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"Animal Spirits" by Robert Shiller- time to look across disciplines

 "Animal Spirits"  is a new book by Robert Shiller and George Akerlof. It's sort of interesting that Shiller  an Economist, refers to Psychology pretty often in this video from McKinsey and also throws in Sociology and Political Science in the context of the current "fear" among both businesses and customers. It's sort of interesting that Schiller does not talk about business disciplines at all in the video but I hope does talk about in the book. For example ,Marketing ( an academic discipline that explicitly recognizes economics and psychology as "mother" disciplines) , Management (which draws a great deal from Sociology and informs Operations that studies Supply Chain) and Innovation (which is a lot about "Spirit" the human kind!). The fact is that Economics is a dominant discipline and has an annual Nobel Prize while no other liberal arts or business disipline does. Globally economists have powerful influence  on public policy. And sadly, Econometric models without behavioral variables are unable to explain the current fear in the market as Schiller says. Time to look across disciplines !

Stock market bubble,sub-prime lending, Alan Greenspan and the monkey story

I have only limited understanding of the financial sector , particularly the ways of the stock market,mortgages and the the sub-prime mortgage mess. Have been therefore talking to  friends who are closer to mortgages and banks and they have been trying to explain what was going on and how the global meltdown has escalated.

It was not until I saw Alan Greenspan's testimony on TV that I got some better insight. But check out the clip from YouTube:

Not yet clear? Check out the monkey story explaining stock market bubbles and "moral" bubbles that a dear friend sent  me via  email:

QUOTE
Once upon a time in a village, a man announced to the villagers that he would buy monkeys for $10.

The villagers seeing there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts.

The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort
to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.

In the absence of the man, the assistant told the villagers: ' Look at all these monkeys in the big cages that the man has collected. I will sell them to you at $35 and when he returns
from the city, you can sell them back to him for $50. '

The villagers squeezed together their savings and bought all the monkeys.

Then they never saw the man or his assistant again, only monkeys everywhere!
UNQUOTE

I am beginning to get the picture....

Harry Potter and the Deathly Hallows

The last Harry Potter book, i.e. as of now, is getting launched in the US at 12.01 am i.e. in less than 9 hours. People are queuing up and you know things are serious and global when average book sellers from New Delhi are giving long TV interviews about the prospects of this and related books. Guess the book is launched in New Delhi and points east. And then there is the whole secrecy thing with JK Rowling, the author imploring people not to reveal the ending and be a"spoiler." An account of the global roll-out is here. Amazon.com is teaming up with UPS to deliver 1.3 million copies as their largest ever print run. Forbes painstakingly reports the fortunes of related organizations like the publisher 'Scholastic" and the various new plans that folks in the hard book business have to come up, now that Harry has grown up. For example, there will be a 7 pack gift set this holiday season for "muggles" who  will actually  admit to having not read the stuff ! Well there is marketing hope here, as the product will be called a "collectors edition."

On the ground, its interesting to see that the grocer "Stop and Shop" has the book on its weekly flyer and assures patrons that being a 24 hour operation is really going to help-this time. Was at Barnes and Noble a few days ago and they had a rather large tear down calendar with no. of days to go till launch and the University book store sent out a message that the book will be available despite the rather relaxed summer scene. Consider, that we had all thought that books and print will decline with the Internet , online shopping etc. On the contrary the Internet has actually fueled the  print industry with more  "brick" book stores and book sections  at various stores , "spoiler' videos on the book plot, lots and lots of buzz on community sites ,blogs etc. Best of all, kids worldwide are reading more than ever before.

Dow crosses 14,000 for the first time

Today the Dow crossed 14,000 for the first time . Interestingly, this has happened despite record oil prices and  troubles in the housing market. Inflation fears are low, and global markets for US multinationals have picked up. The global boom and globalization has much to do with the happy news as do the big corporations and manufacturers  that drive the Dow like 3M ,Caterpillar,Alcoa and Exxon Mobil. These big corporations have been working hard to build their global brands on the market side and have been working equally hard to streamline their global supply chains for both goods and services.As the numbers come in and are analyzed an interesting twist to globalization is that Rupert Murdoch the Australian magnate's News Corp has reached a tentative agreement to buy Dow Jones driving its shares lower.

Dow crosses 12,000

The Dow crossed 12,000 for the very first time on Wednesday and this was a major milestone. The stock market is not an area of expertise for me but I have been studying too many global sourcing decisions to not at least start taking some interest on the impact the stock market has on sourcing decisions. CEO's are responsible for the companies performance and performance is about increasing revenue or reducing costs. The consumer market is doing well and consumer confidence is up and oil prices are down in the last 10 weeks. But an important driver of the DOW is the company earnings numbers. I could not find a single report that speculates as to whether lower costs and global sourcing is leading to better corporate performance. That's interesting because it is the CEO/CFO who seem to be pushing sourcing folks to find better deals- anywhere in the globe.