Every few years in seems people treat other people very badly and for various reasons decide the best action is to eliminate them. Governments assist in the elimination and things go on in the country. For people similar to me, in seems odd that you would want to kill your neighbour just because they have a different religion, tribe, etc. In the old Star Trek series there was a group that had their faces painted black and white and one of the characters asked why are they against the others and he said to the effect I am black on the right side and white on the left, the others are white on the right side and black on the left. To the Star Trek personnel, they both looked the same. In the last 20 years the world has seen many examples in Yugoslavia, Rwanda, Cambodia and many other countries have either eliminated or did their best to do so.

In the genocide in Europe where Hitler’s forces implemented the final solution or the elimination of Jewish people, as well as those that were not deemed strong enough for the new race – handicapped, those with epilepsy (full disclosure as a young person I took drugs for epilepsy), mental problems, etc. The German policy towards the social services was likely not good if you were a patient. One of the few who helped saved hundreds of Jews avoid the concentration camp was Oskar Schindler and trying to understand why has been a great mystery. A book called Oskar Schindler and the His List edited by Thomas Fensch, Paul S Eriksson Publisher Forest Dale, Vermont, 1995 tried to answer some of the questions. Many people such as myself had heard or knew the name Oskar Schindler through the film Schindler’s List. We went to watch and thought it was was good that someone did something and went back to our lives. When we hear of the genocides in the world, sometimes we wonder would we do something? would we have participated with the approval of the government? In the book, Mr. Schindler is not a flattering character he was pro-Nazi, owned a plant to gain government contracts to both enrich himself and use “slave or very inexpensive” labour. However he ended up saving the lives of over 1,100 people and no one really knows why. Perhaps that is good thing, for it shows all of us that we can use the resources we have to do the right thing.

Linking to dividend paying stocks, as a shareholder you want the company you own shares in to make a profit and pay the dividends. In many companies the salaries expense is a large one and finding efficient and productive means to lower it is a very worth while goal. In the company the author works for we have share bonus program which the company contributes to what we buy in owning shares, perhaps that is a good method not to go after the slave labour market. All companies must balance the information they receive and the demands of the world, and every year it seems to get both easier and more complex, but doing the right thing is a good thing.

There are more questions than answers, till the next time – to raising questions

Recently a history of a financial institution almost 200 years was picked up and read. In this case, the bank is a Canadian based one called the Bank of Montreal, the book is A History of the Bank of Montreal, Merrill Denison, McClelland and Steward, 1966. At present the Bank of Montreal has operations across Canada as well as in the Midwest of the United States centred around Chicago with Harris BMO. When the bank was incorporated the funds came from Montreal, Boston and New York although majority voting shares were in Montreal. The bank started as an commercial bank for the bills of exchange and trying to make money on the exchange rates between Montreal, New York and London. There were very few individual depositors in those days (where the bank makes the bulk of its money, now days), over the years banking changes.

In reading the history there are some themes that emerge including cycles in the economy – things happen in the world which will have economic impacts on banks and their balance sheets. In the 1800’s countries went to war – the economy was boosted by the extra military spending, when the war was settled there tends was close to a recession as the countries not longer needed the supplies. In today’s times more than one bank is sustained by safekeeping government funds as well as the military payroll. In the Bank of Montreal’s case much of the history is ensuring the company has good relations with the Colonial office in London. For all legislation or bills needed to be ratified by the English Parliament and they took their input from the Colonial Office. One aspect of dealing with the Colonial office is similar to bureaucracy everywhere, most do not like risk taking. Thus they ensure rules are made to limit risk taking, do not interfere with UK based banks and as such fewer banks tend to fail. As a customer and a government this is a good thing, sometimes the company wishes to take more risk than it does, but bureaucracies limited the risk taking.

In the case of fundraising to start the company, similar to today, while there is always some money available in your hometown, in this case Montreal and being Montreal was an English colony you would have thought linkages to London would have brought money from there; but in the end in came from Boston and New York where the Montreal companies had trading relationships. It could also be thought before the Erie Canal was built the harbour of Montreal was the busiest on the Great Lakes system, primarily because of the rapids on the St. Lawrence. After the Erie Canal was built it took a long time before Montreal responded to the new trade route and raised the money to build canals on the St. Lawrence.

