Time for bed
Unlike the funny pic posted yesterday which clearly has been ‘edited’ this one looks to be genuine.
Thanks to Dan G for forwarding it. Classic!
By Paul Handover
Year: 2009
Remarkable people update
Another quick look at Riverford Organics and a lesson for all.
Further to my post on Guy Watson of Riverford Organics, in the mini-series on remarkable people:
A couple of Saturdays ago (October 24), we had a great time out at Wash Farm, the home of Riverford Organics.
Our five year old son enjoys eating sweetcorn. Recently, having carried the weekly veg box from our doorstep to the 
kitchen calling “Riverford coming through!”, he was then delighted to report: “there are three sweetcorns”, there having been two in previous weeks!
On Saturday, he marched into a field of sweetcorn and, as if he had done it for years, went straight to a plant and, explaining what he was doing, tested the crop for size and ripeness and picked it by breaking it off like an expert. He then handed it to me and proceeded to pick many more of them. When I asked him how he knew what to do, all was revealed: “I saw it on the telly!”.
As luck would have it, I encountered Guy Watson at the event and it was great to shake his hand and offer a few words of congratulation on what he has done. Of course, he has no idea who I am!
Their customer service is great; and now they are embarking on more market research to understand better how their customers use their products! [See the relevant edition of their newsletter here!] [The subject of a Post on Market Research coming out soon. Ed.]
Although I am not an expert, I know enough to know that this is remarkable. To think about how customers are using the product, to measure it, to go into customers homes and find out what they are really doing with your products: this is at the pinnacle of good customer research!
No doubt there are others, but I have only ever heard of one other company who paid so much attention to customers in their homes. It was Intuit, the highly regarded US software vendor which, for decades, has consistently beaten Microsoft at providing accounting software. Their representatives would wait in a shop for a customer to buy their product and then request permission to travel with them to their home to record exactly what experience they had with installing and using it!
Final report from the day at Riverford: the event on Saturday was “Pumpkin Day”, its primary purpose being to buy (and have carved) your pumpkin for Hallowe’en. There was a competition to guess the weight of a (largish) pumpkin; I guessed by comparative lifting of the pumpkin and of said five-year-old son, and based my estimate on information from his mother about his most recent weight! Guess what? I have just heard that I won! So a case of (organic, of course) red wine is now expected to materialise alongside this weeks box of vegetables!
By John Lewis
P.S. The Riverford Blog is a good read
Is your dog this clever?
Dogs? Yes, we can certainly learn a lot from them.
We could start by learning to clean up our own mess better …..
By Chris Snuggs
[Wish our lot would learn this skill? 😉 Ed.]
U.S. Cash for Clunkers Program a Failure?
Is there evidence that this US programme has been a failure?
I was asked by a reader recently about my claim that the Cash for Clunkers program was a failure. He said, and I quote, “And your proof is…?” Here is my response:
My conclusion that the Cash for Clunkers program was a failure is based on three factors.
One, it did not have the intended consequences on the environment; for those folks who purchased a marginally more fuel efficient car now, rather than later, the added fuel efficiency was likely more than offset by the pollution generated by destroying the old car, and by the loss in additional fuel efficiency they would have enjoyed had they waited a year or two to replace their current vehicle with an even later, even more fuel efficient model year.
Two, the costs of the program, which are much greater than the $4,500 rebate, far exceed any benefits generated. Abrams and Parsons in the Economists’ Voice estimate that the costs of the program exceeded the benefits by about $2000 per car. A recent study by Edmunds.com put the cost of the program at $24,000 per car once the cars purchases that would have occurred during that period anyway are deducted (http://content.usatoday.com/communities/driveon/post/2009/10/620000657/1). I think the real cost is somewhere in-between, but closer to $24,000 than $2,000. 
