Category: Random Walk

This post was triggered by a current MBA student at my alma mater. I really should get some recruiting dollars from my former employers. It’s amazing how many questions I get about my past, as a direct result of this blog.

Unfortunately, I won’t be able to cover all of the ground as suggested in the title, but one item that came up from the soon-to-be grad was weighing the tradeoffs of going to one of two management consulting firms. One of the firms in question clearly had a better brand name (in terms of general recognition) than one of the firms I worked for, PRTM. One item of importance to this person was opportunities for advancement, potentially post-employment at one of the consulting firms and potentially as connected to brand strength.

In my opinion, brand name can play a role with future employers and with colleagues in an organization. This is just a fact of life. As a simple example, when I look through resumes, if it easier for me to identify with the companies that a person has worked for, I can often get a better sense of the context associated with that person. It’s just a matter of instant name recognition. Of course, when I spend more time on due diligence, I try to cut through all of that so that it doesn’t matter whether a person has past experience with a well-known brand or unknown brand company. All that matters is whether the person can do the proposed job, mix with the team, and flourish.

But fact of the matter in professional situations, like when I’m in a room introducing myself and there are brand names like Booz Allen and McKinsey at the top of people’s minds and perhaps sitting at the same table, people will often give me less attention until I back up my pedigree with actual experiences. Only then am I able to get myself ahead or on level ground. In some ways, it’s another level of explanation that I need to get through before I can get across the message of the "real me". Note that I’m not emphasizing ego here – simply the observation of how much communication time one may be allocated by others depending the initial impressions one makes based on brand name of past (or current) employers.

My original question was how much does brand name matter though? In worlds where first impressions matter more (which is not every world by any means), where there are numerous one-off interactions before people start formulating opinions or working relationships, where other people may talk about you (e.g., your boss’ boss) without having much direct working experience with you, I believe that brand weighs more strongly. So I have tendencies to believe that in things like startup and engineering environments, where relationships are more closely knit, organization structures are small, and where interactions are more frequent between people, the notion of brand name will not matter so much. In a larger company, however, there may be many more one-off interactions (in certain areas of a company like business development or consulting), and brand name of your past employers may matter "more".

But to put this in context, one does not have to use the brand of the employer to put forth one’s own brand. This was one of the reasons I was comfortable enough to take employment with a less well-known management consulting out of business school. It was easier for me to focus on fit, experiences that I desired, etc. as opposed to getting concerned with what company name was going to be on my resume.

When I sat down to write this post, I thought that I was going to conclude that people should put forth their own brands. At least I find that this seems to work for me, and it is probably the method I would suggest by default. But I have tried to open my mind some, and I have observed that there are some people that do quite well advancing the brands of their past employers before they advance their own brands. I have tried to think about why this may be so, and I tend to believe that the optimal path may depends on the environment in which one plays (e.g., as defined in terms of number of cold people-to-people interactions on a daily basis, the timeframe of an average interaction, the size of the organization, and the basic goals of an average interaction).

This weekend I had a chance to see HDNet Film’s movie/documentary, Enron: The Smartest Guys in the Room. Great movie. Helps puts some perspective on the role of vision, morals, big business, and government. Now I want to read the book.

A few things that kind of surprised me about the movie:

• I expected to see something about McKinsey per this story by Gladwell.
• It was interesting to see the breadth and depth of connections of Enron to the power troubles in California.
• The movie seemed to portray the accounting related to "mark-to-market" as evil – clearly the Enron interpretation of the technique was way too aggressive, but it strikes me  (on first blush) as incorrect to call the techniques used at Enron as mark-to-market. For Enron, it seemed more like something like "mark-Enron-assets-to-future-market-in-my-dreams".
• The movie portrays the financial analysts on Wall Street as a bunch of idiots that cannot see through the tradeoffs of accounting techniques. But this is odd to me because, at many b-schools, one is trained to adjust for things like LIFO/FIFO inventory liquidations, restructuring/"big bath" one-time accounting charges, off-balance sheet items, etc. Investment bankers are trained to walk on water to be able to see through accounting stuff and boil things down to true economic impact. Now outright deception (by the company doing the financial reporting) is something that one can’t always control for, but it seems that there must have been something externally visible …

At least for some of these points, I reconcile it all in my mind that greed can drive people to be blind.  The reference in the movie to the Milgram experiment is also very noteworthy, but I tend to prefer the temptation explanation over the more pessimistic "we just do as we’re told"-Milgram explanation.