Another theme is as the Bank grew and wanted to expand outside of Quebec, the competition used its influence at the parliamentary office to lessen competition. Banks occupy an important part in the functioning of an economy, it is possible to exist without one but it is much easier to operate with it and those on the Board of Directors level tend to interact with government to ensure the playing field is not changed too much. In the case of the Bank of Montreal, one of its main competitors was very deeply enshrined with the government of the day and also charged high fees, which meant the Bank and other competitors constantly voiced their concerns about the monopoly like conditions which competition could open up for better fees and services to the community. It took 20 years and various changes in governments before the bank could expand beyond Quebec.

Linking to dividend paying stocks, one reason to read the history of the bank is many banks are consistent in paying dividends over the years they have been in operation. For most, raising the dividend is to be seen and having a portfolio with banks is a very good place to place your money. After the 2008 recession banks are now making more money than they ever had been and the price of the stock is reflected in the changed outlook for the economy. As in the past and it is now, the art and practices of lending money, charging interest and getting paid back has never changed. Some banks focus on businesses, others on retail and both strategies have their advantages and disadvantages. Generally the banks do not lose money on retail, except when residential real estate prices fell across the world, hopefully that will not happen again.

There are more questions than answers, till the next time – to raising questions

As the Winter Olympics is beginning to wind down, one of the local radio stations had a documentary about ice which was caught while driving through non ice conditions. My ride was not long enough to hear all of the show but a ship captain of an ice breaker was interviewed. He talked about ice breaking – a large double hull steel ship which breaks up ice to allow for other ships to move in the wintertime. He explained how he has to prepare where to go, how to break up the ice and using different strategies to the job. My limited understanding of breaking up ice was the big ship which has added strength would break up the overnight forming ice and do it on a regular basis. It was interesting to find out being prepared, having a game plan and trying to execute it with enough flexibility to try again if the ice was not broken. The ice breaker captain talked about a gut feel of where the ice would be more vulnerable to break up and how interesting his job is.

Linking to dividend paying stocks, similar to the ice breaker captain, doing your homework, having a reason to buy the stock and not falling in love with it so you have flexibility to change your portfolio also applies to picking good stocks. The past history has shown that dividend paying stocks perform better than growth stocks (unless they get taken over with high multiples) but if they do not achieve a takeover, the dividend plus the capital gain is an excellent method to invest your money.

There are more questions than answers, till the next time – to raising questions

The Power of Why is a book written by Amanda Lang, Collins, Toronto, 2012 in which the author examines curiosity and the ability to ask the right questions can lead you to innovation. There is no magic formula to innovation and everyone does it at, although most people tinker at the edges for a variety of good reasons. One of the reasons is as a young person we were curious about everything, but the people around us were not, so through a host of different methods we are taught it is best not to be so curious. The older you get, often the less curious you are, the better marks you received in school. Moving into the workplace, meant working for someone else and they often received the job by not being curious. We are able to think about changing in the workplace but not allowed to say anything until either senior management wants innovation or a new boss arrives who wishes to hear new ideas. What they do with or do not do will determine if you have any more ideas about work.

One easy example people have is browsing on the internet – the internet is filled with vast amounts of information, if you were to check your normal sites where you go, would they have changed in the last 6 months? 1 year? 2 years? The answer is likely not much, which means you are in the vast majority. There is nothing wrong with the answer, it just a quick method to show most of the time we are not that curious and do not ask why more than once? There is a theory you should ask why 5 times to get to the real answer, however coming up with the answer to why 5 times will take some research.

A wonderful example in the book was a hospital – in the hospital hand washing is encouraged, the nurses know this better than anyone else. But in the hospital, the surveys were showing the nurses were not washing their hands, guest to the hospitals were. The question of why? The answer was the soap the hospital was using made the nurses skin red and dry. It turns out the reason why the hospital was using the soap was the purchasing department was under constant pressure to save money and picked a brand which cleaned and was relatively inexpensive. If someone only washed their hands once or twice, they would not have the same problem as the nurses and would be satisfied with the hospital policy. However with multiple washings skin was turning red and dry for the nurses. Two different departments trying to do the right thing by management, but the solution was not working out for patients. Eventually a soap which did not make the nurses hands red and dry was changed to.

