Establishment Backlash

Just this week, JP Morgan Chase CEO Jamie Dimon came out strongly against Bitcoin.  Calling it a “fraud“, claiming that “it is worse than tulip mania”, and declaring that he will fire any employee who trades the cryptocurrency for being “stupid”. (While somewhat amusingly admitting that his daughter invests in Bitcoin.)

Also this week, several China-based Bitcoin exchanges including BTCC, ViaBTC, Yunbi, OKCoin and Huobi have been ordered to stop trading by the end of September. This news follows a decision by Chinese authorities earlier in the month to ban fundraising through Initial Coin Offerings (ICOs).

The price of Bitcoin dropped by around 32% during September, before rocketing 27% in a single day on Friday.

What’s going on here?

At least three things.

Firstly, Bitcoin can function without a trusted financial intermediary, which means it may take business away from established financial institutions like JP Morgan. Bitcoin is a cryptocurrency; that is, a digital currency which records transactions in the blockchain, a decentralised shared public ledger stored on computers connected to the Bitcoin network, and secured using cryptography. As a result, transactions can take place between any users on the network without needing to pass through a trusted financial intermediary. As it happens, JP Morgan Chase often plays the role of a financial intermediary, from which it earns substantial revenues [pdf]. This may help to explain why Jamie Dimon, the firm’s CEO, has been so critical of Bitcoin. It is a technology which could disrupt his bank’s business model, which makes it a potentially serious threat that needs to be squashed.

Secondly, Bitcoin allows anonymous transactions worldwide, which makes it difficult for governments to monitor and control. Jamie Dimon is skeptical that authorities will ever allow a currency to exist without state oversight, and this may explain China’s crackdown. China is likely concerned that people are using Bitcoin to shift money out of the country in violation of its capital controls.  China is also likely worried, and legitimately so, that Bitcoin and ICOs could be used for things like terrorism financing, money laundering, and organised crime. As cryptocurrencies like Bitcoin become more mainstream, we should expect increasing levels of government oversight and regulation. America’s SEC, Australia’s AustracJapan’s Financial Services Agency, and others have already started to do this. My feeling is that the crackdown in China may be a temporary measure, which could be followed by the People’s Bank of China issuing a brand new government backed cryptocurrency that the government is able to control.

Thirdly, unlike fiat currency, Bitcoin is designed to have a strictly limited supply. No more than 21 million Bitcoins are ever expected to be issued. Assuming people continue to have confidence in Bitcoin, this artificial scarcity will help to guarantee its value. This may explain why Bitcoin’s price increased by 27% on Friday, even though there has been a lot of negative news coming from China and Jamie Dimon.

In response to Jamie Dimon’s comments, John McAfee, CEO of MGT Capital Investments, responded by saying, “you called Bitcoin a fraud? … I’m a Bitcoin miner. We create Bitcoins. It costs over $1,000 per coin to create a Bitcoin. What does it cost to create a U.S. dollar? Which one is the fraud? Because it costs whatever the paper costs, but it costs me and other miners over $1,000 per coin. It’s called proof of work.”

Bitcoin’s artificial scarcity could encourage investors to buy Bitcoin as a hedge against inflation rather than buying dollar denominated assets like government bonds. If the market for Bitcoin becomes big enough, this could make it more costly for some governments to borrow. Traditional currencies usually experience inflation because central banks tend to print more money than is required to facilitate economic activity, leading to higher prices. Inflation allows governments to borrow money today, and repay debts in future with money that is worth a little bit less. If Bitcoin becomes a global reserve currency, some governments may face pressure to issue debt denominated in Bitcoin. As a result, they would no longer be able to print money to repay their debts. For a country like America, which controls the world’s reserve currency and runs consistent budget deficits, this would represent a significant change from the status quo.

Bitcoin remains resilient despite this week’s establishment backlash.  However, the biggest risk for Bitcoin in the short to medium term would appear to be regulatory risk. Will other governments follow China’s lead by banning Bitcoin exchanges and seeking to establish their own state backed cryptocurrencies?

My feeling is that in Western countries, the free market will prevail. However, even if this is the case, we should anticipate much more government scrutiny, supervision, and regulation going forwards.

Image: Pexels

Lest We Forget

This past week we saw violent protests in Charlottesville, USA. They deserve our attention.

A rally called “Unite the Right” had formed to prevent a statue of Robert E. Lee from being torn down. Lee was a General during the American Civil War who fought for the Confederacy, a collection of southern states that supported the continued existence of slavery.

Racial tension remains an ongoing issue within America, and in that context some have called for visible public symbols, like Confederate statues, which call to mind past conflicts and fan the flames of ongoing tensions be moved to museums or elsewhere.

Some would say this is the wrong thing to do because where do you draw the line? When do you stop removing statues? George Washington, the first President of the United States, was a slave owner. Should all of Washington’s statues also be moved to museums?  Obviously this is a nonsense argument, since the American Founding Fathers are central to America’s identity. Although, it does highlight some key questions. Is it appropriate to pull down statues? And, what is the best way to reduce racial tensions?

On its face, removing a statue might be seen as erasing history, destroying cultural heritage, or censoring ideas. Clearly it is not something that should be done lightly. However, it would seem appropriate in certain circumstances, for example if a statue is being used as a rallying point by racists, bigots, or extremists. It might be argued that pulling down a statue will in time help people to forget past conflicts and thus move forwards together. However, it is worth remembering that removing statues does not by itself remove social tensions. Ultimately, the only antidote to conflict is not collective amnesia but community forgiveness and reconciliation. It is not necessary to forget the past in order to forgive others and move forwards, and it may not even be sufficient. Research suggests that animosities can linger on long after the original facts that caused hard feelings are forgotten.

Unfortunately, these issues are highly politicised, and moving forwards together is not what most people engaged in the issue are focused on right now. The Washington Post reported that at the Charlottesville protest “[a] lone figure stood inside Emancipation Park, offering water and holding a sign that said, “Free Hugs.” Tyler Lloyd said he came hoping for a peaceful solution. The rallygoers accepted his water but declined the hugs.”

Shortly after the protests, President Trump poured gasoline on the fire by failing to clearly denounce hate speech (including pro-Nazi, anti-black, and anti-Semitic slogans) chanted by many of the protesters. In his initial address he condemned “hatred, bigotry, and violence on many sides.” While pulling down statues may not be the solution to racial tensions, it is hard to see how this amounts to hatred or bigotry when its intent is the opposite. And so, what Trump was actually doing was drawing a moral equivalence between the protesters engaging in hate speech and the counter-protesters opposing them. In response to Trump’s comments, David Duke, former Imperial Wizard of the Ku Klux Klan, tweeted “[t]hank you President Trump for your honesty & courage to tell the truth about #Charlottesville…” As if being endorsed by the KKK weren’t bad enough, a dozen CEOs also stepped down from Trump’s advisory councils in protest. As a result, the Strategy & Policy Forum and the Manufacturing Council are to be disbanded.

Are we living in base level reality, or is this one of Elon Musk’s distopian simulations?

The events surrounding Charlottesville give us a glimpse into the way Donald Trump thinks. He did not clearly denounce hate speech in his initial address, and while some have taken this to mean that Trump is a Nazi sympathiser it seems unlikely. He denounced the KKK and neo-Nazis as ‘repugnant’ two days later. However, he later defended his original morally ambiguous comments.

Trump’s willingness to spin on a dime and play fast and loose with tightly held American values highlights what many people already knew: Trump is a narcissist. He is more interested in his own agenda than what anyone else thinks. This means he is willing to tacitly support those who support him (remember that the alt-right was part of his support base during the election), and will viciously attack anyone who attacks him (CNN, the Washington Post, and other ‘fake’ news organisations). Trump’s narcissism is dangerous not because he intends to hurt others, but because he is casually indifferent to the agenda of anyone who is not Trump. What this means is that there is no way to understand or predict his behaviour, expect by knowing that he will at each step along the way reliably do what suits him best at a given point in time.

So where does that leave us?

The world finds itself at a delicate moment in history when the President of the most powerful country in the world clearly prefers expediency to morality, and has publicly demonstrated a casual indifference towards overt prejudice and discrimination.

In a heartening show of resistance, during the week a video released by the US War Department in 1943 went viral. It encourages Americans not to fall for the fascist rhetoric of prejudice and division. It is a positive message and if you haven’t already watched it, I encourage you to take a look. Lest we forget.

Uncooperative

In economics, perfect competition is hailed as an ideal. It is a situation where a large number of firms each produce a similar product, and so consumers can get what they want at the lowest possible cost.

The cult of competition starts early. At certain elite high schools in Sydney, student exam scores are publicly displayed so that every student can see where they rank against each other. This information is then used to stream students into classes. Top ranked students study with other top ranked students, and bottom ranked students study with other bottom ranked students.

If the true goal were education, then it would seem reasonable for each class to contain a mix of strong and weak students so that the strong students could gain even higher mastery by teaching the weaker students. Instead, the streaming process places all of the weakest students together. Exams are less about erudition than about classification.

While elite high schools may not be providing an optimal learning environment, they are teaching their students a crucial life lesson. We are social animals, and your relative position often matters greatly. The schools will of course defend their system by pointing out, quite rightly, that ranking students encourages them to compete, and competition pushes students to achieve higher levels of performance.

Whether ranking students makes them perform better is an open question, but it certainly serves the interests of schools. Firstly, it allows schools to hothouse the best students, thereby increasing the chance that they will get into the best universities. This always forms a key pillar of an elite school’s marketing campaign to prospective parents. Secondly, it puts the students into a competitive mindset, which is just what they will need to fight for and secure the highest paying jobs. High incomes are of course necessary so that graduates can afford the school’s astronomical school fees and provide the school with generous donations in future.

“Competition” is a notion beloved by headmasters, economists, and government policy makers. In other words, by the very people who themselves do not face competitive market forces.

Would a rose by any other name smell as sweet?

Another word for “competitive” is “uncooperative”. The brutal ranking system used in our education systems pits one student against another, and makes it dangerous to help a friend gain a greater understanding of the material. Unless of course you are so gifted as to be well above your friend in the competitive ladder, or so foolish as to not be able to perceive the cutthroat game into which you have been placed. Only geniuses and fools can afford to be benevolent in a school system designed to pit child against child.

This may all be true, but these are just issues for teachers and elite high schools. How is this relevant to issues in the business world like profit, market share, and market dominance?

Well, it is common for people from all spheres of life to believe that the ends can justify the means. Certain elite high schools believe this, which leads them to hot-house students in order to get them into the most prestigious universities. Uber, the global ride-hailing firm, also believes this, which has led the firm to engage in some very questionable behaviour over the past 8 years.

Founded in 2009, Uber has followed an aggressive growth strategy which might best be described as “ask for forgiveness not permission“. The firm has expanded quickly, entering new markets in many cases before regulations were in place. This has attracted protests from taxi drivers. However, Uber’s approach has been applauded by many economists who have argued that existing laws are often unfair since they protect complacent rent-seeking taxi monopolies that profit at the expense of consumers. Unrestrained competition, after all, is the temple where economists worship.

Uber’s belief that the end justifies the means appears to be an ingrained part of its culture, and not limited to its aggressive growth strategy. In the past, Uber employees have reportedly ordered and cancelled thousands of rides with Lyft, a rival ride-hailing firm. An executive publicly suggested digging up dirt on journalists who criticised the company. Uber implemented surge pricing during various emergencies including Hurricane Sandy in 2012, the Sydney hostage crisis in 2014, and the London Bridge attack in 2017. Uber also started using a tool called Greyball in 2014 to allow its drivers to avoid giving lifts to regulators and law enforcement officers in areas where Uber is illegal.

While “success at any cost” may sound like a start-up mantra to live by, a key problem with this type of culture is that it encourages self-serving behaviour which is both reckless and irresponsible. In 2014, U.S. Senator Al Franken, Chairman of the United States Senate Judiciary Subcommittee on Privacy, Technology and the Law, stated that Uber has a “troubling disregard for customer privacy“. The following year, Uber acknowledged that driver names and license plate information of roughly 50,000 drivers had been exposed.

Waymo, the self-driving car subsidiary of Alphabet, is currently suing Uber for the alleged theft of trade secrets and patent infringement. Court documents filed this week have revealed that Kalanick was aware that Anthony Levandowski, founder of self-driving truck company Otto, was in possession of data from Google before Uber purchased Otto for $680 million.

