Strategy under uncertainty

Credits - McKinsey Quarterly

At the heart of the traditional approach to strategy lies the assumption that executives, by applying a set of powerful analytic tools, can predict the future of any business accurately enough to choose a clear strategic direction for it. The process often involves underestimating uncertainty in order to lay out a vision of future events sufficiently precise to be captured in a discounted-cash-flow (DCF) analysis. When the future is truly uncertain, this approach is at best marginally helpful and at worst downright dangerous: underestimating uncertainty can lead to strategies that neither defend a company against the threats nor take advantage of the opportunities that higher levels of uncertainty provide. Another danger lies at the other extreme: if managers can't find a strategy that works under traditional analysis, they may abandon the analytical rigor of their planning process altogether and base their decisions on gut instinct.

India's growth story gone down the drain: Shankar Sharma, Chief global trading strategist, First Global

First Global's chief global trading strategist Shankar Sharma does not mince words when speaking about markets and investments. Sharma lashed out at RBI's hardline stance on interest rates and Anna Hazare's crusade against corruption. Sharma sees Europe andUS in deep debt trap and professes equities to remain a gross underperformer for many months to come. He only finds 'underwear companies' worth investing in current times. Edited excerpts: 

How do you read the situation in Europe and the US? 

Both blocs are at points of no return... I don't see any way out for them. Both have lived off fat deficits, and it's time to pay the bill. Europe at least accepts its situation. But the US has got its head buried in the sand. There is lot of talk, but no real action on reducing deficits... and if they were to indeed make cutbacks to reduce deficits and debt, the whole consumer spending-based economy will keel over. 

What is your mid-term outlook for Indian equities market? 

Five Prescriptions to Heal Economy’s Ills: Laurence Kotlikoff

http://www.bloomberg.com/news/2011-09-28/five-prescriptions-to-heal-economic-ills-commentary-by-laurence-kotlikoff.html

Desperate times call for creative measures. We’re in desperate times, but we’ve had little creative thinking from the Obama administration on how to fix the economy.

According to Ron Suskind’s new book, “Confidence Men,” Lawrence Summers, formerly the president’s chief economist, was concerned more with controlling than developing policy. No surprise. Hiring Summers was a huge mistake. But he’s gone, and the current economics team is free to think outside of Summers’s narrow, politically calculated box.

The president’s new-yet-familiar jobs bill entails more spending and more tax cuts, neither of which is affordable absent new revenue. The president wants the rich to cover the bill’s cost. House Republicans are saying no, dooming the bill to political oblivion.

What about printing more money?

If the world were a 100 people!

The following statistics are an abbreviated version of the research that we commissioned from the University of Wisconsin - Green Bay. The detailed research and source information can be found here. The statistics contained in the email that originally inspired the project have been retired, but can still be viewed here for purposes of comparison.


50 would be female
50 would be male

20 would be children
There would be 80 adults,
14 of whom would be 65 and older

There would be:
61 Asians
12 Europeans
13 Africans
14 people from

How a rogue trader crashed UBS

http://in.reuters.com/article/2011/09/26/idINIndia-59559120110926

UBS trader Kweku Adoboli arrives at City of London Magistrates Court in London September 22, 2011.

Credit: Reuters/Paul Hackett

By Emma Thomasson and Edward Taylor

ZURICH/SINGAPORE | Tue Sep 27, 2011 1:31am IST

(Reuters) - Late last Friday afternoon, as Formula One teams readied their cars for a practice session ahead of the Singapore Grand Prix, the entrance hall of the nearby Ritz-Carlton buzzed with activity.

One by one, senior executives of Swiss bank UBS entered the lobby, which is designed by Pritzker-winning architect Kevin Roche and features a soaring glass ceiling, and made their way to the gold-coloured lifts that whisk guests up to rooms that overlook the Marina Bay street circuit.

As the bankers sped past works of art by the likes of Henry Moore, David Hockney and Frank Stella, some made their way straight to a lounge UBS had hired to entertain clients during the race weekend. At its entrance stood three Singaporean women wearing red and white polo shirts, each holding a sign emblazoned with the UBS logo and the slogan "Welcome, the race starts here".

The Digital Dead Sea Scrolls

http://dss.collections.imj.org.il/

Ever wondered/thought of sea scrolls and how they look in reality!

