Exactly one week from today I will be home in the great USA! While I am so happy that I had this experience, and have loved my time in the beautiful UK, I am very excited to go home. It's funny how patriotic and homesick a little distance can make you...
If you read this blog ever, thanks for your support, it's been a fun project and I hope Duke continues it next year.
If you need any crumpets or etc. please place your orders this week - the plane leaves Sunday morning!
Ciao.
-Kate.
Monday, 9 March 2009
Thursday, 5 March 2009
Fascinating Factoids - Spain and Germany
Did you know...
After the fall of Franco in the 70s, Spain became a manufacturing powerhouse. Attracted by relatively cheaper labor on the continent, European manufacturers set up shop in droves and the economy grew at a healthy and promising clip... right up until 1989.
Date ring a bell? It's the year the Berlin wall fell and the soviet blocks opened up. Because of their proximity to their Western European neighbors and their decentralized form of communist rule, Eastern European countries had factories and managers galore waiting eagerly for foreign direct investment that would allow them to leap into the EU as fast as possible. No sooner did the doors open, but companies bailed on Spain for the greener/cheaper pastures of the Eastern European states and the Spanish economy was in shambles.
From that shock, the Spanish economy reformed itself from a production and manufacturing-based one to one that is known the world over for fancy banks, investments, and services. (Heard of a little guy called Santander?) How did they do it, and how did that happen? Apparently no one really knows yet and it's a topic of "hot" study...
Did you know:
In Germany after the war, the political economy was designed under the premise that German firms were considered part of society and are treated as a communal good in a way - the goal of the firm in Germany is NOT to serve the shareholders, it is to provide jobs for Germans, grow the German economy, and be a citizen of the country and an entity for the people. German shareholding is done by few large shareholders who are long-term minded and German capital markets are largely served by banks with exclusive relationships with firm customers who offer patient and long-term capital, removing firm's needs to seek quick gains or returns.
Workers sit on the boards of firms and are entered into a social contract with the firm called co-destiny. Employees in Germany really don't switch jobs, almost from the time they exit school, and firms pay for extensive training for skilled workers so that the contract is complete. Benefits, well-being, employment, all these things are the role of the firm. Wages are set at a central level by the industrial representatives, which shores up the no-poaching or job hopping climate that allows firms to invest in their employees.
It all sounds nice... until German firms start expanding overseas to escape the confines of the law because now they have US and other foreign PE and hedge fund investors putting unfamiliar pressures on them to restructure or grow.
It's also interesting to view the effect this system has on innovation. MBA studies would tell you that without the easy hire/fire laws, liberal capital markets that include venture capital money, and institutions like bankruptcy laws, you simply won't get highly innovative companies springing up in Germany. And, this is somewhat true... but you do get a lot of innovation, it's just of another kind.
Since R&D is an Asset in German accounting, not an expense as it is at home, companies invest a TON in internal R&D. Innovation within the firm comes from the employees themselves who have a direct incentive and obligation to see their company survive and grow. In fact, some of the largest IT companies in the world are German, think SAP for instance, which is a highly technical business but is built on relationship-driven sales and long-term partnerships with customers. The German model allows this to work.
Germany also focuses on niche, highly technical manufacturing - not commodity work which it simply couldn't compete on given the high costs of labor. So, it goes for sweet spot high price, high expense, niche markets and does very well. Scarily well for a bunch of socialists. Why this is a bad word in the US lexicon, I'll never understand because Germans are capitalists - very good and successful capitalists, they just practice a very different kind of capitalism from the US-Anglo version.
The point is though, it's their way and it works for them because they went all the way. The second they try to implement liberal market stuff, the system starts to weaken. You have to be either liberal market, or socialized market, you can't be in between or it doesn't work because the institutions can't be streamlined - well, so say the experts at LSE. And I'm inclined to agree.
