Wednesday, December 29, 2010

The unlikely villain turned hero

Painting with a broad brush is not always the right thing to do. In the United States, virtually anybody who's in the finance sector has been branded a villain. They of the billion dollar bailouts and the million dollar bonuses. Near the top of the pecking order of rogues, in the public mind, is AIG - the insurance company that had to be bailed out at the peak of the crisis. But consider what's happened to AIG in the last one year and you may change your mind.

AIG's stock has risen 97% in 2010 - the fourth best performer in the S&P index. AIG was a solid company brought down by the antics of one department. But that didn't detract from the soundness of the rest of its business. When confronted with the crisis, it had a number of valuable assets it could sell. Top of the pile was AIA, its Asian subsidiary, which was a jewel. It has disposed of other businesses as well. It brought in a new CEO - Bob Benmosche, a rather colourful personality, out of retirement. Lots of things have been done well.

The US government holds 92% of the company now thanks to its 182 billion bailout. But it can now start to look forward to exiting. If it could realise $30 per share it could break even as the Wall Street Journal says here. If it could sell at $45 it would make a profit of $20 bn. The share price now is $ 58. Of course the government couldn't unload the stock at this price - it would simply crash; but it increasingly looks likely that in a carefully managed divestment spread over time, the US taxpayer might actually make a profit. Bailout should not be a bad word anymore, if you make a profit, but alas in the intellectually challenged shrillness of US politics, such niceties are unlikely to be observed.

A rather interesting subplot is that of the CEO Bob Benmoshe. When appointed he called Congress, a bunch of crazies. Fortune voted him the most tone deaf CEO of 2009. He demanded a private jet and took a holiday weeks after being appointed. But then, just look at AIG's performance. As a shareholder, you have to be delighted. Sadly, he has been diagnosed with cancer recently and in undergoing chemotherapy, but hopes to oversee the government exit from AIG and turn a profit for the shareholder. Recently, he wistfully wondered if somebody would call him and congratulate him , but then he realised the Ayn Rand's famous quote of " Find your Thank Yous from within" was perhaps more appropriate.

Appearances and name tags are deceptive. Convenient buckets of heroes and villains are not always true in the real world. Reality is often far more messy and not reduceable into a pithy soundbite on Fox News or the New York Times. At the moment, AIG, and its Chief, deserve a tipping of the hat. Why is it that you aren't likely to find many Americans who would agree with that ?

Perhaps you should promote the poaching?

Seeing your star employees being poached by a rival always seems a bit of a bummer. And rightly so. We know from research, on industries as varied as semi-conductors and mutual funds, that they often take valuable knowledge with them and therefore enhance the performance of your rivals. And indeed, research on Silicon Valley law firms as well as on Dutch accounting firms*, shows that moving employees do not only enhance the survival chances of the poaching firms but also decrease the survival probability of the firms from which they were poached. This was especially true if the employees moved in groups and if it concerned geographically proximate rivals, because they are the ones you are especially in competition with.

Customers poaching

So far the bad news. But can there be any upside to your employees being recruited? Well, yes, actually there is definitely a potential upside to that as well – especially if your employees are being hired by your customers, as professors Deepak Somaya, Ian Williamson and Natalia Lorinkova discovered. They examined the movement of patent attorneys between 123 US law firms and 109 Fortune 500 companies from a variety of industries. And they found strong evidence that if a client company recruited a patent attorney from a law firm, subsequently that law firm would start to get significantly more business from that company.

Hence, your employees leaving for your clients can be a good thing; they bring you valuable business. McKinsey – always ranked as one of the most admired professional services firms in the field – understands and manages this process particularly well; once you have been employed by McKinsey you automatically become “an alumnus of The Firm” (rather than a deserter). The firm carefully nourishes its relationship with its “alumni”, because they subsequently bring a large chunk of their business through the door.

