http://www.mercurynews.com/scott-herhold/ci_15943260?IADID=Search-www.mercurynews.com-www.mercurynews.com&nclick_check=1
Quick comments triggered by the tree surgeon’s entrepreneurial experience:
May Jim prevail against the odds, as David against Goliath, bootstrapping or getting help from friends and proper capitalists, not taxes or the more costly government debt owed by taxpayers.
Taxpayer OPM, the ultimate in “other people’s money,” IS like “opium.” This potent addictive lure used by politicians and their cliques traps, clutters, and lulls businesses into false security at best; much better to prove business-viability by finding real investors and especially customers, who of their own free will and choice, supply sufficient fuel to prosper the enterprise. Leave the tax money in the hands of prospective investors and customers to make their choices and learn from them. If your resourcefulness cannot get people to freely choose to invest and especially to purchase what you offer, find something better to do.
True processes are sensible, efficient, low cost, high quality, ever improving to provide sufficient return to customers, investors, and other stakeholders who make free will choices to participate. Truth be told, governments co-opt the term “process” as a euphemism to camouflage bureaucracy which inherently coerces, enslaves, bullies, and abuses personal agency, choice and accountability.
Permit requirements and command & control standards serve big companies well as barriers to entry to impede the competitive innovations of new ventures. Big companies become addicted to taxpayer OPM as they cozy up to government monopoly power behind artificial, unnatural barriers to entry, including costly government-permitting bureaucracies. The $41K for permits is a hugely exorbitant, euphemistic tax to support government and related workers in San Jose, CA. Money wasted on this barrier to entry would have been better spent getting cash flow from customers. But at least other regions of the country and world benefit from this unnecessarily high cost of doing business in California.
How tragic to have adversarial taxpayer-draining government burden the pursuit of enterprise dedicated to meeting real needs of customers, investors, and employees. Thank you to courageous entrepreneurs whose fortitude in spite of sappy impediments of government makes so many good things possible. May we see the time when decentralized, Internet-facilitated enlightenment throws off the enslaving costly plague of excess government before the empire strikes back with more compulsory means – taxes.
Start by letting social/education entrepreneurs better serve teachers and local principals with solutions for top-down elimination of tax-funded education bureaucracies. Education consumers can finally pay teachers what they merit with funds available from the complete elimination of federal, state, and school district level bureaucracies, everything from superintendents and their supporting staff and above.
Tuesday, August 31, 2010
Wednesday, April 29, 2009
Four Season's Leadership Style and Business Model
From Book Review in WSJ, 4/29/09, "Rooms At the Top," by Laura Landro
The core reason for the Four Season's staying power, Mr. Sharp believes, is a credo that may sound almost quaint: Follow the Golden Rule. Workers, he says, are vital assets who should be treated accordingly. At most hotel companies, he notes, housekeepers, cooks, bell staff, waiters and clerks are often the lowest paid and "the least motivated people." But at the Four Seasons, those who might otherwise be considered the most expendable "had to come first," because they were the ones "who could make or break a five-star service reputation."
Turning the top-down management philosophy on its head, Mr. Sharp authorized every Four Seasons employee to solve service problems as they arose and to remedy failures on the spot. Managers were told: "Keep your egos in check and let the people who work for you shine." Mr. Sharp says that it took years to weed out of the company the many managers who disagreed with this philosophy and could only see staffers as a cost. (The chain appears to be continuing in this tradition under its new owners: It was just named to Fortune magazine's "100 Best Companies to Work For," for the 12th consecutive year.)
Another key to success was Mr. Sharp's business model. Though there were rough patches -- at one point he had to pledge his entire stake as collateral for a loan -- he eventually found a way of "growing" the business while curbing the risk. He kept investments in hotels to a small percentage of equity, signing 50-year (or longer) management contracts with property developers who owned the hotels. Four Seasons was paid a percentage of gross revenue and participated in profits.
The core reason for the Four Season's staying power, Mr. Sharp believes, is a credo that may sound almost quaint: Follow the Golden Rule. Workers, he says, are vital assets who should be treated accordingly. At most hotel companies, he notes, housekeepers, cooks, bell staff, waiters and clerks are often the lowest paid and "the least motivated people." But at the Four Seasons, those who might otherwise be considered the most expendable "had to come first," because they were the ones "who could make or break a five-star service reputation."
