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January 31, 2006
Hispanics Filled One-Third of All U.S. Jobs Created in 2005
Hispanics filled one-third of the jobs created in the United States in 2005, acccording to Hispanic Business. In raw numbers, that’s 847,000 jobs out of 2.6 million created in 2005. The unemployment rate for Hispanics is currently 6.0%, modestly higher than the 5.0% overall unemployment rate.
Posted by John at 7:35 PM | Comments (0) | TrackBackA Secret to Success from Alan Greenspan
It must have taken quite a while to get the place cards just right for a White House farewell dinner held in honor of outgoing Fed Chairman Alan Greenspan (from the New York Times via the Seattle Post-Intelligencer):
At one table was Vice President Dick Cheney, the hard-nosed combatant at the Bush White House, whose friendship with Greenspan began 30 years ago in the Ford White House.
But just a few tables away was Robert Rubin, a Treasury secretary under President Clinton and a man so disliked in the Bush White House that many officials use his name as a sneering put-down -- "Rubinomics."
The guest list also included Vernon Jordan Jr., the millionaire lawyer and ubiquitous adviser to Democratic leaders, and Peter Peterson, a Republican who has infuriated the White House by lambasting Bush's budget deficits.
The Times reporter goes on to note how Greenspan’s friendships spanned the political spectrum and how few enemies he had despite a long career in Washington.
His secret?
"He likes to be challenged by intelligent people," said Andrea Mitchell, Greenspan's wife and a correspondent for NBC News.
A rare trait coming from someone whose whole career has been either Washington or Wall Street.
Posted by John at 5:43 AM | Comments (0) | TrackBackQuote of the Day for Tuesday, January 31, 2006
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January 30, 2006
U.S. Agrees to Cut Tariffs on Mexican Cement Imports
I’ve railed about the unnecessarily high prices cement consumers (like people rebuilding along the Gulf Coast) have been paying because of "anti-dumping" tariffs the U.S. has placed on Mexican cement.
It appears the U.S. and Mexico have reached an agreement which immediately cuts tariffs on imported Mexican cement. Ultimately, Mexican producers may be able to import without restrictions by 2009.
According to the Los Angeles Times:
Officials tried to put the best face on Thursday's deal.
Joe Dorn, a Washington attorney who represents the U.S. firms whose complaints sparked the punitive tariffs, called it "a classic situation where everyone can claim victory to some extent."
Some cement makers expressed resignation and relief.
"It buys peace," said Charles Sunderland, chairman and chief executive of Kansas-based Ash Grove Cement Co.
"I'm just glad it's over," said James Repman, CEO of Glendora-based California Portland Cement Co.
If I were running the California Portland Cement Company I'd be glad the whole thing's over, too. I wouldn't have to worry about crazy bloggers pointing out that my company is actually is a subsidiary of the Taiheiyo Cement Company, Tokyo, Japan.
Posted by John at 11:55 PM | Comments (0) | TrackBackTexas the Most "Magnetic" State
According to Allied Van Lines' latest Magnet States Report, Texas is the country’s most "magnetic." By Allied’s definition, magnetism is defined as the excess of inbound over outbound relocations.
Texas narrowly beat North Carolina in the survey. Arizona and Georgia ranked third and fourth, respectively.
The top net outbound states were (in order): California, New Jersey, Michigan, and New York.
Posted by John at 10:47 PM | Comments (0) | TrackBackSeven Day Spring Festival, 12 Billion Text Messages
An estimated 12 billion short text messages will be sent through mobile phones in China during the current seven day Spring Festival. Approximately 1 billion short text messages were sent for the entire year in 2000.
While this volume sounds huge, it's only about 30 messages per subscriber. There are currently about 400 million mobile phone subscribers in China.
Posted by John at 8:49 PM | Comments (0) | TrackBackQuote of the Day for Monday, January 30, 2006
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January 29, 2006
Wall Street's Bonuses Equal the GDP of Afghanistan
Wall Street’s 2005 bonuses equaled $21.5 billion, spread among 172,000 people. This amount equals the GDP of Afghanistan in 2004, a country with a population of 30 million.
Wall Street’s bonus pool for last year also exceeds the GDP of two-thirds of the world’s countries.
[From the Baltimore Sun; thanks to Under the Counter for the pointer.]
Posted by John at 1:57 PM | Comments (0) | TrackBackKung Hei Fat Choi!
