martes, 19 de abril de 2016

The Doha Oil Freeze Talks (Not)

A couple of days ago, the eyes of the world were turned to the city of Doha in Qatar, where the majority of oil producer countries met, allegedly to reach an agreement on freezing production in order to boost oil prices.

It didn't go well.

Saudi Arabia's Oil Minister Ali al-Naimi was strong to call out the freeze agreement 

Two days before the meeting day, Iran announced they would not attend the meeting (despite being invited in advance). This supposedly triggered a Saudi Arabia boycott on the agreement that had been pre-arranged between Russia, Qatar, Venezuela and themselves, and was to subsequently include the rest of the OPEC countries. I can only begin to imagine what it must felt for the remaining countries to take a flight to Qatar and go back home empty handed haven't achieved anything.

Oil prices followed suit on the monumental failure of the Doha meeting, and fell below $40 per barrel once again. This hurts the Saudis, but it hurts the other countries even more.

The oil pipeline has taken a huge hit these past months

Without taking any sides, I like how Saudi Arabia imposes as necessary condition to agree on the freeze, that all countries must join the pact. It pretty much emphasizes the nature of OPEC and what it is meant for: to be and act as a cartel. Let's remember that OPEC was founded to be and act as a cartel, after the United States had been dominating (and sort of imposing) oil prices throughout the 20th Century. After the creation of OPEC, it was now up to them to dominate oil prices from tne 1970s to our present time. But things may now be behaving differently, and perhaps, yes perhaps, we may see (or we already seeing) the US controlling oil prices again. And... the failure of this meeting can be labeled as monumental, considering the agreement was including non-OPEC countries. That's why Saudis were aiming for the "All-In" scenario.

Prince Alwaleed bin Talal
This article in which Maria Bartiromo interviews Saudi billionaire businessman Prince Alwaleed bin Talal, gives the best insight I have read so far regarding the aspiration of seeing a $100-a-barrel oil ever again. It shows why Saudis are the best at what they do (that is, the oil business of course), and their vision regarding crucial elements of the oil market, including the four key pillars of any business: sales & marketing, operations, human capital and finance. In other words, this is a top executive management Master's class. How will the output of my decision affect each of my key pillars?

The Saudis are smart: they have learned valuable lessons from past mistakes (from themselves and other nations) and they are adamant to any decision that may result in them repeating the same mistake. Their argument is quite simple, as it results from a combination of those four key pillars. They don't want to lose market share. As long as they maintain their market share in the industry, they have a privileged position, so why give it away? Doing so would be like Apple agreeing with all cellphone manufacturers to freeze production of smartphones, hence freezing the production of iPhones, but not including Samsung in the deal. It's basically the same thing than digging your own grave. Saudis 1, Rest of the World 0.

Keep in mind Saudi Arabia is the top oil producer in the world, pumping over 12 million BPD. Only Russia and the US at 11 million BPD and 9 million BPD, can come close to their figures... but hey... it's Russia and the US we're talking about. All the other countries don't even make it past 5 million BPD, so to them have Saudi Arabia and Russia freeze production is a huge helpout. Do you want another key factor? Saudi Arabia has the one of the lowest barrel production costs of all countries. While it costs $11 in Russia and $16 in the US, the Saudis' produce at a cost of $8 per barrel. All the other countries costs vary between ($10 and $25). Saudis 2, Rest of the World 0.

Way better than $4 per gallon...

What about the US? At this point I think they could't care less whether if OPEC countries freeze production or not. Of course, income is affected and revenue is nowhere near two years ago, but keep in mind that the US government doesn't own any oil companies. Meaning it's not THAT big a deal for the American economy, compared to say Iran, Russia, Qatar, Venezuela and the other countries whose primary source of income is oil, and on top of that, having the fact that most oil companies are state owned in those countries. Why do you think Saudi Aranco is going public? Saudis 3, Rest of the World 0.

Game, set and match, Saudi Arabia.

I'm telling you, those Saudis know their thing.