Turning the top-down management philosophy on its head, Mr. Sharp authorized every Four Seasons employee to solve service problems as they arose and to remedy failures on the spot. Managers were told: "Keep your egos in check and let the people who work for you shine." Mr. Sharp says that it took years to weed out of the company the many managers who disagreed with this philosophy and could only see staffers as a cost. (The chain appears to be continuing in this tradition under its new owners: It was just named to Fortune magazine's "100 Best Companies to Work For," for the 12th consecutive year.)
Another key to success was Mr. Sharp's business model. Though there were rough patches -- at one point he had to pledge his entire stake as collateral for a loan -- he eventually found a way of "growing" the business while curbing the risk. He kept investments in hotels to a small percentage of equity, signing 50-year (or longer) management contracts with property developers who owned the hotels. Four Seasons was paid a percentage of gross revenue and participated in profits.
Monday, April 20, 2009
Managing Risks - More than Meets the Eye
Prostate Cancer and FDA Politics
Their first priority should be to save patients. WSJ Editorial 4/20/09
Last week brought hopeful news for prostate cancer patients, with the biotech company Dendreon announcing that its cancer treatment Provenge improved survival and prolonged life in an important study. That may finally be enough for Provenge to win Food and Drug Administration approval, but the tragedy is that it wasn't approved years ago.
Provenge is an advanced cancer "vaccine," which stimulates the body's immune system to attack tumor cells and thereby fight off cancer on its own, instead of using chemotherapy or surgery. In an earlier placebo-controlled Phase III trial (the most rigorous kind), men with late-stage cancer who received Provenge lived a median of 25.9 months, compared with 21.4 months otherwise. After three years, 34% were alive, compared to only 11% for the control group. In March 2007, an FDA advisory panel voted 13 to 4 that there was "substantial evidence" the drug worked, and 17-0 that it was safe.
But later that year, the FDA delayed approval, ruling that the trial did not meet its criteria for statistical significance and that the patient sample was too small. So Dendreon agreed to complete another double-blind trial to FDA specifications, and Dendreon officials say the results have now met those benchmarks. The detailed results will be presented later this month.
The larger question is why Provenge wasn't made available sooner to the 30,000 American men who die each year from prostate cancer. The FDA regularly -- and pointlessly -- slow-walks potentially revolutionary therapies, relying on overly simplistic and unscientific statistical models that don't take into account the fact that some drugs may work better in certain subgroups than in others. Its regulatory blockade is especially cruel to terminally ill patients for whom drugs like Provenge may mean extra months or years of life.
These corroborating data should lead to a shift in the way the FDA evaluates innovative oncology medicines. But they almost surely won't, since the demands of bureaucratic politics to play it safe nearly always trump the needs of patients.
Their first priority should be to save patients. WSJ Editorial 4/20/09
Last week brought hopeful news for prostate cancer patients, with the biotech company Dendreon announcing that its cancer treatment Provenge improved survival and prolonged life in an important study. That may finally be enough for Provenge to win Food and Drug Administration approval, but the tragedy is that it wasn't approved years ago.
Provenge is an advanced cancer "vaccine," which stimulates the body's immune system to attack tumor cells and thereby fight off cancer on its own, instead of using chemotherapy or surgery. In an earlier placebo-controlled Phase III trial (the most rigorous kind), men with late-stage cancer who received Provenge lived a median of 25.9 months, compared with 21.4 months otherwise. After three years, 34% were alive, compared to only 11% for the control group. In March 2007, an FDA advisory panel voted 13 to 4 that there was "substantial evidence" the drug worked, and 17-0 that it was safe.
But later that year, the FDA delayed approval, ruling that the trial did not meet its criteria for statistical significance and that the patient sample was too small. So Dendreon agreed to complete another double-blind trial to FDA specifications, and Dendreon officials say the results have now met those benchmarks. The detailed results will be presented later this month.
The larger question is why Provenge wasn't made available sooner to the 30,000 American men who die each year from prostate cancer. The FDA regularly -- and pointlessly -- slow-walks potentially revolutionary therapies, relying on overly simplistic and unscientific statistical models that don't take into account the fact that some drugs may work better in certain subgroups than in others. Its regulatory blockade is especially cruel to terminally ill patients for whom drugs like Provenge may mean extra months or years of life.
These corroborating data should lead to a shift in the way the FDA evaluates innovative oncology medicines. But they almost surely won't, since the demands of bureaucratic politics to play it safe nearly always trump the needs of patients.
