thingamy

The age of heretics and sceptics

Busy times on the Côte d'Azur. A 20 minutes bike ride along the coast towards west and I reach the Croisette and the glamour of the Cannes film festival, if I ride towards east I pass the Hotel du Cap after ten minutes and a pack of paparazzi sitting on their scooters smoking and chatting while waiting for some celebrity to go for a morning run. Do they do that?

Even more to the east, about 90 minutes ride, you get to Monaco and the F1 circus of last week.

The glamour, the expensive cars, the champagne, the often intended jaw dropping appearance of the opposite sex - all interesting to watch, all in all quite a contrarian display these days. 

Nuff said, the more interesting issue was pointed out in NYT/IHT on Saturday - namely how the new and scrappy teams are beating the shit out of the well funded, well managed old teams. How Brawn and Toro Rosso beats the MacLarens, Williams and Ferraris.

In a way it's an image of how dramatic times changes the rules, in particular how the established and their ways that works like a dream during stable and good times then lets the heretics and sceptics win when the rules changes. And the rules are changing. Big time.

It's happening everywhere, just ask anybody at any big corporations. It's far beyond an issue of cutting costs and realigning, it's about much bigger changes. And for that we need sceptics and heretics. 

Heretic - somebody holding an opinion at odds with what is generally accepted.

Sceptic - somebody inclined to question or doubt all accepted opinions.

Attitudes, both two sides of the same issue, that are made for times like these. Perhaps they're even instrumental in pushing the rule changes?

But as attitudes goes, attitude comes from the heart. A sceptic reacts instinctively, a heretic has no fear of being rebuffed. Nothing you can add to your personality palette by reading the latest "10 rules to...". A sceptic child is called quarrelsome, a heretic child is a disrespectful one. Some survive the attempts to being conditioned and good is that.

And the results of being a sceptic and heretic are well... eh... results. You cannot be say a contrarian, that would lead nowhere. It's the sceptic that might choose to act in a contrarian fashion and become a heretic. That's contrarianism with meaning. And only meaning gives... eh... meaning.

Too much saving caused the economic crisis

Let me expand on the claim by asking "what really is saving?" 

Initially it was about stashing away some food for a rainy day. That the fresh meat could rot had to be accepted, losing some was still better than outright starving later.

On the other side, if there is an opportunity to invest in an increased output of useful products or services using less resources then a return could be negotiated. But if no increase in the rate of value creation is obtainable there is no need for funds nor would there be a yield to be had.

If I have 9 cows and a bull and the yield is 1 calf per year, year after year, there is no reason why I should borrow anything. But if, by building a shelter, I could increase that to 2 calves per year it would make sense to borrow and build. But only if interest, annual principal repayment and my living expenses added up to less than 2 calves. 

You are at all times free to stash away for a rainy day, no return on those savings of course, most probably negative earnings. Still your sole prerogative.

But if you want a return on your savings you have to find somebody, directly or indirectly, that has a way to invest in increased rate of value creation. Such savings cannot be pushed, it has to be pulled, that privilege is the borrower's.

In other words saving is either: 

1. Stashing away while accepting loss of value or 
2. investment in increased output of useful products and services.

But at some point of time we got used to getting a return, to the point where we're now hardwired to believe that we can save at any time and get a return from the savings. But as opportunities to invest in increased value creation comes in leaps and bounds, like when a new technology or method is invented, saving with a return should not always to be had.

That opened for new professions to create "saving forms" decoupled from investing in increased value creation. In other words, savings that mostly could be termed humbug. 

And the humbug could take three forms:

1. Investment in scarcity. Expensive watches, art, real estate, gold. Investing in a flat on Manhattan makes sense as long as there is increasing value creation elsewhere in the society, wealth that flows into New York eventually in the form of people moving there. But soon that could turn and the zero-sum game becomes a reality. And I'm not saying art and the other scarce products do not have a value, they have, but they do not increase the value creation and should not yield a real return. Having been conditioned to believe something does not necessarily make it true. "Gold? Dig it up, then bury it, then dig it up, and bury it again, so where's the value creation?" 
2. Power leverage. You're sitting on excess funds today while the younger generation struggles. That creates an opportunity for you to lend it to the younger generation for their consumption today, then sit back and see them work twice as hard as you had to in order to pay back with interest. They have little choice, you can push through high interest, hence the power leverage. (In fact much of the scarcity investing is a version of this, sell your inflated value big house to a young family and you get the point.)
3. Schemes and fakes. Read any paper from last nine months and take your pick among the disaster "instruments" for further study.

