As I was reading the news about J.P. Morgan's buyout of Bear Stearns, I had a thought about how I could maneuver my own personal investments to weather the current financial storm.
A basic technique to mitigate risk in an investment portfolio is through diversification; that is, owning a number of assets of different enough types so that poor performance in one category of asset is balanced or outweighed by better performance in at least one or more other categories of assets that you own.
Good retirement portfolios follow this principle, and have a certain proportion of their value in asset classes like "large cap", "small cap", "international", etc.
The problem lately is that even if your portfolio does well it's still denominated in dollars (if you're an American). So if you manage to accumulate a few million by your retirement time, it's not worth much if a bag of potato chips costs $500.
So I had an idea: let's add another dimension of diversity to a well-balanced investment portfolio, and that's not by holding a new asset class (there's a diminishing return beyond a certain number of assets, 30 is that number I believe) but by diversifying the currency in which the assets themselves are denominated.
By holding a well-balanced portfolio, with each distinct asset class diversified in a basket of different counter-balancing currencies, you mitigate both industry risk and currency risk.
I'm not sure if it's possible yet, for an individual to hold foreign-denominated equity positions, but in theory it seems like a good idea. Especially if you don't like buying gold at $1,000/oz.
Monday, March 17, 2008
Monday, February 18, 2008
You Can't Fight Gravity
A couple of weeks ago, I was walking past the copy room at the office when I noticed a calendar hanging on the wall. It's the 2008 edition of the "Seven Habits" series by Franklin Covey, and it was turned to the January page. There's a quotation in it that I thought was a great synthesis of my personal perspective on things:
"Principles always have natural consequences attached to them. There are positive consequences when we live in harmony with the principles. There are negative consequences when we ignore them. But because these principles apply to everyone, whether or not they are aware, this limitation is universal. And the more we know of correct principles, the greater is our personal freedom to act wisely.
By centering our lives on timeless, unchanging principles, we create a fundamental paradigm of effective living. It is the center that puts all other centers in perspective."
Those principles apply to everyone, whether or not they are aware of them, just like a physical phenomenon such as gravity. Before the word "gravity" was first used, did gravity exist? Surely. Fighting it was futile, and the results were swift and nondiscriminating, and gravity doesn't care that it's not "recognized". It just is, and the principles that the quote refers to "just are", and it's too bad that we're not more focused on figuring out precisely what they are.
"Principles always have natural consequences attached to them. There are positive consequences when we live in harmony with the principles. There are negative consequences when we ignore them. But because these principles apply to everyone, whether or not they are aware, this limitation is universal. And the more we know of correct principles, the greater is our personal freedom to act wisely.
By centering our lives on timeless, unchanging principles, we create a fundamental paradigm of effective living. It is the center that puts all other centers in perspective."
Those principles apply to everyone, whether or not they are aware of them, just like a physical phenomenon such as gravity. Before the word "gravity" was first used, did gravity exist? Surely. Fighting it was futile, and the results were swift and nondiscriminating, and gravity doesn't care that it's not "recognized". It just is, and the principles that the quote refers to "just are", and it's too bad that we're not more focused on figuring out precisely what they are.
Thursday, January 17, 2008
Would You Go?
In Seeing What's Next, Clayton Christensen and his fellow researchers use the principles they established in The Innovator's Dilemma and The Innovator's Solution to show readers how to predict radical and disruptive innovation. Then, they go on to apply those principles to some industries, one of which is the American Healthcare industry.
One trend they forecast is the continued increase in healthcare costs, and increased pressure on consumers to bear a greater share of those costs. Disruption typically occurs at the low-end of a given product's target market, (so-called "overserved consumers") and so predictably we should see the biggest changes in an industry emerge there. Also, when people are forced to go to central locations for limited resources, the theory says that this is another environment where disruptive innovation will occur. Recall how people used to have to buy computing time on mainframes and how they flocked to personal computers when given the chance - that's disruptive innovation. It changes the way people do things.