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A happy, healthy, and prosperous Year of the Dog to you all!
. Posted by John at 12:52 PM | Comments (0) | TrackBackQuote of the Day for Sunday, January 29, 2006
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January 28, 2006
Please Don't Confuse Me with Facts--My Emotion Circuits are Fully Illuminated
Just in case you need proof that much of what passes for political debate in the U.S. is more heat than light, researchers at Emory University have it for you. LiveScience.com reports:
Democrats and Republicans alike are adept at making decisions without letting the facts get in the way, a new study shows.
And they get quite a rush from ignoring information that's contrary to their point of view.
Researchers asked staunch party members from both sides to evaluate information that threatened their preferred candidate prior to the 2004 Presidential election. The subjects' brains were monitored while they pondered. . . .
"We did not see any increased activation of the parts of the brain normally engaged during reasoning," said Drew Westen, director of clinical psychology at Emory University. "What we saw instead was a network of emotion circuits lighting up, including circuits hypothesized to be involved in regulating emotion, and circuits known to be involved in resolving conflicts." [Emphasis mine]
The test subjects on both sides of the political aisle reached totally biased conclusions by ignoring information that could not rationally be discounted, Westen and his colleagues say.
Then, with their minds made up, brain activity ceased in the areas that deal with negative emotions such as disgust. But activity spiked in the circuits involved in reward, a response similar to what addicts experience when they get a fix, Westen explained.
The study points to a total lack of reason in political decision-making.
"None of the circuits involved in conscious reasoning were particularly engaged," Westen said. "Essentially, it appears as if partisans twirl the cognitive kaleidoscope until they get the conclusions they want, and then they get massively reinforced for it, with the elimination of negative emotional states and activation of positive ones."
Notably absent were any increases in activation of the dorsolateral prefrontal cortex, the part of the brain most associated with reasoning. . . .
This research is a warning to all decision-makers, not the least of which are investors. It's important to know whether you're interpreting facts, or whether your network of emotion circuits are lit. The latter can cost you a lot of money.
Posted by John at 10:22 AM | Comments (0) | TrackBackIf International Competitiveness Requires Massages, We're in Great Shape
Daniel Gross points to a revealing quote in the Financial Times from GE Chairman and CEO Jeffrey Immelt:
Posted by John at 5:20 AM | Comments (0) | TrackBackLast week, Mr Immelt told the Economic Club of Washington, "If you want good manufacturing jobs, one thing you could do is graduate more engineers. We had more sports exercise majors graduate than electrical engineering graduates last year. If you want to be the massage capital of the world, you’re well on your way."
Quote of the Day for Saturday, January 28, 2006
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January 27, 2006
Wisdom from "Granny Boo"
My pal Steve Sellery offers a wonderful tribute on his blog to his grandmother, known in the family as "Granny Boo."
One pearl from Granny Boo: "The growth and development of one's character is seldom pleasant during construction."
For everyone who's had a grandmother whose wisdom they highly valued, you'll enjoy Steve's beautiful salute.
Posted by John at 3:25 PM | Comments (0) | TrackBackQuote of the Day for Friday, January 27, 2006
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January 26, 2006
Sweet Jobs, Alabama
I recently posted on the virtues of Birmingham and its recent "secret" renaissance. BusinessWeek’s Michael Mandel has discovered the economic vitality of Alabama as a whole.
Alabama’s unemployment rate is at a record level, driven in part by robust foreign automakers and their suppliers. Additionally, Mandel quotes economist Carl Ferguson at the University of Alabama: "The cultural and social amenities that white collar workers and executives expect, you can find here now."
That's not just hometown boosterism; Ferguson's opinion has strong basis in fact.
The Alabama jokes just don’t hold much water anymore.
Posted by John at 8:59 PM | Comments (0) | TrackBackChina's Most Impressive Product
Economist John Rutledge, a frequent traveler to China, comments on why he travels there every month:
The enthusiasm of young students in China is infectious. They believe in the American dream, that they can achieve anything through hard work. They are natural friends for Americans. We just have to make the effort to get to know them.
My travelmates and I were talking about this very subject during our recent China trip. China’s most impressive product right now is its young people. Whatever shortcomings they have they make up for in a willingness to work very hard, an infectious enthusiasm, and an voracious curiosity.
