Entry December 6, 2006

Thought: Intel Capital and Investment into FPT – Analysis From an Investor’s Viewpoint

A month ago in a talk about WTO and impact on Vietnam in Hanoi, I had a short conversation about the reason why Intel Capital decided to choose to invest in FPT. I said then that the reason Intel had chose FPT was more than just profitability or leadership, though these were important, but strategic alignment in the business between Intel and FPT. In fact, FPT is offering ISP service and at the same time owns the biggest Vietnamese PC assembling lines, one by its own and one in cooperation with CMC, another local IT company.

A couple of days back, when I read an article on Red Herring about Intel Capital’s investments exceeding $1 billion this year, I quickly did a reality check of what I said the other day. What I found from their Web site confirmed the strategic alignment, at least at the high-level. In addition to the three companies that received investment from Intel Capital announced in October also fit perfectly into this category.

Introduction about the group:
“With an overall strategy to stimulate advances in computing and communications, the Intel Capital team seeks out and invests in promising companies worldwide working together to:

• Establish new and innovative technologies
• Develop industry standard solutions
• Drive global Internet growth
• Enable new usage models
• Advance the computing and communications platforms”

Moreover, among Intel Equity funds, Intel Digital Home Fund’s investment strategy is detailed below:
“The Intel Digital Home Fund is a US$200 million private equity investment fund that invests in companies developing hardware and software, as well as connectivity and supporting technologies that are aligned with Intel’s strategic efforts to drive convergence of personal computer and consumer electronics devices in the home.”

Clearly, FPT was chosen for strategic fit for Intel Capital. Therefore, if the market rules apply, the price that Intel Capital paid for FPT’s shares would be higher than the simple expected value of the company. This suggests that FPT share is well over priced in the market right now. This might not be important for short-term investors, but it is for long-term investors to know.

Thought: Do China’s Tech Firms Gain on Multinational Rivals

From Wall Street Journal online:

“China’s technology companies are closing the gap with their foreign rivals in productivity, positioning themselves to become a bigger threat to multinationals both in China and abroad, according to a survey by McKinsey & Co. and China’s Tsinghua University.

The survey suggests that Chinese tech companies are gaining ground on multinationals in terms of size and in terms of the efficiency of their operations, as they learn to fine-tune processes that in the past relied strictly on China’s abundance of cheap labor to compete. It also found that Chinese tech companies are increasingly moving up from low and midprice product segments, which they have long dominated, into higher-end product segments that foreign companies have long dominated.”

From the first looks, the result was quite impressive. However, a couple of important points from the same paper issue helped me to understand more, and at the same time change my impression about the article.

• The companies surveyed are from different sectors, ranging from “fire-safety products to mobile phone and PC manufacturers“. No breakdown available made it impossible to determine the competitiveness of Chinese high-tech companies, which I am most interested in.
• Efficiency in the survey was defined as average revenue per worker. Taking R&D investment, salary and working regulations into consideration, if all labor conditions were the same, the number may not be that high.
• Average Return on Equity (ROE) of Chinese tech companies was 12.1% in comparison to 15.7% of their rivals in US, but up from 6.8% of the tech companies in Germany.

After all, the only firm conclusion I could find from this survey is foreign tech firms, especially European ones, got hurt because of rigid labor regulations, especially in presence of Intellectual Property issues in China. This is nothing new, of course. Then, I have problem understanding why McKinsey invested in this survey and why Wall Street Journal publish such a result, from which one cannot find any new insight.

Uploaded in Heidelberg, Germany.

Entry December 3, 2006

Thought: On finding my own life mission

Having been back home after almost a year in September and October, I faced quite a tough time acknowledging how much the society I grew up from had changed, more in the bad direction than good. But the most important thing I gained from that trip was a great discovery, my life mission. Today, when I read a blog of a friend about to go back to Vietnam and at the same time thinking about changing his job, I suddenly had an “Aha” moment. I realized that I would not have found the mission for my life should I hadn’t been in touch with my root.

