SOPHISTICATED FINANCE

Latin American University Rankings

It is well known that universities in LATAM do not rank highly in international comparisons. In an article in Inside Higher Education Ana Garcia de Fanelli offers this explanation:

"In our knowledge society, research universities are key actors that can make national innovation systems more competitive. This task, however, is not easy in some Latin American countries and not only because they have a significantly lower per capita GDP than those countries with the top 100 universities. Building research universities implies concentrating funds in a handful of institutions. In a context of scarce resources and a mass education policy, this funding design may exacerbate conflict in the allocation process. So, from a political perspective it is not as feasible for Latin America to build world-class universities."

Of course, the allocation of scarce resources creates political problems for the funding of education at all levels everywhere in the world. One possible solution is to take away the annual budgeting allocation for education from the political process. For example, education could be funded by a law that states that X percent of annual tax revenues from _________ will be placed in a trust to fund education, such trust to have the explicit purpose of funding universities or primary school education. Preferably the trust would be administered by an independent board with lifetime appointments. Few countries use such an approach, but it might improve the allocation process. The debate on such a law in any country would be interesting to watch.

Note: Paraguay is using a similar approach to fund primary school education.

Gmail Meter

I am always interested in add-ons to Gmail. An article in AVC lead me to Gmail Meter. Gmail Meter analyzes your email behavior, but it is not a Google app or even an add-on. This services analyzes your email behavior in more detail than I have found elsewhere.

My report from Gmail Meter showed that in September:

• I received 2839 emails, less than I thought but calendar invites and other types of email are stripped out
• I sent 1075 emails to 188 people

My daily email traffic looks like this:

This chart suggests to me I should check email at 8 am, 1130 am and 430 pm and not as often as I apparently do. Also shows I have been sleeping in til 6am more than I thought.

As you might expect from the style of this blog my responses to emails are short.

Time to respond to emails surprised me. Don't expect quick responses. Urgent matters should be by text message.

Always interesting to look at data that gives one insights into oneself.

Foreign Direct Investment 1H 2012

The Economist has an interesting article on foreign direct investment in the 1H of 2012. Investment this year trails last year. Foreign inflows declined by 8%. As shown in the Economist chart below, China is the largest recipient of foreign investment, and when combined with Hong Kong, China surpassed the U.S. in both 2011 and 2012. However, investment in China in 2012 trails 2011. Brazil is noteworthy in showing an increase year-on-year.

 

 

Open Learning in Minnesota

Education Futures reports today on the recent ruling in Minnesota that attempts to curtail the operations of Coursera. The state Office of Higher Education has informed Coursera that they never got permission to operate in the state. Coursera offers online courses similar to MITx, Stanford’s d.school and Khan Academy.

The issue of states trying to control online education (and protect their large investment in state universities) will not be going away soon. Progressive states will encourage their state supported school to become active providers of online courses. Less progressive states will follow Minnesota.

 

The views expressed herein do not reflect the views of any client or organization with whom I am affiliated and are solely my own.

A Better Approach to Design

Over the years I have been involved in several design projects for retail stores, shopping centers and merchandise. Mostly, I participated because skilled professionals were not available. I have no formal training in design or related disciplines.

Recently I joined a team of both design professionals and corporate executives to develop a new product. In three months this team produced a totally new product in the category and initial reactions are very positive. The team consisted of only 4-5 people who had a strong vision of what the product needed to be, relied on their experience rather than exhaustive research and aimed to produce a working concept rather than a completed design. Also, the product significantly evolved in terms of 1-3 key features throughout the design process.

What I find interesting about our approach is that it mirrors the advice of UX Magazine in an article yesterday-Lean Strategy for UX Design. UX Magazine advice:

1. Have a clear strategic vision for the product
2. Have a working theory of what the product should be
3. Target to deliver the product in its simplest form
4. Planning should be ongoing rather than carved in stone at the beginning of the project

The full article is worth a read.

Apologies to Readers

I have been concerned for sometime by the absence of comments on this blog. Today I discovered that all comment notifications were going to my spam e-mail file. All suitable comments to date have now been posted.

Another Look at ROI

I have done finance for almost 40 years and I have done it in almost all its forms--capital raising, trading securities and funding operations. Whenever I am involved in an operating company people always ask me what ROI do we need to reach to justify an investment. In routine, repetitive investments (such as opening another retail store) I almost always have a quantatative target and it tends to be much, much higher than the cost of capital. I have seen several CFOs who use the same technique of setting very high ROI targets. If you use such a technique in routine, repetitive investments you generally get people focused on the efficiency of capital, which is a good thing. Given the high hurdle rate for ROI you also get people focused on customers and revenue. These are equally good results.

However, in other situations I never use ROI. These investments are for strategic reasons or to build comparative advantage against the competition. Until today I had never found anybody who shared this view--ignore ROI for strategic investments that build the foundation for the company future.

In a post today on company sustainability, the AVC blog shared the same view.

"ROI is not the right framework for companies to evaluate investments. ROI is for the wall street folks. They will use it to decide if they want to invest in your company. But when you make investment decisions in your company, don't use the tools that wall street uses. Use the tools that animals use. Survival instincts. What will it take to ensure that your company is around in ten years, fifty years, 100 years? That's how to think if you want to stay in business."

I always say that I specialize at the intersection of finance and strategy and almost always strategy is more important than finance!

UN Initiative: Education First

Ban Ki-Moon. Image from UN.org.

Last week U.N. Secretary General Ban Ki-Moon announced a personal initiative, "Education First", to draw attention to the need to improve education standards worldwide. A full description of Education First is here.

Andres Oppenheimer, writing in the Miami Herald, summarized the initiative in this article, "U.N. picks wrong education partners". The iniative follows several prominent UN themes:

1. Education fosters gender equality
2. Education fosters economic development
3. Education fosters better health practices
4. Educations fosters improved environmental sustainability

Oppenheimer critiques the initiative as follows:

"My opinion: The problem with Education First is that it believes that governments will make it their priority to improve education standards.

They won’t, for the simple reason that political leaders think in electoral time frames — three or four years — whereas investments in teacher training and other key tasks to raise education standards pay off in fifteen or twenty years."

The examples where one government has started an initiative in education and the next administration has discontinued it are many. The way to avoid such problems is to establish non-ministerial, independent organizations that are funded over 10-20 year time frames to improve education. This is a similar approach to what Uruguay's Plan Ceibal has done and what Paraguay is considering. This approach also gives the initiating President a real legacy for their administration, an objective that sometimes even overcomes the importance of electoral politics.