There is only one way out of this crisis and the saving-investment need mismatch; find the balance. That can be had by less saving or increases in value creation. Everything else is a waste of time or at best band-aiding a broken leg. 

In the latter part of the last century the US personal saving rate was much higher than today, but then it was a period of huge investment needs world-wide in infrastructure, new manufacturing methods and equipment including IT - all increasing the world's value creation. The last few years we've seen much lower saving rates, more matching the lack of opportunities to invest in value creation increases. But then, typically China and the oil producing countries saved huge amounts that increased the imbalance tremendously despite low saving rates in the US.

Good thing that the world's governments seems to be well underway to do their part in the investment bit, hope is that it's towards real increases in value creation. Bad thing is that saving is increasing as well.

At the end of the day, the way to find the balance is to remove the universal notion that we have a prerogative to save with a return while exposing the "humbug" saving for what it really is. That would be the only long term fix.

[Hat tip to my friend Pete (url free alas) who prompted the discussion.]

France, law makers and the Internet - scary

I'm quite fond of my adopted homeland, France. Sometimes their quirks and ways deserves some vigourous shaking of head (but what country does not?) and sometimes one may get annoyed (same for most places). But mostly they serve great lunches and in general behave very civilised, in short a good place to be.

But this time I'm scared stiff by the lack of understanding by the lawmakers, and if they keep it up I might very well be out of here sooner than later:

I'm talking about the "three strike law" regarding download of copyrighted material. No courts involved, all in the hands of an "above-the-law" agency that can shut down your access to internet based on the instructions from the music and film industry.

My concern is not about the legality or lack thereof if downloading copyrighted material, neither do I oppose a democracy to impose law and order as they please.

But...

The internet has become the backbone of almost all commerce and industry as well as private life. It's the core of many people's social life, aka communication, and no corporation can exist without being able to connect plants, offices, people, suppliers and customers.

If I break the law of the road when driving they will give me a slap or a fine. I can even be a danger to other people's life by driving all too fast and still get away with a mere € 50 fine. Loosing the right to drive requires a very serious offence and the courts will be involved.

Now, if you insult or trespass the "rules" as the music/film distributors see fit they'll take away the road, not only the right to drive, gone will be the access to road and pathways. For all use, walking, getting to school, cycling, everything, lock you up basically. And no court involved, just a rather powerful bureaucrat. Those will soon rank among the most feared and powerful in the land, parallels to the Inquisition will be easy to summon.

The days of bossnapping and suing your employer will be a thing of the (popular) past in France, instead any disgruntled employee will start downloading pirated music or movies in short time effectively putting his employer out of business without much effort nor risk.

Cool eh?

If you in any form or fashion are involved in any commercial activity in France; better be keeping an eye on that legislation now, you might have to think about moving.

[Update May 7: The EU parliament is more sensible... here are some quotes:

"The European Parliament on Wednesday rejected a long-planned revision of the Continent’s telecommunications laws because of a controversial provision to punish Internet pirates.
In Strasbourg, the Parliament’s lower house, by a vote of 404 to 56, passed an amendment to the telecommunications package making it illegal for any E.U. country to sever Internet service unless a citizen is found guilty in court, effectively blocking the broad revision."...
“The Parliament has taken a stand against the arbitrary cut-off of Internet service to E.U. citizens,” said Alexander Alvaro, a German lawmaker from Bonn. “This is something we simply cannot allow to happen in Europe, allowing punishment to be assessed before a trial takes place.”...
"“The legal precedent that would be set — that one is penalized before being tried — is a troubling statement,” said Francisco Mingorance, the European policy director in Brussels for The Business Software Alliance, which represents software makers."

Precisely.]

[Update May 11: Work at French television (largest, private) + disagree with the law proposal + send mail to your MP = lose job. Nice one!]

A Government Dilemma

Been head down in Keynote lately. Busy producing presentations and other non-blog content. 

