Category Archives: Business

Thus Begins Cold War II

5 Replies

Russia celebrated a holiday recently with a large scale military parade on Red Square. Just like the bad old days. Putins sock puppet, President Dmitri Medvedev, smiled while Putin stood stern-faced at his side at the annual Parade of Hardware.  Insiders claim that Russia’s effort to modernize its military forces is anemic and plagued with corruption. Putin and followers are plainly appealing to that voice in the Russian soul that longs for strongman leadership.

China, on the other hand, is quietly constructing a secret underground nuclear submarine base on Hainan. Hmmm. A secret underground lair. Sounds like Dr. No.  I doubt there are miniskirted nubiles with machine guns. Bummer.

Whereas Russia is fighting infrastructural inertia in its return to the platform, China is methodically ramping up its military with an economy flush with cash. With funding from its exports of Wal-Mart inventory and other Cheap Plastic Crap (CPC) marketed through its many outlets in the USA, China is moving closer to a blue water Navy and an SSBN fleet.

In the next 20 years, we are likely to see China flexing its muscle by positioning naval (carrier ?) groups and hints of Chinese submarine fleets prowling the continental shelves of the world.  Just like us.

While the USA shadow boxes with multiple terrorist threats around the world, China plods forward minding its own business and funding its own growth.

Four US presidential terms were squandered following the fall of the Soviet Union- 2 x Clinton and 2 x Bush.  US efforts to engage Russia in economic cooperation were weak at best. The highlight was perhaps the downgrading of Soviet era nuclear materials.  Instead of building friendships and trade cooperation, US presidents were distracted by faulty nation building exercises and dubious foreign adventures. Mikhail Gorbachev himself recently lamented that “… every US president has to have a war…”. 

US government needs to spend a 4 year term focused inwards. We must address US infrastructure as eagerly and aggressively as we land troops on the sandy reaches of the earth. The US needs an upgrade in electrical power distribution, bridges, its rail “system”, and its ports.

Collectively, we must find ways to keep factories and businesses in the USA. We need to reconsider the structure of the Code of Federal Regulations. Our regulatory structure is now so complex and extensive that we face the real risk of killing innovation. Our tax code is too complex and too burdensome on citizens and businesses. The government is funding far too many activities.

In short, the USA must get back to basics. The country is in a existential crisis and we need to get grounded again. We need fewer rules in our lives, not more. We need fewer people telling us how to live an authentic life. More of us need to spend a bit more time in the pursuit of happiness.

On Company Lawyers

2 Replies

In the chemical technology world, it often happens that one company will engage another in the manufacture of some particular substance. Company A needs a particular material made according to certain specifications. Company A goes to Company B to ask for price and availability.  But first, Company A must disclose the identity and certain particulars of the material to Company B.

For Company A to disclose the identity of its material, it must work out a secrecy agreement with Company B. Company A’s business depends on the material and it does not want Company B to disclose the details of the material, the process, or any other aspect of the business. So, they execute a secrecy agreement.

What is interesting about such arrangements is the great diversity of “language” in the terms among companies. Some companies are very concerned about the faintest smidgeon of errant information and write detailed terms accordingly. Others are much more concerned about the broad strokes and are apparently willing to let the courts work out the details in a conflict.

Some companies are willing to yield on unreasonable terms and conditions while others will fight to the death on even the slightest change.  There is a strong correlation to the corporate culture and the extent to which a company is under a market pull influence (tolling operators) or is engaged in technology push (inventors).

In some companies, issues relating to intellectual property (IP) are strongly influenced by the lawyers.  In such an organization, it sometimes happens that management is completely immobilized by indecision in IP matters. Managers may not understand the IP, are unable to engage their own lawyers in detailed discussion about the issue, or may simply be terrified of making a mistake. Doing business with organizations that are highly rigid in deference to their lawyers tends to be a more difficult activity. The thinking is that if the lawyer makes the decision, then they can take the heat if it goes south. Of course, the lawyer won’t take the heat- they’ll just bill you to get you out of the mess.