Competitors poaching

Recently, professors Rafael Corredoira from the University of Maryland and Lori Rosenkopf from the Wharton School even found a beneficial effect of your employees being poached by rival firms. Using patent analysis studying US semi-conductor firms, they examined the transfer of knowledge between pairs of firms: the firm from which the employee was poached and the poacher. Not surprisingly, there is quite a bit of evidence that when this happens, knowledge transfers to the poacher; it comes in the form of the brains of the newly arrived recruit. However, Rafael and Lori also discovered that, as a result of employees moving to another firm, the old employer also experienced knowledge inflow from the recruiting firm!

Now, how is that possible? Someone moves out and, as a consequence, you gain knowledge from the place they went to?! Well, that’s because in real life we often socialize with our colleagues. When they start to work for a different firm, this does not mean that we stop talking to them. And what do they talk about? Well, work… While having a drink or two, former colleagues exchange information about how things work at their new place, how they solved a particular problem over there, what technology they use, and how they have got their processes organized. And you benefit from that.

Perhaps slightly surprisingly, Rafael and Lori’s findings showed that this exchange of knowledge was especially pertinent if it concerned a geographically distant firm. They conjectured that that is because there are other means in which you can get knowledge from rival firms that are nearby; perhaps then it is likely that you already have friends there, go to the same local conferences anyway, or that your kids go to the same school. Whatever the reason, it seems evident that if your employees are at risk of being poached by a rival firm, make sure it is done by one far away: you don’t suffer the adverse consequences of a strengthened competitor as much, but you do get the knowledge inflow upside.

Hence, scrap the non-compete agreements and gardening leaves, but only on the condition that they are moving far away, and promise them a sumptuous dinner and lavish drinking budget if they come back to visit their old friends at the firm.

Sunday, December 26, 2010

Yuletide Cheer

Its that time of the year, when there is a nip in the air (or a vigorous bite if you happen to live in cold lands). The world is seeming an altogether nice place. Half the world's humanity is on holiday. Warm greetings and best wishes are flying around. Most of us are prepared to put the ills of the world behind us and, for a few days at least, look forward with hope and happiness to celebrate all that's good in this world. As indeed, it should be.

For those in the northern hemisphere, its deep winter. Both in Europe and in the United States, they are facing an especially cold start to winter. Many will have a white Christmas, even in places where snow is unusual. Its cold and blustery outside. Perhaps frigid. But inside, the family has got together. The fireplace is exuding warmth. There's food on the table. There's a drink to warm the insides. There's a feeling of joy and togetherness. The spirit of Christmas.

And there's the coming New Year. Millions more, who are not Christians, will join in ushering out the old and welcoming in the new year. A time to look forward with hope for better times to come. For most of us, the year past might have been a mixed one. Some joys, some sorrows, some victories, some disappointments. Although it might appear that the bad was more than the good, nature actually deals us a reasonably even hand. Its time to forget the not so good times, and cheer for that which is to come.

Its also the season for resolutions. Make them, many do, for the New Year. Most break them soon enough. But in the season of hope, its entirely appropriate that we try to aspire for something that we would like to be. For its only hope and cheer that can see us through the winter.

For some, hope would be a difficult emotion to drum up. Perhaps homeless, shivering in the cold. Perhaps nature dealt them a bad hand. But even then, I hope, and pray, that the cheer in the air will ease some of the pain and make it a little more sunny for them.

As you would have gathered, this isn't a post with a theme or a message or an opinion. Its just a revel in the mood that I can feel. And therefore an incoherent ramble. By Indian standards, which might laughable elsewhere, there is a nip in the air. Not all is well with the world, but there is the feeling of cheer and hope. Its a wonderful feeling. A moment to savour. A time to thank the Lord (or the stars if you prefer it that way), for safely negotiating the year gone by. And a prayer (or an exhortation) to stand by and see us through the year to come.

Pause for a moment. Sniff the air. Imbibe the cheer. Take a deep breath and feel the hope in the lungs. And then, resolutely, march on.

Xin nian kuai le !

