Play the Game of Life
Ryan Petersen's Blog

How can tolerant people be so intolerant of intolerance?

Labels: Strange Questions

Last week Columbia Business School had the thrill to host Isaac Shongwe, a South African entrepreneur, trustee of the Aspen Institute and head of the South African chapter of the African Leadership Initiative.

Shongwe was one of the few black South Africans fortunate enough to receive a scholarship to study in the United States during the early 1980s. He attended Wesleyan University in Connecticut, and during his first summer worked at the ANC offices in New York City. Because it was still banned in South Africa, New York must have played an even more crucial role in the organization's operations. During this summer, he realized that while there were many South Africans working on political solutions for post-Apartheid era, nobody was working on economic issues. He realized that in order for the condition of black people in South Africa to be materially improved after the regime change, economic solutions would be critical. And besides, says Shongwe, he would make a bad politician because he likes to argue, asks too many questions and is too honest.

When he looks at the incredible progress that has been made in his home country in the last 15 years, he is always amazed. "If you asked those of us at ANC in that summer how things would turn out, they couldn't have dreamed that things would have progressed as far as they have today." Much of that progress is due to the miracle of 1994 and before that, the miracle of '91 when Mandela was released from prison. Then when the ANC rose to power, they legislated Black Economic Empowerment (BEE), a statute designed to enhance black involvement in the economy at both employee and ownership levels.

Shongwe's response to BEE is that it doesn't encourage entrepreneurship but it does encourage redistribution. At the outset, it was necessary because things were so badly skewed toward the whites that some level of redistribution was necessary, but in the long run the goal must be to have a society that does not require race-based legislation of this type.

In 1988 Shongwe, having finished his degree in the United States, returned to South Africa and joined one of the big companies there. By this time he had already decided to go the entrepreneurial route, but would first spend five years learning about the industries he was interested in. So he joined an industrial conglomerate and spent several years working there while living in a township. At that time, blacks in the township where he was living still were very much opposed to private enterprise because they felt capitalism provided the economic support that perpetuated an evil system of government. He was actually embarassed to tell people that he worked for a business at that time, and believes that to this day South Africa suffers from a lack of entrepreneurial and capitalist mindsets as a legacy of the apartheid years.

In 1989 Shongwe won a Rhodes scholarship to do his MBA at Oxford. He then joined Monitor Group, a consulting firm founded by Michael Porter. He spent several years there and eventually moved back to South Africa to help launch the firm's first office in the country. His stay with Monitor was really geared to ward acquiring the skills he would need to open his own consulting firm, known as Letsema Consulting focused on corporate transformations and BEE. He and a friend lined up one client and then launched a strategy consulting company.

Today they are a major local partner for McKinsey, employing sixty people and generating sizable profits for the partners. They have differentiated themselves from other BEE partners by creating intellectual capital that businesses in South Africa would really need. In '98 they set up the investment arm that began approaching firms in need of BEE partners (by law any company doing business with the government in South Africa must be at least 25% black owned), with the proposition that they would provide value-added consulting work that would vest as ownership stakes over a period of time. This allowed partners to meet their BEE requirements while receiving more in exchange than other BEE investors could offer.

Since '98 he has also launched a public relations and communications firm. Meanwhile the holding firm, which employs six full-time staff, is now invested in six companies.

His company’s largest investment to date is a 25% in Barloworld Logistics, a huge player in the South African transportation and logistics business. Because BEE laws mandate that all companies in the country must use suppliers that are black-owned as well, it made a tremendous amount of sense for a B2B firm like Barloworld to take on a BEE partner. And as noted above, Shongwe makes an ideal BEE partner because his company brings a tremendous amount of black intellectual capital as opposed to simply providing financing. So when his company purchased 25% of Barloworld, he became CEO of the firm, not just a BEE partner.

The motivation for him becoming CEO is that to finance the deal, his firm had to take on $150 million in debt. It was therefore very important to see to it that Barloworld was managed for growth while simultaneously providing the cash flow to meet the interest payments. They have since more than doubled revenues to about $6 billion U.S., exceeding forecasts so that his investment firm can pay down the debt faster than expected.

