Sunday, October 26, 2008

A DECEPTION OF GARMENT SIZES

A previous blog entry discussed the epidemic of obesity that exists now in America. Concurrent with this is an unspoken but accepted agreement betwen suppliers to "benevolently deceive" the American market.

The original article was reported by CBS News in 1995. Click here for the full text of the article. Salient points follow:

A common way of making overweight people feel smaller is by expanding the world around them. Architectural designers call it “framing.” What is its relation to garments? Well, clothing designers “frame” constantly. Garment sizes depend heavily upon perception so fashion designers frame sizes to project the image that consumers want.

Garment sizing is a major topic in fashiom design. Over the past 20 years, the American fashion industry has manipulated clothing sizes to accommodate its widening public, especially women. To show how sizing has changed over time, size-eight dresses from the 1980s, 1990s, and today were compared. The waist circumference on a 1984 dress was 25 inches. On the 1995 dress, it was 26 inches. And on a 2004 dress, it was 27-1/2, a two-and-a-half inch difference from 1984 to 2004. Furthermore, “the sizing deception is a product of American ingenuity. Sizing standards in other parts of the world have remained constant. The Europeans have an entirely different view of fashion and their sizing hasn’t changed.”

The deception is intentional, because although the woman has gotten bigger, her garment size stays the same or gets even smaller.


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Saturday, October 25, 2008

AN EPIDEMIC OF OBESITY

There were far fewer overweight people in 1985 when I arrived in America. That recollection didn’t come to me until I read the following article: Ten things the food industry doesn’t want you to know.

Another investigation behind the scenes. Okay, it was worth skimming. Unfortunately, as I went down the list I slowed down. Hence this entry.

Yes, 23 years ago there were far fewer overweight Americans. I do remember that.

So I let my curiosity do the walking and I unearthed one article. It was a sign of the times and also quite disturbing.

THE WIDENING OF AMERICA

CBS News reported it in 2005. The original article links here. Here are the salient points.

Note that this article was written just before the housing bubble burst (brought about by the sub-prime crisis). Its significance? McMansions. Sorry but this is a high-context entry. These two links will explain the term but it’s up to you to connect the dots. Link-1. Link-2.

Here are the salient points:
NEW YORK, July 24, 2005

(CBS) All over America, the buzzword is big: big houses, big malls, big cars, and big Americans inside them.

“Sixty-five percent of Americans are overweight or obese. Overweight is the new average," observes International Design magazine. Designers and urban planners are creating an America that accommodates its increasingly overweight population, but you'd never know it.”

“There is tremendous profit potential out there for companies and designers who cater their products to obese people. The challenge, though, is to give them that product that allows them to function in everyday life more easily and more comfortably without making them feel disabled, without calling attention to themselves. Fat is a four-letter word.”

One of the most common ways of making overweight people feel smaller is by expanding the world around them. Architectural designers call it “framing.”

“A person who is big does not want to look big. So if their house is bigger, they will look of a more average proportion.”

Big homes, bathrooms, beds and cars can provide a large frame for people in private and now, when they go out to public spaces, architectural regulations make it so everyone fits most anywhere, anywhere, that is, that was designed recently.

A stadium seat from 100 years ago like Soldier's Field in Chicago might have been 16 or 17 inches, maximum. When they designed the new Soldier’s Field the expectation for new seats was many inches more than that.

The same applies to public transportation around the country. It has become roomier.
AN INHERENT CONFLICT OF INTEREST

Now, go down that list with me. For brevity, each item was stripped of further explanation. You can read the entire article by clicking here.

Ten Things the Food Industry Doesn’t Want You to Know
by Adam Voiland, Oct. 20, 2008


Two nutrition experts argue that you can’t take marketing campaigns at face value.

With America’s obesity problem among kids reaching crisis proportions, even junk food makers have started to claim they want to steer children toward more healthful choices.

In a study released earlier this year, the Centers for Disease Control and Prevention reported that about 32 percent of children were overweight but not obese, 16 percent were obese, and 11 percent were extremely obese.