As if all of this weren’t enough, in February Susan J. Fowler, an ex-Uber engineer, publicly claimed that she was sexually harassed while working at the company. Uber hired former Attorney General Eric Holder to look into the claims, and in June more than 20 people were fired. Last week, CEO Travis Kalanick was finally ensnared in the continuous series of scandals and resigned following demands from investors.

The problem with a culture that supports warlike competition and uncooperative behaviour is that there is no easy solution. Where people are causing harm to others through extremely self-serving behaviour, the punishment may need to be severe. In extreme cases, even the Roman Catholic Church will resort to excommunication rather than communication and forgiveness. Benjamin Edelman, Associate Professor at Harvard Business School, appears to agree with this line of thinking, and this week argued that Uber has been operating beyond the law from day one, and needs to be closed down.

Will it come to that?

While Uber lost almost $1 billion in 2016 it has raised around $15 billion from investors. As a result, it most likely still has a huge war chest. However, combine Uber’s lack of profitability with its seriously problematic corporate culture, which may take many years to change, and it seems that Uber’s troubles look set to continue for a long time to come.

In the near term, it is a promising sign that Uber has decided to adopt all of the recommendations from former Attorney General Eric Holder’s investigation. The key recommendations are extensive including a reallocation of responsibilities of the CEO, use of performance reviews for senior management, an increase in the number of independent board members, an improved human resources system, creation of a robust and effective complaint process, and redrafting the company’s cultural values.

Uber’s bold always be hustlin’ culture has produced rapid growth, but has also attracted scandals, enemies, protests, and disgust. Now would be a good time for it to adopt a more cooperative, friendly (and law abiding) approach.

5 Steps to Structuring A Professional Email

One thing they don’t teach you at university, but which every young professional needs to learn, is how to write an effective email.

Here are five (5) steps to help you successfully structure your professional emails.

Step 1: Start with a greeting

You should start your email with a greeting.

It is important to do this for three (3) reasons. Firstly, it is convention; presumably a tradition carried over from the days when people communicated via telegrams and letters. Secondly, your greeting will help the recipient identify whether the email is intended for her. Thirdly, and most importantly, a greeting personalises your email and increases the chance that the recipient will continue reading. Emails without a greeting are much more likely to be ignored.

Generally, you should include in your greeting the name of anyone whose email address appears in the To field. Although, if you are sending the email to more than three people, you can start with a more general greeting such as:

Dear all,

Hi team,

 

If you don’t know the name of the recipient, or you are sending a bulk email to multiple recipients, you can use various alternatives such as:

Dear shareholder,

Dear customer,

Dear Sir/Madam,

If your relationship with the recipient is formal, and you are emailing the person for the first time (for example, a manager, partner, client on a project, or a professional at another firm), then you can use “Dear” followed by the person’s first name. For example:

Dear Sarah,

If you are exchanging emails back and forth and the recipient has dropped the word “Dear” in response to your emails, or if you feel that some rapport has been established, then you can drop the word “Dear” and simply use the recipient’s first name. For example:

Sarah,

If you are sending an email to a friend, or if you are sending an email to a colleague who you know well and your work culture is quite casual, then you can use a more informal greeting, such as:

Hi Sarah,

Hey Sarah,

Step 2: Open with a compliment, pleasantry or word of thanks

After greeting the recipient, you should open your email with a compliment, pleasantry or word of thanks. This is polite, and will make the recipient more receptive to your message.

If you are writing to someone you don’t know for the first time, then you might open your email with a compliment such as:

I enjoyed your talk about Artificial Intelligence last Friday.

I just finished reading your article about Cryptocurrency. Very insightful!

If you are writing to someone you know, you can open your email with a pleasantry such as, “Hope you are well!” or “How are things?”.

Alternatively, if you are replying to an email, then you should start by thanking the other person. For example:

Thank you for your questions.

Thank you for your prompt response.

Thanks for getting back to me.

Step 3: Communicate your message

The third thing you need to do is to communicate your message.

In doing so, there are five (5) tips to keep in mind.

1. State your purpose:

Start the substance of your email by stating your purpose. For example, you could say “We are writing in relation to …”, “We are writing to enquire about …” or “I am emailing to ask you about …”. By stating your purpose at the beginning, this will help the recipient to understand the relevance and importance of your email, to digest and understand your message, and to take action more quickly.

2. PDS:

Your email should be polite, direct and specific. Language can be ambiguous, and any uncertainty in your email will create stress and waste valuable time.

For example, instead of saying something like “We have a few comments on the documents.” you could instead say “Please see below our comments on the shareholder’s agreement.” (emphasis added)

If you are writing an email to multiple recipients, and some of them need to do something, then you should mention those specific people by name in the email.

3. Highlight key information:

Format your email and highlight key information to help the recipient scan your email and quickly digest your message. You can do this in various ways, for example:

  • Separate each paragraph by a blank line. Large unbroken blocks of text are daunting and hard to digest.
  • Bold key words.
  • If it is a long email, group information under headings.

4. Refer to attachments:

If you are attaching documents to your email, refer to them in your email; don’t just leave them hanging. For example, instead of saying “We have some comments on the business plan.” you could instead say “Please see attached our comments on the business plan.” or “We have some comments on the business plan (attached).”

5. Clarify next steps:

After the recipient has read your email, what needs to happen next? It is generally a good idea to clarify the next steps. Who needs to do what, and by when? For example:

Could you please send me your comments this evening?

Could you please write the article by Friday 31 March?

Please talk to John about the business plan, and then get back to me.

If appropriate, provide the recipient with a range of options. This will increase acceptance and allow you to better control the relationship. For example, instead of saying “We need to discuss.” you could say “Can we please have a call to discuss the shareholder’s agreement tomorrow: 10am-11am, 2pm-3pm, or 7pm-8pm?”

Step 4: Close with polite remarks

You may find yourself working on multiple deals or projects at the same time, all of which have tight deadlines. This can sometimes become very stressful. As a result, it is important to always conclude your emails on a positive and friendly note.

Your closing remarks should make it clear that the email has come to an end, and might also re-iterate your call to action.

It is best practice to conclude with some polite closing remarks and by thanking the reader. Examples of polite closing remarks include:

If you have any questions, please let me know.

I look forward to hearing from you.

Which should be followed by a word of thanks, examples of which include:

Thank you for your cooperation.

Thank you for your help with this.

Many thanks!

Step 5: End with a friendly signoff

The last step is to include an appropriate signoff along with your name.

You can select a professional signoff such as “Kind regards,”, “Best regards,” or “Sincerely,”.

Be careful to avoid casual signoffs such as “Best wishes,” or “Cheers,” unless you are good friends with the person.

If you found this article interesting or insightful, please download “How to Craft an Effective Business Email.” It contains additional information, plus a sample of an effective professional email.

(Image Source: Flickr)

Travel, Training and Mentorship

Travel, Training and Mentorship

Three significant aspects in the life of a management consultant: travel, training and mentorship.

Travel

When it comes to travel, different consulting firms have different policies. McKinsey consultants often spend Monday to Thursday at the client site with Fridays in the office. Bain and BCG often spend a lot of time with the client at the beginning and end of the project but less time in between.

Training

Consultants are the primary asset of a consulting firm, and top consulting firms invest a considerable amount on formal training and development programs.

Consultants may spend as much as eight weeks per year attending formal training sessions and conferences.

Since university courses are often overly theoretical and academic, the focus on training and development can serve as an invaluable bridge into the corporate world. This can lay a solid foundation for a career in the consulting industry, as well as open up attractive exit opportunities.

Mentorship

Consulting firms will typically assign new recruits with a formal mentor.

A mentor is responsible for overseeing professional development and can be an invaluable source of career guidance, an advocate to help you get staffed on projects and a person to champion your promotion within the firm.

In addition to having a formal mentor, junior consultants should also develop relationships with consultants throughout the firm, particularly with people who share a common area of interest or with whom they have developed a good rapport.

[For more information on the management consulting industry, download our “Guide to Management Consulting“.]

(Image Source: Flickr)

Celebrate, Motivate, Get Passionate

Three ideas for the new year.

1. Plan a Celebration

It is common at the turn of a new year to set “resolutions” for things you want to do, change, or achieve in your life.

The problem with new year’s resolutions is that, if they had been really important to you, you would have set them earlier without needing the new year as a prompt.

Achieving goals is more important than writing wish lists.

Instead of making a resolution, make a plan for a celebration you plan to have after your goal is achieved.

As Tom Peters has said, “celebrate what you want to see more of.”

2. Motivate Others

Zig Ziglar once said “people often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

It can sometimes be hard to find motivation because working towards a meaningful long term goal requires short term effort. Delayed gratification is not easy.

One way to increase your motivation is to try and motivate your family, friends and colleagues. Some of your positive energy will rub off on you.

A second reason to motivate others is that there is a limit to what you can achieve by yourself. In the long run, your success will be limited unless you can motivate and inspire other people to work with you and for you.

3. Get Passionate About A New Idea

Life is a wonderful journey.

Find a new idea, person or project to be passionate about, and set aside some time for your new passion each week.

There is no limit to what you can learn. However, for many people (especially if you are in the corporate world) their job requires them to carry out routine tasks which sap their energy or bore them half to death.

“The mind is not a vessel that needs filling, but wood that needs igniting.” (Plutarch)

Find something new to get excited about.

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”.

the-spirit-of-giving-2

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

Political Correctness Killed the Republic

political-correctness-killed-the-republic

Six months ago I predicted that Trump would most likely win the US election. The official opinion polls told the opposite story, that Hillary was the preferred candidate, but my reading of the situation was different.

It was mid-July, and I was attending a talk given by Elizabeth Economy, Director for Asia Studies at the Council on Foreign Relations in New York. Economy gave a wonderful speech, and she shared her view that a Trump victory would be truly unthinkable. This was the consensus in the room. However, despite her convictions, and the pro-Hillary audience, Economy couldn’t help smiling broadly every time she mentioned Trump’s name.

This was extremely telling.

It has been said that emotion makes people act, and logical makes them think. Trump is a man who clearly knows how to connect with people’s emotions, while Hillary is woman with a lot of knowledge, experience and intellect.

And so, it occurred to me that if a thoughtful intellectual type who strongly opposed Trump’s candidacy was having trouble resisting his charm, brand, charisma, call it what you will, then what hope had everybody else?

What hope indeed.

Donald Trump is now president-elect of the United States of America.

Who is to blame?

No single person or event is to blame, perhaps, but I believe a culture of political correctness in the West is one of the causes that has contributed towards America’s current predicament.

Let me share a brief anecdote.

A few days before the US election I shared with friends on Facebook my view that both candidates were bad choices for president.

On the one hand, Donald Trump, a man who hurls abuse at Mexicans, Muslims and anyone who tries to challenge him, inspires fanatical devotion in his followers and, based on everything we know about his behaviour, given the opportunity Trump will not hesitate to make a show of strength or take steps to enhance his own power. A potentially dangerous temperament.

On the other hand, Hillary Clinton, an intelligent, hard-working and ambitious career politician who has survived and thrived in a broken political system by adopting a public and private persona, and at times appears to have placed pragmatism over principle (shown by her decision to accept donations to the Clinton Foundation from Qatar and Saudi Arabia, known funders of terrorism, while she was Secretary of State).

Wonderful! Two wonderful choices!

I didn’t want Trump to win, but both candidates had clear weaknesses, and I thought I had a right to comment.

Shortly after sharing these thoughts on Facebook, I deleted the post. I was under attack from a number of my pro-Hillary friends, and so I ducked for cover.

How dare I say anything negative about Hillary!!!???

How dare I indeed.

My feeling is that the political thought police are doing America and the West a grave dis-service and causing more harm than good.

What kind of societies do we want to live in?

Ones where people have to tip-toe around and only share their true thoughts in private or at the ballot box?

Or ones where ideas and issues are openly and candidly debated and discussed?

Hopefully you will agree that openness and debate are the best option.

But don’t just take my word for it. Have a listen to the wise and amusing words of Jonathan Pie (the satirical news reporter played by Tom Walker). Foul language warning! You might not want to play this if you are in the workplace, or if you are sensitive to the F-word.

