Wikileaks

I've refrained from commenting too much about the Wikileaks case as honestly I've yet to digest the whole situation. On one hand I laud the transparency that the project has brought and how it is increasingly forcing big governments and big business to think about the ways in which they are conducting themselves. But on the other hand I also acknowledge that whereas in an ideal world we could have complete transparency, in our sub-optimal world many things can be a lot less painful if not done in the open.

From a big business perspective, I have a hunch that this is in fact a good thing. I've long held the view that companies adhere to a rather intuitive life cycle of birth, growing stronger, increasing inertia, and eventually falling. In the ideal case after a company reaches the threshold level of inertia, the resources are merely freed up to do other things in more efficient fashion. And that is natural. The problem often is that once big business reaches a certain size, it is occasionally difficult to let the company fall. And sometimes the companies may even begin to behave irresponsibly by abusing its commanding market position to help it stay competitive.

To tackle the problem of the undead incumbents, we have some authorities, such as the anti-trust authorities who enforce competition laws. They have been, to an extent, fairly toothless in the past. This has naturally enabled some companies and some individuals within companies to behave irresponsibly and do things that they shouldn't be doing. It is to this issue that I feel that the trend of leaking and whistle-blowing could offer a counterweight. If chances of getting caught if you do bad things gets closer to 1 and the penalty is heavy enough, this should be a clear demotivator for companies to behave in anti-competitive ways. And if this in turn helps to revitalize industries and create a level playing field once again, all the better.

I would apply a somewhat similar logic to the governments. It still may not solve the agency problem where big government fails to dismantle unneeded structures to increase available resources only to build more rigid structures on an already a very rigid system. But leaks and whistle-blowing will hopefully make big governments think twice about how to conduct its affairs and whether to engage in activities that cannot stand daylight.

Of course there may be multiple problems with the above. Perhaps the irresponsible people opt instead not to document any bad things they are doing and only rely on word-of-mouth instructions and guidance when coordinating their schemes. And perhaps governments may be less inclined to discuss diplomatic issues if they fear that they can't speak in a direct and frank fashion lest someone gets a hold of the material. But despite this, big business and big government is getting increasingly out of control and the checks and balances mechanisms are either not working or completely nonexistent. So maybe, just maybe, the media will now begin to take a more active role again in keeping these increasingly strong actors on their toes. I would like to think that this will have longer term implications and help bring more health to the whole system, but at the same time I am fearing the worst and thinking that maybe nothing large will change in the long term and that this is just normal oscillation within the system.

Requiem for a Tower

Rules

Nicholas Antongiavanni writes the following about how young men should dress:

For it is very ordinary and reasonable that the old should envy the young, to whom it is given to enjoy so many more pleasures, so much more intensely, for so much longer. Truly, we would marvel if they did not envy them. And this envy extends to dress, because old men wish to reserve to themselves the few pleasures which remain to them to enjoy. Thus they get angry when they see young men wearing double-breasted suits and French cuff shirts. It does not seem reasonable to them that young men should enjoy the trappings of eminence before attaining the reality.

He then continues at a later point:

In addition to those modes mentioned above, these especially are to be avoided by the young man: three-piece suits 8especially if the vest is double-breasted), contrast-collar shirts, two-tone or crocodile or anything but solid calf shoes, hats, pocket watches, bow ties, handkerchiefs, bold patterns and bright colors.

But some things are safe ground for young men:

... blazers and khakis, single-breasted suits, plain black shoes, shirts with barrel cuffs and button down collars, striped ties, belts, subtle patterns and somber colors. And if someone should complain that these rules leave him no room within which to make a profession of style but consign him to dreariness, I reply that necessity forces them on him.

Bearing the above in mind and by reflecting against them, I must note that I have scored very badly. Amusingly enough it seems that based on my experiences in Finland, it is the younger folks who tend to be offended by my dress whereas the older people tend to be fairly supportive of proper dress.

But I will concede and leave my elders with the pleasures of wearing hats and pocket watches. As for the other points, everything's fair game...

A trip down memory lane...

While clearing my closets at work I stumbled on a January 2007 issue of The Economist and got around to browsing through it. Some fun quotes below:

The [American] housing market downswing may not yet be over...

And:

The creation of new instruments, such as complicated derivatives, probably makes that financial system stronger in the long run ... But some of these instruments have yet to be tested by a sever revession or a big corporate default. ... there could be an almighty scrampble for the exits when the trend changes

What does a car sound like?

Everyone knows that cars have engines and the fast cars have engines that roar. A car sounds like something and the best car geeks can even determine what the engine and thus what the car most likely is based on the noise it emits. Yet now with the emergence of hybrids and electric cars, the sound of the car is changing. Some parties have now started to worry about whether pedestrians are able to hear the cars anymore and if they can't that this would have implications regarding public health.