In other companies, upper management will take legal advice, but will not leave the decisions to the lawyers. These managers understand that IP is company treasure that must be put to good use in order to bring in revenues. Lawyers get paid irrespective of the outcome in the advice dispensing trade. A good manager knowns how to ride a lawyer like a cutting horse, digging in the spurs now and then to show who’s boss.

Thoughts On Secrecy in Business

2 Replies

It is unusual to join any company engaged in technology or finance and not have to sign a secrecy agreement. The competitive nature of business is such that information relating to business activity needs to be kept from the prying eyes of the competition. That’s easy to understand. If you refrain from blabbing your activities to the competition, you may have an advantage in the market. It’s a zero sum game- their ignorance is your gain.

But it is possible to stumble across the line from prudent practice to paranoia.  Often is the case that the first draft of a contract or a secrecy agreement is full of grabby, over-reaching terms and conditions that represent a minefield for the inattentive. Negotiation is the act of shaving down unreasonable requirements to an agreeable topography of ups and downs that you can live with.

I have learned that it is best to decline to agree to broad, ill-defined terms, in favor of short, highly focused terms regarding specific actions, information, or outcomes. For instance, agreeing to “hold in confidence all information to relating to the business activity” of a company is a recipe for potential trouble.

It is better to set the expectation that the agreement is for a tightly defined purpose and only a narrowly defined range of information will be disclosed in the first place.  It is important to require that whatever is disclosed is reduced to print, or if disclosed verbally is reduced to a tangible form within a short time period.

If you are going to be subject to a lawsuit due to an alleged breach of secrecy, then it is important to have discoverable evidence that a limited range of information was disclosed. It is also important to set the expectation that Confidential Information is properly marked as such so that the recipient can reasonably prepare to contain it.  You do not want to have hand waving arguments by the other side claiming that “we said (this or that) in a meeting and then the defendant willfully disclosed the information without permission”.  Verbal disclosures are nothing but potential trouble.

Being in possession of another companies secrets is a genuine burden and a risk. You want to minimize it to the greatest extent possible and impose disciplines on the part of both parties to keep the disclosures lean and tight.

Reality Check. Always Certain But Frequently Wrong.

2 Replies

One of the benefits of being a student is that there is always someone standing over your shoulder, watching the choices you make. In school you choices result in a score of some sort. Out in the world, your choices have bigger consequences than letter grades.

As in school, the Big Big World is always under time pressure. Better, Faster, Cheaper. There isn’t always time to deliberate on the global optimum solution. In industry, sometimes the choice you make is the first one that shows any promise. Experienced business people know that everything takes longer and costs more than you first realize. There is no substitute for an early start.

What results from this need to jumpstart a project is the failure to question your basic assumptions.  In chemistry, a person may slide into the seductive notion that you are an expert in a process and, of course, you know that your process will work on a particular analog. But, do you really?

Non-linear phenomena are particularly troublesome.  Or phenomena that are polynomial in description.  It is hard to intuit outcomes when terms that were previously small become dominant in the equation. There is no substitute for measurement. If you want to truly understand a thing, eventually you are going to have to make measurements and plot a curve.

Like a lot of people fresh from Grad School, I was sometimes an arrogant turd. Just ask around. Today I am much more cautious about my abilities and knowledge. Periodically I am reminded that intuition can fail. Like a 2×4 between the eyes.

While I can’t give details, I have had to drastically recalibrate my intuition about some things that I believed I had a handle on. It involved mass transport concepts. The separation of substances can be subject to constraints that aren’t so obvious to someone who has only been through the ACS-approved chemistry curriculum. An engineer might have looked at my circumstance and solved the problem in a New York minute.

But Th’ Gaussling had to learn the hard way. What else is new?