Usually I have nothing but contempt for the format, at least as it's too often used - one dash PowerPoint template, one dollop overcrowding of bullet points then then use as manuscript with back to audience. My yawn reflex kicks in automatically when I see the cables being plugged in and with the first 11 points coming up I slide out from the deck for some networking and coffee.

At least that used to be my modus operandi.

But lo and behold, starting to like the blasted thing again, it allows a certain freedom in rhythm that is hard to attain otherwise. And the images of course, but that can certainly be overdone as well.

So now, please allow me to indulge in an experiment; a slide deck instead of a post. Be warned, no cute images, mashed up "old" ideas and points-of-view as well as the usual lead-out to own wares coming up in this A Government Dilemma deck:

Ownership, the secret ingredient

Inject the most secret, largely misunderstood but highly efficient ingredient into your company. Daring recipe to follow, only for the brave. 

"My football team won!"  "We did that!"  "That's my house!"

Ownership (in human terms) does not require a deed or contract, it applies to your ideas or the task you helped finish. Even tangible stuff can be "owned" without a deed; the car you lease is still "your" car even if the registration papers says otherwise.

The opposite is true as well, you might well hold the deed to the thing or property but if you have no say then legal ownership has only a marginal effect. If I have to ask for permission to change a picture on the wall, if I was decreed by somebody to mow the lawn on Saturday at 10 am, if the arrival and departure of guests was set in a calendar by somebody else - would I feel that the house was "mine"? No amount of deeds and keys would help, it would not be "mine".

"That's my work!"  "I did that!"  "I Made it!"

Accomplishment, the pride in sealing the ownership to work well done. 

So why bother with ownership and pride? 

Because we're all involved in communal undertakings - groups of all kinds including commercial undertakings. 

If the participants (see employees and partners) are strongly driven in a coherent way, preferably getting much joy from the drive, well then the chances of success would be much higher! 

Ownership is the strongest driver of them all, love and hunger aside (albeit pretty futile to try using those).

Ah, but we have bonus and stock-options to drive our fine leaders you say?

Study this light hearted decision tree for bonus and pay challenged bank executives receiving state support, as suggested by Business Week in their Feb 23 issue. 

Despite the humorous poke it's still logical or what?

Pure monetary incentives are almost useless, strong perhaps, but inevitably short term interests clashes with long term and morality and principles are easily compromised. 

Look no further than the current crisis and how the "incentives and bonuses" have wreaked havoc. 

Option schemes, share ownership for employees - all nice and dandy as a principle, but totally off the mark if the purpose is to create a feeling of ownership. Unless the shareholders get a direct say as well you could just as well disburse with cash, same diff.

Does a small shareholder in a large corporation feel the ownership? Would you feel the ownership if some little clique of managers has taken charge of the whole thing, informing you occasionally through Wall Street Journal or an annual report while jetting around on your penny?

True ownership on the other hand has meaning, balances short and long term purposes and yields true pleasure. It binds, it drives, it makes sense, in short it's basically human - but only ownership that transcends the legal meaning of the word.

I can only think of a few examples that have included some of the right meaning of ownership: One would be Berkshire Hathaway. The leader shows in all he does that he's merely the leader of the pack but that you're all in it together. His letter to shareholders, his hours of Q&A at the annual shareholder's meeting, his openness towards fellow shareholders - it's all there and I bet you if you ask a long term shareholder he might very well utter "our company" when he talks about it on his flight back from Omaha.

Still it's hard to include thousands and thousands in a two way discussion and for decisions. Especially when letters and physical meetings were the only means, still Mr Buffet managed to get it more right than others.

The Open Source movement is another story, differing from Berkshire Hathaway in only two aspects - one being they have no commercial interests directly in the product thus no need for equity shares, secondly they use the modern networking technologies in contrast to letters and annual get-togethers.

In other words the strongest possible incentive for working hard and smart while offering great pleasure and true meaning is open to be used by commercial enterprises. The technology that could make it possible is available, but it will only work if those with power dare. And therein lies the issue for the current owners and management; dare to open up, dare to be transparent, dare to include, dare to be one of us - dare to include the owner community in decisions! 

