Sunday, May 13, 2012
PARAG KHANNA - on multiple identities
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PARAG KHANNA on ' How to Run the World :" Wharton
----------------------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2811
Stephen J. Kobrin: In How to Run the World, you talk about the fact that we are entering a "postmodern Middle Ages" and that 21st-century diplomacy is going to be very complex. Technology and money, rather than sovereignty, [will] determine who has authority and who calls the shots. And you talk about "mega-diplomats." Who are these mega-diplomats?
Parag Khanna: Well, let's go back to the "postmodern Middle Ages." This is a very important analogy -- it's not just a clever historical reference. The Middle Ages was that period a thousand years ago when East and West were simultaneously powerful -- when China was the world's most advanced civilization under the Song Dynasty, when the Chola Dynasty of India was a great naval power, and when the Arab and Islamic Caliphates ruled all the way from North Africa to Central Asia. Europe was weak and divided between the Byzantine Empire and the Holy Roman Empire. The fact that it was a multipolar landscape around the world is a very important attribute of the Middle Ages.
ON MULTIPLE IDENTITIES : It's either your ethnic identity or your religious identity or your national, state identity -- or what's on your passport. That's not a very creative way of understanding how identity can take shape in a technological environment and an environment where money talks as much as it does. I meet a lot of young people who subscribe to a generational identity. They identify with certain causes that they are either members of physically or financially or through technology communities in the clouds -- like Facebook and various other groups and causes. Corporate identities are also extremely important today. When I meet young people who work for multinationals, but who have citizenship from Brazil or India or China or Russia, they realize that, in fact, their national identity will not allow visa-free access to the West or other parts of the world for years and years to come. The corporate identity is what allows them that access -- and the visas that their corporation gets for them.
PARAG KHANNA on ' How to Run the World :" Wharton
----------------------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2811
Stephen J. Kobrin: In How to Run the World, you talk about the fact that we are entering a "postmodern Middle Ages" and that 21st-century diplomacy is going to be very complex. Technology and money, rather than sovereignty, [will] determine who has authority and who calls the shots. And you talk about "mega-diplomats." Who are these mega-diplomats?
Parag Khanna: Well, let's go back to the "postmodern Middle Ages." This is a very important analogy -- it's not just a clever historical reference. The Middle Ages was that period a thousand years ago when East and West were simultaneously powerful -- when China was the world's most advanced civilization under the Song Dynasty, when the Chola Dynasty of India was a great naval power, and when the Arab and Islamic Caliphates ruled all the way from North Africa to Central Asia. Europe was weak and divided between the Byzantine Empire and the Holy Roman Empire. The fact that it was a multipolar landscape around the world is a very important attribute of the Middle Ages.
ON MULTIPLE IDENTITIES : It's either your ethnic identity or your religious identity or your national, state identity -- or what's on your passport. That's not a very creative way of understanding how identity can take shape in a technological environment and an environment where money talks as much as it does. I meet a lot of young people who subscribe to a generational identity. They identify with certain causes that they are either members of physically or financially or through technology communities in the clouds -- like Facebook and various other groups and causes. Corporate identities are also extremely important today. When I meet young people who work for multinationals, but who have citizenship from Brazil or India or China or Russia, they realize that, in fact, their national identity will not allow visa-free access to the West or other parts of the world for years and years to come. The corporate identity is what allows them that access -- and the visas that their corporation gets for them.
Labels: Knowledge at Wharton
beauty-care industry , a predominantly a woman's domain ?
FMCG business is predominanatly woman's
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2759
(with a greater range of choices for consumers and lower barriers to entry for companies, Estée Lauder has remained committed to selling in upscale department stores. Stylists behind the makeup counter add value to purchases by offering personalized advice to the customers. )
[But in the case of beauty products,] consumers still want to see it, touch it, feel it, smell it. Technology does not allow that to be replaced, so she's still willing to go to a store. The other thing is the notion of what shopping is about -- that's a behavioral pattern that hasn't really changed. It's still as much about entertainment as it is about an act of consumption. Many people can entertain themselves happily at home with different electronic gadgets. But many still want to get out and about and be in a social environment. They still like to shop in an environment like that. And then you add the interaction with an expert with whom they can talk. That behavior has only evolved a little bit, not a lot. We in the cosmetics business, for example, thrive on the fact that so many of our consumers, once they find the product that they love and they like, want to come back and buy it again and again.
[Customers] want something new, but they also want the products that they like not to change, so they can use them again and again. The number one consumer feedback we get is "Bring [a certain item] back" when we've discontinued a product....
Problems in Family owned business : Many of the challenges of a family owned business are the same no matter what kind of business you're in. You have family members who may have certain emotional opinions and biases, which may or may not be best based on rational thought. Sometimes those emotions are legitimate, and sometimes perhaps they're based on ideas that did work at one point but perhaps are not as relevant today. In other words, [older family members might say,] "When I was your age, I did this or that." The ability to say, "Gee, you know, I'm not so certain that might work right now," isn't so easy. That is the other side of what I talked about before, which was that we are very innovative and we have innovation as a part of what we do. But occasionally there are stakeholders who perhaps have the same last name as I do, who have a stake in the way it was, not necessarily the way it will be. It takes extra convincing for them to get there. That's one of the issues.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2759
(with a greater range of choices for consumers and lower barriers to entry for companies, Estée Lauder has remained committed to selling in upscale department stores. Stylists behind the makeup counter add value to purchases by offering personalized advice to the customers. )
[But in the case of beauty products,] consumers still want to see it, touch it, feel it, smell it. Technology does not allow that to be replaced, so she's still willing to go to a store. The other thing is the notion of what shopping is about -- that's a behavioral pattern that hasn't really changed. It's still as much about entertainment as it is about an act of consumption. Many people can entertain themselves happily at home with different electronic gadgets. But many still want to get out and about and be in a social environment. They still like to shop in an environment like that. And then you add the interaction with an expert with whom they can talk. That behavior has only evolved a little bit, not a lot. We in the cosmetics business, for example, thrive on the fact that so many of our consumers, once they find the product that they love and they like, want to come back and buy it again and again.
[Customers] want something new, but they also want the products that they like not to change, so they can use them again and again. The number one consumer feedback we get is "Bring [a certain item] back" when we've discontinued a product....
Problems in Family owned business : Many of the challenges of a family owned business are the same no matter what kind of business you're in. You have family members who may have certain emotional opinions and biases, which may or may not be best based on rational thought. Sometimes those emotions are legitimate, and sometimes perhaps they're based on ideas that did work at one point but perhaps are not as relevant today. In other words, [older family members might say,] "When I was your age, I did this or that." The ability to say, "Gee, you know, I'm not so certain that might work right now," isn't so easy. That is the other side of what I talked about before, which was that we are very innovative and we have innovation as a part of what we do. But occasionally there are stakeholders who perhaps have the same last name as I do, who have a stake in the way it was, not necessarily the way it will be. It takes extra convincing for them to get there. That's one of the issues.
Labels: Knowledge at Wharton
India as desitnation of medical tourism
-------------------------------------------------------------------------------------------
, India’s share in the global medical tourism industry will reach around 3% by the end of 2013
India has not been able to set up an adequate health care infrastructure for its own citizens and it doesn’t have the money to do so. Creation of a sophisticated medical tourism structure will have a trickle-down effect. ( or , will it ? Ever ?)
--------------------------------------------------------------------------------------------
" "India has been ranked among the top five destinations for medical tourism," says Rana Kapoor, founder, managing director and CEO of Yes Bank, which has recently done a study on health and wellness tourism in India along with apex chamber of commerce FICCI. The ranking by Nuwire Investors, an online source for news on alternative investments, puts Panama on top, followed by Brazil, Malaysia and Costa Rica
-------------------------------------------------------------------------------------
"We produce the largest number of doctors, nurses and medical technicians in the world. Also, we have been traditionally linked with western health care because of the British influence on our medical education and the ability to speak English. This is extremely important for developing [global] health care. Our greatest asset is our ability to produce the largest number of technically-skilled individuals. We also have the largest number of USFDA (U.S. Food and Drugs Administration)-approved drug manufacturing units outside the U.S."
(Dr.Devi Shetty)
, India’s share in the global medical tourism industry will reach around 3% by the end of 2013
India has not been able to set up an adequate health care infrastructure for its own citizens and it doesn’t have the money to do so. Creation of a sophisticated medical tourism structure will have a trickle-down effect. ( or , will it ? Ever ?)
--------------------------------------------------------------------------------------------
" "India has been ranked among the top five destinations for medical tourism," says Rana Kapoor, founder, managing director and CEO of Yes Bank, which has recently done a study on health and wellness tourism in India along with apex chamber of commerce FICCI. The ranking by Nuwire Investors, an online source for news on alternative investments, puts Panama on top, followed by Brazil, Malaysia and Costa Rica
-------------------------------------------------------------------------------------
"We produce the largest number of doctors, nurses and medical technicians in the world. Also, we have been traditionally linked with western health care because of the British influence on our medical education and the ability to speak English. This is extremely important for developing [global] health care. Our greatest asset is our ability to produce the largest number of technically-skilled individuals. We also have the largest number of USFDA (U.S. Food and Drugs Administration)-approved drug manufacturing units outside the U.S."
(Dr.Devi Shetty)
Labels: Knowledge at Wharton
Y , middle managers R the most important in your company !
Why Middle Managers May Be the Most Important People in Your Company
-----------------------------------------------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2783
--------------------------------------------------------------------------------------------------
The importance of individual skills and characteristics can be especially significant when measuring firm performance in industries and fields that value innovation, like computer games, software, consulting, biotech and marketing, according to Mollick.