Evidence of this happening in healthcare can be seen in recent developments in "retail healthcare", such as the new MinuteClinic concept, where patients are promised quick access to certified professionals who can diagnose and treat the most common illnesses, such as colds and strep throat. The value propositions are speed and convenience to the consumer, and cost savings to the insurance carriers from fewer unnecessary trips to the family doctor.
Seeing this new business model makes me wonder... how long will it be before your primary care physician (PCP) becomes another specialist in the eyes of the insurance carriers? It's not hard to imagine insurers mandating that you visit your local healthcare retailer and get a referral to your PCP in order to ensure that you actually need to see him or her.
Frightening? Ask anyone you know in the healthcare industry "which insurance pays the worst, takes the longest to pay, and is the hardest to work with?" and hear the responses of "Medicaid" and "Medicare", which are the State and Federal government health insurance plans. Now just imagine that you have to use them in a nation with single-payer national health care.
Now that's frightening.
One trend they forecast is the continued increase in healthcare costs, and increased pressure on consumers to bear a greater share of those costs. Disruption typically occurs at the low-end of a given product's target market, (so-called "overserved consumers") and so predictably we should see the biggest changes in an industry emerge there. Also, when people are forced to go to central locations for limited resources, the theory says that this is another environment where disruptive innovation will occur. Recall how people used to have to buy computing time on mainframes and how they flocked to personal computers when given the chance - that's disruptive innovation. It changes the way people do things.
Evidence of this happening in healthcare can be seen in recent developments in "retail healthcare", such as the new MinuteClinic concept, where patients are promised quick access to certified professionals who can diagnose and treat the most common illnesses, such as colds and strep throat. The value propositions are speed and convenience to the consumer, and cost savings to the insurance carriers from fewer unnecessary trips to the family doctor.
Seeing this new business model makes me wonder... how long will it be before your primary care physician (PCP) becomes another specialist in the eyes of the insurance carriers? It's not hard to imagine insurers mandating that you visit your local healthcare retailer and get a referral to your PCP in order to ensure that you actually need to see him or her.
Frightening? Ask anyone you know in the healthcare industry "which insurance pays the worst, takes the longest to pay, and is the hardest to work with?" and hear the responses of "Medicaid" and "Medicare", which are the State and Federal government health insurance plans. Now just imagine that you have to use them in a nation with single-payer national health care.
Now that's frightening.
Monday, January 7, 2008
If You Eat Your Vegetables, You'll Grow Up Big And Strong!
I got my latest issue of Dr. Dobb's Journal, and it had two articles that mentioned a technology called LINQ (which stands for "language integrated query") that is new to Visual Studio 2008.
After reading about it, LINQ strikes me as another way to simplify programming. By abstracting the data access syntax required to get at data in disparate sources (such as relational databases and XML files) programmers gain some advantages: programmers have one language to learn to access data instead of several, and the data access code can be compiled and checked unlike the string-literal techniques used with ODBC or JDBC and Xpath or Xquery.
To some, that is a blessing, and to others, it's not such a blessing. I'm in the latter group. With good use of n-tier architecture principles, design patterns, and their implementations such as data access objects, adapters, and stored procedures, developers can write compiled code that is not brittle at the joints, and is easy to maintain. Also, learning more programming languages makes a programmer more valuable, versatile, and if necessary more marketable.
But as a computer scientist, I am not sure we need another way to divorce developers from good technology-agnostic principles and marry them to a specific implementation (in this case, .NET, Visual Studio, and LINQ). There already aren't a lot of .NET developers I know who are well-versed in good programming theory and principles. They're very good at Nike coding (a.k.a. "Just Do It") but when performance or scalability become important they just don't have the exposure to the foundational concepts, like patterns and n-tier, to consider the impacts of their choices on their systems. Or should I say, the impacts of the choices that were made for them by the Microsoft system libraries and .NET framework?
