engage EcoTech

Stop Worrying & Start Living

2011-11-13T17:02:00.001+11:00

It’s taken me some time to publish this Blog – I’ve wanted to ever since I read a quote from a great book by Dale Carnegie titled ‘How to Stop Worrying and Start Living’. More on that soon. It’s been a very big year for me and my family with an exciting new business going well and a fantastic trip to the USA in September where we had a taste of New York City, Connecticut, LA, Disneyland, Beverly Hills and Santa Monica.

The catalyst for me to finally write this blog was a quote in the book ‘Too Big to Fail’ by Andrew Sorkin, which is an in-depth account of how the string of Wall Street Investment Bank failures in 2008 almost brought the whole Global Financial System to a grinding halt. About half way through the book and within hours of Lehman Brothers, the large investment bank, going under, Hank Paulson, the United States Secretary of the Treasury, came to the realisation that the whole financial system was about to end as we know it. So he called his wife and told her “What if the system collapses? Everybody is looking to me, and I don’t have the answers. I’m really scared.” His wife, Wendy tried to allay his fears by reciting Timothy 1:7 – “for God hath not given us the spirit of fear, but of power, and of love, and of a sound mind.”

Those of you that know me know that I’m not a religious person. When I came across great lines like that, it certainly makes me stop and think about the human condition, the way we live our lives and most importantly, the thought processes that play in our heads.

That brings me to another even more powerful quote that I read in Dale Carnegie’s book as I mentioned earlier. In his book, Carnegie quotes the great French Philosopher, Montaigne. “My life has been full of terrible misfortunes most of which never happened.”

That’s probably the root cause of our bad moods, depression and negative views on life. We worry about all the things that could go wrong in our lives. And the truth is that the list is endless. However, another truth is that many of them will probably not happen to us. So there’s no point losing sleep over them.

One thing that I’ve noticed with myself is that when I’m faced with a real problem, an event that is quite negative, I don’t actually worry about – I go to work and either try to solve it or if it’s out of my control, let the natural course of action play out. And like most people, worry is replaced by grief and sadness if the worst outcome eventuates.

Worry is pointless because you can only worry about something before it happens – as Wikipedia states in its definition of worry: “Worry is thoughts, images and emotions of a negative nature in which mental attempts are made to avoid anticipated potential threats. As an emotion it is experienced as anxiety or concern about a real or imagined issue”. When it happens, worry is replaced with sadness, sense of loss, grief, etc. All legitimate feelings and emotions for the fragile human condition.

2011-03-26T10:03:00.005+11:00

Embracing Uncertainty

This is my first Blog entry for the year. I’m surprised that it’s taken me so long to write another one and I’m consistently reminded how quickly time passes when you’re busy. And it has been a busy year both from a personal and professional perspective.

We’ve been working hard looking after our major clients and our business has experienced very strong growth this year. While the core business team continues to deliver value to both our customers and our people, we’ve had to ask for help. And for many men, this is not always easy. This is because we think we’re big and tough enough to take it all on by ourselves. So we went back and had a look at our values and what they mean. They’re quite simple really – Honesty, Integrity & Humility. It’s what we expect from all our people and how we treat them and our clients and everyone we deal with. So after we took an honest look at ourselves and saw what we have created to date, we were humbled and we realised that we needed help. So we went out and got the help we needed. I now count myself extremely fortunate that I’m surrounded by magnificent people that are professional, hardworking and most importantly, share our values. I’m just amazed that there are great people all around – they’re not very hard to find at all.

So we are now in a position to take the business to the next level. What that will look like, I’m not really sure but it’s exciting. I’m embracing the uncertainty.

Many people, however, are uncomfortable with an uncertain future – they can only sleep at night knowing that tomorrow will be OK and that they have control over their lives. The thing is the future is always uncertain and we have limited control over our lives. After the recent events in Japan and the Middle East, many people commented that the planet and people are so angry and financial markets started to waver. The truth is what’s changed? Japan has always had earthquakes and the word ‘Tsunami’ is Japanese. As for the Middle East unrest, when has there ever been peace in the Middle East? These recent events should not shock or surprise us. As terrible and heartbreaking as they are, they should be expected. We all know that the future will bring more natural disasters and civil unrest. But it doesn’t necessarily mean that it’s the end of the world. At least I hope not!