What's the solution? Well, as they did with the Chicago river, the logical answer is to reverse the flow of the river. Or in this case to make electric cars emit a sound that resembles that of an roaring internal combustion engine. Voila, problem solved!

But seriously, are the guys jumping over the problem a bit too easily? I personally have noticed that it doesn't really matter what the car actually sounds like as most of the time in urban areas where the problem is most frequent, people tend to listen to their music players with noise-canceling headphones. So the problem actually isn't solved and with the increasingly widespread adoption of portable music players, be they iPods or mobile phones, the problem is getting worse, regardless of whether the electric vehicle sounds like a "real" car or not.

Perhaps another approach could be to go back to the drawing board and think about how the fundamental problem could be changed? But then again, I don't perceive it as a problem: if I'm listening to music, I'm still paying attention to the traffic. And as an engineer the idea of making electric vehicles sound like traditional cars is very silly, in my opinion.

Business 101: Finnair

The employees of Finnair are at it again. This time the flight attendants are on a strike protesting their apparently harsh and cruel working conditions and whatnot. And I'm sure everyone can agree that flying long haul flights requires time to adapt to the timezones and so on. But most people will also acknowledge that the people who have to fly for work will often not get these types of resting times. When the plane lands, off to the meetings you go. So should the flight attendants have their extra time and continue to work 90 hours a month and receive an above average salary (on the Finnish scale)? I don't know, but I do know the following...

Pricing is quite crucial in business. If you price too low, you forgo potential profits. If you price too high, you don't sell. If you price way too low, you sell at a lower price than with which you can sustain the business. Now, the first caveat of pricing is that many people think pricing has something to do with costs. It doesn't. Period. You charge what the customer is willing to pay and you reverse engineer your costs from that amount to see if it's possible to make business out of it. In some cases you will see that even with the highest amounts that you can charge you still can't make up the costs. Hence you should call it a game and move on: there's not business there.

What does this have to do with Finnair or aviation in general? Well, the trend has been changing ever since Southwest came along and made a value innovation and changed the rules of the game. To complement the traditional premium strategies, Southwest created a low-cost competitor: no frills, but the cheapest prices and you still get to go from point A to point B. And lo and behold, there was room in the marketplace for this type of maneuver. This is course leaves the mid-level companies, such as Finnair, in the unfortunate position in which it has to decide what kind of animal it wants to evolve into. The wealthy people will either fly their own planes, charter planes and do the Netjets thing or fly first class in luxury. I on the other hand will optimize the costs associated with the travel and get the cheapest possible ticket. Being in the middle is difficult: you may be able to target the business crowd, but let's face it, in these economic times companies are more than ever before looking at how to reduce travel and where it isn't possible try to get the absolute best rates. It's often cheaper to buy a couple of no frills flights from a low-cost carrier than to get a flexible ticket from the likes of Finnair.

So, the environment has changed and Finnair will need to reinvent itself and think about how to position the company into the marketplace. Based on this, the company will then need to think about its cost structure: if it chooses the low-cost route, the name of the game is scale and minimizing costs as much as possible. Look at Southwest or RyanAir or what have you: standardized fleets, quick turnaround times, optimized costs by flying to remote airports at unattractive time slots to avoid airport fees, and so on. Is Finnair fit to play a game like this? At the current cost structure the answer is definitely not. Can Finnair play the premium game? Well, the premium market in Finland is very limited, i.e. there aren't that many truly rich people (*cough* taxation and the whole shebang). So this may also be a rocky road. And as most people who have flown Finnair will know, the flight attendants never smile. So I'm definitely not going to pay premium prices for grumpy service.

Already the situation is looking quite grim for Finnair. The fact that the different employee groups are trying to suck an already declining company dry may actually be a good thing: my thinking is that the sooner Finnair declares bankruptcy and gets killed off, the sooner we can start from a clean slate and establish a brand new national carrier for Finland which is better positioned in the modern world. This would also take care of the path dependency issues as long as the culture is killed thoroughly enough in the transition. But will this happen? My forecast is no. The Finnish government still has a majority stake in the company and letting a flag carrier fail and at the same time have the staff laid off is something that no politician is willing to do. That is why I am guessing that if the situation gets worse, the government will step in to prop up the company. Mind you, Finnair's brand has already been diluted as a result of the frequent strikes and inability to reliably operate its flights.

So, it doesn't look too promising for Finnair or the tax payers of Finland. The net winners will most likely be the employees in the short-term as they will not need to adapt to the changing world as long as the government continues to bleed money and fight gravity. In the longer term we're all net losers, however, as we are only making a bigger space into the marketplace for foreign competitors to gobble up the space in Finnish aviation and establish routes to compete with the dinosaur that is Finnair. Oh well...