The Dao of Competition (2)

Does the ends justify the means?

When one is strategically positioned ahead of the competition, he can be positively optimistic. ... In an extreme competitive situation, having more positive capital than the competition is a factor.

Being ahead means the leader can make the contenders to grind purposelessly. He knows the obstacles that can be fatal and the necessary resources that are needed to stay on course.


How does one overtake the leader?

"If you're last, then use yin tactics, if you are first, then use yang tactics. When you have exhausted the enemy's yang measures, then expand yin to the full and seize them. ... This is then the subtle mysterious of yin and yang according to the strategists. - Questions and Replies, 2 (from Seven Military Classics of Ancient China)
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January 29, 2009
Chinese Premier Injects Note of Optimism at Davos
By CARTER DOUGHERTY

DAVOS, Switzerland At this year’s annual meeting of the World Economic Forum, the word optimist comes across as an ironic joke, with precious few attendees prepared to guess what comes next.

Gloom is the order of the day.

We cannot underestimate the challenges and dangers that the world economy faces in 2009, Stephen Roach, chairman of Morgan Stanley Asia, said at the forum’s traditional opening debate on the macroeconomic outlook. It will most likely be the first year since World War II when G.D.P. actually contracts.

The only bright spot, as the conference got under way came from Wen Jiabao, the Chinese premier. Eager to calm concerns that his country’s economy would not avoid recession, Mr. Wen struck an unabashedly upbeat tone.

I can give you a definitive answer, he said. Yes, it will; we are full of confidence.

Mr. Wen, in a rare appearance by a top Chinese official at Davos, said that the Chinese government had set a goal of 8 percent growth in 2009, which he called an attainable target through hard work. He reeled off statistics that showed bank lending and investment, after slowing sharply in the fall, picked up in December and January.

The harsh winter will be gone and spring is around the corner, Mr. Wen said.

Still, the International Monetary Fund, in its new forecasts, sketched the outlines of a very tough winter indeed, economically speaking.

Global economic growth will reach 0.5 percent this year, the weakest pace since World War II, the monetary fund said. That is down from a 2.2 percent prediction in November.

The monetary fund also predicted that losses linked to bad mortgage loans in the United States could reach $2.2 trillion, weighing down banks worldwide. That far higher than the $1.4 trillion it anticipated in a November report.

Unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth, the monetary fund said.

The picture in individual areas of the world was equally grim, in the monetary fund view. It foresees a 1.6 percent contraction of gross domestic product in the United States this year, and 2.6 percent in Japan. The 16-nation euro area will shrink 2 percent, it said.

Despite the ambitious goal, Mr. Wen left no doubt that the Chinese were feeling the ill effects of the financial-turned-economic crisis in earnest.

We are facing severe challenges, including notably shrinking external demand, overcapacity in some sectors, difficult business conditions for enterprises, rising unemployment in urban areas and greater downward pressure on economic growth, Mr. Wen said.

For now, though, governments are trying to hold things together with bank bailout schemes and stimulus packages in major economies that dwarf what has ever been tried.

Mr. Wen touted Chinese 4 trillion yuan stimulus package, equal to about 16 percent of gross domestic product over two years, as a large contribution to domestic demand after years of being the workshop of the world. The plan includes housing projects, rural development, railways and infrastructure, environmental protection, and recovery from last year’s devastating earthquakes.

He said that feasibility studies and other institutional arrangements ensured China would be able to put the plan in place effectively.

One theme that emerged early, in Davos this year, though, was that the globalization that brought national economies together in times of brisk growth demands that countries hammer out policies together on the downside. Otherwise, new government spending flows across borders, diluting its effects.

We need to have coordinated fiscal response stimulus, said Justin Yifu Lin, senior vice president and chief economist at the World Bank. They are largely not coordinated.

Mr. Wen largely agreed. Only with closer cooperation and mutual help can we overcome the crisis, he said.

Trevor Manuel, South Africa’s finance minister, cautioned that some fiscal plans may come to nought until countries figure out how to spend money sensibly.

We see a lemming-like approach: trying to get to the precipice first without having any idea what that money will do, Mr. Manuel said.

I think we will have wealthy states indebted without much to show for it.

And complaints about how national banking rescue plans are working also emerged.

We feel that governments are encouraging banks to invest only in domestic assets, the chairman of the Dogus Group in Turkey, Ferit Sehank, said. As an advocate of globalization, I see this as a new way of protectionism.

Echoing a widely held view in the global business community, Heizo Takenaka, director of the Global Security Research Institute in Keio, Japan, said fear of the future had taken over as the main driver of the crisis.