My experience is also the same at that of John Rutledge: China’s young people have an admiration and avid interest in America. They don’t always agree with U.S. foreign policy—-that’s another subject—-but they love America’s capitalist example and the ability people in this country have to climb the economic ladder. Yes, they do.
They want to know us, and we indeed should get to know them.
Posted by John at 8:48 PM | Comments (0) | TrackBack"You Can Have Davos, I'll Take Mississippi"
So says Forbes Publisher Rich Karlgaard, who used the attend the World Economic Forum in Davos, Switzerland. The WEF, where CEOs jostle to speak on the same panel as Bono or Angelina Jolie and speak on 80,000 feet topics which have nothing to do with their shareholders, is going on at the moment.
Meanwhile, Rich is in Mississippi, happy to be in the real world. In a great post, he’s learned that Chinese food wholesalers pay 50 cents a pound for chicken feet and only 30 cents a pound for drumsticks. Makes sense to me—-I don’t recall ever being served a drumstick in China, but I’ve seen a whole hen house full of chicken feet. Then again, I’ve never eaten in a KFC in China.
By the way, if Mississippians know what wholesale chicken prices in China are, it must mean that more than a handful of them owe their jobs to trade with China, eh?
Posted by John at 8:30 PM | Comments (0) | TrackBackQuote of the Day for Thursday, January 26, 2006
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January 25, 2006
Embracing Openness Creates More Jobs
 Gov. Eduardo Bours Castelo |
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NAFTA’s effect of leveling the playing field of trade between the United States and Mexico, Bours contends, was tremendously beneficial to both sides:
Posted by John at 4:50 PM | Comments (0) | TrackBackIn just a few years [after NAFTA went into effect] Mexico increased both its exports of traditional agricultural products and high-tech, high-end products. So did the United States, profoundly increasing its exports to Mexico over the same period.
In Sonora, a state at the cutting edge of NAFTA, with a skilled labor force and favorable proximity to the United States, we have learned that traditional approaches to traditional problems no longer apply. Furthermore, the results of free trade taught us that an open, diverse approach to trade not only expands our economy but also provides us with a model to solve a variety of social problems. . . .
In Sonora, a state whose economy is growing faster than almost any state in Mexico and the United States, NAFTA proved that embracing and advancing openness leads to more jobs and opportunities. . .
Quote of the Day for Wednesday, January 25, 2006
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January 24, 2006
In Investing, Past is Not Prologue, Size is Not Strength
Michael Moe over at ThinkBlog points out, in a highly effective way, that past is not prologue in investing, particularly in the stock market. The accompanying chart is just one illustration of his point.
 Number of Companies Among the 100 Largest in Market Capitalization, 1925 & 2005 |
You think financial services might be as well represented in the top market cap companies a decade from now? What about healthcare and pharmaceuticals?
It’s worth actively considering, particularly if you seriously believe that Bank of America’s market capitalization, for example, is a sign of strength. (Just to pick on one beached whale of banking who offered quite an anemic earnings report on Monday.)
Posted by John at 5:15 AM | Comments (0) | TrackBackA Phone and a $20 Card and You're in Business
It’s something of an overstatement for effect from professor and author C.K. Prahalad, but not overly so.
BusinessWeek offers an interesting profile of Prahalad and his ideas, which deserve careful consideration in the West. (Additionally, a podcast is available here.) Even if he’s partly right, Prahalad’s vision has sweeping implications for many seemingly entrenched industries and business models in the West.
Prahalad see a dynamic mix of entrepreneurial energy and resourcefulness at work in less developed countries like his native India. Success in such countries depends on squeezing a lot from very little and furnishing top quality products at very low prices. Prahalad believes these nations will produce new business models from this mindset which transform industries such as financial services, health care, and telecom services:
For his next book, due in fall, 2006, Prahalad is assembling case studies of Indian companies that could spawn entirely new ways to think about conducting business. Fast-growing telecom operators such as Bharti, Reliance, and Tata, for example, are profitably selling cellular service for as little as 2 cents a minute "even though they must buy the same hardware as Western companies," he says. Now they're preparing to launch broadband TV, data, and voice for around $30 a month -- about a third of the cost of such packages in the U.S. Bangalore's Narayana Hrudayalaya hospital charges a flat fee of only $1,500 for heart bypass surgery that would cost 50 times that in the U.S. and operates on hundreds of infants each year for free. Yet it is highly profitable, has no debt, and claims a higher success rate than most U.S. hospitals. Narayana also profitably insures 2.5 million poor Indians against serious illness for 11 cents a month per person.
