Risk Preference

Recently I read a book "What I Wish I Knew When I Was 20" by Tina Seelig. This book provides a lot of fascinating examples and is well organized. I found and got some useful insights from the book. Also, it was very easy to read. I'd like to mention a thing from the book, anyway.

The author introduces a thought of risk in a chapter. According to the book, there are five types of risks:

1. Physical risk: such as being willing or unwilling to bungee jump off a bridge.
2. Social risk: like being willing or reluctant to start a conversation with a stranger. 
3. Emotional risk: revealing own emotion and feeling.
4. Financial risk: a big financial risk taker or not.
5. Intellectual risk: willingness to take risk in pursuing scientific inquiry.

According to the finance, risk is the probability that actual return on an investment will be lower than the expected return. And, suppose a financial assumption -- which is the more you take risk, the more you get the return, and vise verse -- is correct (For example, high-risk, high-return research is here). That is, the more we take risk, the more we will get something successful or big, as the following comic strip shows.

Comic Strip: Frank & Ernest published on June 23, 2011

With the above idea, I'd like to consider about my risk preference, that means which types of risks I am willing to take. I'm comfortable to take physical risks because I don't think about risk of fracturing a born which some people may worry, while taking social risks are uncomfortable for me as I confessed before: "Shy is not Shine". Also, I'm willing to take intellectual risks such as I like casting doubt on theories and common thought regardless of whether my critics for them are correct and pertinent or not, but I'm not a big financial and emotional risk taker so I may be a cheapskate and an expressionless face...

As Tina Seelig points out, although we are taking a big risk, we don't see ourselves as big risk takers on certain types of risks. For instance, unlike me, some entrepreneurs and bankers don't assume themselves as big risk takers despite spending huge money for investments. On other hand, if someone paid one million dollars for you to play a sky diving, you could never try it out. I think a message comes from these things. That is, "Don't be afraid of failure and shame." But, I know easier said than done. As for the first step of action, take a look at your own risk profile. Which types of risks are you willing to take and don't you see as a big risk? Though it is just a starting point, it would be easy and sometimes helpful for you to go ahead. 

Mrs. Tanaka

Since 2007, Mrs. Watanabe has been recognized as one of factors to move market trends among dealers and investors who are in active to global currency market.

Who is Mrs. Watanabe?

Photo: The Star Publications

No...(This is Ken Watanabe, a famous actor, and his wife)

Photo: Catastrophist

Indeed, Mrs. Watanabe is "a mythical housewife representing the thousands of small Japanese investors who prefer speculating on currencies to stocks" (Reference is here). She is generally doing investment activities during lunch time. As a result of her activities, at Tokyo market, a fact that after the lunch time the market price frequently turns the opposite way against that morning market price, despite no significant factor, at the foreign exchange market between dollar and yen has been confirmed. This was surprising foreign investors. And, they couldn't help highlighting Mrs. Watanabe.

Recently, Mrs. Watanabe has been crashed allegedly by hedge funds. After the Japanese big earthquake and tsunami, despite the serious situation, the yen has been risen against the dollar. This tough condition would continue to face on Mrs. Watanabe awhile.

Although some articles wrote up of Mrs. Watanabe, I would like to highlight another point these articles didn't pointed out. Many housewives include in small Japanese investors who deal in the foreign exchange -- aka Mrs. Watanabe. I guess they are majority, of course though there are a lot of college students and businesspeople engaging as side business. And, they are a key player for Japanese economy now.

Though some of them got a lot of loss by this tough situation, they would keep doing or come back because most of their money come from their husband's income -- for them, dealing in foreign exchange is a thing like earning their allowance.

For example, my mom, Mrs. Tanaka, set up a booth at a flea market like a garage sale last Sunday. When coming back home, she got some money by selling our stuffs which we didn't need. Also, she has engaged to invest some stocks and have a real estate -- the source of funds from my dad -- like many Japanese housewives do , though she is not one of Mrs. Watanabe. When she gets a profit from her business (?), she enjoys traveling and shopping by using its money.

Thus, Japanese housewives are so powerful not only in their family, particularly wives hold real power in modern family, but also in economy by their very good business mind. They will have continued to have an impact on markets and economies, albeit Japanese markets and economies have been sunk by the earthquake and tsunami. And surprisingly, they are spending a lot of money to buying clothes and even eat a great lunch at an expensive restaurant because they have a good backup giving them funds and also their return in their investment to stocks and foreign exchanges. Although Every housewife is not like that and Mrs. Watanabe, they are worth to be highlighted and they are the hinge of recovering from this bad situation in Japan.