Food giant PepsiCo, for example, points out on its website that “we can play an important role in helping kids lead healthier lives by offering healthy product choices in schools.” This page offers to provide nutrition information for all Pepsi products. The company highlights what it considers its healthier products within various food categories through a “Smart Spot” marketing campaign that features green symbols on packaging. PepsiCo's inclusive criteria
explained hereaward spots to foods of dubious nutritional value such as Diet Pepsi, Cap'n Crunch cereal, reduced-fat Doritos, and Cheetos, as well as to more nutritious products such as Quaker Oatmeal and Tropicana Orange Juice.

But are wellness initiatives like Smart Spot just marketing ploys?

Such moves by the food industry may seem to be a step in the right direction, but ultimately makers of popular junk foods have an obligation to stockholders to encourage kids to eat more—not less—of the foods that fuel their profits, says the pediatrician co-author of a commentary published in the Oct. 15, 2008 issue of the Journal of the American Medical Association (JAMA) that raises questions about whether big food companies can be trusted to help combat obesity. The other author, a professor of nutrition at New York University, both of whom have long histories of tracking the food industry, spoke with U.S. News and highlighted ten things that junk food makers don’t want you to know about their products and how they promote them.

COMMENT: There is, in other words, an inherent conflict of interest. It doesn’t mean that these companies are doing wrong. It just means that there is a natural conflict of interest.


  1. Junk food makers spend billions advertising unhealthy foods to kids.
  2. The studies that food producers support tend to minimize health concerns associated with their products.
  3. Junk food makers donate large sums of money to professional nutrition associations.
  4. More processing means more profits, but typically makes the food less healthy.
  5. Less-processed foods are generally more satiating than their highly processed counterparts.
  6. Many supposedly healthy replacement foods are hardly healthier than the foods they replace.
  7. A health claim on the label doesn't necessarily make a food healthy.
  8. Food industry pressure has made nutritional guidelines confusing.
  9. The food industry funds front groups that fight anti-obesity public health initiatives.
  10. The food industry works aggressively to discredit its critics.


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Tuesday, October 21, 2008


THE FIVE SECRETS YOU MUST DISCOVER BEFORE YOU DIE

This is one of those special messages that should mean something to everyone. Normally, I’m skeptical about unsolicited or chain letter-type messages but I clicked on this one because I’m familiar with the publishing house, Berrett-Koehler (BK) Publishers. BK is an independent publisher with an ambitious mission: to create a better world.

But back to the five secrets. The content was created by John Izzo. It’s a six-minute movie with musical accompaniment so confirm that your speaker is turned on. Click here for the message that I think will touch you.


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Monday, October 20, 2008

A BIG BET ON RUSSIA: BP's PREDICAMENT

BP—formerly known as British Petroleum—is currently facing the largest crisis in its storied 99-year history. The crisis is full of superlatives. By any measure, it’s enormous. It involves tens of billions of dollars and the direct employment of almost 100,000 Russians. It’s being closely watched as a harbinger of Moscow’s real intentions—economically and militarily. It has the potential to bring down a giant company. And it involves numerous ethical and legal issues.

Befitting the largest British company, BP shares trade primarily at the London Stock Exchange. Energy is currently a hot industry. Last year, BP was the fourth largest company in the world measured by revenue, preceded only by Exxon-Mobil and Royal Dutch Shell.

In 2003, BP bet big. For starters, it invested $6.15 billion for 50% ownership in a joint venture called TNK-BP. This was just for starters. BP took this gamble not only because of the enormous potential of Russia’s Siberia but also because it’s traditional haunts in the North Sea, Gulf of Mexico, and Alaska had become prohibitively expensive, its proven reserves were perilously low, and its global oil production (on which its revenue depended upon) was declining. In short, BP was desperately looking for new fields (literally) to mine.

But why Russia? Virtually all the other oil majors, with the exception of Royal Dutch Shell, had steered clear of it. BP’s peers had concluded (and it appears, rightfully so) that Russia’s legal fabric was still unproven. Why is its legal fabric so important? Russia has historically been an autocratic state. Its recent behavior in Georgia is indicative of the way the Russian government pursues its objectives. It shoots first and then presents the world with a fait accompli.