(Image Source: Odyssey)

Hope

Hope

“Hope is like a path in the countryside: originally there was no path, but once people begin to pass, a way appears.” ~  Lu Xun, Chinese author

(Image Source: Flickr)

Do You Know What You Need?

Do you know

It’s what you know.

It’s not what you know, it’s who you know.

It’s not who you know, it’s who knows you.

Knowledge, networks, and branding.

You have to start somewhere, and the logical starting point is to acquire knowledge. Society understands the importance of this, which is why primary and high school education can be obtained for free in pretty much all developed countries. And in many countries, university is also heavily subsidized.

But hold on a minute, you might be thinking, many high schools are not free. In fact, they can be very expensive. Think of schools like Eton, public schools in the UK, or private schools in Australia.

It’s true that many schools are expensive, but there is a good reason for this. The parents at these schools are buying something in addition to mere knowledge. They understand the importance of surrounding their fortunate child with other fortunate children. And they are willing to pay big money for the privilege. Friendship networks are a valuable resource that can open doors to a more prosperous and enjoyable life.

However, in a world where knowledge is increasingly commoditised and friendship networks can provide counsel and support but not definite opportunities, the truly important factor is to become distinctive.

The best schools understand and educate their students in the importance of finding an interest and standing out. In Australia, I was fortunate to attend St Aloysius’ College. It was a school run by the Jesuits where students were encouraged to partake is sports, music, cadets, drama, the Duke of Edinburgh program, and all manner of other extra-curricular activities. These activities were fun but they also gave the students a unique experience and story that we could tell about themselves. A brand that the boys could continue to build at university and beyond.

I am currently teaching at a university in China, and the students also seem to have an intuitive sense that branding is crucial. While extra-curricular activities may not be quite as important as they are in Australia, the students will do almost anything to obtain an ‘A’.

Nothing could be more devastating than a ‘B+’.

Of course, after the dust has settled and the exams are finished, the student who earns the ‘A’ doesn’t necessarily know or remember more than the student with the ‘B+’. But in a country with 1.3+ billion people, the costs of failing to distinguish oneself can be high – less chance to study abroad, fewer career opportunities and, perhaps worst of all, diminished prospects for a favorable marriage.

Knowledge is mandatory and networks are helpful, but branding is key.

[Side note: Congratulations to my alma mater, Oxford University, which was ranked #1 in the latest Times Higher Education World University Rankings, which judges the performance of 980 universities across 79 countries.]

(Image Source: Flickr)

Levered Monkeys

levered-monkeys

As Oxford’s poet-philosopher Ludovic Phalippou once put it, “we are all just levered monkeys!”

What did Phalippou mean by this comment?

Well, as I explained to my corporate finance students this week, the use of debt by companies is called “financial leverage”. That is, debt acts like a lever which can magnify the size of both gains and losses.

Imagine that you are the CEO of Apple Corporation and require a return on investment of 10%. There is a new venture you can undertake that will generate a return on assets of 2%, but you can currently borrow money at an interest rate of 0%, and so you can use debt to help you achieve your required return.

You decide to go ahead with the project, and the numbers look something like this:

Venture     – Debt           = Investment
$1 million – $800,000 = $200,000

EBIT        – Interest = Income
$20,000 – $0           = $20,000

ROI = Income/Investment = 10%

Bravo!

In this very simple example (which ignores things like taxes and capital gains), you have successfully used debt to increase your return on investment from 2% to 10%.

As I mentioned in an earlier post, central banks in some of the world’s major economies are keeping interest rates at record low levels. And in a few places (like Japan, Europe, and Switzerland) interest rates are negative.

Since debt can be used to magnify investment gains, central banks are no doubt hoping that businesses will take advantage of lower interest rates to increase investment and thereby stimulate the economy.

However, record low interest rates can’t last forever.

When will central banks return interest rates to more normal levels?

This past week there was talk about whether the Fed would raise interest rates in September. Jamie Dimon, CEO of JPMorgan Chase, argued that the Fed should raise rates sooner rather than later. However, Goldman Sachs reduced the chance of an interest rate hike in September from 40 percent to 25 percent; while at the same time increasing the odds of an increase in December from 30 percent to 40 percent.

Nobody knows exactly when central banks will start to increase interest rates again, but it seems that it could happen in the not too distant future.

As the CEO of Apple Corporation, you had managed to achieve your required rate of return of 10%, and you were feeling pretty pleased with yourself. However, imagine now that the central bank decides over the course of a few short years to increase interest rates back to a more normal level of, say, 4%.

What happens to your return on investment?

Venture     – Debt           = Investment
$1 million – $800,000 = $200,000

EBIT        – Interest  = Income
$20,000 – $32,000 = -$12,000

ROI = Income/Investment = -6%

Bazinga!

As a result of rising interest rates, the return on investment for your venture has fallen to minus-6%. This is below the return on assets of 2%, and even further below your required return of 10%.

What can we learn from this simple example?

Well, one of the goals of central banks, in keeping interest rates at record low levels, is to stimulate the economy. This should work because lower interest rates reduce the required rate of return, as we saw in our example. However, by encouraging business leaders to undertake projects that offer low returns, it may be that central banks are sowing the seeds of the next downturn.

They have to raise interest rates at some point, and when they do, businesses who have taken advantage of financial leverage to pursue projects with low returns will have their losses magnified.

The more debt a business has used, the more pain it will feel.

Silly monkeys!

(Image Source: Flickr)

Capital For You and Me

capital-for-you-and-meThis past Friday marked the 40th anniversary of the passing of Mao Zedong, the founding father of the People’s Republic of China.

Most notable here in China was the absence of discussion or commentary.

This is perhaps understandable since it is Chinese government policy to celebrate past leaders’ birthdays rather than the anniversary of their passing. However, it also seems to be quite telling. According to the Wall Street Journal, one Weibo user contrasted the occasion to the 2014 anniversary of the death of Communist Party leader Hu Yaobang for whom “all kinds of media and officialdom [paid] unbridled tribute. But this year on the 40th anniversary of Mao’s death, it’s this quiet. Especially today, you don’t even see a few comments here or there.”

Why the silence?

Well, for one thing, Mao was a communist revolutionary responsible for the Great Leap Forward and the Cultural Revolution. Putting the merits of communist theory to one side, it could be argued that these initiatives were not exactly a run away success.

The Great Leap Forward (1958 to 1961) aimed to transform China by establishing agricultural collectives and pursuing rapid industrialisation, and ended up causing a period of economic decline and tens of millions of deaths.

The Cultural Revolution (1966 to 1976) aimed to maintain the communist ideology within China; a decade of violence and instability ensued.

Despite all of this, Mao remains a complex historical figure, widely regarded as the greatest Chinese figure of the 20th century, and the official government line remains that Mao was “70 percent correct and 30 percent wrong”.

It is understandable though if China’s government may want to distance itself from Mao as the years go by.

For one thing, Mao was a revolutionary, and the Communist Party would prefer to maintain stability and growth.

Over the last year, China’s GDP grew by around 6.7 percent; slow compared with historical growth rates over the last twenty years but still more than three times America’s GDP growth rate. At the current rate, the size of China’s economy will double in around ten years. This will open up new opportunities for Chinese workers, and help to lift millions of people out of poverty. At the same time, however, there are suggestions that China’s growth is being fueled by increasing amounts of debt. This could mean that current growth is unsustainable, and that lower growth and higher unemployment may be likely in future. The Communist Party are wise not to inspire a revolutionary sentiment.

Mao was also a communist, and advocated collective ownership and ideas like the removal of the class system; policies which sought to alienate people from capital assets like land and social status. These policies would have made it difficult for people to be productive or creative, resulting in economic stagnation.

China’s current growth and development depend on it embracing quite a different philosophy, one that allows people to develop and accumulate capital (whether it be intellectual, social, financial, natural, physical, or technological capital).

There is a common misconception that if China embraces the value of “capital” in helping people become more productive and creative, then it will need to adopt the American free market version of capitalism. This is of course not true. Germany and the Nordic countries have their own unique versions of capitalism. And China has embraced a version of state capitalism which seems appropriate given its culture and historical perspective.

Capital for you and me (and the state).

(Image Source: Wikipedia)

Surviving in a Procyclical Industry

Surviving in a Procyclical Industry

(Source: Flickr)

Management consulting is a service industry that earns its keep by serving large organisations – corporate, non-profit and government.

During economic downturns these prospective clients typically have less money, or more uncertain cash flows, and so are less likely to spend money on consulting services. As a result, consultants are vulnerable to layoffs during economic downturns.

Consultants and consulting firms can go some way towards reducing the effect of economic downturns by offering a range of services including some which are counter cyclical, that is, services which are more in demand during downturns such as restructuring and turnaround support services.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

How Empowered Are You?

Empowered

What does it mean to say that someone is “empowered”?

The Oxford dictionary defines the term as “stronger and more confident in controlling ones life”.

Key to this definition is the idea of control; that is, the ability to influence the course of events.

Roles in the community that we might think of as empowered include priests, professors, public figures, as well as sportspeople, artists and entertainers who have gained a following. People in these roles are in the business of creating and sharing different kinds of ideas: wisdom, knowledge, public announcements, entertainment, perspective and spectacle.

Each of these roles is different, but if we agree that all of them to a greater or lesser extent are “empowered”, then what can we say they have in common?

Well, for one thing, all of the people who hold these roles have a voice. That is, they have an audience who is willing to engage with their ideas.

In simple terms, then, being empowered means having a voice within the community; an audience who is willing to engage with your ideas.

How empowered are you in your life right now?

If you are not creating ideas and sharing them with people who care, then I can guess your answer.

You can start to empower yourself today by developing your ideas and putting them out into the world. You can choose whatever form you like: public speaking, music, writing, painting, poetry, physical achievement, or feats of daring. You can also choose whatever kinds of ideas best help to shine a light on your interests and aptitudes: law, finance, science, philosophy or pure entertainment and spectacle.

By empowering yourself you can gain more control over your life. And in doing so, you will then be in a better position to empower other people within your community, organisation, family or group of friends.

(Image Source: Tech Insider)

Cheap money, what is it good for?

Cheap money, what is it good for

Cheap money should help to stimulate the world economy, but is it working?

Following the leave campaign winning the Brexit referendum, which will see the UK leave the EU two years after the Prime Minister notifies the European Council of its intention to do so, there was much fear about what this would mean for the strength of the UK economy.

Mark Carney, Governor of the Bank of England, issued a statement immediately following the result in which he aimed to calm market sentiment.

He acknowledged that Brexit would result in a period of uncertainty and adjustment, but there would be no initial changes in the way people are able to travel, or in the way that products and services are sold.  In a calm demeanor, he reassured us that the Bank of England would not hesitate to take additional measures, as required.

What kind of additional measures did he have in mind?

Well, Carney went on to say specifically that “… as a backstop, and to support the functioning of the markets, the Bank of England stands ready to provide more than 250 billion pounds of additional funds through its normal market operations.”

What did he mean by this?

Well, traditionally, central banks have aimed to control monetary policy by influencing interest rates. By lowering interest rates a central bank hopes to stimulate the economy by lowering the required rate of return on business investments, which should increase the total amount of investment in the economy.

As recently as ten years ago, it was unthinkable that a responsible central bank would try to stimulate the economy by turning on the printers and pumping new money into the economy. But this is what Carney was suggesting, “the Bank of England stands ready to provide more than 250 billion pounds of additional funds“.

Since the 2008 financial crisis, central banks have increasingly resorted to this new and unconventional policy known as quantitative easing. The US has engaged in three rounds of quantitative easing, purchasing an estimated $4.5 trillion in financial assets. And the UK has also been busily printing money, purchasing more than £375 billion in financial assets.

QE is new and unconventional, but notice how carefully Carney finessed his words.

“The Bank of England stands ready to provide more than 250 billion pounds of additional funds through its normal market operations.”

There is absolutely nothing “normal” about printing money in order to prop up the economy. This behaviour was traditionally the province of banana republics like Zimbabwe and the Weimar Republic, and in both of those cases it led to rampant hyperinflation. The Bank of England’s website even acknowledges this, stating “Quantitative easing (QE) is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds.” (emphasis added)

However, mid-last week, Carney’s “normal market operations” appear to have finally hit a bump in the road.

