Ferrarri vs AOL

Watch the exchange between MR Ferrari and the AOL customer rep.

I cancelled AOL a couple years ago. It was not as bad. AOL is in an awful industry sector, sunset sector with no way out. AOL tried to move its customers into braodband through partnering with Telcos, but they did not have much value than just being a re-sell agent. There was a surreal lame TV ad last year telling people AOL was a lid on your food tray when two guys were queuing in a cafeteria. US FCC refused unbundling internet service from Telcos and AOL's dial-up internet service is doomed.

At the end of the video clip it was said AOL issued an apology and said it fired the customer rep. The poor guys was trying very hard to do this job. Presumably he also has a playbook he got in the training and was reading lines from the book, although a bit blindly. You got to think he is not so creative as to invent the "may I speak to your dad" line. The fact that many people encountered similar experiences further showed that this rep was just unlucky to be caught on tape. I bet one gets similar response from every other AOL rep.

So what is AOL's problem? Complacency and scapegoating. AOL should have fired whoever who wrote the playbook or the trainer who either created this obnoxious playbook or mis-trained the reps to mis-use the playbook. If I were the rep in question, I would sue AOL. I hope AOL did not coerced him into signing any waiver.

This is one good management lesson, on cutsomer service, and human resource management, and more importantly, general management approach. Strategy-wise, AOL did admirably tried to leverage its portal and customer base to mimic google last year, though it is unclear how its luck has been. Judging from how AOL handled this incidence, I am very skeptical such management is capable of implementing that sound strategy.

Translation: There is no downside selling to foreign capital

Original: 张五常:外资收购何害之有? 6/2006

Here is the translation:

There is no downside selling to foreign capital -- Ng-sheung Cheung

Three years ago anti-trust law was passed proposed by Beijing, it was supposed to go into effect on 1st Nov 2003. While reading it, I thought, there were many good things in US to learn from but you got this, anti-trust in American style; what kind of people would copy this from some so-called textbook? I wrote 10 essays in a row, it seemed that repelled it. Last year I read again that Beijing was going for anti-trust again, with another methodoloy. Not knowing the details, I thought, maybe it is good this time. So many SOEs rely on monopoly to survive, seems fun to go against them. One problem, the monopolies are protected by the state, isn't this left hand fighting right hand?

Recently anti-trust got on news again in the mainland, reportedly it was already 'preliminarily passed' [passed one stage]. [The content seems] Not easy to understand, it seems that the most important item is anti-merger, i.e. anti-merger by foreign capital. I may not have the precise interpretation, but [from what I understood] it basically says, for enterprises or groups with annual sales over RMB12bn, unless the deal is approved, cannot acquire another with sales over RMB0.8bn [is this a typo? should be 8bn?]. In recent months many commentaries flow around the internet are against foreign capital taking over Chinese enterprise -- concerned about so-called 'control', so-called 'drifting away fo assets', etc -- showing co-incidental similarities [with this part of the anti-trust law].

These are my opinions:
1) Anti-mergers is not a simple task, because there are many ways to get around it. It you really want to control this, you may need to go for litigation, and litigation may cause severe headache. If not done properly, this would only increase the transaction cost of merger and acquisition, or encourage splitting into smaller entities just to be merged in a number of transactions of smaller sizes [to get arounf the rules]. This does nothing good for the economic of the country.

2) When foreign capital acquires a Chinese company, for example, if the company suffers from capital squeeze when there is upheaval in China's economic cycle or macro-control, it will not be surprising that they may get a good deal. There is no need to be jealous, I do not know a single Chinese entrepreneur who is stupid [enough as to sell cheaply]. On the one hand, the foreign capitals are the best of the best in their home country, on the other, "a fierce tiger from foreign land may not rival a local bug' as Cantonese saying goes. I would put my money on the 'local bug'. [Harbin Brewery comes to mind]

3) For foreign companies operating in China [including the acquired companies], they will have to hire [some] Chinese managers. Knowledge, expertise and technology move into China accordingly. We should not care about the skin color of the big boss in these cases. Will the capital be withrawn later? As long as China maintains its current investment environment, they won't, more will come in instead. If the environment is unfavorable, everyone (not juse t thforeigners) will flee. As for the worry about foreign capital controlling Chinese economy, what a strange thought! Not even Beijing is able to control Chinese economy! Whoever has such phobia need to talk more to the young entrepreneurs in China today.