In conclussion, dealing with business is no easy task, but it pays huge dividends to know your terrain, know who you're sitting with, know you you're sitting against, know the implications of your decisions and have a past-history of results that can back you up. A hunch can go a long way in a Las Vegas Casino, but in the business world, we are talking about costs, revenue and income. Sitting down on a table hoping for the best with no previous preparation of the meeting you will be attending, can send you on a terrible path of failure. Being well documented, can put you on the path to success.

The funniest thing is that after not attending the meeting, Iran sends a cable recommending all the other countries to go ahead with the freeze output as it was planned.

H






domingo, 17 de abril de 2016

Barcelona sinks faster than the Titanic or Kodak

To win, when you feel you have already won: is it easy or is it unmeasurable pressure? As we have seen in the past weeks, for FC Barcelona, it's definitely the second.

FC Barcelona have gone from riches to rags in just four weeks

One of the best coaching books I have read is Brad Gilbert's Winning Ugly. In one of its chapters, Gilbert claims that throughtout all his tennis experience as teenager, pro and coach, he discovered that there is an emotional behavior called the "Achievement Effect", which makes tennis players lose more matches than you can imagine.

Gilbert explains that in tennis, the achievement effect happens when you're halfway through a tennis match with a winning score and you have gained a sufficient advantage, that makes you feel like you have already won the match. Like for instance, in a best of three, say you are up a set and an early break in the second set, like 6-2 / 2-0. Gilbert claims that the player who at this point in the match is the one losing, still has a very good chance of turning things around, making a comeback and win the match. He gives two reasons for this:
  1. The hurt bear: which means at this point the losing player will change his strategy and begin playing more aggressively.
  2. The achievement effect: which is the one I will talk about in today's post.
One month ago, FC Barcelona had a 9 and 12 point advantage over their closest followers, Atletico Madrid and Real Madrid in Spain's La Liga. They were also #1 favorites to win this year's UEFA Champions League, having trounced Arsenal in the round of 16. Today, Barcelona and Atletico are tied at first place, with Real Madrid just one point behind. And, they were eliminated from Champions League by Atletico after being defeated 2-0 last wednesday.

Barcelona hasn't celebrated in quite some time...

Most football pundits would say: "there's no way that happened." Well, it did.

After achieving a streak of 32 consecutive wins through the season, Barcelona somehow lost their compass (and their ability to score at will) and in just four weeks, they tied Villareal 2-2, then lost to Real Madrid 1-2 as hosts, then lost to Real Sociedad 0-1, then lost to Atletico Madrid in the Champions' Quarterfinal match 2-0, then today, they lost to Valencia 1-2, also at home.

So how did this happen? I believe Gilbert's theory claimed another victim.

I believe that at some point between the start and the finish line of a race, when you find yourself as the leader, your mind and your body become relaxed and both of them feel like they have conquered the objective of becoming "number 1". It is at this point when the mind apparently forgets that becoming #1 is not the same as finishing as number 1, and eventually lets your body's guard down a little bit. As your body relaxes, you lose rythm, tempo, motivation, strength, will, and several other positive factors that are in charge of taking you to the finish line in first place. The pack behind you -who aren't on first place- haven't lost any of these factors, and eventually catch up with you and pass you. At this point you freak out because you can't turn your body on back again, because mentally you had already "cashed out" of the game. Next thing you know, you lose.

This is why people can say whatever they want about LeBron James, Kobe Bryant and more recently Steph Curry. To me, the list of 100 greatest NBA players of all time consists of Michael Jordan at #1, followed by 99 other guys.

Jordan dunked on Magic... and never looked back

After struggling during his first years, finding his place as a team player and not a solo-act player in the Chicago Bulls, then battling (and losing against) the Detroit Pistons for three straight years, Jordan got to the finals in 1991 and won his first title against the Los Angeles Lakers. After winning his first title, Michael never looked back, meaning he never knew what it meant to be on the losing side ever again. He never lost at anything again. He never lost at all, again. Once MJ got used to winning, his mind never relaxed or let himself down.

As most of you may know, Michael won the 92, 93, 96, 97 and 98 finals. Six finals, six wins. Oh and yes, he was also named MVP of all six finals. No other player in the NBA has achieved this. No one.