And those that one day will dare will win big. Unleash and use one of the strongest motivators there is for commercial purposes and I think you will drive past your competition. No pun intended.

Where's your Capital?

If you're in "industry" your Capital will mostly be solidly bolted down as assembly lines, production facilities, distribution channels and your "Brand". Altogether making the basis for the entirety of your value and wealth creation.

If you're in "services" the same basis for your value and wealth creation will be solidly lodged in the brains of your employees, who, by the way, could leave by lunch tomorrow. Bye, bye Capital.

Industrial Capital can be used to it's full extent and almost instantly by the newly hired.

Intellectual Capital on the other hands, requires years of training, workshops and mentoring before the newly hired can use it fully to create value and wealth.

In other words, we have a two-lane economy.

One fast lane, one extremely slow lane.

The crazy thing is that the wealth and value created in the slow lane (as expressed in world wide GDP) is twice the amount that is created in the fast lane.

Imagine what would happen if the slow lane became a fast lane!

Thus time to challenge the assumption that the two types of Capital has to be treated differently and try a new set of "ground rules":

1. "How you do things" is the core - call it what you will, "Industrial" or "Intellectual", it's all Capital.

2. Ownership and retainability must be the same for both types of Capital. 

3. Time-to-full-productivity and speed of growth of both types of Capital should be the same.

To ensure better use of Intellectual Capital all knowledge work and practices must be sufficiently, albeit not suffocatingly, structured so the paths and choices - "how you do things" - becomes tangible: 

1. The Intellectual Capital must be embedded in every task as it's delivered with all pertinent information and the required tools allowing the Capital to be instantly used to full effect with little or no training.

2. The process must have real time visibility and real choices, again reflecting the Intellectual Capital, in order to amplify the value of the human creativity and it's use of the Capital.

3. Every step, every word, every choice must be captured real time (and historically) thus building the Intellectual Capital continuously and keeping it for the future.

Some "systems" do actually try to deliver these kind of effects - BPM comes to mind, CRM, KM systems and Enterprise 2.0 tries it's best as well. Common though is that these are restricted to certain limited practices / processes, and whatever the sales pitch says, precious little holistic process structure is offered. While "Capital" is all-encompassing and can only be fully utilised by holistic solutions.

[Disclosure: This issue is one of many that we (try to) address with Thingamy.]

Economic growth - what's next?

What's the most repeated word we hear these days? 

GDP.

If it goes down a recession is declared and all hunker down, stock markets tumble and worse happens.

GDP is defined as the total market value of all final goods and services produced within the country in a given period of time. It includes government as well of course. By the way, GDP is in principle same as GNP, differs only in how the import - export equation is worked out.

So how to stop a recession from happening? Simple, very simple, here's the answer:

1. You write a paper (you choose the theme, it does not matter what) and call it a Report. Slap an invoice (any sum, big is fine) onto it and send it to me.
2. Upon receipt of your "Report" I'll add some notes and scribbles on the bottom. Then I'll send it back to you with another invoice for "services rendered". Your invoice is balanced by my invoice by the way.
3. Now you slap more notes to the thing, add another invoice and send it to me again.
4. Rinse and repeat as fast as we can.
5. At the end of the quarter we'll add up all the invoices and send them to whoever do the GDP calculations.

Voilà, GDP miraculously increased and we've done our duty. 

Obviously this is not what an economist would suggest, too easy to criticise. No, some have a much better idea: Consume more!

1. You hire me to produce some consumer goods and pay me for that.
2. I use the pay to buy the product I just produced so you have funds to pay me next month.
3. Rinse and repeat.

Voilà, we all do our duty.

To help kick start such cycles Mr Darling of the UK has lowered the VAT and his colleagues in the US are using all the tools in their tool box to get the US consumers going. And all rejoice when the not-too-bad numbers from Black Friday came in.

  

Not the smartest of moves this, pure self delusion to be honest, but what to do?

Wealth creation is the crux, real increase in wealth creation is even better.

Go back in time and see what really made a difference in wealth creation: Every time we did a leap in productivity. Every time the equation of value created per resource unit spent increased.

It happened when agriculture and domestication of animals started, it happened when industrialisation happened, it happened when IT made it's impact on production and logistics.