The FT reported that the Bank of England’s new programme to buy long-dated UK government bonds had run into trouble as pension funds and insurance companies were refusing to sell. “The Bank of England fell £50m short in its gilt purchase target … , and even then only secured [as much as it did] by paying well above market price,” said Darren Bustin, head of derivatives at Royal London Asset Management.

Is the Bank of England’s money no good?

Why might these institutions be refusing to sell their long-dated bonds?

A few reasons.

Firstly, by printing money and lowering long term interest rates, the Bank of England is, in effect, siphoning money out of the pockets of old people.

Pension funds have long term liabilities which will not fall due for many years. In order to be able to provide for their members during retirement, these institutions need to buy long-dated assets, which will provide revenue over a long period of time. With interest rates continuing to fall, it makes sense that these institutions would prefer to hold onto their long term bonds, which will provide a steady stream of fixed coupon payments.

Already this year, 10-year gilt yields have fallen from 2% to a staggering low of 0.56%, which has led to worsening funding shortfalls for UK pension funds. Lower interest rates mean that pension funds expect to earn less from their bond portfolios in future, and so will be less able to pay their members’ pension entitlements. This means that employees, worried about their standard of living during retirement, are now under pressure to save even more than before (exactly the opposite of what the Bank of England is hoping to achieve).

The second reason that these institutions may be reluctant to part with their bonds in exchange for cash is that, as central banks continue to engage in quantitative easing, money is becoming increasingly worthless.

If we think of interest rates as the “price” of money, then we can see that in many countries money has never been less valuable.

Here is a list of prevailing central bank interest rates in some of the world’s major economies (as of today, August 14th 2016):

  • Bank of Japan: -0.1%
  • European Central Bank: -0.4%
  • Swiss National Bank: -0.75%
  • Sweden’s Riksbank: -0.5%
  • U.S. Federal Reserve: 0.4%
  • Bank of England: 0.25%
  • Reserve Bank of Australia: 1.5%

Cheap money should help to stimulate the world economy, but is it working?

The evidence doesn’t seem too positive.

Low rates are meant to encourage business investment, but in a low growth world where companies and governments are already heavily indebted it is easy to understand why this may not happen.  Moreover, if banks absorb the cost of negative interest rates themselves, then this lowers their profit margins and may make them less likely to lend money.

As we saw in Germany on Friday, one bank has now decided to pass on negative interest rates to its retail clients. In other words, it will now penalise thrifty individuals for having savings in the bank. If enough other banks follow this lead and make more customers pay to hold their money in the bank, then customers may start putting cash under the mattress or stashing it in a safe. This would reduce the total amount of deposits held in banks and could potentially set off a bank run.

Cheap money, what is it good for?

(Image Source: Flickr)

“Up or Out” Policy

Up or Out

(Source: Flickr)

It is common for top consulting firms to subject consultants to a rigorous “up or out” policy.

What this means is that consultants are required to advance to the next level of responsibility within a certain period of time or leave the firm.

Consultants normally receive regular performance feedback and so have frequent opportunities to gauge whether they are making satisfactory progress.

If a consultant is falling short, they will normally have opportunities to talk to their manager about areas for improvement and benchmarks to measure progress. If the consultant is unable to make the necessary headway within an agreed timeframe, they will normally be asked to resign. This extended resignation process is referred to as “counselling out”.

Consulting firms appear to employ the “up or out” policy for three reasons.

Firstly, consulting firms typically embrace a meritocratic culture, and so the “up or out” policy is a way of making sure that the best consultants advance within the firm.

Secondly, most consulting firms adopt a business model based on a pyramid organisational structure with a small number of partners at the top and a relatively large number of business analysts at the bottom. The only way to hire a constant flow of talented business analysts is to ensure that existing consultants are advancing upwards or leaving the firm.

Thirdly, top consulting firms value their alumni network and use it to drum up new business. The up or out policy ensures that this network continues to grow.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

Brevity

“Never use a long word when a diminutive one will do.” ~ George Orwell (slight mis-quote)

[Diminutive is a synonym for “small”.]

Consulting Roles

Consulting Roles

(Source: Flickr)

A consultant who enjoys a successful career progression within the consulting industry will be promoted up through the ranks and hold various different roles along the way. Job titles will vary by firm.

An entry level consultant may be called a business analyst or junior associate.

New recruits who hold an advanced degree (e.g. MBA, PhD, JD/LLB or MD) may start as an associate, senior associate or senior consultant. Many top consulting firms require analysts to pursue an MBA before being promoted to associate.

Consultants who perform well at associate level are likely to be promoted to manager, and will be responsible for managing projects and the day to day client relationship.

Managers who perform will be promoted to senior manager and then ultimately to partner level. Partners are responsible for building the business, forming new client relationships, and developing the firm’s brand and intellectual property.

[For more information on the management consulting industry, please download “The HUB’s Guide to Management Consulting“.]

End of the Republic

If I were a betting man, at this stage my money would be on Trump to win the American presidential election.

This is not an endorsement, or a show of support of any kind. I think a Trump victory would be a horrible outcome.

So, why do I think Trump has more than a 50/50 chance? And what might the implications be if he wins?

The world is currently experiencing turbulent times economically and politically.

On the economic front, things look a little grim. Government debt as a percentage of GDP in America, Japan and at least nine other countries currently exceeds 100%, and other countries like the UK, Ireland, Spain, Canada and the EU are not far behind. Add to this the unprecedented levels of disruption to the workforce that will result when driverless technology automates millions of trucking jobs and technology like Kiva automates the work of millions of factory workers. High global debt levels combined with systemically higher unemployment levels are not two things that scream “economic stability and smooth sailing ahead”.

Politically, there appear to be more than a few explosives in the tinderbox. The UK held a referendum, the result of which will almost certainly see it leave the EU (and who knows which countries might follow).  The recent attack in Nice on Bastille day led to 84 deaths when an Islamic militant drove a truck through a crowd gathered to watch some fireworks (and this is just one in a series of attacks in France and Belgium in recent months). And militants in Turkey are now trying to stage a coup.

May we live in interesting times.

Trump has already surprised the analytical and political community in America by gaining enough delegates to win the Republican nomination. He is yet to be officially nominated but tensions are mounting. Politico reports that “nearly half of GOP insiders in key battleground states … believe there’s a good chance violence will break out around next week’s Republican National Convention in Cleveland.”

In a short blog post that I published in June last year I mentioned that Donald Trump “… has announced his intention to run for the White House in 2016 … Trump is a master at manipulating media attention and getting people to talk about him …”

At that stage I thought of him merely as a reality TV star, someone who was entertaining, a famous self-promoter. The prospect of him running for President seemed like it would make for good television. Little did I consider or realise the hateful ideas he would put forth in order to whip his faithful followers into a frenzy.

As I said last June, Trump is a master of building the Trump brand. He has authored multiple books, and put his name on everything from high-rise buildings to golf courses and casinos. His years of effort in building a branding juggernaut appear to have created a seemingly unstoppable force. This view was acknowledged (and more comprehensively discussed) by Politico back in October last year.

The problem for Hillary (and the Republican candidates who Trump has already defeated) is that while she might be a strong candidate, Trump is a candidate backed by the power of a global brand that conjures an alluring tale of “unstoppable and never-ending success”. His followers are not merely supporting Trump’s candidacy, they are supporting his story. They are supporting the brand.

This might sound like a subtle distinction, but it’s not.

Let me give an example.

I recently attended a talk in Beijing entitled “Advising the Next U.S. President on China” given by Elizabeth Economy, Director for Asia Studies at the Council on Foreign Relations in New York. Ms Economy gave a wonderful speech and her view, along with the consensus in the room, was that a Trump victory would be truly unthinkable. However, despite her intellectual knowledge and conviction that Trump would be an absolute abomination, she couldn’t help smiling every time she mentioned Trump’s name.

This is extremely telling.

Trump is a man who is hurling hurtful and disgusting abuse at Mexicans, Muslims, judges, and anyone who would oppose him. And yet, when a well-meaning intellectual who opposes Trump’s candidacy mentioned his name in front of a packed audience, she smiled broadly every time.

This is not Ms Economy’s fault, but what it tells us is that the power of the Trump brand has infected even his staunchest opponents.

Intellectually she knows he is bad news, but even still she can’t resist.

And if thoughtful intellectual types are having trouble resisting Trump’s brand, what hope has everybody else?

If Trump does win, then what might the implications be for America?

Well, as I mentioned, we are living in turbulent times.

France has been in a state of emergency since the terrorist attacks in Paris last November, and plans to extend the state of emergency following the Bastille day attacks. What this means is that normal rules of law do not currently apply.

I am by no means an expert on the American political and legal system, however it is possible to imagine a similar state of emergency being called by Trump (following another inevitable terrorist attack). Conveniently, Trump might decide never to re-institute the normal rules of law and subsequently appoint himself as Emperor.

One of my colleagues here in Beijing is a Texan, and he explained to me that such a wild idea could never happen in reality because Congress would never allow it.

Maybe.

But, if the Bush family and Republican Party are collectively unable to prevent Trump from becoming the Republican nominee, then I really don’t think that Congress will be able to stand in Trump’s way.

[Please let me know your thoughts on this issue. Do you agree with me? Or are you strongly opposed?]

Harnessing Creative Energy

China comes up for criticism in modern times for stealing software technology from the West.

Software is a language (or a set of languages) which can be used to make computer hardware do marvelous things, and because software is easy to copy (or reverse engineer), it’s easy to steal.

But if there is software stealing going on in China and elsewhere, should we really be concerned about it?

Software development is currently a fertile ground for creative minds to explore because the leverage provided by billions of computers and smartphones networked over the Internet means that a single piece of software can be used to solve problems and delight millions of people. And the additional cost of reaching one extra person is basically zero.

This presents a wonderful opportunity for creative minds to make a big impact.

And when it comes to stealing software, the reality is that creative types have been stealing from each other since the dawn of time.

In ancient times, travelling minstrels would borrow each others words, using the principle that “he writeth best who stealeth best all things both great and small, for the great mind that used them first from nature stole them all.”

In more modern times, Steve Jobs adopted the philosophy of a travelling minstrel, and is well known for stealing many of his best ideas including the idea for the computer mouse which he discovered at Xerox park.

Legal protections for intellectual property like patents and copyright remain important. But not for the reasons that most people will tell you.

The common line in the media is that patents and copyright are important because they protect the innovator’s profits, and therefore protect the innovator’s incentive to invent new technology and continue innovating.

This may be part of the story, and it is certainly true that many people are interested in profit. However, the biggest innovators in history have been the people who have pushed the boundaries because they were interested in the work. People like Galileo Galilei, Leonardo Da Vinci and Steve Jobs. They were not driven by profits but by a passion for the work.

And so, if the most creative people are driven by passion, and will do the work whether they get paid or not, then why are legal protections required?

Well, at the heart of the issue would appear to be the concept of “fairness”.

Discovering new technology is difficult, but copying a technology once it exists is often a task that any fool can accomplish. And once a new technology has been copied, the production process can often be scaled up quite quickly.

What this means is that, in the absence of legal protections, a fast follower might be able to scale up more quickly than the original innovator and thereby take most of the benefits from innovation.

This seems like a very unfair outcome.

And it is not the kind of outcome that is encouraged in countries that champion innovation such as Australia, America, or the UK.

By making legal protections available for new technology, a community can give the original innovator time to scale it up and the chance to make an impact. And this is the community’s way of saying thank you for the gift of a new creation.

An issue arises though when multiple countries are innovating concurrently, each playing by a different set of rules.

Should we be concerned if new technologies are being created in America, say, and then copied and scaled up overseas?

On the one hand, this seems quite unfair. The reason that firms in Silicon Valley are able to innovate and develop new technology is that they are located in a country that supports innovation and provides appropriate legal protections. Having secured these protections, though, many of these firms then turn to foreign companies to help them scale up production. Thereby transferring employment, productive capacity and tax revenues overseas.

It is easy to see how some people might view this as unfair.

On the other hand, most Economists would argue in favour of technology transfer and the offshoring of production to low cost jurisdictions. Average labour costs in China, for example, are low relative to developed countries, and so increased production in China allows the rest of the world to benefit from cheap imports (and Chinese workers to benefit from rising wages). Many young people in China aspire to study in Western countries and buy Western products, and successful Chinese firms are likely to invest overseas. And so, by helping China to become more prosperous, America and other developed countries are helping themselves in a kind of positive feedback loop.