Here's another interesting stat: Michael Jordan never lost a series when having home court advantage. And, to be more exquisite, he never let a best of seven finals reach game seven. How can one interpret these two stats?

Michael Jordan never lost when he was expected to win.

Six finals, Six Championships, Six MVP titles.

Barcelona's downfall experienced in the past weeks raises several questions regarding what caused the team to lose when expected to win. After all, they had a nine (potentially twelve) point advantage over second place in their domestic league and were overwhelming favorites in European Champions League.

Many fans believe the team was tired given the grueling schedule of domestic, european, cup and international matches. I disgree with this affirmation. In 1991, when Jordan and his Bulls won his first NBA title, the team played 82 regular games, plus at least 18 more play-offs and finals games -a total of 100 games-. The following season, they had to go through the same schedule. And again the season after that to conquer their first three-peat. And again from 1995-96, through 96-97 and 97-98, including a season in which they set a record of 72-10. So were the Bulls not as tired as Barcelona? I really don't think so.

Atletico Madrid won fare and square against a totally unkown Barcelona team

Others point to hail the performance of their rivals. I'll give you that Villareal, Real Madrid, Atletico Madrid, Real Sociedad and Valencia played well against Barcelona. They really did, but they didn't really blow them away off the field. It was a combination of their rivals playing well and Barcelona not. Every time Roger Federer plays (and loses) to Rafael Nadal, Roger plays to the best of his abilities, but he simply can't beat an opponent who plays better than him. It's as simple as that. It's not like Roger doesn't play well enough, it's just that Nadal is too good for him.

Others bring up the debate of either poor defense vs poor offense. In those most recent four matches, Barcelona has allowed nine goals and have only scored four (two of them against Villareal). Whichever way you put this, it only spells blood-loss, as Barcelona has been riding the wave of having three of the best forwards in the world, Messi, Suarez and Neymar.

To me, the main reason behind Barcelona's disaster is none other than the "Achievement effect". By two thirds of the season, the team "felt" they had won their domestic league. By the time they had reached the quarter-finals of the Champions League, the team "felt" they had already won the trophy.

Which brings me to Jordan and his Bulls... and another key figure that must be mentioned: Phil Jackson.

Arguably, the two main forces driving behind the Bulls' Six Championships

Like I have stated before, once you achieve the feat of winning, it's really hard to keep up with that mindset since there is nothing that goes on top of winning. I mean once you get to that champion or #1 rank, the only thing left to do, is to /defend keep the trophy or rank. Phil Jackson understood this more than anybody (well, maybe second after Jordan) and as a coach of the Chicago Bulls he endured a day-and-night marathon of being the chief strategist and leader of a group of players who were used to win.

Simply put, Phil Jackson's job was to prevent the Chicago Bulls to lose their status of champions, contrary to what happened with major corporations like Kodak and Blockbuster early in the 21st Century. And that is what a great leader does.

In Barcelona neither Luis Enrique nor Barca's Jordan's equivalent, Lionel Messi were able to brush off the "Achievement Effect" from last season, and the results of the last four weeks prove it.

When you find yourself running a business and you're CEO or President of your company, whether if you are on the rise to become best at your market segment, or if you already are on top, you must always strive to keep that hunger for winning. And you must make sure that your leaders and the rest of your key players are also hungry for winning.

Even if you have already won.

H

viernes, 15 de abril de 2016

The Black Mamba says goodbye

Kobe Bryant played his last NBA game two days ago, putting an end to a 20-year career that places him in the legends league of NBA History.



Thanks for everything Kobe.

In a previous post where I addressed the NBA top players of all time, I ranked Kobe at 10th and that was as high as I could place him, considering the 9 fellas that are ranked higher than him are, well... better.

To me, Kobe was a great individual player who succeeded through a combination of hard work, dedication, discipline, ethics, commitment to the game, and several other positive qualities. His first five years with the Lakers he averaged 7.6, 15.4, 19.9, 22.5 and 28.5 PPG, which reflect that while he may have started a bit low-profile, he kept getting better and improving with each passing season. He won his first NBA Championship in 1999-00, in a team in which he was second fiddle to Shaquille O'Neal's prime and dominance of the paint. The partnership followed suit with two more rings in 00-01 and 01-02, until tensions between Shaq and Kobe dismantled the team after a traumatic 4-1 loss against the Detroit Pistons in the 03-04 finals. After teaming up with Spaniard center Pau Gasol, Kobe -now in the role as team leader- returned to the glory podium winning back to back rings in 08-09 and 09-10. As for our country, Kobe was part of the USA teams that won two gold medals (2008 and 2012) and the 2007 FIBA Championship.