It is in these knowledge-intensive industries where variation in the abilities of middle managers – the "suits" he refers to in his paper -- has a "particularly large impact on firm performance, much larger than that of individuals who are assigned innovative roles," he says. His research differentiates knowledge-based companies from traditional industries where "economies of scale are critical, such as manufacturing, and where there seems to be little need to take individuals into account to explain performance." Toyota is an example. "With a six-layered bureaucracy, cross-trained workers and clearly delineated departments, Toyota built a manufacturing powerhouse that integrates workers in a complex mechanism to produce cars efficiently," Mollick writes. "Individual workers are ultimately replaceable and interchangeable with others who have received the same extensive training." The process "does not rely on any individual worker's skills but rather firm-level processes to hire and train the appropriate individuals for the appropriate roles." ------------------------------------------------------------------------------------------------------ Caught in the Middle: Why Developing and Retaining Middle Managers Can Be So Challenging Published: May 28, 2008 in Knowledge@Wharton ---------------------------------------------------------------------------------------------------- http://knowledge.wharton.upenn.edu/article.cfm?articleid=1968 -------------------------------------------------------------------------------------------------- middle managers. They are often referred to as the "glue" that holds companies together, bridging the gap between the top management team and lower level workers. They implement strategy and organizational changes, keeping workers engaged during both good and bad economic cycles. ------------------------------------------------------------------------------------- "Many companies are seeing significant turnover in middle management ranks, and with significant turnover, they don't have the ability to execute strategy," says vice dean of Wharton Executive Education Thomas Colligan. "Top management can spend all their time creating strategy, but without someone there to implement it, where are you at the end of the day?" --------------------------------------------------------------------------------------------- As companies go through economic cycles like the current one, middle managers get hit with the elimination of rewards and incentives and, in some cases, layoffs. This is particularly true now in the financial services industry, he says. "In cost-cutting times, knee-jerk reactions happen. There is a paradox where middle managers are essential, but end up sacked when restructuring occurs. It's a rough situation because the people needed to run the most important projects are in the middle."
It is in these knowledge-intensive industries where variation in the abilities of middle managers – the "suits" he refers to in his paper -- has a "particularly large impact on firm performance, much larger than that of individuals who are assigned innovative roles," he says. His research differentiates knowledge-based companies from traditional industries where "economies of scale are critical, such as manufacturing, and where there seems to be little need to take individuals into account to explain performance." Toyota is an example. "With a six-layered bureaucracy, cross-trained workers and clearly delineated departments, Toyota built a manufacturing powerhouse that integrates workers in a complex mechanism to produce cars efficiently," Mollick writes. "Individual workers are ultimately replaceable and interchangeable with others who have received the same extensive training." The process "does not rely on any individual worker's skills but rather firm-level processes to hire and train the appropriate individuals for the appropriate roles." ------------------------------------------------------------------------------------------------------ Caught in the Middle: Why Developing and Retaining Middle Managers Can Be So Challenging Published: May 28, 2008 in Knowledge@Wharton ---------------------------------------------------------------------------------------------------- http://knowledge.wharton.upenn.edu/article.cfm?articleid=1968 -------------------------------------------------------------------------------------------------- middle managers. They are often referred to as the "glue" that holds companies together, bridging the gap between the top management team and lower level workers. They implement strategy and organizational changes, keeping workers engaged during both good and bad economic cycles. ------------------------------------------------------------------------------------- "Many companies are seeing significant turnover in middle management ranks, and with significant turnover, they don't have the ability to execute strategy," says vice dean of Wharton Executive Education Thomas Colligan. "Top management can spend all their time creating strategy, but without someone there to implement it, where are you at the end of the day?" --------------------------------------------------------------------------------------------- As companies go through economic cycles like the current one, middle managers get hit with the elimination of rewards and incentives and, in some cases, layoffs. This is particularly true now in the financial services industry, he says. "In cost-cutting times, knee-jerk reactions happen. There is a paradox where middle managers are essential, but end up sacked when restructuring occurs. It's a rough situation because the people needed to run the most important projects are in the middle."
Labels: Knowledge at Wharton
Friday, August 05, 2011
Parameters for measuring happiness : Wharton : Nic Marks interview
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Idea of happiness : various measuring parameters. Limitations of GDP as an index of happiness
----------------------------------------------------------------------------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2818
Recent book by Author Mr.Nic Marks, " Happiness Manifesto " is becoming very popular and selling millions of copies all over the world. In an interview with a Wharton Professor, Mr.Nic Marks says, there are 5 keys to increase our happiness in life. And they don't cost us anything or very little. Felt like sharing part excerpt ....
CVR
Knowledge@Wharton: What are some of the other things that contribute to happiness? You talked about community relations and family relations. Those are important measures in the way that you look at things, are they not?
Marks: Yes. Every piece of well-being research will say that human relationships are the most important thing.Our relationships are absolutely key to our survival. From a biological perspective, our happiness is tied in with that.There are lots of things outside of the economy that are really, really important.
At the New Economics Foundation, we talk about there being 5 things that really generate people's happiness and well-being.
The first is "Connect," which is your social relationships.
The second is "Being Active," which is physical activity. It is great for our well-being. The fastest way out of a bad mood is to go outside, go for a walk, run or whatever it is you like doing.
Third thing is - "Taking Notice" is about allowing yourself to be moved by things around you, noticing them, noticing what is going on with other people, noticing the changing seasons -- beauty. Noticing what is coming up from within you. Listening to those sorts of doubts or those suppressed joys in your life and actually starting to act them out.
The fourth is to "Keep Learning." Curiosity is great for well-being. [That means] understanding things -- less about knowledge [and] more about an engagement with the world and actually wanting to learn new things, right through the life course. Older people who keep learning have much better health outcomes.
And then, finally, the last one is "Give." Be compassionate." I think there is actually a huge hunger in the West to give again. I think it is what people fear had been suppressed. In a way we have become quite individualistic and selfish as a society. I think there is a huge potential there for unlocking that.
In a classic experiment, people were given money at the beginning of the day. One half was told to go and spend it on themselves. . And the other half was told to spend it on someone else. At the end of the day, [the experimenters looked at] happiness and how [people] have enjoyed the day. It was measured. The ones who gave to other people were significantly happier than the ones who spent it on themselves. That is very, very interesting. One of the best ways to spend your money -- if you want to spend it for happiness -- is to think about giving away a portion of it.
Marks: Starting with GDP and what's wrong with it: There is a long list probably. But the first one is that it makes no differentiation between whether expenditures are for a good thing or for a bad thing. We call these "defensive expenditures" when they are for bad things, things that are basically done to defend quality of life rather than to promote it. So, for example, the big oil slick down off Florida (from the BP oil rig blowout) would have cost an awful lot of money to clear up. That would be added as a positive to GDP, but obviously it is an extremely negative situation.
It(GDP) does know how to do it with financial capital. It has ways of adjusting it, but not with natural capital. It just treats it as a free good altogether. There is also the fact that lots of things happen outside the economy, which are of value, but they are not valued. This is one of the things that Simon Kuznets -- the original architect of GDP -- was well aware of. Household labor, parenting, community work and volunteering ... are the core economy in many ways, and yet they are not valued. So GDP has many, many problems when you think about quality of life.
There is a tension between good lives now and good lives in the future, according to the Stiglitz Commission. That is something we totally agree with. That is actually why it is such a political issue because we often are trading off the future for the now with some of our decisions about consumption patterns and how much CO2 we are pumping into the atmosphere, and things of that nature. So that is a really, really important issue !
Wharton : I don't know that you mean to separate a level of affluence from happiness, but can you talk about that dynamic? Perhaps there is a minimum level of affluence that one needs to become satisfied -- after which further affluence doesn't make you much happier?
Nic Marks : Marks: Definitely. All the well-being research suggests that there is the classic falling marginal utility of income -- that basically a thousand dollars in the pocket of a rich person is worth much less than a thousand dollars in the pocket of a poor person -- and that's clear [even at] the country level. It is the same everywhere. The idea of GDP growth is that a rising tide lifts all boats and that everyone [becomes] better [off economically]. The problem is that most GDP growth has been extremely unequal, so it is actually tipping the boats in lots of ways. Secondly, the things that are really, really critical for well-being simply don't cost so much.
So I don't agree with Wolfers' argument that you have to have rising GDP. We can see nations [that are examples] -- Costa Rica's average life expectancy is longer than the United States' -- or very, very similar. Some years it is higher and some years it is not. They have a great healthcare system there. They are much happier than people in the United States and they have a quarter of the GDP.
Knowledge@Wharton: That is a good example. Didn't they come up number one in your happiness index?
Marks: Yes. They actually come out as the happiest nation on the planet, which is a surprise result. But actually I have since been to Costa Rica -- the beginning part of this year. You can see it is very, very relational. They feel quite free, and they also have very strong family relationships, very strong community relationships. They have their problems. They have unemployment. They have rising income inequality and they have rising crime. So they are not without problems. But they are a very, very different society than several. Latin American countries also are blessed with a sort of life philosophy, which is quite vibrant and of course,
Labels: Knowledge at Wharton
Tuesday, May 24, 2011
career defining decisions in life
How to deal with ' career defining moments' in life ? How do CEO s do it ? A Wharton interview .
