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Except 1: Does Chinas Population Really Approximate 1.5 Billion?

Analytical Consideration Analysts are supposed to challenge what passes as common

knowledge, especially when that common knowledge is propagated by the same government that
represses investigative journalism to a point of it being a simulacrum. It is often said that Chinas
population stands at 1.5 billion; Chinas population is undoubtedly enormous. However, after
walking down Nanjing Road (Shanghais equivalent to Rodeo Drive in Beverly Hills) during
mid-day and not seeing many people at all, I began to question whether Chinas population can
really be 1.5 billion. If the German rate of childbirth is more than one (but below the replacement
rate of roughly 2.1 births per woman) and China had until very recently a strict policy of one
child per family (its more recent attempts to loosen such policy have been ineffective in spurring
childbirths), why is Chinas population rising while Germanys population is falling? I do not
understand why the math behind population replacement rates works so differently in China than
in Europe.
I havent heard any explanation for why there are so many ghost buildingseven entire ghost
townsin China, especially in view of China supposedly bursting at the seams with humanity.
Somehow, we are to believe that the absence of people is evidence of an overwhelmingly large
population.
Having a huge population is a source of great pride for the Chinese. On a recent trip to Shanghai,
during breakfast, my hosts told me that the population of Shanghai was 20 million. That same
day, at lunchtime, my hosts told me that the population of Shanghai was 40 million. (How can
any citys population double in a few hours?) Maybe Chinas reported population is the result of
sandbagging by its regional authorities who try to outdo one another in terms of reporting
regional growth. (These leaders advancement is based on their regions growth.)
Maybe the Chinese government feels it must report a population that exceeds Indias 1.25 billion
people in much the same way it feels it must report economic growth rates in excess of those of
Taiwan. Maybe Chinas population statistics are a governmental corollary to vaporware: Chinas
military wants to project its power and the Chinese economy stands to benefit by luring investors
into China. The enticement being, that yes, foreign businesses that enter China will lose money
for a long time, but these losses are well worth it since the Chinese market is nearly infinite.

Except 2: How Portable are On-Demand Taxi Services Such as Uber and Lyft?
The two largest U.S.-based on-demand transportation companies, Lyft and Uber, are based in
San Francisco, the perfect launching pad for that business model. To the extent that other cities
characteristics deviate from those of San Francisco, the portability of progressive taxi services
becomes less certain.
San Francisco resembles a custom built stage for casting unregulated livery services in the most
favorable light. San Francisco has a very young and tech savvy population which generally ranks
environmental stewardship above auto ownership. In other words, San Francisco boasts the ideal
demographic for embracing taxi apps. The prohibitive expenses associated with parking and auto
insurance renders on-demand taxi services a valuable proposition while San Franciscos hilly
terrain discourages walking and bicycle riding.
Many large cities have centralized all of their public transportation offerings under one
management authority, such as New York Citys Metropolitan Transportation Authority. In
contrast, San Francisco probably has the worlds most balkanized transportation system with six
or seven distinct bodies. The result of these transportation agencies having largely failedin
terms of syncing the schedules of various modes and lines of transportation as well as granting
riders discounts on integrated journeysis that end-to-end travel in San Francisco is
uncoordinated. On top of that, at 8.1 miles per hour, San Franciscos light rail system, which
feeds in the metro service, has the infamous distinction of being the slowest in the U.S. The
problems associated with the halting tempo of parts of San Franciscos disjointed transportation
network are compounded by the fact that hundreds of thousands of San Franciscos commuters
are required to work on East Coast time. Those required to arrive at their offices extremely early
in the morningmany of those whose jobs are tied to the opening of the New York Stock
Exchange have to arrive at their desks no later than 5:30 am local timeare very receptive to
alternative transportation solutions