After the fall of Franco in the 70s, Spain became a manufacturing powerhouse. Attracted by relatively cheaper labor on the continent, European manufacturers set up shop in droves and the economy grew at a healthy and promising clip... right up until 1989.
Date ring a bell? It's the year the Berlin wall fell and the soviet blocks opened up. Because of their proximity to their Western European neighbors and their decentralized form of communist rule, Eastern European countries had factories and managers galore waiting eagerly for foreign direct investment that would allow them to leap into the EU as fast as possible. No sooner did the doors open, but companies bailed on Spain for the greener/cheaper pastures of the Eastern European states and the Spanish economy was in shambles.
From that shock, the Spanish economy reformed itself from a production and manufacturing-based one to one that is known the world over for fancy banks, investments, and services. (Heard of a little guy called Santander?) How did they do it, and how did that happen? Apparently no one really knows yet and it's a topic of "hot" study...
Did you know:
In Germany after the war, the political economy was designed under the premise that German firms were considered part of society and are treated as a communal good in a way - the goal of the firm in Germany is NOT to serve the shareholders, it is to provide jobs for Germans, grow the German economy, and be a citizen of the country and an entity for the people. German shareholding is done by few large shareholders who are long-term minded and German capital markets are largely served by banks with exclusive relationships with firm customers who offer patient and long-term capital, removing firm's needs to seek quick gains or returns.
Workers sit on the boards of firms and are entered into a social contract with the firm called co-destiny. Employees in Germany really don't switch jobs, almost from the time they exit school, and firms pay for extensive training for skilled workers so that the contract is complete. Benefits, well-being, employment, all these things are the role of the firm. Wages are set at a central level by the industrial representatives, which shores up the no-poaching or job hopping climate that allows firms to invest in their employees.
It all sounds nice... until German firms start expanding overseas to escape the confines of the law because now they have US and other foreign PE and hedge fund investors putting unfamiliar pressures on them to restructure or grow.
It's also interesting to view the effect this system has on innovation. MBA studies would tell you that without the easy hire/fire laws, liberal capital markets that include venture capital money, and institutions like bankruptcy laws, you simply won't get highly innovative companies springing up in Germany. And, this is somewhat true... but you do get a lot of innovation, it's just of another kind.
Since R&D is an Asset in German accounting, not an expense as it is at home, companies invest a TON in internal R&D. Innovation within the firm comes from the employees themselves who have a direct incentive and obligation to see their company survive and grow. In fact, some of the largest IT companies in the world are German, think SAP for instance, which is a highly technical business but is built on relationship-driven sales and long-term partnerships with customers. The German model allows this to work.
Germany also focuses on niche, highly technical manufacturing - not commodity work which it simply couldn't compete on given the high costs of labor. So, it goes for sweet spot high price, high expense, niche markets and does very well. Scarily well for a bunch of socialists. Why this is a bad word in the US lexicon, I'll never understand because Germans are capitalists - very good and successful capitalists, they just practice a very different kind of capitalism from the US-Anglo version.
The point is though, it's their way and it works for them because they went all the way. The second they try to implement liberal market stuff, the system starts to weaken. You have to be either liberal market, or socialized market, you can't be in between or it doesn't work because the institutions can't be streamlined - well, so say the experts at LSE. And I'm inclined to agree.
Jobs, Layoffs and German Co-Destiny
For me, occupying thoughts in London on most days are "do I want to try the mature cheddar and pickles sandwich today?" or, "does this espresso come with the 10 pence student discount?" But I have been being a good little European student and have been reading the FT and the Economist diligently (esp. since my fellow students are young and pompous and I refuse to be showed up on current events.) As a result, I'm definitely paying attention to a few things that I find very interesting, and here is this week's installment of the news from Europe:
Germany last week announced that it would be subsidizing the wages of people in hurt industries directly so as to help their employers and thus the populace retain jobs. Some economists might say that this makes no sense, but perhaps it makes some (beyond the obvious political benefits) – this keeps people employed and not laid off by struggling employers, and keeps them off the dole. Furthermore, it does something for confidence and panic in the country which has to have positive effects and of course a working person is a healthier person than a despondent laid off one (and studies have proven this).