Some of Kobe's career highlights also include:

  • 33,464 points (3rd all time, after Kareem's 38,387 and Karl Malone's 36,928)
  • 2xNBA Finals MVP (09 and 10)
  • 18x All-Star 
  • 2008 season MVP
  • 11x NBA First Team, 2 times Second Team and 2 times Third Team
  • 9x NBA First Defensive Team, 3 times Second Team
  • 25,0 PPG career average (12th of all time)
  • 25.64 PPG Playoff average (12th of all time)
  • 1,944 steals (14th of all time)

Say what you will about the Black Mamba, but Kobe retires demonstrating that he was one of the greatest players of all time.

Once again, thank you Kobe.

martes, 5 de abril de 2016

Panama Papers claim their first victim

A few days ago I was browsing through my regular news feed, when one of the most recent posts read that there had been a leak in information about offshore investments involving several world figures. I was a bit skeptic at the beginning but when I started to dig into it, I saw this was the real thing.



Vladimir Putin, Sigmundur Gunnlaugsson, David Cameron, Mauricio Macri, Jackie Chan, Lionel Messi, and several other worldwide personalities had relationships with the Panamenian firm Mossack Fonseca, supposedly with the intent of hiding wealth and avoiding taxes -among other things-.

My question here is: these are supposed to be world leaders, the people that represent and vow for the people. What is going on here?

I was immediately taken back to my childhood years, when primary teachers lectured you over and over again, about stealing is bad, killing is bad, lying is bad, and so many other morally incorrect actions and behaviors. I am no saint, I'll give you that, and most people around the world aren't as well. Everyone has something on them if you look at them under a microscope. But come on, world leaders hiding wealth in offshore investments?



Iceland's Prime Minister, Sigmundur Gunnlaugsson resigned earlier today after pressure coming from protests that attracted thousands of Icelanders angered by the crime their leader commit. Other world leaders have either dismissed or act with indifference to the accusations.

On a different note, Brazil's President Dilma Rousseff faces impeachment on accusations of a mislead public accounting scandal. Former President Luis Ignacio Da Silva is being accused of corruption. Then we have Venezuela, the country with one of the largest inflation around the world, that is run by a former bus driver with no college whatsoever and who never got past seventh grade.

What is going on with our world?

At what point did world leaders began this unavoidable spiral of corruption and poor qualifications, and got placed in a power position to look over the welfare of their citizens?

Shouldn't countries be run by honest, hard-working people who made their way through the steps of meritocracy to reach the pinnacle of politics?

People who are not qualified to be president, just simply can't be president. It's as simple as that.

World leaders who are vaguely suspected of any accusation, facing investigation on corruption or any other crime, should step down from their position until proven innocent. It's as simple as that.

Say what you will about Barack Obama, but the guy has nothing under himself to hide and has never been accused of defrauding the anything to benefit himself or increase his personal wealth. You can accuse Obama about anything, but corruption. That's why I also don't have a problem with Donald Trump being a candidate. You can say anything you want about Trump, the guy is a successful businessman. Now, on the matter of him becoming president, that's another matter.

Why do we keep finding over and over again new cases of corruption that have been going for years -if not decades- and no justice is brought to them?

I'm quite sure Bill Gates is no saint either, but I sincerely doubt that the richest man on the planet made his fortune by means of corruption, stealing, hiding wealth or getting involved with unethical accounting. Moreover, I'm quite sure he became and held the position of CEO because he was capable of doing so, both academically, intelectually and professionally. Same goes for guys like Richard Branson, Larry Page, Mark Cuban, Elon Musk and many others.

It just boggles my mind that uncapable and corrupt people are running countries. That's not the way it should be.

Something must be done.