4) Globalization has been a hot topic for some time already. Back and forth it has been about internet, international exchange, trade growth, and gadgets like such. True examples of globalization can only (begin to) be observed in China: along the Yangtze delta, almost all of the factories are world class - this scene cannot be seen in any other country in the world. I once took a few Gweilo for a visit, they were all surprised and awed at waht they saw. On true globalization, China scored first. I do not recommend China to fight for those so-called leadership position -- do not ever try that -- but "honor is given by others, humility is caused by self", as the Cantonese saying goes, if today honor is delivered to us, it is wrong not to receive it.

5) Lastly, I need to say something about international politics which I know nothing about. I feel something is wrong. American military is unrivalled in the world, no one can counter. But some people are working somewhere on nuke, some others on terrorism. Such 'polarization' in the beginning of this millenium, who knows how to deal with them? Only god know how it would evolve into after so many years. I personally feel, there is possibility that it would go really bad.
China is still under reform, still needs to focus on economy, improve the livelihood of the people. To do this political upheaval has to be avoided, not to mention war. A safe investment environment is important. We cannot buy insurance for this, but we can try to assure it, by encouraging foreigners to invest and build factories in China. The more foreign investment in China, the more safe China will be. Economical interdependency and mutual interests are the best assurance of safety.
Australia, Canada and Russia are friendly toward China, because China's demand for the natural resources supported many people in their countries. Korea is friendly, because Samsung and the likes are making big money in China. Heads of Japan are talkative, perhaps due to political motives. But Japanese has a lot of investment in China and they have been quite courteous. Over two years ago there was even some strange theories called "Japan-Japan trade" [one of the "Japan" refers to Japanese company in China]. The theory thanks China. What about France and Germany? the so-called luxury brands (there are genuine goods besides the counter-feits), machinery, auto, etc. are ubiquitous in China. Boeing is secretly laughing whenever they hear the word 'China'. Microsfot also begins to smile now.
There is only one stupid boy: Chen Shui-Bian. There are 3000+ Taiwanese-owned factories in Kunshan [near Shangahai], even if you are psychotic you do not have to shout "Taiwan independence" so loud every day do you? [To be fair, perhaps none of these 3000 businesses voted for CSB, but then isn't that a vicious circle? In a broader sense, should a politician answer for all voters or only those who voted for him?]














Poor people's living standard

How do the poor people fare in different countries? I am sure there are such stats. I just couldn't locate them. Without the official data, I need to make some quick approximations.

The basic idea is quite simple. I would use the GDP/capita number (
List of countries by GDP (PPP) per capita) for each country, plus the income disparity numbers ( World GINI and income inequality data from wiki, where there are ratios of the top 10% vs bottom 10% of the population, and also top 20% vs bottom 20% -- see also GINI index) and estimate the GDP/capita (a proxy for income/capita) of the bottom 10% (and that of bottom 20%) percentile of the population in each country.