The above example and there are plenty more in the book is a great example because people were trying to do the right thing; 95% of the time there will be a reasonable reason why solutions are chosen in the method they are; it takes research to find the root causes of the problem; and solution looking back the solution seemed easy. Innovation does not have to be a game changer, change the world, most innovation is trying to make things better.

Linking to dividend paying stocks, these companies are not necessarily looking for innovations that will change the way they operate, an improvement from year to year in the method they serve their customers is good. Most times similar to the hospital example, there are different ideas to how to improve from each area of the business, and anyone working in a medium to a large sized organization knows management often favours one department over another. Asking the why? and actually receiving answers is the hallmark of an organization at least willing to do innovations.

There are more questions than answers, till the next time – to raising questions.

Onward is the name of the book written by Harold Schultz, Rodale Publishing, NY, 2011 and is the story of Starbucks coffee company. Mr. Schultz joined the company shortly it was formed and has been with it ever since becoming the global powerhouse of over 17,000 coffee shops and multiple delivery vehicles for its coffee. In the book, the company went from a roaring success where the success of neighbourhood was brighten by a Starbucks franchise to belt tightening to save the company to going back to core values to remain an important part of millions of people who drink coffee. If you are a coffee drinker you have likely had a least one cup of Starbucks either at their stores or though their other delivery channels. The Starbucks is the premium brand and is meant to connect to people who interact at the coffee shop. The book centres on the transformation from slow growth to no growth to recovery and the efforts it takes. When a company moves to no growth and then to recovery, it essentially has to refocus on what made it important in peoples lives and to only do things that fit into their core reason for existence. All that is easier to say than do, because to do it means lots of people have to believe next year will be better. When a company is in growth, whatever the percentage of growth, it is easier to focus on next year, because there are always many things that can be done better – including operationally. When a company is in decline, trying to find resources to invest to do better becomes harder, for the mantra is doing more with less and considerably less is better.

Mr. Schultz had his team could easily find the core values which was the company reason to exist, people come in for great coffee. However, all the systems in the Starbucks company had to be revamped to keep with and expectation of the times. While they were doing this, the competition was squeezing them as much as possible and the company experiencing decline in store revenues. When companies go in decline they need to examine all aspects of the business and come up with solutions to little things that add up to a lot. An example is Starbucks threw away a lot of milk, milk is expensive, but to do the job meant throwing away milk. As the company went through the reorganization, Starbucks found a simple but effective method to waste less. It took a lot of people to look at the problem and find a solution, but it was one of many solutions that needed to be found.
In order to climb up from revenue declines, many different areas of the company have to doing the right thing in terms of what you see and behind the scenes or operations to achieve them in very short time is why the book is worth reading and learning from.

Linking to dividend paying stocks, all companies experience cycles in the business, grow is the easiest and seemingly best for shareholders because the profits are being made. In the downturn, if the company goes back to its roots or reason for being in business, other decisions whether they are good for the business or should you do become much easier to make. In one line of thinking, downturns can be good (as long as the company does not lose too much money) for the downturns can make management and the strategy for the company better for the long run.

There are more questions than answers, till the next time – to raising questions

There are many books about innovation but few are about Hacking Work, one such book was written by Bill Jensen and Josh Klein, Penguin Books, 2010. The authors premise is in order for the bulk of the workforce to be more productive, you have to break the stupid rules to achieve smart results. Anyone who works or has worked for a medium size or large organization knows there are many rules. If the organization is corporate, the rules were all designed for corporate decision making which is very good for the corporation. When a rule is designed this way it is a one size fits all and whoever administers the rules becomes an expert with the rules. Usually the rules are there because someone in the past has broken some which caused concern and/or losses to those who administrate the rules. Sometimes they are put in to save money on insurance premiums or government regulations or an outside agency or a previous boss who used the numbers for something. As time goes on, people accept them, find them non productive but live with them. The authors believe you should find a way around the rules, first by finding out why they are the rules exist in the first place. Then slowly changing the rules to fit your needs and finally changing them to allow you to be productive with your time at the company.