BP was undeterred. It forged ahead. The promise of enormous gas and oil reserves, low cost, and the advantages of vertical integration—from the ground through the pipes to the consumer—was irresistible. It was willing to risk bad governance, a corrupt judiciary, venal bureaucracy, combative local partners, organized crime, and capricious legislation. It boldly proclaimed that Russia is changing for the better. Russia’s fledgling democratic society is becoming stable. Russia needs foreign investment and will give its investors at least a level playing field. It has to behave like a civilized country of laws for it to retain its status as an inviting place for investment.

It seems to have fooled itself. Whether or not it deluded itself, this is a dangerous type of managerial delusion. It puts a lot of jobs, not to mention resources, at risk—if the decision, in fact, was a product of managerial delusion.

A HISTORICAL PERSPECTIVE

I think Senator McCain, the current Republican candidate for the US presidency, said it best. In a campaign interview last month, he said:

Let me put a little bit of historical perspective on this. I think all of us had [developed] a kind of a romanticized view of the world after the fall of the Soviet Union. There was a period of time when we saw dramatic progress around the world of countries attaining democracy [referring primarily to the former vassal states of the USSR]. Many assumed that it was almost automatic that China and Russia would inexorably [follow] a path toward democratic and free societies. Then we saw Tiananmen Square, the chaos [including the attempted coup d’├ętat] in Russia and their diminished stature in the world. Now Vladimir Putin and company are eager to reassert [their centuries-old self-image of being one of the major powers in the world].

So, in other words, great economic progress did not mean the diminishment of autocracies. I still believe that history will show that democracy and freedom go hand in hand with economic development, sophistication, and the technologies that enable the free flow of information. I think we all are realizing that progress is not going to be as rapid as we may have thought it was going to be in the halcyon days of the 1990s.

Assassination continues to be one of their tools (referring to Alexander Litvinenko), oil, brazen attacks on civilians (in Chechnya, etc.), outright attacks on the pretext of protecting its citizens (in the breakaway provinces of South Ossetia and Abkhazia in Georgia).

I don’t think we’re going to reignite the Cold War. I don’t think there’s going to be a nuclear confrontation with Russia. I do think there’s going to be a dramatically different relationship.

We should always try to maintain relations and communications with every country in the world. But never confuse national interests with personal relationships.
Comment: Incidentally, that’s what President Bush did back in 2001. His famous remark was “The more I get to know President Putin, the more I get to see his heart and soul ...the more I know we can work together in a positive way.” Sorry George, you’re very wrong on that one. Putin is a former KGB agent. What were you thinking?

Three short years later, by 2006, TNK-BP went on stream. In its 2007 Annual Report, BP announced that TNK-BP accounted for 25% of its global oil production and contributed 15% of its net income. From 2003 to 2006, BP claimed that it had earned enough dividends to recoup its initial investment. Indeed, by the third quarter of 2006, BP’s share of revenue amounted to $6.9 billion. (I’m not clear on the source or nature of these “dividends.” The term might be used generically.) Not so prominently mentioned was the fact that BP has no other major projects on stream that could take TNK-BP’s place.

The economic climate turned around in 2007. Russia had tasted the wealth and power that comes with being the major supplier of Europe’s energy needs. Now the real Russia came out.

RUSSIA MAKES ITS MOVES

In December 2006, it forced Royal Dutch Shell along with its Japanese partners, Mitsui and Mitsubishi, to sell its controlling stake in Sakhalin-2. This was a $22 billion stake. This is not an amount to trifle with—even for the oil majors. Russia was able to impose its will anyway. How? It used a government environmental agency (just like the EPA of the US government) to threaten to freeze work on the project.


Since then, Russia has focused its efforts on harassing BP. It uses a combination of tactics—the same environmental agency, the tax revenue police, the justice police, and, most ominously, the FSB (the modern-day successor of the KGB).

The results were predictable. There is no contest between one of the largest companies in the world against the largest country in the world.