At the core of opportunities in the new South Africa is the massive expansion of opportunities for black people. The economy is really being fueled by new spending power on the part of the black population, which can be seen in the growth in mortgages, autos, and other spending on consumer goods. As the tax base has increased, the government is in a strong position to develop badly needed infrastructure. Huge sums are now earmarked for water, sanitation, and electricity.

Meanwhile, there is a backlog of housing, which has meant that construction firms are operating at full capacity trying to meet this demand. There are also huge shortages in education infrastructure as well as in roads, rails and ports. Add to all this the 2010 World Cup, with the first subway going into Johannesburg at a cost of $10 billion Rand ($1.3 billion US). All these projects are leading to surges in international interest, which we saw most recently with the Industrial and Commercial Bank of China’s $5 billion US investment in Standard Bank.

Perhaps the greatest shortage in South Africa remains a lack of entrepreneurship. According to Shongwe, this has its roots in an apartheid system that provided so few opportunities to blacks that they did not develop the mindset needed to develop their own businesses. A big part of this is simply the lack of education provided during that era, and building up that educational infrastructure is not something that can be done overnight.

In conclusion, Shongwe sees big challenges and some serious risks ahead for the country. However, as he looks around the world, he asks which country doesn’t have a risk of some form or another. But when you go to South Africa, things work, some parts are really like the first world. And in general, since 1994, the black government has done a great job to the point where democracy is now a way of life in the country. The next president of the ANC will be decided in December, so there is a polarized situation within the ANC. However, he is optimistic that sanity will prevail and that the country’s economic trajectory will continue to be pursued by the new government.

Labels: Africa, BEE, business, Columbia Business School, entrepreneurship, Investing in Africa, South Africa

With all the attention on Africa orginating from the investing community, it was only a matter of time before somebody created an African index. Renaissance Capital won the race on this one, but expect many more as investors seek assets whose returns are not correlated with world markets. By most accounts, African stocks represent one of the last asset classes that still fits this description, attracting many hedge fund managers, private equity and others whose pay depends on alpha. It appears that raising the funds will be far easier than investing them in thet continen'ts relatively thin capital markets.


Source: BBC
URL: http://news.bbc.co.uk/2/hi/africa/7038394.stm

Labels: Africa, Capital Markets, Investing in Africa

Austin Okere, founder of Computer Warehouse Group, on the need for an entrepreneur to maintain control, make quick decisions and seize opportunities.

“You need the speed of light to make a decision. I talk about [growth] as intrinsic opportunity which means you can’t say now this is my budget and my strategy for the year and then that’s it.

That’s the difference between being an entrepreneurial-minded person, I think, and someone who is more managerial. You know you give [a managerial person] a blueprint and you run with it, but you wouldn’t know what opportunities he has missed along the line if you are doing what you are doing.

Our growth has been exponential because of these opportunities that we constantly take advantage of which we probably didn’t see at the beginning of the year when we were doing our strategic plan.”

Labels: Africa, Columbia Business School, Computer Warehouse, Nigeria

ODesk.com wins my vote for most useful site (besides Google) for small business owners. It allows you to hire talented remote workers in a manner that is quick, easy, and transparent. And reasonably priced too.

So far I have Denese in South Africa and Phillip in Macedonia helping me to organize my life and stay two steps ahead of the curve with everything at work, school and even in my personal life. While I was at a Halloween party last night, Phillip compiled all the 2007 revenues and expenses for my businesses into an Excel spreadsheet, and then did some online comparison shopping to find me a good deal for hooking my laptop up to the TV.

Forget social networking sites like Facebook and MySpace! This one helps you get things DONE.

Labels: business, outsourcing

My brother purchased this new domain for me this week. Despite many warnings that changing your URL is SEO suicide, I decided to go forward for several reasons:

3) This is a non-commercial site, so there was no actual risk
2) Interesting experiment to find out if the 301 Redirect from the old domain will really maintain Google "juice"
1) I was so tired of explaining that the name Expreference came from my goal of Expanding References and Expressing myself

Below is the actual cover letter that landed me an interview with Yahoo! They tell me it was the most unique cover letter they've received from any business school. And also the reason that I got the interview...