Wednesday, December 22, 2010

FCC Moves to Halt Internet Service Provider Content Discrimination and Preferences

The Federal Communications Commission has moved to keep Internet service providers from limiting or unreasonably discriminating against content provided by competing services

The regulations are designed to keep telephone and cable companies that provide phone services from using their Internet services to limit use of Skype and other online telephone services. It is also intended to halt them from making content provided by audio and video service providers they do not own less desirable by limiting downloads from firms such as Netflix or Hulu or providing faster service only for their own content.

The rules are designed to maintain a level competitive position on the Internet and to restrict the abilities of companies that dominate access to the Internet from using oligopolistic control of the service points to harm content competitors.

The regulations require that services allow their customers equal access to all online content and services, but allow the services some flexibility to management network congestion and spam as long as the rules are clear and not anti-competitive.

The rules apply to fixed line services, but do not apply equally to wireless telephony which is becoming the primary means of Internet access though smart phones and electronic tablets and e-reader. Mobile phone providers are permitted to provide preferential access to their services or selected partners, but the rules forbid mobile providers from blocking access to competing sites and services. Mobile services are given more leeway to manage their networks because capacity is more limited than on the Internet.

The regulations are an important step in ensuring that major service providers such as Comcast and Verizon are not allowed to use their dominance in service provision to harm other companies and the FCC should be applauded for its efforts. Such companies have in the past shown their willingness to take advantage of their monopoloy power and are not widely noted for their consumer friendliness.

Major service providers and Republicans are vowing to fight the move, arguing that the FCC does not have the authority to issue such regulations. If the courts side with them on the issue, Congress should explicitly give it the authority or empower the Federal Trade Commission to ensure competivieneess online.

Does the stock market appreciate management consultants?

Management consultancy has boomed over the past decades. I recently saw a statistic which showed that in 1980 global revenues in the consultancy business equalled $3 billion. By 2005, it was more than $150 billion.

But what does it say about you, as a company and management team, when you are hiring a management consultant to help you out, with your strategy or organizational structure? On the one hand it is a good thing, right; you are not afraid to ask for help, and management consultants can bring in valuable outside knowledge, ideas, and experience. On the other hand, it could be interpreted as a bit of an admission of defeat… “we’re not able to figure it out ourselves”, “we have run out of ideas and options”, “we’re in seriously trouble; we need help” or something along those lines. Plus, these pin-striped guys do not exactly come cheap.

Whatever way you put it, it is some sort of a signal – either openness to outside ideas or a signal of brewing trouble. And signals are what the stock market is always on the lookout for, like a vulture spotting the slightest of limps in a wounded animal or, perhaps more kindly, some green shoots to announce the arrival of spring. So, it is an interesting question: does the stock market usually respond negatively or positively to a firm hiring a management consultant?

Professors Don Bergh from the University of Denver and Patrick Gibbons from University College Dublin set out to examine exactly this question. They collected information on 116 listed firms that publicly announced hiring a management consultancy, and statistically analyzed whether such an announcement increased or decreased the firm’s share price. And the answer was clear: share price increased with an average of 1.4% by the hiring of such an advisory firm. Now that’s value for money for you; the pin-striped guys haven’t even done anything yet and your company has already increased in worth.

But did everybody experience this uplifting effect? Not really: Don and Patrick also found that this entire effect could be attributed to well-performing firms; firms that already were healthy and profitable before bringing in the advisor saw quite an upsurge in their share price – apparently the market thinks that the combined forces will be able to make the company grow even faster. However, underperforming firms – firms with a more dismal financial track record – did not benefit at all from hiring a consultant. As a matter of fact, the stock market’s reaction would even turn negative for the real sub-par performers. Apparently, in that case it is interpreted as a sign that the company is in even more dire straits than originally assumed.