Technical notes:
  • The same GINI index may give different values for the income ratio of 0-10% group vs 90-100% group, because the distribution curves are different (i.e. the curves between 11% and 89% are different)
  • PPP is used, because for the poor people, they buy the basic goods with lowest quality (or food with no clear quality distinction), and there is only small difference in quality
  • The income disparity ratios in wiki were collected in different years. I had to assume that they did not change and applied them to the 2005 average GDP/capita numbers
The mothod I used is an approximation and not very precise. So takes these numbers as indicative only. I assumed the average of the top 10% and bottom 10% equal the average of the overall population. So if the top/bottom ratio is 10, then the bottom 10 percentile average = national average x 2 /(10+1). In reality the curve if far from symmetric and my numbers are almost definitely wrong. Perhaps the average of the logarithms of these numbers would equal the national mean. Anyway, this is for illustration purpose only. Systematic error will carry through all countries. So the relative values should still sort of make sense.
  • e.g. If the average of top and bottom are at 30% more than the national mean (instead of the mean), we just have to shift the numbers of all countries up by roughly the same factor. So the relative values are still (partially) true, thought one would expect that the amount of 'shifting' will be different for different GINI distribution.
The table below shows the results, quite a few facts I found are counter-intuitive
  • Due to higher income disparity, standard of living for poor people in China are not much better than those in Pakistan! (despite almost 3 times difference in national average)
  • Poor people in Russia are most well off in my (arbitrary) list of developing countries (well, Russia is not really a developing country. Its 2005 GDP is also helped by the commodity boom)
  • Poor people in Japan are much better off (more than 2x!) than their counterparts in US, althought US average is 35% higher than Japan's.
  • South Africa, Botswana, Chile and Russia have similar GDP/cap. But poor people in Russia make almost 9x those in Botswana and 3.5x of S Africa, 5x Chile
  • Indian dalit lives are (3x) better than those in Rio de Janeiro scum
  • Almost all ex-Soviet Bloc countries (except a few poor central Asian Stans) enjoy low GINI index and decent lives. Socialism is not that bad? (But will deteriorate in another dacade? see China, right below)
  • China, on the other hand, is among the most capitalistic countries, with a GINI index similar to that of US. So, please, don't let me hear the word "communist China" any more.

Country GINI 20% ratio 10% ratio
GDP/cap (PPP) Poor 20% Poor 10%

Mongolia 30.1 9.1 17.8
2,175 431 231
Kyrgyzstan 34.8 5.5 8.6
2,088 642 435
Vietnam 37.0 6.0 9.4
3,025 864 582
Pakistan 33.0 4.8 7.6
2,628 906 611
China 44.7 10.7 18.4
7,204 1,231 743
India 32.5 4.9 7.3
3,344 1,134 806
Indonesia 34.3 5.2 7.8
4,458 1,438 1,013
Romania 30.3 5.2 8.1
8,785 2,834 1,931
Russia 31.0 4.8 7.1
11,041 3,807 2,726
Nigeria 50.6 12.8 24.9
1,188 172 92
Tanzania 38.2 6.7 10.8
723 188 123
Kenya 42.5 8.2 13.6
1,445 314 198
Uganda 43.0 8.4 14.9
1,617 344 203
Ethiopia 30.0 3.4 6.6
823 374 217
Bostwana 63.0 31.5 77.6
11,410 702 290
S Africa 57.8 17.9 33.1
12,160 1,287 713
Venezuela 49.1 17.9 62.9
6,186 655 194
Brazil 59.3 26.4 68.0
8,584 627 249
chile 57.1 18.7 40.6
11,937 1,212 574

UK 36.0 7.2 13.8
30,470 7,432 4,118
US 46.6 8.4 15.9
41,399 8,808 4,899
Germany 28.3 4.3 6.9
30,579 11,539 7,742
Sweden 25.0 4.0 6.2
29,898 11,959 8,305
Japan 24.9 3.4 4.5
30,615 13,916 11,133

Finally, this estimate is promted by Curzon's obseravtion that rural people in Vietnam may have a higher standard fo living than rural people in Yunnan and Sichuan in China. Let's make another approximation here, by adjusting the China number using its provincial GDP vs national GDP ratio (2001 data) (this is almost certainly wrong, because the disparity is double counted in the national GINI ratios. but hopefully the overlapping is small). Yunnan and Sichuan GDP/cap is 64-68% of national average. So the poorest 10% earns about 2/3 of the national average, i.e. about $500 (actual number should be slightly higher, given the "overlap factor" and picking up of inland economies from 2001 to present). While the poor in Vietnam makes $582. That is 16% above Yunnan peasants.

So Curzon's observation is supported by facts. The Vietnamese peasant he saw perhaps make considerably more than Vietnam's average. Because Sapa is a border town with tourism and trade incomes. But even if not, the Vietnam bottom 10% still makes some 10-20% more than bottom 10% in Yunnan and Sichuan. Chinese government's recent efforts in alleviating the pains of the peasants are belated, but they are neccesary, and imminent.