The true costs of the program include but are not limited to the additional paperwork and private and public workers needed to administer the program, the interest costs to dealerships of financing the rebate program while awaiting the government checks (some less capitalized dealerships actually went out of business because of the program), the costs of destroying the old vehicles, and the cost of lives lost and injuries sustained in accidents in smaller, less safe but more fuel efficient cars, just to mention a few.
Last, this “injection” into the economy — which, in reality, is the blatant substitution of private consumption choices with public policy, and an affront to our economic freedom — costs the economy untold sums by putting off the inevitable failure of automotive companies that fail to produce cars the population values sufficiently to keep the auto companies in business without being propped up by the government.
Case in point: GM’s plunge of 45% and Chrysler’s fall of 43% in the months following the rebate program; Honda and Toyota also reported double-digit slides, while Kia and Hyundai had double-digit increases.
New car sales fell in September as the predicted post-“cash for clunkers” slump dragged the U.S. market down to its lowest levels in seven months.
I wish it weren’t so, but I’m afraid that good business is not the strong suit of our policymakers.
By Sherry Jarrell
Sherry responds to John
A Post published today by John Lewis raises the question of why not consumer protection for financial ‘products.
Sherry’s reply.
A great question, John: why do we not have a threshold level of safety for financial products, as we do with cars and toys?
Well, for one, if a financial product “fails,” the consequence is purely financial – it is not injury or death. A financial product simply represents a financial investment today in exchange for financial payoffs tomorrow.
The less certain those payoffs, the higher the minimum required return on that investment. If the returns were certified or regulated in some way, risk would be reduced, and the required return would also fall. Limiting risk exposure throws out the baby with the bath water: less risk means lower returns on the investment. Look at the real returns to U.S. Treasury Bills – they are almost zero!
There is a role for regulation in financial products and that is for disclosure of relevant information. When we invest in a financial product, we are putting our money at risk in exchange for future expected cash flows. We forecast those cash flows on the basis of material information about the firm, its products or services, and its management and strategy.
Even here there is a fine line between the right to know and proprietary information that enables a firm to invest its own funds in the hope of generating a large return in exchange for taking risks.
The Securities and Exchange Commission’s requirement for a 20-day window between the time a bidder makes a tender offer for a target and the time the target shareholders must decide whether to accept the offer or not is an example of a regulation that crosses the line, in my view.
In a misguided attempt to protect shareholders from fly-by-night tender offers, the SEC has created an environment where multiple competing bids can arise, driving down the return to the original bidder and limiting the incentives for firms to productively redeploy assets through tender offers.
By Sherry Jarrell
Zombie Stocks: Not for the faint of heart
Prof. Sherry Jarrell in the news
A news release by Wake Forest University has been picked up by at least one publication. It reads as follows:
Two weeks before Halloween, the Securities and Exchange Commission again warned investors against buying shares of bankrupt companies, but like those creatures in horror films that rise from the dead, so-called “zombie” stocks–shares of companies that failed during the financial crisis–are still on the march.
Take, for example, Washington Mutual and Lehman Brothers. At the end of last year, their stocks traded at 2 cents and 3 cents per share, respectively. With no future earnings in sight, shares of Washington Mutual recently traded around 20 cents, and Lehman Brothers shares have hovered around 15 cents–spectacular gains fueled by what many consider nothing more than gambling.
Critics have called on the SEC to halt the trading of such stocks to protect unsophisticated investors who might be lured into unwise trades. But Professor Sherry Jarrell, who teaches a graduate-level class on investments and portfolio management in the Wake Forest University Schools of Business, disagrees.
While Jarrell doesn’t think investing in zombie stocks is a sure-fire profitable strategy, she doesn’t consider it gambling either, because there is an expectation of gain. Jarrell also doesn’t believe those who are trading zombie stocks are ignorant or unsophisticated. Jarrell says:
To outlaw these stocks means that you’ve truncated an avenue for people to express their different risk preferences. If someone wants to go on that haunted trail, let them. It’s not like they’re taking advantage of people on the other side of the trade.