By June 2007, BP agreed to sell one of TNK-BP’s prize assets—one of the world’s largest natural gas fields—to Gazprom. The latter is a Russian state company and a monopoly. The leverage used by the Russians was typical: the threat to revoke the company’s license to develop the gas field. The Russians window-dressed the transaction. Gazprom would “buy” it from BP for $700 to $900 million. BP will take a huge opportunity loss on this. Analysts estimate that the gas field, called “Kovykta,” was capable of earning between $1.5 to $2 billion. Furthermore part of BP’s compensation will be the opportunity to invest another $3 billion and form a joint venture with Gazprom.

Comment: Thank you very much. First, you force me to sell at a loss. Second, youre generous enough to give me another opportunity to lose more money.

BP’s reaction was puzzling, to say the least. Its CEO welcomed the arrangement as the start of a new strategic partnership with Gazprom. Furthermore, in the same speech (given in Moscow, incidentally), BP’s CEO praised BP’s business progress and encouraged other companies to invest in Russia. He called the gas field dispute just “one of those bumps in the road.” Of course, this was probably smoothing the crisis on the surface. Wait and see and until then, pretend everything is going smoothly.

Thirteen months later, in July 2008, BP-TNK’s CEO was effectively ousted. Moscow’s tactic: the non-renewal of the expatriates’ work permits. Affected with the CEO were 150 senior engineers of BP. Moscow presented BP with one small consolation—the CEO was still the CEO and could continue to run the company albeit from overseas.

CAN WE DRAW SOME CONCLUSIONS?

Would you agree that the following conclusions can be drawn from this story?

  1. Russia is pursuing a policy of state control. It lures Western oil companies and, over time, makes them junior partners. It needs Western investment and technology and is only intent on building its own capabilities.
  2. It will not use bald-faced tactics to expropriate Western investments. Instead, Moscow uses its entire arsenal of laws and regulations to harass its foreign partners until it achieves its goals. Time and location are on Russia’s side.
  3. Russia’s power elite, led by Putin, will not hesitate to apply these same tactics to domestic enemies. The former owner of Yukos, Russia’s first large oil company, dared defy Putin in 2003. Yukos was looted and eventually absorbed by Russia’s state owned oil company, Rosneft. As for the billionaire who defied Putin, he now languishes indefinitely in an obscure penal colony close to the Russian-Mongolian-Chinese border. Apart from him the other big losers were Western banks who were owed more than $1 billion.
  4. It’s obvious that Russia is leveraging its power as the single largest fossil fuel producer (second after the entire OPEC cartel) to re-arm itself. Russia’s goal is to return to its place as one of the world’s superpowers. This goal can only be attained by developing its industrial and military capabilities. To this end, it is vital for Russia’s oil and gas to stay within Russia’s border until it reaches its European customers. This is a major reason for its hostility to the West and to its former satellite states for daring to build a trans-Caucus pipeline.
WHY DID BP MAKE THIS DECISION?

Why did they take such an enormous risk especially since most of their peers, save another one (Royal Dutch Shell), played it safe?

It won’t do much good to second guess the board’s decision. The agreement to go ahead was signed with much publicity. Putin even flew to London for the event. BP’s decision doesn’t seem like it was made secretively.

A clue may be found in the reported condition of BP’s board in 2001 till 2003. It seems that BP’s board was dysfunctional. The CEO, Lord Browne, led autocratically and not by consensus. He was forced out in 2007—for reasons unrelated to BP’s Russian investment. Various unflattering portraits of him can be found on the Web. Four examples are:
I mentioned decision-making delusions that plague executives earlier. Click here for a link to a blog entry that discusses the subject. It’s based on a critical review of a book entitled The Halo Effect.

Click here for a link to a guide for making good decisions:.

Bottom line: The shareholders (among many other observers) probably held their collective breath for the first few years. They must have been pleased, even euphoric, at the results as reported by the 2007 Annual Report. The rapidity of successive setbacks that began in 2007 to the present day must be shocking them.

