Monday, July 28, 2014

"But the German way with money is to keep it quiet"

"It is not the kind of place then to approve of young millionaires roaring around in expensive cars - they may make the Porsches and the BMWs but it's for others to rev them up and show off."

"In the US and Britain, business people are part of public life. Warren Buffett gives press conferences. Bill Gates tours the world, banging the drum for measures to prevent disease. Every American city has a museum or a medical research centre or a university department named after a local moneybags."

In Nigeria, ... , never mind.

Enjoy Germany's super-shy super-rich, by Stephen Evans, for BBC News. 
This article is my source for the quotes above, and is reprinted below.

Karl Albrecht and the shop in Essen started by his mother
Karl Albrecht and the shop that began the Aldi empire
Nobody could accuse the richest people in Germany of flaunting their wealth, quite the opposite.

With the death of Karl Albrecht, there was no announcement for nearly a week, and not until the small, private funeral was over. He and his brother, Theo, had turned their mother's small grocery store in the Ruhr into Aldi, one of the world's biggest supermarket chains, but the habits and thoughts of this mega-business mogul were unknown.  For the obituaries the German papers could only trace bland statements he had made in 1953 and 1971.
This was not a chatty public figure.
He grew orchids, apparently, and played golf - but on his own, private golf course. In the absence of a public presence, a legend grew around him.
The brothers, ex-employees said, would keep accounts using stubs of old pencils, almost too short to hold. It is said that they once told architects designing a new store that they were using paper that was too thick.  

It was this frugality which set the Albrecht brothers on the road to super-rich status.
Interior of the original Albrecht family shop
The Aldi chain began after Theo and Karl Albrecht took over their mother's grocery shop in the Ruhr
After the war, they took over the grocery store and set up a company called Aldi after Albrecht Diskont.  They pared the costs to the bone, dispensing with advertising and relying on the reputation for low prices. They sold what sold quickly, only 300 items initially.  Even shelves were thought to be too extravagant - after all shelves had to be stacked and that meant stackers and that meant wages. Instead, the goods were deposited, in the stores on the pallets on which they arrived.
Even today, Aldi stores usually offer no more than 2,000 products compared with the 45,000 products for other chains.
Food tended to be in tins because fresh food cost money to store. Managers had no telephones - they were told to use the nearest pay phone.

When Theo was kidnapped in 1971, Karl negotiated - over some days, according to the German media - and then paid the ransom which, legend has it, he tried to offset against tax. 

If Karl Albrecht was reclusive, the head of the rival Lidl chain is positively invisible.
There are only two photographs in existence of Dieter Schwarz, and one of those is in black-and-white. He may be the 25th richest man on the planet but nobody outside his closest circle knows anything about what he thinks or does. 

It is the same with the Quandt family which owns BMW. The product may be a symbol of conspicuous consumption but they are a symbol of inconspicuous taciturnity.
Take the case of Susanne Klatten, the daughter of the industrialist Herbert Quandt, the man who made BMW the luxury-car colossus it is today. She was left 12.5 % of BMW.
With her other business interests, she is the 44th richest person in the world, but a woman with a low profile. When she started in business, learning at the bottom, as an apprentice, she worked at a BMW factory under a false name.
The man she married never knew her real identity until the romance was solid.
Susanne Klatten
Susanne Klatten is Germany's richest woman
It would be tempting to draw big conclusions about the reticence of Germany's super-rich. 
In the US and Britain, business people are part of public life. Warren Buffett gives press conferences. Bill Gates tours the world, banging the drum for measures to prevent disease. Every American city has a museum or a medical research centre or a university department named after a local moneybags. 

But the German way with money is to keep it quiet.

It is partly because frugality is a virtue, a matter of morality and not just of wise behaviour. And maybe, after the experience of Theo Albrecht, privacy means you're less likely to get kidnapped.
It is not the kind of place then to approve of young millionaires roaring around in expensive cars - they may make the Porsches and the BMWs but it's for others to rev them up and show off.

The figures show that private wealth in Germany is more unevenly distributed than in any other country in the eurozone. While the richest 1% have personal wealth of just short of one million euros on average, a quarter of adult Germans have no wealth or even owe money.
But because those with the money keep their heads down, it doesn't always show.

Tuesday, July 22, 2014

The World Can Afford to Shrink The Workweek

Interestingly, workers are not ready for the freedom that a shrinking workweek may entail.  For many the fear is "if I'm not commuting to and from work daily or earning a better job title, then who am I?"- an existential crisis.  The same type of fear that makes even wealthy people hate losing their job - rather than embrace the opportunities for a newer freer life, they're just upset because they want, more than anything zen you can think up, to keep in the game, so to speak. The job gives them meaning and order.

It is also true that many, particularly the poorest, need the jobs because they absolutely need the income.  Employment creates a pathway, particularly for the poorest people, to scramble out of poverty into the realm of possibility.