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2718
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2718
Labels: Knowledge at Wharton
Fiscal Attraction & Entrepreneurship
Fiscal Fatal attraction and idiosynchracies of entrepreneurs
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2762
How Money Impacts Marriage
When it comes to marriage, do opposites attract? Or do birds of a
feather flock together? While men and women are known to
gravitate toward mates with personal qualities similar to their own
in most respects, Wharton marketing professor Deborah Small
found the opposite to be true when it comes to money.
find that stingy spenders tend to marry those who splurge freely,
and vice versa. The pattern amounts to "fatal attraction," the
researchers argue, because it causes conflicts over money and
thus has a negative effect on marital well-being.
"There's a lot of academic literature and interest in individual
decision making, [but what has been] largely neglected is that
people are often making decisions jointly and the outcomes of
financial decisions affect other people," Small says. "It's important
to understand that even though two individuals are involved in a
decision and are being affected by it, their attitudes and
preferences may not be aligned."
he majority of relationship research suggests that people are
attracted to those with similar demographic characteristics,
attitudes, values and even names. But Small and her co-authors
based their hypothesis of spendthrift/tightwad attraction on a
theory that men and women also tend to seek out a mate who
has qualities that are the stark opposite of those they most strongly
deplore in themselves -- in this case, the tendency to spend too
much or too little.
Two subsequent experiments asked different sets of respondents to
rate their own and their spouses' behavior on the spendthrift-
tightwad scale. In both cases, the researchers found that stingy
spenders were more likely to be married to profligates and high-
rollers gravitated toward the miserly.
People might think "that someone on the other end of the
spectrum might heal them in some way," Rick notes. "If I'm a
tightwad, I want to find a spendthrift to loosen me up, because
tightwads by definition want to loosen up. Spendthrifts also by
definition want to change their behavior.... They might think that
an opposite would help reel in that misbehavior. That [is not] what
we find."
Even though these couples may have assumed that marrying an
opposite when it came to money would balance out their own
behavior and lead to greater financial health, Small and her co-
authors discovered that such matches did not necessarily make for
happier relationships. Indeed, the research shows that conflicts
over money created more marital strife for these "opposites
attract" couplings. "We have some findings suggesting that two
spendthrifts are happier than a spendthrift and a tightwad [even
though] two spendthrifts are much more likely to end up in debt
and have other financial problems," Small says. "It's not clear that
what makes you happier is also going to make you more financially
secure."
the current findings suggest that couples should talk about
financial habits and practices early on in a relationship, and form a
set of shared expectations, plans and goals. "I think doing that
helps people recognize if the differences are too broad to
overcome," she adds.
"Entrepreneurs create so much wealth in our society, but we don't
understand what makes a person become an entrepreneur," says
Wharton finance professor Nikolai Roussanov. "This question of 'why'
is fascinating for economists because entrepreneurs benefit society
as a whole to such a great degree. We would be worse off without
them."
"Why do certain people take the entrepreneurial leap?"
His conclusion is that entrepreneurs have unique social aspirations
that other people typically don't share. "They weigh risks and
outcomes differently," he notes, which leads to atypical, but
rational, conclusions about risks and opportunities. Contrary to
common perception, entrepreneurs are not less averse to taking
chances; they simply view relative hazards with a different eye.
Socially, Roussanov says, aspiring entrepreneurs do not want to
merely keep up with the proverbial Jones; they want to get
marginally ahead of them. "Absolute wealth is not as important to
them as relative wealth." Entrepreneurs also save more and spend
less as a portion of their incomes than other people, according to
Roussanov. The consumptive value of money isn't their motivation.
Rather it's the social esteem that comes with achieving
incrementally greater wealth than they had previously, and than
their perceived peer group has. Of course, "Who 'the Jones' are
changes as you progress," Roussanov points out. "First you think, 'I
know these guys are successful and I would like to be like them.' But
as you progress, you change your comparisons. You want to be in
the Forbes 400, then in the top 10 and so forth.
In his paper, Roussanov notes that "if the satisfaction brought by
'getting ahead of the Joneses' outweighs the danger of falling
behind, risky activities with highly idiosyncratic payoffs, such as
entrepreneurship, can be particularly attractive." By contrast,
"Other people may not have this preference for status. They look at
the risks and say, 'This is too much for me.'"
What is perplexing about an entrepreneur's endeavors, Roussanov
adds, is that, "from an economist's point of view, the risk in
entrepreneurial ventures is high." These people "commit a large
fraction of their human and financial capital to their ventures, thus
exposing themselves to large undiversified risks," he writes in the
paper. "Economic theory predicts that higher risk should be
compensated by higher average return, [yet] returns on
undiversified entrepreneurial investments are no higher than the
average return on publicly traded equity."
For Luxury Goods Aficionados, Knowledge Equals Wealth
Many consumers buy high-end products to signal wealth and
status to those around them, aided by explicit branding such as a
large Mercedes symbol on the front of a car. But if consumers buy
expensive goods in part to clearly communicate things like status
to others, why would shoppers spend thousands of dollars on
handbags or other goods that have no visible logos?
In the paper, "Subtle Signals of Inconspicuous Consumption,"
Wharton marketing professor Jonah Berger and Morgan Ward, a
marketing professor at Southern Methodist University, suggest that
manufacturers of consumer goods wanting to sell to a high-end,
niche customer base should offer exclusive product lines with
smaller logos and more subtle branding elements. Based on studies
of consumer preference among ordinary shoppers and those who
were more fashion conscious, the researchers found that "insiders"
in a given consumption range (e.g., fashionistas, car enthusiasts,
etc.) prefer products that identified them as being "in the know"
only to a select group of peers.
The consumer study groups examined products with both highly
visible branding, such as the word "Gucci" emblazoned in tall
letters on a handbag, and more subtle signals of price -- for
example, the signature cherry-red soles on Christian Louboutin
shoes.
The majority of "typical" consumers preferred the products with
larger brand identifiers, and tended to misidentify products with
subtler branding. Among products with subtle signals, "typical"
consumers "thought the high-priced options were no more
expensive than their cheap alternatives," the authors write. But
the "insiders," in this case fashion students or people with an affinity
for high fashion, not only could tell the difference between a low-
cost generic item and a high-priced item with a tiny logo, but also
preferred the subtly-branded products.
To understand such "insider" shoppers, companies need to realize
that the handbag these shoppers carry or shoes they wear is
largely about sending signals, Berger notes, almost like
communicating a coded message to members of a select group.
"A Rolex is a widely recognized status symbol, but might be looked
down upon by true watch enthusiasts," the paper states. "A
Vacheron Constantin, on the other hand, will be invisible to most
people, but respected by watch aficionados."
Another lesson, conversely, is that being selective with branding
techniques comes with risk. A consumer goods company that
wants to target high-end shoppers might select a subtle pattern or
small logo, but that could turn off the majority of shoppers -- those
who can't tell the difference between a cheaper product and the
expensive item."Most people think a $6,000 Bottega Veneta bag is
no more expensive that a cheap Wal-Mart bag that has no logo,"
Berger says.
According to Berger and Ward, from the point of view of an
"insider," being identified as such is vitally important, to the point
that they will opt for possibly being mistaken for lower-end shoppers
by the masses in exchange for recognition by their fellow high-
fashion fans. The researchers also suggest that "discretely marked
products, subtle but distinct styles or high-end brands that fly
beneath the radar" have a longer life on the market than their less
expensive, more loudly branded alternatives.
"The value of signals is that they distinguish social groups, so when
outsiders start copying insiders' signals, insiders may abandon that
product and search for a new signal," Berger says. "Because explicit
signals, like large logos, are easier to observe, they are more likely to
be poached or copied, and thus more likely to eventually be
abandoned in favor of a new group marker."
That has clear implications for products with explicit brand
markings, even on expensive high-end products. "Explicit status
symbols may generate large sales in the short term, but this will only
persist if enough of the buyers are truly wealthy," the researchers
write. "If not, the symbolic value will shift towards being a marker of
the wannabe rich, and sales will decline as consumers search for
the next aspirational symbol."
More generally, the researchers suggest, the role of wealth as a
status marker is changing, being replaced by knowledge or
"cultural capital." With the expansion of credit and leasing
programs, and the wider availability of knockoff items, "it is a lot
easier now for someone who is not truly wealthy to be able to
purchase something that seems expensive," Berger notes. "Cultural
capital, though, remains elusive. Acquiring the right knowledge
requires time, effort and the right connections -- things that are
hard to fake."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2762
How Money Impacts Marriage
When it comes to marriage, do opposites attract? Or do birds of a
feather flock together? While men and women are known to
gravitate toward mates with personal qualities similar to their own
in most respects, Wharton marketing professor Deborah Small
found the opposite to be true when it comes to money.
find that stingy spenders tend to marry those who splurge freely,
and vice versa. The pattern amounts to "fatal attraction," the
researchers argue, because it causes conflicts over money and
thus has a negative effect on marital well-being.
"There's a lot of academic literature and interest in individual
decision making, [but what has been] largely neglected is that
people are often making decisions jointly and the outcomes of
financial decisions affect other people," Small says. "It's important
to understand that even though two individuals are involved in a
decision and are being affected by it, their attitudes and
preferences may not be aligned."
he majority of relationship research suggests that people are
attracted to those with similar demographic characteristics,
attitudes, values and even names. But Small and her co-authors
based their hypothesis of spendthrift/tightwad attraction on a
theory that men and women also tend to seek out a mate who
has qualities that are the stark opposite of those they most strongly
deplore in themselves -- in this case, the tendency to spend too
much or too little.
Two subsequent experiments asked different sets of respondents to
rate their own and their spouses' behavior on the spendthrift-
tightwad scale. In both cases, the researchers found that stingy
spenders were more likely to be married to profligates and high-
rollers gravitated toward the miserly.
