When fact is deliciously stranger than fiction

Along B. Gonzales Street near Katipunan Avenue, a cafe is daring to be different. Cafe Xocolat boldly offers an alternative to your routine caffeine fix – a bold cup of hot chocolate. It doesn’t harm that they also offer good great meals and dessert at (almost) student prices. Craving for churros con chocolate? Sure, you can find it there! (Dear readers, I failed to take photos when I was there and it might be some time before I can go back and take my snapshots. I will appreciate if you can post your photos in the comments section in the meantime.)

On the wall at the cafe while waiting for my meal, I read a sign:

Great ideas start with completely unrealistic thoughts.

It just so happened that I just read Harvard Business Professor Teresa Amabile’s article entitled “Creativity and the Role of the Leader”. In the article, Prof. Amabile enjoins organizational leaders to “motivate with intellectual challenge” but also to “accept the inevitability and the utility of failure.” The end goal is to encourage the free flow of ideas – continuously and sustainably. Professor Amabile’s insights almost sound like common sense and promoting good ideas across the ranks in the organization should be as easy as banana toffee pie in Xocolat. Except that the great ideas may appear like absolute nonsense at first glance! Especially to leaders so accustomed to the corner office.

So what does a good and enlightened leader (and Xocoholic) do when fact appears stranger than fiction? Step back and enjoy a good cup of hot chocolate and then ask herself what the eminent Professor Amabile will do in the same situation – which, among other things, is to acknowledge that great ideas can come from across organizational rank, social and educational background, ethnicity, and gender.

Happy ideation!

The Cafe Xocolat Menu

Creativity and the Role of the Leader at Harvard Business Review

creativity

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Three Reasons to Travel

At the beginning of the New Year, it is customary for magazines (and now, web blogs) to feature lists – anywhere from the top ten memorable things in the past year to the top ten resolutions for the New Year. In order to come up with a list of my own, I asked my three adult children over dinner what they learned from traveling. This is what they told me:

  1. Chop Suey is American

One child replied that Chinese food is not the same everywhere adding that the way that Chinese cuisine can accommodate local preferences can be surprising. Anecdotally, he mentioned that while the Chinese food in Amsterdam’s Nieuwmarkt was fabulous, it was deeply disappointing in Boston’s Chinatown. Of course, my son’s sample size may have been way too small but the point, I believe, is nevertheless valid. I have no doubt that the ubiquity of Chinese cuisine stems from that impressive ability to absorb external influences. Asking for menu staples such as chop suey or beef and broccoli in a restaurant in China will likely confuse your Chinese waiter because these dishes are more American than they are Chinese. The traveler, like Chinese food, becomes more adaptable absorbing new influences.

  1. There are places that you can drink water from the tap

The second one mentioned that he was blown away by how different cities operated so differently – from spanking modern Singapore to the more tradition-bound London, from the right-hand drive New York to the left-hand drive Adelaide. The pomp of a Queen’s Day parade imprinted on him how the government in the UK was vastly different from our (American-influenced) presidential system. But what he was most surprised about was how in some countries, you can drink water right from the tap! There is indeed more than one way to skin the cat and the traveler becomes more accepting that different ways can work equally well.

  1. Camila Cabello’s “Havana” is not Egyptian-sounding

My daughter was delighted at the sheer variety of art and music, of architecture and history. One of her favorite places is Seam Reap – a place that is relatively close to the Philippines and yet so different. She believes that travel broadens the “right brain” and elevates the traveler’s creativity profoundly. She chides that I need to travel more often (and more thoughtfully) because I once commented that Camila Cabello’s “Havana” sounded Egyptian to me.

I believe that my three children have given examples of a phenomenon that MIT Sloan’s Peter Senge calls a Shift of Mind that comes from seeing the world anew. Travel broadens the traveler’s sense of identity – beyond the family, the community, and the nation. The traveler begins to see one global village. And from there, it becomes easier to envision and advocate world peace, coming together to stem climate change, and finally ending poverty, prejudice and inequality.

Happy New Year and happy travels, everyone!

Edinburgh castle

A learning opportunity at Edinburgh Castle

It’s a bubble alright

I’ve heard that the best place to see the most magical sea of tulips is in the Keukenhof flower garden in springtime. Expect to be hypnotized by a blaze of colors stretching several hectares. (Pity that the few times I’ve traveled to Amsterdam is always around Fall.)

