A bombsell may be hidden in my psychological analysis of Twitter today. Why? Because of Twitter’s new Application Programming Interface (API). CEO Costolo’s decision-making process did it wrong again. His decided to introduce this major business changing model to Twitter appearing to me as a desperate Kahneman System 1 heuristic decision in a complicated psychological area of information processing where there is not enough research data to show what the public will do to a company that makes it more difficult rather than easier to connect. Introducing a restrictive Application Programming Interface that will require tweets to be all Twitter’s or forcing you to go through an app that may or may not allow you to add data in your tweet from other sources (Imagine being unable to readily tweet because you added a picture of your kid from Instagram).
The world of electronic communication is cluttered with too many new rules, umpteen mini commercials on social media sites, ID requirements, passwords needed around every computer corner, and more and more minds that are becoming less and less curious about even personal messages. Piaget is losing the battle of enticing people to seek information by giving out a “teaser” sentence, e.g., “Your wife left an important message… You can find out by joining this retail website.” Dr. Daniel Kahneman in his book Thinking fast and slow says about people, “They tend to be lazy.” Do you think Twitter’s API will streamline tweeting or restrict the flow? If 50% of tweeters quit, you’ll see it in your next quarter’s earning’s loss. People won’t tweet because they can’t effortlessly attach external data to the tweet, that is my psychological analysis. They will quit tweeting, what will Twitter do then? Go back to R&D for something else to beat the market? There are 2 type of CEO attitudes, the one that makes naturally System 2 decisions to grow and the one that bullies itself into the market with System 1 decisions. Guess who is who?
Monday, November 27 is the day you will know that Twitter shares gained a penny or two more than analysts expected. The fourth quarter will be a bit better than the third that was a bit better than the second. This is a snail parade for the eternal optimists that catapulted Twitter to $50 per share on loses of $2.40 per quarter. This is not my first blogging on Twitter. I don’t like to say it but the internet is getting less free. You can’t read anything today without a requirement to joining something.
Interesting that I just received an email from a friend. The email said, “You have to join the website free to get your friend’s message.” Needless to say I deleted the message from my friend without opening it. My curiosity level has reached zero. How about you? I know that most of my friends still will join something to get the picture of the kid on a tweet or to find out what a friend wrote in an email. Not me, I am happy with Facebook and Google that keep my social life easy.
Decisive actions don’t happen in business as often as in politics, but what Apple did this week is an economic coup d’etat and I don’t mean just the popularity of the new iPhone 6. Let’s look at the incredible app that come with it. Apple is now in the retail PayPal business that may transfer more billions from hand to hand than the value of Apple itself (600 billion). Poor newbie Plastic that appears with a good idea to replace your multiple credit cards with just one super card, “Jack of all trades” for a fee, and poor newbie Coin that wants to streamline your payments. Do these 2 midges fighting a giant know their psychology? They charge $100 entrance fee to their unknown gadget show expecting to win the race against the Apple horse, ridiculous! Are they aware that delaying their entrance til next year gives Apple a huge head start that it actually doesn’t need. Don’t plastic and Coin realize that getting 10% of the retail market for each of them won’t cut the mustard to avoid folding up? Yah, consumers are attached to their plastic credit cards but is that a strong enough force against the Apple app in the cloud? The iPhone is more intimate and personal than any card, it’s your baby!
Let’s do a serious psycho-analysis of the economic coup d’etat at the Apple store:
1. Likert scale has a -2 – 1 0 +1 +2. Solving a problem gets you from -2 to -1. Improving gets you from +1 to +2. These are good changes. But, crossing from -1 to 0 to +1 is transformation. Is Apple sending a billion financial transactions to the cloud? They will be the fastest in the business of numerical living in the fast lane.
2. Is Apple going to dominate the business of paying for products and services? 10%, 25%, 50%, 75%, 100% What do you think?
3. I don’t know about you, but to me this electronic horse race to the cloud is exciting to watch. I think Apple will win because CEO Cook that replaced CEO Jobs with fitness and skill is swell. And, for Seeking Alpha or other blogs that sometimes quote me, please don’t do it this time. I may be biased because I own a cart of apples since 1997!