The current situation is something more than a financial and economic crisis, Mr. Takenaka said. We face a confidence crisis. Once the confidence of crisis occurs, we need a strong government and central banks.

The panickiest of the lot, Mr. Roach said, are American consumers, who are retrenching after a decade-long binge fed by inflated housing prices, and creating ripple effects maybe they are more like tsunamis across the world. Mr. Roach predicted that American consumers are only 20 percent into a multi-year adjustment that will leave them much more frugal.

Chinese exports have already declined quarter-on-quarter, he said.

Shipments from Taiwan and Japan are also down. As the Chinese economy has hit a wall, the rest of Asia has followed suit, Mr. Roach said.

Mr. Manuel, of South Africa, said the economic crisis has hit his continent hard in the past year, as projects to develop natural resources, an area with much potential for Africa, are scaled back.

In the Democratic Republic of Congo alone, 48 mining projects are in various stages of abandonment, Mr. Manuel said.

Look at Africa, he said. It’s a risk of decoupling, derailment, and abandonment altogether.

Mr. Manuel and others said that as Western and Asian governments start borrowing heavily to spend for stimulus packages, they should allocate a portion to poorer countries.

Copyright 2009 The New York Times Company

http://www.nytimes.com/2009/01/29/business/29econ.html

The Dao of Competition

In this competition of high stakes, one should expect no mercy.

q: How does one defeat an competitor with a large advantage?
a: Indirectly, the professionals use soft methods to distract. Then they apply hard methods for direct confrontation.

While outsiders consider it to be a deceptive game of wits, precision execution and endurance, the insiders are looking at this scenario as a deciding factor that could determine the new world order.

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February 8, 2009
Economic View
It’s No Time for Protectionism
By N. GREGORY MANKIW

WHAT approach will the Obama administration and the Democratic majority in Congress take on international economic policy? It is too early to say for sure, but the signs so far are worrying.

Just before his confirmation as Treasury secretary, Timothy F. Geithner turned up the heat on the Chinese regarding the dollar-yuan exchange rate. President Obama, he said, believes that China is manipulating its currency. Countries like China cannot continue to get a free pass for undermining fair-trade principles.

Like many economists, I cringe whenever I hear the term fair trade. It is not that I am against fairness who is? but the word fair is so amorphous in this context as to defy definition. Most often, the slogan fair trade is little more than a rallying cry for protectionism.

Just days after Mr. Geithner pointed his finger at China, Wen Jiabao, the Chinese prime minister, pointed his own finger right back. Speaking at the World Economic Forum in Davos, Mr. Wen blamed the United States for the economic crisis the world is now experiencing. He talked in particular of the failure of financial supervision.

Most likely, Mr. Wen was aware that one of the important players in the United States supervisory system has been Mr. Geithner, who until recently was president of the Federal Reserve Bank of New York. In that role, Mr. Geithner was, for example, the primary federal regulator for Citigroup. Mr. Wen may have been suggesting quite rightly that the new Treasury secretary should focus his energy on fixing problems a bit closer to home.

But timing aside, is Mr. Geithner right about the currency question? Are Americans hurt by China’s exchange-rate policy?

Critics of China say it is keeping the yuan undervalued to gain an advantage in the international marketplace. A cheaper yuan makes Chinese goods less expensive in the United States and American goods more expensive in China. As a result, American producers find it harder to compete with Chinese imports in the United States and to sell their own exports in China.

There is, however, another side to the story. The loss to American producers comes with a gain to the many millions of American consumers who prefer to pay less for the goods they buy.

The situation is much the same as when the price of imported oil falls, as it has done in recent months. Domestic oil producers may see lower profits, but American consumers are better off every time they fill up their tanks. Consumers similarly gain when a cheap yuan reduces the prices of T-shirts and televisions imported from China.

Mr. Geithner and other China critics might also want to ponder how the Chinese keep the yuan undervalued. The essence of the policy is supplying yuan and demanding dollars on foreign-exchange markets. The dollars that China accumulates in these transactions are then invested in United States Treasury securities.

So when the Treasury secretary complains about the undervalued yuan, his message to the Chinese boils down to this: Stop lending us money.


Not surprisingly, after Mr. Geithner made his remarks about the Chinese currency, the prices of Treasuries fell and yields rose. If China took him seriously, long-term interest rates would rise even more. As the United States embarks on a path of unusually large budget deficits, the nation’s chief financial officer should pause and think carefully before turning up the heat on one of its biggest creditors.

Perhaps the oddest thing about Mr. Geithner’s move is that his complaint seems out of date. The yuan-dollar exchange rate has moved considerably in recent years. After a long period of completely fixing the exchange rate, China allowed its currency to start moving in July 2005. Since then, it has appreciated by 21 percent.