Trial and Error for Innovation
In Finance, Too, Learning Entails Risk
What if other innovators had given up?
By L. GORDON CROVITZ
Modern cities were built through trial and error. As architects reached upward, there was the trial of inventing a safe elevator so that buildings could become skyscrapers. Early contraptions were used in factories and mines, but when cables broke they plummeted to the bottom of the shaft. In the 1850s, Elisha Graves Otis developed a safety device to keep elevators from falling, eventually giving people the confidence to use them.
Our era may be losing the tolerance for the trial and error needed to make innovations successful. Consider the financial engineers whose mistakes led to today's financially led recession. They thought they were creating a more stable economy by applying mathematical models to markets, using new technologies of computing power and global trading. Even having lost fortunes, today they and their financial institutions are pariahs, subject to media frenzy and government regulation.
The innovators who thought up the elevator, the cotton gin and space travel didn't intend to kill or injure people as they perfected the technologies. Likewise, today's financial engineers never imagined their miscalculations could result in a global recession.
Perhaps the best person to illustrate this point is Robert Merton, the Harvard economist who won the Nobel Prize for his work that led to the options and futures markets of the 1970s that revolutionized financial markets. He was also a founder of Long-Term Capital Management, the hedge fund that became the poster child for mistakes in financial engineering in the 1990s.
Mr. Merton gave a fascinating lecture at MIT last month that deserves wider attention (the video can be viewed via The Business Insider Web site at http://bit.ly/MertonatMIT).
I asked Mr. Merton about the genesis of his talk. "There are plenty of fools and knaves in the unfolding story of the crisis," Mr. Merton said. "However, my focus was on providing some insights into what is happening in the financial arena, which are structural in their nature."
We need to figure out why the models failed. "Propagation of risk throughout the system, the potential dysfunctional elements of innovation, the limitations of models of all sorts, etc.," Mr. Merton told me, "all that would be there even if all involved in its development and management were competent, well-informed and completely ethical people."
In his lecture, Mr. Merton said this crisis was not a failure like the space shuttle Challenger disaster that could be blamed on the single factor of a faulty O-ring. Instead, many factors we're just beginning to understand, sparked by the housing bubble, led to the collapse. Risk grew across interconnected financial institutions as they bundled together assets such as mortgage-backed securities that collapsed together when volatility exceeded what the history-based models considered remotely possible. Government guarantees of deposits held by these banks, he noted, means "the government is writing a put option on a put option," making the plunge deeper.
Our fundamental problem is what Mr. Merton called the structural tension "between financial innovation and crisis." We know a lot about risk, information and probabilities, but not enough. "We've created instruments for manipulating financial risk without a thorough understanding of the underlying engineering." He compared innovations in finance to a new fast train running along tracks not yet redesigned for the speed. The value of the innovation, once perfected, outweighs the problems in the meantime.
It's easy to forget that financial derivatives have real value when applied with judgment. Businesses use them to hedge risks, from currency to the chances of a counterparty going out of business. Lenders can offer better terms by minimizing their risks, freeing up capital to support investment and economic growth. When the system seizes up, as we now see, pain spreads well beyond financial markets.
In a paper for the scientific journal of the Royal Society back in 1994, Mr. Merton warned that "any virtue can become a vice if taken to extreme, and just so with the application of mathematical models in finance practice." We know even better now that some risks can be calculated and thus reduced, while some unknowns cannot be turned into probabilities. "The mathematics of the models are precise, but the models are not, being only approximations to the complex, real world."
The measure of innovators is not in the mistakes they make, but in the lessons they learn. We now know that our complex markets need better models, which should include more humility, acknowledging that some risks are still too uncertain to measure and should be avoided. Instead of vilifying modern-day elevator engineers, we should challenge financial engineers to find fixes for what's broken.
What if other innovators had given up?
By L. GORDON CROVITZ
Modern cities were built through trial and error. As architects reached upward, there was the trial of inventing a safe elevator so that buildings could become skyscrapers. Early contraptions were used in factories and mines, but when cables broke they plummeted to the bottom of the shaft. In the 1850s, Elisha Graves Otis developed a safety device to keep elevators from falling, eventually giving people the confidence to use them.
