Category Archives: Business Strategy

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5 Questions With Warrent Buffet

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Warren Buffet doesn’t have to prove anything to anyone because his performance numbers speak for themselves. And that’s what makes it so interesting to hear him take Q&A: “The nastier the better”… as he says!



It’s a long video… if you are in a rush, here’s our summary of the various Q&A:

Q1. What do you look for in the people you like to work with?
WB: I like to work with people I like. I don’t look at their CVs or Grades to decide who can do what. In fact, I don’t even look if they have a degree. If you are working with people you don’t enjoy, please do yourself a favour, and leave the job and work with people you like. You’ll do better.

Q2. What kind of businesses do you like to invest in?
WB: I want to invest in businesses that are stable and where I can visualize it 10 years from now. Companies like Coke (soft drinks), Gillette (mens shaving blades) are examples of my investment choices. There are many others like GEICO (automotive insurance), Nebraska Furniture Mart (maximum sales from a single store location in the US), Iscar Metalworking Company (an industry leader in metal-cutting tools from Israel). I don’t have the understanding of technology-intensive business like software etc, and I stay away from them.

Q3. How do you do business valuation? How detailed is it?
WB: I like to invest in businesses where I have great comfort with the business owner. A paragraph is often sufficient to know the business value. The example being Nebraska Furniture Mart owned by Mrs. Rose Blumpkin, who recently turned 101 years, who has no formal education but has great common sense.

Q4. Tell us some of your bad decisions and what you learned from them?
WB: I invested in US Air though it was a difficult sector. Call it Temporary Insanity. I have learned that my bad decisions have happened when I had more cash than necessary. The airline industry is one step forward for mankind, a giant step backward for capitalism! And then there are other mistakes that conventional accounting does not capture, like the selling of 5% stake in Walt Disney (at $6m) within a year of buying it (at $4mn) in the 1960s. Today that stake is worth over a billion dollars.

Q5. Why not split the Berkshire Hathaway share to make it more affordable to investors?
WB: I think of my investors as a club or an audience in my presentation and we want long-term investors not traders. I don’t want high trading volumes for our shares. In fact, I will be happy with no trading at all. Our share price ($25k per share in recent times) has helped us maintain that seriousness and attract long-term investors.

Thanks for coming by!
MyOrbit Team

Business Development, Business Services, Business Strategy, FAQ, Innovation, People, Project Management, Risk Management, Sales & Marketing, Software, Start-ups, Technology

Will Information Technology Really Turn Organizations Upside Down This Time?

The battle tank example used by Professor Heskett is a high risk, high gain scenario for an information technology (IT) application. The latest advances in IT have the highest marginal utility for a tank commander because it is a question of life and death. However, the majority of us prefer to deploy IT applications for medium risk, medium gain scenarios like credit card processing, market forecasting etc., and prefer the manual route where it really matters.

The battle tank example presents two distinct scenarios. On one hand, a badly implemented IT application could lead a tank commander to make a wrong decision. On the other hand, a well implemented and intuitive IT application could actually lead the same tank commander to save his life and that of his comrades. He could fight more and increase his country’s chances of winning the battle.

In business terminology, the latter scenario is equivalent to large gains in employee productivity and increased employee contribution towards winning market share. All CEOs want this to happen, but only a few succeed. Why?

It is because organizations differ in their risk-taking profiles. We can divide organizations in two broad categories. On one end, we have organizations like the pension funds that are risk-averse because their investors want it that way. Their employees tend to have the same philosophy. And because they are giant investors themselves, they pass their risk-averse sentiment along with their investments. The quarterly reporting on Wall Street represents this sentiment. Strategic investments like high-end IT applications tend to get flagged as low priority in the annual budgeting exercise, even though some of them could turn out to be market winning applications.

On the other end, we have organizations that want to experiment, and their investors want them to do exactly that. Failure is usually a part of the annual expenses. The firms in biotech and wireless are examples of this category. They are smaller in size than the typical Fortune 500 and the employees know their regular customers. They tend to know how an event could affect their revenues and profits. These firms not only sell their experimentation, but also pass their innovative methods on to their customers.

Most of today’s Fortune 500 organizations lie in between these two ends. And therefore, they vary in their zeal to try out an innovative approach, which could be an IT application.

