The Economics of Branding

May 14, 2012 By in Finance & Economics, Management & Strategy, Marketing & Branding, Our Interviews with World Leaders Leave a comment

An Interview with Interbrand Chairman, Rita Clifton

In February 2012 in a paper titled, “The Role of Brands in Human Culture” I noted the significance of branding in our world.  To illustrate this, we should note that the top 10 global brands (as measured by the Interbrand index) have a combined value of over $432 billion (against their total market capitalisation of $1.7 trillion).  That means that 24% of the real economic value of these organisations lies in their brands. Think about that for a moment… That’s $432 billion of real economic value which exists in potentially the most intangible asset of a business, an asset which only exists in people’s minds.

Brands are more than just intellectual property, they become the underlying common ethic that affects all aspects of a firm’s activities.  In the above paper Philip Kotler (widely regarded as the most influential marketer of all time) notes that, “…An increasingly number of companies see their brand as the platform for running their business.  The brand creates an identity for the product and/or company in the marketplace.  It requires the company to think deeply about its mission, vision, and values. The company has to work hard at developing the image that it wants customers to have of the offering.  The brand must not only convince prospective customers and draw them to the brand but also be deeply believed in by the employees and other stakeholders of the company...” That note about belief is critical.  Branding is a psychological entity that manifests economic value and firms of all sizes.

To learn more about the economics of branding, I spoke to Rita Clifton, Chairman of Interbrand London, who are regarded as one of the world’s top branding consultancies and the pioneers of brand valuation.  Continue reading →

A Life Changing £600 Million

May 2, 2012 By in Finance & Economics, Global Issues, Management & Strategy Leave a comment

Guest article written for AllAboutAlpha.com – the official publication of the  Chartered Alternative Investment Analyst (CAIA) Association

Originally posted at: http://allaboutalpha.com/blog/2012/04/30/a-life-changing-600-million/

Impact Investments are a maturing asset class.  These are investments that go beyond financial return to deliver a measurable positive social or environmental impacts for the beneficiaries they affect.  JP Morgan estimate that over the next decade, this asset class will constitute an investment opportunity of between US$400 billion and US$1 trillion, generating profits of between US$183 billion and US$ 667 billion.

For governments, impact investment provides a unique bridge between the public and private sector, allowing innovation and entrepreneurship to be applied to social issues which would typically have been the prevail of government institutions to resolve.  The United Kingdom is one of the global leaders in this field with over 30% of all business start-ups in the country being socially motivated.  Following a decade of planning, Big Society Capital was launched this year as, “..an independent financial institution established to develop and shape a sustainable social investment market in the UK…“

To learn more about Big Society Capital, we spoke with Chief Executive Nick O’Donohoe.  Prior to taking this role, he was Global Head of Research at JP Morgan (responsible for the firm’s Equity, Credit, Interest Rate, FX, Commodities and Economics research departments).  He was also a member of the bank’s management committee, and sat on the Executive Committee of JP Morgan Chase (including their Social Finance Unit).   He co-authored “Impact Investments: An Emerging Asset Class”, published by JP Morgan and the Rockefeller Foundation in November 2010. Prior to JP Morgan he worked at Goldman Sachs. He is a board member of the Global Impact Investing Network (GIIN).  Continue reading →

Humanity’s Relationship with Animals

May 1, 2012 By in Global Issues, Our Interviews with World Leaders Leave a comment

In this exclusive interview, we speak to Ingrid Newkirk (Co-Founder and President of PETA – People for the Ethical Treatment of Animals). We discuss the relationship of our species with the animal kingdom. We look at issues ranging from animal rights, to the use of animals for food, clothing, entertainment experimentation and more.

http://thoughteconomics.blogspot.co.uk/2012/05/humanitys-relationship-with-animals.html

The Brand of Hedge Funds

April 27, 2012 By in Finance & Economics, Management & Strategy, Marketing & Branding Leave a comment

Guest article written for AllAboutAlpha.com – the official publication of the  Chartered Alternative Investment Analyst (CAIA) Association

Originally posted at: http://allaboutalpha.com/blog/2012/04/26/the-brand-of-hedge-funds/

With almost US$2 Trillion under management, the hedge fund industry is a significant component of the global financial market.  To put their size in context however, it is important to realise that the size of the world equity markets are around US$30 trillion, a factor of more than 10 times larger.