On Chemical Negotiation

1 Reply

I always amazes me how little negotiation goes on in chemical B2B transactions. Buyers ask for the price of an obscure chemical and that may be the last you hear from them. Only rarely do I see pushback. Either a purchase order arrives or it doesn’t.  I’m not referring to trainloads of soda ash or other mass quantities of commodity chemicals. I’m talking in the one to 100 of kg range. People naturally take prices as fixed in concrete.

This is especially unfortunate or even tragic for materials that are very unusual. Items that have a low volume or minimal competition are products whose price has not been made rational through the forces of the market place. Competition has not forced the price to an optimum level.

Price is determined by what the market will bear. If there is limited exposure of a product to the market, then a rational price probably has not been reached and someone is leaving money on the table. Prices are initially based on some reasonable multiple of costs. The demand picture and the sellers anxiety to move product determine the real price point.

Much has been written about negotiation. I have no new concepts to add except a reminder that the best deals can come from multiple iterations of offer/counter-offer. Only by going into cycles of offer/counter-offer can you find out exactly what is possible to get from the bargaining.

Some companies, like SAF for example, are notoriously rigid in their approach to sales. I have found that they do fix their prices in blast resistant concrete. SAF is uber-aggressive in the marketplace because they are after total global domination. But not all companies are like this. Many are pleased to make a deal to get some material out of inventory.

What is troublesome for manufacturers of new or obscure products is that the initial price may frighten off a buyer. If the buyer recoils in horror from a price without any attempt to negotiate, then they lose the benefit of that product and the seller loses the sale and perhaps the entire market future of the material. I have seen this happen many times.

What makes this a difficult issue for the seller is that you don’t want to seem too anxious to drop your price. That just telegraphs to the buyer that they should expect a better price. The seller should have a front price that they want and a fallback price that they can live with. It is better to have the fallback price than nothing.  The skill comes in the smooth application of salesmanship.

A good sales person watches the prospective buyer carefully for flight impulse and silently swoops in like a vampire for the seduction and the lusty bite. 

Hip-motized by Doctrine

1 Reply

It is interesting how people can adhere to abstract doctrines while reality rages all around them.  In particular, I am thinking of a recent “conversation” with an economist friend. A fundamentalist libertarian, he steadfastly refuses any hint of pragmatism in favor of his utopian idealology promoted by certain Austrian economists.

To the economist, anthing that smells like collectivism of any sort is deemed an automatic throwback to the failed ideals of Marx. It’s all about the individual and his property. Nevermind that any anthropologist will observe that people spontaneously form groups and associations to lessen risks and burdens associated with survival. 

Harm comes to people and society when those with a power position advocate for abstract doctrines over the welfare of citizens.  Notions of political structure, reproductive issues, qualification for acceptance into an after-life, or slavery are all sacred abstractions on which people have taken stands and many have killed or been killed for.

How many people have needlessly died because of the squeemishness of celebate men with the idea of condoms? How much destruction was released in Southeast Asia due to the opposed idealogies of Marxism and Capitalism?

Today, Americans face continued endurance of a broken health care system because certain vocal idealogues profess doubts over “Socialized Medicine”? American health care is already socialized to some extent. But in a way that favors the flow of cash to the coffers of corporate medical providers and insurers. Why do you think Warren Buffett is so enthusiastic about owning insurance companies?  You get paid up front. Surely there are other health care models out there that we can emulate.

Sustainable Chemistry and YOU

2 Replies

A new chemical journal was distributed at the recent ACS meeting. It is called ChemSusChem and is a European effort published by Wiley-VCH Verlag GmbH & Co. The theme is chemistry and sustainability. Librarians and Deans will surely groan when they hear a new chemical journal is available. I don’t know what an institutional subscription costs, but they all seem to be very expensive.

More than a few of us are convinced that we are presently watching a slow motion movie of the de-industrialization of the European Union. Many will scoff at the appearance of another greenish journal, especially from the EU. Indeed, the EU does seem hell-bent on outsourcing its basic industry to other parts of the planet with lower overhead costs. But cost doesn’t seem to be the only driver.