So, is using LINQ like getting dessert before eating your vegetables? I think so.
After reading about it, LINQ strikes me as another way to simplify programming. By abstracting the data access syntax required to get at data in disparate sources (such as relational databases and XML files) programmers gain some advantages: programmers have one language to learn to access data instead of several, and the data access code can be compiled and checked unlike the string-literal techniques used with ODBC or JDBC and Xpath or Xquery.
To some, that is a blessing, and to others, it's not such a blessing. I'm in the latter group. With good use of n-tier architecture principles, design patterns, and their implementations such as data access objects, adapters, and stored procedures, developers can write compiled code that is not brittle at the joints, and is easy to maintain. Also, learning more programming languages makes a programmer more valuable, versatile, and if necessary more marketable.
But as a computer scientist, I am not sure we need another way to divorce developers from good technology-agnostic principles and marry them to a specific implementation (in this case, .NET, Visual Studio, and LINQ). There already aren't a lot of .NET developers I know who are well-versed in good programming theory and principles. They're very good at Nike coding (a.k.a. "Just Do It") but when performance or scalability become important they just don't have the exposure to the foundational concepts, like patterns and n-tier, to consider the impacts of their choices on their systems. Or should I say, the impacts of the choices that were made for them by the Microsoft system libraries and .NET framework?
So, is using LINQ like getting dessert before eating your vegetables? I think so.
Thursday, January 3, 2008
American English Refresher
In A Nation Gone Blind: America in an Age of Simplification and Deceit by Eric Larsen, I saw a footnote that piqued my interest. That footnote referenced The Elements of Style by Strunk and White, which I haven't used since I was in high school, and even then I probably didn't use it as much as I should have.
I spent a few minutes looking up a copy, and I think that its style reminders would make me a better writer, if I learned and used them. The style reminders that seemed the most unlike the writing I most frequently come across in everyday life are:
1. Place Yourself in the Background.
[...]
4.Write with Nouns and Verbs.
[...]
7.Do Not Overstate.
8.Avoid the Use of Qualifiers.
[...]
14.Avoid Fancy Words.
[...]
17.Do Not Inject Opinion.
[...]
19. Do Not Take Shortcuts at the Cost of Clarity.
20. Avoid Foreign Languages.
21. Prefer the Standard to the Offbeat.
I know that when I was growing up, and to an extent as an adult, going against these style suggestions appeared to be the hallmark of good writing, and not evidence of bad writing. Maybe I should reconsider?
I spent a few minutes looking up a copy, and I think that its style reminders would make me a better writer, if I learned and used them. The style reminders that seemed the most unlike the writing I most frequently come across in everyday life are:
1. Place Yourself in the Background.
[...]
4.Write with Nouns and Verbs.
[...]
7.Do Not Overstate.
8.Avoid the Use of Qualifiers.
[...]
14.Avoid Fancy Words.
[...]
17.Do Not Inject Opinion.
[...]
19. Do Not Take Shortcuts at the Cost of Clarity.
20. Avoid Foreign Languages.
21. Prefer the Standard to the Offbeat.
I know that when I was growing up, and to an extent as an adult, going against these style suggestions appeared to be the hallmark of good writing, and not evidence of bad writing. Maybe I should reconsider?
Wednesday, January 2, 2008
Encouraging Creativity
I'm reading Big Think Strategy by Bernd Schmitt and the chapter I'm on now has a nice discussion about innovation (radical innovation to be specific) and creativity. Schmitt writes that he's often asked by his clients about how they can come up with the next big idea, think creatively, and escape the trap of "Small Think Strategy".
In finding a good answer to that question, Schmitt researched the current understanding on what mechanically goes on in the brain when a person is "thinking creatively". In a nutshell, when more than one area of the brain is stimulated simultaneously with the part of the brain that is considering the problem at hand, then creative thought is encouraged.