During and immediately after the 2008 financial crisis, hedge funds became a convenient media and political scapegoat- not just the crisis itself, but for any volatility in practically any market- blamed for spikes in food prices, oil prices and more.   From being the darlings of the financial world, the brand of the hedge fund market faced a significant (and largely unjustified) threat.

To learn more about the realities facing hedge fund brands, we spoke to Ron Resnick, Co-Founder and Partner of CounselWorks, a business strategy and regulatory consulting firm which provides project based consulting and manages compliance and regulatory programs for hedge funds, private equity firms, investment advisers and broker-dealers. Continue reading →

Investing in Israel

April 20, 2012 By in Finance & Economics, Global Issues, Management & Strategy Leave a comment

Guest article written for AllAboutAlpha.com – the official publication of the  Chartered Alternative Investment Analyst (CAIA) Association

Originally posted at: http://allaboutalpha.com/blog/2012/04/19/finding-alpha-in-israels-emerging-market/

Since the nation’s establishment in 1948, Israel has existed in a perpetual state of conflict.  There is little doubt that these conflicts have had a negative impact on the country’s stability and relations.  The BBC World Service Country Poll states that 49% of the more than 28,000 interviewed held a negative view on Israel’s influence in the world.

This small nation has, however, experienced astonishing economic growth.  Israel is 40th largest economy in the world with a GDP of around US$245 billion (putting it ahead of Portugal and Ireland, and just behind Malaysia and Singapore).  This is a nation second only to the United States in terms of venture capital funds, with the highest rate of start-up businesses per capita and also the highest ratio of university degrees to population anywhere in the world.

To learn more about the opportunities in Israel, I spoke to Michael Freedman, Executive Director of Asquith Israel Merchant Bank. Continue reading →

Money Under the Corporate Mattress

April 18, 2012 By in Finance & Economics, Management & Strategy Leave a comment

It’s Time to Get Business Spending

In March 2012, The Economist reported that UK corporate surpluses reached more than £700 billion last year, amounting to almost 6% of GDP. The United States told a similar story with the 1,100 non-financial corporations rated by Moody’s showing cash balances of over £1.24 trillion (almost 10% of US GDP)… and in Europe, a group of 30 larger cap non-financial corporations (as at June 2011) were sat on over $872 billion (around 7.2% of European Union GDP).

There are a constellation of reasons why firms are hoarding their cash, but a few key ones are:

  1.  Economic Sentiment:
    There is no doubt that firms of all sizes are viewing the economy as being very uncertain and potentially precarious.  With such sentiment being widespread, firms are much less likely to invest in assets (which may decrease in value) or projects (which may fall victim to economic volatility).  The poor perceived outlook on consumer, corporate and institutional spending (across most global territories) also makes firms considerably less likely to engage in expansion strategies.
  2. Tax & Policy:
    Entrepreneurs and CEO’s are genuinely worried that firms are going to face years of increased taxation to pay for the unprecedented economic stimulus.  Alongside this one must also factor in the ‘risk value‘ of cash.  Businesses operating in a riskier environment will inevitably want a higher return on the capital they deploy.  In most developed countries however, the marginal increases in taxation have yielded a disproportionate ‘flight to safety‘ where firms end up hoarding their cash balances against forced redistribution. A less discussed but equally significant phenomenon has been a gradual erosion of faith in central governments and their policies. A well functioning economy requires that entrepreneurs, firms and other stakeholders place trust in their political leadership to not only support them- but be consistent in their approach.  One business advisor I spoke to said he finds it very hard now to fathom, “what on earth they [referring to government] will do next…“.
  3. A Lack of Investment Alternatives:
    Private sector cash balances are not a new phenomenon within the economy. The new aspect is behaviour.  These cash balances were often plugged into a wide variety of financial instruments (such as equities, funds and more) which typically gave near cash-like risk profiles with a reasonable return.  Such instruments are now lacking as even previously robust classes such as sovereign debt and large cap equities now carry more risk than most corporate treasury managers would like to hold without a corresponding return.
  4. Hidden Deficits:
    The profligate spending of the past 25 years has also left a tremendous amount of firms worried about structural deficits which may be created through gaps in pension fund obligations and even gaps in the value of hard assets.  Many larger firms in particular are holding cash-balances on reserve to cope with these eventualities which could easily prove fatal otherwise.  To put this in perspective, the US Private Sector is estimated to be running a pension deficit of over $420 billion. Continue reading →

The Role of SME’s in the UK Economy

April 10, 2012 By in Finance & Economics, Global Issues, Management & Strategy, Marketing & Branding Leave a comment

In 1919, a man started a small business selling surplus groceries from a market stall in East London.  His first day’s sales were £4, giving a profit of £1 (around £178.00 in sales and £44.00 profit in today’s money).  Fast-forward around 90 years and this business now generates over £50 billion in annual revenue, employs around 472,000 people worldwide and generates £6,000 in profit every single minute of every single day.  This business is TESCO Plc.