One thing that seems clear is that the creative process involves two separate components. Firstly, it requires some kind of creative leap, which might involve discovering a new technology, or combining existing technology in a way that people really love. Secondly, it requires a viable business model that allows the organisation to provide the new offering at a price which exceeds the cost of production, which is likely to require economies of scale and production experience.

The role of Silicon Valley firms in making the creative leap and pushing the boundaries of innovation is crucial for the creative process.  At the same time, however, it might be argued that the role played by low cost manufacturers in places like Shenzhen, China is equally crucial because it allows new offerings to be created at sufficiently low cost to allow for viable business models.

Successfully harnessing humanity’s creative energy clearly requires high levels of cooperation. Lots of people in many different organisations working in various countries across the globe.

Thinking as an Economist, I would argue without hesitation that the more globalisation, foreign direct investment and international trade we have the better it will be for everyone.

However, we need to bear in mind that organisations and their respective country governments will typically care more about their own self interest rather than obtaining the theoretical optimal solution for the world as a whole.

Thinking as a strategist, I would provide some words of caution. When an organisation is thinking about outsourcing activities that provide value for the end customer, it is important to consider how strategically important those activities might be. Will outsourcing lead to the loss of crucial knowledge that will be difficult to re-learn? Is it possible that the supplier will become a future competitor? What are the firm’s competitive advantages and will these be strengthened or weakened as a result of outsourcing? Will the new supplier benefit from economies of scale and so be difficult to compete with later if necessary?

Thinking as a government policy maker, there are some other issues that might be relevant. For example, how many jobs and how much tax revenue might be lost as a result of local firms sending production overseas? Instead of providing welfare payments to unemployed people, would it make more sense to provide subsidies and tax incentives to encourage firms to incorporate and build production capacity locally rather than overseas? Is the outsourced knowledge important for national security? Are domestic firms outsourcing production to a country whose government is uncooperative or hostile to the values of the domestic country?

We live in a world where robots and the automation of work could lead to unprecedented levels of unemployment over the coming decades.  And so, it has never been more important for individuals, firms, government and the world at large to think about how we can harness our collective creative energy.

Globalization will have a large role to play, but it will also be important for individuals, firms and our respective governments to act independently and work for the benefit for their respective stakeholders. Through cooperation, we can all be made better off.

Efficiency vs Fairness

On Thursday 23rd of June, the British people voted by a majority of 52% to 48% to leave the EU.

This is a monumental event, and it is worth trying to piece together what happened, and what some of the implications might be.

The voter turnout was strong with around 72% of voters casting a ballot. However, the results showed significant division within the UK, with different regions and demographics supporting different sides of the argument.

In England and Wales, a majority voted to leave the EU (53% and 52% respectively). However, within England itself, voters in London overwhelmingly opted to remain. Similarly, 62% and 56% of voters in Scotland and Northern Ireland voted to stay in the EU.

Perhaps even more interestingly, there were significant divides between key demographics. Regions that had a greater percentage of young people, residents with higher education, and higher median income levels were much more likely to vote to remain in the EU. Whereas, areas with older, poorer and less well educated residents overwhelmingly voted to exit the EU.

What does this tell us?

Well, some of the key arguments put forward by the “remain” campaign were about the economic benefits of staying in the EU. Leaving the EU, it was argued, would lead to increased unemployment, lower levels of investment, and lower levels of growth for the UK economy.

On a basic level, these arguments make sense. Economic theory suggests that free trade can increase the overall surplus available to producers and consumers. And investors are also much less likely to invest in a country when there is a lot of uncertainty. Reduced investment can reduce economic growth, and lead to a self-fulfilling prophecy of reduced investment, lower growth and yet still lower investment.

If these economic arguments are valid, and staying in the EU is better for the UK economy overall, then why would 52% of voters opt to leave the EU?

Well, putting the lies of the “leave” campaign to one side, I don’t believe it is particularly helpful to characterize all of the more than 17 million British people who voted to leave the EU as either stupid or racist.

If staying in the EU is good for the UK economy overall and would increase the size of the economic pie, then it may be that many of the people who voted to leave the EU don’t believe they will receive a fair slice of the pie (or any pie at all).

The referendum result highlights a growing tension in the UK and worldwide between the neo-liberal model which favours free trade and deregulation of markets, and a more social-democratic model (practiced in the Nordic countries) which aims to reduce poverty and support universally accessible public services like child care, education, old-age care, and health services.

Even large investment houses are starting to appreciate the risk posed by inequality.

Joachim Fels, a global economic adviser at Pimco, an international investment firm, wrote in a research note: “As I see it, the vote in the UK is part of a wider, more global backlash against the establishment, rising inequality and globalisation.” And Pimco has advised its clients that “… investors must start to anticipate new populist policy responses.”

Immigration was a big issue during the Brexit referendum, however I don’t believe, unlike some of my esteemed friends, that pretty much everyone who voted to leave the EU in order to limit immigration is a racist.

Lack of jobs, rising levels of economic inequality and uncertainty about the future can easily explain why many people might have wanted to limit new immigration to the UK.

That being said, economic stress can lead to high emotions and the desire to find a scapegoat for ones problems. Following the Brexit result being announced, the UK appears to have experienced an increase in racial abuse. For example, London’s metropolitan police say that they have seen a 57% increase in reporting to the “Stop Hate Crime” website.

Racism is a serious problem, but I believe it is a symptom rather than a cause of the division that we are currently witnessing in the UK.

People in the UK with the money and power to do so need to look for ways to reduce inequality and provide opportunities for the most marginalized members of their respective communities. And in doing so, they might benefit by taking a closer look at the social-democratic model adopted in the Nordic countries.

Increasing the size of the economic pie is an admirable goal, but if the system is set up in such a way that a growing number of people get no pie at all, then we shouldn’t be surprised if hungry people manage to find a way to spoil the party.

Sanitised vs Sanitary

Are you trying to build a work environment that is more sanitised or more sanitary?

There is a difference.

A sanitised work environment is generally inoffensive, and is designed to satisfy the strict (and habitually self-serving) requirements of the HR checklist.

sanitary work environment, on the other hand, is one that’s designed to be favourable for the health and proper functioning of the organisation.

Do employees have enough free time and appropriate physical space where they can meet and mingle? This is likely to be important for relaxation, stress relief and the serendipitous generation of new ideas.

Are the key working areas of the business fit for purpose?

Too often the answer is no.

Take for example a professional services firm; it could be a consulting firm, law firm or accounting firm.  The existing mantra at many professional services firms is the “open plan” office, a form of madness which takes the much needed physical space that staff need, and plonks it right in the heart of productive work areas. The result is noisy chatter, annoyance for anyone who needs to concentrate for more than 30 minutes at a stretch, increased stress levels and reduced productivity. The workspaces at your typical professional services firm will satisfy the HR checklist, but they are often not fit for purpose.

Sanitized is not the same thing as sanitary.

 

Generalist versus Specialist

Generalist versus Specialist

(Source: Flickr)

The traditional consulting career model employed by top consulting firms like McKinsey was to develop generalist consultants who could apply general business principles and frameworks across different industries, sectors and functional areas.

Clients increasingly value industry experience and specialized knowledge, and so firms are evolving the traditional consulting career model to accommodate these changing client demands.

Consulting firms often expect generalist consultants to specialize within two or three years of joining the firm. As a junior consultant you need to be pro-active in managing your career since you can quickly become pigeonholed. For example, if your first few projects relate to “big data” you could become the firm’s in-house expert and then work primarily on projects relating to big data.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

Destiny vs Destination

When things go badly, the optimist is likely to respond with a reference to forces outside her control, “our competitors got lucky this time!”

When things go well, the pessimist is likely to respond in a similar way, “I got lucky this time!”

In both situations the person is making a call to destiny.

The optimist believes that things will go well as a matter of course, and so any setbacks are explained away as temporary bad luck.

The pessimist seems to believe the opposite; every situation presents the realistic possibility of failure and defeat. And when things go well, the pessimist is just thankful for the good fortune she enjoyed this time around.

The literature on positive psychology is totally in favour of the optimist, and with good reason. By explaining away defeat, the research has shown that a person will be much more resilient, which means they will be more likely to try again next time.

Resilience is important because it can help people to achieve their goals, and to avoid depression.

The problem with this blind support for the optimist though is that it ignores the value of intellectual honesty.

Sometimes you will have bad luck, and it is obviously fine to say so.

However, sometimes you will catch a lucky break, and in these instances claiming that your success is caused by your god-given brilliance may simply be dishonest, distasteful or downright obnoxious.

The winds can change.

Seneca, the Roman Stoic philosopher, is quoted as saying that “if one does not know to which port one is sailing, no wind is favorable.”

Good luck will feel wonderful and bad luck will feel horrible, but both can be equally unfavourable if you have no ultimate destination in mind.

You might have heard Behavioural Economists talk about “outcome bias”, which means judging a decision based on the outcome (good or bad?) rather than the quality of the decision at the time it was made.

In life, as in business, we should assess the quality of our decisions by whether they stand a reasonable chance of bringing us closer to our goals.

Which port are you sailing to?

Brief History of the Consulting Industry

Brief History of the Consulting Industry

(Source: Flickr)

Executives often rely on the advice of management consultants.

Was it always this way? Where did it all begin?

The management consulting industry, as we know it, originated in America.

The very first management consulting firm was Arthur D. Little, founded all the way back in 1886 by a professor at MIT whose name was (funnily enough) Arthur D. Little.

Almost 30 years later, Booz Allen Hamilton was founded in 1914. Booz was the first management consultancy to serve both industry and government clients.

Founded in 1926, McKinsey & Company was the world’s first pure management and strategy consulting company. McKinsey is arguably the world’s most prestigious consulting firm. The culture of the firm was heavily influenced by a man named Marvin Bower, who served as managing director from 1950 to 1967. Bower believed that management consultancies should adhere to the same high professional standards as lawyers and doctors. To this day, the core guiding principle at McKinsey is professionalism.

Boston Consulting Group, arguably the world’s second most prestigious consulting firm, was founded in 1963 by Bruce Henderson. It all began when Henderson left Arthur D. Little to accept a challenge from the CEO of the Boston Safe Deposit and Trust Company to start a consulting arm for the bank.

Ten years later, in 1973, Bill Bain and others left the Boston Consulting Group to form Bain & Company, which is also one of the world’s leading consulting firms.

According to the UK Management Consultancies Association, the consulting industry in the UK began to grow quickly in the 1950s, fuelled by the arrival of the US consulting firms, a wave of new management techniques, and increased demand from clients for specialised consulting skills.

[For more information on the management consulting industry, please download “The HUB’s Guide to Management Consulting“.]

Taking Profit

I am currently living in Beijing, lecturing strategy and finance courses to undergraduates.

One observation I’ve made is that the people here are good at identifying opportunities for profit.

And I use the word profit not in a financial sense, but with the broader meaning of the French verb profiter, which means “to make the most advantage of”.

This can have positive, negative and hilarious consequences.

Here are three examples:

  1. Food is a religion here in China. There is no better example of making the most out of life than having a true appreciation of good food. (Peking duck, jiaozi and baozi are my three current favourites.)
  2. People often say that the Chinese are hard bargainers, which is true. They see how big the pie is, and, with a friendly smile, they ask for all of it. This is obviously a generalization, but I have witnessed it enough times for it to have become a familiar pattern. It can be extremely positive, for example, if the person is your friend and is helping you to bargain for a big ticket item. It can also have calamitous consequences, such as the traffic jam which is frequently caused at an intersection near my apartment because every driver tries to gain a small edge by cutting through the intersection without waiting for a green light; a complete traffic meltdown typically ensues.
  3. Opportunity knocks at the door only once (机不可失,时不再来). I was recently at a large French retail store called Auchan. I left my shopping trolley at the end of a long isle, with a few items in it, and walked down the isle to see if I needed anything. When I returned to my trolley, I noticed that my items had been neatly placed on a shelf, and the trolley was gone. It took me a half a minute to figure out what had happened … someone had stolen my trolley! The experience was so bizarre. Five minutes later and a few isles further along I spotted a middle aged Chinese lady with a huge carry bag sitting in a trolley that looked suspiciously like the one I had lost.

