Swiss Currency Shock: Whom to blame?

Another day, another bout of extreme market turbulence. The last cue for mayhem has been the decision by the Swiss National Bank toabandon its attempts to prevent the franc from appreciating against the euro. Given that just a month ago, the SNB said it would hold the line with the “utmost determination”, the announcement took traders by surprise. The franc soared, the euro collapsed, shares lost their gains. It was uproar.

The reason the Swiss have thrown in the towel is pretty obvious. Mario Draghi finally seems to have convinced the Germans that quantitative easing is needed to prevent the eurozone from sliding into a potential damaging period of deflation, and the European Central Bank is likely to publish plans for a sovereign bond buying programme when it meets next week.

The SNB has close links to the ECB, and knows QE is coming. It may have been tipped off that the programme will be bigger than the markets are currently expecting. As a result, the Swiss authorities saw little point in continuing to buy euros in order to keep the value of the franc at a minimum of 1.20 against the euro.

The SNB sought to soften the blow by cutting its deposit rate to minus 0.75% in the hope that would deter investors from holding francs.

That looks unlikely. There are only three ways that QE can boost activity and raise inflation: it can provide the banking system with the financial resources to boost lending; it can increase the value of government bonds which leads to lower bond yields and cheaper long-term borrowing; and it can reduce the value of a currency.

In the case of the eurozone, it seems unlikely that QE will work through either of the first two channels, which is why the Germans question its worth. Eurozone banks are already awash with cash: they are either reluctant to lend or are finding that demand for loans is weak. Bond yields are already extremely low. So the only way the ECB is going to get inflation up is by pushing down the value of the euro. That will push up prices by making imports dearer and should also boost export growth. It is fair to assume that the ECB will continue doing QE until it gets the desired exchange rate effect.

For the Swiss, that’s a far from rosy prospect. Almost half its exports go to the eurozone and they are about to become ferociously expensive. The tourist industry, for example, will find that skiers in the winter and walkers in the summer migrating to cheaper Alpine destinations in the eurozone. For the moment, the SNB has decided that it can’t buck the market. But if it continues with the policy announced on Thursday, it will kill the economy. It won’t be all that long before it is once again actively buying euros.

Failure- a luxury?

The importance of failure in innovation is all the buzz right now. Business modeling and lean startups are great ways to mitigate and manage the risk of failure. There is a great deal to be learned from failure if we choose to learn it. That’s part of the reason I think Experiment-Learn-Apply-Iterate is the new PDCA cycle of the world.

But, is failure — the freedom to fail — really a luxury? 

Stop and think about the decisions most of us have faced and will face. Seldom are they totally, completely irrevocable and permanently life altering. I’m not talking about emergency situations like  medical emergencies, etc.; I’m talking about choosing to try something we are passionate about, we want to create or make happen where failure is a definite possibility and going for it. We are basically free to fail, even if our culture doesn’t always accept failure. We try things, we experiment and if it doesn’t work, we try again. Few of our failures are life threatening or make us social outcasts forever.

In the developed world, people expect (and probably get) second, third, fourth chances. 

In our country, choosing to take a risk as described above may not be an option. A failure may not be life-threatening but may mean being permanently disowned, cast out, shunned — for you and maybe even your family, especially in cultures where there is a strong sense of saving face and shame. Your life is irreversibly altered. A failure may wipe out all your and your family’s meager assets without the possibility of a “regular” job or any chance of restitution as options, condemning your family forever.

It’s not clear to me that failure is as readily an option as it is for most of us. It seems that failure may actually be a luxury to  some in the rest of the world can’t afford.

As we toss around the word and concept of failure so nonchalantly, maybe we should understand and appreciate that perhaps it is a luxury for most people even if it’s not for us. What if the freedom to fail is a privilege and blessing not to be taken for granted? Would that increase our learning and application from failure? What if we look at our organizations, communities, countries, and cultures to see what we can do to make the freedom to fail no longer a privilege and blessing to us, but to others as well.

What do you think? What can you do?

Life as a manifestation of self awareness of the Universe and or God?

If this is our premise then our purpose is clear; to experience life and absorb it to our fullest as we are part of something much larger than ourselves.

Perhaps it is not self awareness, perhaps it is more like a monitor or even a heart or another organ. Suffice it to say our premise is we are co-dependent with the Universe; I leave the relationship of the Universe and God up to you. 

We are then an extension of the Universe, a flower if you will and if equally co-dependent then the universe is an extension of us. This is certainly consistent with harmonic balance we observe everywhere providing the contrast in states such as the various cells that make up blood, muscle and sinew. Can the universe exist in one state only or does it need a countering balance and I offer life as this harmonic opposite yet equal.

With such a premise we can imagine life throughout the universe like leaves on a tree but we can equally contend there is only one like a heart or a brain or maybe both in the same.