People might think "that someone on the other end of the
spectrum might heal them in some way," Rick notes. "If I'm a
tightwad, I want to find a spendthrift to loosen me up, because
tightwads by definition want to loosen up. Spendthrifts also by
definition want to change their behavior.... They might think that
an opposite would help reel in that misbehavior. That [is not] what
we find."
Even though these couples may have assumed that marrying an
opposite when it came to money would balance out their own
behavior and lead to greater financial health, Small and her co-
authors discovered that such matches did not necessarily make for
happier relationships. Indeed, the research shows that conflicts
over money created more marital strife for these "opposites
attract" couplings. "We have some findings suggesting that two
spendthrifts are happier than a spendthrift and a tightwad [even
though] two spendthrifts are much more likely to end up in debt
and have other financial problems," Small says. "It's not clear that
what makes you happier is also going to make you more financially
secure."
the current findings suggest that couples should talk about
financial habits and practices early on in a relationship, and form a
set of shared expectations, plans and goals. "I think doing that
helps people recognize if the differences are too broad to
overcome," she adds.
"Entrepreneurs create so much wealth in our society, but we don't
understand what makes a person become an entrepreneur," says
Wharton finance professor Nikolai Roussanov. "This question of 'why'
is fascinating for economists because entrepreneurs benefit society
as a whole to such a great degree. We would be worse off without
them."
"Why do certain people take the entrepreneurial leap?"
His conclusion is that entrepreneurs have unique social aspirations
that other people typically don't share. "They weigh risks and
outcomes differently," he notes, which leads to atypical, but
rational, conclusions about risks and opportunities. Contrary to
common perception, entrepreneurs are not less averse to taking
chances; they simply view relative hazards with a different eye.
Socially, Roussanov says, aspiring entrepreneurs do not want to
merely keep up with the proverbial Jones; they want to get
marginally ahead of them. "Absolute wealth is not as important to
them as relative wealth." Entrepreneurs also save more and spend
less as a portion of their incomes than other people, according to
Roussanov. The consumptive value of money isn't their motivation.
Rather it's the social esteem that comes with achieving
incrementally greater wealth than they had previously, and than
their perceived peer group has. Of course, "Who 'the Jones' are
changes as you progress," Roussanov points out. "First you think, 'I
know these guys are successful and I would like to be like them.' But
as you progress, you change your comparisons. You want to be in
the Forbes 400, then in the top 10 and so forth.
In his paper, Roussanov notes that "if the satisfaction brought by
'getting ahead of the Joneses' outweighs the danger of falling
behind, risky activities with highly idiosyncratic payoffs, such as
entrepreneurship, can be particularly attractive." By contrast,
"Other people may not have this preference for status. They look at
the risks and say, 'This is too much for me.'"
What is perplexing about an entrepreneur's endeavors, Roussanov
adds, is that, "from an economist's point of view, the risk in
entrepreneurial ventures is high." These people "commit a large
fraction of their human and financial capital to their ventures, thus
exposing themselves to large undiversified risks," he writes in the
paper. "Economic theory predicts that higher risk should be
compensated by higher average return, [yet] returns on
undiversified entrepreneurial investments are no higher than the
average return on publicly traded equity."
For Luxury Goods Aficionados, Knowledge Equals Wealth
Many consumers buy high-end products to signal wealth and
status to those around them, aided by explicit branding such as a
large Mercedes symbol on the front of a car. But if consumers buy
expensive goods in part to clearly communicate things like status
to others, why would shoppers spend thousands of dollars on
handbags or other goods that have no visible logos?
In the paper, "Subtle Signals of Inconspicuous Consumption,"
Wharton marketing professor Jonah Berger and Morgan Ward, a
marketing professor at Southern Methodist University, suggest that
manufacturers of consumer goods wanting to sell to a high-end,
niche customer base should offer exclusive product lines with
smaller logos and more subtle branding elements. Based on studies
of consumer preference among ordinary shoppers and those who
were more fashion conscious, the researchers found that "insiders"
in a given consumption range (e.g., fashionistas, car enthusiasts,
etc.) prefer products that identified them as being "in the know"
only to a select group of peers.
The consumer study groups examined products with both highly
visible branding, such as the word "Gucci" emblazoned in tall
letters on a handbag, and more subtle signals of price -- for
example, the signature cherry-red soles on Christian Louboutin
shoes.
The majority of "typical" consumers preferred the products with
larger brand identifiers, and tended to misidentify products with
subtler branding. Among products with subtle signals, "typical"
consumers "thought the high-priced options were no more
expensive than their cheap alternatives," the authors write. But
the "insiders," in this case fashion students or people with an affinity
for high fashion, not only could tell the difference between a low-
cost generic item and a high-priced item with a tiny logo, but also
preferred the subtly-branded products.
To understand such "insider" shoppers, companies need to realize
that the handbag these shoppers carry or shoes they wear is
largely about sending signals, Berger notes, almost like
communicating a coded message to members of a select group.
"A Rolex is a widely recognized status symbol, but might be looked
down upon by true watch enthusiasts," the paper states. "A
Vacheron Constantin, on the other hand, will be invisible to most
people, but respected by watch aficionados."
Another lesson, conversely, is that being selective with branding
techniques comes with risk. A consumer goods company that
wants to target high-end shoppers might select a subtle pattern or
small logo, but that could turn off the majority of shoppers -- those
who can't tell the difference between a cheaper product and the
expensive item."Most people think a $6,000 Bottega Veneta bag is
no more expensive that a cheap Wal-Mart bag that has no logo,"
Berger says.
According to Berger and Ward, from the point of view of an
"insider," being identified as such is vitally important, to the point
that they will opt for possibly being mistaken for lower-end shoppers
by the masses in exchange for recognition by their fellow high-
fashion fans. The researchers also suggest that "discretely marked
products, subtle but distinct styles or high-end brands that fly
beneath the radar" have a longer life on the market than their less
expensive, more loudly branded alternatives.
"The value of signals is that they distinguish social groups, so when
outsiders start copying insiders' signals, insiders may abandon that
product and search for a new signal," Berger says. "Because explicit
signals, like large logos, are easier to observe, they are more likely to
be poached or copied, and thus more likely to eventually be
abandoned in favor of a new group marker."
That has clear implications for products with explicit brand
markings, even on expensive high-end products. "Explicit status
symbols may generate large sales in the short term, but this will only
persist if enough of the buyers are truly wealthy," the researchers
write. "If not, the symbolic value will shift towards being a marker of
the wannabe rich, and sales will decline as consumers search for
the next aspirational symbol."
More generally, the researchers suggest, the role of wealth as a
status marker is changing, being replaced by knowledge or
"cultural capital." With the expansion of credit and leasing
programs, and the wider availability of knockoff items, "it is a lot
easier now for someone who is not truly wealthy to be able to
purchase something that seems expensive," Berger notes. "Cultural
capital, though, remains elusive. Acquiring the right knowledge
requires time, effort and the right connections -- things that are
hard to fake."
Labels: Knowledge at Wharton
Wednesday, May 11, 2011
branding, consumer beh, signals, cultural capital
Fiscal Fatal attraction and idiosynchracies of entrepreneurs
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2762
How Money Impacts Marriage
When it comes to marriage, do opposites attract? Or do birds of a feather flock together? While men and women are known to gravitate toward mates with personal qualities similar to their own in most respects, Wharton marketing professor Deborah Small found the opposite to be true when it comes to money.
find that stingy spenders tend to marry those who splurge freely, and vice versa. The pattern amounts to "fatal attraction," the researchers argue, because it causes conflicts over money and thus has a negative effect on marital well-being.
"There's a lot of academic literature and interest in individual decision making, [but what has been] largely neglected is that people are often making decisions jointly and the outcomes of financial decisions affect other people," Small says. "It's important to understand that even though two individuals are involved in a decision and are being affected by it, their attitudes and preferences may not be aligned."
he majority of relationship research suggests that people are attracted to those with similar demographic characteristics, attitudes, values and even names. But Small and her co-authors based their hypothesis of spendthrift/tightwad attraction on a theory that men and women also tend to seek out a mate who has qualities that are the stark opposite of those they most strongly deplore in themselves -- in this case, the tendency to spend too much or too little.
Two subsequent experiments asked different sets of respondents to rate their own and their spouses' behavior on the spendthrift-tightwad scale. In both cases, the researchers found that stingy spenders were more likely to be married to profligates and high-rollers gravitated toward the miserly.
People might think "that someone on the other end of the spectrum might heal them in some way," Rick notes. "If I'm a tightwad, I want to find a spendthrift to loosen me up, because tightwads by definition want to loosen up. Spendthrifts also by definition want to change their behavior.... They might think that an opposite would help reel in that misbehavior. That [is not] what we find."
Even though these couples may have assumed that marrying an opposite when it came to money would balance out their own behavior and lead to greater financial health, Small and her co-authors discovered that such matches did not necessarily make for happier relationships. Indeed, the research shows that conflicts over money created more marital strife for these "opposites attract" couplings. "We have some findings suggesting that two spendthrifts are happier than a spendthrift and a tightwad [even though] two spendthrifts are much more likely to end up in debt and have other financial problems," Small says. "It's not clear that what makes you happier is also going to make you more financially secure."
the current findings suggest that couples should talk about financial habits and practices early on in a relationship, and form a set of shared expectations, plans and goals. "I think doing that helps people recognize if the differences are too broad to overcome," she adds.
