Follow up

Over a month passed since the time I have created this blog and life has written new lines to some of the stories present in my previous posts.

Business ethics

Last week's Wall Street Journal presented a couple of interesting stories, which add to the post about unethical behavior of business professionals (http://janbartczak.blogspot.com/2007/01/when-will-they-learn.html).

Siemens seems to be in a lot of trouble as bribery allegations might overlap with a German-Russian big-time telecommunications scandal, deepening the company's problems. The case is even more severe, as the issue is clearly not only unethical, but also unlawful behavior.

An example of handling a similar issue completely differently was given with KPMG and its CEO, who decided to admit to the organizations unlawful practices and tried to eliminate such behavior. These actions apparently saved the company, which faced a threat similar to the one that destroyed Arthur Andersen a couple of years ago.

Securities market

In the post “What does the market hold for the future?” (http://janbartczak.blogspot.com/2007/01/what-does-market-hold-for-future.html), I have discussed the possible effect of various factors on the stock market.

Some time followed since then and a couple of things are clearer now. The stock market is obviously affected by the fluctuations of oil prices, and moves in such industries as the Technology Sector (which particularly holds for NASDAQ).

Through this month the Dow Jones Industrial Average showed strength, as it climbed over 12,700 points, and set yet another record in the high 700’s. It is interesting to see now, how the major indices will react to such factors as lower automobile demand, changes in real estate prices and oil price fluctuations.

Re-energize

The world has been dependant on fossil fuels, especially oil, as a source of energy for many decades now. What is worse, a major part of the world’s oil supply is controlled by a cartel grouping mostly Middle Eastern states, which pursue their own interests regardless of the influence they have on other countries’ economies. The rest of the world has painfully felt that during the 1973 oil crisis. To illustrate the scale of the shock that developed economies suffered, let me use this example: before the crisis West Germany had virtually no unemployment, after the crisis the rate of unemployment jumped rapidly and never returned to the pre-crisis values (See: http://www.destatis.de/indicators/e/lrarb01ae.htm ). This is only one of the many examples has the crisis shocked developed economies.

Since then, not much has changed – the world has experienced a few more oil supply shocks, and in the recent years has struggled with high oil prices, which were the effect of a combination of things. The US is the biggest consumer of oil in the world, using it mainly for gasoline and heating. The dependence on OPEC’s oil has been seen increasingly painful by the American policy makers. President George W. Bush in this year’s State of the Union Address: “Extending hope and opportunity depends on a stable supply of energy that keeps America's economy running and America's environment clean. For too long our Nation has been dependent on foreign oil. And this dependence leaves us more vulnerable to hostile regimes, and to terrorists -- who could cause huge disruptions of oil shipments ... raise the price of oil ... and do great harm to our economy.” (Quoted after: http://online.wsj.com/article/SB116960205937185687-search.html?KEYWORDS=state+of+the+union&COLLECTION=wsjie/6month For comments on the Address see: http://online.wsj.com/article/SB116960576529585829-search.html?KEYWORDS=state+of+the+union&COLLECTION=wsjie/6month ).

The factors named above, as well as environmental concerns, brought up a discussion about alternative sources of energy. Unfortunately, for a long time they have been in efficient and economically unviable. The common view, which is also one that the author of this blog shares, is the following: economic effectiveness cannot be sacrificed simply because of environmental issues. This has made a large scale use of alternative energy sources a rather futuristic scenario.

Well, the future is right now. It actually seems that alternative fuel sources become cheaper and more efficient. High oil prices make it easier to achieve economic viability (For details see: http://online.wsj.com/article/SB117087922327101294.html?mod=mostpop ). This might mean that the day when energy is traded in a really free market and the oil cartel does not have a grip on the rest of the world can come very soon. Furthermore, alternative energy sources seem to be a good investment for the future which satisfies the need of many investors for a environmentally friendly policy. Hopefully in a couple of years we will be able to say “welcome to the future”.

Encore

Last week an interesting news piece hit the news, but did not make a significant impact. The story was about Michael Dell returning as a CEO for Dell Inc. The company, his “child” which grew to be one of the most successful computer hardware sellers in the USA, if not in the world is struggling now. Dell’s vision and skills are supposed to be the answer.

In my opinion, he might just succeed, but I do not find the question “will he make it or not?” the most interesting aspect of the story. For me it is about another founder coming back to the business he/she created and trying to make a turnaround.

Steve Jobs of Apple, Charles Schwab of Charles Schwab Corp. are just two of the examples of how a founder can make a difference when coming back. Actually, Jobs practically save the company, revitalized it and allowed to achieve new heights. After Bill Gates stepped of at Microsoft, what followed was a turbulent time for the software giant, with greater competition on the account of Linux and tons of anti-monopolistic law suits. This resulted in a drop in stock price after 2000 (See: http://mwprices.ft.com/custom/ft2-com/html-quotechartnews.asp?symb=msft&vsc_appId=ts&ftsite=FTCOM&searchtype=equity&searchOption=equity ), which in turn resulted in Mr. Gates running Microsoft actively again.

Can it be a start of a nation-wide trend? The Wall Street Journal informs there have been 65 such “encores” in USA biggest 1500 companies in the last dozen of years (More on this story: http://online.wsj.com/article/SB117063556472497775.html ). Of course, not every such return is a stunning success, but most of the time you only hear about those that are.

I feel there might be something to it – the rules: “no one knows this company better than the founder”, and “if you want to have something done right, do it yourself” could very well apply…