Sometimes you have to laugh.

We would do well though to follow the Chinese example of trying to always make the most out of life, particularly where it involves a shared positive experience or the chance to create something valuable for others (like the wonderful Chinese cuisine!).

Profite!

Disclaimer: Creating traffic jams, and stealing shopping trolleys should generally be avoided.

Consulting Jargon

Consulting Jargon

(Source: Flickr)

We have commented on consulting jargon before, but we will do it again.

Organisations hire management consultants to provide advice on their most challenging business problems. Senior management are busy people, and so consultants need to communicate as clearly as possible.

The need for clarity, however, has not prevented consultants from developing an industry jargon all of their own, which can sometimes be pretty incomprehensible to industry outsiders.

Below we outline some of the jargon that you are likely to come across in the consulting industry.

10,000 foot view: A high-level overview of the situation.

80/20 rule: A rule of thumb which holds that 80% of a business problem can be solved by focusing on 20% of the issues.

Add some color: Make it more interesting/appealing/persuasive.

Adding value: Making a contribution.

AOB: Stands for “any other business” and might be used in a meeting agenda to block out time for miscellaneous discussion.

At the end of the day: A consultant may use this phrase before summarising the main thrust of her argument.

B2B: Stands for “business to business” and indicates that a business is aiming to sell to other businesses rather than to end consumers.

B2C: Stands for “business to consumer” and indicates that a business is aiming to sell directly to consumers rather than to other businesses.

Bandwidth: Capacity to take on additional work commitments. For example, “I don’t have any bandwidth this week”.

Big 3: McKinsey, Bain and BCG.

Big 4: Deloitte, EY, KPMG, PwC.

Boil the ocean: Go overboard; undertake an excessive amount of analysis; fail to follow the 80/20 rule.

Buckets: Categories.

Buy in: Agreement; support. For example, “we need to get buy in from the client before finalising the report”.

CAGR: Compound annual growth rate.

Charge code: A unique code provided for a project which can be used to record work-related expenses.

Circle back: Follow up with someone at a later point in time.

Close the loop: Completing an item on the agenda or topic of discussion with everyone being in agreement.

Core client: A client that has a long-standing relationship with the firm.

Deck: PowerPoint slides.

Deep dive: To conduct an extensive examination of a particular issue.

Deliverable: Work product that a consultant needs to provide to her manager or the client as part of a client engagement.

Development opportunity: A professional shortcoming or area for improvement that requires attention.

Due diligence: Comprehensive examination of all relevant issues, such as a review of the client’s business or industry.

Elevator pitch: A short persuasive summary of a proposal, which leaves the listener wanting to know more.

Fact pack: A pack of information that provides the essential facts for a project/industry/company.

Granular: Focusing on the finer details, as in “this analysis needs to be more granular.”

Hard stop: A stated time after which the person will no longer be available to continue the meeting/discussion. For example, “I have a hard stop at 3 o’clock”.

Key: Critical; essential; required; important; central. For example, “the key issues are X, Y, Z.”

Let me play this back: Words used before providing a summary of the discussion from the listener’s perspective. This is a helpful technique which can allow a consultant to clarify her understanding of the key issues and at the same time sound intelligent by saying something even if the summary adds no additional insights.

Leverage: Make use of.

Low hanging fruit: Targets that are easily achievable, issues that can be quickly resolved, opportunities that can be readily exploited, or problems that are simple to solve. By picking the low hanging fruit first, consultants can demonstrate quick results, which can boost client confidence in the project and help build initial momentum.

Lots of moving parts: Complex.

Managing upwards: Providing feedback to more senior employees.

MBB: McKinsey, Bain and BCG.

MECE: Pronounced “me see”, and stands for “mutually exclusive, collectively exhaustive”. It is a principle developed at McKinsey for grouping information into distinct categories which, taken together, deal with all available options.
On the beach: In between assignments. Time spent on the beach may be spent in training or used for new business development.

On the same page: See things from the same perspective.

Opportunity cost: What you give up in order to pursue an opportunity; the value of the next best alternative.

Out of the box thinking: Lateral thinking; coming up with new ideas which don’t follow neatly from the data.

Ping: Contact someone, as in “I will ping you later via email.”

PIOUTA: Pulled it out of thin air.

Pipeline: Current and upcoming client engagements.

Production: A department of the consulting firm (often outsourced) that assists in producing material needed for presentations and meetings.

Pushback: Resistance or disagreement, as in “we received some pushback from the client.”

Right size: Downsize.

Sandwich feedback technique: A structure for providing feedback that resembles a sandwich – one positive comment, followed by a piece of constructive feedback, and ending with a positive comment.

Scope: Agreed set of deliverables for a client engagement.

Scope creep: When the client adds, or tries to add, additional deliverables which were not agreed in the initial project brief.

Sniff test: A common sense check of a particular idea, proposal or analysis.

SWAG: Some wild-ass guess.

Take the lead: Take responsibility for something, as in: “Why don’t you take the lead on this project.”

Takeaways: The key points that should remembered at the end of a discussion or meeting.

Touch base: To meet at a certain time to talk about the project.

Up or out: Many top consulting firms employ an “up or out” policy. Employees are expected to advance up to the next level of responsibility or they will be counselled out of the firm.

Work stream: The tasks that make up a project.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

Consulting or Banking

Consulting vs Banking

(Source: Google Images)

If you are a high achieving undergraduate or MBA student, then you are likely to be considering various highly paid and prestigious career options.

This post provides you with a high level comparison of management consulting and investment banking.

1. Nature of the job

Management consultants assist organisations by providing advice to address specific problems and to improve organisational performance.

Investment banks help companies raise money for various purposes including investment, acquisitions, and provision of working capital. They do this by selling stocks and bonds to public investors. Within an investment bank, the work is split into many roles including investment banking, sales and trading, equity research, risk management, operations, and technology.

People in the “investment banking” or “corporate finance” division typically help large organisations undertake merges and acquisitions. This is a front office role and normally the most prestigious and highest paid role at an investment bank.

People in the “sales and trading” division buy and sell financial products. Sales people communicate with investors to sell financial products. Traders buy and sell securities with the bank’s money with the aim of making money for the bank.

People in “equity research” review listed companies and provide buy/sell recommendations. Investment banks employ “sell-side analysts” while investment funds employ “buy-side analysts”. The research division will provide reports to the sales and trading division to inform trading activity and provide ideas to help sell financial products. The research division may also provide research to clients in the hope that they will execute trades through the bank’s sales and trading division.

Risk management is a middle/front office role which assesses the market or credit risk assumed by the bank or its clients in a particular transaction. Prior to the 2008 financial crisis the views of the risk management division in most banks were overlooked in favor of the short term profit opportunities pursued by the investment banking division (this may or may not still be the case).

Investment banks also employ people in a range of back office roles including operations and technology.

2. Salary

For fresh graduates, the base salary for investment banking is typically similar to the base salary for management consulting. However, in good years bankers typically get an end of year bonus in the range of 50% to 100% of base salary. Consultants may also receive an end of year bonus, but it will be much smaller, around 10% of base salary.

Salaries will vary by country and over time.

Below are some average base salary and bonus figures for new analysts drawn from Glassdoor for 2014/2015.

Consulting or Banking

In general, adjusting for experience level, bankers will earn more than consultants.

While there are many factors to consider when charting your career direction, if money is a deciding factor for you, then banking may be the way to go.

3. Lifestyle

Hours: Banking work hours can average 10 to 18 hours per day, while consulting work hours average around 12 hours per day.

Work hours in both industries will vary depending on various factors including client demands, the eccentricities of your boss, and where you find yourself in the deal/project lifecycle.

Travel: Bankers sometimes do roadshows to drum up support from investors, but will typically spend 90% of their time in the office.

In stark contrast, it is normal for consultants to travel up to 80% of the time.

Work culture: Consulting firms typically have a professional and collegial atmosphere where an intense client focus is combined with networking and professional development opportunities.

In comparison, investment banks are competitive and hierarchical. It is not uncommon for bosses to yell at staff for mistakes, and colleagues are less likely to lend a helping hand since everyone is competing for the same bonus pool.

4. Exit Opportunities

Consulting offers many exit opportunities including industry, academia, government and entrepreneurship. Top consulting firms make a point of keeping current employees in touch with alumni, so there are likely to be many firm sponsored networking events.

Investment banking is an excellent starting point for future careers in the finance industry including private equity and hedge funds, although less helpful if you want to pursue non-finance related exit opportunities.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

In Search Of Returns

The wonderful thing about financial markets is that they help to get funds from people who have them to people who have a productive use for them. In other words, they help to make things more efficient by enabling money to be put to good use.

The problem with financial markets, though, is that more often than not participants insist on measuring everything based on “return on investment”.

Why is this a problem?

Well, return on investment is a measure which is interested in how much cash you will get back, and how quickly. If you assume a fairly conservative required rate of return of 7%, then cash received ten years from now would be worth about half as much as cash received today.

As a result, this way of thinking focuses the mind on short term gains, and encourages us to ignore the future.

A similar problem can occur in a social setting.

The wonderful thing about community organisations is that they can bring people together, and give people with particular talents an opportunity to contribute towards a constructive goal. In other words, they make communities more effective by enabling people to put their talents to good use.

The problem with community organisations, though, is that more often than not the people who lead them insist on measuring everything based on a “social return on investment”.

What does this mean? And why is it a problem?

Well, if you are willing to come with me on this thought experiment and assume that all human life has value. Or more broadly, that all life has value, then we can quickly see how measuring things based on their “social return on investment” can lead to questionable outcomes.

Imagine, for example, that you are the bishop of a Catholic diocese based somewhere in America and a Muslim community based somewhere in the Middle East has recently been bombed by American troops causing a large number of civilian casualties.

This is certainly a human tragedy, but you may be less likely to make a public outcry than you would have been if the affected community were Catholic. In other words, since your actions earn you less social returns, you may be less likely to act.

A focus on financial returns encourages us to ignore the future, and a focus on social returns encourages us to ignore the needs of people who might benefit from our assistance the most.

In either case, by thinking about what we might get from the deal, rather than about how we can contribute, we limit our freedom to act and the chance to make the world an easier, better and more enjoyable place to live.

Is Consulting For You?

Is Consulting For You

(Source: Flickr)

Management consulting is a nice perch, but it is not for everyone.

Many people go into consulting with a plan to gain a few years of experience and then apply for B-school or pivot into industry or entrepreneurship. This is a legitimate strategy, but it can also be a cop out with many people leaving their career direction too much to chance.

The sooner you figure out what you are passionate about, the better.

One of the reasons that many applicants are attracted to the consulting industry is that consultants travel with work.

Travelling sounds like fun, but travelling for work can be a double edged sword. Constant travel, lonely hotel rooms, and an inability to plan time with family and friends can be disruptive and exhausting. Different consulting firms have different travel policies, and if travel is an important factor for your decision then look into this before applying.

Consulting is not for everyone, and one reason is that consultants work hard to provide valuable recommendations but tend not to see the fruits of their labor. Consultants often leave a client prior to implementation. For people who enjoy seeing projects through to completion, this can be unsatisfying. Clients also tend to take the credit for positive outcomes and blame consultants if things go wrong. As New York based consultant Alan Weiss would say, “If you want to be loved, get a dog.”

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

3 Ways to Distinguish Yourself

We live in an increasingly digital and technology enabled world, which is increasing the level of competition between organisations.

Why is this the case?

There are three key reasons.

Firstly, technology is helping to lower barriers to entry. It has never been easier to create new goods and services, and get them noticed by your target audience.  Whether it be a website, a blog or an iPhone app, the initial startup costs for launching a new project have never been lower. This is especially true for organisations that have software development skills and who are able to produce new digital products by drawing on their own capabilities.

Secondly, the Internet is the greatest communication device ever invented, and allows customers to find out about products quickly and easily. This means that customers have more information than ever before, and are able to switch from one organisation to another based on the benefits on offer and the asking price. Customers have more power, and so organisations need to stay on their toes.

Thirdly, the large number of startups which are being launched each year means that there are lots of failures but also lots of breakout success stories. This increases the intensity of competitive rivalry for everyone, and makes it more important for organisations to innovate where they can before someone else innovates for them.

