3/2015 – The theory of nothing

by Tan Thiam Hock

Saturday, 21 February 2015

IN the last 400 days or so, I must have received 1,001 pieces of advice from concerned friends, strangers and family. All with good intentions, of course. Much appreciation from the bottom of my heart and my burnt-out ablated liver and lungs.

What to eat-what not to eat; avoid sweet and acidic-go alkaline; delay chemo-try alternative; avoid white rice-embrace brown; no fried-just steamed; best drink-noni and lemon juice, blended organic juice and sabah snake grass concoction; and a must-have, porcupine date, if you can afford it.

My confused state of mind just could not process this overload of information. So, I turned to my oncologist for some diet enlightenment. She advised me that I would probably starve to death first before I can starve the cancer cells. And since my taste buds have lost all sense and sensitivities, I was allowed to eat anything I like … in moderation.

Now, don’t you think medical doctors make the best politicians? Racist politicians and their sheepish followers should heed such “moderate” advice from Tun Dr M and my wise oncologist. Even the corrupt politicians and their cronies have stopped stealing moderately from the state coffers. Instead, they allegedly commit grand theft by the billions in broad daylight right under our noses. Nary a care as to what you would think of them.

I remember when I started my business 30 years ago, relevant information was hard to come by pre-Internet. I had to depend on friends who were working for big corporate companies to lend me their training and market information notes. Only the big companies could afford consumer behavioral studies and market research. So, the safest approach was to follow brand leaders when they had had a successful launch. It did not matter if you were one year late, as the new trend normally ran on a three-to-five-year product life cycle.

These days, however, you can wiki info on anything and everything, YouTube all kinds of instructional videos, and tweet your thoughts at a moment’s notice. Suddenly, everyone is well-informed and an acclaimed expert. Everybody knows how to be an entrepreneur and research information on any product and industry is easily available at the swipe of a handphone. Has it become a level playing field for David? Goliath beware ….

However, readily available information can create a false sense of confidence if the entrepreneur lacks the experience to analyse the intricacies of the market ecosystem and the nature of the competition. Market leaders are normally first movers with an established operational structure and deep pockets. They have ongoing new product innovations in the pipeline which you do not know about. And they possess the speed-to-market capability to counter and disrupt your so-called innovative breakthrough launches. David beware ….

For low-entry-barrier businesses, the product life cycles have shortened considerably. First movers enjoy a honeymoon period that will be short and definitely less sweet. There is a pressing need to differentiate continuously and to scale up vis-a-vis new competitors. Competitive strength is measured by your cost per dollar sales. The higher gross margins enhance the ability to outspend the competitors and your superior business model ensures sustainability and longevity.

For low-IQ businesses, there is no barrier to the level of stupidity that they can achieve. Just when you think they have made the most outrageous comments, another self-proclaimed NGO will raise the bar yet again. Ostracised by society at large, they are now avoided like the plague by the same politicians who had created them in the first place. It will be difficult to sustain such a high level of stupidity before the curtains fall on them, so do enjoy the entertainment provided by these court jesters. But then again, I have been proven wrong many a time.

For high-entry-barrier businesses, you would need to create highly innovative and exclusive technological solutions. Or you could use your financial might to buy major assets. Your ability to buy is limited only by your ability to borrow. It does not matter whether you borrow the money from foreign banks or super-rich chettiars at high interest rates, there can only be one winner at the end of the day. But do remember, big loans mean big defaults, so make sure it is guaranteed by the Government to ensure an AAA* rating. Then, borrow some more until you can borrow no more – the “Theory of Nothing”, ie, when something is created out of nothing, it inevitably returns to nothing.

For those who plan to go on your own, googling for relevant information alone is not sufficient for you to make a sound decision. Check out your direct and indirect competitors and understand them thoroughly, from financials to competitive strengths. Better still if you have access to an experienced entrepreneur whose advice will save you lots of time and money.

For those already in business, just remember your competitors have the same access to Internet information as you do. If you plan to make the field uneven for your competitors, then you have to outthink and outsmart all of them.

Study and compare everybody’s financial accounts and you will have a fairly good idea of the industry value chain. Compare the profit-and-loss accounts and you will see the competitive advantages in margins and operational efficiency. A study of the balance sheet will reveal individual financial and asset strength.

More importantly, on-time monthly management accounts will reveal to you the current true state of affairs. Delve into it a bit deeper and you will be surprised at how little you know of what has been happening in your company. All the talk about vision and mission will come to naught if you do not manage your basic operations efficiently.

Much as I appreciate the well-intended advice of my managers and oncologist, I will still need to combine the cold hard facts of a financial report before I make any business decision … for a simple reason, numbers don’t lie.

Published: http://www.thestar.com.my/business/business-news/2015/02/21/the-theory-of-nothing/

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