I personally have a little hope that my mom becomes the person called "Mrs. Tanaka" who is success in business world instead of "Mrs. Watanabe." I know it's not going to happen...

Just a Memo

I guess that the hard disk drive (HDD) market is not familiar to many people. The bottom of the figure shows us an example of the Kryder's law, which is one of similar laws of Moore's law -- a long-term trend in the history of computing hardware. Anyway, I'd like to think about the HDD industry through a current issue.

Figure: Hard Drive Capacity Over Time by the Wikipedia

Western Digital (WD) and Hitachi announced on March 7, 2011 that WD will acquire Hitachi Global Storage Technologies (Hitachi GST) for approximately $4.3 billion, according to an article by Venture Beat and a press release by WD.

This news gives a significant impact on the HDD industry. To begin with, the leader of the industry is Seagate, which has occupied about 41% of the market share, according to Smart HDD. And, WD is the second at approximately 23%, and the third is Samsung at approximately 16%. Hitachi GST has held about 8% of the market share. As a result of the acquisition by WD, WD will be closer Seagate's market share (simply, market share of WD and Hitachi GST totals about 31%.). Additionally, as an interesting thing, Seagate is favoring heat assisted magnetic recording (HAMR), while Hitachi GST favors patterned media (DTR or PBM) -- both have been known as a new technology. As long as I read a report of the HDD industry by Tom Coughlin and Ed Grochowski, it would be happened a format war between HAMR and DTR/PBM, such as the format war between Blu-ray Disc and HD DVD, and so on -- aka, a de facto standard. Therefore, competition between WD and Seagate will be harder, instead of the previous competition among to five companies; Seagate, WD, Samsung, Hitachi GST, and Toshiba.

It also implies another thing, which Samsung would take action like acquiring a HDD company or constructing a new factory to enhance their capacity of producing. It is because Samsung will keep away from the top two companies; Seagate and WD.

Thus, what WD is going to buy Hitachi GST is a big deal for the HDD market. How the market will be changed is interesting for me as a consequence of the acquisition.

One Step Forward, Two Steps Back

Recently some articles on the TechFlash have introduced Microsoft's cutting-edge technologies. Each technology is cool and, needless to say, is expected to launch as up-and-coming products (visit for more other videos: Todd Bishop's Microsoft blog. However, stories of businesses by stunning technologies aren't generally in progress, and reach the happy end. There are some reasons why brilliant technologies don't promise to be success and to be accepted by consumers.

For instance, an electric car was already invented in the mid-19th century, and seemed to get legitimacy by consumers between 1890s and 1900s. But, the history was different. In fact, electric vehicles were defeated by gasoline cars as a result of competition regarding more popularity (A story of why people changed from horses to cars as a transportation by NOVA is interesting. If you are interested in it, click on THIS.). Since then electric cars have waited for a century to get the tipping point. They would seem to build status instead of gasoline cars within a few decades.

Why are technologies so difficult or taken much time to be accepted by consumers? Cameras, TVs, Computers, the Internet, Google, Facebook, Smartphones, and so on look like easy to diffuse markets. But, each had different difficulty in the way to accomplish the tipping point (btw, Malcolm Gladwell is actually my favorite author.). As far as I know, lots of books and theories tell us how to break the wall in order to get citizenship in markets (As references from a point of view of marketing and management, Blue Occean Strategy, The Innovator's Dilemma, Crossing the Chasm, et cetera.).

Here, from my point of view, I would like to make a comment. Obviously, some of technologies like the above video are too daring. They are hard and difficult for customers to figure out, and they are even far away from and beyond their life style. Thus, a problem for the hyper cutting-edge technologies is how to sell products with such technologies. In other words, it is a marketing problem. A good example is the Apple Inc.. iPhone is one of the great gadget and at the same time a blockbuster. Also, Mac series, despite having maniac functions, have contributed to build and acknowledge the Apple brand by consumers. A key for diffusion is that it is recognized as cool and stylish not like gizmo. On other hand, PlayStation and Xperia by Sony -- especially, PlayStation 3 and Xperia TM PLAY -- is too having functions and qualities, such as too beautiful screens and sounds, too much capacity to play game and use cellphone, and so on. Apparently, the target customers are not everybody but a part (and, actually I don't know how much they are sold, so this opinion is not strong and needed more information, though).