But might this not be dependent on who you hire, thou might wonder? Surely McKinsey, BCG, Bain or Booz Allen must be viewed differently by the market than some second-tier cheap-suit shop? Well, ehm… no. The stock market’s reaction was exactly the same no matter who the firm hired; whether it was McKinsey, some local chaps, or one of the big accounting firms doing a bit consultancy on the side; the market did not care. Apparently, it doesn’t matter whose help you ask, but it sure matters whether you ask for any at all.

Sunday, December 19, 2010

Au revoir Phil

How do you say farewell to a man like Phil, on his retirement ? You just can't. Period.

How do you even begin to say farewell to somebody who has spent 42 years in the company. No that's not a typo. The number is right. FORTY TWO years of sterling service to the company. He has seen it all - he's seen the company's many victories and some setbacks. He has seen people come and go. He's seen history being made ; well, he made much of the history.

Phil's an Australian and typifies everything that's great about that country. Sporty, fun loving, thoroughly professional, amazingly warm in a non sentimental way and above all, a wonderful human being. I bumped into him on a lovely barmy day in Sydney in 1994 ; an instant friendship grew that carries on to this day and will undoubtedly carry on for a long time more.

I could go on and on about his professionalism. He's the only person I have ever known who drove an initiative that was right for the company, even if it meant his job was going. He's amongst the rare breed of men who's untainted by even the faintest whiff of corporate politics. Scrupulously fair, unfailingly honest, brilliant at execution, but rarely bothered about acclaim - seeing Phil renews your faith that such people still exist.

But even more than his professionalism is his ability to build fabulous relationships with people across the world. Across nations, across cultures, across geographies. I've seen him in tough negotiations out of which would emerge friendship , not bitterness. He virtually redefined the concept of win win in a business relationship - in every deal I have known him to do, both sides won. Now how many people in the world can lay claim to that.

As he became a senior statesman in the company; his energy actually grew, not diminished. I've seen many brilliant people become cynical and static as they age in a company. Not Phil. He actually became younger. He became even more energetic, if that was possible . Every youngster was treated as a friend and equal ; not an ounce of condescension. He was still at the forefront of company dos even as his retirement was looming.

He has a love affair with India. He's been here many times and has hosted countless Indians in Sydney. He's taken us to innumerable restaurants for many a warm evening. He's taken us to the Sydney Cricket Ground to see Indians play. When all didn't go well for us in business, he stood by us like a rock. He's guided and coached many many of us during times of trouble. He showed us how to imbibe the wonderful Australian spirit of winning fairly. Phil's an Indophile in the true sense of the word. In fact, one of his granddaughters is actually named India.

Thank you Phil for everything that you have done, for what you are and for the incredible relationships that you built with so many of us. You leave a wide gaping hole in the company as you retire. I know that in your typical way, you would say somebody else will pick it up and do an even better job and that the business would go on. But the place won't be the same without you Phil - not by a long chance. And many will miss your presence deeply. It so typifies you that you would be missed not only inside the company, but by every outside organisation you have dealt with.

Many readers of this blog know Phil personally and I invite you to record your thoughts in the comments section.

Au Revoir Phil. Thank you for the friendship and wish you much happiness in the years to come.

Phillip L Cox retires this week after 42 years of sterling service to Unilever round the world.

Friday, December 17, 2010

The stock market generally hates acquisitions, but here is an exception to the rule

In about 70 percent of the cases, the stock market responds negatively to the announcement of an acquisition. Put differently, despite their popularity, the average take-over destroys value for the acquiring firm. There are literally hundreds of good academic studies that consistently show that effect. For long, it was actually quite impossible to find any category of acquisitions that defied this rule and made some money, but lately a few studies have started to emerge that identify types of acquisitions that are seen in a more positive light by the ever elusive stock market.

One such sub-sub-subcategory of acquisitions that do appear to make at least a little bit of money are international acquisitions that were preceded by an alliance between the merging firms, especially if it was a strong form of an alliance, i.e. an R&D or Marketing alliance or prior buyer-supplier relationship (rather than a mere equity stake or licensing agreement). I know, it sounds like a very very specific category but I am already glad we have at least found one.