The EU has become a confederation of nanny states, all seemingly pre-occupied with the extermination of risk (and the US is on the way as well).  Some of it is legitimate, I believe, but to a significant extent some of the EU fussing with environmental issues is due to an inability to come to terms with ppm-level risk. Thus REACH.

The effect of REACH may be that this de-industrialization is accelerated. I am now involved in trying to understand REACH and how it affects exports to the EU.  For smaller companies who do not have the administrative structure to accomodate a new shelf of complex regulations, this is a genuine burden. Not just in terms of direct labor to manage it, but also the associated liability of non-compliance.

So, back to sustainable chemistry. The basic idea of sustainability provides for minimizing ecological insult and maximizing the long term availability of natural resources. It is hard to argue with the merits of this. But I would take it a step further.  Sustainable chemistry can easily accomodate advantageous economics if it is executed right.

Advantageous how?

Turns out that the principles of sustainability run in parallel with many good operating practices in process development.  High space yields, good atom efficiency, minimum energy inputs, solvent recycling, hazard abatement, etc. All of these ideals add up to maximum economic benefit.  It is just a form of frugality.

The people who can implement sustainable chemical processing are R&D and process chemists and engineers.  By adding more frugal methodologies to our toolkits, we can put sustainability into practice. The direct benefit would be better process economics. The larger benefit is a better competitive posture for industry that has chosen to remain in the EU or North America.

Sustainable principles applied to process chemistry can be a “next wave” of innovation that can lead to a re-think by business leaders in the eternal chess game of industry.  A tidy bit of “sustainable chemistry” has already been published. We chemists should filter through this to see what may be applicable.

Of course, if our academic friends have been busy beavering away writing patents on it, then it will be a much harder sell to management.  But that is another post.

 

The Corporation

Leave a reply

LinkTV has been running a documentary called The Corporation. I find it rather thought provoking and would recommend it to others.

The quote that sticks with me is from a business ethics seminar I took. Our prof said “sometimes it is dumb to be too smart” in business.  Witness the pesent banking disaster.  Some of our B-school geniuses have devised instruments of finance that are so convoluted and complex that the mechanism and magnitude of failure was not widely appreciated.

What has always puzzled me is that conservatives who profess open scorn and distrust of big government are somehow able to accept the privatized power of big business.  Big government extracts the wealth of our labor and disperses it in ways that are not economically efficient. But at least there are constitutional means of remedy.  If you do not like the way a business operates, you are free to quit buying their widgets.

Big business extracts wealth from labor and resources and disperses it to shareholders.  Government pays for national infrastructure to support business activity and business practices tax avoidance. Government has gotten too big and business has learned to game the tax system.  Taxpayers are left to subsidize both big government and corporate welfare.  The system is wildly out of balance.

The essence of power is in the ability to allocate resources. Governments and businesses are centralized organizations that have large resources to allocate. Consumers are dispersed and disorganized units that have microscopic resources to allocate.  The consumers biggest leverage is the ability to make politicians fearful with respect to their re-election prospects.

Russian Oil Production in Apparent Decline

Leave a reply

According to an article by Greg Walters at Bloomberg.com, crude oil output in Russia is expected to decrease for the first time in 10 years.

“Two years ago, we said the growth rate was falling, and we said this was bad for Russia, remember?” Trutnev said in televised remarks after a government meeting in Moscow today. “Now we’re saying the production rate is falling this year. This is not a bogeyman, unfortunately, this is real,” Trutnev said, without giving a specific forecast.

The petroleum problem in Russia seems to stem from the lack of investment in exploration in combination with exorbitant taxes on the industry.

Gail the Actuary has an interesting post on the post-peak-oil economy. Gail is a contributor to The Oil Drum Discussions.  It’s all kind of gloomy.  Time for a nice glass of Bordeaux.