In this world of increased competition, here are three (3) ways to distinguish yourself:

1. Brand building – tell a compelling story and build relationships with the people who care. Your story won’t resonate with everyone, but it will resonate with some people. And so the goal is to find your people, to feed them and to delight them.

2. Making old things new – iPhone apps and websites can be used to add additional value to offline products and services. One example of a company that seems to have done this quite nicely is Bluesmart. Travel bags are old news, but by redesigning the travel bag and connecting it with a user friendly iPhone app, the company has created the world’s first smart luggage and is re-imagining the travel experience.

3. Mix things up – I am currently staying in a hotel in Beijing. The reception staff have been very nice to me, but they don’t seem to be too friendly to the locals who come to stay here. The staff appear to have the mentality that they are selling beds, and so the need to smile and be friendly to customers is not part of what they are providing. This, of course, misses the point entirely. Everything you say or do is part of the experience, and part of the value that you provide to others. And so while smiling may not be a core part of your business, it doesn’t hurt to mix things up a little.

Required Consulting Skills

Required Consulting Skills

(Source: Flickr)

The consulting industry provides many services and covers many industry sectors, and so the domain knowledge and expertise that a consultant needs will vary depending on the industry focus and services that the consultant actually provides.

That being said, there are some generic skills that every consultant will need to have.

As a starting point, every consultant will need to be intelligent and energetic to cope with client expectations, a relentless travel schedule and demanding deadlines. Consultants will also need to enjoy learning since no two consulting assignments are the same. Consulting firms screen heavily for intelligence and enthusiasm during the application process. If you are not smart and energetic then breaking into and succeeding in the consulting industry may be an uphill battle.

Skills Required By Junior and Mid-level Consultants

Assuming a consultant has sufficient aptitude and the right temperament, there are also a number of generic skills that junior and mid-level consultants require, outlined below.

As you read through the list, be honest with yourself. Do you possess these skills? You don’t need to be perfect on day one, but your time is valuable and pursuing a career in consulting will be challenging if you are not well prepared.

Which areas do you need to work on?

  1. Communication skills – Consultants work in many different service areas and industry sectors. Where ever a consultant may find herself, she will need to be able to communicate clearly and persuasively. Consultants need to be able to collect information from employees, obtain client buy-in, ensure that the proposed solution is feasible, and present recommendations to senior management.
  2. People skills – Consultants work in teams and often deal with the client’s senior management team. As such, consultants need to be agreeable and pleasant to work with as well as assertive and able to influence outcomes.
  3. Quantitative skills – Consulting firms screen applicants in the interview for their quantitative skills using market sizing and maths questions. It is important for consultants to be comfortable working with numbers and using programs like Excel. Some people are better at maths than others, but all applicants can improve their maths skills through dedicated practice.
  4. Analytical skills – Consultants need the ability to collect and synthesize large amounts of information, develop a hypothesis about the client’s problem, analyze the data to uncover insights, and come up with a set of recommendations. In short, consultants require strong analytical skills.
  5. Organisational skills – Consulting assignments can be fast paced, multifaceted and chaotic, and consultants are sometimes staffed on more than one assignment. Consultants without strong organizational skills are likely to flounder.
  6. Initiative – Consultants need to be able to identify issues and take action without supervision, and to know when to ask for help. A consultant will sometimes be sent to work independently at the client site, and should be able to represent her consulting firm and make a favorable impression with the client.

Skills Required By Partners

With good core skills and a strong performance record a consultant can get promoted through the ranks. However, once she approaches partner level a consultant will also need strong sales and marketing skills if she wants to be able to sell high priced consulting services and enjoy continued success at partner level.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

9 M’s Resource Audit Checklist

An organisation’s approach to strategy will always depend on the circumstances.

Who are the organisation’s competitors? There will be existing competitors, and outsiders who might threaten to compete in future.

And who are the organisation’s customers? There will be existing customers, and larger groups that the organisation wants to target.

By understanding the external environment, an organisation will then be able to develop a strategy to achieve continued success by taking advantage of opportunities and avoiding threats.

But while understanding the business situation will obviously be very important for ongoing success, an organisation’s ability to compete will ultimately be determined by the resources and capabilities that the organisation has available to it.

In order to find out what these resources and capabilities might be, an organisation will want to carry out a systematic review; a process that might be referred to as a ‘resource audit’.

The thing about auditing is that it tends to be quite a formal process, and you want to make sure that you don’t miss anything. And so, it will be a good idea to use a checklist.

While by no means perfect, the 9 M’s Resource Audit Checklist might prove useful for the task.

The checklist categorises an organisation’s resources into nine categories; each of which, as you might of guessed, starts with the letter ‘M’:

  1. Materials: Who are the organisation’s suppliers? Does the organisation have good working relationships with them? Are they reliable and responsive? Do they provide quality inputs? How much do they cost? Do they have spare capacity? Where are they located?
  2. Machinery: What kind of plant, equipment and other tangible assets are used by the organisation to turn raw materials into finished products? What is the age, condition and utilisation rate of these asset? Are they technologically up to date? What is the likely replacement cost? What is the quality of finished products?
  3. Make-up: What is the culture and structure of the organisation? What intangible assets does the organisation possess, e.g. patents, trade marks, brands, and good will?
  4. Management: What are the skills, experience level and vision of senior management? What is the management structure and prospects for career progression? Are management loyal to the organisation, and are there programs in place to align management incentives with the long-term interests of the organisation?
  5. Management information: Does management have the ability to generate and share relevant and timely information within the organisation? Does management have the ability to easily collect and analyse information from within the organisation to support strategic decision making?
  6. Markets: What customer segments and regions does the organisation serve? What products are sold in each market? What is the market position of the organisation? What is the position and life cycle of its products?
  7. Men and women: How many staff does the organisation employ? How does the organisation attract, select and recruit new candidates? What skills do they have, and what training programs are in place to support their development? How are staff compensated, and what are wage costs as a proportion of total costs? What is the level of staff morale and labour turnover?
  8. Methods: How are activities carried out? Are they capital intensive or labour intensive? Which activities are performed in-house, and which activities are outsourced? How does the organisation handle its supply chain process, e.g. push method, pull method?
  9. Money: What is the organisation’s cash position? What is the credit period? What is the turnover period? What kind of short-term and long-term financing does the organisation have access to? What is the organisation’s debt-to-asset ratio? What are its investment plans, and how will they be funded?

What Do Consultants Do Each Day?

What Do Consultants Do Each Day

(Source: Flickr)

Consultants work on projects of varying lengths, and are often required to travel to work on site with the client.

The specific tasks that a consultant undertakes will depend on which firm she works for, the project requirements, as well as her level of seniority and experience.

Projects typically follow a predictable cycle which involves five stages: pitching, hypothesis generation, research and analysis, reporting, and implementation.

1. Pitching

Pitching involves selling the firm and its consultants to prospective clients, and includes not only sending the final proposal but also conducting industry research, investigating prospective clients, and making sales calls. Much of the pitching process at consulting firms is handled at partner level.

Consultants who are “on the beach” (that is, not staffed on a client project) may spend time researching prospective clients and supporting the firm’s marketing and business development efforts.

2. Hypothesis Generation

Prior to commencing any research or analysis, most consulting firms start by developing a case hypothesis about the specific business problem that needs to be solved. This may require a few days of brainstorming involving the consulting project team and members of the client organisation.

3. Research and Analysis

The consulting team will perform research and analysis to test its case hypothesis. This may involve gathering information from the client, conducting market surveys, attending client meetings, interviewing employees and building quantitative models.

The consulting team will use its research findings to uncover insights and develop a set of recommendations.

4. Reporting

The consulting team will usually communicate with the client organisation throughout the project at various intervals: daily, weekly, monthly.

The purpose of ongoing communication is to keep the client informed about the evolving hypothesis, get buy in about key assumptions, and make sure the consulting team is on track to meet client expectations.

The consulting team will often conclude its project by delivering a final report accompanied by a polished PowerPoint presentation.

5. Implementation

Providing recommendations is often not the end of the story, and clients often engage consultants to help implement the recommendations produced by the consulting project. Depending on the nature of the project, implementation may involve project management, software development, systems integration and testing, or post-merger integration.

[For more information on the management consulting industry, download “The HUB’s Guide to Management Consulting“.]

Scarcity or Abundance

Not enough, or more than you need.

It’s generally one, or the other.

Are you working for the money, with grand plans for what you will do when you one day finally have “enough”?

Or are you just happy to be here, every day, because you can’t believe they are paying you to do what you’d happily do for free?

Are you waiting until you have the money you think you need, before you start living the life you want?

Or, do you look each day for new ways to increase the impact you can have with the resources you already have available to you?

Do you believe that the only way for you to win is if other people lose?

Or, do you view life as a chance to collaborate, and strangers just as friends who you haven’t yet had the chance to meet?

In some sense, wealth is a mindset.

And since a mindset is something which is free for each of us to adopt, then why not choose the way of thinking which ensures that you will always have more than you need. The approach which says “I love what I do!”, “I love finding new ways to contribute!” and “tomorrow is a new chance to do it all again!”.

Types of Consulting

Types of Consulting

(Source: Flickr)

There are many different types of consulting.

As an aspiring consultant, you would be well advised to understand your options so that you can make an informed decision about which kind of consulting is right for you.

Here are five (5) of the main types of consulting that might interest you:

  1. Strategy: Think BCG, McKinsey and Bain (although it is worth noting that these firms are doing less and less “pure” strategy work and more operations, implementation and restructuring). Strategy consulting is the kind of consulting that you probably think of when people say “management consulting”. Strategy consultants work with the CEO and senior management to address strategic problems including declining profitability, growth strategy, market entry, product development, or responding to a competitive threat.
  2. Operations: While strategy consultants give recommendations about what a client “should” do, operations consultants help clients actually improve existing operations. Operations consultants might work on projects relating to supply chain management including streamlining procurement or improving manufacturing efficiency.
  3. Information Technology: In an increasingly competitive digital world organisations are increasingly looking for digital solutions. IT consultants work with the CTO and senior management to develop software solutions to improve efficiency and organisational performance.
  4. Human Resources: For many firms wages are their biggest expense and people are their biggest asset. HR consultants help organisations attract, select, train, compensate and assess employees.
  5. Economic: Economic consultants normally work with government and law firms to provide economic forecasts and expert evidence based on statistical analysis and econometric models.

[For more information on the management consulting industry, download our “Guide to Management Consulting“.]

5 Reasons It’s Okay To Say “No”

  1. If you are using your talents in a way that interests you for the benefit of other people, then that’s a good thing. Charities, non-profits and religions may come to you for aid, but it’s valid to refuse if your gifts to them would detract from the good work you are already doing
  2. Giving more than you can manage can create an imbalance in your relationships with other people, which can damage or destroy those relationships when you discover that they do not reciprocate to the same extent
  3. Saying “no” marks a boundary beyond which you are not willing or able to go right now, which helps to demonstrate your independence and enhance your identity
  4. It makes sense to put your own Oxygen mask on first. Helping other people when your own affairs are not in order can cause harm to you or harm to other people who may need to step in and rescue you
  5. One of the three necessary ingredients of a have strong personal, professional or corporate strategy is “focus”. Steve Jobs once said that “[p]eople think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”

What is Consulting?

What is Consulting

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“Consulting” is a pretty general term, and doesn’t really give you a clear idea of what consultants actually do.

The Oxford dictionary indicates that “to consult” means to “seek information or advice from someone (especially an expert)”.

In other words, consultants are people who provide expert advice.

We are interested mainly in the consultants who provide advice to organisations (corporate, non-profit and government). They are typically employed by management, and hence they tend to be called “management consultants”.

In general terms, management consulting involves providing advice to organisations with the aim of helping to improve organisational performance or solve specific business problems.

Consultants can perform a wide range of tasks including framing a business problem, synthesizing large amounts of data, undertaking research, interviewing employees, developing recommendations, and presenting findings to senior management.

Consultants can work in a wide range of industries including automotive, CPG (consumer packaged goods), chemicals, defense, electronics, financial services, healthcare, infrastructure, logistics, media, mining, oil & gas, pharmaceuticals, private equity, retail, social sector, technology, telecommunications and tourism.