Although such alliances-turned-acquisitions are pretty rare – as evidenced by research by professor John Hagedoorn from Maastricht University – there are examples of firms doing it that way consistently: Cisco is well-known for turning dozens of small equity alliances into full-fledged take-overs and also Heineken has been using this incremental approach over the years with much success, consistently first cooperating with local breweries before fully acquiring them.

And in a way I find it understandable why, although rare, this type of acquisitions has a pretty decent track record. Acquisitions are just very hard to do. They usually are fraught with information asymmetries; basically most firms don’t have a clue what they’re buying. And due diligence is not going to solve that problem; acquisition integration is often hampered by cultural differences, incompatible systems and plain mistrust – something you don’t just look up in the company’s books beforehand. Hence, the troubles are hard to avoid.

But a preceding alliance might actually do that trick for you. Having lived through a lengthy alliance before the deal (“a lat relation before moving in together”) will have reduced these information asymmetries and unfamiliarities while, crucially, in the process, may well have bred some much needed trust. Because trust is definitely what you require abundantly when merging households (although precisely then, it often is in short supply…).

Professors Aks Zaheer, Exequiel Hernandez and Sanjay Banerjee from the University of Minnesota examined such alliances-turned-acquisitions and assessed how the stock market responded to their announcements. Let’s say it was a weak “yes”: unlike the average take-over, the stock market had a weak but positive appreciation of these types of deals. Where the stock market usually responds negatively to an acquisition, they found that if the take-over was preceded by an alliance between the firms, the share price of the acquiring firm increased after the take-over announcement.

This results was really only true though (i.e. “statistically significant”) if it concerned an international acquisition. And in a way I find that understandable, because the issues of information asymmetry, cultural differences, and mistrust are clearly aggravated in the case of a cross-cultural merger. Hence, in these cases, a prior alliance proves particularly helpful.

So, see, there is a glimmer of hope after all, for the track record of M&A. All it needs is a bit of patience and fidgeting around before engaging in the real thing.

Monday, December 13, 2010

Acquisitions – finally something to cheer about…?

Decades of research scarily consistently shows that most acquisitions destroy value, and only cost the acquirer money. There is really no denying it – all “ifs” and “buts” have been raised, examined and rebutted – about 70 percent of acquisitions fail. That is because acquirers are usually inclined to overpay (under pressure from bankers, the press and their own adrenaline; a take-over premium of 60-80 percent is really nothing unusual) and because managers systematically overestimate their potential for value creation; integration is often much harder to pull off than one thinks and “synergies” carry you only so far. So far the (familiar) bad news.

Slightly to my surprise though – although not unwelcome – over the past years a few studies have emerged that managed to identify categories of acquisitions which on average do create surplus value. And the first category identified is actually quite a sizeable one: the acquisition of private firms. Pretty much all of the research on M&A is conducted on public firms; that is, firms listed on the stock market. And that is understandable because we simply have much more information on them; because they’re public firms, they more consistently gather and report data and, of course, share price data is available. Hence, we can examine them better.

Professors Laurence Capron from INSEAD and Jung-Chin Shen from York University managed to obtain data on a large number of private deals and, guess what, in contrast to the public deals they examined, these did create some value! Where the take-over of a public target made the share price of the average acquirer fall by about 1 percent; the acquisition of a private target raised it by an average of 4 percent. That may not seem overly impressive to you but it’s really quite a bit of peanuts if you calculate its monetary equivalent – certainly in comparison to the abysmal take-over track record of public deals.

But how come these private take-overs do appear to create some value? Well, that’s a bit of speculation, but Laurence and Jung-Chin had an informed suspicion: information asymmetry. Because, by definition, information about private firms is usually not publicly available, there would also be much fewer buyers aware of the juicy take-over target, and that it was possibly available at a bargain. Consequently, there were fewer bidders and more opportunity for value creation for the eventual acquirer.

Consequently, private deals usually do better than public ones. They might be a bit murkier, hidden and not as glamorous, but hey, they actually make you some dosh!