I read an article in press a few weeks ago and the journalist stated that “people like certainty in the markets”. This is just plain silly and the reason why markets behave the way they do – they are driven by the emotions of people.

So embrace the uncertainty of the future in the comfort that everything is well today. And if things aren’t going well through illness, of either your own health or those of loved ones, I hope there will be peace and healing.

2010-11-13T18:59:00.007+11:00

Is It The Price, Cost or Value of Technology?

The other day, my lovely wife made a comment about how much technology stuff is around these days that weren’t available when we first got married way back in the early 1990’s. This came as I was checking out Sony’s new eReader. It’s a very nice gadget and the top end model costs just $299, has a SD memory card slot and can play MP3 music and audio files. Oh, I forgot to mention that it can hold around 1,200 books, has a battery life of 2 weeks and weighs just 200 grams. You see, I get excited when I see this kind of advancement in technology. Here we are just about to enter into the second decade of the 21st century and we have Smart Phones like the iPhone, powerful and fully functional ultraportable laptops weighing just over 1kg that you can run almost all day on the battery for under $2,500, eReaders like Sony and Amazon’s Kindle for a couple of hundred dollars, 64GB Micro memory cards the size of a thumbnail that can hold your entire CD and book collection plus a bunch of Hi-Def movies for under $200, tablet PC’s for under $1,000 like the iPad, iPods and other music players for under $300 and heaps of software that once cost thousands of dollars for a few hundred and in some cases for free. But for some people, they see it as just another way to waste money. After all, it’s not like you can wear it to a dinner party!

My wife came home from a presentation one day back in the late 1990’s just as the tech boom was taking off. Some expert was claiming that we’d soon see the introduction of an ‘information appliance’. One device that is capable of doing everything for you from surfing the net, to making phone calls and organising your life. Ha, what a laugh that is – I said it back then and I’ll say it again. Why? Because all the large vendors from Apple to Sony and now even the typical software companies like Microsoft and Google, don’t want you to have one device. They want you to buy many of them. Then upgrade each one every year so that you’re effectively ‘keeping up to date’ by buying a gadget almost every month!

All this got me thinking – are we spending too much on all these gadgets and devices? Is it sustainable from an economic point of view? I’m not convinced that it’s sustainable from an environmental perspective unless we find better ways to recycle all the materials that go into making high-tech devices, but that’s another story.

So I decided to have a look at how much you could spend today to get kitted up with some nice devices to keep you occupied when you’re working, holidaying, travelling and just relaxing.
• Mid-Range Ultraportable Laptop like Toshiba’s Portege RS7000, with 320GB HDD - $2,400
• Mid-Range Desk Top PC with good gaming capabilities - $1,700
• iPod touch 32GB - $378
• iPad Wi-Fi + 3G 32 GB - $928
• Sony 6” eReader - $300
• Smart Phone - $0 just pick a Carrier contract for 2 years and you can have the phone for free
• TOTAL SPEND - $5,706

So let’s now go back to 1995, the year I first connected to the Internet with my desk top PC. That PC cost me around $2,500 back then and I fitted it with a 28KB modem that cost $350. That’s $2,850 in 1995 prices. Other than the modem and a clunky first generation GSM mobile phone for around $1,000 (back then as it is today, the carriers just locked you into a multi-year contract because no one would buy a phone for $1,000), there wasn’t much more you could buy in terms of technology unless you wanted a fax machine at home. A business grade laptop cost around $4,000 back in 1995 so not many people had them.