As long as I saw the videos by Microsoft, they are trying to promote their technologies with their familiar products like Xbox360 and Kinect. I think this is a good way. However, Microsoft should pay attention not to be caught a competency trap (aka an innovator dilemma), as examples for it; actually Sony's PlayStation 3 and more likely film cameras (More in detail: Organizational Learning, or The Innovator's Dilemma). They always have to stare at customers in order to avoid happening such situation (Unfortunately, Microsoft is already called as 20 centuries company). At the same time, we consumers have to catch up with their cutting-edge technologies, too!!

I cannot imagine it before I see it



Air Multiplier by Dyson.com

 Today I went to Fry's for the first time with D, my host's friend. There were a lot of interesting products. What I was most interesting in the products was an electric fan by Dyson. It is a very fashionable shape, and looks like a magnifying glass. My surprising point was that Air Multiplier, the product's name, has no blades. It is amazing for me. What do you think about it? It because I thought a fan always had blades before I had seen Air Multiplier.

I just want to say "Innovation is super!" By an innovation, we are sometimes noticed or recognized somethings about which we have never thought. Today my host father was also surprised at Kindle, though I don't have it and I am wondering whether I buy it or not so far. The reason why surprised was a speed that he bought a book online and then Kindle got it immediately! We don't need to wait for a cashier in the bookstore. Hmm...unbelievable!

Who is the Villain/Villainess?

My first blog is about a relationship between Revenge and Scapegoat, both terms are a sociological concept.

Recently I have read The Upside of Irrationality by Dan Ariely. The story of vengeance is introduced the chapter 5 of the book. Especially, I was interested in an experiment of Agents and Principals in the chapter. For instance, when we go to a restaurant, our waitress give us a bad customer service such as spending a lot of time until serving a food. And then, we want to take revenge to her through tipping her a bit less or writing the complaint of the restaurant over the Internet. To decrease the size of tip is vengeance on her, while revenge by using Word-of-mouth is not only for her whom the agent is usually, but also for the restaurant whom the principal is. According to study by Ariely and co-researchers, we tend to seek revenge not to depend on whether the agent or the principal when we want the someone to feel the desire for revenge because they did something to make us get angry.

Next, I will talk about Scapegoat. Seattle Mariners dismissed Don Wakamatsu, manager, due to be miserable team performance, even though some researches show that changing manager during the season is negatively related or not correlated with improving the team performance. Such firing is called Scapegoating in the field of succession study, which deals with how manager or CEO takes over in an organization and a company, and how managerial succession influences on firms. Also, Scapegoating is more likely to be manegers or executives who have less power than more powerful them, according to Boeker (1992). In the case of Mariners, the General Manager who is the principal did not quit, despite a responsibility of the struggling as well as Wakamatsu who is the agent.

Introduced two topics share a common point. It is that we are bad at grasping a causal relationship, and also we prefer passing a blame on to the other people. Accordingly, we often take revenge and scapegoat, which are, I suspect, an instinctive behavior.

Finally, I am going to introduce an example that both revenge and scapegoat are related. Mr. Nozoe, former President of Fujitsu Limited (Fujitsu), was dismissed on September 25, 2009 because of connected with a third-party company that was said to have an unfavorable reputation. In this time, Mr. Nozoe agreed with accepting to be fired, according to a board member of Fujitsu. But, on March 6, 2010 Mr. Nozoe sent a letter about requesting his resignation be nullified to Fujitsu, and then a relationship between him and the company was very threatening. He was about to sue the company for libel, and so far he haven't had a regal fight to them. I think he was scapegoat for a responsibility of having a relationship to a unfavorable company and carrying out too drastic reforms. However, the reason for being dismissed is still unclear. Also, Mr. Nozoe took a revenge to the company by a big report. For this, Fujitsu received to decline a reputation and pay a cost to work out. I still don't know which Mr. Nozoe or Fujitsu said a true thing, and he needed to disclose the issue because of this revenge to the company who is the principal instead of the board members who are the agent. But, Mr. Nozoe seemed to me to be the villain through the series of reports. Which do you think that Mr. Nozoe or Fujitsu is the villain?