Low wages alone can't account for such price gaps with the West, Prahalad contends. The real secret is ingenious cost-cutting practices, such as extreme reliance on outsourcing, novel use of technology, and making the most of capital investment. "These are radical innovations," Prahalad says, many of which can be adapted to the U.S. . . .
Prahalad thinks globalization also can help rein in America's soaring health-care costs. That's one reason he is studying Indian hospitals such as Narayana Hrudayalaya, founded by cardiac surgeon Dr. Devi Shetty. Some reasons for its low costs can't be easily replicated elsewhere. The land was owned by Shetty's family. The hospital's 25 foreign-trained surgeons earn half what they could in the U.S. Outsize malpractice awards are rare in India, so insurance costs are low. But the hospital also operates for free on anyone who cannot pay and on any infant younger than one month. For the rural poor, it runs 39 remote clinics and mobile-testing labs with satellite links that so far have treated 17,000 patients.
Some of the biggest savings come from its business model. In the U.S., the chief surgeon manages the entire patient process, from testing and diagnosis to supervising the operating room, recuperation, and billing. Narayana works more like an assembly line: The surgeons perform only surgery.
That may seem like a recipe for shoddy care. But Shetty asserts it actually translates into fewer mistakes because specialists focus on what they do best. The 1.35% mortality rate for coronary bypasses and 2.7% rate for aortic valve replacements reported by Narayana are roughly half the average of U.S. hospitals, according to federal statistics, though those aren't the only measures of quality care. "The importance of volume isn't well understood in our industry," Shetty says. "A surgeon doing three or four operations a day does much better work than one doing three or four in a week." The factory approach also leads to economies of scale. The hospital uses all of its expensive CAT scanners and X-ray and magnetic-resonance machines to the max. "In the U.S., a lot of this infrastructure is used five days a week," says Shetty. "We use ours 14 hours a day, 7 days a week."
Such radical thinking about health care or telecom business models is easy to dismiss, particularly by large corporate entities in the United States and Europe which have a vested interest in sticking their heads in the sand.
Hospitals in the United States, for example, have tremendous infrastructure and an attendant cost structure devoted to very costly delivery of treatment. The system surrounding that hospital, including its information technology, payments system, and overall efficiency of operation, is fairly dysfunctional. (If you disagree, you either haven’t been near a hospital for a while or you’ve had a pretty extraordinary experience.)
When a dysfunctional industry with a bloated cost structure rubs up against dissatisfied consumers, a major overhaul driven by technological innovation and lower cost operating models is in store.
Incidentally, we haven’t even addressed the advances in technology and understanding of disease which will radically change what and how gets treated in the hospital. I was at Emory’s Winship Cancer Institute today and got a fresh reminder of how quickly our understanding of these disease is advancing. (More on this later.)
It may take more than a phone and a $20 card, but riveting changes are in store over the next decade for U.S. healthcare and a variety of other industries.
Posted by John at 4:58 AM | Comments (0) | TrackBackQuote of the Day for Tuesday, January 24, 2006
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January 23, 2006
Math, Not Mandarin
Bloomberg columnist Andy Mukherjee asks some hard questions, and makes some valid points, about the costs/benefits of learning Mandarin to students in the U.S. Mukherjee’s argument is that China, like many countries, has essentially accepted English as the world language of commerce.
To whit, about 50,000 students in the U.S. are now learning Mandarin, while about 110 million are learning English.
Math, not Mandarin, should be the priority for U.S. students, says Mukherjee. (Presumably so should science as well.)
In that regard, says Mukherjee, consider the results of last month’s C.F.A. Level I examination. Test takers from China had the highest pass rate, followed by Germany, India, and in fourth, students from the United States.
By the way, one of those bright young Chinese C.F.A. candidates who passed last month works for us. Congratulations again, Yin!
Posted by John at 5:03 AM | Comments (0) | TrackBackSecond Tier Chinese Cities Receiving More Attention from Multinationals
China Daily reports on a survey by real estate services firm Jones Lang LaSalle indicating multinationals are most interested in China’s second tier cities for further expansion. Tops in the survey were Chengdu, Dalian, and Hangzhou.