Tulips can be so stunningly lovely that it is no surprise that in the 17th century, the Dutch master painter Jan Van Goyen exchanged two of his masterpieces for a handful of the short-lived blooms! And it wasn’t just Van Goyen – a classic example of a speculative bubble leading into a sharp market crash is the Tulip mania of 1634-7. Back then, the demand for tulips became so intense that outside of tulip season, tulip “futures contracts” had to be invented! The interest in tulips reached a frenzied crescendo in the winter of 1636 when the futures contracts were changing hands up to ten times a day.

What happened next came completely out of left field. In February 1637, not a single buyer came for an auction in Haarlem due to reports of an outbreak of the plague. It was a wakeup moment for the multitude of tulip traders. The price of tulips had risen far and beyond the ornamental and the hobby value of the flowers. Overnight, the bullishness turned into panic. Panic sent the price of tulips crashing, leading to economic crisis for  the Dutch middle class that same spring.

Since that time, each and every financial market crash has been referenced to the grand-daddy of market crashes, the Dutch Tulip Mania.

Today, there is a lot of chatter about the phenomenal rise in the value of the Bitcoin as Tulipmania 2.0.

What goes up ….

Don and Alex Tapscott have evangelized through their book  Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World and through articles in Fortune and other business journals about how the underlying technology of Bitcoin – Blockchain –  will completely transform financial services and payment systems. Indeed, the technology is likely to be profoundly disruptive and Bitcoin is merely one of a myriad of use cases.

Bitcoin is a cryptocurrency. It is meant as a substitute for the many fiat currencies of the world such as the US Dollar or the UK Pound. Last week, the value of Bitcoin has reached a record high of US$ 17.5 thousand and the murmurs that Bitcoin is merely the latest irrational exuberance of the financial markets have grown ever louder.

Long Island Ice Tea is a New York based beverage company that has been unprofitable for some time. In a bid to turn its business around, it decided that it will change its focus away from non-alcoholic beverages into blockchain-based opportunities. While it has not taken any concrete action to implement its new vision, the company did quickly manage a change of corporate name into Long Blockchain Corporation.

The name change led to an astonishing 289% rise in the Company’s share price.

Long Island Iced Tea Soars After Changing Its Name to Long Blockchain.

Iced tea

Refreshing iced blockchain with a slice of lemon

The story of this company points strongly to the emergence of yet another financial market bubble. Indeed, is a medium of exchange like the Bitcoin worth US $ 17.5 thousand in the midst of several globally accepted reserve currencies such as the US Dollar, the Euro and the Japanese Yen whose Central Banks are seriously looking into issuing their own cryptocurrencies?

Bitcoin is biggest bubble of them all, and it’s the Fed’s fault, says Ron Paul

Global payments is in a state of flux and will perhaps remain so in the short-term. Until we see the impact of the initiatives of the world’s central banks to integrate cryptocurrencies into the global financial order, the jury is still out for Bitcoin and the other cryptocurrencies seeking to replace the world’s reserve currencies.

That bitcoin speculators exponentially outnumber legitimate users reminds us to never forget that the paper profits of the countless Dutch tulip traders in the 17th century eventually ended in a tragic economic catastrophe. This is one instance where gravity will prevail: what goes up will come down soon enough.

Coming soon: country as a service!

The rush of the US towards backwardness can be breathtaking. First, I read in the news that Donald Trump’s FCC voted to repeal a 2015 regulation that prohibited broadband companies from blocking or slowing access to websites or services.  Then I discover that the State Department’s Office of International Communications and Information Policy does not offer any new material other than what is in the Obama administration archive!

ICT

The US is very busy advancing the global digital economy

Watch this video explaining net neutrality using beers in a bar

What you need to know about the FCC’s net neutrality repeal

The retrograde developments in the US got me curious and drew me to that universal wellspring of knowledge  – the Google search bar – to find out which  are the most high tech countries in the world.  I came across the Networked Readiness Index rankings as a way to gauge the ability of countries to innovate in a digital economy.  At the top of the list are the usual suspects – the US, Germany, UK, Japan, Singapore, Finland, the Netherlands, etc. However, two names stood out for me – Luxembourg at No. 9 and Estonia at No. 22. The latter, especially since I even had to check a map to be sure where in Eastern Europe it was exactly.

Networked Readiness Index 2016

And what a find Estonia turns out to be!