I’ll use an average CPI (inflation rate) of 3% over the last 15 years. So in 2010 dollars, all that equipment not including the fax machine because why would you want one at home, we have the following prices:
• The Internet equipped PC - $4,440
• Laptop Computer - $6,230
• Total Spend - $10,670

In summary, back in 1995 all you’d get for around $10,000 was 2 computers – one to sit on your desk and one to take with you on the road. For around half that price, that’s $5,700 you can get a lot of gadgets today and fill your pockets and hand bag with radiation emitting, battery chewing information appliances to keep you and your family amused, entertained, distracted and not communicating for eternity!

2010-08-11T22:00:00.000+10:00

Australia’s Private Debt Problem

I was shocked when I learned about Australia’s current Private Debt levels. That’s debt ordinary Australian’s and business holds. Let me share a quote from Steven Keen’s blog…

“This is the real debt story of our economy right now. As the first chart above indicates, private debt is far higher than Government debt, even after the increase last year due to Rudd’s stimulus package. Government debt is currently 5.5% of GDP, whereas private debt—even though it has fallen slightly due to business deleveraging—is over 150% of GDP: 27 times the size of Government debt. The so-called debate that the major parties are having over the size of Government debt is an embarrassment.” For the full article, go to http://www.debtdeflation.com/blogs/.

That just about says it all. The biggest challenge our miracle economy faces is not Government debt. Never has been. The government can pay it off in no time and in the Global scheme of things, we really don’t have any government debt at all. However, as for our private debt, of which the vast majority of it is held by Households – you know Mortgages, Credit Cards and personal loans (in that order), we’ve got a real problem.

The Commonwealth Bank today announced a huge cash profit figure - $6.1 billion for the last financial year. That’s up 40% over the previous year. I like the way The Age put it… “…full-year cash profit swelled more than 40 per cent to $6.1 billion - or almost $700,000 an hour.” So what do you think CBA shares did today – went up… No, that’s incorrect, they went DOWN 3%. Why is this? Simple, all the cash was made in the first year as people went on their borrowing binge! As The Age quotes… “Over the past 18 months the major banks, led by CBA, have been able to stage strong revenue growth, driven mostly by market-share gains in mortgages and deposits.”

The Age article went on to say… “Taking a look at CBA's second-half performance, revenue fell 4 per cent from the first half while the net interest margin fell 10 basis points to 2.08 per cent largely due to the higher cost of funds.”

Surprise, surprise. People take out more and larger loans and the banks make more money. This is not a good thing since relying on Mortgage Income for Residential Properties is not productive or positive for our economy. The answer for this is simple. Our economy relies mainly from people spending money. So if people spend less money because they have large mortgage repayments, our economy will eventually suffer. And I dare say that this time is probably upon us. Notice how the Reserve Bank has ‘paused’ on raising interest rates. But don’t worry, the Banks have made it clear that they intend on raising interest rates regardless of what the RBA does because it’s costing them more to borrow money overseas and the GFC Part 1 fades into history (go back and read the last quote above from the Age).

I hope you’ve all ‘deleveraged’ and have secure jobs. May I also suggest helping out our economy by Spending at the shopping centres. But leave your credit card behind and do as the old migrants have always done… Pay Cash!

2010-04-04T11:01:00.003+10:00

Occam’s Razor and Making Fast & Frugal Decisions

I decided to start this blog with a few relevant quotes from thought leaders throughout the ages.

“Nature operates in the shortest possible way.”
- Aristotle
“Everything should be made as simple as possible, but not simpler.”
- Albert Einstein.
“All models are wrong, some models are useful.”
- Edward Deming

These quotes focus on a central theme of simplicity and its importance in decision making. The challenge of making smart, quick decisions in the real, complicated world is extremely important for business, government and even in our own private lives. Why? If you can’t make fast decisions, you are sure to be left behind as the pace of change increases in the modern world.

Over the ages, Philosophers grappled with how to make simple decisions when time was pressing and we all know that modern life for many of us is so busy that time is one of the most precious and rarest of resources. To complicate matters even more, we are faced with Information overload in our current world. Since the beginning of the ‘Information Age’, which some people claim started in the 1950’s with the advent of new technologies like Television and computers, the availability and access to information has increased exponentially, especially since the Internet become widely adopted since the mid-1990’s. We need to remember that many of the ‘new technologies’ that have proliferated our society today like the Internet and Global Positioning were invented in the 1960’s.