"Entrepreneurs create so much wealth in our society, but we don't understand what makes a person become an entrepreneur," says Wharton finance professor Nikolai Roussanov. "This question of 'why' is fascinating for economists because entrepreneurs benefit society as a whole to such a great degree. We would be worse off without them."
"Why do certain people take the entrepreneurial leap?"
His conclusion is that entrepreneurs have unique social aspirations that other people typically don't share. "They weigh risks and outcomes differently," he notes, which leads to atypical, but rational, conclusions about risks and opportunities. Contrary to common perception, entrepreneurs are not less averse to taking chances; they simply view relative hazards with a different eye.
Socially, Roussanov says, aspiring entrepreneurs do not want to merely keep up with the proverbial Jones; they want to get marginally ahead of them. "Absolute wealth is not as important to them as relative wealth." Entrepreneurs also save more and spend less as a portion of their incomes than other people, according to Roussanov. The consumptive value of money isn't their motivation. Rather it's the social esteem that comes with achieving incrementally greater wealth than they had previously, and than their perceived peer group has. Of course, "Who 'the Jones' are changes as you progress," Roussanov points out. "First you think, 'I know these guys are successful and I would like to be like them.' But as you progress, you change your comparisons. You want to be in the Forbes 400, then in the top 10 and so forth.
In his paper, Roussanov notes that "if the satisfaction brought by 'getting ahead of the Joneses' outweighs the danger of falling behind, risky activities with highly idiosyncratic payoffs, such as entrepreneurship, can be particularly attractive." By contrast, "Other people may not have this preference for status. They look at the risks and say, 'This is too much for me.'"
What is perplexing about an entrepreneur's endeavors, Roussanov adds, is that, "from an economist's point of view, the risk in entrepreneurial ventures is high." These people "commit a large fraction of their human and financial capital to their ventures, thus exposing themselves to large undiversified risks," he writes in the paper. "Economic theory predicts that higher risk should be compensated by higher average return, [yet] returns on undiversified entrepreneurial investments are no higher than the average return on publicly traded equity."
For Luxury Goods Aficionados, Knowledge Equals Wealth
Many consumers buy high-end products to signal wealth and status to those around them, aided by explicit branding such as a large Mercedes symbol on the front of a car. But if consumers buy expensive goods in part to clearly communicate things like status to others, why would shoppers spend thousands of dollars on handbags or other goods that have no visible logos?
In the paper, "Subtle Signals of Inconspicuous Consumption," Wharton marketing professor Jonah Berger and Morgan Ward, a marketing professor at Southern Methodist University, suggest that manufacturers of consumer goods wanting to sell to a high-end, niche customer base should offer exclusive product lines with smaller logos and more subtle branding elements. Based on studies of consumer preference among ordinary shoppers and those who were more fashion conscious, the researchers found that "insiders" in a given consumption range (e.g., fashionistas, car enthusiasts, etc.) prefer products that identified them as being "in the know" only to a select group of peers.
The consumer study groups examined products with both highly visible branding, such as the word "Gucci" emblazoned in tall letters on a handbag, and more subtle signals of price -- for example, the signature cherry-red soles on Christian Louboutin shoes.
The majority of "typical" consumers preferred the products with larger brand identifiers, and tended to misidentify products with subtler branding. Among products with subtle signals, "typical" consumers "thought the high-priced options were no more expensive than their cheap alternatives," the authors write. But the "insiders," in this case fashion students or people with an affinity for high fashion, not only could tell the difference between a low-cost generic item and a high-priced item with a tiny logo, but also preferred the subtly-branded products.
To understand such "insider" shoppers, companies need to realize that the handbag these shoppers carry or shoes they wear is largely about sending signals, Berger notes, almost like communicating a coded message to members of a select group. "A Rolex is a widely recognized status symbol, but might be looked down upon by true watch enthusiasts," the paper states. "A Vacheron Constantin, on the other hand, will be invisible to most people, but respected by watch aficionados."
Another lesson, conversely, is that being selective with branding techniques comes with risk. A consumer goods company that wants to target high-end shoppers might select a subtle pattern or small logo, but that could turn off the majority of shoppers -- those who can't tell the difference between a cheaper product and the expensive item."Most people think a $6,000 Bottega Veneta bag is no more expensive that a cheap Wal-Mart bag that has no logo," Berger says.
According to Berger and Ward, from the point of view of an "insider," being identified as such is vitally important, to the point that they will opt for possibly being mistaken for lower-end shoppers by the masses in exchange for recognition by their fellow high-fashion fans. The researchers also suggest that "discretely marked products, subtle but distinct styles or high-end brands that fly beneath the radar" have a longer life on the market than their less expensive, more loudly branded alternatives.
"The value of signals is that they distinguish social groups, so when outsiders start copying insiders' signals, insiders may abandon that product and search for a new signal," Berger says. "Because explicit signals, like large logos, are easier to observe, they are more likely to be poached or copied, and thus more likely to eventually be abandoned in favor of a new group marker."
That has clear implications for products with explicit brand markings, even on expensive high-end products. "Explicit status symbols may generate large sales in the short term, but this will only persist if enough of the buyers are truly wealthy," the researchers write. "If not, the symbolic value will shift towards being a marker of the wannabe rich, and sales will decline as consumers search for the next aspirational symbol."
More generally, the researchers suggest, the role of wealth as a status marker is changing, being replaced by knowledge or "cultural capital." With the expansion of credit and leasing programs, and the wider availability of knockoff items, "it is a lot easier now for someone who is not truly wealthy to be able to purchase something that seems expensive," Berger notes. "Cultural capital, though, remains elusive. Acquiring the right knowledge requires time, effort and the right connections -- things that are hard to fake."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2762
How Money Impacts Marriage
When it comes to marriage, do opposites attract? Or do birds of a feather flock together? While men and women are known to gravitate toward mates with personal qualities similar to their own in most respects, Wharton marketing professor Deborah Small found the opposite to be true when it comes to money.
find that stingy spenders tend to marry those who splurge freely, and vice versa. The pattern amounts to "fatal attraction," the researchers argue, because it causes conflicts over money and thus has a negative effect on marital well-being.
"There's a lot of academic literature and interest in individual decision making, [but what has been] largely neglected is that people are often making decisions jointly and the outcomes of financial decisions affect other people," Small says. "It's important to understand that even though two individuals are involved in a decision and are being affected by it, their attitudes and preferences may not be aligned."
he majority of relationship research suggests that people are attracted to those with similar demographic characteristics, attitudes, values and even names. But Small and her co-authors based their hypothesis of spendthrift/tightwad attraction on a theory that men and women also tend to seek out a mate who has qualities that are the stark opposite of those they most strongly deplore in themselves -- in this case, the tendency to spend too much or too little.
Two subsequent experiments asked different sets of respondents to rate their own and their spouses' behavior on the spendthrift-tightwad scale. In both cases, the researchers found that stingy spenders were more likely to be married to profligates and high-rollers gravitated toward the miserly.
People might think "that someone on the other end of the spectrum might heal them in some way," Rick notes. "If I'm a tightwad, I want to find a spendthrift to loosen me up, because tightwads by definition want to loosen up. Spendthrifts also by definition want to change their behavior.... They might think that an opposite would help reel in that misbehavior. That [is not] what we find."
Even though these couples may have assumed that marrying an opposite when it came to money would balance out their own behavior and lead to greater financial health, Small and her co-authors discovered that such matches did not necessarily make for happier relationships. Indeed, the research shows that conflicts over money created more marital strife for these "opposites attract" couplings. "We have some findings suggesting that two spendthrifts are happier than a spendthrift and a tightwad [even though] two spendthrifts are much more likely to end up in debt and have other financial problems," Small says. "It's not clear that what makes you happier is also going to make you more financially secure."
the current findings suggest that couples should talk about financial habits and practices early on in a relationship, and form a set of shared expectations, plans and goals. "I think doing that helps people recognize if the differences are too broad to overcome," she adds.
"Entrepreneurs create so much wealth in our society, but we don't understand what makes a person become an entrepreneur," says Wharton finance professor Nikolai Roussanov. "This question of 'why' is fascinating for economists because entrepreneurs benefit society as a whole to such a great degree. We would be worse off without them."
"Why do certain people take the entrepreneurial leap?"
His conclusion is that entrepreneurs have unique social aspirations that other people typically don't share. "They weigh risks and outcomes differently," he notes, which leads to atypical, but rational, conclusions about risks and opportunities. Contrary to common perception, entrepreneurs are not less averse to taking chances; they simply view relative hazards with a different eye.
Socially, Roussanov says, aspiring entrepreneurs do not want to merely keep up with the proverbial Jones; they want to get marginally ahead of them. "Absolute wealth is not as important to them as relative wealth." Entrepreneurs also save more and spend less as a portion of their incomes than other people, according to Roussanov. The consumptive value of money isn't their motivation. Rather it's the social esteem that comes with achieving incrementally greater wealth than they had previously, and than their perceived peer group has. Of course, "Who 'the Jones' are changes as you progress," Roussanov points out. "First you think, 'I know these guys are successful and I would like to be like them.' But as you progress, you change your comparisons. You want to be in the Forbes 400, then in the top 10 and so forth.
In his paper, Roussanov notes that "if the satisfaction brought by 'getting ahead of the Joneses' outweighs the danger of falling behind, risky activities with highly idiosyncratic payoffs, such as entrepreneurship, can be particularly attractive." By contrast, "Other people may not have this preference for status. They look at the risks and say, 'This is too much for me.'"