Last Friday I attended the Business Forecast Luncheon in Dallas, sponsored by the University of Chicago Graduate School of Business. Guest speakers were Dr. Robert Aliber, Professor of International Economics and Finance (Emeritus) at the University of Chicago and Dr. Harvey Rosenblum, Executive Vice President and Director of Research, Federal Reserve Bank of Dallas. The talks were excellent as they were last year.

What really drives me to write this post is that we are seeing Alan Greenspan retire. When I think about things, he’s close to the only central banker that I have experienced during my entire adult/business life, where Greenspan has reigned for some 18+ years. Central banking has an important effect on business and the health of the economy, and this something that the luncheon speakers are renowned experts on.

The general consensus was that Alan Greenspan will go to “Central Banker Heaven”. More on this later.

While last year’s forecasts focused on the deficit and the exchange rates, what came to the forefront this year were three things that will impact the economy for the next twelve months. These are: the (deflating) housing bubble, term structure of interest rates (and the inverted yield curve), and the philosophies and makeup of the new chairman (Ben Bernanke).

Although I will gloss over the individual perspectives of the two speakers, my general takeaways on the three areas were the following:

• Housing bubble is deflating – Apparently in the areas of concern (e.g., Boston, Southern FL, CA), prices are starting to fall 10%ish. Well-known builder, Toll Brothers, has had its stock price fall some 50% (note I have not verified), plus they have cut back their forecast on building out. More generally beyond Toll Brothers, housing inventories are starting to build up. If one subscribes to a doom-and-gloom forecast, housing bubbles have historically demonstrated price declines of an additional 40%.
• Inverted yield curve is disturbing – In 8 of 9 times when the yield curve inverted, the economy had slumped into a recession within one year.
• New chairman philosophically tends towards being a price-level setting person, as opposed to one that takes a long-term view of the economy first – Price-level setting philosophies involve having a target inflation rate in mind and then setting the interest rates to obtain that rate. In some countries, this policy is taken to an “extreme” where concern for other factors, such as unemployment rates, are ignored. Wild cards in the U.S. include the fact that the international world is less stable, and that long-term energy/oil impacts associated with unstable countries (which may each comprise 5% to 6% of supply) should not be ignored when pursuing price-level setting at the central bank.

So all-in-all, the forecast for the U.S. economy over the next twelve months was mildly positive, with some areas for attention. The March meeting for the central bank will be key, as this will shed some light on how the new Fed chairman handles his new role.

Which brings me to my earlier about getting into Central Banker Heaven. Greenspan has been praised by having all of the key skills and a proven-performance record:

• an ability to show independence from the administration and partisan views
• deep knowledge of history and economics (which both Greenspan and Bernanke share)
• inflation-fighting skills with a long-term view.

But in some sense, while Greenspan has had all of these skills, it could be argued that he also got lucky (being good and lucky is the best of all worlds). During Greenspan’s tenure, he did not have to deal with chronic problems. Now, Ben Bernanke has a tough and important job ahead of him. He has a chronically unstable international world to deal with, and he has to show his inflation-fighting abilities with a long-term view that people like Greenspan so carefully considered.

I thank Alan Greenspan for his service. I wish Ben Bernanke the best of luck for our people and future generations.

Update (2/16/06): Bernanke addresses Congress just yesterday.

This past week I was researching some telecom reports, and I happened to run across an outlier in the corporate mix that caught my eye. It was a Gartner report, entitled "Prepare for Avian Influenza: Our Interview With the World Health Organization’s Dr. David Nabarro" (sorry – subscription required).

Now I don’t follow the management consulting and other firms that specialize in risk management and human resources that closely, so I thought I would check their sites out for a peek. Marsh has some information on the avian flu here. AON has something over here.