After the collapse of the Soviet Union, Estonia methodically and purposefully sought to develop a Unique Selling Point (USP) while at the same time upgrading government services to its 1 million or so inhabitants. The government pushed for ICT education for its citizens and issued a ID card with a chip, a pin code and a USB reader that in combination forms the digital identity of the citizen. It is also the primary means to receive online services conveniently following a “once only” policy which dictates that no single piece of information should be encoded twice.

Today, citizens can vote from their laptops, challenge parking tickets from home, buy a house or apply for a loan and have the system pull their data—income, debt, savings—as may be required. There’s nothing to fill out in doctors’ waiting rooms, because physicians can access their patients’ medical histories. This year, the average Estonian takes only three minutes to complete his tax declarations.

Estonia has managed to offer integrated government services with the safest, privacy friendliest system ever. It is no surprise that it is recognized as the Champion of Europe for the online provision of public services. The transparent, no-contact public service has allowed the country to rise to No. 22 out of 176 countries in the 2016 Global Corruption Index of Transparency International.  In comparison, the Philippines is no. 101. The government estimates that it has also saved 2% of GDP in foregone salaries and operations costs.

How Estonia became the most digital country in the world

Forbes: How Estonia became the digital leader of Europe

Be a Virtual Estonian Citizen

In December 2014, Estonia had an idea that not only Estonian inhabitants, but everyone in the world, should be able to use the country’s digital infrastructure. For €100, anybody over 18 years can acquire e-Residency from over 200 locations worldwide. With your card and pin code you’re granted access to Estonia’s user interface and you’ll receive a digital authorization tool. Your e-Residency gives you access to European payment providers, allows you to start your company digitally,  provides you with various financial and technological tools. You can close a deal using a smart contract, for instance.

The day following the launch,  4 thousand persons from 150 countries had already subscribed.  To date, there are 28 thousand e-Residents – secure in the thought that the backbone of Estonia’s digital security is a blockchain technology called K.S.I.

The New Yorker: Estonia, the digital republic

Estonia believes that their e-Residency project will evolve into something significant as more location independent businesses are born. In April 2016, Estonia flippantly launched the website ‘Country OS’. The site describes the country as a service subscription as follows:

Revolutionary cloud-based country management tool for modern tech-based countries. Get your country management efficiency to a whole new level.

I just can’t wait to outsource our government …..

Christmas market in Estonia

Happy Christmas from e-Estonia!

 

 

 

March to Prosperity: A History in Pictures

Ninang Riza of UNTV fame feels very strongly about improving the money handling skills of the needier sectors of our society: those who often find themselves in debt need to be equipped with the ability to find a way out. She thought that a sprinkling of basic economics should be part of the skills base for money-mindedness. More than a year ago, she challenged me to chat about economics in her TV program. I hesitated because beyond the challenge of squeezing the concepts into practical everyday tips and beyond explaining in a crisp 30-second sound bite, I also needed to speak in plain Taglish[i]!

She explained that it’s not as difficult as it seems and all it needs is a little creativity. She mentioned that she already spoke about GDP in her program and even differentiated it from Gross National Product or GNP. GDP means “Gawa Dito sa Pilipinas”. GNP means “Gawa Ng Pilipino”. Easy, right? That level of creativity is the Holy Grail, right there.

Back to our topic from the last blog post

In my last blog post, I introduced the term per capita GDP as a measure of the affluence of a country’s population. We will now use this measure to establish how we, as a people, have fared through recent history.

The Good Old Days

We always hear about how the Philippines was the second wealthiest country in Asia next only to Japan. I thought that the 1930s would a good period to try to show this. The country had started to flourish after the Spanish and American wars. Old Manila was both prosperous and charming, even drawing comparisons to Paris.

Manila in the 1930s

Manila in the 1930s

The chart below traces per capita GDP back to 1934 and shows that we were close to being second after Japan and Hong Kong. There are a few ways to argue we were really second. One, Hong Kong is an autonomous territory but not a country. Another is that the population of Hong Kong is so small compared to the Philippines that our economy was far larger than Hong Kong’s back then.

Per capita GDP of the Philippines and the First Wave Tigers

Per capita GDP of the Philippines and the First Wave Tigers

A few other things need to be pointed out from the chart. The acceleration of economic growth in Hong Kong and Japan is very visible from 1954. Both countries embarked on an aggressive drive to industrialize in the early 1950s. Hong Kong’s textile industry grew, helped by a US embargo on China beginning with the Korean War. Japan had started to produce very small cars such as the Toyopet Master.