With very few exceptions all of the largest companies in the world started life as small businesses which, through a supportive economy, access to the right people and- of course- capital, turned into giants.  In practice it’s a very small percentage of small firms who experience this kind of growth but the fact remains that small businesses (as a group) remain critical to the UK economy, providing over 67% of the UK’s private-sector jobs and contributing over 50% of UK GDP.

To learn more about the importance of SME’s in the UK economy, I spoke to Professor Mark Hart of the Economics and Strategy group at Aston Business School.  He jointly manages the Global Entrepreneurship Monitor (GEM) project in the UK and advises a number of Government Departments on SME matters including BIS, UKTI, HMT and HMRC.

Continue reading →

The True Scale of Global Crime

April 1, 2012 By in Global Issues, Our Interviews with World Leaders Leave a comment

In this exclusive interview, we speak to Yury Fedotov (Executive Director of the United Nations Office on Drugs and Crime, UNODC). We discuss the scale of global crime looking at issues ranging from drugs and drug trafficking to money laundering, corruption, violence and even the illegal trade in human beings themselves.

http://thoughteconomics.blogspot.co.uk/2012/03/true-scale-of-global-crime.html

The Secrets of Value Investing

March 30, 2012 By in Finance & Economics, Management & Strategy Leave a comment

Guest article written for AllAboutAlpha.com – the official publication of the  Chartered Alternative Investment Analyst (CAIA) Association

Originally posted at: http://allaboutalpha.com/blog/2012/03/29/alpha-hunter-lauren-templeton-on-generating-alpha-from-value-investing/

Value investing has been a successful strategy for many investors since the earliest days of equity markets.  The principle is quite simple.  Investors select stocks they feel are trading for artificially less than their intrinsic values and hence are (significantly) undervalued by the marketplace.

Sir Jon Templeton was a pioneer in this field  He began his career on Wall Street in 1937 and went on to create some of the world’s largest and most successful international investment funds.  In 1999, Money magazine rated him as, “arguably the greatest global stock picker of the century…“  He sold the Templeton Funds in 1992 to the Franklin Group for $440 million, and today his great niece Lauren Templeton continues the legacy through her firm, “Lauren Templeton Investments“.  Ms. Templeton is the president and founder of the Southeastern Hedge Fund Association, INC and is a Trustee of the Baylor School and the Finance Advisory Board of the University of Tennessee Chattanooga alongside which, she is a member of the Templeton Foundation.  She also co-authored “Investing the Templeton Way: The Market Beating Strategies of Value Investing Legendary Bargain Hunter“.

In this interview, Ms. Templeton takes us through her story of generating alpha from value strategies.

Continue reading →

When You Can’t Trust Economics

March 16, 2012 By in Finance & Economics, Global Issues, Management & Strategy Leave a comment

Has Conflict of Interest Created a Check-Mate in the Reporting of Economic Data?

In February 2012 The Economist took an astonishing step, removing Argentina from their much respected financial indicators page.   Their rationale being that, “…since 2007 Argentina’s government has published inflation figures that almost nobody believes. These show prices as having risen by between 5% and 11% a year. Independent economists, provincial statistical offices and surveys of inflation expectations have all put the rate at more than double the official number.”  They continue to note that, “…in an extraordinary abuse of power by a democratic government, independent economists have been forced to stop publishing their own estimates of inflation by fines and threats of prosecution. Misreported prices have cheated holders of inflation-linked bonds out of billions of dollars.”

The Inter Press News Service (IPS) also note how trials against Argentina’s 1976-1983 dictatorship have revealed economic crimes.  One prominent Argentine businessman they interviewed told IPS, “We weren’t involved in politics and had nothing to do with the government. But they took everything we had, our seven companies and the company plane. And it’s a miracle they didn’t kill us…” He later explained to journalists that government front-men, against these assets, took millions of dollars in loans from banks with ties to the dictatorship.  They defaulted on these loans taking down the companies against which they were secured and even the banks.  The Argentine Central Bank then auctioned off these [toxic] assets which were bought in good faith by others. Continue reading →

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