Per my oft-stated contention that China’s low cost labor advantage will disappear over time (for example, in this post), consider these few lines of the article:
[Jones Lang LaSalle country head Pol-Henry] Cox indicated that Chinese cities hoping to attract multinationals with manufacturing facilities, research and development plants face tough domestic and international competition.
"It is not enough that China have seemingly low labour costs, as different competing regions offer various incentives geared towards attracting a specific type of industry in order to get the upper-hand," said Cox.
The pressure points may not be exactly the same, but a competitive globalized economy pressures not just the United States or Europe, but China as well.
Posted by John at 4:40 AM | Comments (0) | TrackBackQuote of the Day for Monday, January 23, 2006
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January 22, 2006
Utah’s Emerging Hispanic Population
The buying power of Utah’s Hispanic population has grown almost sixfold in fifteen years and now stands at about $4 billion. This demographic is now a "vital part" of strategic plans for Utah’s business community, reports the Salt Lake Tribune.
Posted by John at 9:53 AM | Comments (0) | TrackBackMoments in China Providing a Reminder of What Little I Know
One of my first mentors many years ago was Patsy Meadows. Patsy was a fixture at J.C. Bradford & Co. for many years, one of the under recognized people who in fact held the place together.
In response to my post on returning from China, Patsy emailed me with this question: "Why did you and your travel mate, Jeff, feel like you know so little after such a trip to China?"
Patsy’s question, deceptively simple, is a very good one. Why did I feel this way after this trip, as I do after every such visit? Here are just a few such moments in which the thought crossed my mind during this trip:
--When a Chinese venture capitalist explained how he and his team have to find companies by going from building to building, looking at building directories and knocking on doors. "That’s the only way you can find all the companies you need to be looking at," he says.
--While I’m sitting in Wenzhou at a forum on innovation and intellectual property strategy. A decade ago, Wenzhou was commonly referred to as the "knockoff capital of the world."
--When I talked to a young woman whose English is more perfect than my Chinese will likely ever be, and I think about where I was when I was her age.
--When I toured a factory and saw every piece of manufacturing equipment had been modified in some way to increase or automate production.
--While I was talking with a successful Chinese industrialist who was a farmer two decades ago.
Indeed, I’ve got a lot to learn. I'd better get busy.
Posted by John at 9:33 AM | Comments (0) | TrackBackDeveloping Economies Now Account for Over Half of World Output
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Additionally, more than half the world’s growth in GDP in current dollar terms was due to emerging economies.
Without such growth in the developing world, notes the Economist, growth in developed economies would be slowing due to aging populations.
Posted by John at 8:21 AM | Comments (0) | TrackBackBritish Secondary School Makes Chinese a Core Language Requirement
"This year China replaced Britain as the world's fourth largest economy. . . We in Britain need to face up to this challenge, see it for the trading opportunity that it is, and ensure that our nation's children are well-placed to thrive in this new global reality."
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Cairns believes that what is good for the chicks is good for the hen, too:
Posted by John at 5:01 AM | Comments (0) | TrackBack"I have also agreed to join the first Mandarin Chinese class. . . I think it is the best way for me to show the pupils how important I regard this new addition to our core curriculum."
Quote of the Day for Sunday, January 22, 2006
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January 21, 2006
The University of Georgia Establishes a Degree in Chinese Language and Literature
The University of Georgia has established a new degree option for its undergraduates: a Bachelor of Arts in Chinese language and literature. This program was established, in part, because of increased student demand.
This degree is the first of its kind offered at a public institution in the state of Georgia.
We earlier noted Georgia Tech’s expanded alliance with Shanghai Jiao Tong University, and we anticipate ties between universities in Georgia and China will deepen in coming years.
Posted by John at 4:00 PM | Comments (2) | TrackBackHispanic Network TV to be tops in 2006 Ad Spending
Of the twenty different media tracked by TNS Media Intelligence, spending on Hispanic network television is expected to increase the most in 2006 (10.4%). Internet advertising (9%) is expected to be the second fastest growing, following by cable television (8.4%).
You can read the complete release from TNS Media Intelligence by following this link.
Posted by John at 11:27 AM | Comments (0) | TrackBackA Reality Check for China Bulls and Bears
As I mentioned in my post on China’s banking system, I’ve often found that when you find large numbers dividend into two polar extreme camps of opinion on a subject, both are usually wrong. A muddled blend of those two points of view is often the actual result.