Self help books talk a lot about how to find a mission for one’s life. Many of them talk about finding what you want to do in life and what you’re good at, etc. Some mention values as selection criteria. Odd enough, one often has too many things one likes to do in life while quite a lot of uncertainty about one’s true talents. As a consequence, personal mission seems to be the most difficult thing to find.

What I found out is that my root helped me to understand who I am and where I am from. Being with my family, teaching my son how to read and write, meeting my best friends, doing some social works that I used to spend a lot of time on, and even sitting in my favorite place in West lake… Now I know I brought together all the things I identified myself with and recalled the major decisions in my life. And exactly that time, with a little clue from a meeting with a few young, capable and energetic people, I found it!

I found my life’s mission when I linked who I was, what choices I had made, and what I had done. The mission was nothing more than a natural extension of these factors, under the light of the new view of life and myself that I had. Being with the root helped me to single out what I really want to do in future. A personal mission is as much about the past and present, as about the future, now I know. And I remember Prof. Konsynski of Emory once told me: “if you know how to construct the past, you can see the future”, what I had so much doubt about and had spent a full semester just to realize how true it was.

Uploaded in Heidelberg, Germany

Entry December 2, 2006

Thought: Modern brain imaging experiments help to connect brain science and psychology

“Neuroscience of Leadership” of Stragegy + Business magazine is a highly recommended article for whoever interested in the connection between human brain and mind.
I include here the Mindmap I created for the article using MindManager 5.0 for those interested. Note that you need to save this document and rename from .pdf into .mmap, then open it. This is my way to get around WordPress’ uploading file type restriction.

The authors brought together several new neuroscientific discoveries, which support not-very-new psychological conclusions:

• Being in a new experience creates an uncomfortable feeling. A new experience, engaging energy-intensive, low-capacity “working memory” for a long time, normally is disturbing to people.
  
• Difference between expectation and outcome (“error”) makes people more emotional and act more impulsively. Strong signals when brain detects “errors” in the area near the emotional part of the brain can trigger this part and draw away metabolic energy from the part taking care of logical thinking.
• Focus helps to reinforce experience/learning. QZE (Quantum Zeno Effect) in neuroscience implies that focusing attention stabilizes brain circuits established by a thought, an insight, a picture, a fear, etc. Therefore attention activates and fortifies connections in the brain.
• Positive thinking is effective in changing. QZE also shows that thinking about “bad” behavior or actions, will only stabilize the connections, thus triggering the behavior or actions one wants to avoid – a reason why positive thinking is necessary.
• After insight, positive reminders are required to entrench a new behavior. Insight, i.e. solutions arise suddenly and seem obviously correct, happens after a strong burst of energy to create new connections. However, given the limitedcapacity of working memory, further attention is required to reinforce the connections.

In another incident, a new research published recently about brain response with brands suggests the importance of brand (marketeers would love this). The result was staggering. Strong (and I guess desirable) brands activated “areas of the brain associated with warm emotions, reward and self-identity“. On the contrary, “less-recognized brands triggered more activity in brain regions associated with working memory and negative emotions – suggesting these products were less easy to “process” and accept.” On the other hand, this discovery, suggests that:

• Difference means more difficult to be accepted,
• There is a close connection between emotions, reward and self-identity. People identify themselves with good experience and feeling, the basis for sense making. It also helps to explain why personality is normally the result of successful strategies.

It is amazing how much we can use the knowledge about brain to support and even extend psychology. In other words, human is getting more and more successful in connecting the dots between our brain and mind. For me this means two areas, brain science and psychology, are closely related and I should focus more on brain science. This requires time and investment (for instance, The Triune Brain in Evolution, Role in Paleocerebral Functions by Paul D. MacLean costs almost US$200). I need a big bonus this year!!! Boss, do you read this post?

Posted in Heidelberg, Germany