Therefore we are now in danger of suffering from ‘Paralysis by Analysis’ simply meaning that we have way too many choices and an overload of information in order to be effective in making decisions. Psychologist and Neuroscientists have discovered that the human brain can only handle around seven different pieces of information at one time and we can only make effective choices from no more than a few options. So how do we cope at a conscience level when we are required to make an important decision under time pressure and with too much information at hand?

Franciscan friar William of Ockham, came up with the principal stating that entities must not be multiplied unnecessarily. In its original Latin form, Occam’s razor is “Pluralitas non est ponenda sine necessitate” (plurality should not be posited without necessity). A common interpretation of the principal is that the simplest of two or more competing theories or models is preferable. Occam’s razor does not guarantee that the simplest solution will be correct, but it allows us to focus our priorities.

To support this idea, the field of heuristics explores how to make constructive, positive choices by simplifying a process. The Oxford Dictionary definition of Heuristic is: “Serving to discover; using trial and error; teaching by enabling the pupil to find things out.”

Gerd Gigerenzer and Peter Todd’s “Simple Heuristics that make us smart” shows how we can cope with the complexities of our world using the simplest decision-making tools. They claim that ‘Fast & Frugal heuristics’ employ a minimum amount of time, knowledge and computation to make adaptive choices in real environments. As you can imagine, there are no shortage of decision making systems and tools available for business. As wide and varied as they are, they all seem to contain the following five elements or stages:

Define the situation
Generate alternatives
Information gathering
Selection
Action

Let’s look at some practical examples of how people apply these concepts in the real world.

Finance and financial markets are arguably one of the most information rich industries. A company or market’s key financial information or news can spread around the world in an instant. The number of listed companies on stock markets, commodities markets and fund manages (Mutual Funds for our American readers) run into the hundreds of thousands if not higher. With so many investments to choose from and the amount of information available on each investment (just think about the amount of information available on a single large listed company today including all their financial information and media releases over a 12 month period), how can anyone make a single investment decision or more importantly build an investment portfolio? For some investors, sorry let’s call them traders, they choose one or two pieces of information to make fast decisions on a trade. The most common being price followed by volume. They tend to ignore all the media releases, financial reports and ‘expert analysis’. In essence, they have taken ‘Occam’s Razor’ to work.

When it comes to business, the amount of information is also staggering and the larger the company, the greater the amount of corporate information and knowledge that a handful of executives are required to get a grip on. Executives are expected to make important decisions that affect the lives of many people ranging from employees and their families, shareholders and customer’s that rely on their products and services. Hence the reason why many companies employ the models we’ve discussed above to build Dashboards and Scorecards that focus on a few Key Performance Indicators or KPI’s. The most types of indicators are leading indicators. These are the key pieces of information that provide an insight into where the company and the markets they operate in are heading. After all, there is no point on glowing in the aftermath of a great profit season achieved six months ago if the business is heading for tough economic conditions over the next 12 months or if a competitor has just released a new product that has made your top selling product obsolete overnight.

So when you’re faced with making some big tough decisions, don’t waste time creating a new strategic plan that could take weeks or months to produce (not to mention the high cost in developing some of these plans). Employ an effective decision making model and use ‘Occam’s Razor’ to help you make an effective decision today and steer a new course for yourself.

2010-02-22T19:10:00.005+11:00

Alternative Energies – the next bubble?

I recently attended a seminar on the alternative energy investment market. Alternative energy refers to the generation and use of energy sources other than traditional coal and oil, which as we all know produce vast amounts of Green House Gas (GHG) emissions. Interestingly enough, Natural Gas and Nuclear energy are classified as alternative energies. This is because of the claim that they produce less GHG emissions compared to oil and coal. So it would be a mistake to think of all Alternative Energies as Sustainable or Renewable energies because some are not.