And now, in one dramatic moment everybody stopped up, is looking around declaring loudly "we have to rethink our strategy", "we have to revisit our plans", "we have to do things differently". And the best part, corporate purchase-on-autopilot just because we always did is history.

Excellent. Bravo. That's what it's all about, do things differently.

Better agriculture, slicker production or tweaking IT to refine logistics or sales processes will not deliver the needed leap any more. They've done what they can. Thank you, but now is the time to look elsewhere.

We've done what we can with how we plough and harvest, with how we move stuff around efficiently, in how we produce with less resources, in how we move people into shops to keep the money flowing ever faster. All good, but we left one small item behind: How people work, how they spend their time, how to increase knowledge and it's use (aka innovation), how to create much more in less time while making the resources (people) even more enthusiastic and happy so they'll become even better.

Funny really, as that is where most of the resources go - not only when you're at the office, after all you have to live and consume when not working as well. We cannot shut you off after work hours and save resources. So getting more out of people while they work is a double whammy - and I'm not talking longer office hours, I'm thinking of innovation, less waste of time, smarter decisions, smarter processes, less fluff and much more.

There are billions of people delivering services - directly as a value to the consumer, to other firms or to their own firm. And they all work using paper based methodologies in millenniums old frameworks. And with "paper based methodologies" I include current crop of IT as they're still documents and forms based, include business rules and hierarchies, and reports by transactions as has been the method for hundred of years.

Business Models (as in how to use resources to deliver a value), workflows and methods are in for a change.

The best part is that not only is it the objective right way to move, it's now subjectively seen as the right way as other alternatives do not have the promise required in such scary times, and most important, the lull allows for the time and space to give it a go. When all was at 100% of capacity and nary a cloud was in sight nobody wanted to do anything different, neither did they have time for it.

With the cold shower and dark clouds all over all of that evaporated and a new tune can be heard.

I'm elated as suddenly the obvious becomes visible. And now, roll up your sleeves and get going.

Luckily my little project is built for precisely that, so I'm reasonably happy. 

The story of our times - time to abolish accounting as we know it

Imagine this, you're out driving... [Reality references in brackets at the bottom of the post]

But the windshield is not there, instead you have a standardised set of reports [1] coming up on a "dashboard" in front of you [2].

The reports are supposed to give you an idea as to where you are heading and what dangers might lurk, or jump out from the kerb.

The reporters are not in the cabin, they're under the bonnet somewhere, peeking out through the grille [3] delivering information to your windscreen-replacing dashboard. And they're trained to interpret what they see, or think they see, armed with thick manuals of standardised interpretation methods. Every now and then an inspector [4] joins the ride to check if their reports last quarter more or less reflected the standardised interpretation manuals.

(Image from idashboard.com)

Obviously the lag is bad for your driving prowess, but luckily you're allowed to roll down the window so you can stick your head out every now and then and get a fleeting glimpse of what's happening [5]. Coming back to the "dashboard" again you're often able to correlate that with what you saw. The best drivers are often the ones that stick their heads out frequently.

Obviously the speed of your vehicle is seriously hampered by this and an Elk jumping out of the woods would often hit your windscreen in full force, an occurrence often termed a "Black Swan" these days despite the fact that Elks do this all the time. 

But you have masters, the owners of the truck [6], and they pay you well for speed and volume of goods delivered. This will inevitably lead to you convincing the masters that they should give you funds to buy a bigger van [7], preferably with a bigger engine and more refined dashboards to give at least an illusion of control. And the masters often comply while your driving expertise increases over time.

With speed and size Elks are flattened and other little wild animal corpses simply get stuck in the grille. But the size and speed increase makes sudden bends in the road harder to handle, although as long as the road is straight and the maps are good, it works. 

Some drivers are in the business of fuel delivery [8], and their trucks used to be small and nimble driving at low speeds where the driver would have his head out the window all the time [9]. In those days the dashboard was not electronic, it was paper-based [10] and delivered by hand, so keeping the head in the wind was a must.

But with new dashboard technology [11] the fuel trucks grew in size to huge juggernauts, the speed increased to warp speed [12] - and for awhile the masters were happy while the driver's [13] bonus made them very rich men (mostly men I'm afraid, manly business such truck-driving).