(FYI, The search no longer takes you to the specific post due to today's change of domains for the blog)

October 24, 2007

Dear Yahoo!
Cover letters strike me as inherently boring. Yahoo!, on the other hand, seems like a fun and exciting place to work. This juxtaposition bothered me for a while, until I realized that this is my cover letter and I can do it however I like. To that end, I’ve created a very short video about myself which you can find by pasting “Why should we hire Ryan Petersen?” into your search engine.
Thanks for considering me for this marketing manager position.


Yours truly,



Ryan Petersen
Columbia Business School
MBA Class of 2008

Labels: business, Columbia Business School, Interview, Yahoo

I just came across this quote from Yvon Chouinard, founder and owner of Patagonia.

“I’ve been a student of Zen archery for many years. In Zen archery, for example, you forget about the goal—hitting the bull’s-eye—and instead focus on all the individual movements involved in shooting an arrow. You practice your stance, reaching back and smoothly pulling an arrow out of the quiver, notching it in the string, controlling your breathing, and letting the arrow release itself. If you’ve perfected all the elements, you can’t help but hit the center of the target. The same philosophy is true for climbing mountains. If you focus on the process of climbing, you’ll end up at the summit. As it turns out, the perfect place I’ve found to apply this Zen philosophy is the business world.”

If you haven’t seen his book, “Let My People Go Surfing: The education of a reluctant businessman,” you may want to check it out. He has some great insights on the importance of running a company according to your core values, treating the supply chain as an interdependent ecosystem, focusing on process and getting out of the way of his people.

Labels: business, process, quotes

By Ryan Petersen
Columbia Business School, MBA '08

The Business Environment as a Complex Adaptive System

The landscape that managers must navigate is unfathomably complex. With an infinite number of interconnections and contingencies, the business environment is subject to waves of upheaval that render the most accurate snapshots irrelevant. Furthermore, this landscape appears to be made of rubber, where each step we take sends ripples of repercussion throughout the system, ultimately shaking the very ground on which we stand. Faced by the impossibility of making even one truly optimal decision in this complex adaptive system, how can managers avoid paralysis?

First, we must understand just how complex this environment is. To illustrate, let’s look at the game of chess, a highly constrained system that generates a seemingly infinite amount of uncertainty. According to Brian Arthur of the Santa Fe Institute, even if every atom in the universe were a supercomputer that had been crunching away since the Big Bang, it would still be impossible to identify the optimal move at the outset of a chess match . Given that any business system is many orders of magnitude more complex than a chess game, it is clear that we must abandon the very notion of optimal decision making.

The economy is a complex adaptive system, whose aggregate behavior emerges from a vanishingly large number of interactions taking place everyday between its component agents and artifacts. In fact, what is true for the economy as a whole is also true for the sub-components themselves; markets, corporations, divisions, business units and individuals themselves are all complex adaptive systems.

In recent years the science of complexity has provided astounding new insights on the behavior of these types of systems. Complexity theory tells us that in any complex adaptive system, the most interesting patterns will unfold at the edge of order and chaos . For managers making decisions in groups, this translates into finding the balance between everybody following the party line (order) and everybody contributing anything that comes to mind (chaos). By keeping our groups poised on this razor sharp edge, we create the greatest probability of generating novelty.

So our job is not to make optimal decisions. Rather, we must facilitate processes that allow for the invention of alternatives, welcoming of challenges, and continual learning. Each of these essential elements of successful decision-making are performed better by well-managed groups than by individuals.

Inventing Alternatives

Given that we can never be certain that our course of action is ideal, we must always be willing to explore alternatives. By their very nature, groups are better at inventing options than individuals. Each member brings a distinct set of experiences and provides unique approaches to any problem. At the same time, the very act of sharing ideas often stimulates further ideation within the group, resulting in solutions that no single member of the group could develop in isolation.

The challenge for management, however, is to create a decision-making process that balances the need for safety in exploring new ideas with the need to reach a conclusion so the group can take action. In his work on building learning organizations, Peter Senge characterizes this as a balance between dialogue and discussion. “In dialogue,” he writes,” “there is a the free and creative exploration of complex and subtle issues, a deep ‘listening’ to one another and suspending of one’s own views. By contrast, in discussion different views are presented and defended and there is a search for the best view to support decisions that must be made at this time.”