The topics and issues raised during the seminar left me and many of the other people in attendance in amazement. Some of the numbers and statistics banded around make the mind boggle. For example, China is urbanising its population at a rate of 12 million people per year. That’s equivalent to building a city the size of Brisbane every 2 months – and we think Queensland’s growth is impressive!

I recall watching a documentary on the ABC a little while ago and an expert on Nuclear energy was being interviewed. He stated that every country that has nuclear power, has also considered or planned a nuclear weapons program. This is backed by Frances Howe from Corporate Watch Australia confirming that, “Of the 10 nations to have produced nuclear weapons, five did so under cover of an ostensibly peaceful nuclear program - India, Pakistan, Israel, South Africa and North Korea. Over 20 countries have used their “peaceful” nuclear facilities for nuclear weapons research”. While many energy experts claim that nuclear power results in lower GHG emissions, they are only stating part of the story. Howe states some counter-arguments to nuclear energy:

a global doubling of nuclear power at the expense of coal would reduce greenhouse emissions by less than 5 per cent with significant risks. For example the reactors would produce enough plutonium to build over one million nuclear weapons; and
a significant and growing body of scientific literature and experience demonstrates how the use of renewable energy sources and energy efficiency policies and technologies can generate major reductions in greenhouse emissions - without recourse to nuclear power.
Not a single repository exists in the world for the disposal of high-level nuclear waste, and few countries have identified potential sites for such a repository.

The Energy Gap
While at university in the 1980’s, I recall one of my lecturers, Dr Kalam, discussing the growing energy gap building up around the world. He said something along the lines of “…we’ll need to build 1 nuclear power plant per month into the future just to stop the energy gap from growing”. That’s around 12 per year.

So how are we faring today as we round off the first decade of the 21st century and what’s the status with nuclear power globally? There 441 plants are operational around the world, while 27 are under construction and a further 80 are planned. I’d say that Dr Kalam was very close. And the Energy Gap problem still exists.

I spoke to one of the presenters at the seminar and he stated that if the world continued to use nuclear power at the rate we are and planning to do, we’d probably run out of Uranium in about 20 years time anyway. Funny about that, another natural resource that isn’t infinite!

What about oil? Our Seminar Presenter showed that world oil production is expected to ‘peak’ between 2012 and 2015 at around 30 billion barrels per year. After the ‘peak is reached, the production of oil will steadily decline down to less that 15 billion barrels per year in 2050. Around this time however, the world demand for oil will continue to grow from 30 billion barrels per year in 2015 to around 50 billion barrels per year in 2050 based on current growth and consumption. And we thought that $1.70 for petrol was expensive when it peaked in the middle of 2008. According to these figures, that leaves us with a severe shortage of oil in less than 5 years. Sell the car.

The Good News
I believe that we are entering an important point in human history. The signs around us are clear from the problems the world is facing with slowing economies, credit problems and strong population growth. We are getting hungrier not only for food but also for energy. We will need to work on building renewable and sustainable energy resources.

The good news is that there are lots of renewable energies available and they are not only proven but many of them have been around for decades or longer. The list is long when you compare it to non-renewable energies such as coal, gas, oil and nuclear. Examples include Geothermal, Wind, Solar, Hydro, Tidal, Bio-mass, Bio-Fuel and Fuel Cells. And who knows what else in on the drawing board.

From an investment perspective, the Presenters at the seminar showed that the Alternative Energy sector has experienced faster growth than oil and coal. Remember that the definition of Alternative Energies included natural gas, nuclear and renewable energies.

Some experts argue that alternative energies are expensive compared to fossil fuels and nuclear energy. That may have been the case in the past but as our natural, non-renewable resources dwindle, and we all know they will, renewable energy will not only be cheaper, they will need to provide our energy needs in the future. Estimates showed that energy costs (gas and electricity) are expected to double in Australia over the next 5 years before taking into consideration the cost of the Rudd Governments Emissions Trading Scheme (ETS) and recent Government Debt to avoid the fall out from the Global Financial Crisis. By introducing a 20% reduction in emissions, the costs of energy in Australia will rise by over 300%. Sell the Plasma TV and air conditioners. Better still, place your order for Solar Panels and buy a nice bicycle.