France announced that they would be doing the exact same thing.
Renault/Nissan which is a Japanese company that ate a French one and has a French CEO – was able to lay off workers in the UK last week (from the most productive car factory in Europe), but was unable to do so in France – France provided $ to keep them on, and has lay-off laws to protect workers. The CEO was quoted as saying, "It's just really hard to fire people in France." A fact that has stifled growth of manufacturing and innovative industries in the country for some time and has led to the stereotypes of unproductive French who unfortunately become the brunt of so many jokes the world over.
The UK is not considering paying car manufacturers to keep workers. Instead they are offering loans and aid to “green” industries as part of their bailout.
Critics say that laying off highly skilled workers (construction, auto etc.) and then rehiring them and re-training them all in a few years when the economy picks back up, makes no sense. If highly skilled workers know how to do things that are good and healthy for the UK's local industries, why should they be re-trained for something else, or worse yet incentivised to leave the UK to seek jobs overseas?
It's an interesting question from a political/economic lens of what's best for a country in the long-run beyond the knee-jerk reaction of "must save jobs! panic now!" In the US, my opinion is however, that our car companies and industrials are not all suitable to weather the storm and do need to be let go and that is the exercise foremost - what industries do we keep and why, and then how best do we preserve them through this downturn. God, I'm so glad I'm not a politician...
Germany last week announced that it would be subsidizing the wages of people in hurt industries directly so as to help their employers and thus the populace retain jobs. Some economists might say that this makes no sense, but perhaps it makes some (beyond the obvious political benefits) – this keeps people employed and not laid off by struggling employers, and keeps them off the dole. Furthermore, it does something for confidence and panic in the country which has to have positive effects and of course a working person is a healthier person than a despondent laid off one (and studies have proven this).
France announced that they would be doing the exact same thing.
Renault/Nissan which is a Japanese company that ate a French one and has a French CEO – was able to lay off workers in the UK last week (from the most productive car factory in Europe), but was unable to do so in France – France provided $ to keep them on, and has lay-off laws to protect workers. The CEO was quoted as saying, "It's just really hard to fire people in France." A fact that has stifled growth of manufacturing and innovative industries in the country for some time and has led to the stereotypes of unproductive French who unfortunately become the brunt of so many jokes the world over.
The UK is not considering paying car manufacturers to keep workers. Instead they are offering loans and aid to “green” industries as part of their bailout.
Critics say that laying off highly skilled workers (construction, auto etc.) and then rehiring them and re-training them all in a few years when the economy picks back up, makes no sense. If highly skilled workers know how to do things that are good and healthy for the UK's local industries, why should they be re-trained for something else, or worse yet incentivised to leave the UK to seek jobs overseas?
It's an interesting question from a political/economic lens of what's best for a country in the long-run beyond the knee-jerk reaction of "must save jobs! panic now!" In the US, my opinion is however, that our car companies and industrials are not all suitable to weather the storm and do need to be let go and that is the exercise foremost - what industries do we keep and why, and then how best do we preserve them through this downturn. God, I'm so glad I'm not a politician...
Tuesday, 3 March 2009
How Fancy Duke Is
Somewhat related to my abroad experience is Duke's new Global MBA strategic initiative which will create campuses in countries all over the world enabling students to physically study in those locations. Sounds so cool and while too late for me, will hopefully one day make some rising star MBAs very happy. Check out our fancy new commercial:
http://www.fuqua.duke.edu/wakeup/?utm_campaign=WakeUp_Brand_Worldwide_022309&utm_medium=email&utm_source=mba2&utm_content=dean
http://www.fuqua.duke.edu/wakeup/?utm_campaign=WakeUp_Brand_Worldwide_022309&utm_medium=email&utm_source=mba2&utm_content=dean
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