More often managers err on the side of discussion, focusing on concrete action at the expense of exploring new directions. To address this problem, managers must be willing to make changes to the very process of decision-making. We should assemble diverse teams and encourage cognitive conflict between the members. We should reward people who propose ideas, even when the idea is not adopted. If we are seen as too close to a problem, we should consider removing ourselves from the idea generation process. If a decision is important enough, we should consult with experts from diverse backgrounds who are further from the problem than our group. And if we remain frustrated by a lack of promising alternatives, we should consider introducing outside facilitators to lead formal ideation sessions.

Inviting Challenge

Challenging our assumptions, ideas and perspectives is crucial to improving our decision-making abilities. Indeed, the generation of actionable feedback is the very essence of learning from experience. We must create atmospheres where dissenting opinions and challenges to our perspectives can be safely introduced. To do this we must open ourselves up to personal challenge.

Unfortunately, by our very nature such challenges generate uncomfortable emotions that millions of years of evolution have programmed us to avoid. This opposition to challenge, known as homeostasis, characterizes all self-regulating systems. We owe our very existence to this built-in resistance to change, as it creates the stability needed to survive in an ever-changing world. Unfortunately, homeostasis does not discriminate between changes that are good for us and those that are not. It just opposes all forms of change indiscriminately!

Developing emotional self-awareness is the key to overcoming this natural tendency to feel threatened by opposition. Managers must foster the ability to disconnectedly observe their own emotions, understand the root causes of the feelings, and then make a conscious decision about whether these are justified or not given the circumstances. Achieving this degree of awareness (enlightenment?) is perhaps the most daunting task we face. Yet if we are to create a process that generates the actionable feedback necessary for learning, we have no choice.

Learning as Feedback in an Evolutionary Business System

The complexities of the business world are such that we will never have all the information we need to make truly optimal decisions. What we can do, however, is to improve our ability to interpret the limited data we do have through continual learning.

The business environment is an evolutionary system: a vast, self-organizing web of agents and business modules coevolving through time. The most successful business modules become widely replicated, while less profitable ones disappear. Fundamentally, the manager’s job is to develop business modules that are able to adapt quickly to the constantly shifting landscape beneath our feet. The “fossil” record provides ample evidence of overly rigid companies that failed to coevolve with their environment.

Recognizing that the business world is subject to the forces of natural selection, managers would do well to take lessons from the evolution of ecological systems. The driving force behind natural selection is feedback from the environment. Mutations in DNA generate alternatives and the environment provides brutal feedback about their fitness. In a sense, over time the species “learns” what characteristics the environment values most.

Fortunately for us, our business units are powered by human brains with the power to receive feedback from the environment far faster than the DNA within us. We have the ability to synthesize a lifetime of diverse experiences to develop near instantaneous decision-making. Most important for the manager, we have the ability to connect our minds in a vast network.

To encourage development of a learning organization, the manager must adopt processes that facilitate a true linking of the minds on his team. A first step is to lay out a vision with the power to motivate team members and align their efforts toward a common goal. He must create safety, reward innovation, encourage dissent and welcome challenge. Meanwhile he must work to maintain a balance between dialogue and discussion. And throughout the process he must be constantly vigilant of his own emotions.

If the leader’s job really is to keep his team forever balanced on this tightrope between order and chaos, then it becomes clear why so many promising young managers plateau just a few years after graduation. They may have unknowingly accepted the hardest task known to man.

Labels: business, Columbia Business School, complex adaptive systems, complexity, evolution

With barely 24 hours advanced notice, more than seventy-five CBSers attended an October 1 talk by Simon Harford, CEO for West Africa of Actis, a pioneer in emerging markets private equity.

Mr. Harford began the discussion of private equity and entrepreneurship in Africa by painting a very rosy picture of the economic outlook for the continent, with particular emphasis on Nigeria, a place he has called home for the last several years. He expressed optimism in the ability of the private sector to succeed in creating progress in places where decades of foreign aid and poor governance have accomplished little.

However, he emphasized that Africa suffers from a shortage of well-trained managers who are prepared to lead the next generation of business ventures on the continent. Mr. Simon concluded by saying that before Africa can ever come close to its potential, it must handle the problem of corruption.

