Sunday, June 21, 2009

Economy trends

Economic growth

In our economic history there are some things that are not fully understood. The most significant is probably the economic cycle. The are many reasons an economic downturn can happen, war, oil crisis, terrorist attacks, mortgage crisis, etc… And as unpredictable these may be they end up contributing to the cycles.

The economic cycle is relatively easy to predict and can give a rough estimate on how the next few years will be like. Knowing our economic cycle can give us a broad perception of the future and allow us to plan accordingly.

US GDP Growth yearly, 5yr average and 5yr trend

USA GDP growth, yearly change in blue/orange (quarterly), 5 year average in red (first 5 year are average until 1948, quarterly), arithmetic trend line in black.

In the above chart there are a few things we can see

  • The economy is becoming more stable as time progresses
    • This is mostly because the government has a better understanding of macroeconomics than ever before, so it adjusts the economic policies to that effect. So we get less recession periods and in the same token we also get more modest growth periods.
  • The average growth changed very little
    • As we can see in the red line, the average growth is almost the same as it was in 1948 with a very slight decreasing tendency.
  • Recession cycles are preceded by strong growth cycles
    • There is also some correlation between the strength of the recession and the strength to the growth
  • There are longer cycles averaging 10 years and smaller cycles averaging 2 years
    • A recession usually constitutes of a lower turn in the longer and the shorter cycles.
  • The 5 years average is always above 1.5% growth

Average 5 years

Average 5 years.

This is a closer view to the 5 years average. The 55 years average growth is 3.44%.

In this view it is easier to see the cycles, however a 5 year average also limits the reaction time, this is, after the economy recover from a bad cycle it will take about 3 years for this graph to show.

Very roughly we can see

  • 50's poor economic cycle
  • 60's good cycle
  • 70's to mid 80's poor cycle
  • Late 80'd good cycle
  • Beginning 90's poor cycle
  • Mid 90's to beginning of 2000's good cycle
  • Late 2000's poor cycle

Because it is an average of 5 years, means that the above numbers can vary up to 5 years from the actual recovery or down turn.

The economic cycles can vary from 5 to 15 years. A poor cycle is proceeded by a good cycle and vice-versa.

US GDP growth compared to the unemployment rate

USA GDP growth, 1 year change in blue, unemployment rate in red

There is a strong correlation between the economic growth and the unemployment rate, no surprise here. We can also see how the unemployment can rise very quickly however it only falls through a long period of time.

What qualifies a crisis into a depression is the unemployment rate.


Economic policies

The government adopts several policies according to the economic output of the country. When the economic growth is high, the interest rates will rise too, when the economic growth is small or negative the interest rates will fall.

Besides changing the interest rates the government can also increases public spending, usually meaning more government contract for private companies.


Prices are determined by the supply and demand. When the economic output is low the demands will also be low (the demand (private consumption) goes directly in the GDP calculation) so one way companies try to increase demand again is by lowering their prices, this results in low inflation levels, sometimes even negative value.

Stock market

The stock market is a great indicator of how well a country is performing economically, a below average rise or even a fall in the stock prices can be expected.


The money value is also determined by supply and demand (although it can vary from country to country). The money value falls when demand is low and rises when demand is high.

The government can also affect directly the value of the money either by issuing more notes and coins or by changing the interest rates.

The government usually emits more money in economic downturn, as a way to decrease the value of the money and therefore increase the exportation levels and lowers importation.


When things turn bad companies start cutting their costs, this includes firing employees.


Friday, June 12, 2009

Problem Solving

Nature of the problem


Common characteristics are:

  • Defined boundaries
  • Very specific in an area of knowledge
  • Easy to recognize the solution
  • Few exogenous factors

Ex. Develop a faster microprocessor


Common characteristics are:

  • Undefined boundaries
  • Broad area of knowledge
  • No single solution
  • Results are difficult to measure
  • Many exogenous factors

Ex. Develop a new sales campaign



An Exogenous factor is what is outside of us.

Very rarely can we control the exogenous factors. More often than not we can control which exogenous factors we are affected by, by changing our endogenous factors.

Ex. a problematic investor, instead of trying to fix this exogenous factor, it can be more productive change it, looking for a different investor or a different way to finance your operations.


An Endogenous factor is all that is inside of us.

This is where our power lies.


Divide your problem into smaller pieces, we are best a taking several small steps, instead of a giant leap. Giant leaps can be a morale boost for the entire staff, however they are extremely inefficient and there are many other ways to achieve the same appearance without the inefficiency.

Ex. Instead of taking on the problem of poor sales, divide it into small pieces, find where the problem is, and attack the problem of poor market knowledge of your product.

Visual Maps

Visual maps are cool, not only that, but they help to understand the problem.

There are some things to avoid when making a visual map:

  • Information overload
  • Complexity
  • Redundancies
  • Mixing an action plan with a problem plan
  • Not contributing anything new

A good Visual map will help to make the problem tangible.