In this vein, the ChinaSolved blog offers a reality check for both China’s bulls and its naysayers:
China is not going to take over the world tomorrow.
China is not a bubble that is going to fade away.
It is a large, rapidly developing market. It is going to be extremely important for the rest of our business lives. It is a world class production center, and a very important market for finished goods and some raw materials. There is no appreciable service sector. The Chinese are great some things, weak at others, and working hard to improve across the spectrum. Let’s all just get a grip. . .
Read this post in full—it’s very good and right on target.
Posted by John at 7:07 AM | Comments (0) | TrackBackThanks to our Tidbits Guests for their 2006 Predictions
We’ve featured some great guest Tidbits prognosticators over the past couple of weeks with predictions ranging from thoughtful to madcap. Thanks to all of you for your kindness in participating and sharing with Tidbits readers.
Just in case you missed anyone, we featured the following guests:
Chip Macdonald, Alston & Bird
Ronnie Austin, Atlanta Business Bank
John Daly, www.johndaly.tv
Wei Hu, Troutman Sanders
Steve Sellery, The Golf Channel
Jouko Rissanen, Private investor
Tim Vaill, Boston Private Financial Holdings
Bud Stumbaugh, AssuranceAmerica
Bill Gossard, Mesirow Financial
John O’Hurley, Actor and Private investor
Brian Walsh, currency trader
Tom Hawker, Capital Corp. of the West
Tim Xia, Morris, Manning & Martin
Actor Bubba Gilliam
Terry Dan, Real Estate Developer
John Peterman, The J. Peterman Company
Barry Chen, UPS
Bert Lance
Jimmy Tallent, United Community Banks, Inc.
Quote of the Day for Saturday, January 21, 2006
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January 20, 2006
Learning from the Rhino
Historian Paul Johnson writes a column for Forbes which I enjoy regularly; his latest effort is particularly edifying.
Behold the rhinoceros, says Johnson:
. . . the rhino is not a particularly subtle or clever animal. It's the last of the antediluvian quadrupeds to carry a great weight of body armor. And by all the rules of progressive design and the process of natural selection the rhino ought to have been eliminated. But it hasn't been. Why not? Because the rhino is single-minded. When it perceives an object, it makes a decision--to charge. And it puts everything it's got into that charge. When the charge is over, the object is either flattened or has gone a long way into cover, whereupon the rhino instantly resumes browsing.
History is full of rhinos, notes Johnson. Moses, in leading the Israelites out of Egypt, was a rhino. So was Alexander the Great, Julius Caesar, the American Revolutionaries, Abraham Lincoln, and Winston Churchill.
Rhinos aren’t just found among military and political leaders. Johnson notes, quite rightly, that rhino principles apply particularly to entrepreneurs. Successful businesspeople come with varying characteristics, but one of the indispensable characteristics all of them have is a single-minded aggressive focus.
Sam Walton’s vision of a retailer with low prices and operational excellence was the "charge" which created Wal-Mart. The Home Depot Company resulted from a single-minded drive, on the part of Bernie Marcus and Arthur Blank, to bring a wide range of home improvement products at attractive prices under one roof. Fred Smith, a student of history himself, envisioned a business which could make money by flawlessly delivering packages overnight around the country. The result is the FedEx Corporation.
Thousands of entrepreneurs whose stories have received much less publicity have achieved success by a focused determination embodied in the rhino. They’ve understood that it’s physically impossible to charge three or four ways at one time. The rhino can’t do it. Neither could any of these entrepreneurs. Survival itself, much less success, is predicated on aggressively pursuing one focused vision.
Johnson’s moral is worth remembering:
Posted by John at 10:36 AM | Comments (0) | TrackBackWe can choose to lead quiet lives and get through them without achieving much. But if we want to do the big thing, if we hope to leave a record that will be admired and remembered, we must learn to distinguish between the peripheral and the essential. Then, having clearly established our central objective, we must charge at it again and again until the goal is achieved.
That is what the rhinoceros does. It may not be a model animal in most ways. But it does one thing very well. And that one thing we can learn: Charge!
Back from China with a Reminder of how Little I Know
I’m landed back in Atlanta after a very successful trip to China.
Just before I left, one of my travel mates on this trip, Jeff Schulte of Morris Manning & Martin, said that one of the things he’s learned on this trip is how little he knows.