Saturday, December 11, 2010

Climb every mountain

If you are from the generation that grew up with The Sound of Music, you may recall this song - Climb every mountain. In that classic musical, it wasn't the most melodious of pieces, but it made up with some depth of meaning. Each one of us climb our personal mountains and this post is a rambling muse into how all achievements, big or small, are remarkable, amazing and, in many ways, the purpose of life.

Any one of us who has watched a baby take her first step can easily marvel at that achievement. For the baby, that step is like climbing Mt Everest. The act, by itself, is simple and one that the baby won't give a second thought to in the years to come. But at that moment, its a priceless achievement.

Big achievers reach stardom. They get much fame, but alas not always, some happiness. But, each and every one of us, achieve many victories during the course of the years. Small it may seem to the outside world, but giant it is in our own hearts. Every personal milestone, we cross is a moment to savour, to dwell on the wonder of life and take heart. Far too often, we fail to celebrate ourselves and recognise the immensity of what we had done.

Corporate organisations are notorious in putting down achievement on the mistaken premise that you must always set the bar higher and be in a perpetual state of disappointment. Every deadline met, every target achieved, every move made, is a moment for quiet satisfaction. Its amazing how the overwhelming feeling of every corporate citizen is one of anger, disappointment, grouse, and all things negative and rarely one of accomplishment, which should often rightfully be the case. Witness any water cooler gossip and you'll know what I mean.

Its not only the biggest winner that counts, Every winner, no matter however small the win , ought to justifiably take pride. We need to inject more of the sense of achievement, fulfillment, and victories into our lives. To counterbalance the despair, the heartache and the defeats that often tend to crowd out everything else.

Take sport. Ask anybody who the heroes of the Beijing Olympics were and 9 times out of 10 the answer would be Michael Phelps or Usain Bolt. Rightfully so. But to me Natalie du Toit and Natalia Partyka were equal heroines. They won nothing. But Natalie made it to the Olympics swimming competition despite having lost a leg in an accident and Natalia played table tennis for her country despite being born without a right hand. They made it to the Olympics on sheer merit; no allowance was given for their disabilities. What an amazing personal accomplishment.

I'll leave you with a sporting scene to savour at the end of this chaotic, jumbled up, post. It wasn't the Olympics or World Championships or anything like that. Its was a middling event of questionable global relevance. The best of the business stayed away from it. But four girls from humble origins performed way out of their skin and achieved an amazing result. Way beyond expectations. That's achievement to me. Turn up the volume, sit back and watch this; and I guarantee you goosebumps.

Monday, December 6, 2010

The looks of a leader

Attractive people are generally seen as more competent and fit for their job. For example, experiments using headshot photographs of people mixed with random CVs generally show that people rated as physically more attractive also receive higher ratings in terms of “job competence”. Men deemed to be handsome are more likely to be regarded good business leaders. Yet, we know that, at the same time, for example intelligence and physical attractiveness don’t correlate (positively or negatively!). Hence, it is purely a physical preference; and nothing else.

The most striking example and evidence of this I found was not in an experiment on business leaders but from an experiment on political leaders – although I am sure the situation won’t be much different for business leaders.

Two researchers from the faculty of business and economics at the University of Lausanne - John Antonakis and Olaf Dalgas – ran an experiment in which they gave 684 people in Switzerland photographs – and nothing else – of the pairs of faces (the winner and runner-up) from the run-off stages of the 2002 French parliamentary election. These Swiss people would never have seen and did not know anything about these sets of two candidates. Subsequently they asked them “who do you think will win this election?” In 72 percent of the cases, having seen only the two photographs, people predicted the results of the elections correctly… That’s probably a lot better than most political analysts.

Then they got a little mischievous; they gave the photographs to 681 children and told them “we are going to play boat; who do you want as captain of our ship?” In 71 percent of the cases, the children’s’ choice correctly predicted the winner of the local French parliamentary elections.