Our era may be losing the tolerance for the trial and error needed to make innovations successful. Consider the financial engineers whose mistakes led to today's financially led recession. They thought they were creating a more stable economy by applying mathematical models to markets, using new technologies of computing power and global trading. Even having lost fortunes, today they and their financial institutions are pariahs, subject to media frenzy and government regulation.
The innovators who thought up the elevator, the cotton gin and space travel didn't intend to kill or injure people as they perfected the technologies. Likewise, today's financial engineers never imagined their miscalculations could result in a global recession.
Perhaps the best person to illustrate this point is Robert Merton, the Harvard economist who won the Nobel Prize for his work that led to the options and futures markets of the 1970s that revolutionized financial markets. He was also a founder of Long-Term Capital Management, the hedge fund that became the poster child for mistakes in financial engineering in the 1990s.
Mr. Merton gave a fascinating lecture at MIT last month that deserves wider attention (the video can be viewed via The Business Insider Web site at http://bit.ly/MertonatMIT).
I asked Mr. Merton about the genesis of his talk. "There are plenty of fools and knaves in the unfolding story of the crisis," Mr. Merton said. "However, my focus was on providing some insights into what is happening in the financial arena, which are structural in their nature."
We need to figure out why the models failed. "Propagation of risk throughout the system, the potential dysfunctional elements of innovation, the limitations of models of all sorts, etc.," Mr. Merton told me, "all that would be there even if all involved in its development and management were competent, well-informed and completely ethical people."
In his lecture, Mr. Merton said this crisis was not a failure like the space shuttle Challenger disaster that could be blamed on the single factor of a faulty O-ring. Instead, many factors we're just beginning to understand, sparked by the housing bubble, led to the collapse. Risk grew across interconnected financial institutions as they bundled together assets such as mortgage-backed securities that collapsed together when volatility exceeded what the history-based models considered remotely possible. Government guarantees of deposits held by these banks, he noted, means "the government is writing a put option on a put option," making the plunge deeper.
Our fundamental problem is what Mr. Merton called the structural tension "between financial innovation and crisis." We know a lot about risk, information and probabilities, but not enough. "We've created instruments for manipulating financial risk without a thorough understanding of the underlying engineering." He compared innovations in finance to a new fast train running along tracks not yet redesigned for the speed. The value of the innovation, once perfected, outweighs the problems in the meantime.
It's easy to forget that financial derivatives have real value when applied with judgment. Businesses use them to hedge risks, from currency to the chances of a counterparty going out of business. Lenders can offer better terms by minimizing their risks, freeing up capital to support investment and economic growth. When the system seizes up, as we now see, pain spreads well beyond financial markets.
In a paper for the scientific journal of the Royal Society back in 1994, Mr. Merton warned that "any virtue can become a vice if taken to extreme, and just so with the application of mathematical models in finance practice." We know even better now that some risks can be calculated and thus reduced, while some unknowns cannot be turned into probabilities. "The mathematics of the models are precise, but the models are not, being only approximations to the complex, real world."
The measure of innovators is not in the mistakes they make, but in the lessons they learn. We now know that our complex markets need better models, which should include more humility, acknowledging that some risks are still too uncertain to measure and should be avoided. Instead of vilifying modern-day elevator engineers, we should challenge financial engineers to find fixes for what's broken.
Thursday, April 16, 2009
Government - All or None or Some
Humanity can be categorized into four sets.
One believes in government as the solution to most problems.
A second believes that government is the cause of most problems.
A third believes in a vital, but limited role for limited government -- the solution to some problems, the cause of many others.
The fourth is everyone else.
One believes in government as the solution to most problems.
A second believes that government is the cause of most problems.
A third believes in a vital, but limited role for limited government -- the solution to some problems, the cause of many others.
The fourth is everyone else.
Wednesday, April 15, 2009
Free to Succeed / Free to Fail
You can't have one without the other. Freedom to succeed must also be freedom to fail.
Too Big to Fail
Divide it, split it up so nothing is too big to fail. Keep it more manageable.
The Requirement of Risk
If freedom to succeed must also be freedom to fail, that condition is called risk. We must have risk, the uncertainty to succeed or fail. The freedom to make choices...
Too Big to Fail
Divide it, split it up so nothing is too big to fail. Keep it more manageable.
The Requirement of Risk
If freedom to succeed must also be freedom to fail, that condition is called risk. We must have risk, the uncertainty to succeed or fail. The freedom to make choices...
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