Business

Tesla should go Private through Norwegian Oil Reserve Fund

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Predictions are useful as they can be used to demonstrate that you have a better filter on reality than those who incorrectly predict outcomes. I don’t fully agree because being able to accurately predict how human beings will act, intermixed with the complex variables that shape outcomes, is not possible at a reliable rate.

This last month, I correctly predicted Trump winning the presidency. Doesn’t mean that’s what I wanted to happen of course; so where else can I make predictions that come true?

Tesla: Within the next 3 years, I believe that Tesla will try to go private with money from a Saudi fund or Norwegian 1 trillion fund oil reserve fund. I am not a total fan or detractor of Elon Musk’s Tesla. The companies share price will continue to be influenced on heuristics, earnings management and the state of the founder, who channels Steve Jobs. I do see his behaviour following the classic startup zeitgeist. I also believe that one option that Tesla should explore is doing what Michael Dell has done with his company.

Get out of the public markets! Why? The speculators are all short-term centred, the stock market is appropriately short-termist. If you want a solid explanation of short-selling read Business Adventures by John Brooks! But to explain it quickly, imagine you have an orange prices at $1, and I believe that the orange market is going to be saturated, driving the price down to $.50 in a weeks time! I ask you if I can borrow your orange (since you’re not going to use it) I then sell the orange at $1, I then have this orange profit, and boom, the orange market drops so I buy an orange for $.50 and give it back to you. I have made $.50 off of this interchangable orange. So there is a whole class of Tesla stock holders who let short-sellers borrow their stock and then sell it immediately hoping and even forcing the price down so that they can swap it back to the original owner. The incentives to short a highly startup-like stock are pretty obvious. Any negative news impacts Tesla’s stock price and Tesla, as a car company, does not produce enough cars. Compared to GM and Ford, Tesla is 1/10th the size.

I’m hoping my MBA will help validate the claim that financial statements helps investors decide on whether to buy or sell their stock. However, Tesla has many investors who operate on heuristics.

Meanwhile, the Norwegian oil reserve fund: which is nearing $1 trillion dollars USD. Or the Saudi funds that helped companies like the Four Season Hotels go private.

In terms of earnings management, Tesla is starting to show how much this critical skill set matters. In Finance classes at major universities, the narrative of earnings management both the “good” kind and the “abusive kind.” I have yet to actually take a finance course, but I have seen a strong cross over between politicians and CEOs in terms of positioning the best case for their re-election or their stock price respectively. I think that Tesla’s long-term vision is baked into the price of the stock and that price will fluctuate to the point where it makes more sense to go private. Only time will tell!

Business, Politics

Lessons from a Masters In Business Administration: What Is Strategy?

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What Is Strategy? Michael Porter’s five forces have shaped business strategy since his theory was published in 1980. Five Aspects of Business Strategy: 1) barriers to entry, 2) supplier powers; 3) customer power; 4) substitutes, 5) rivalry. An example of the application of this model would be a London kebab shop: barriers are relatively low, does not require highly skilled labour, and anyone can buy a kebab shop with a bank loan. That is why so many immigrants run kebab shops in London UK, for example. If you speak bad English, have little money, and are prepared to work hard, kebab shops are a great first entrepreneurial endeavor. The suppliers to a kebab shop are those who make meat rotator machines and the variable costs like the Halal meat. There is plenty of both, so prices are lowered, and there are options to change suppliers at any time. The bad news is customers, as there are 100s of kebab shops in central London. If they don’t like your kebabs, they can go to another. Competition is fierce, and stoked by low barriers to entry, weak suppliers, powerful customers, and substitutes in the market where the business is located. In addition to the five forces is “6) complements”: Complement are for example, PCs you could get the software, and printers. The better software, and computers make the PC more desirable. Nurturing complementary businesses can have a positive effect on your business.

Competitive Advantage: either you have a cost advantage where you can make things cheaper and sell them cheaper OR you differentiated your product somehow either by making it better than your rivals or by designing it differently to appeal to a different group of people. There two forms of differentiation were known as vertical or horizontal. Vertical is meant to be better or worse; horizontal means different. Vertically differentiators would mean for example that you have two cars, one with better brakes, and steering. That car is better therefore they are vertically differentiated. If you have identical cars but one has been painted pink they are horizontally differentiated. One nightmare for a business is to have no advantage, to be neither the cheapest produce nor clearly differentiated. Bill Gates has a picture of Henry Ford in his office because it reminds him that success breads complacency. Ford was over taken by General Motors overtime. When the iPad came out, Amazon introduced the kindle fire…

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Science

Concorde – Going Super Sonic Against Complacent Carriers & Manufacturers

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Super Sonic is the past. But if corrections are made, super sonic travel may be the future in some form or another. The truth is that a Super Sonic aircraft is able to deliver passengers more quickly but expensively. The Concorde had its problems but the airlines and the manufacturers decided to end the goal of satisfying an obvious desire amongst customers; to get where you’re going quickly and safely. I expect a new generation of high speed airliners to emerge if airlines demand that their manufacturers innovate to address with customers may want or don’t realize they want rather than towards seeking to maximize shareholder equity; a noble goal to be sure. If shareholders were in control of businesses, they would be. Leave the vision to the top brass.

Business

Farming Automation -> Substitution Threat to Grocery Chains

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The list of threats of substitutes in the grocery store industry will soon be adding automated farming greenhouses. Imagine growing your own vegetables, fruits and herbs in your backyard with precision and accuracy. FarmBot is an innovative company that gives its owner that exact ability, the ability to grow produce with ease. The implications of this kind of thinking are significant. Having a household that is not dependent on mass grocery produce may be a positive alternative to what we do now; taking advantage of the availability of the sun and the net benefits of being close to the source your food has been a trend in the developed world. Meanwhile, generally innovating in agriculture is immensely valuable. If you want to start a new company consider how much more important food is compared to so many tech centred startup ventures. As a species, we should embrace poly-crop farming in my opinion in some form or another. Of course, you’ll need to have a nice, warm climate (synthetic or nature) to grow produce in. Increasingly individuals are able to take further control of the world around them. And just as importantly plants do demand tender love and care; to be watered specifically at the unit level, which has until now taken a lot of patience to get exactly right. There is also a zombie apocalypse joke here somewhere, just waiting in the wings, if you’re not already impressed by FarmBot.

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