The inspectors being soon overwhelmed, cozied up to the masters and the drivers crossing their fingers and hoping the maps where good. The traffic cops [14] and some traffic analysts [15] on the other hands saw a different world out there, almost blown off the road when the juggernauts passed at warp speed. Some started complaining, but as things stood, few legislators [16] were keen to do much as the speed and volume of fuel distributed was overwhelming and all were happy and able to live in big mansions and drive big trucks themselves. And BTW, the police chiefs and legislators saw even less of the reality than the drivers or the traffic cops.

Until some mid autumn day when the first truck hit a tree [17] and went up in flames, then another were saved in the nick of time [18], and another [19] and soon all the fuel trucks went into a crawl. The other trucks, delivering normal goods soon realised that they too had to slam on the brakes to avoid the suddenly obvious dangers out there, then move slowly forward to save fuel that instantly increased in price [20].

The traffic cops blew their whistles, and some entered some of the biggest trucks and took over the steering wheels as the drivers had been reduced from cocky one-hand-on-the-wheel road cowboys to shaking bundles of nerves. Even a new and unblemished police chief [21] was called in, increasing hopes for a solution. We have yet to see if he'll be radical enough, perhaps we'll only see more traffic cops?

 

And that's where we are today. And now we're trying to find out what went wrong and what to do.

Would lower speed and smaller trucks been better? Of course. Would more traffic cops out there been helpful? To a certain degree, but only very limited unless they took over the wheels which might have reduced the interest of the masters to put up money for the bigger trucks.

Nope, the answer then as today can be found in the driver's (and everybody else's) ability to see reality as it is. The dashboard reporting system that was developed for paper based technology worked adequately at low speed, with small trucks with drivers hanging out the windows. But not anymore if we want to grow the economy.

What we need is a transparent windscreen where the driver can see reality without a filter. And we need it now.

So forget the discussion about "more traffic cops" or more "traffic rules" or even smaller trucks at lower speeds. The discussion must focus on the way the drivers are given access to reality.

The indirect representation of reality by proxy, the transactions, in today's reporting and management systems has to go, it must be replaced with a representation of reality directly.

[1] Accounting rules, GAAP, IFRS

[2] Management systems, accounting

[3] Accounting departments

[4] CPA

[5] Visit customers, people at the front lines and in the plants

[6] Shareholders

[7] Capital increase, IPO

[8] Financial institutions

[9] Your local bank that knew all the townspeople

[10] Good old bound ledgers

[11] Enterprise software

[12] Derivatives and other creative financial instruments

[13] Wall Street workers

[14] SEC et al.

[15] Analysts (duh)

[16] Washington, Brussels, Westminster etc. workers

[17] Lehman Brothers

[18] AIG

[19] Fannie Mae, Freddie Mac

[20] TED Spread

[21] Barack Obama

The crisis: Which companies might prosper - two questions

The other day I got a newsletter from my old business school, INSEAD. The first paragraph was all about how serious they were about the current crisis, their dramatic and immediate cuts in travel costs given as a prime example. Then the newsletter proceeded to pitch an assorted number of conferences, all requiring travel over vast distances for the rest of us.

Unintended I'm sure, but nevertheless a perfect example of "grab the helmet and dive into the ditch" that is apparent everywhere. Jump first, think later and hope that it pleases the investors and saves the day. Action more important than thinking.

This not without reason as investors everywhere are asking themselves (and others) "what companies show resolute behaviour in the face of the difficulties?" as well as "what industries or companies could be recession proof?". 

And it's not only investors that are asking, employees and vendors are in the same boat.

I think the questions are the wrong ones. This is not a "normal" downturn, most agree that this is a systemic failure. 

Thus the first question must be if the "system" has infiltrated a specific company.

As discussed earlier, with "system" I allude to gaming the quarterly results, having off-balance items or any other structure created to make things look better, leveraging anything but core activities - in short the creative use of double-entry book keeping.

Take your local bank that has lent money to home owners and local businesses for decades using local knowledge keeping the loans on their books and a keen eye on what their creditors are up to. Now they're doing it the "new" way where loans are bundled and sent off leaving the local bank to earn money from placing loans without any risk. So now the local bank are good at pushing loans but have forgotten it's former core knowledge. In other words the "system" has taken over.