There are some wonderful examples in the book and one of them is – a person bought a franchised carpet-cleaning service. In the franchise business, the equipment is supplied and you find the customers. The person thought the tools provided were good, but not great and he began to redesigned a number of the tools in order to be closer to great. This has resulted in having an unique competitive advantage – my competitors are competing against the way I am supposed to be doing everything, not what I actually am doing. The book does not say but hopefully the carpet cleaning service implemented the new ideas across all their franchises.

In an more service environment, the process would be find the rules that drive you most crazy – either they seem to be stupid, lack common sense, and because the boss said I told you so. If they are related to technology which many are, methods such as gmail, google docs, open source Web tools are available and also know many of the solutions are to be found on the internet. Information that used to be limited to senior management is often found on the internet. For example, many organizations have an arrangement with firms to look after pension money, there are a variety of sites which list how well all pension fund investment firms are doing. You can check out how yours is doing and knowing this will help you in your financial future.

One of the reasons you will hack as the authors say is all organizations keep a very close eye on their employees, every time you sign on, how often you are not on, what you do, but translating all that information to whether you are productive or not is not perfected. You can help the process and counteract claims against you, because the information can help show you are productive and important.

Linking to dividend paying stocks, hacking work is really about the changing relationship between employers and employees. For a number of years, where most bosses came through, there was a rather straight relationship, now the relationship is changing to employees proving they are a valued asset and wish to remain working at the employer. Companies are slow to adapt, the old days where only the senior management had ideas are hopefully gone (and they spent most of the time hoping the president or the next potential president like them) to everyone in the company needs to be valued for their ideas and abilities. Companies which adapt well will continue to produce good economic returns, companies that do not will continue to lose talent (employees) to other companies because of the rules that do not make sense any more.

There are more questions than answers, till the next time – to raising questions.

In this case the Vikings is a TV show which is entering in its 2nd year, looking through various channels on the internet – the History Channel was found and a few episodes of Viking were watched. The show is entertaining, both males and females will likely enjoy the main characters but what is of interest to this blog is the theme of one of the shows. The individual males pledge their alliances to the earl or king who will defend them in times of war. In addition, every summer the Vikings would sail on ships to the east to raid other known kingdoms for their riches. Thus part of the culture was to ensure when war is fought, they are physically prepared. One of the group has heard stories about going to the west, this was a time when people did not know the earth was round, to navigate the seas were unknowns and many thought somewhere out west, if you went you would not come back. Those are very large obstacles to contend with, however one of group heard about a new method or technology to determine whether the ship was going in a direction they thought they were going when they are in the ocean and all you can see is the sea. Coupled with a new ship design (the type of ship that is now commonly associated with Vikings) the young man was determined to go west against the wishes of the leadership. The consequences of disobeying your earl or king was an early death, but determination and hearing stories of untold riches in the west lead the young man to lead a ship to England. They were fortunate in the first voyage to land at a monastery and steal the religious icons, thus when they arrived back, riches were brought forth and all was forgiven.

The next trip was after a larger prize because one of the captured monks at the monastery told them about life in England, so the Vikings both knew what to expect and were prepared for fighting. In the case of the Vikings, they left many dead and were not concerned whether the number was high or low, which is a reason why others would quickly fear them.

Linking to dividend paying stocks, in the above case, the earl and kings were only interested in raiding the known lands in the east, not sending resources to the west, because going east although the plunder was not large it was reasonably consistent in size. In many dividend paying companies, when the yearly returns are consistent, there is limited desire to explore new venues. The problem is unless there is very large treasury, someone is likely to doing the exploring. If there is a large treasury, companies can be bought even at high multiples, 99% of the people have a price to sell at. It is important for all companies to do exploring or research and development, otherwise the consistency which is valued will drop over time.

