Outsourcing

What comes to mind when outsourcing is mentioned? The top three things are (1) labor, (2) cost savings, and (3) a different (usually 3rd world) country.

Only 1 out of 3 assumptions though is actually a good reason for outsourcing.  If you guessed at cost savings you are already ahead of the game. The first assumption is valid only upto the point that labor is an area where a firm needs to save money. For example, call centers are a good place to save money. The problem with going international is that now additional laws have to be followed, and regional sensitivity to culture and resources have to be maintained. Also by going to this country, if there is a problem getting the goods back or all the laborers go on strike, then that part of the process comes to a halt.

So what is outsourcing? it is simply a firm or any entity performing an activity with someone else without having to do it themselves (and of course paying them for it). Any firm or entity would do this because they figure they can get more value from doing with someone else than themselves. Much time is spent researching where to outsource and which part of the firm to outsource so it is not just a matter of outsourcing within the country but how much value can the firm get from doing this activity externally than internally.

The Markets and Monopoly

An interesting NPR article about how the current collapse of the market can be related to the game of Monopoly.

 

http://www.npr.org/templates/story/story.php?storyId=129021829&sc=17&f=1003

iGoogle

I was recently asked what a good way to have information at a glance would be. I asked this person what service they used (as a matter of how to help them with a personalized answer, not that it is better or worse than anyone else). This person replied that they have a gmail account and that is all they use. I replied that Google offers a plethora of services that allow for this. For example, Google has a page called iGoogle. This page can be setup with widgets (this is sort of where the widgets on the Android platform originated). All sorts of widgets can be added (i.e. mail, news, feeds, weather, etc.). This person then proceeded to ask if I use this service. I do as it helps to consolidate where I need to go for the various sites I go to. I have my page setup for news, feeds, calendar, and the How-To Geek. I have it setup for efficiency on what I look at regularly. Yahoo and Microsoft offer similar services which have different layouts, but can offer the same thing.

 

So you may ask what this has to do with finance. Shouldn’t this be on your tech review blog? Not this time because this has to do with efficiency and productivity, a core part of any firm. Any group of services can be made efficient once a common thread is found. Productivity basically takes this efficiency and uses it to the firms goal(s). Why should I do this in my personal life? In short, anything I read or learn about can be put to good use if the general theme behind it is understood. If I read a news story about how the economy is doing bad, it can help understand why someone is having trouble paying me. Or if I read a story on why Microsoft is having trouble in the tablet PC market where Apple is currently succeeding, I would look at the circumstances of both and realize that Apple is going after the consumer market, where Microsoft is going more for a broad business environment, though they can apply their strategy to the consumer market since they are established there as well.

In short, it is important to know what your firm can an cannot do, where it is established, and how it can ensure competitiveness through efficiency and productivity.

Incepted

Last night, I finally was able to see Inception. I already wanted to see it but after hearing all of the hype, I decided to check it out for myself. I will not review it here and try not to spoil it but I will say this about the movie. It seems like it can relate very well to extreme circumstances in this day in age. I talk, of course, about the financial meltdown. When a business is made in any form that is difficult for more than one person to follow, the end result will be very devastating. In the movie, the main character is the only who has performed an Inception while the others remain very skeptical and hesitant. Much like any cause of the financial meltdown (I will not specify as any particular part can be made worse the the others), few people actually understood what was sold to the masses.

 

So why, you ask, do I related these two. Only because, like Ariadne, understanding comes not from rushing into something thinking one can handle it but from taking a step back and bringing the idea to the forefront. The other example is when the Professor tells Cobb that he never taught him how to be a thief. Much like business school, acting based on facts is of utmost importance than actually making money or how costs are cut.

 

At this point, you’re saying, whoa you got all philosophical on me for a second. I say no. Think for a second about the number of times anyone has wanted to go for the next big score only to have it blow up in their face or the times anyone has said “You get what you pay for.” Responsibility will get what you want, like the movie, but the rewards will be that much more than was expected.

To Recover or Not To Recover

The jobs report was recently released and the U.S. is not doing quite as well as we had hoped. The numbers only looked good because census takers were recently employed but were also more recently let go. This basically left us in the same employment situation as before, but time does not stop for the census. People who have given up looking for work actually caused the numbers to change as well. The main flaw in our system for checking unemployment (which causes a small controversy every few years) is that it only counts those people actively looking for jobs and are unemployed. It does not count people who are unemployed and not looking for work and those who are employed and looking for another job.

Some have asked, well why not just add these figures into the unemployment figure. This is a great idea more in theory than in practice. First off, counting these people takes time. By the time anyone can clearly figure out who has or hasn’t found a job for a particular period, the data would irrelevant as the person could have found a job (and/or started looking for another job – temporary work is still an issue). Second, keeping track of changing employment data for much of America consumes a lot of resources. The budget for this is not quite this big, and not many people would find this a good allocation of resources.

So what to make of this? The nation’s employment figures are too high for many people to like but until factors like consumer spending, and bank lending start flowing a little more smoothly (day-to-day changes occur regardless of how good or bad the economy is), it will be daunting to get data that is accurate and (I hesitate to say) makes us feel good enough to think the economy has recovered.

EuroZone

I was recently asked what exactly is the EuroZone. Why not just say Europe or any specific nation or nations the topic covers? I then was intrigued as all I could explain about the EuroZone was that it relates only to those countries who use the Euro as their currency.

This definition though is rather narrow or broad depending on your view of things (a la glass half full, half empty, or too much glass). The EuroZone includes those countries in that use the Euro has their sole currency. Such countries that have done this are Austria, Belgium, France, and Germany, among others.

In order to enter the EuroZone, a country must first adopt the Euro alongside its own currency and is monitored by the European Exchange Rate Mechanism. The Euro is monitored and regulated broadly by the European Central Bank. The European Central Bank can loosely be related to the United States Treasury (but as with many international relationships, the laws and regulations vary by region). Interest Rates and Inflation are paramount as the recent financial crisis has been argued as proof of the lack of regulation or oversight though others argue that how regulations are measured and implemented is key.

 

Here are a couple of articles with more information on the EuroZone and the European Central Bank:

http://en.wikipedia.org/wiki/Eurozone

http://en.wikipedia.org/wiki/European_Central_Bank

Cap and Trade (aka Emissions Trading)

By definition, this is an administrative means for the government to provide incentives to businesses to reduce emissions and control pollution through economic incentives.

 

To elaborate, the government issues a limit (or cap) on the amount of pollutants that can be emitted. Business then issue credits to show how much they have reduced their share of these pollutants by compared to the amount of limit the government has imposed. In theory, those who have reduced their emissions will have leftover credit while others will break even and others will pass their limit. Those who pass their limit would be have to buy credits from those who reduced their pollution to avoid penalties from the government. This would reward those who reduce their emissions while those who did not would have in one form or another be “paying” for not changing.

 

Read all about it here: http://en.wikipedia.org/wiki/Emissions_trading