It is true that exposing decision ­making information to frontline employees is a business risk. But a well-implemented IT application can mitigate that risk and still bring the benefits of speed into business. For example, it could help a customer service rep to identify potential sales, and pitch right away from a pool of ready-made product demos while the competition is still planning an internal meeting. It is the same as the ability of a Japanese autoworker to stop the billion­ dollar production line and correct a defect right away, and avoid expensive and embarrassing recalls later.

So, will information technology really turn organizations upside down this time? Yes it will, but only for a few organizations. These would be organizations willing to experiment with the capabilities of their frontline employees using innovative approaches. These would be organizations willing to place the knowledge acquired by the seniors in front of the juniors. And possibly, these would be organizations poised to become the new market leaders.

Shankar AVSB
Associate
Infosys Technologies Limited
01 October 2021

Reference:  https://hbswk.hbs.edu/archive/heskett-column-will-information-technology-really-turn-organizations-upside-down-this-time-readers-respond

Business Strategy, Start-ups, Venture Capital

Profile Of The Typical Angel Investor

We first heard the term “angel” in the early 1900’s used to describe investors on Broadway who invested in theatrical productions. Today it refers to high net worth individuals who are “accredited” investors under the SEC rule 501 who invest in companies in early stage rounds of growth.

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Business Strategy, Capital Markets, Market News, MyOrbit Blogs

JPMorgan buys Bear Stearns for $2 per Share!

$2 a Share for shares that were trading about $60 last week! Amazing things you can do with $2 per share in a bearish market.

Over the weekend Bear Stearns showed its empty wallet to the Fed and managed to convince US Treasury Secy Henry Paulson for a bailout plan.

And over the weekend, the Federal Reserve cut its discount rate by 25 basis points and offered to lend money to several financial firms, in an effort to prop up the US financial sector. Well, a lot of props have been put already (refer our previous posts on US Banking sector crisis).

With the help of further cut in discount rate, JP Morgan Chase offered to buy rival investment bank Bear Sterns for $2 a share, with a total value of $236 million.  It could have been 99 cents per share as well, but no, that would look too bad! The deal occurred Sunday night, with the US federal government acting as a catalyst to avoid a bankruptcy.

For anyone who’s been looking at Bear Stearns, Cash flow problems have been brewing for the last few months – they had clearly over leveraged themselves – and this weekend did it.

To quote AP news:

JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns’ 14,000 employees worldwide, or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns’ prime brokerage business, which completes trades for big investors such as hedge funds.

This CNN report has more info:

http://edition.cnn.com/2008/BUSINESS/03/17/world.markets/index.html

JPMorgan inherits some liabilities as well. For example, about $16.5 million property liability in the form of lease rental agreement that Bear Stearns had signed in London with the Canary Wharf Group (CWG).

This news over the weekend has resulted in hard falls of various stock indices across Asia as well. The Indian Sensex fell 951 points today (6% drop in one day).

Business Strategy, Internet, Market News, MyOrbit Blogs, New Media, Online Marketing

Google completes DoubleClick acquisition

A lot has been talked about Google’s acquisition of DoubleClick, and whether they can show tangible improvements or new services as a result of it. DoubleClick has a strong platform for display advertising, and that’s the main reason Google bought it, so that it can give a good offering for a variety of media advertisements. Yesterday, Eric wrote this note on Google’s blog:

3/11/2008 09:48:00 AM
Posted by Eric Schmidt, Chairman and CEO

I’m pleased to share the news that we completed our acquisition of DoubleClick today. Although it’s been nearly a year since we announced our intention to acquire DoubleClick last April, we are no less excited today about the benefits that the combination of our two companies will bring to the online advertising market.

Because we have been waiting for regulatory approval for our acquisition, we’ve been limited by law in the extent to which we could conduct detailed integration planning to map our way forward. That work will begin in earnest now. Although we don’t have detailed plans to announce today, we will communicate regularly with you about our progress in integrating our two companies.

An immediate task we’ll undertake over the next few weeks is matching and aligning DoubleClick employees with our organizational plan for the business. This will involve determining the right staffing levels for all functions and will ensure that we have the right people assigned to the right responsibilities within Google. We plan to complete this process in the U.S. by early April.

Outside the U.S., the steps we will propose are subject to consultation with employee representatives where applicable, and of course any decisions will be made in accordance with local law. The exact timing of the process outside the U.S. will vary based on the needs and requirements of each region.

As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well. We know that DoubleClick is built on the strength of its people. For this reason we’ll strive to minimize the impact of this process on all of our clients and employees.

For more, read Google’s blog post here.