Consultants can also provide many different services including growth strategy, pricing, marketing, supply chain optimization, software development, human resources management and economic forecasting.

Large full service firms like Deloitte, PwC and KPMG typically provide a wide range of consulting services across a broad range of industries. While smaller consulting firms often specialize in providing advice in a particular service area or to a specific industry.

[For more information on the management consulting industry, please download “The HUB’s Guide to Management Consulting“.]

The Great Reset?

This past week there has been fear circulating among founders and private investors who hold stock in certain early stage startups that have achieved sky-high valuations.

Why the fear?

The startups in question are privately held, meaning that the founders and early stage investors own shares in the companies, but shares have not yet been offered for sale to members of the public.

Many of these startups have achieved record valuations, based largely on a hope among investors that they will be able to sell shares in these companies to members of the public at even more inflated prices when the companies are eventually sold via IPO.

Early stage investors are willing to bet big because they are desperately searching for the next big win, the next Facebook, Airbnb or Whatsapp.  And they have been comforted by the fact that, if their optimistic expectations don’t come to pass, they should still be able to break even or turn a small profit by passing the buck onto a hapless public.

This form of aggressive investing has produced a record number of unicorns (that is, startups with a valuation of more than $1 billion). Unfortunately for all the Venture Capitalist cowboys, though, prices for tech companies in the public markets have been falling, and this has started to make unicorns that are yet to float on the stock market look over valued. Business Insider reports that “[o]ver the past year, LinkedIn shares have fallen by about 52%.”

Falling prices in the public markets means that a fear of missing out on the next big thing appears to have morphed into a fear of losing money. Early stage investors will need to reset their expectations, ignore the startup hype and return to investing basics by looking for companies with a proven business model.

A Career In Management Consulting

A Career in Management Consulting

(Source: Flickr)

Consulting is an appealing career choice for many graduates.

Consultants have the potential to travel with work, network with Fortune 500 executives, earn six figure salaries, develop high-level transferable business skills, and benefit from lucrative exit opportunities.

What’s not to like?

Well, for all its benefits, the life of a consultant is not necessarily a bed of roses.

Consultants can be placed under a lot of pressure, required to work extremely long hours, spend endless nights in lonely hotel rooms, and face the continual threat of redundancy either due to an economic downturn or the firm’s ‘up or out’ policy.

Before you embark on a career in management consulting, it is worth taking some time to understand the consulting industry and whether the requirements of the industry are likely to be a good fit with your personality and goals for the future.

[For more information on the management consulting industry, please download “The HUB’s Guide to Management Consulting“.]

False Dilemma

Harvard Business School Professor Michael Porter argued back in 1985 that there are three generic strategies that an organisation can follow to achieve above average performance.

You can operate at low cost, provide distinct value to customers, or focus on doing one of these things while targeting a specific niche in the market.

The unfortunate fallacy that Porter introduced is that he made us think of these three choices, “low cost”, “differentiation” and “focus”, as three separate strategy alternatives.

In reality, they might more accurately be thought of as three necessary ingredients of any strategy that stands a chance of thriving in the long run.

Two companies that appear to have adopted the strategy trifecta are Aldi and Ikea.

Both firms have focused on a particular market niche. Ikea provides nicely designed furniture, and Aldi provides good quality groceries.

Both firms have designed their organisations to enable them to operate at low cost and they have passed these savings on to the customer.

The additional beauty of pursuing this strategy is that delighted customers can’t help but talk about the value for money that they receive, and so the firms make further savings by being able to reduce their marketing costs.

The choice of pursuing low cost or high value is a false dilemma.

While it is true that it might be difficult to achieve both on any given day if the resources and systems are not in place, it is also true that organisations don’t exist merely at a point in time.

Most organisations exist for many years and a sound strategy is one that will make this enduring existence more certain, sustained and successful.

How To Deal With Rejection

Dealing with Rejection

(Source: Flickr)

If you have gone through the consulting interview process and are not offered a position with your target firm, then you should find out why.

There are two reasons this is important.

Firstly, getting specific feedback on your performance is the only way you can learn and improve.

Secondly, you may discover that the firm has formed an inaccurate opinion of you.  It is usually impossible to transform a rejection into an offer, but you really have nothing to lose.

If you believe that you were very close to getting an offer, then you may want to try proposing a compromise. You could offer to work for free, or on a trial basis rather than in a permanent full time position.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

The sky is falling

Back in September last year, the Wall Street Journal wrote an article about how low oil prices could lead to a global recession. An article by the Guardian last Friday repeated the sentiment with a suggestion that low oil prices could hurt the stock market.

Look out, Chicken Little, the sky is falling!

The doom and gloom argument appears to be based on two factors:

  1. Falling oil prices will hurt oil producers like Exxon and Chevron. Since these firms are large, falling profits will lead to lower share prices which in turn will pull down the market index and lead to a drop in the overall market. This would bad for shareholders;
  2. Secondly, the falling oil price will make it more difficult for oil companies to repay outstanding debts. When oil prices were high many Wall Street banks lent money to finance new drilling expeditions, and Dealogic estimates that the oil and gas industry has roughly $500 billion in outstanding debt. Increased levels of distressed debts could lead to stress in the banking sector.

Oil producers and the banks who backed their optimistic projects during the boom years will stand to lose in the new reality of low oil prices.

Luckily though the economy is composed of more than just banks and oil producers.

Richard Branson, the billionaire entrepreneur and philanthropist, provided some sound wisdom at Davos recently when he said that “oil prices are good for the consumer, they are good for most businesses. They are very good for the airline businesses. And obviously if you are an oil company they are not so good for you. But I think what the market has missed is that with oil below $30 a barrel and likely to stay there for a long time, that there is no need to try to make up a recession. This is going to be the greatest boost to the economy that you can imagine.”

In support of Branson’s view, The Economist reported on Saturday January 22nd that “the economies that have enjoyed the strongest GDP growth in the past year have .. been oil importers: India, Pakistan and countries in east Africa.” Similarly, in the IMF’s latest forecast, published on Tuesday January 19th, the economies that were spared a GDP growth downgrade — China, India, Germany, Britain, Spain and Italy — were all net oil importers.

While it is true that a slump in oil prices will produce winners and losers, and there are likely to be stormy waters ahead for countries like Brazil, Saudi Arabia, Russia and Nigeria, the good news is that the sky is not falling.

Negotiating An Offer Of Employment

Negotiating An Offer Of Employment 3

(Source: Flickr)

If you have received an offer of employment from the consulting firm of your choice, you may still want to negotiate the terms of the offer.

How should you go about doing this?

Use your bargaining power

Your ability to negotiate the terms of your offer depends on how much bargaining power you have. The consulting industry is currently experiencing growth in various markets, and so it may be possible to negotiate a more favorable employment contract.

Whatever the state of the economy, it is worth considering negotiating the terms of your offer. After you accept your offer of employment you will have virtually no bargaining power, and so the time for negotiation is beforehand.

If you are friendly and businesslike then negotiating needn’t create a negative impression, on the contrary, it demonstrates that you have a keen business sense and a healthy level of self confidence.

Obtain written confirmation

You need to obtain written confirmation of all terms that you successfully negotiate.

Terms to negotiate

There are a number of offer terms that you may want to negotiate, these include:

  1. Office location;
  2. Start date;
  3. Compensation;
  4. Starting position;
  5. Annual leave; and
  6. Offer response deadline.

1. Office location

To negotiate a change of office location, a first step might be to explain the reason for your request to the recruitment manager. If they agree to look into the matter, make sure you agree on a date to follow up with them.

If your request is turned down, try to identify a person in your target office who can vouch for the transfer. When you find someone, contact them to explain your situation and ask if there’s anything he or she can do to help you. Offer to meet with them in person.

2. Start date

In a weak economy, you may be able to negotiate a later start date. This benefits the firm by allowing them to start paying your salary later than planned.

3. Salary and bonus

Given the strong growth of the consulting industry, it may be possible to negotiate an improved remuneration package.

The best form of leverage is to have another offer that pays more money. If you are an MBA or lateral hire and your previous salary was higher then you can use this as leverage. You may be able to convince the recruiter that you are being undervalued.

4. Starting position

If the job offer is for a position at a lower level than you believe is justified given your qualifications and experience then you can ask for higher starting position. If this doesn’t work, then you might want to ask for a shorter performance review period, which will allow you to prove yourself and get promoted sooner.

5. Annual leave

If you don’t like the amount of annual leave provided, then you might want to try asking for more. If that fails, ask about the firms unpaid leave policy.

6. Offer response deadline

Consulting firms are in a war for talent and can sometimes give applicants an “exploding offer”, which expires within a very short time period.

Exploding offers are designed to pressure applicants to accept an offer as soon as possible in order to minimise the risk that the applicant accepts a more favourable offer from another employer.

If you need an extension to the offer deadline, ask for it. It’s a very common thing to get more time to make a decision.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Bricks and Mortar

Builders intuitively know that if you are building a house then you need both bricks and mortar, and they need to be arranged in a certain way in order to construct a safe, functional and attractive residence.

The bricks provide strength, the mortar holds it all together, and the architect’s plan ensures that they are arranged in an appealing way.

This seems like a common sense approach to building.

However, when it comes to building organisations in the corporate world, this basic logic regularly gets thrown by the way side.

All too often, organisations idolize super stars. The solid bricks. Those individual over-achievers who it is believed will enable organisational success.

But how much effort is spent on giving people the philosophy, community, time and space that they need to work together in a productive and harmonious way?

And how much care is taken to ensure that the right people get placed in the right parts of the organisation for maximum effect?

People are important, and talented individuals will often be able to make a big contribution. But wonderful organisations (like buildings that are able to stand the test of time) will always be more than the sum of their parts.

Accepting An Offer Of Employment

Accepting An Offer Of Employment

(Source: Flickr)

If you are offered a position with a consulting firm (and are happy with the terms of the offer) then feel free to accept it.

You can talk to the recruitment management to let them know your decision, and you will also need to sign, date, and return a copy of the offer letter.

Be sure to make a copy for your records.

If you have successfully negotiated any terms of the offer, then you need to capture the additional or amended terms in writing.

Ideally the firm should provide you with an updated offer letter reflecting the agreed terms of the offer.

However, the recruitment manager may conveniently forget to provide this, in which case you should set out the agreed terms in an email and send it to the recruitment manager.

The firm may try to wriggle out of its obligations later, and so you need to have written evidence of what was agreed.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

The Gift of Giving

The Gift of Giving

Merry Christmas to you, dear reader!

This is a special time of year when people give gifts and send messages of happiness, peace and good will to family and friends.

Christmas is a unique and valuable tradition because the practice of gift giving reminds us what life is all about.

As social animals, our identity, survival and prosperity depends on being part of groups. And by giving gifts at Christmas to the people we care about we help to build the social bonds and positive relationships which give meaning and value to our lives.

This is a positive idea that we can reflect on throughout the year.

May you have a happy and prosperous year ahead!

(Image Source: Flickr)

Fixed Thinking

Many people are afraid to fail.

Terrified of flunking a test, getting fired, having their heart broken, or being laughed at.

Loss is painful, yes, it truly can be.

The problem with this way of experiencing life, though, is that it represents fixed thinking. A belief that things can stay the same and a desire to preserve the way things were.

There is an alternative.

You can look up at the stars and appreciate the abundance of space.

You can reflect on the passing of the seasons and accept that change is constant.

You can be curious about life and cultivate a openness to new ideas and experiences.

You can have heroes and role models who remind you that, if you dare to dream big, success is possible.

You can bear with life’s changing tides and be open to new opportunities to learn, contribute and grow.

After The Interview

After The Interview

(Source: Flickr)

We have talked at length all year about consulting interviews, and in this post we provide three (3) thoughts on what to do after the interview comes to an end.

  1. Confirming the next step: To find out about the next step in the recruitment process, talk to the recruitment manager (this will probably be someone other than your interviewers).
  2. Thank you email: It is a nice courtesy to send a short thank you email to your interviewer the day after your interview. The note should thank the interviewer for her time, remind her of a few key points that you discussed, and state again why you are genuinely interested in working with the firm.
  3. Following up: If the date on which you expected to hear back from the firm has passed, then feel free to call the recruitment manager to follow up on the status of your application.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]