We pretend – mostly to ourselves – when selecting a job market candidate, filling out a ballot, or choosing a leader, that we carefully weigh the pros and cons, assess someone’s experience and competence, and make a well-informed rational choice. Yet, in reality, at the end of the day, we’re all just playing boat.

Sunday, December 5, 2010

All that glitters is gold

They say all that glitters is not gold. But today, that might be a slightly misplaced sentiment. Gold is glittering so much that everything seems to pale into significance. I mean the price of gold. If you haven't noticed, it has skyrocketed. And the cause of it is coming from an unlikely direction.

Gold hit an all time high price of $1424 a troy ounce in Nov. It seems to be zooming northward. I haven't done the math, (after all this is a Sunday post !), but gold might have performed as well as equities as an investment vehicle in the recent past. That's a little funny given the significant difference in risk profiles.

Cut, to a completely different angle. One of the fundamental cultural differences between Indians and Chinese comes in the area of addiction to the yellow metal. Indians simply love gold and can't resist hoarding it. Gold jewelery, that is. It is passed from generation to generation; safely stored in bank lockers. They are taken out only for weddings, when Rajalakshmis try to outdo each other in the amount of yellow they display. Regular readers will remember that the aforesaid lady is in a regular battle with the weigh scale. But for once, she doesn't mind adding substantially to it, by decking herself from head to toe (literally) in gold.

Madame Wang has different tastes. She simply doesn't like gold at all. She won't be caught dead wearing yellow; convincing proof that the nomenclature of the yellow race is a misnomer.She has a fancy for diamonds; especially those paid for by the male species, but that's another story.

End result. China used to consume some 200 tonnes. Indians gobble up some 600 tonnes. No contest.

No longer so. Chinese imports surged five fold in 2010. Consumption stands now at some 450 tonnes. The unthinkable may happen - China may overtake India as the largest consumer of gold.

What on earth is happening ?? Has a cataclysmic change happen in the gemological tastes of Madame Wang. Yes; but not what you might think. She still doesn't like to wear yellow. But she has money flowing through her ears. She doesn't know what to do with it. What can she do ? She gave it to the Americans until they can take no more. She started giving it to even the Greeks, but there are far less Marias than there are Wangs. Who else to give it to ?? So she's now started to buy gold instead. Not jewelery, but just plain bullion. stocking the stuff.

So here's a tip to Rajalakshmi. Start selling all that's in the bank locker bit by bit to Madam Wang. In a trickle. Empty it over the next two years. You'll make a fortune. And walk lightly into the next wedding !!!

PS. Yes , I know its a Sunday, but .............

Thursday, December 2, 2010

Content Farms and the Exploitation of Information

A growing number of firms are aggressively pursuing the market for information by providing material that answers online searches and employing strategies so their material appears high in search results.

These enterprises are providing high quantity, low quality material on topics designed to produce many search hits and driven by the desire to make money from advertising received as high traffic sites. Some are proving quite successful.

Demand Media, for example, uses about 13,000 freelance writers to produce about 4000 articles a day for which it gains about 95 million unique visitors with more than 620 million page views monthly. Its site alone gets about 50 million users., Yahoo and AOL are also engaging in the market.

When you make a search and are taken to,, or hundreds of other sites providing such information to the public, you encounter this mass produced content. The business strategy is working and many of the sites are among the top 25 sites in the U.S.

These producers and a whole range of similar organizations are producing material in content farms that rely on freelancers who are paid as little as $1 an article or get no payment except for number of page views for their specific work. It is a throwback to the penny-a-word days of journalism in the 19th century. The firms are increasingly seeking video producers, photographers, and graphic artists to provide similar material at similar levels of compensation.

Even established news organizations and other enterprises are starting to use the syndicated material produced by such content farms. Organizations such as Hearst publications and National Football League are relying on them for some content that appears on their sites, for example.

The implications of these developments on the quality of Internet information and the prospects for professional writers are clear and hardly encouraging.