1955 Toyopet Master

1955 Toyopet Master

For purposes of this chart, I needed to combine the statistics for North and South Korea, which split into two separate countries in 1950.

Korea split into two in 1950

Korea split into two

Singapore did not become independent until 1965, when it split from Malaysia.

Singapore independence

Singapore Independence

The Bad Old Days

Rabid Marcos fanatics glibly claim that the country was second to Japan during the Martial Law years.

In reality, comparing the Philippines versus Japan, South Korea, Hong Kong and Singapore during the Martial Law years is not even meaningful because the Philippines would merely be flat-lining at the bottom of the graph against the massive increases in affluence of those countries. A comparison of per capita GDP with the emerging tigers of that period – Thailand, Indonesia, and Malaysia – will be more instructive.

The Philippines and the Second Wave Tigers

Per Capita GDP of the Philippines and the Second Wave Tigers

Note how all four countries were clustered closely together around the beginning of military rule. Despite the borrowing binge by Marcos at the beginning of the 1970s, the stranglehold of his cronies over the economy choked all momentum out the economy. As a result, our country could barely match the growth rates of the other countries. Further, the Philippines was the only country to lose ground during the period when the per capita GDP sank between 1980 to 1984 – bringing untold suffering on the Filipino people. By the time of the 1986 People Power Revolution, historical laggard Indonesia had caught up with our country.

A Double Dip

The last 30 years saw a growing income gap between the Philippines and its neighboring countries.

Per Capita GDP in the Last 30 Years

Per Capita GDP in the Last 30 Years

The 1997 Asian financial crisis was a mere breather for the region’s extraordinary progress, with Indonesia being the worst affected. The Philippines saw its per capita GDP dip a second time in recent history during the term of Gloria Arroyo (even after the massive election spending in 2010), allowing Indonesia to once again overtake our country. Despite that drawback, our strong economic growth during the term of Noynoy Aquino allowed the country to keep in step with the rest of the ASEAN region. At the end of his term, there is renewed hope that the Philippines may at last join the Asian community of tiger economies. President Duterte has big shoes to fill indeed.

[i] A mix of Filipino and English often spoken in the Philippine cities.

Pinoy Ekonomiks 1: What is GDP?

In the next few blog posts, I will bravely attempt to make economics accessible to all those who are not Filipina mothers. As we know, Filipina mothers are already the best economists in the world, amazingly able to make ends meet for their large families. This series of blog posts is meant for those of us that chose that other elective course in college just to avoid this dreaded subject matter. I admit that I did take up Economics myself and was foolhardy enough to take it under the eminent Mareng Winnie. In that economics course, I discovered the full depth and breadth of my intellectual limitations – but that is another story.

Whenever people gather together and imbibe their favorite pale Pilsen, the conversation would sometimes drift to how well the government is managing the economy. People who dislike the government will naturally argue that the country’s economic performance is poor. These malcontents will conveniently cite that nearby barangay (village) with a lot of informal settlers (or squatters) to support their case. Families living in these impoverished communities suffer in the squalor without any relief for many years. Apologists for the government will cite that brand new mall selling all the fancy gadgets and stylish products or that cluster of new, state-of-the-art buildings at the edge of the city as evidences of the extraordinary health of the economy. As we listen quietly to both sides, we know that the truth probably lies somewhere in between. In order to discover this truth, we turn to the dismal science called Economics.

Gross Domestic Product

The most common (and objective) way to measure a country’s economic performance is through its Gross Domestic Product or GDP. GDP is calculated by adding together the value of all the goods and services produced in a country. In a poor country, this means adding the value of the rice and chicken produced, the value of the tricycle rides taken by the commuting public, the cost of all the “salakot” and “bakya” made, etc. In a rich country, it will include all the basic commodities produced similar to what you find in the less affluent countries plus the cost of the Ferraris built, the iPhone 6’s produced, the healing spas given, the skyscrapers constructed and the Maroon 5 concerts held. In short, the greater the value of the products produced and services delivered in a country, the healthier its economy is supposed to be.

Philippine GDP

The GDP of the Philippines in 2014 is USD 285 billion. By itself, this figure is largely useless for most of us. One way to make this figure understandable is to compare the latest GDP figure against the historical trends. The bar graph below shows the GDP levels from 2006. Note the steadily rising GDP under the current Aquino administration beginning 2010. This is good news as this indicates a steadily growing level of economic activity every year.

GDP graph

We are a predominantly Catholic country that loves to raise large families. Larger families need more soap bars, more shirts and pants, and more Starbucks coffee. GDP should naturally grow as the population increases.

