“You have to be very concerned about a company that has no future… If you’re playing a game and this is your last hand, and you’re not coming back, you’re going to play it a little different…When somebody goes all in, they can do things you can’t do. Because you’re trying to manage your resources…While they’re all in. Don’t play to comeback… Don’t play as if there’s another hand. Be all in.”
— Jen-Hsun Huang, CEO @NVIDIA
Entrepreneurship is a hard. It’s a long path that takes years to effectively become successful. We’ve been on that path and love to hear stories about inspiring entrepreneurs that have persisted in the face of adversity. In this video, Jen-Hsun Huang describes his journey, his strategy for building a great products, the purpose of your work, and sticking with the vision beyond the competition.
After mergers and acquisitions, currency translations, and year-to-year revenue growth numbers have been removed, organic revenue growth can be analyzed from an operational perspective. The most common breakdown is: Revenues = (Revenue/Units) * Units.
The operating statistics a company chooses to provide are typically dependent on industry norms and/or competitive best practices. By relating different operating statistics to total revenues, we can garner deeper insights into the business. Let’s compare Home Depot vs. Lowe’s. In this example, Units would be stores: Revenues = (Revenue/Stores) * Stores.
To further analyze the growth we can utilize a ratio tree, which unlike viewing typical operating ratios, ratio trees allow us to see how ratios change over time, as well as how they relate to other ratios. At Home Depot, store-based revenues increased by 6.2% in 2012, while Lowe’s revenues were relatively flat within the same year. In spite of Lowe’s opening nine new stores (versus four new Home Depot stores), Home Depot managed to have a 6% increase in revenue per store. What the data tells us is that Lowe’s growth strategy for 2012 was driven by adding new stores, while on the other hand, Home Depot’s was driven by focusing on increasing its dollars per square footage and the dollars per transaction.
Honing in on the growth within stores is extremely important, so much so that they have earned a name within the financial industry affectionately coined as “comps.” Comps compare the degree of revenue growth or decline that a firm’s stores achieve relative to their sales in previous years. Why is this important?
Deciding on the number of stores to open is an investment decision, while on the other hand, same-store sales reflect a stores ability to compete in a local market.
Opening new stores requires significant capital investment, whereas growth in comps requires little incremental capital. Higher revenue and less capital leads to higher capital turnover, which leads to higher ROIC.
Highlighted below are the percentages of the world’s largest market cap from countries around the globe. Additionally highlighted is how much each country’s percentage of the world market cap changed from 2011 to 2012. Although the US’ market cap is 5x’s that of China and represented 40% of all of the world’s total market cap, the nations with the biggest increases in market cap were Venezuela, El Salvador, Vietnam, Philippines, Turkey, Kenya, Estonia, Nigeria, and Thailand with 392%, 96%, 80%, 60%, 53%, 45%, 45%, 44%, 43% annual market cap growth, respectively.
% of World Market Cap
Hong Kong, China
Data Source: World Bank: Market capitalization of listed companies
“I think Obama sticking it to Putin is a global world media event. It’s the first time anybody’s nailed Putin in a long while and I think it changes the game.”
– Larry Kudlow
President Obama recently opted out of a meeting with Russian president Vladimir Putin on the heels of Russia granting whistle blower Eric Snowden asylum for one year. The move to cancel the meeting between the two heads of state is a sign that the US has had lost patience with the politics of the Russian president and that the US is threw with playing nice. In spite of opting out of the meeting, Pres. Obama will still attend the G-20 summit in St. Petersburg in early September, where all eyes will be on the two presidents to see if any deal(s) can be reached to reduce the tensions and restore relations.
Between 2009 to 2011, the U.S. had an unprecedented advance in economic cooperation between the two countries with exports to Russia rising 57 percent and total U.S.-Russia trade increasing to over 80 percent. U.S. companies reported numerous major business deals in Russia in 2012, including the ExxonMobil-Rosneft deal in May for exploration in the Arctic shelf, Boeing’s $15 billion in aircraft sales in Russia over the past five years, and Ex-Im Bank’s June MOU signing with Sberbank, Russia’s largest bank, to support up to $1 billion in exports to Russia.
In December 2011, culminating 18 years of hard work and dedication, Russia was invited to join the World Trade Organization (WTO), a major accomplishment that will bring the world’s largest economy outside the WTO into the organization and bind it to a set of rules governing trade, as well as a dispute-resolution mechanism to enforce those rules (1).
1. Dept, US State. “U.S. Relations With Russia.” U.S. Department of State. U.S. Department of State, 14 Dec. 2012. Web. 08 Aug. 2013. <http://www.state.gov/r/pa/ei/bgn/3183.htm>.
J.P. Morgan bailed out U.S. Economy during the “Panic of 1907”, a financial crisis that nearly crippled the U.S. economy after many major banks were on the verge of bankruptcy? This move eventually led political and banking leaders to create the Federal Reserve system in 1913, vowing never to let it happen again.
The Federal Reserve Bank destroyed approximately $190M worth of water-soaked moldy bills after Hurricane Katrina?
During the Civil War, nearly 1/3 of all currency was counterfeit?
North Korea is the only known counterfeit operation with the capabilities of producing U.S. currency with the same level of detail as the Fed? It’s called the North Korean Supernote
U.S. currency basically backed only by the faith of our U.S. Government to make good on it’s fiduciary promise?
Inflation is the cost of holding money and used to induce spending, saving and or investing?
The Fed’s firewall blocks 3 million cyber attacks per day?
Expect slow growth in high income countries and slow growth in developing countries.
Key risks include:
Quantitative easing: The massive surge of capital outflows to emerging and other developing economies is having a major impact. Corporations with sound credit ratings, attracted by the low borrowing costs, have taken on more debt, thus increasing their exposure to foreign exchange. As a result, their vulnerability to future interest rate changes in the developed world and the overall exchange rate volatility will increase.
Industrial commodity prices are easing due to new supply, however;
Rising global food demand will push up prices 10 to 40 per cent over the coming decade.
Growth in food production has slowed over the past decade even as rising incomes in developing countries boosted consumption
Higher prices will have their biggest impact in developing countries.
Higher interest rates are a cause for concern for developing countries.
Two inner forces can drive a person to use all of his/her capabilities. He/she can be:
A. Competence-driven, or;
The former concerns itself with job or task mastery. A virtuoso […] who continues to practice day after day is obviously moved by something other than a need for esteem and recognition. He works to sharpen his own skill, trying to do a little bit better this time than the time before… He is relentless, driven by the self-actualization need, a need to get better that has nolimit.
The achievement-driven path to self-actualization is not quite like this… Some people —not the majority—are moved by an abstract need to achieve in all that they do. These people work at the boundary of their capability... [they] test the limits of what they can do. [Achievers] simply musttest themselves. By challenging themselves, these people are likely to miss a peg several times, but when they begin to ring the peg consistently, they gain satisfaction and a sense of achievement.
The point is that both competence and achievement-oriented people spontaneously try to test the outer limits of their abilities.
— Andrew S. Grove, Former CEO, Intel Corp.
Grove, A. S. High Output Management. Los Angeles, USA: Vintage Books, 1997.