The Israel Museum welcomes you to the Dead Sea Scrolls Digital Project, allowing users to examine and explore these most ancient manuscripts from Second Temple times at a level of detail never before possible. Developed in partnership with Google, the new website gives users access to searchable, fast-loading, high-resolution images of the scrolls, as well as short explanatory videos and background information on the texts and their history. The Dead Sea Scrolls, which include the oldest known biblical manuscripts in existence, offer critical insight into Jewish society in the Land of Israel during the Second Temple Period, the time of the birth of Christianity and Rabbinic Judaism. Five complete scrolls from the Israel Museum have been digitized for the project at this stage and are now accessible online.

Is China's Economy Contracting?

http://www.forbes.com/sites/gordonchang/2011/09/25/is-chinas-economy-contracting/2/

Year-to-year comparisons tell us the Chinese economy is growing in high single digits, but month-to-month numbers suggest it flatlined this summer.  Now, there is evidence indicating it is even starting to contract.

The National Bureau of Statistics estimated that gross domestic product increased by 9.5% in the second quarter this year, down from 9.7% in Q1.  Yet GDP is not the most reliable indicator of economic activity in China.  The official Q2 number was substantially above analysts’ estimates, indicating once again that the statistic is “man-made”—manipulated for political purposes—in the memorable words of Vice Premier Li Keqiang.

The most reliable indicator is undoubtedly electricity consumption.  In August, consumption of electricity was up 9.1% from the same month last year but down 0.1% from the preceding month.

Interesting Link!

http://www.submarinecablemap.com/

Click here to launch map

TeleGeography’s free interactive submarine cable map is based on our authoritative Global Bandwidthresearch, and depicts 188 active and planned submarine cable systems and their landing stations. Selecting a cable route on the map provides access to data about the cable, including the cable’s name, ready-for-service (RFS) date, length, owners, website, and landing points. Selecting a landing point provides a list of all submarine cables landing at that station.

Cables shown include international and US domestic submarine cables with a maximum upgradeable capacity of at least 5 Gbps. Cable routes are stylized to improve readability, and do not reflect the physical cable location. Similarly, cable landing stations do not show the precise coordinates of the building, and are meant to serve as a general guide to where a cable system lands.

We update our map regularly to ensure that our data are as accurate and as up-to-date as possible. If you have updated information for a cable system please email us at cablemap@telegeography.com.

Source: Global Bandwidth Research Service

Social technologies on the front line

The Management 2.0 Challenge is the first of three contests in a yearlong competition in which executives describe practices that make management more adaptable, innovative, inspiring, and accountable.1 In this first phase, entrants were asked to describe how Web 2.0 tools and technologies are changing management. A panel including McKinsey partners and external experts chose seven winners from a field of 143 entries. These winners come from organizations of all sizes and cultures, including the Mexican cement giant Cemex, the Dutch government, and a California-based tomato processor.

Unleashing innovation: Why Tata Nano is a no-no and who will be king of Cyber-ia

Scott Anthony is the managing director ofInnosight Asia-Pacific , a disruptive innovationconsulting firm founded by Harvard Business Professor, Clayton Christensen. Over the years, Anthony has written extensively about innovation. He is the author of two forthcoming books from Harvard Business Review Press, The Little Black Book of Innovation (late 2011) and Paving the First Mile (2012). In this interview with CD, he discusses Tata Nano, unleashing innovation energy and 'Iteration-itis'. Edited excerpts: 

More than a year back, you wrote a blog titled 'Is the Tata Nano Really 'The People's Car?' Can you explain why you think it may not be a people's car? 

I am a huge fan of the vision behind the Tata Nano - getting families off unsafe two-wheeled vehicles into safer, affordable cars. My observation (or, more accurately, my colleague's observation) was simply that the price of a car wasn't the only thing stopping people from making that shift. My colleague described to me how 10 years ago, he purchased a Maruti 800 for Rs 1,05,000. Not only was that car affordable, it had features the basic Nano lacks, like a cassette player and air conditioning. Plenty of people could afford good used cars, but they choose motorcycles and scooters. Why is that? Watching the traffic in Mumbai for about 10 minutes provides one answer. Automobiles slowly plod along, but motorcycles and scooters find cracks in traffic and make quicker progress. Parking is an obvious problem too. You can store a two-wheeled vehicle in a bunch of places but cars take up space that doesn't exist for many target consumers. These are reasons why I think the Nano has struggled - the target customer doesn't actually consider it better than existing alternatives along several important dimensions. 

What can be done to increase the slow sales of the Nano? 

What China’s five-year plan means for business - Guangyu Li and Jonathan Woetzel

China’s recently announced 12th five-year plan aims to transform the world’s second-largest economy from an investment-driven dynamo into a global powerhouse with a steadier and more stable trajectory. The plan affects domestic and foreign companies in all industries. To help senior managers decode and understand its provisions, we analyzed the potential impact on 33 industries. Two dimensions stood out: the effect on their profit pools and competitive landscapes. (For a detailed look at this analysis, see the interactive exhibit, “The economic impact of China’s 12th five-year plan.”)