I told him that this is my fifth trip to China and I say the same thing at the end of every trip. I’ve got no doubt whatsoever that I’ll have the same sentiments at the end of trip number twenty or thirty, if I get that far.
Because of the shortness of this trip, I didn’t have much time to post, other than a few notes from Wenzhou. Other than catching up on sleep, plane rides are great for catching up on writing, and I’ll be posting more observations on this trip in coming days.
Posted by John at 9:19 AM | Comments (0) | TrackBackQuote of the Day for Friday, January 20, 2006
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January 19, 2006
Quote of the Day for Thursday, January 19, 2006
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January 18, 2006
Quote of the Day for Wednesday, January 18, 2006
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January 17, 2006
Jimmy Appleseed
One more nugget from my recent conversation with Jimmy Tallent: "If I’m not plowing back a few percentage points of current year growth into the business something’s wrong. The long-term best interest of the shareholder is that I grow at 13% instead of 15% or 16%. If I’m growing at 16% I may not be doing my job."
These few sentences help explain a premium multiple in banking. It could be any industry.
What Jimmy was referred to is the need, in his mind, to reinvest earnings back into the business in the form of people. As we noted in another post, the business will follow good bankers.
Hiring a banker or group of bankers with a good book of business can bring a very healthy return on investment. It’s generally much better than buying a bank and paying a hefty control premium.
The problem is that capturing this return involved taking a short term loss. The compensation, office, and other expense associated with hiring a loan officer comes in advance of the business that person brings in. If the banker’s good, the business will come, but it can take some time.
Banks whose strategic revolves around organic growth have to plant people seeds. They have to plant the right seeds, or they’ll get chrysanthemums instead of oak trees. Those seeds have to germinate and grow.
Skilled bankers like Jimmy Tallent (or Tom Hawker, Tim Vaill, or Ronnie Austin, for that matter) understand how to execute a seed planting strategy. They’re willing to exercise patience because they understand that the market pays for organic growth—-for managers who know how to grow a business without acquisitions gimmicks or accounting tricks.
It’s one principle reason why United Community Banks sells at a premium multiple relative to its peers. The market intuitively understands that the company’s true underlying growth rate is understated. Seeds are being planted. The market sees future earnings in incubation.
Call him Jimmy Appleseed.
Posted by John at 7:49 PM | Comments (0) | TrackBackQuote of the Day for Tuesday, December 17, 2006
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January 16, 2006
Company Culture: 'Don’t Ask Me, Talk to People You Know'
I related the long holiday conversation I had with Jimmy Tallent, CEO of United Community Banks, and his perspectives on the coming year.
Naturally, during our extended conversation, we alternately talked, laughed, and shook our heads about a variety of topics.
Jimmy talked in depth and proudly about his company’s culture. That’s the part of United Community’s development which he says he’s most proud of.
And so he should be. Without the cultural environment which he and his management team have so vigilantly cultivated, UCBI wouldn’t have been able to pull off such coups as they did in Gainesville during 2005, for example.
As Jimmy noted, "one of the things I’ve learned is that when you get the good bankers, the business will follow. You’ve got to create a good environment to get good bankers."
I was struck by one particular comment he made regarding culture. When he’s recruiting and talking about the company’s internal working environment, he tells prospective employees: "Don’t take my word for it—-call people you know and ask them for their opinion."
I’m amazed by company CEOs who think they can keep the actual state of their company’s culture hidden from their investors, vendors, and customers. These very same company heads mouth fealty to "the importance of culture," but just a cursory dip below the shiny veneer they portray to the world sometimes reveals a tempestuous mess.
It’s amazing, as an investor in both public and private companies, what you can learn about the actual working environment at a company. All you have to do is ask. Employees will tell you. They’re telling you their side of the story, but nuggets of truth can be picked out.
The truth about culture always comes out.
Always.
Posted by John at 7:01 PM | Comments (0) | TrackBackGuest Predictions for 2006 from Jimmy Tallent, United Community Banks, Inc.
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One trait Jimmy has which I particularly like is that Jimmy is still "Jimmy." He hasn’t let the company’s success get to his head. He was running hard, taking nothing for granted, when I first met him a number of years ago, well before his stock was listed on NASDAQ.