A native of the UK, Mr. Harford first moved to Nigeria three years ago as the founding CEO of Virgin Nigeria, a joint-venture between Virgin Atlantic and Nigerian institutional investors. He joined Actis to run its West Africa arm 1.5 years ago, and is currently helping to raise the group’s next fund. Professors Murray Low and Paul Tierney, Jr. invited Mr. Harford to visit CBS as part of their new master class, Entrepreneurship in Africa.

Mr. Harford pointed out that Nigeria’s economy has averaged +/- 6 percent economic growth for the last several years, and emphasized that if you remove the oil industry from these statistics, growth approaches 8-9 percent. Likewise, foreign direct investment has doubled in recent years to about $6 billion in 2005, while FDI in the non-oil sector have increased from $0.3 billion to $1.7 billion.

Mr. Simon pointed out that investments from foreign companies are already beginning to dwarf aid money from the UN and loans from the World Bank. Similar trends can be seen across the African continent, presenting what may be the greatest investment climate since independence.
Not surprisingly, then, stock markets across the continent are soaring. Indeed, according to Mr. Harford, the stock market in Lagos is arguably approaching levels of “irrational exuberance” comparable with those seen in Shanghai. He attributed the run-up in Nigeria’s markets to three factors: GDP growth and pension reform has lead to greater savings, which are being invested in the markets; government crack-downs on money laundering have made it harder for “dirty” funds to be transferred overseas; and finally, the influx of foreign capital flows.

The country’s burgeoning capital markets ensure that raising money for a business venture in Nigeria is no longer the biggest problem. If an entrepreneur or business person tells that they cannot raise the money they need to grow, one can assume immediately that there is something wrong with the business plan, the management team, or some aspect of the operations themselves.

Rather, the major obstacles to entrepreneurship are corruption and a shortage of management. Mr. Harford said that several of his friends had tried starting businesses in Nigeria but were frustrated by the obstacles and costs of bureaucracy and demands for bribes. He also shared several stories about such challenges he faced as CEO of Virgin Nigeria. Although he says that he maintains a zero-tolerance policy for corruption, and that he has never paid a bribe of any sort—not even in his personal life—he acknowledged that such a policy is both extremely difficult, and vastly easier for one in his position managing a relatively large and high profile business, whereas a small business owner will often face greater challenges.

In addition to endemic corruption, Mr. Harford also pointed that African companies often cite their concerns of insufficient management pool. However, from the looks of enthusiasm in the audience, it appears that at least a dozen or so African CBSers are eager to prove him wrong.

Labels: actis, Africa, corruption, entrepreneurship, private equity, simon harford

I purchased a Google share last week. Yes, one share. Sadly $630 is about all I can afford to put into such a risky stock right now...

And at a PE of 53, it's definitely a risky stock. If the online advertising market slows down due to a wider recession, the stock could get killed. But I don't think the online ad business will be badly hurt even in a pretty major recession.

Here's why:

The fact is, online advertising delivers the most targeted audience, with extremely measurable returns. For the first time, marketing becomes a true profit center within the firm because you can now actually match your revenues directly back to your ad dollars. The tools for measuring these returns are fairly new, but once Google Analytics and its (much better, if more expensive) competitors are well-understood by more marketers, Google AdWords becomes the best place to put your ad dollar. So the market can only grow as marketing people learn the skills. And in a recession, are you really going to cut spending on the one area of your marketing budget that you know is producing returns?

The company's mobile phone plan is genius too. They give the under-financed handset makers in china a cutting edge software platform for free. All they have to worry about is making decent hardware at a low price, and suddenly they can deliver powerful mobile computers super-cheap throughout the world. As far as Google's strategy is concerned, this is a particularly powerful model for the developing world. Suddenly you have billions of people doing Google searches who have never even used a computer before. The phone tells Google exactly where the searcher is, so they can deliver an ad that is locally relevant. Suddenly every local store on the planet--from Wal-Mart down to the tiniest tin-roofed kiosk--can deliver ads to all people within a stone's throw of their front door. Who wouldn't pay for that?

This is a business I want to own. Now I do...

Labels: business, Google