Let me be psychologically blunt. The Chinese are invading Africa for its natural resources and cheap labor and the Africans who are not educated to handle the influx, will be lucky if they get 10 cents on the dollar invested in that poor, diseased, authoritarian bloody continent. Sure, economic imperialism by the West in Africa was more blatant in previous centuries, but it happening again in more subtle ways? Why are the Africans, whether they live in Africa or in American, always get the short end of the economic stick? Well, it is a touchy subject enough for most writers to appear politically correct, but not this writer. African will continue to be exploited economically untill it gives up its “culture of poverty.” They have to start teaching western education in Africa. This is a tough problem for all cultures that can’t produce the good life. Some find oil and live well for a hundred years. Some find donors and live well for a generation. Some, the great ones, say “we need to give up the part of our culture that doesn’t work.” These leaders get assassinated because culture, whether good or bad, is cherished by its people. That is why most immigrants to the west spread their culture of poverty in rich countries. The Bible says you have to wait a whole generation to get free to achieve, but the truth is that it takes many generations because the parents WILL teach their kids how to stay poor in the name of the old tradition. The only reason that Japan is now a prospering democracy is that they got conquered by the west. The only reason that Germany today is no more fascistic and free to achieve the good life is that it was conquered by the west. Who will conquer Africa with the blessings of the poor? No one!
This is my response this morning to the BBC program I just watched saying that “we don’t know if China can become an innovative society.” For my readers who want to predict economics better than the BBC the answer is Yes, we do know why China can’t afford be an innovative society and stop copying others. The reason is that China must continue to have control over society and control prevents Chinese people with innovative ideas from implementing their ideas, i.e., going bank shopping for a loan (government controls the banks in China). I have been watching China and India for ten years, 2 giant economies, one overly permissive (India) and one strict (not overly strict), China. Let me give you the Likert Behavioral Attitude Scale (L-BAS) of economic and cultural development. It runs from overly permissive to permissive, neutral, Strict and overly strict. India is overly permissive, almost any behavior goes in its economy, although now with a new right-wing conservative prime minister (Narenda Modi) India is bound to move to permissive from overly permissive which would be ideal for a less chaotic development. China, on the other hand, will not move from strict to neutral because it does very well now copying innovations from the United States which is an overly permissive society and very innovative. There are 2 overly permissive societies on earth, Israel and the U.S., the 2 most innovative societies in history. China in now moving into a strong economic relationship with Israel, which shows not only how smart the Chinese are but how skillful in copying others. They know that they can’t give up control (see what is happening in Hong Kong), and the next best thing is copying those 2 countries that gave up control over their societies in favor of innovative spirit that requires psychologically to not have fear of the authorities (requires also permissive fathers at home). If the Chinese gave up control over their society the next generation would become the most innovative – and chaotic – place on earth. They can’t do that, but the Indians, they can and will. expect India in the next few decades to come up with new technologies (apps) that will boggle the mind. The future of innovation belongs to the US, India and Israel. The economic future in general belongs to China because they don’t have to spend a fortune on R&D to get the future app goodies!
Hewlett-Packard splits PC, tech services units (Timecolonist.com, Tuesday, October 7, 2014, Business section
This article was copied by the Time colonist, Victoria, from the Associated Press, New York, indicating that the editors of the Victoria, BC paper consider the splitting issue important. I will not examine what is in the article since you can read it yourself. I brought it up in my blog today because what Hewlett-Packard did, splitting its Products and Services divisions into 2 independent companies, is powerful and common phenomenon that occur when a company believes it can earn more money if it splits, it’s like saying, better 2 than 1. However, the issue deserves a lot more attention psychologically than is given to it is the article from New York or in the business world itself!
I want my readers who work in various businesses to get more sophisticated about the psychological meaning of 3 kinds of interrelated companies you work for in the market place; those companies that sell only products, those that sell only services and those that sell products and services.