You look into yourself and determine if you feel connected to the universe in ways unexplained from the pain of a knee scrap or the pleasure of a love. Imagine the vast numbers of impressions life delivers from all organisms: animals, plants, bugs, viruses, bacteria and all else all absorbed by the Universe satisfying a purpose to perceive reality. We might be the only organ the Universe has in fulfilling this purpose to propagate life to sense through experience and perhaps most importantly to think.

While the Universe would benefit from the sense of a successful high jump does it not make sense it is our higher order reason the Universe compels us toward?

So if you believe you are an extension of the universe and the Universe is an extension of you then you should always remember to stop and smell the roses.

Simple.

Life and times in a pressure cooker

I have been under the weather for some time now. All of a sudden Sleeplessness has become a constant companion. Blurred thinking and clouds below eyes are telling a story.

My family and friends (specially few young ones) are helping me destressing. I have been writing regularly. Restarted little bit of poetry and yes music has come back to life.

It set me thinking, specially while travelling to home ( to meet my lovely princesses and the anchor of my life, Seema).

Last one year has been rather difficult and challenging. Some of the challenges are:
1. Constantly living away from family
2. Extended work hours ( min 14 hrs per day)
3. Above all ,most challenging assignment , bringing online new assets.

Work pressures in corporate life is not new. To some extent, it promotes excellence. But question is  how much of this is OK.  We give up some part of  ourselves (may be on permanent basis) in these situations. We will never be able to retrieve back this lost part again.

What is then the sweet spot for all of us? I am grappling with this question right now.

Something, which comes to mind immediately is to check if the contribution you are making while going through the pressure situation is worth it.

In my case, the answer seems to be yes. Bringing new assets online is exciting and challenging. It creates permanent source of employment and livelihood for people. It also adds value to the national economy.

Please keep one thing in mind, realise that the pressure is on you. This realisation itself is enough sometime.

I invite all of you to contribute your experiences and how you are tackling it.

Love to hear from you, as always.

Microsoft- Behemoth needs a change, now....

Microsoft is stagnating.  It is doing the same things the same way- result would obviously the same. Company has stopped innovating, no new products, only new versions of same product.

We dont want new version of same old windows which takes forever to boot and hangs up whenever it feels like. We want a completely new way of interacting with computers, kinesthetic may just be be one of them.

This needs complete change in the way company works and innovates. Above all it needs an incredibly smart leader and and rekindling of everlasting excellence culture.

A recent Wall Street Journal article quotes Steve Ballmer as saying: “the best way for Microsoft to enter a new era is with a new leader who will accelerate change.” Amen to that.

Since I didn’t agree when  when Mr. Ballmer took the reins, I have no personal peeve against him. In fact, I can actually feel sympathy for him. He took over an organization that had gone through a period of incredible success. With it came all of the usual problems of such success: A culture of arrogance. Competitive juices turned inward creating a deeply political environment. Complacency. Good luck trying to accelerate with those anchors hanging on the corporate ship.

And that brings us to the challenge for the new boss. He or she needs to get the organization to accelerate, yes. But the new CEO will have people who probably think they are already going as fast as they can. And they’re probably going in six different directions, or around in circles. He will have people who think they’re smarter than the new boss and who probably begrudge that they, or their mentor, didn’t get the CEO job. And he will likely be surrounded by people who will tell him that if only we do this little thing, or that little set of things, we can break out of our stall — which is a fantasy. It’s a big, heavy stall and nothing little is going to break them out of it.

Can such a large, hierarchical organization accelerate into a better future? Can it become more strategically nimble in an increasingly chaotic environment? Yes. But the problem is systemic and can’t be solved with a quick fix. As I have written about previously, we need a whole new system that enables the organization to capitalize on opportunities and dodge threats, and yet still make the numbers — a kind of dual operating system. This system is real and I have seen it in action,  but it takes real work to build.

Step one in the journey toward building this totally new way of operating at Microsoft will be creating a genuine sense of urgency around the right big, rational yet emotionally compelling opportunity. And I mean urgency not just among the 5% of “important” people. The new boss will need at least 51% of everyone. 80% would be better. This is so far from where they’re at right now. Where there is arrogance, people have no sense of urgency, and where there is politics, people, even if they do have urgency, will never have any alignment.

So, is it possible for the new boss to break Microsoft out of its slump, where for the last decade its batting average has been about .109? The answer is yes. But change will only be real and sustainable if he or she steps back to look at the whole operating system, and then focuses on the right opportunities to raise urgency.

What do you think about MS now? I know some of incredibly smart people read these entries. Your feedback would make a little bit smarter.....

Comment comment

Good one from Unreal times....

What is your take on this?

China’s Contribution To The New Global Financial Crisis

This time, my favorite topic China. But fist, few housekeeping announcements. This blog has been running sine Nov-2004. There have been 331 entries, 27130 page views and only 502 comments. Lot of this material has now become irrelevant with change of times, ethos and perceptions. In addition, I would also like to Gen Z to be part of this journey now onward. So following changes are done:

1. All entries till Dec-2014 have been safely archived. Copies of this can be had on request to shashankgoel0210@gmail.com.
2. I may also like to implement invite based access in future. Any comments?