Washington Mutual and Lehman Brothers lost their standing to be listed on stock exchanges, so traders have to keep up with prices through a quotation service known as the Over the Counter Bulletin Board, which unsophisticated investors are unlikely to access. Other troubled companies, such as Fannie Mae, Freddie Mac and AIG, whose shares are widely considered to be zombie stocks, are still listed on major exchanges. The federal government’s own backing of those companies weakens any argument against allowing individuals to invest in them, if they dare.
One project Jarrell assigns her students is to identify a publicly traded stock they believe the market has significantly mispriced. By definition, she says, the exercise requires the same calculation made by traders of zombie stocks–reaching a different conclusion about a stock’s future cash flows and risks than that of the market.
Jarrell points out that all investments carry a degree of risk proportional to potential returns, and investors have varying tolerances for risk. Some hide from risk; others seek it out.
She recalls a study some years ago that found striking similarities in the blood chemistry of day traders on Wall Street and jet fighter pilots. “It turns out they need a certain amount of danger to feel normal,” Jarrell says. “They seek risk in order to feel comfortable.”
By Sherry Jarrell
Consumer ‘safety’ for financial products
Are we missing a lesson that has been applied for years?
I have resisted any temptation to comment on the economic situation on Learning from Dogs. The contributions from others are based on far more knowledge and understanding of the subject then I will ever have.
However, I feel obliged to ask humbly for some clarification about something that bothers me. Are we putting the cart before the horse? Are we ignoring the relationship between provider and consumer in finance?
The regulatory regime applied to the vast majority of products which are allowed to be sold to the public is such that 
there are probably more stringent safety standards for an electric toaster than for most, if not all, financial products!
Much of the talk of regulation and restraint, in the current climate, seems to relate to remuneration of people working for financial organisations. But, why does it matter what they receive? In other fields, success is rewarded and the shareholders, admittedly fairly indirectly, have some say on the policy in that area. Why should they not pay what they wish?
On the other hand (to coin an economic phrase!), the minimum standards of the products are set by regulators.
In other fields, if a supplier cannot demonstrate, to the satisfaction of the regulators, that its product meets specified safety standards, then that product is not allowed to be offered.
It is very simple! I am not referring to contracts, customer service, compensation and so on; I am referring to a threshold level of safety below which the product is not allowed to be sold or operated. Think: “cars”, “aeroplanes”, “electrical appliances”, “children’s toys”, and … well anything else!
To be even clearer, this is not about “perfect safety” which is, of course, not available at any price. This is not about blame. This is not about guarantees. It IS about inspection, testing, certification, regulation … oh and policing!
Can anyone explain why this approach cannot be applied to financial products? (Sherry attempts to here.)
By John Lewis
p.s. as chance would have it the image of the toaster at the head of this Post was taken from an article talking about a recall of the Viking Toaster – point made rather well, don’t you think?
Perkins and the Economy
Transcripts from our bug in the Ministry of Misinformation, Whitehall, London
Sir: Morning, Perkins. You look a bit perturbed this morning …
Perkins: Good morning, Sir …. well, it’s the economic news …
Oh come on Perkins … swings and roundabouts, economic cycles, what goes around comes around and all that.
Yes, but it seems we’re in the longest recession since records began.
Records, Perkins? Well, of course they’re there to be broken, and if anyone can do it, the Labour Government certainly can! Come on, cheer up – it’s just a spot of fiscal turbulence … in six months we’ll be wondering what all the fuss was about ….
Six months?
Well, nine months then … the PM has promised an end to the recession in 2010.
Some are saying that government promises about the economy aren’t worth the paper they’re written on …
Well, he only said it, Perkins. I don’t think he actually wrote it down as evidence, so to speak.