Today, now that his shares are listed and more widely traded, he’s got twenty-somethings from New York, representing "smart money," calling him and giving him the benefit of their wisdom. Despite it all, Jimmy still carries himself the same way today he did many years ago before the beguiling lights of Wall Street were turned his way.
In contrast, I’ve seen quite a few bank CEOs in recent years, carrying themselves in a manner befitting King Louis XIV, who can only dream about having a track record just in the same area code as Jimmy Tallent’s.
Behind his easy-going and humble demeanor, however, is one tough, focused, and studious mind. Underneath the pomposity of some of his peers lies the discipline of a bowl of Jello.
I had a long telephone conversation with Jimmy during the holidays. He had more time to talk—he was in a relatively less hectic time for him—-and I had plenty of time to listen, as I was in the car driving from Atlanta to Nashville. My only problem was that it was hard to jot down legible notes while I was driving. The listening was delightful and, as always, educational.
With his subsequent blessing, I’ve paraphrased my notes from our conservation, which represent Jimmy’s contribution to Tidbits guest predictions for 2006:
Posted by John at 5:32 AM | Comments (0) | TrackBack--We look for good internal growth in all the markets we operate in, including north Georgia, Atlanta, Savannah, east Tennessee, and western North Carolina. We do not see a real estate bubble bursting in any of these markets.
--North Georgia will continue to be a baby boomer destination over the next several years. It’s proximity to metropolitan Atlanta, it’s natural beauty, and it’s desirability as a "live, work, play" location should continue to drive strong growth.
--There’s a lot of talk about mortgage interest rates being high, but they are only high relative to levels of a year or two ago. Taking a longer view, long-term mortgage rates remain relatively low enough to drive much of the development going on in UCBI’s markets.
--Interestingly, we’ve seen positive effects in our banks from Katrina-related relocations.
--Strong core deposit growth will continue to separate winners from losers in the the banking industry. Those banks which have the best core deposit franchises will be best able to drive shareholder value.
--My biggest concern for metro Atlanta is traffic. The traffic around the northern arc of the city can be terrible, particularly on Georgia 400. Such congestion threatens the area’s livability quotient.
--The effects of possible auto plant closures or any further dislocation caused by Delta Airlines will be readily absorbed by Atlanta’s overall dynamic economy.
--The improvement in highway infrastructure along Georgia highway 316 between Metro Atlanta and Athens is vital. The collection of universities in and around North Carolina’s Research Triangle has had a huge impact on economic development in that area. With improved transportation access, expect a similar impact in the greater Atlanta area over time, as the research assets of University of Georgia, Georgia Tech, and Georgia State University intermingle in ways which should significantly benefit the region’s economy.
Quote of the Day for Monday, January 16, 2006
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January 15, 2006
A Few Quick Notes from Wenzhou
--I landed in Wenzhou after midnight Saturday evening, and spent Sunday alternately resting and with colleagues and meeting new friends.
--I’ve been looking forward to coming to this city for some time, as it is known for being chock full of entrepreneurs.
On a tour of the city yesterday, we asked our guide, an economic development official with the city, where the commercial center of the city was.
"It’s everywhere!" he said.
--While laying over in Shanghai’s Pudong Airport on the way to Wenzhou, I ran into a gentleman from Australia in the pollution control business. As I expected, he told me that business was very brisk (not in just in China—-he’s about to open an office in Eastern Europe).
He related the story of a friend of a friend who had lived in Beijing for 15 years and went to the doctor for a checkup. After the examination his doctor told him he needed to quit smoking. The man told him he’d never smoked in his life.
--I have a theory is that the Chinese provinces which understand how important air quality is and do something about it will be big economic development winners. China is very similar to the United States in this regard: provinces and cities compete for new economic development the same way states and cities do in the United States.
I asked my Australian friend whether something like that was in play in his business. "Absolutely," he said, "the provinces and the national government aren’t always in sync."
Sounds just like the United States to me. California’s air quality initiatives have been consistently tougher than those of the U.S. federal government.
As I’ve mentioned before in Tidbits, there is huge opportunity in China for even the smallest company which is in the pollution control business.
--My partner and friend Dr. Dwight Clark has put me on the best cure for jet lag I’ve ever had: melatonin. His remedy: take 3 mgs of melatonin before you go to bed for the first five nights after you arrive, and for the first five nights after you get back home. I may fall over into my lunch later today, but it’s worked pretty well for me.
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