I suspect the board fulfilled its responsibilities—ethical and legal—to its shareholders and to the greater society. Fortunately for management, the results from the first few years validated their decision. I wonder if any activist shareholders plan to file a derivative suit or the equivalent in the UK. But what would the suit’s legal theory be based on?

A final note about Lord Browne: he was rewarded with a parachute (a very, very modest one by US standards—it was only $4 million!) when he retired.

THE ROCKY RELATIONSHIP BETWEEN THE US AND RUSSIA

The relationship of the US with Russia has always been rocky. The US helped Russia beat back the Nazi onslaught. It wouldn’t be an exaggeration to say that without the help of the US, Russia would’ve fallen.


After the USSR fell in 1991 and the US poured billions into assisting the former adversary, I wondered what the heck was going on. I could understand our assistance in so far as the USSR’s former nuclear arsenal was concerned; we certainly don't want any of those weapons to fall into the wrong hands. Unfortunately the technology, i.e., the skills, is more difficult to control. Witness the rogue Pakistan physicist who shared his knowledge with countries whose relationship with US is currently on edge (North Korea, for example).

WHAT NEXT?

In retrospect, it appears that BP was reckless (or bold, depending upon how things would turn out) in investing in Russia. A capitalist-based economy is still new to them. The majority is not used to democracy or freedom. Their present system is merely a continuation of the corrupt system of Communism.


A badly skewed socio-economic system invites corruption on a massive scale. Russias entire wealth is concentrated in the hands of about 100 families. It has a population of almost 150 million and a GDP of about $2 trillion. There is a very thin middle class. In many ways, despite its imposing military, Russia is a third country. (National Geographic, 2008)

So returning to BP and its current predicament, it’ll be interesting to see what happens in the next 24 months.



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Sunday, October 12, 2008

CAN WE OBJECTIVELY MEASURE THE BENEFIT OF FIGHTING THE WAR IN IRAQ?

I believe it’s possible. There’s an economic tool called marginal analysis that can do it. After reading both parts of this blog entry, tell me if you agree.

Are you familiar with the concept of marginal analysis?

It’s an economic concept that you actually apply in everyday life. We make important decisions based on the concept all the time. Let’s use a real-world example.

How many laptops would you like to have? One or two? For most people, one laptop is sufficient, would you agree? You enter a store with $10,000. This is more than enough money to buy two powerful laptops. Would you buy one or two? If you’re like most persons, you’d buy only one and either save the remainder or spend it on another toy. The additional benefit you would derive from a second laptop is marginal (i.e., minimal). That’s the reason why you probably wouldn’t buy a second one. But let’s say you bought that second laptop anyway. How likely is it now that you would buy a third laptop? You probably wouldn’t, would you? In fact, only a very few would.

MARGINAL ANALYSIS EXPLAINED

This is the concept of marginal analysis. The marginal utility (i.e., the additional benefit) you would derive from a second laptop is minimal compared to the marginal utility you would derive from a first laptop. A third laptop will provide even less utility than second.

Marginal analysis, therefore, is concerned with analyzing the value of additional benefits compared to the cost of additional resources. In this case, your resources consist of $10,000. If each laptop cost $3,000, your marginal benefit from the first laptop exceeds the marginal cost of $3,000. In other words, you felt that you gained more—a lot more—by exchanging $3,000 for a laptop. Will you feel the same gain if you bought a second laptop? Probably not. If you’re like most, you would decide that one laptop is enough. In other words, the marginal cost of exchanging another $3,000 outweighs the marginal benefit of owning a second laptop. But let’s say you bought the second laptop anyway, would you take it another step further and buy a third laptop? At this point, 99% of you would say “No.” In other words, 99% of you will decide that the marginal cost of spending another $3,000 outweighs the marginal utility (or benefit) of a third laptop.

Instead of laptops, you can substitute your weekly grocery money and your list of groceries to buy. You could also substitute your appetite. Would you fill yourself up on one dish and not leave room for another? Or would you rather have one of this so that you leave room for that.

This is marginal analysis in action and as this example illustrates, you use it every day.