What is perplexing about an entrepreneur's endeavors, Roussanov adds, is that, "from an economist's point of view, the risk in entrepreneurial ventures is high." These people "commit a large fraction of their human and financial capital to their ventures, thus exposing themselves to large undiversified risks," he writes in the paper. "Economic theory predicts that higher risk should be compensated by higher average return, [yet] returns on undiversified entrepreneurial investments are no higher than the average return on publicly traded equity."
For Luxury Goods Aficionados, Knowledge Equals Wealth
Many consumers buy high-end products to signal wealth and status to those around them, aided by explicit branding such as a large Mercedes symbol on the front of a car. But if consumers buy expensive goods in part to clearly communicate things like status to others, why would shoppers spend thousands of dollars on handbags or other goods that have no visible logos?
In the paper, "Subtle Signals of Inconspicuous Consumption," Wharton marketing professor Jonah Berger and Morgan Ward, a marketing professor at Southern Methodist University, suggest that manufacturers of consumer goods wanting to sell to a high-end, niche customer base should offer exclusive product lines with smaller logos and more subtle branding elements. Based on studies of consumer preference among ordinary shoppers and those who were more fashion conscious, the researchers found that "insiders" in a given consumption range (e.g., fashionistas, car enthusiasts, etc.) prefer products that identified them as being "in the know" only to a select group of peers.
The consumer study groups examined products with both highly visible branding, such as the word "Gucci" emblazoned in tall letters on a handbag, and more subtle signals of price -- for example, the signature cherry-red soles on Christian Louboutin shoes.
The majority of "typical" consumers preferred the products with larger brand identifiers, and tended to misidentify products with subtler branding. Among products with subtle signals, "typical" consumers "thought the high-priced options were no more expensive than their cheap alternatives," the authors write. But the "insiders," in this case fashion students or people with an affinity for high fashion, not only could tell the difference between a low-cost generic item and a high-priced item with a tiny logo, but also preferred the subtly-branded products.
To understand such "insider" shoppers, companies need to realize that the handbag these shoppers carry or shoes they wear is largely about sending signals, Berger notes, almost like communicating a coded message to members of a select group. "A Rolex is a widely recognized status symbol, but might be looked down upon by true watch enthusiasts," the paper states. "A Vacheron Constantin, on the other hand, will be invisible to most people, but respected by watch aficionados."
Another lesson, conversely, is that being selective with branding techniques comes with risk. A consumer goods company that wants to target high-end shoppers might select a subtle pattern or small logo, but that could turn off the majority of shoppers -- those who can't tell the difference between a cheaper product and the expensive item."Most people think a $6,000 Bottega Veneta bag is no more expensive that a cheap Wal-Mart bag that has no logo," Berger says.
According to Berger and Ward, from the point of view of an "insider," being identified as such is vitally important, to the point that they will opt for possibly being mistaken for lower-end shoppers by the masses in exchange for recognition by their fellow high-fashion fans. The researchers also suggest that "discretely marked products, subtle but distinct styles or high-end brands that fly beneath the radar" have a longer life on the market than their less expensive, more loudly branded alternatives.
"The value of signals is that they distinguish social groups, so when outsiders start copying insiders' signals, insiders may abandon that product and search for a new signal," Berger says. "Because explicit signals, like large logos, are easier to observe, they are more likely to be poached or copied, and thus more likely to eventually be abandoned in favor of a new group marker."
That has clear implications for products with explicit brand markings, even on expensive high-end products. "Explicit status symbols may generate large sales in the short term, but this will only persist if enough of the buyers are truly wealthy," the researchers write. "If not, the symbolic value will shift towards being a marker of the wannabe rich, and sales will decline as consumers search for the next aspirational symbol."
More generally, the researchers suggest, the role of wealth as a status marker is changing, being replaced by knowledge or "cultural capital." With the expansion of credit and leasing programs, and the wider availability of knockoff items, "it is a lot easier now for someone who is not truly wealthy to be able to purchase something that seems expensive," Berger notes. "Cultural capital, though, remains elusive. Acquiring the right knowledge requires time, effort and the right connections -- things that are hard to fake."
Labels: Knowledge at Wharton
Saturday, April 23, 2011
Art of Pricing in Services industry . what's ' fair' pricing ?
A Wharton article on pricing of services
--------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2751
These are charges for special services and modifications, like using an out-of-network ATM. Docters, who is also the author of Winning the Profit Game: Smarter Pricing, Smarter Branding, says that these premium fees can be well received if explained properly and understood by the consumer. He notes that companies often use these kinds of fees, or the lack thereof, to reward valued customers -- like high-mileage air passengers who are often exempt from the extra charges levied against less frequent fliers.
Making people pay $5 for a sandwich seems reasonable on a short domestic flight, for example, but if airlines start charging for basic beverages on international flights, where consumers have no other options, that seems unfair and is more likely to provoke outrage. "Consumer perception of fees is less about money and more about fairness," Berger notes.
With regulators drastically restricting overdraft fees in mid-2010, banks are looking to make up this income in other ways. Last month, Bank of America announced a new suite of accounts that include monthly maintenance fees, some as high as $25. Overall, the number of banks and credit unions that offer free checking declined 11% from 2009 to 2010, according to a study by Moebs Services. The study points out that, to recoup these lost fees, banks are pushing e-statements and direct deposit and may levy fees against customers who decline to use these features.
By way of explanation, he points to "prospect theory," which states that people prefer their gains in smaller increments to spread out their joy, but want losses to be concentrated so the pain arrives in one hit. "It's ... ironic that companies don't charge enough to begin with," and then compound their problems by spreading out the rest of the cost in the form of unpopular fees, Fader says.
According to Bell, for consumers to accept fees, three factors need to be in place: Customers need to understand the need for the fees, perceive them as fair, and feel that they have received some benefit from the fee. "Absent these conditions, consumers are likely to be frustrated."
"Fees must reflect the context of the event prompting the fee. If the fee is consistent with a customer's expectations, then customers tolerate a surprising level of fees."
--------------------------------------------------------------
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2751
These are charges for special services and modifications, like using an out-of-network ATM. Docters, who is also the author of Winning the Profit Game: Smarter Pricing, Smarter Branding, says that these premium fees can be well received if explained properly and understood by the consumer. He notes that companies often use these kinds of fees, or the lack thereof, to reward valued customers -- like high-mileage air passengers who are often exempt from the extra charges levied against less frequent fliers.
Making people pay $5 for a sandwich seems reasonable on a short domestic flight, for example, but if airlines start charging for basic beverages on international flights, where consumers have no other options, that seems unfair and is more likely to provoke outrage. "Consumer perception of fees is less about money and more about fairness," Berger notes.
With regulators drastically restricting overdraft fees in mid-2010, banks are looking to make up this income in other ways. Last month, Bank of America announced a new suite of accounts that include monthly maintenance fees, some as high as $25. Overall, the number of banks and credit unions that offer free checking declined 11% from 2009 to 2010, according to a study by Moebs Services. The study points out that, to recoup these lost fees, banks are pushing e-statements and direct deposit and may levy fees against customers who decline to use these features.
By way of explanation, he points to "prospect theory," which states that people prefer their gains in smaller increments to spread out their joy, but want losses to be concentrated so the pain arrives in one hit. "It's ... ironic that companies don't charge enough to begin with," and then compound their problems by spreading out the rest of the cost in the form of unpopular fees, Fader says.
According to Bell, for consumers to accept fees, three factors need to be in place: Customers need to understand the need for the fees, perceive them as fair, and feel that they have received some benefit from the fee. "Absent these conditions, consumers are likely to be frustrated."
"Fees must reflect the context of the event prompting the fee. If the fee is consistent with a customer's expectations, then customers tolerate a surprising level of fees."
Labels: Knowledge at Wharton
Friday, March 25, 2011
valuations in M&A
http://mytoday.com/u/1846 : Mergers & Valuations.
---------------------------------------------
Plenty of merger deals should never happen: Buyers are too often attracted to "false positives" in targets that are overvalued. Less noticed are the deals that get away, but shouldn't, because of "false negatives" -- an undervaluation based on outdated methodologies that leads to a losing bid. The true value of a target company can be determined only if the buyer looks beyond current core operations to include future potential, argue three M&A experts.
What are often overlooked, though, are the deals that could have been big wins but didn't happen, because of false negatives. By that we mean instances, such as the one faced by Bank X, in which a much-needed acquisition was lost due to analytical and valuation methodologies that we think are outdated.
----------------------------------
The problem that we hope to mitigate stems from the pressure to make deals pay off quickly in terms of earnings per share, a goal that creates a systematic bias to discount value creation that is tied to future time horizons.
-----------------------------------------------------------------------
necessitate a valuation methodology that takes into account more than the net present value (NPV) of the target. We call this the Opportunity Value (OV) of an asset. OV allows us to consider the potential upside of an acquisition through a disciplined analysis that is based on range estimates relating to how the future might unfold. Because OV provides a positive view of uncertainty, itcomplements the NPV, which treats uncertainty negatively, and the two together provide an inclusive but not inflated valuation.
---------------------------------------------------
Labels: Knowledge at Wharton
Friday, December 31, 2010
Water Conflicts and spirituality - Aaron Wolf
Interview with Mr.Aaron Wolf. Geology, water resources and conflict management specialist. Trying to bring the element of spirituality into conflict resolution practices.
--------------------------------------------------------------------------------------------
"I realized that science only got you so far with water resource management and you had to understand human systems, I felt that understanding human systems from a rational perspective was very limiting. And I think most mediators feel that way: When it comes to dealing with real values or core issues, most people refer to the energy in the room, the transformation or being present."