There are more questions than answers, till the next time – to raising questions

Recently read a book called Merchant Kings by Stephen Brown, Douglas & McIntyre, Vancouver, 2009. In the book, Mr. Brown outlines the individuals that ran country related trading firms which were owned by investors, the wealthiest members of the country, but also were backed by the resources of the host country. The 6 trading companies outlined are the Dutch East India Company, The English East India Company, The Dutch West Indies Company, the Russian American Company, the Hudson’s Bay Company, and the British South Africa Company. Similar to all private trading companies, the aim of the company is to make a profit for the shareholders and pay a healthy dividend. The easiest method to do this was to control a monopoly or be a monopoly like business. Along the way for the all these companies, decisions were made to use the native population as serfs – to do the cultivation of resources so the trading companies could resell in Europe at a very high markup.

In the north, the Russians had discovered Bering Sea and the rich animal life in the north which lead to a Moscow backed company was set up to trade in animal skins including Sea Otter. Alexsandr Baranov ran the operations in what is now known as Alaska and quickly realized the best method to operate was to have a monopoly thus ensuring prices remained high and inventory of animals remained sustainable. When Mr. Baranov first arrived there was hundreds of thousands of sea otters, it did not take long to reduce the numbers significantly for other competitors and countries were discovering the north. As time went on the Russian America Company expanded to have operations from Alaska to California primarily focused on sea otters with headquarters in Sitka, Alaska. After Mr. Baranov left the leadership, the company’s fortunes declined and eventually the company lands were sold to the US in the Alaska purchase.

In what is now know as Canada, the King gave ownership to all the lands that drained into Hudson’s Bay which turnout to be most of Canada, to the Hudson Bay Trading Company. The interest was a rival French company sending beaver pelts to Europe. The beaver felt was used in hat making and at the time the fashion of the day was for everyone to wear a hat. Some of the hats were passed down from one generation to the next. Fortunately for the Hudson Bay Company the lands they were given by the King were rich in beavers. The person in charge of the operation was Sir George Simpson who had merged the competitors to strengthen the company and have a monopoly. Mr. Simpson ruled the land as a baron, however his primary concern was fur trading and fur trading conflicts with people, so he did not want too much population in the region. The country of England decided to send its people including convicts, orphans, and offers of free land to citizens to Australia and Canada. Much of the lands of Rupert’s Land became provinces of Canada with Hudson Bay moving into retail stores and another part cultivated mineral resources.

In Africa, Cecil Rhodes made his money consolidating the diamond mines in South Africa and then controlling the gold mines in order to keep prices high or the minimum stable. You may have heard about Rhodes Scholars, DeBeers diamonds, Consolidated Gold Fields, the country of Rhodesia these were all done by Cecil Rhodes. He started with diamond mines owning a mine and reinvesting the profits. As time went on, greater capital was needed to mine the diamonds and the company DeBeers was formed and soon it was a leading firm and paying dividends of 25%. Mr. Rhodes wished to monopolize the diamond trade and did a unfriendly merger with the help of European financing. Soon gold was discovered in the Rand in South Africa and Mr. Rhodes used a similar process with Consolidated Gold Fields. For all his power in business, he believed in the superiority of white Anglo Saxons particularly the British Empire thus his companies operations would have fit easily into the apartheid system that would develop in South Africa.

Linking to dividend paying stocks, people for hundreds of thousands of years have been trading goods and services and in the 1600’s much of the world was influenced by company trading companies. The goal was to go to lands bring back goods and sell them at a higher price and pay dividends to the shareholders. 300 or 400 years ago, much was taken by force, ideally there is change today or at least we hope there is. Looking back at the 6 companies which ruled parts of their world, all but one went out of business which means it is still a hard job to maintain a profitable dividend company over the years.