Companies and organizations do not seem prepared. A survey by the Deloitte Center for Health Solutions appears to indicate that 66% of companies do not feel adequately prepared (poll of 179 companies). Instapundit points out how hospitals could barely keep up with the normal flu here. When I step back from the business aspects and whether companies can withstand prolonged labor shortages of 30%+, etc, I am a bit more concerned that communities and families may not be prepared. At least I find myself not quite fully informed to a level that hits close to home, despite all of the press.

So I have started to make some mental notes from research reports, like those from Gartner, that hit close to home. Maybe readers will have other sources of info to share.

From the Gartner report (note Dr. Nabarro is the highest medical authority, the U.N.’s top official for global pandemic response planning), here are my key notes:

• "in the last 200 years, there have been pandemics at intervals of every 30 to 40 years, on average" – so if even if one doesn’t have to be concerned about it, there could be an impact on one’s children or their children
• "modellers are [saying] that it may be as few as 21 days from the initial appearance of the virus to it being a full-blown pandemic" – note that the increased mobility of people shortens the cycle-time of viruses spreading ; I ask myself, how and how fast would I personally react once something hit the continent, country, or city I live in?
• Dr. Nabarro indicated he is not sure (because he doesn’t know enough about how corporations work) whether corporate CEOs should assign senior executives to coordinate their response to avian flu

It seems the World Bank estimates economic damage from an avian flu pandemic could cause $800 billion in economic damage. To put that number in perspective, Hurricane Katrina damages were estimated at $125 billion. A sickening of 90 million Americans as stated here – gee, that would be out of a population of 296 million Americans according to the CIA World Factbook. My wife and I can barely control flu in the household between kids let alone if one of every three people in the entire US is sick. What would you do?

I suppose after writing all of this down, I am not more prepared for an avian flu pandemic than I was before, but I do find myself at a heightened level of awareness. That’s probably at least one step forward.

Update (1/29/06): As an aside, raders have choices of stockpiling N95 masks approved by the CDC or apparently, Kimchi (which I despise the smell and taste of).

1991 was not a great year for engineering graduates. During 1991, many engineering graduates were lucky to have any job offer in hand upon graduation. Things got better though as the years passed. 1999 was a great year for graduating b-school students that went into mangement consulting, where many got hefty signing bonuses and/or full tuition paid for. That same year, however, was a pretty bad year for associates entering the venture capital space. With the bubble, many of those vintage 1999 venture capital folks got toasted a few years later – some left the space not having closed a single deal. Some watched their firms implode after having long histories in the business. 2001 to 2002 was also a bad year for startups drawing venture capital – many venture lawyers were reporting 2x to 4x ratchets on deal terms, not to mention the bankruptcies.

In business, the "business cycle" matters quite a bit. One needs to be very sensitive to it and try to work with the trend. I feel fortunate for taking leave from the telecom space in 1999 and shifting to the software sector. I’ve been shifting back my focus as of recent, but the telecom and software markets are converging. While those in telecom and media may refer to Web 2.0 as broadband and Web 3.0 as 10 gigabits a second whereas by contrast those in the software industry may characterize Web 2.0 and Web 3.0 as a collaborative and interactive eras of the Internet, deals like Cisco acquiring Scientific Atlanta will likely affect how people both communicate and use the Internet. Vintage 2005 and 2006 software & communications mergers will be memorable.

Changing gears a bit, only in the past year have I started to better appreciate how important year/vintage affects wine. In retrospect, this almost seems obvious as weather affects grapes which affects wine quality. Nevertheless, in the past I have often selected wine primarily based on grape type, geography, or past experience with a wine maker and largely ignored vintage.

Well, my wife found this very cool 2-page chart for selecting wines based on vintage and region (and ignoring wine maker). This may be an easier task for some as compared to trying to remember individual wine makers, doing a lot of guessing on wine quality based on bottle art, etc. I have not verified the accuracy of the chart, but its gives a snapshot view why more knowledgeable wine enthusiasts like 2003 Rhone wines, 2000 Bordeaux wines, etc. and avoid 2002 Rhone wines (my wife and I became a bunch of winos over the Thanksgiving holiday) …