----------------------------------------------------------------------------------------------
Knowledge@Wharton: Did you have a transformative moment yourself?
Wolf: In our training, we show a map of a watershed with the political boundaries. Then we take the boundaries off the map. For a lot of people, it's the first time they see their world in a different light. You can feel a jolt in the room when they see their watershed in a way they never have before. The idea came from someone who worked for a major development bank. He had a deep spiritual side and he said that the maps worked like an analog for spiritual transformation. That was my "Aha!" moment
---------------------------------------------------------------------------------------------
2 questions. First, how do spiritual traditions construct concepts or emotions such as conflict or anger? Second, what tools do they use to create settings that are conducive to transformative processes.
------------------------------------------------------------------------------------------
Knowledge@Wharton: What do you think about claims that the next world war will be fought over water?
Wolf: I don't think that will be the case. The assumption is very simplistic that because we're running out of a critical resource, people will fight across international borders. It doesn't take into account any aspects of human creativity, ingenuity, markets or history. There's only been one war over water and it was 4,500 years ago.
-----------------------------------------------------------------------------------------------
Knowledge@Wharton: Do you meet skeptics, people who don't buy into the spiritual discourse?
Wolf: You have to distinguish between religion and spirituality. As soon as you start talking about religion, half the room gets tense. You can see it in the body language. People will also comment on the irony that religion is at the root of most conflicts.
If you really want to focus on processes, such as transformation or transcendence, you have to find a common ground, such as recovering from an accident or having a baby. Your world is profoundly rocked when you become a parent; you can't explain it in rational terms. People also find spirituality in fly-fishing, rock climbing or whatever else, and as long as we're talking on those terms, most people get it.
There are a lot of situations where I don't use the words religion or spirituality. If we're talking about the four needs, for instance, I can draw just as easily from Maslow as I can from the Bible. I try not to push people past their comfort levels.
----------------------------------------------------------------------------------------
Businesspeople will recognize that. When you're sitting down for discussions or negotiations, even in a regular meeting, how many times have you asked someone a question to understand more about how they feel? We need to learn to set aside the things we want to put on the table and profoundly and deeply listen to others until we really understand what their issues are. That process is transformative. People who feel they have been listened to are generally willing to listen in turn. That's the moment in the room when the whole dynamic changes.
------------------------------------------------------------------------------------------
Knowledge@Wharton: So using your BlackBerry in a meeting and checking e-mails is not going to be conducive to great outcomes?
Wolf: I don't think so. Presence is something that most spiritual traditions emphasize. The power of presence, of silence, of reflection, of really being there -- it is something that we need to learn to do better. If you're multi-tasking, you're not doing anything brilliantly.
---------------------------------------------------------------------------------------------------
Knowledge@Wharton: If you had one piece of advice for a businessman, what would it be?
Wolf: I would learn to listen. It is the most underrated yet transformative quality there is. It's like meditation. It sounds simple, until you try it.
---------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
"I realized that science only got you so far with water resource management and you had to understand human systems, I felt that understanding human systems from a rational perspective was very limiting. And I think most mediators feel that way: When it comes to dealing with real values or core issues, most people refer to the energy in the room, the transformation or being present."
----------------------------------------------------------------------------------------------
Knowledge@Wharton: Did you have a transformative moment yourself?
Wolf: In our training, we show a map of a watershed with the political boundaries. Then we take the boundaries off the map. For a lot of people, it's the first time they see their world in a different light. You can feel a jolt in the room when they see their watershed in a way they never have before. The idea came from someone who worked for a major development bank. He had a deep spiritual side and he said that the maps worked like an analog for spiritual transformation. That was my "Aha!" moment
---------------------------------------------------------------------------------------------
2 questions. First, how do spiritual traditions construct concepts or emotions such as conflict or anger? Second, what tools do they use to create settings that are conducive to transformative processes.
------------------------------------------------------------------------------------------
Knowledge@Wharton: What do you think about claims that the next world war will be fought over water?
Wolf: I don't think that will be the case. The assumption is very simplistic that because we're running out of a critical resource, people will fight across international borders. It doesn't take into account any aspects of human creativity, ingenuity, markets or history. There's only been one war over water and it was 4,500 years ago.
-----------------------------------------------------------------------------------------------
Knowledge@Wharton: Do you meet skeptics, people who don't buy into the spiritual discourse?
Wolf: You have to distinguish between religion and spirituality. As soon as you start talking about religion, half the room gets tense. You can see it in the body language. People will also comment on the irony that religion is at the root of most conflicts.
If you really want to focus on processes, such as transformation or transcendence, you have to find a common ground, such as recovering from an accident or having a baby. Your world is profoundly rocked when you become a parent; you can't explain it in rational terms. People also find spirituality in fly-fishing, rock climbing or whatever else, and as long as we're talking on those terms, most people get it.
There are a lot of situations where I don't use the words religion or spirituality. If we're talking about the four needs, for instance, I can draw just as easily from Maslow as I can from the Bible. I try not to push people past their comfort levels.
----------------------------------------------------------------------------------------
Businesspeople will recognize that. When you're sitting down for discussions or negotiations, even in a regular meeting, how many times have you asked someone a question to understand more about how they feel? We need to learn to set aside the things we want to put on the table and profoundly and deeply listen to others until we really understand what their issues are. That process is transformative. People who feel they have been listened to are generally willing to listen in turn. That's the moment in the room when the whole dynamic changes.
------------------------------------------------------------------------------------------
Knowledge@Wharton: So using your BlackBerry in a meeting and checking e-mails is not going to be conducive to great outcomes?
Wolf: I don't think so. Presence is something that most spiritual traditions emphasize. The power of presence, of silence, of reflection, of really being there -- it is something that we need to learn to do better. If you're multi-tasking, you're not doing anything brilliantly.
---------------------------------------------------------------------------------------------------
Knowledge@Wharton: If you had one piece of advice for a businessman, what would it be?
Wolf: I would learn to listen. It is the most underrated yet transformative quality there is. It's like meditation. It sounds simple, until you try it.
---------------------------------------------------------------------------------------------------
Labels: Knowledge at Wharton
Friday, December 24, 2010
Merits of employing Older workers
http://mytoday.com/u/1561 dated 24.December.2010
---------------------------------------------------------------------------------------
Ageing people coming bak to work is called ' Silver Tsunami'.
Olders workers cost less on Medi care bills since, they no longer have dependent children on them.
When it comes to job performance, older workers frequently outdo their younger colleagues, says Cappelli. Older workers have less absenteeism, less turnover, superior interpersonal skills and deal better with customers. "The evidence is unbelievably huge," he notes. "Basically, older workers perform better on just about everything.
And contrary to the belief that older workers resist learning new things, older workers ranked "job challenge and learning" as a top source of satisfaction with their work, says center director Marcie Pitt-Catsouphes.
Many myths about older workers reflect 20th century views of retirement that have proved to be short-lived. "Historically, the idea of people working full-time and stopping completely is an anomaly of world history," says Cappelli. The notion of retiring at age 65 came in with the Social Security system and employer-based pensions, he says. But full retirement was never what most employees wanted, he notes, adding that "what they want is to keep working in some fashion. They want to change the way they work, but not stop altogether."
-------------------------------------------------------------------------------------
When the Society for Human Resource Management conducted its most recent survey of attitudes toward older workers in 2006, 60% of the 308 personnel managers surveyed said that older workers are more reliable and 59% said older workers have a stronger work ethic than younger ones. On the flip side, 49% said that older workers do not keep up with technology and 38% said such workers cause health care costs to rise.
----------------------------------------------------------------------------------------
Ads targeting such workers often mention the benefit that the age group values most: flexibility. One former ad invited recruits to "Use our employee discount to shop for your grandkids."
Retirement doesn't end ties between employees and the Freeport, Maine-based company, which encourages retirees to return to work on a seasonal basis. "We find that many retirees bring a high level of maturity," says a company spokesperson. "They understand the importance of a good work ethic" and have no problem with flexible schedules. "More than half of our seasonal workforce comes back year after year."
-----------------------------------------------------------------------------------------
A study sponsored by the MetLife Foundation and Civic Ventures, a think tank that helps people find "encore careers," predicts as many as five million job vacancies by 2018 if the baby boomers retire at the same rate and age as current older workers. Many of these vacancies will be in social service fields such as health care, education and non-profit positions. Not only will there be jobs for older workers to fill, says the study, "but the nation will absolutely need older workers to step up and take them."
--------------------------------------------------------------------------------------
Gardner envisions partnerships and mentoring relationships between older workers who seek meaning in phased retirements and younger individuals who are looking to build their careers. Gardner himself has no plans to step down from his job researching the college labor market and recruiting trends. "At 64, people are asking me to stay until I'm 70," he says. "I'm having fun with what I do, so why quit? Why give up a job I love?"
---------------------------------------------------------------------------------------
Ageing people coming bak to work is called ' Silver Tsunami'.
Olders workers cost less on Medi care bills since, they no longer have dependent children on them.
When it comes to job performance, older workers frequently outdo their younger colleagues, says Cappelli. Older workers have less absenteeism, less turnover, superior interpersonal skills and deal better with customers. "The evidence is unbelievably huge," he notes. "Basically, older workers perform better on just about everything.
And contrary to the belief that older workers resist learning new things, older workers ranked "job challenge and learning" as a top source of satisfaction with their work, says center director Marcie Pitt-Catsouphes.