Do big conglomerates need to have "three legs" of which one is "investment" - hard to understand for an investor, employee or client and a funding volume far outstripping what the original value-creation required?

Spreading the "credit risks" or "enhancing the return on free cash" becomes quickly entangled in the "system" that has failed, so a "yes" to the question should be a warning signal.

The second question would be if the company is willing to face changes to customer behaviour, now.

As mentioned earlier, I do not think a "need" disappear when a customer becomes shell-shocked, but I'm sure his behaviour might change.

Plans for expensive family vacations being replaced with budget camping trips could be the first step. Second step could be that the kids loved it and it becomes the favourite summer activity.

The luxury hotels that have cut their costs waiting for all to go back to "normal" might never see "normal" again while camping outfitters will be hugely surprised and perhaps not geared to grab the sudden opportunity.

That would be the second clue I would be looking for - is the particular company I'm looking at revisiting it's strategies, are they in fact spending time with their customers and even new potential customers to try and understand what opportunities lies ahead? Or have they merely grabbed their helmet and is now carefully peeking out of the ditch?

In sum I would look for companies with these traits:

1. No-nonsense reporting, zero gaming of financial parameters, simple and visible value delivery.
2. Clear signals that the strategy is being re-visited.

I will be sceptical if I see:

1. Non-core financial engineering and/or too smooth results reporting.
2. Ditch-diving and blind cost-cutting unless the strategy has been re-visited and re-engineered already. 

Obviously there are many more questions to be asked, but this would be my first filter.

Contrarian or not? A consensus that consensus is wrong.

As the world has it's pangs of panic and licks it's wounds, many have their helmet on or at least wonders what went wrong; one message comes up more and more frequent: Consensus is dangerous, be a contrarian.

Fred Wilson's recent post "Conventional Wisdom Will Be Wrong" is not alone. 

Mind you, I do agree, I'm merely a sceptic smelling yet another consensus; this time that contrarian is good, a consensus that consensus is wrong. Spot the Paradox I say.

Taleb (of Black Swan fame) is often called upon as witness, but to me it seems one fact is all too often forgotten: Taleb is not simply contrarian in principle, he's a sceptic in principle. And he had some very practical ideas as how to translate his scepticism into action. Even in his book, long time before the latest downturn his hedging was described as based on two issues: Unexpected big dips in the market will occur and a sudden market fall is faster and steeper than a market rise. And lo and behold, that worked.

My point being:

Being contrarian as a principle does nothing, that would be rather confusing.

Being contrarian based on specific understanding, now that makes sense.

Being a sceptic leads to becoming a contrarian in specific cases, no shortcut available there.

In fact Fred partly acknowledges the point by saying "Read everything you can. And then come to your own conclusions. It is better to be contrarian in times like these. But do it wisely and don't bet the farm." But he should have added - start out as a sceptic!

Understanding "everything" is a bit too much to request, where shall I start looking, what signals shall I attune my radar to? That would be the crux of the whole exercise.

Here's a suggested sceptical method, mentioned a few years ago on this blog:

"The more I hear a 'Truth' the more I'm sure it's wrong"

It's based on some very basic human traits:

Intuition, gut feeling, often "knows" a long time before our conscious brain, and sometimes we get faint warning signals from somewhere deep down. But signals are not signals unless they differ from our conscious attitudes and actions, thus you've been handed an internal and personal conflict.

Thing is, we do not like conflicts, but we know the simplest way to handle it; smother it, overwhelm it with peer consensus. Repeat your conscious convictions and solicit agreement, the more the merrier and with that the internal voice of conflict is muffled. Much backslapping and nodding happens and the annoying gut feeling slowly loosens it's grip.

As an outsider my radar goes bip, bip, bip when I hear statements of some "Truth" being repeated. I smell conflict between intuitions and current beliefs, a clear call to challenge that "Truth". And believe me, that has led to many eye-opening discoveries over time (not always right I might add, but still). Discoveries, ideas or theories that are frowned upon of course, that comes with the territory.

I'd suggest you try it, not a bad path to some contrarianism with meaning.