Sam Pitruzzello, January 2010

© Copyright 2010

2010-01-21T17:43:00.002+11:00

Building Resilience in Stressful Financial Times

Over the summer, I’ve been reading a financial markets Trading Book by Michael Covel. One of the things that I didn’t expect to get from the book was the wealth of philosophical gold nuggets. Reading the book over this holiday period has allowed me to reflect on my business life and career.

There are some thoughts that I’d like to share from Michael Covel’s book. First up, a quote from Alvin Toffler. Toffler came up with the term ‘Future Shock’ and subsequently wrote a book with this title, which he states is the shattering stress and discrimination induced in individuals by subjecting them to too much change in too short a term. Toffler also coined the term “Information Overload”. He came up with these ideas 40 years ago in 1970. How much has the world changed over this very short period of human history.

The other interesting point was based on a psychological test that showed a marked increase in a person’s stress levels when they just thought about getting a 30-year mortgage. The article went on to say that there would probably be a lot of depressed people in twenty years time as many people found themselves less than half way into their 30-year mortgage.

I’m not going to bore you with the incredible developments in technology – it is all around us for everyone to see, experience, be involved in or hide from. The choice to accept and adapt to new technologies and fast pace change is ours… or is it?

While studying my Master’s back in the late 1990’s, a good friend and class mate chose and interesting topic. He wanted to find out what technology had the greatest impact on the lives of older Australians. His focus group were parents of Baby Boomers – people aged in their 70’s and 80’s. Interestingly, he didn’t get the answer he was expecting. It wasn’t TV, Radio, telephone, computers or the car. It was the Fridge! The Fridge - the most humble and largest of the white good family. The reason is that people could extend their trip to the shops to around a week and they didn’t need to buy ice every day or so for the ice box.

Now let’s think about a person born in a developed country just 30 years. At the age of 15, fifteen years ago in 1995, they would have been exposed to the commoditisation of mobile phones, affordable lap top computers, the internet, Pay TV, DVD and home theatre. Within a few years and barely out of their teens, along comes the iPOD, Google, smaller more powerful and cheaper Laptops, Gaming Consoles, Blackberry and the dot.com boom and crash … And still to come is the iPhone, Facebook, wireless internet access and the 2008 GFC (Global Financial Crises).

Aside from technology, modern Western societies have experienced other dramatic changes. The breakdown of the traditional nuclear family (mum dad and 3 children), big and fast growing cities with 24 hour peak hour traffic and crowded public transport, high housing costs and non-stop information flow – try getting away from non stop advertising and 24 hour news where ever you go.

Is this incredible pace of change one of the main reasons that depression and mental illness is one of the fastest growing health concerns in the developed world at the moment? There is no doubt that we are all at the risk of experiencing Future Shock. Therefore we need strategies and support from people to help us deal with our modern society.

A few years ago I attended a seminar hosted by a good friend of mine. He invited a very bright and experienced Psychologist from South Africa to talk about Resilience. Her discussion on Resilience was around ways people can build up their resilience to stress situations. The types of stressful situations she talked about are truly traumatic. For example, she shared a story with us about the time she was abducted and held hostage for over four days. Other examples include the death of a loved one, being struck by serious, life threatening illness or injury and suffering large financial set backs.

She described a method of building our resilience to these traumatic events by taking very short but frequent breaks away from your home and daily chores. The reason is that most people work throughout the year without much of a break. Then we take 2 to 3 weeks holiday of which we spend at least ¾ of the time trying to unwind. Then, when we’re finally relaxed, it’s time to go home and get back to work. The frequent, short breaks train our body and mind to get into a relaxed mode quickly. By doing this, our longer breaks are more effective. Furthermore, if and when we experience a traumatic event, we should be in a better position to recover from the trauma.

So, try this ‘resilience building’ strategy at least 6 times per year and leave the iPhone and Laptop at home!