Employment creates a pathway for the poorest NATIONS also, and this is why it must remain a pillar of economic policy in Nigeria and several other developing nations - massive employment gives the population something to do that is not destructive, it may sometimes give the people a skills ramp too so they can move to higher-value production, and - very importantly - it earns income in a granular way that goes direct to the people and fosters democracy rather than through a central source that then fosters inequality and crime and war in the extreme scenario.  

Anyway, here are two comments on the need to shrink the workweek instead of moaning endlessly about unemployment:

Vivek Wadhwa, in We're Heading into a jobless future, no matter what the government does (The Washington Post):
"...Summers is right. Within two decades, we will have almost unlimited energy, food, and clean water; advances in medicine will allow us to live longer and healthier lives; robots will drive our cars, manufacture our goods, and do our chores. There won’t be much work for human beings. Self-driving cars will be commercially available by the end of this decade and will eventually displace human drivers—just as automobiles displaced the horse and buggy...
Summers is wrong, however, in his belief that governments can do as they did in the industrial age: create “enough work for all who need work for income, purchasing power and dignity.” They can barely keep up with the advances that are happening in technology, let alone develop economic policies for employment.  
The only solution that I see is a shrinking work week. We may perhaps be working for 10 to 20 hours a week instead of the 40 for which we do today. And with the prices of necessities and of what we today consider luxury goods dropping exponentially, we may not need the entire population to be working. There is surely a possibility for social unrest because of this; but we could also create the utopian future we have long dreamed of, with a large part of humanity focused on creativity and enlightenment."

Larry Page, in this famous, and very highly recommended, chat that also features Google co-founder Sergey Brin and venture-capitalist Vinod Khosla.  
"VinodKhosla The vast majority of employment shifted from farming to only needing about 2-percent of the U.S. workforce. That happened between 1900 and the year 2000. I see the beginnings of that happening again with the rapid acceleration the next 10, 15, 20 years.
LarryPage I totally believe we should be living in a time of abundance, like Peter Diamandis' book. If you really think about the things that you need to make yourself happy - housing, security, opportunities for your kids - anthropologists have been identifying these things. It's not that hard for us to provide those things. The amount of resources we need to do that, the amount of work that actually needs to go into that is pretty small. I'm guessing less than 1-percent at the moment. So the idea that everyone needs to work frantically to meet people's needs is just not true. I do think there's a problem that we don't recognize that. I think there's also a social problem that a lot of people aren't happy if they don't have anything to do. So we need to give people things to do. We need to feel like you're needed, wanted and have something productive to do. But I think the mix with that and the industries we actually need and so on are-- there's not a good correspondence. That's why we're busy destroying the environment and other things, maybe we don't need to be doing. So I'm pretty worried. Until we figure that out, we're not going to have a good outcome. One thing, I was talking to Richard Branson about this. They don't have enough jobs in the UK. He's been trying to get people to hire two part-time people instead of one full-time. So at least, the young people can have a half-time job rather than no job. And it's a slightly greater cost for employers. I was thinking, the extension of that is you have global unemployment or widespread unemployment. You just reduce work time. Everyone I've asked-- I've asked a lot of people about this. Maybe not you guys. But most people, if I ask them, 'Would you like an extra week of vacation?' They raise their hands, 100-percent of the people. 'Two weeks vacation, or a four-day work week?' Everyone will raise their hand. Most people like working, but they'd also like to have more time with their family or to pursue their own interests. So that would be one way to deal with the problem, is if you had a coordinated way to just reduce the workweek. And then, if you add slightly less employment, you can adjust and people will still have jobs.
SergeyBrin I will quibble a little bit. I don't think that in the near term, the need for labor is going away. It gets shifted from one place to another, but people always want more stuff or more entertainment or more creativity or more something."
Watch and/or read the complete fireside chat and transcript here.

You may say I'm a dreamer, but I'm not the only one...

Wednesday, June 11, 2014

Central Bank of Nigeria gets new governor; what's on his plate?

Economist Ayo Teriba has written about two important challenges facing the new CBN head.

1. The need to gather and use economic data 
"...latest detailed spending and employment data available [as at June 2014] are for 2011...It is hoped that the CBN will broaden its partnership with the National Bureau of Statistics to ensure that these yawning data gaps are filled so that MPC can be adequately informed of these key aspects of the economy before vital policy decisions are taken."
2. The need to use expert economists
"No economist on the CBN board, few part-time economists on the Monetary Policy Committee...the technical expertise required for the Board of the CBN and the MPC to confront contemporary global economic and financial complexities and translate them to growth, employment, price, exchange rate and financial stability outcomes for Nigeria cannot be currently assumed to exist within the CBN. Both the Board of the CBN and the MPC are now populated by lawyers, accountants, bankers and/or stockbrokers."  