But he also said: “Britain is better placed than other European countries to weather the recession”, and now look at France and Germany! My old schoolmate Snuggs down in Southern Germany says there is no sign of a recession – boarded-up and charity shops are as rare as unicorns, BMWs, Mercedes and Audis whiz back and fro’ to Munich – not an old banger is to be seen, immaculate countryside …. the only black spot is farmers whingeing about the low price of milk, but then they’re always whingeing about something.
Perkins, I’ve told you before, that’s Germany … you can’t apply the same standards of comparison to Britain …. as for posh cars, well, they make them don’t they? They probably have a surplus and so are flogging them off cheap.
But what about the sinking pound, Sir? It’s now just hovering around parity with the euro – a year ago it was well above it. It’s very worrying …
Perkins …. I believe you’ve never studied economics, have you? that’s just the way it is. The German currency always goes up relative to the pound. I remember when I was at school it was 11DM to the pound.
But it’s not the German currency, Sir, it’s the euro.
Don’t be silly, Perkins. The euro is 90% the Deutschmark in reality. But I wouldn’t worry about the falling pound: it’s great for our exports. Besides, it hasn’t fallen relative to people in Britain. The pound in your pocket has maintained its value. Old Harold Wilson had a good understanding of relativity …. our whole approach is based on the principles of Einstein himself.
But won’t commodities rise, Sir? After all, we depend on imports for practically everything.
Aha! But that’s good for restraining consumption … we must consume less, Perkins, if we are to save the planet.
But the PM is banking on increased growth to save the economy, so how can we have increased growth and lower consumption, Sir? I don’t understand!
As I said before, Perkins, you’re not an economist – or a politician, come to that …..
But they’re saying that we are borrowing billions just to cover current expenditure rather than spending it on long-term infrastructure projects.
Ah … now you’re getting a bit technical, Perkins … you really must avoid jargon … after all, this is the Ministry of Misinformation ….
Jargon? What about “quantitative easing”? Isn’t that just jargon for “borrowing even more humungous amounts of money we haven’t got?”
Perkins – you’re getting confused; obviously we haven’t got it if we have to borrow it …. besides, “quantitative easing” is nothing like borrowing as you describe it.
Why not, Sir? I don’t understand.
It’s completely and utterly different, Perkins. It has a different name for a start.
Well, I can’t help being worried, Sir.
Enough of this nonsense, Perkins. The economy is booming … have you been to Harrods lately? Absolutely packed ….
Yes Sir, with Arabs and Russian oligarchs ….
Well, look on the bright side, Perkins, at least they’re spending their money over here rather than in their own countries ….. besides, where would the Premiership be without their money? …. come on, Perkins – let’s have a cup of tea and forget about all this economic nonsense … we have some misinformation to sort out …
Carts and horses!
“Don’t chase the money! Chase personal development and let the money chase you!”
This was the parting shot that came to my mind a couple of years ago, at the end of delivering a one week training course to a group of new graduates.
In general, my approach to training is less well suited to people at their stage than it is to people who are motivated by the need to get a job done. However, that is, of course, my “problem”.
Nevertheless, at the end of that particular course, I felt the need to pass on something from my years of supposed experience, however irrelevant that experience might seem to a group of young, newly minted, investment banking people.
Cause and effect
Although I do not remember the source of the quote, it seemed quite apt. I liked the way in which the opening exhortation seemed completely opposed to their motivation. That woke them up! Then the second part gave them a different entry point and restored the connection with that original motivation.
Perhaps the strongest aspect of the quote is, of course, that it attempts to clarify the direction of causation between money and personal development.
It seemed neat at the time, and it still does!
By John Lewis
Improved clarity
The authors of Learning from Dogs held a conference call last Sunday to review the progress of the Blog. As a result, we have added both a Vision and Purpose and amended the Welcome page.
We hope that it greatly improves your understanding of what motivates us to be authors.
Without you, the Reader, this Blog is pointless. Here are some more ways you may want to participate.
Finally, all of us at this end of the Blog really appreciate you stopping by to read what we have to say and the growing audience is all the thanks we need.
Learning from Dogs 