The plan’s likely impact on profit pools was categorized as either favorable (for example, sensitive to an increase in domestic demand or specifically targeted for special treatment), unfavorable (subject to restrictive policies), or neutral. For the effect on the competitive landscape, we looked at the intensity of regulation.

The perils of bad strategy - Richard Rumelt

Horatio Nelson had a problem. The British admiral’s fleet was outnumbered at Trafalgar by an armada of French and Spanish ships that Napoleon had ordered to disrupt Britain’s commerce and prepare for a cross-channel invasion. The prevailing tactics in 1805 were for the two opposing fleets to stay in line, firing broadsides at each other. But Nelson had a strategic insight into how to deal with being outnumbered. He broke the British fleet into two columns and drove them at the Franco-Spanish fleet, hitting its line perpendicularly. The lead British ships took a great risk, but Nelson judged that the less-trained Franco-Spanish gunners would not be able to compensate for the heavy swell that day and that the enemy fleet, with its coherence lost, would be no match for the more experienced British captains and gunners in the ensuing melee. He was proved right: the French and Spanish lost 22 ships, two-thirds of their fleet. The British lost none.¹

Nelson’s victory is a classic example of good strategy, which almost always looks this simple and obvious in retrospect.

Finding the courage to shrink your busines - Bill Huyett and Tim Koller

It takes courage to break up a company. CEOs and boards of directors often fear that investors will view asset divestitures as admissions of failed strategy—that having certain businesses under the same corporate umbrella never made sense. Many worry that shedding assets will cost a company the benefits of scale, cut into the advantages of analyst coverage, or even damage employee morale. Spin-offs in particular draw scrutiny because they shrink the size of the parent company but, unlike sales, don’t generate cash to reinvest.

We don’t believe these arguments hold up. What’s more, they may lead executives to pass up value-creating opportunities. A fundamental principle of corporate finance holds that a business creates the most value for shareholders and the economy as a whole when it is owned by the best—or, at least, a better—owner.¹ So it makes sense that companies should continually reallocate their resources as circumstances change. Moreover, the benefits of being part of a large company come at a cost; in fact, many spun-off companies can make substantial cuts in overhead costs once they are independent. Investors typically don’t care about a company being too small once it reaches a threshold of about $500 million in market capitalization.² And in our experience, executives and employees of spun-off companies often feel liberated and quite happy to be on their own.

Why dictators and democracies are failing at the same time: Thomas Friedman

Kishore Mahbubani, a retired Singaporean diplomat, published a provocative essay in The Financial Times on Monday that began like this: 

``Dictators are falling. Democracies are failing. A curious coincidence? Or is it, perhaps, a sign that something fundamental has changed in the grain of human history. I believe so. How do dictators survive? They tell lies. Muammar Gaddafi was one of the biggest liars of all time. He claimed that his people loved him. He also controlled the flow of information to his people to prevent any alternative narrative taking hold. Then the simple cellphone enabled people to connect. The truth spread widely to drown out all the lies that the colonel broadcast over the airwaves. 

"So why are democracies failing at the same time? The simple answer: Democracies have also been telling lies." 

Meet Comex, The 19-Year-Old iPhone Uber-Hacker Who Keeps Outsmarting Apple

http://www.forbes.com/sites/andygreenberg/2011/08/01/meet-comex-the-iphone-uber-hacker-who-keeps-outsmarting-apple/

Nicholas Allegra lives with his parents in Chappaqua, New York. The tall, shaggy-haired and bespectacled 19-year old has been on leave from Brown University since last winter, looking for an internship. And in the meantime, he’s been spending his days on a hobby that periodically sends shockwaves through the computer security world: seeking out cracks in the source code of Apple’s iPhone, a device with more software restrictions than practically any computer on the market, and exploiting them to utterly obliterate its defenses against hackers.

“It feels like editing an English paper,” Allegra says simply, his voice croaking as if he just woke up, though we’re speaking at 9:30 pm. “You just go through and look for errors. I don’t know why I seem to be so effective at it.”

To the public, Allegra has been known only by the hacker handle Comex, and keeps a low profile. (He agreed to speak after Forbes‘ poking around Twitter, Facebook and the Brown Directory revealed his name.) But in what’s becoming almost an annual summer tradition, the pseudonymous hacker has twice released a piece of code called JailBreakMe that allows millions of users to strip away in seconds the ultra-strict security measures Apple has placed on its iPhones and iPads, devices that account for more than half the company’s $100 billion in revenues.