The right team

Creativity, expertise, experience, teamwork, imagination are some of the skills to look at your problem solving team.

Every man has their place, so make sure the management is looking at the big picture while the rest of the team focuses in the details.


If you can't measure, you can't manage. Throughout your process always keep in mind the importance of having a feedback system, so you'll know if the solution is working or not. A good feedback system can separate all the variables and the steps of the solution.


Monday, March 30, 2009

Find your market

Work on your business while on vacation.

I see so many people going on vacation only to not leave their own country. If you are one of those, next time make sure you go to a foreign country. You are missing a great opportunity of interacting with a different culture and finding great business opportunities, an import business.

Travelling is a great way to find new products to sell it back in your home country.
Many product make success in other countries before getting to your.

Globalization isn't perfect yet, so it still takes a while before a foreign product gets to where you live. You can be the guy that brings that product home.

When in a foreign country check out supermarkets, local stores, local ads, talk to people, see what other people are buying. Find what's hot!

It doesn't have to be a really big thing, it just gotta be different from what you have back home and people must find it useful or cool.

Now, once you find it, you need to get in contact with the people who make it. This is where you research, read the labels, do a google search, talk to the manager of the establishment you found it, do whatever it takes.

Next offer them a distribution deal in your home country and go for an exclusive dealership. The terms vary greatly from deal to deal, so use your best judgement, and aim slightly higher.

Back home, you can sell them yourself to the general public or you can setup a B2B channel where others will sell you product for you.

One way of getting into the B2B market is getting a hold of one or two big retail companies, however it is very hard to get the attention of a big company, not to mention you gotta have a very solid deal with your supplier or else you run the risk of the big company stealing the product from you.

If you can get an exclusive deal with your dealer, you got your life easier. Now you gotta present to your clients why this product will work on your market.

Negotiating with a big company deserves a post all by itself, however always remember to make a good presentation, show them the advantages of working with you instead of doing it themselves (most big retail chains do importing themselves).
Also keep in mind that most big retail chains avoid making deals with very small companies, but if the deal is good enough they will go for it.

Just keep in mind, that the harder it is, the better it feels once you get it done.

~Bruno A. R. Faria


Starting up a new business,

Starting up your own business is allot of fun. It involves allot of creative thinking, imagination, decisiveness and maturity.

If you don't like not having somebody tell you what to do, then starting your a business is probably not for you.

We can divide the planning stage of your business in three steps.

  1. Get a product/service that you can offer
  2. Find a market for it
  3. Mold your objectives around it

This has been the traditional way and it still is order in which most entrepreneur make their plans. It is the safest. You find something that you can make money from, then just work your way around it.

I believe it is more important to make your business suit your needs instead of the other way around, too many business owners find themselves in a position where they make allot of money and end up unhappy for various reasons.

In the end, starting a business should be more than just about making money, it should fulfill you in some way, it must improve you quality of life.

I recommend putting your objectives first, like this:

  1. Find out your objectives
  2. Find a potential un(der)explored market that meets your needs
  3. Search or design a product or service that will fit in it

In future posts I'll go indepth in each of these steps, but this is a simple breakdown of the above points:

1-Find out your objectives

Before starting your business, any business, you should look in yourself to find the reasons you want to do it. Be specific! In the end your business should be there to fill your objectives first.
Now, don't work with the intangible here, think of feelings and action, "become rich" and "stop working" are not good goals. Work on the feelings it gives you.

For example, rarely does somebody want to become rich, most of the times they want the lifestyle of being rich instead. Money for the sake of money does not improve your life, spending it does.
Not working is very boring, there is a huge amount of free time on your when everybody else is busy (working!) and while it is easy to achieve it is very hard to maintain. Instead "Having more time to spend with the family", "Making money in a way that I enjoy", "Be able to work from anywhere in the world". The first and third probably gives you almost the same end result and is tangible, the second you probably would be happy to get to work.

Bottom line: Choose something that will improve your life quality.

2-Find a potential un(der)explored market

Every time you see something and think to yourself "that sucks", "that's unsafe", "it should be easier" etc... it's a potential market to be explored. You may or may not have the means to explore it, but to start you only need one.

Next make sure the market is compatible with your objectives. If you tapping into an activity that requires your presence, such as most services, it will be incompatible with any objective that you may have of freeing up your time or working less.

3-Search or design a product or service that will fit in it

This is where the beginning ends, depending on your resourses you may design the product yourself, hire somebody to do it for you or buy it from somebody.

Your product should have something that will make it unique and different from any direct competition it may face. That will be your winning edge.
However your winning edge doesn't have to be in the product itself, instead it can be in the way you present it to the public or in the way sell it or how you support it or all of these.

Getting all the above steps done already puts you on the top 15% of all the entrepreneurs. Next comes the execution.

~Bruno A. R. Faria