Excerpt 3: Antilog Analysis and Connecting the Cement and Bridal Industries
Lets say that you are considering backing an entrepreneur who wants to rapidly expand his
fledgling chain of hot chocolate cafes. This entrepreneur is using Starbucks as his analog. His
analysis is thorough as it runs the gamut from real estate strategy, customer profiles, price points,
supply chain issues, employee training, marketing and more. After reading this entrepreneurs
report, you may be prepared to invest in his chain of hot chocolate cafes. While the analog
analysis is necessary, it is not sufficient. The analog analysis should be accompanied by antilog
analysis, which in this example, would compare the hot chocolate shops with chains of cafs that
failed. Taking a second look at the hot chocolate chain could cause you to come to the
conclusion that the entrepreneurs shops and expansion strategy more closely resemble the hot
beverage chains that failed.
Decision makers should consider the frequency at which companies with a winning concept elect
not to promote that concept. Lets say that you are a business development executive employed
by Dangote Cement, the leading cement producer in Nigeria. You want to expand your
companys revenues. You conduct some research into best marketing practices that some of the
worlds most successful cement companies have undertaken to grow their revenues. During the
course of this research, you learn that one of the initiatives that Monterey, Mexico-based Cemex
took earlier in its history was to market cement to newlyweds. Cemex realized that most newlymarried Mexican couples could not afford to move out of their parents homes, but still craved
privacy. Millions of Mexicans solved this dilemma by building additional rooms onto their
parents houses.
So, if you were a manager at Dangote, and you were looking for marketing angles and revenue
expansion opportunities, you might try to emulate Cemexs success by redirecting part of
Dangotes marketing budget to wedding planners and bridal stores. So far, this seems reasonable
given the resemblance of the financial position and living preferences of recently betrothed
Mexican couples to Nigerian newlyweds.
However, before you redirect your marketing budget to wedding planners and bridal magazines,
consider just one more thing. Why havent cement companies in other developing countries
pursued cement sales to newly-married couples? Surely, many executives at cement companies
are aware of Cemexs success in this regard. When I wrote a patent valuation report for a large
Thai cement company, I brought the Cemex-bridal issue to that firms attention but those
executives did not show any interest in pursuing a similar strategy.1 Cemex itself has been a
serial acquiror of cement operators in developing countries. In many of its related press releases,
During the lunches and dinners that my hosts treated me to, several of the twenty-something
executives at the Thai cement company mentioned in passing that they lived with their parents.
My thinking was that if these successful people reside with their parents, such living
arrangements must be common in Thailand.
1

Cemex stated that it will boost the acquirees operations by sharing its managerial acumen.
However, as far as I can tell, Cemex has not marketed its cement to newlyweds in other
countries.
The point is that it is an error to use as an analog a strategy that was once successful but never
replicated elsewhere. There is a stronger argument for the Dangote cement executive to refrain
from marketing cement to newly-married couples than to pursue such a strategy.

Excerpt 4: A Thought Experiment Revolving Around the Popularity of eReaders

Gedankenexperiment Lets say that you would like to determine the extent to which people
are reading books from electronic readers. Maybe you are at a caf or airport lounge. As you are
getting your coffee, you notice that some ten people are reading from Kindles or Nooks. All of a
sudden, there is an Internet outage. How many of those ten people are still reading from their
dedicated e-readers? If only two are, then eighty percent of people using e-readers are doing so
to access the Internet, not to read books.

Excerpt 5: Opposition from First Responders

One overlooked area of potential challenge to business models is the stance that first
responderssuch as the police and firefightersmight take against a product or service.
Police forces may oppose legalized marijuana dispensaries. This is because a lot of police forces
rely on asset seizures from marijuana purveyors for some of their forces funding. The growth of
marijuana dispensaries results in less raids, fewer seizures of the culprits assets, less fire-sales of
such assets and less money flowing into the police departments coffers. In short, the legalization
of marijuana means more funding problems for police forces.
Police department policies are reducing the appeal of burglar alarms. Due to stratospheric levels
of false alarm ratesan average of 97% in Colorado Springs in recent years, for example
police departments are requiring that homeowners register their burglar alarms, imposing fines
for repeat false alarms and opting out of responding to excessive false alarms connected to given
addresses.
Some firefighters oppose the placement of solar panels on rooftops. This is because solar panels
can create the risks of roofs collapsing due to their weight, an inability to gain footing (they
introduce slipping and tripping hazards) and even potential electric shock. In a conventional
building, firefighters typically cut off the electricity leading into the house before entering.
However, as long as sunlight hits solar panels, voltage continues to be sent down from the roof
throughout the building even after power is shut down. Another danger associated with solar
panels is that they obstruct rooftop ventilation.

Analytical Consideration At my twins (Zachary and Zoe) four-year birthday party, I

got to talking to one of the other fathers. This gentleman was an engineer with an
expertise in installing solar panels on buildings. I asked him about the risk of firemen
getting hurt by the flow of electricity throughout a building during a firefight. He told me
that this was not a problem because there are ways to shut off the flow of electricity in
solar-powered buildings. Then, about six months later, I was with my oldest son when the
local fire department came to Daniels school. The firemen did a fine job of educating the
children about fires and the like. I asked the firemen the same question about the risks of
fighting fires in solar-powered buildings. They said that such buildings are of great
concern to them. So whose opinion matters more? The engineers or the firemens? The
firemens perspective on solar panels matters much more since it is they that have to
navigate the solar panels when extinguishing fires. So what is the lesson of this story?
When expert opinion and tactical practicality are in conflict, the practitioners opinions
will have more influence on the business model.