Marginal analysis is useful because it determines the optimal or best combination of goods and services for a given amount of resources. How about another example? This time we’ll use your hunger as the resource. You sit down to eat. There are three kinds of equally tasty and nutritious dishes on the table. Would you satiate your hunger by eating all of one dish or by eating some of all three? If you ate only one dish, you would deny yourself the benefit of the other two. If you ate two dishes, you would have a tastier and more balanced meal. But if you ate some of all three dishes, you would have eaten the tastiest and most balanced possible meal. It’s in your best interest, therefore, to eat moderate portions of each food in order to have the most satisfying meal. Would you agree?

Marginal analysis determines the point where your marginal benefit is equal to your marginal cost. At that point, you have optimized your choices. Each dish adds to your marginal benefit. Each dish also “costs” you something in the sense that it partially satisfies your hunger.

Marginal analysis can be applied to many things. It can be applied to complex decisions. Like war. Should you wage war on an enemy or find another way to resolve your conflict?

Continued here.


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Thursday, October 2, 2008

PIRACY UPDATE - 2 October 2008

When a religion doesn’t have a defined center, it can become a problem. Islam doesn’t have an equivalent to the Catholic Pope. Instead Islam has a multitude of holy men called imams.

From Wikipedia:
An imam is an Islamic leader, often the leader of a mosque and/or community. Similarly to spiritual leaders, the imam is the man—an imam is always a man since female imams never have been recognized in Islam—who leads the prayer during Islamic gatherings. More often the community turns to the mosque's imam if they have an Islamic question. In smaller communities an imam could be the community leader based on the community setting.
There are conservative imams and there are radical ones. An extremist would have little difficulty finding an imam to support his cause. Need to justify the violence that will kill innocent Muslims during a suicide bombing? Well, try that imam. He doesn't agree? Try that imam instead. You can just keep on going until you find one to justify it.

THE HOLY WAR

In the ongoing piracy, the Christian Science Monitor reported that the French news agency...
Agence France-Presse (AFP) reported that those militants have urged the pirates to destroy the ship and its cargo if they do not get the $20 million ransom they are demanding for the release of the cargo and crew.

A spokesman for the militants told AFP they had no links to the pirates, but would gladly use the tanks in their “holy war” against the Somali government if given the chance.

“It is a crime to take commercial ships but hijacking vessels that carry arms for the enemy of Allah is a different matter,” added Robow [spokesman for Shabaab], whose movement nearly stamped out piracy when it controlled southern Somalia last year....

“The Ukrainian ship is loaded with military hardware that is very important for our holy war against the enemy of Allah and it would have changed the war in Somalia if that military shipment falls in our hands,” he said.
What a convenient excuse, isn’t it?

PIRATES ARE ALSO HUMANS

Let’s not forget that these thugs are also human beings. Today's New York Times quoted the pirates’ spokesman as saying...
NAIROBI, Kenya — The Somali pirates who hijacked a Ukrainian freighter loaded with tanks, artillery, grenade launchers and ammunition said in an interview on Tuesday that they had no idea the ship was carrying arms when they seized it on the high seas.

“We just saw a big ship,” the pirates’ spokesman, Sugule Ali, said in a telephone interview. “So we stopped it.”

The pirates quickly learned, though, that their booty was an estimated $30 million worth of heavy weaponry, heading for Kenya or Sudan, depending on whom you ask.

In a 45-minute interview, Mr. Sugule spoke on everything from what the pirates wanted (“just money”) to why they were doing this (“to stop illegal fishing and dumping in our waters”) to what they had to eat on board (rice, meat, bread, spaghetti, “you know, normal human-being food”).

He said that so far, in the eyes of the world, the pirates had been misunderstood. “We don’t consider ourselves sea bandits,” he said. “We consider sea bandits those who illegally fish in our seas and dump waste in our seas and carry weapons in our seas. We are simply patrolling our seas. Think of us like a coast guard.”
Imagine that! The pirates are the volunteer Coast Guard of Somalia! They just saw a big ship and decided to stop it.

They must think we’re as stupid as they are.


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