There are more questions than answers, till the next time – to raising questions

Last week while browsing through a goodwill store, the video Pirates of the Caribbean was seen, not surprisingly having seen it on the screens many years ago the video cost was $3.00 for a dollar and on that day half price. The movie is based on real life – when Columbus discovered the Americas, while trying to find a shorter route to the South China Seas (because the spice trade was very profitable) Columbus declared the land for Spain. Not long after, gold fever struck the next group of adventures and soon the Aztec empire was gone and Spain controlled the countries. The gold mines of Mexico quickly made the Spanish the wealthiest country in Europe and other countries wanted a share. England had smaller ships and encouraged their people to rob the Spanish – Francis Drake achieved his fame this way. The pirates of the day were entrepreneurs who did not want to pay their share to the crown on any country. The navy of England and others were sent to bring the gold back to England and only tolerate a small amount of linkage.

The above is related to a book called Merchant Kings by Stephen Brown, Douglas & McIntyre, Vancouver, 2009. In the book, Mr. Brown outlines 6 firms that that ran country related trading firms that were owned by investors, the wealthiest members of the country, but also were backed by the resources of the host country. The 6 trading companies outlined are the Dutch East India Company, The English East India Company, The Dutch West Indies Company, the Russian American Company, the Hudson’s Bay Company, and the British South Africa Company. Similar to all private trading companies, the aim of the company is to make a very healthy profit for the shareholders and pay a dividend. The easiest method to do this was to control a monopoly or be a monopoly like business. Along the way for the all these companies, decisions were made to use the native population as serfs – to do the cultivation of resources so the trading companies could resell in Europe at a very high markup.

In the case of the Dutch East India Company – in what is now called Indonesia, but in the 1600’s was called Sumatra, Java, Borneo, Banda Islands – spices such as cloves, nutmeg, cinnamon, and other spices were grown. When the Dutch East India Company arrived the previous traders were from Arabian and came through the Italian city of Venice. Naturally the stores they told of how the spices were arrived at reinforced the spices were at the ends of the earth. For someone in Europe to go to the South China Seas meant to go around Africa, through the Arabian Sea and around India. The journey would take two or three years and not all ships made it back with their cargos. At the time in Europe much of the year the food that was placed on the dinner table was very bland, spices brought out the flavours of the food. Having spices in the house was in demand and a profitable business for those who imported them. The Dutch East India Company was the most aggressive in the area and secure their monopoly were lead by Jan Pieterszoon Coen.

The British East India Company was a rival to the Dutch East India Company and after having been defeated, regrouped in India to take advantage of the silks and cotton trade. Also India was a major provider to the world of saltpeter which was a major ingredient in gunpowder. As a country, England backed the British East India Company and a number of wars were shorten when the other side did not have gunpowder. From controlling the saltpeter trade, the company eventually defeated the Moguls who ruled India. The leader of the company was Sir Robert Clive. The shift from the Moguls to the company would control the treasury of India, later profits went down because to influence the economic cycle is one thing to administer a country is more expensive undertaking and not something companies wish to do. The administration was taken over by the British military and India was in the British orbit. The British East India Company imported teas which is why the UK drinks teas (in was less expensive that coffee). when profits were down in India, the company began extensively trading with China and along the way discovered illegal drugs (opium) is very profitable.

With success in the South China Seas, the Dutch formed the Dutch West Indies Company which went to what is now called New York but then was called New Amsterdam. The company charter claimed all the lands that was drained by the Hudson River. People were still looking for a quick method to go to the South China Seas. The head of company in New Amsterdam was Pieter Stuyvesant who ran the city similar to a company town but the town never produce any mineral riches and company towns are taxed at higher rates. Eventually more people other than Dutch came to New York as well as the British controlled New England and the Mid Atlantic states sent their navy into New York and Mr. Stuyvesant surrounded the lands to the British who changed the name to New York. In the years to come the American Revolution was fought and a country would evolve the United States.

The other 3 companies will be highlighted in part 2

Linking to dividend paying stocks, in all the above examples, from a financial point of view, they were successful as they found areas to be strong and create monopoly and sending dividends to the shareholders. How all the above people did what they do is the subject of many books, although for a long time all those trading companies were sending profits and dividends to the shareholders in Europe. Should a company be running a country? such as they did from 1600 to 1900’s that is interesting question?

There are more questions than answers, till the next time – to raising questions