The tool isn’t intended for theft or vandalism: It merely lets users install any application they want on their devices. But jailbreaking, as the  practice is called, violates Apple’s obsessive control of its gadgets and demonstrates software holes that could be exploited later by less benevolent hackers.

Apple didn’t respond to requests for comment, but it’s not thrilled about Allegra’s work. When he released JailbreakMe 3 in July, the company rushed to patch the security opening in just nine days. Nonetheless, 1.4 million people used the tool to jailbreak their gadgets in that time, and more than 600,000 more since then. Allegra has become such a thorn in Apple’s side that its stores now block JailbreakMe.com on in-store wifi networks.

“I didn’t think anyone would be able to do what he’s done for years,” says Charlie Miller, a former network exploitation analyst for the National Security Agency who first hacked the iPhone in 2007. “Now it’s been done by some kid we had never even heard of. He’s totally blown me away.”

see photos

Click for full photo gallery: A Brief History of Apple Hacking

To appreciate JailbreakMe’s brilliance, consider how tightly Steve Jobs locks down his devices: Since 2008, Apple has implemented a safeguard called “code-signing” to prevent hackers from running any of their own commands on its mobile operating system. So even after an attacker finds a security bug that gives him access to the system, he can only exploit it by reusing commands that are already in Apple’s software, a process security researcher Dino Dai Zovi has compared to writing a ransom note out of magazine clippings.

After Allegra released JailbreakMe 2 last year, Apple upped its game another notch, randomizing the location of code in memory so that hackers can’t even locate commands to hijack them. That’s like requiring an attacker to assemble a note out of a random magazine he’s never read before, in the dark.

Yet Allegra has managed to find a path around those locks. In JailbreakMe 3, Allegra used a bug in how Apple’s mobile operating system iOS handles PDFs fonts that allows him to both locate and repurpose hidden commands. That critical flaw allowed a series of exploits that not only gains total control of the machine but leaves behind code that jailbreaks it again every time the device reboots –all without ever even crashing the operating system. “I spent a lot of time on the polish,” Allegra says with a hint of pride.

Dino Dai Zovi, co-author of the Mac Hacker’s Handbook, says JailbreakMe’s sophistication is on par with that of Stuxnet, a worm thought to have been designed by the Israeli or U.S. government to infect Iran’s nuclear facilities. He compares Allegra’s skills to the state-sponsored intruders that plague corporations and governments, what the cybersecurity industry calls “advanced-persistent threat” hackers: “He’s probably five years ahead of them,” says Dai Zovi.

Allegra isn’t after profit: his site is free, though it does accept donations. Nor does he criticize Apple for wanting to control what users can install on their devices. He calls himself an Apple “fanboy,” and describes Android’s more open platform as “the enemy.” “I guess it’s just about the challenge, more than anything else,” he says.

The young hacker taught himself to code in the programming language Visual Basic at the age of nine, gleaning tricks from Web forums. “By the time I took a computer science class in high school, I already knew everything,” he says. When he found that he couldn’t save a screenshot from the Nintendo Wii video game Super Smash Brothers to his computer, he spent hours deciphering the file, and later worked on other Wii hacks, getting a feel for its obscure operating system.

“I didn’t come out of the same background as the rest of the security community,” he says. “So to them I seem to have come out of nowhere.”

Allegra argues that his jailbreaking work is legal. The U.S. Copyright Officecreated an exemption last summer in the Digital Millenium Copyright Act for users to jailbreak their own cell phones, despite’s Apple objections that the ruling could open phones to dastardly hackers and even lead to “catastrophic” attacks that crash cell phone towers.

Whether it’s acceptable to release tools for others to jailbreak their devices, however, has yet to be decided. Three courts have ruled the practice is legal, while another said it could violate the DMCA. In January, Sony used that law and others to sue George Hotz, one of Allegra’s fellow iPhone hackers, for reverse engineering the Playstation 3. The suit was settled, but not before it touched off a wave of retaliatory cyberattacks on Sony by hackers around the world.

Allegra admits that technically, there’s little difference between jailbreaking phones and hacking them for more malicious ends. “It’s scary,” he says. “I use the same phone as everyone else, and it’s totally insecure.”

But at least in the case of JailbreakMe 3, Allegra also created a patch for the PDF vulnerability he exploited, allowing users to cover their tracks so that other hackers couldn’t exploit the same bug. In the period before Apple released an official patch, users who had jailbroken their iPads and iPhones were in some sense more secure than those who hadn’t.

A postscript to Apple: Perhaps your security team could use another intern.