The theory suggests that when these multiple areas are active at the same time, new connections form, and these connections consciously manifest as new ideas and approaches to the problem. This is why people with a problem often come up with a solution at unexpected times, such as during a dream, while in the shower or listening to music.
Maybe all those crazy "creative toys" in the office during the dot.com boom weren't so crazy after all?
In finding a good answer to that question, Schmitt researched the current understanding on what mechanically goes on in the brain when a person is "thinking creatively". In a nutshell, when more than one area of the brain is stimulated simultaneously with the part of the brain that is considering the problem at hand, then creative thought is encouraged.
The theory suggests that when these multiple areas are active at the same time, new connections form, and these connections consciously manifest as new ideas and approaches to the problem. This is why people with a problem often come up with a solution at unexpected times, such as during a dream, while in the shower or listening to music.
Maybe all those crazy "creative toys" in the office during the dot.com boom weren't so crazy after all?
Tuesday, January 1, 2008
What Is Strategy?
I see and hear the word "strategy" or "strategic" being used a lot in my business, but I think people use it a bit more fast-and-loosely than it should be.
Why is that? I think that the word "strategy" or "strategic" has an air of grandeur about it. It lends weight to what you're saying or doing. People like to give the impression they know what they're talking about, or are important, or their work is inscrutable to the uninitiated, so when in doubt prepend "strategic" on what you're saying and it instantly becomes more significant.
I was having a conversation with some coworkers the other day and they said, among other things "we need to put together a strategic plan." I was curious. I asked "so what's changing in the industry that you'll be responding to with this strategy?" I got blank looks. I continued, saying "if you're not responding to some change you're anticipating or is coming for sure in the industry, then you're just coming up with a plan. It might be a one year or two year plan, but it's still just a plan because it's completely inward-looking." They agreed. They had been using the term "strategic" synonymously with "overarching". All that money I paid for the MBA must be paying off...
My strategy professor put it succinctly: "Strategy is about how you will win in the industry. It says how you plan either to differentiate or to be the cost leader. That's it."
It's a simple definition, and a powerful one. It lays out two important concepts:
1. Strategy must exist within some context; a forward-looking assessment of changes either coming or currently exerting themselves on your business and on the industry it operates in.
2. Strategy focuses on either differentiation, or on cost leadership. You either do it better in some way than the other companies in the industry, or you do it cheaper. Without knowledge of how other companies are doing things, or what their cost structure is, your strategy is speculative.
On that note, I hope you have a healthy, happy, and strategic New Year!
Why is that? I think that the word "strategy" or "strategic" has an air of grandeur about it. It lends weight to what you're saying or doing. People like to give the impression they know what they're talking about, or are important, or their work is inscrutable to the uninitiated, so when in doubt prepend "strategic" on what you're saying and it instantly becomes more significant.
I was having a conversation with some coworkers the other day and they said, among other things "we need to put together a strategic plan." I was curious. I asked "so what's changing in the industry that you'll be responding to with this strategy?" I got blank looks. I continued, saying "if you're not responding to some change you're anticipating or is coming for sure in the industry, then you're just coming up with a plan. It might be a one year or two year plan, but it's still just a plan because it's completely inward-looking." They agreed. They had been using the term "strategic" synonymously with "overarching". All that money I paid for the MBA must be paying off...
My strategy professor put it succinctly: "Strategy is about how you will win in the industry. It says how you plan either to differentiate or to be the cost leader. That's it."
It's a simple definition, and a powerful one. It lays out two important concepts:
1. Strategy must exist within some context; a forward-looking assessment of changes either coming or currently exerting themselves on your business and on the industry it operates in.
2. Strategy focuses on either differentiation, or on cost leadership. You either do it better in some way than the other companies in the industry, or you do it cheaper. Without knowledge of how other companies are doing things, or what their cost structure is, your strategy is speculative.
On that note, I hope you have a healthy, happy, and strategic New Year!
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