Sentence of the day

So the combined effect of the Fed policy of a zero Fed funds rate, quantitative easing and massive purchase of long-term debt instruments is seemingly making the world safe – for now – for the mother of all carry trades and mother of all highly leveraged global asset bubbles.

Nouriel Roubini

 

Annals of Obvious Research

Once again the academics have fearlessly gone forth and discovered the what anyone who has ever run a business will immediately tell you.

Analysing 85 years of data on Employee selection criteria, our intrepid researchers identified the  following three characteristics of successful employee criteria

1. GMA tests (“General mental ability”)

2. Work sample tests

3. Integrity tests: surveys design to assess honesty … I don’t like them but they do appear to work.

While the bottom three characteristics assuming graphology is some general rubbish

16. Years of education

17. Interests

18. Graphology (e.g., handwriting analysis)

19. Age

Anyone who has had to hire not in some corporate environment but in an actual business especially a start-up early stage could have told you that.

What the current Argentinian Football mess may teach countries

Simon Kuper has a provocative take on Argentina’s current football mess in FT.

The key is that there are two views of what a national football team is for. The first is the professional view: the team exists to win matches. To do that, it needs to follow best international practice. However, Argentina chose Maradona because it had embraced the second – nationalist – view: the team must be the nation made flesh. Silly as Argentina now looks, many countries periodically fall into the same trap.

This is true not just of football teams but frequently of countries where they believe that there is some unique way of doing business. Whether it’s the Asian way or the Indian way so even the Scandinavian way. Business, trade and culture could be segregated in past days because it took time for innovations and ideas to spread, but in today’s day and age there is only one way and that is the global way.

Is Evolution a Fact

Emanuel Derman writes

That Paris is in the Northern Hemisphere seems to me a matter of definition rather than fact. Evolution is not a fact in that sense at all.

I would call a fact something that you ignore at your peril, in particular your peril in the material world. A fact is Maxwell’s equations, Newton’s laws, the germ theory of disease. You can’t ignore these without severely crippling your ability to live in the (modern) world.

This is a little strange because obviously the author believes in germ theory but doesn’t seem to believe that bacteria becoming resistant to antibiotics is based on fact. Evolution is simply the changing of organisms because of pressures of the environment around them. It’s a simple fact and not something to argue over by linking it to God/religion.

Annals of Useless Research

An FT article highlights research from NYU Stern Business School that Hedge Funds misrepresent facts. Obviously the researchers have not ever had a sales job in their lives. Facts are frequently not just misrepresented but are frequently made up by all sales people, when pitching to clients.

One of the reasons of the Great Financial Crisis seems to be that as far as finance goes, people have forgotten the basic injunction of caveat emptor (let the buyer beware). If more people understood that a majority of people working in finance are simply sales people who are selling you a product, whether it is investment Hedge Funds or buying a Home Loan. Unlike other industries viz. manufacturing or construction or Hotels or anything else, finance simply allocates money around and there is only so much that you can extract in value by moving money around. Then the only way to generate profits is by selling and charging more.

It is important to remember that when dealing with financiers or bankers of any kind.

A Tale of Two Acquisitions

In the last week there have been in the new two acquisitions in the Tech space which are pretty close to home for me. The first was 170 million acquisition of Mint by Intuit. My initial thoughts of starting a Personal Finance SaaS company for Asia was inspired  by looking at Mint and reading this article in WSJ. We are now taking MyMoneyManage into a much broader direction, focusing on not just consumers but on a broader SME market which seems more lucrative for Asia.

The other acquisition was smaller one by IBM of Redpill Solutions but probably more significant to me because I worked at Redpill for one and a half years when the Analytics business was starting off. They were crazy days of literally running around trying to convince clients of the value of tapping into the data that they have sitting around.

Congrats to the Redpill team on pulling this off!

Both acquisitions are on the face of it similar, established companies taking over smaller innovative companies which are focused on providing a different level of service to their customers,  both are also about doing more with the data of their customers. How will these two acquisitions pan out is something only future will make clear. But I would like to believe that Redpill will have a greater impact on the future with their customer focus. Mint will get absorbed into Quicken and become just a pretty front-end service while Redpill has the opportunity to really change the world with the reach and openings that IBM can give them.

Will be following with interest on how these acquisitions play out.

Customer Acquisition in SaaS

Dhamesh Shah has a great bunch of insights on running a SaaS startup. One aspect that he does not really cover in great detail is how do we acquire new customers. It’s great if you are a Guy Kawasaki or have been funded by Y Combinator where you automatically get a reasonable launchpad and can expect some link-love from established presence in the community. But what about where you are launching something which is bootstrapped and you need to acquire customers. Here are some of the ways that you can acquire customers.

• Make sure that you have your keywords set-up correctly, read Google Webmaster’s guide for SEO. It’s a great resource that gives good information and even if you are engaging an external SEO expert, it is well worth your time to understand how Search Engines view your site.
• Build a presence on the web by writing and submitting press releases, blog posts related to your topic as well as participating in discussion forums or on blogs to raise the profile of your product.
• One effective way that I have found regarding raising the profile of the product as well as getting initial customers is to create a survey and send it out to the demographic you are targeting. It’s a good low cost way of getting feedback. I have used Survey Monkey for this and it was very effective in the Customer Development Process.
• If possible run a contest with some kind of free giveaway, popular things to give away are Electronic Goods, complementary services related to the software or even something simple like a T-shirt works if it is well designed and unique.
• Use Google AdWords to drive traffic and acquire customers, an investment of as small as USD 5 per day can generate enough traffic for you to start getting a sense of how the product is being accepted and allow you to move to the next phase of tweaking the product.
• Make sure there is a referral bonus for getting new customers, for your existing ones. Member-Get-Member or Viral marketing is one of the most powerful mechanisms of growing your customer base. Make sure you make it easy for existing customers to invite their peers. See Seth Godin’s talk on Viral Marketing.
• Finally make sure that you provide a Free Trail Period

These are just some of the more cost-effective mechanisms of acquiring new customers and I hope you will benefit from utilising these and growing your business.

Consolidating your financial accounts

Have a new blog post up on consolidating your personal finance accounts.

Journey into personal finance management

Have a new blog post up on the mymoneymanage.com on the first steps that are necessary for taking control of your personal finance.

Liquidity and Friction

A lot of people seem to believe that liquidity provided by the new fangled financial products like CDS, CDO, HFT etc is a good thing since it not only disperses risk but also provides liquidity to the system. Ms. McArdle of Atlantic Business is speaking for a lot of people when she says

What a transaction tax makes less profitable is a portfolio strategy that relies on lots of quick trades.  I suppose there’s a valid question about how much social value those folks provide, though you have to admit that they do at least increase the speed of the price information available in the markets, and to some extent their liquidity, which most people regard as a good thing. [Bold Mine]

However what excess liquidity does is that it increases the velocity of money, it’s the grease that reduces friction in financial transactions. Long ago when I first started studying Physics Friction was characterised as a necessary evil. A world where there was no friction is an uninhabitable world. Similarly when the excess liquidity reduces friction, it leads to inflation of asset prices.

We need to move to a world where there is greater friction in transactions by reducing liquidity as well as restricting the Velocity of Money in the Financial world.