Godwin Emefiele, the new CBN Governor, resumed office June 2nd 2014 for a five-year term.  He was previously Group Managing Director of Zenith Bank PLC.  He has articulated his desire to create "a central bank that is professional, a central bank that is apolitical, and people-focused. A Central Bank that spends its energies on building a resilient financial system that can serve the growth and development needs of our beloved country, Nigeria."
His AGENDA SPEECH is worth reading
or watching:
It includes the kinds of things people want to hear now:
In "B. Central Banks and Economic Development", "We will work with the fiscal authorities in reducing other structural distortions to productive growth, as this will enhance access to credit, as well as stimulate growth and employment generation." 
In "C. Our Agenda for Development Finance", "the CBN will also design a programme for our fellow citizens who need as low as N50,000 without collaterals through registered and accredited local cooperatives. We shall encourage venture capital companies and business angels to fund SMEs" 

And it ends with a summary, because everybody loves a summary:
"CONCLUSION: The sole objective of this briefing is to place before you our plans to move our country forward. These ideas can be summarized as follows:
§ Pursue a gradual reduction in key interest rates, and include the unemployment rate in monetary policy decisions;
§ Maintain exchange rate stability and aggressively shore up foreign exchange reserves;
§ Strengthen risk-based supervision mechanism of Nigerian banks to ensure overall health and banking system stability;
§ Build sector-specific expertise in banking supervision to reflect loan concentration of the banking industry;
§ In view of inadequate trigger thresholds from a macro-prudential perspective, consider and announce measures to effectively address this anomaly;
§ Abolish fees associated with limits on deposits and reconsider ongoing practice in which all fees associated with limits on withdrawals accrue to banks alone;
§ Introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas;
§ Establish Secured Transaction and National Collateral Registry as well as establish a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions;
§ Build resilient financial infrastructure that serves the needs of the lower end of the market, especially those without collateral;
§ Renew vigorous advocacy for the creation of commercial courts for quick adjudications on loan and related offences.
We must, by now, have been tired of hearing people talk about the “potentials” of Nigeria. Now is the time to live that dream. I truly believe that working together, we can achieve our goals and give Nigerians the chance to live longer, better and more fulfilled lives."

The assets and liabilities: 
Emefiele has inherited a solid central bank that is to some extent professional and in the last few years achieved
financial system stability (via AMCON and the intervention that saved depositor funds and ultimately saved the banks and jailed some fraudulent bank chiefs),
low inflation,
exchange rate stability,
an efficient payment system (rather more electronic and less cash-based than it was five years ago),
and a consistent (and transparent) monetary policy in the last couple of years.

On the other hand, profligate spending on bribes for votes in this election season (presidential elections expected in Q2 2015) will make it even tougher to control liquidity, inflation, or exchange rates.
There's also the question of how to better tap into global money flows, since today's hot money (MINT money) is so easily withdrawn from emerging market investments when economic conditions improve in Europe/the USA.
Above all, there's the fact that Emefiele's stated goal of deepening access to capital and finance for businesses and individuals is not new - it's the same thing past CBN governors, Finance Ministry, and in particular the Trade and Investment ministry, the Presidency, NGOs like EFInA, everybody wants.  Maybe it's just a hard goal to achieve.
You can find comments from the usual suspects: Razia Khan, Bismarck Rewane, BGL ... on these challenges.

The gossip section:
What does the new CBN chief mean when he references being "professional, apolitical" and he even used the words "expends its energies building ..." -
Well, some criticized his predecessor Sanusi Lamido Sanusi for poking his nose into politics by informing of billions in missing oil receipts.  Much has been made of the fact that he received an early suspension, got the sack effectively, from President Jonathan for that reason.  He was vocal in other ways: CBN autonomy debate, openly/unprofessionally expressing his abhorrence of (naira) billionaire bank owner-thieves, questioning the presidency's right to fire him without Senate approval even, and he dared to wear full traditional regalia to the office one day - crazy dude, that Sanusi.

In June 2012, dressed as Dan Majen Kano; 
two years later, Sanusi is the new Emir of Kano
As with many things in Nigeria, tribalism unnecessarily plays a role in the criticism of Sanusi.  Why did Sanusi support Islamic banking - is he trying to impose a Sharia kingdom?  Who authorized him to donate xyz money to flood victims in a Northern state?  Did he leak the letter about the missing oil receipts?  Is he working for the opposition party against Jonathan?
 Why fool around with fiscal policy when (for example Igbo) traders and potential industrialists in the real economy can't borrow money and bankers in the real economy can't keep their jobs because your policy has shrunk their bank?  Here are some scathingly critical articles amongst the hundreds you can find.  One, Two, Three, Four, ...
You know where I stand: I can only wish to be that crazy (if crazy also means gutsy, effective, and fun-loving) Ah, but this article is about the new Gov, Godwin Emefiele.
Wish him god-speed. 

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