Back to business (literally dumbos), Happened to see the following graphic in an article in FT:

The trend is very clear and  you will be committing career suicide if you hold on to the idea that China’s problems only amount to a lack of “old style” economic stimulus – and that a bit of old style stimulus is just around the corner.
It is essential that you therefore waste no more time by listening to analysts who still think that the worst things get, the more likely it is that the government will blink. We saw more evidence of this kind of thinking yesterday when analysts predicted “more easing measures” following the release of disappointing purchasing managers’ indices.
One of the potential easing measures analysts identified was another cut in interest rates.
Sorry, but this just seem to add up. The interest rate cut, which was announced on 21 November, was not about boosting growth. It was instead about easing the debt burden of companies as economic reform accelerates.
The cut in the cost of borrowing was accompanied by a widening of the range of deposit rates that banks can offer. This is a key step towards full liberalisation of the banking sector, as was another very important government announcement over the weekend: A draft plan to force banks to provide their own deposit insurance.
Widening deposit rates that banks can offer is about forcing lenders to more aggressively compete for funds from savers. This is designed to make banks exercise much better due diligence on lending.
And the deposit insurance scheme, in effect, says to lenders: “You will eventually be on your own and can and will be allowed to go bust if you continue to make bad loans. The implicit guarantee – that the government will always come to your rescue – is going to disappear.”
There is nothing short of an economic revolution taking place in China right now, which is pretty much experimental in nature – as was Deng Xiaoping’s earlier economic revolution that began in the early 1990s.
Deng’s revolution worked, but it could have gone wrong.
Xi and Li’s revolution will work in the long run, I think – but you cannot discount the possibility that it will go entirely wrong.
At the very least, this will not be a smooth transition and will involve lots of trial and error, as the potential pitfalls of bank liberalisation neatly illustrate. There will also be short term compromises to keep enough people on board, but these compromises will not indicate that the overall direction has changed.
Domestic economic growth has to be much lower as this transition takes place – and “real growth” could quite easily slip into negative territory over the next few years.
If you still don’t buy this argument, which I have been making for several years now, you don’t have to listen to me. Instead, just listen to the government.
Last week, for example, government researchers announced that:

• Government stimulus has resulted in $6.8 trillion in wasted investment since 2009.
• In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy during those two years.

The very fact that they were allowed to announce this shocking data is a sign of the iron-hard resolution of Xi and Li to complete their reforms. They are, in effect, saying to the Chinese people and the rest of the world: “What we did before didn’t work and so has to change”.
The same message has been behind the government’s much-greater openness about the scale of its environmental challenges.

The slowdown in growth that we have already seen in China is one of the triggers for the new global financial crisis (GFC) that I discussed yesterday.

There is a second “China factor” behind the new global crisis, which The Financial Times highlighted in this article on deflation.

I don’t believe that the FT went far enough. Whilst it recognised that China would “export deflation”, via its huge manufacturing surpluses, it viewed this not as a deliberate policy, but rather only really happenstance – an unintended consequence of the credit binge.

That’s right, yes. But I think China will also be forced to export deflation as a policy measure.  Gaining greater share of export markets will enable it to preserve job as growth at home continues to slow down.

As the Great Unwinding gathers pace, we must also not forget about how the impact of commodities, bought by China, that have been warehoused. Once they are sold, this will add to downward price spirals in chemicals, copper, aluminium and other commodities.
Pessimistic? No, realistic I believe – and realism will keep you in work.

Foundational values - Strength or Weakness?

Foundational values are the core of human behavior. These values are traditionally called Dharma. These values are set at the very childhood, through several influencing factors, few of them are:

1. Parental influence
2. Societal Influence
3. Educational influence

Out of these, first one is of paramount importance, because it builds the basis frame work of person's behavior. Which are then strengthened by balance two. 

Having keenly observed behaviors of many personnel, across generations, I have come to conclusion that these behaviors generally remain constant over the period. Having said that, I hasten to add that changes happen, but are triggered by some event.

Problem with foundational values is that you struggle with realities of life. My personnel struggle has been in leadership domain. 

Having come from a traditional middle class family, my value system places a very high priority on respect to elders, sometimes even above excellence.

However, leadership roles force responsibility of managing direct reports who are older to me. Lot of struggle goes inside while questioning these personnel for non performance. In the past, respect always won over performance. I realized it very late but by then lot of damage was already done.

 Fortunately for me, lately, the better sense has been prevailing over me. However, I need to change even more. Some youngsters, have been helping me in this transformation by their impatient questions over the non performance.

Summarizing, foundational values are strengths only if you put right priorities them. Else, they become weakness resulting in sub par performance from individuals.

Adieu for next seven days....