How do we know then that the rising economic activity reflected in our GDP numbers is not just the result of a growing population but can be attributed to rising affluence instead? For this purpose, we can calculate per capita GDP – this represents the average share of each Filipino of the aggregate GDP. The line graph below shows that the per capita GDP all the way back to the term of Diosdado Macapagal as president. There have been ups and downs but has been steadily increasing from around 1993 and has been picking up strongly from 2010. Some people will look back nostalgically at the Martial Law days and refer to those years as the “golden age” in our economic history. Per capita GDP tells a starkly different story: The line graph shows that the per capita GDP at the end of the Marcos regime in 1986 is barely higher than the per capita GDP in 1972, 14 years earlier. The entire period of military rule and dictatorship resulted into an economy that was largely stagnant, notwithstanding the bump in the middle. The good old days were hardly good at all, as it turns out.

Per capita GDP

The sharp rise in per capita GDP during the term of Benigno Aquino is a very positive development, but with one cautionary note. Per capita GDP shows an average figure and does not necessarily mean that each Filipino is being benefited equally. It may be that some Filipinos are benefiting more while others are benefiting less. Income inequality is a topic I can spend time on in the future, if there is any interest from the readers.

Another way to make the GDP numbers more understandable is to compare the Philippine GDP trends is those of some other countries. Some of us like to compare ourselves with Singapore or Japan or Vietnam. We can do this comparison, of course, but this will have to wait until the next blog post. Abangan ang susunod na kabanata!

Oh PSE, I beg to disagree

A tale of two Presidents

I heard a story about how President Ramos quarterbacked the country’s response to the collapse of the Thai Baht in July 1997 when the BSP Governor and the Secretary of Finance often found themselves at odds in steering the economy through the oncoming financial storm. Ramos ended his term in a fine display of skillful crisis management: The Philippines survived the worst part of the economic meltdown relatively unscathed as Ramos’ term was winding down.

When Joseph Estrada assumed the Presidency in June 1998, the economy had somehow started heading south as the impact of the crisis spread throughout Asia. The country registered negative overall growth in 1998. The lackluster economic performance continued even as our neighboring countries started to turn the corner.

Noynoy Aquino and the economy

Noynoy’s critics argue that the Philippine economy grew throughout his term despite his performance. We can go into a lot of detail about what Noynoy’s government did to contribute to the economic growth but that would turn this simple blogpost into an academic paper. I will merely cite the anecdote about FVR and Erap to argue that, for better or worse, the competence of the President and the soundness of his policies do have a substantial impact on national economic performance. I will also point out that during Noynoy’s term, the great majority of countries across the globe experienced economic difficulties as contagion from the slowdown in the US, Europe, and China affected them. The Philippines’ growth was actually being driven by domestic demand more than by the performance of our trading partners. It was the growing affluence of our people as a whole and their confidence about their future that drove our country’s GDP growth in the last few years.

Another commonly foisted argument that it is just the corporate interests that benefited from the Aquino government. This simply does not hold water – companies need to sell to people to make their profit targets. Our economic resiliency stems from strong domestic demand.

The future with Mar Roxas

There is no debate that the benefits of economic growth should be more inclusive. Many have benefited in the past but many, many more need to have access to education, to employment opportunities, to medical services, and to a clear path out of poverty. Only Mar Roxas among our Presidential candidates has the training and the experience to manage a complex and frustratingly dynamic superstructure as our national economy. Singapore has a battery of well-trained and well-experienced technocrats to run its economy of 5.5 million people. With all due respect to all his achievements in Davao, the country cannot be run by an aging, provincial mayor with a penchant for the crude, anachronistic, and insensitive responses.

I have seen articles that try to assuage our people that the economy has sufficient momentum from the Aquino years and that we should be fine irrespective of who wins the election. I believe that this is what the brokers at the Philippine Stock Exchange are thinking.  I beg to disagree. The recent experience with the transition from FVR to Erap tells me that without Mar building greater momentum and reaching that tipping point in about two more years where the Philippines will most certainly be top Asian tiger, we might just find ourselves regressing to the global mean – less jobs, less opportunities, spreading poverty and greater unrest. In the latter case where Mr. Mayor becomes President, the poor and dispossessed can only get more disappointed, disillusioned, and angry. (PSE brokers with your heads in the sand, this means declining stock prices.)

For the sake of the country, who are you voting for now?