Many myths about older workers reflect 20th century views of retirement that have proved to be short-lived. "Historically, the idea of people working full-time and stopping completely is an anomaly of world history," says Cappelli. The notion of retiring at age 65 came in with the Social Security system and employer-based pensions, he says. But full retirement was never what most employees wanted, he notes, adding that "what they want is to keep working in some fashion. They want to change the way they work, but not stop altogether."
-------------------------------------------------------------------------------------
When the Society for Human Resource Management conducted its most recent survey of attitudes toward older workers in 2006, 60% of the 308 personnel managers surveyed said that older workers are more reliable and 59% said older workers have a stronger work ethic than younger ones. On the flip side, 49% said that older workers do not keep up with technology and 38% said such workers cause health care costs to rise.
----------------------------------------------------------------------------------------
Ads targeting such workers often mention the benefit that the age group values most: flexibility. One former ad invited recruits to "Use our employee discount to shop for your grandkids."
Retirement doesn't end ties between employees and the Freeport, Maine-based company, which encourages retirees to return to work on a seasonal basis. "We find that many retirees bring a high level of maturity," says a company spokesperson. "They understand the importance of a good work ethic" and have no problem with flexible schedules. "More than half of our seasonal workforce comes back year after year."
-----------------------------------------------------------------------------------------
A study sponsored by the MetLife Foundation and Civic Ventures, a think tank that helps people find "encore careers," predicts as many as five million job vacancies by 2018 if the baby boomers retire at the same rate and age as current older workers. Many of these vacancies will be in social service fields such as health care, education and non-profit positions. Not only will there be jobs for older workers to fill, says the study, "but the nation will absolutely need older workers to step up and take them."
--------------------------------------------------------------------------------------
Gardner envisions partnerships and mentoring relationships between older workers who seek meaning in phased retirements and younger individuals who are looking to build their careers. Gardner himself has no plans to step down from his job researching the college labor market and recruiting trends. "At 64, people are asking me to stay until I'm 70," he says. "I'm having fun with what I do, so why quit? Why give up a job I love?"
Labels: Knowledge at Wharton
Wednesday, December 08, 2010
U.S. unemployment rate and repercussions
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2619
------------------------------------------------------------------------------------------------
"With a national unemployment rate of 9.6%, many of them cannot
find jobs. Some have had to move back home with their parents;
others are scraping by with low-level work that is barely enough to
pay back the four and five figure loans they took out for college. "It's
not looking particularly good for Gen Y," says Matthew Bidwell, a
Wharton management professor. "And I don't think it's going to go
away by the next graduation season in May. A lot of forecasts are for
a slow and hesitant recovery. We're not going back to 2007 any time
soon."
----------------------------------------------------------------------------------------------
"It takes them longer to get into the workforce so they are not
acquiring the skills they need. In addition, they are more apt to take
a lower level job or an unpaid internship. And once the economy
improves and they land a better job, it takes these workers longer to
climb the ladder because they have to learn skills they should have
been developing immediately out of college. In the meantime, they
are at risk of being leapfrogged by new graduates."
---------------------------------------------------------------------------------------------------
"If you don't get a decent job in your first five years in the workforce,
do you ever? You don't develop the stable work habits or the self-
esteem to move up the corporate ladder," he says. "It's a horrendous
waste of human capital."
------------------------------------------------------------------------------------------------
"With a national unemployment rate of 9.6%, many of them cannot
find jobs. Some have had to move back home with their parents;
others are scraping by with low-level work that is barely enough to
pay back the four and five figure loans they took out for college. "It's
not looking particularly good for Gen Y," says Matthew Bidwell, a
Wharton management professor. "And I don't think it's going to go
away by the next graduation season in May. A lot of forecasts are for
a slow and hesitant recovery. We're not going back to 2007 any time
soon."
----------------------------------------------------------------------------------------------
"It takes them longer to get into the workforce so they are not
acquiring the skills they need. In addition, they are more apt to take
a lower level job or an unpaid internship. And once the economy
improves and they land a better job, it takes these workers longer to
climb the ladder because they have to learn skills they should have
been developing immediately out of college. In the meantime, they
are at risk of being leapfrogged by new graduates."
---------------------------------------------------------------------------------------------------
"If you don't get a decent job in your first five years in the workforce,
do you ever? You don't develop the stable work habits or the self-
esteem to move up the corporate ladder," he says. "It's a horrendous
waste of human capital."
Labels: Knowledge at Wharton
Wednesday, October 27, 2010
wharton on CWG
Wharton on CWG.
http://mytoday.com/u/1429
" The total cost of the games is shrouded in Mystery. The difference over the actual expenses in the CWG is also because, the private sector has put in a lot of money and this is obviously not reflected in the Govt's tally. It's difficult to apportion. "
" Tourism did not deliver. Hospitality industry's occupancy has not lived upto expectations because of terrorism threat. These 2 industries during CWG made huge losses. "
" Beginning from Mexico 1968, virtually every city that had hosted such an event ( as Olympics) has plunged into debt for the next 25 to 30 years. The games never pay for themselves ; it is the public money that falls into the hands of hands of the private busisnessmen. "
Sandeep Bazmai, news editor , Headlines Today : " India simply doesn't have sporting culture. Play for fun. A sport is organized play. India just plays ( barring cricket). "
Daniel Johnson, Colorado college's economics department : " There is a linkage between per capita GDP and sporting performance . Linkage between Olympic medals and per capita income". ( he proved it with 90% accuracy).
" When ever Team India loses a one day match ( to any country), their stock market took a beating , on the following day ! " A research report from Monash University in Australia.
Any one willing to verify ?
Labels: Knowledge at Wharton
Friday, October 22, 2010
Too BIG to fail bogies !
The Coming Meta-Boom and Meta-Bust -- One Economist's View
Simon Johnson, a former chief economist for the International Monetary Fund and author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, says the recently passed Dodd-Frank Financial Reform Act does little to prevent the biggest financial risk of our time -- banks that are becoming "too big to save," either because potential losses could overwhelm government resources, or the public will refuse to sanction another large bailout. Either way, the world economy could crash. But preceding any crash, watch for a worldwide "meta-boom." Following a recent talk Johnson gave at Wharton, he discussed this and several other issues with Knowledge@Wharton, including how shrinking big banks could ward off financial meltdowns, Ireland's solvency-threatening debt burden and the implications of Basel III.
Knowledge@Wharton: The other interesting stat in the book, I think I've seen this elsewhere also, is the percentage of corporate profits that the financial industry represents. I might be off a little, but I think this is roughly right: that up through the beginning or middle of the 1980s, or maybe even a little bit later, the most the financial system ever took up in total corporate profits in the U.S. was about 15%. But just prior to the crash, it was up to 41%. In other words, the financial services industry was earning 41% of all profits in the U.S. That's something that we never even got close to in the past. It suggests that maybe something was out of whack. Why didn't anybody see that? Well, I know some people did. Where are we now and how long do you think it might take before we get back up to that, according to your view of what's likely to happen?
------------------------------------------------------------------------------------
Knowledge@Wharton: The other thing that's interesting -- and you talk about a number of different problems with "too big to fail", such as taxpayers ending up on the hook for all the money -- is this idea that because of the backup, the backstop, the implicit guarantee, the moral hazard is basically there, but only for the very largest banks. The next tier down, say large regionals and so forth, are actually put at an unfair disadvantage competitively because they don't have that subsidy, and therefore they can't operate in the same way. So it's not a level playing field. And yet we don't see too much opposition from them either. You just talked about the corporate sector in general, what's going on here?
------------------------------------------------------------------------------------------
. But "too big to fail" is not the worst of our potential problems. That would be Too Big to Save. Think about Ireland.
Knowledge@Wharton: Too Big To Bail.
--------------------------------------------------------
Knowledge@Wharton: Can you define moral hazard for those people who aren't clear what it means?
Johnson: Moral hazard is very simply that when I give you insurance, you're going to be a little bit less careful.-------------------------------------------------------------------------------------
But in essence, I think Eve is right. The essence is, if the media doesn't get it, if the smartest journalists whom you respect and read every day who write on the front page of major newspapers and on leading analytical serious websites run by those papers, if they don't get it, if they don't understand what the financial sector is doing, why and how, then that definitely contributes to the problem.
With reference to :
http://www.nakedcapitalism.com
------------------------------------------------------------------------------------
Knowledge@Wharton: And talking about concentration, after this crash, it turns out that -- I don't know if that was 13 banks that you were referring to in 13 Bankers -- some of the bigger banks, in an effort to salvage the system, took over competitors. And so now there are really six large banks. Could you talk about them, just how much they control and some of the points you make about them in your book?
Johnson: Sure, well the six banks are, I think, the heart of the problem. Those six banks control, have assets -- the size of the banks and balance sheet -- of roughly 63%, maybe 65% of GDP right now. Before the crisis, they were 57% or 58% of GDP. And if you go back to the early to mid 1990s, that same group of banks and the other banks that they gobbled up along the way, that same group was 16% of GDP. So they have become much larger relative to the economy. There's a very important point, that the U.S. is not a country based on big banks. We don't have a big banking tradition relative to other countries. We don't have a tradition of bank concentration or of concentration relative to the size of the economy.
There are no benefits that anyone can point to from a broader economic point of view of this increase in bank size. So at the very least, we should roll the banks back to where they were before this merger movement, before many of the barriers on their activities were taken off. And we should also consider very seriously putting other controls and restrictions on the ability of those banks that are essential to our credit system, essential to our payment system, to take huge amounts of risk should be severely curtailed.
( to be continued)
-----------------------------------------------------------------------------------------------
Labels: Knowledge at Wharton