1. The 10% Rule (this rule is mentioned in my Peaceful Revolution blog, http://www.drelior.wordpress.com). The more high-tech is a product the better equipped is the manufacturer psychologically to service it at the top 10% level, a level not approachable by others. I have a Toyota Avalon. An independent garage or gas station that accepts Toyotas for service can not give my car the full attention it deserves. Toyota sells more cars than any other company in the world. Toyota company had sent me Toyota employees to teach them the psychology of automotive relationship for years. When I take my Toyota Avalon today to a Toyota service station I feel secure that my car is being taken care of even better than my dog in a licensed grooming place! Can Hewlett-Packard continue to make computers and printers and have the split “other” company continue to give the 10% top service to the equipment? That is the most important question to me as a customer.
2. The focus Rule (this rule is mentioned here for the first time because it a legitimate concern by Meg Whitman the CEO of HP). When a company splits into a product company and a service company it does give each new company the extra room needed to focus better on manufacturing the product or servicing the product. But this is just theoretical. The actual result depends on whether the new and the old CEO’s communicate at the 10% top-level! If Meg Whitman stays the CEO of both service and product HP the 2 focuses may stay independently great, but what if the 2 CEOs don’t communicate? In my opinion, most splits in companies occur for financial reasons and not for psychological reasons. Caveat Emptor!
All, and I mean all of them, all the companies that I as a small investor invest in are making big money, naturally, I am a psychologist who specializes in the behavior (body language, personality, motivation, intelligence, creativity) of unique CEO’s. I analyse the movement of shares in a company based on the behavior of the maverick CEO. In the last 3 years I spoke at UCLA, University of Valencia and the University of Rome on Behavioral Economics. I wrote 2 books on the huge “variance” of importance of a CEO to his company, contrary to the opinion of most investors or investor psychologists.
Now that I may have established my credentials with you, let me tell you about Ma, not my mother but Jack Ma, the CEO of Alibaba, the Chinese company that launched its IPO in New York today instead of in Hong Kong. He was born in a small town in China and thought of New York and learning English as soon as he grew up a bit (reincarnation?). This guy became a business phenomenon, mastering the Chinese and English commerce cultures by the time he was 20!
I am a very conservative investor, I make all my decisions in life scientifically in order to reduce risk to a minimum. Let me tell you, when I saw how Jack Ma retaining control over Alibaba with only 9% of the outstanding shares, I asked myself, “Gee, how can a small guy from a small place in China maneuver the regulations in such a way that Japan’s 34% control and Yahoo’s 25% control of Alibaba are rendered almost obsolete? That is when I got excited about putting in the time in my office to analyse that Ma Fellow. Is he a genius? He certainly was smart enough to circumvent the US legal financial rules of Chinese investing in New York! Then I found out that Ma was also able to circumvent Chinese law against Foreigners owning Chinese stocks by forming an intermediate holding Company in the Caiman Islands. My God, this guy is resourceful, it shows how smart Ma is about international financial dealings. But what about the Chinese government observing all Ma’s shenanigans? Well, he handled them well. He sold (gave free?) Alibaba’s pre IPO shares at $30 to $40 a share to sons of Chinese leaders who would become instant billionaires on September 19, 2014 IPO day if they sold the shares for $100 per share! Ma sure knows how to handle an authoritarian regime by going through the sons!!
I found my unique CEO in Ma. This tenacious Genius has a dynamic personality that remind me of Steven Jobs and Mark Zuckerberg combined! He cares about people and helps the poor. Ma is 49, married with 2 kids, which in psychology is considered the best age for motivation to excel. He is definitely a genius, a Napoleon in international business circles. In 15 years since Alibaba started he connected his company in 240 countries! He lectured in international trade, built fantastic websites, started companies before Alibaba was envisioned and even found time – to save endangered species! And he loves American. Both he and his son studied at the University of Californian at Berkeley!
Forgive me if I have a few “run on sentences.” I wrote this posting, with the research, in just one hour. I wanted to rush it out to my readers ‘hot.” I bought 500 shares today in a sequential buying mode as described in my books. If the shares trend up I buy more and if they go down I wait for the turn. I can’t lose when I bet my money of Jack Ma, a super CEO. Please don’t buy shares just because I do, be smart, do your own research.