Mr. Geithner might think that the yuan needs to move more, but why shine a bright light on the issue at this particular moment? Olivier Blanchard, the chief economist of the International Monetary Fund, had it right when he said: It is probably not the right time to focus on the Chinese exchange rate, given that it is not a central element of the world crisis. There are many other things we should be thinking about.

DIRECTING attention to the China currency issue amid a worldwide recession and growing fears of depression is more than a distraction. It is downright counterproductive. Senators Charles E. Schumer, Democrat of New York, and Lindsey Graham, Republican of South Carolina, have long proposed dealing with the yuan undervaluation by imposing tariffs on Chinese imports. The Treasury secretary’s comments risk stoking those protectionist embers.

Indeed, protectionist influences seem to be finding their way into the stimulus bill winding its way through Congress. The bill passed by the House included a provision banning the use of foreign iron and steel in infrastructure projects. The Senate has adopted a somewhat more flexible restriction (after voting down an amendment by John McCain to strip the Buy American provision from the bill).

Despite having hired many first-rate economists with impeccable free-trade credentials, the president has been only tepid in his public opposition to this creeping protectionism.

This may be a good time to recall the legacy of Senator Reed Smoot of Utah and Representative Willis Hawley of Oregon, both Republicans. The 1930 tariff bill that bears their name did not cause the Great Depression, but it contributed to a plunge in world trade and undoubtedly was a step in the wrong direction.

As we sort through the wreckage of our own financial crisis, a retreat into economic isolationism is one mistake we want to be sure not to repeat.

N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President Bush. # http://www.nytimes.com/2009/02/08/business/economy/08view.html

Best Practices of Desktop Strategists (3)

Another set of best practices from Miyamoto Musashi, the sword saint of Japan. He is definitely not a Desktop Strategist.

1. Do not think dishonestly.
2. The Way is in training.
3. Become acquainted with every art.
4. Know the Ways of all professions.
5. Distinguish between gain and loss in worldly matters.
6. Develop intuitive judgement and understanding for everything.
7. Perceive those things which cannot be seen.
8. Pay attention even to trifles.
9. Do nothing which is of no use.

It is important to start by setting these broad principles in your heart, and train in the Way of Strategy. If you do not look at things on a large scale it will be difficult for you to master strategy. If you learn and attain this strategy you will never lose even to twenty or thirty enemies. More than anything to start with you must set your heart on strategy and earnestly stick to the Way. You will come to be able to actually beat men in fights, and to be able to win with your eye. Also by training you will be able to freely control your own body, conquer men with your body, and with sufficient training you will be able to beat ten men with your spirit. When you have reached this point, will it not mean that you are invincible?

source: http://ninjamarket.com/a-book-of-five-rings

Best Practices of Desktop Strategists (2)

My associates and I have compiled a list of best practices from prominent strategic implementers. In most cases, we utilize all of the mentioned practices in our own way.


Following are other best practices from world class desktop strategists:


Napoleon the great French military leader was fond of writing on cards and organizing them. From a pragmatic view, it is easily to organize (and reorganize) information on index cards.




Napoleon was also famous for waking up before the sun rise.


More to come

Applying SunZi Principles in a Competitive Arena

A drafted post that was lost in the archives.

When a visiting team enters the home territory of their opposition, they must remember the following: "... In dispersive ground the opposition must unify the determination of the army. ... Ground equally accessible to both the enemy and me is communicating. ... Do not attack an enemy who occupies key ground; in communicating ground do not allow your formations to become separated. ... In difficult ground, press on; in encircled ground, devise stratagems; in death (desperate) ground, fight. ... " --- Sun Zi AoW, Chapter 11 Nine Grounds



Notes:
Dispersive ground is a competing situation where a competitor attempts to challenge you before your preparation is completed .

Key ground is a competing situation where one secures great advantage by having the expediency of utilizing the resources at hand.

Communicating ground is a competing situation where you and your competitor(s) are able to advance and retreat easily. The challenge is to secure the space of one's terrain with maximum efficiency, speed and the least amount of resources, without exposing one's weakness.

Difficult ground is a competing situation where you or your competitor encounter major barriers. The challenging part of this situation is deciding whether to advance or retreat.

Serious ground is a competing situation where you or your competitor have gain significant ground in the terrain of their competing arena. The two challenging points of this situation is: (1) the risk of running out of resources and provisions; and (2) determining how to secure more resources as one progress along .

Encircled ground is a competitive situation where you or your competitor are almost out of resources. The recommended protocol is to study the strategic positioning of the "encircling" player, pinpoint weaknesses and devise stratagems to avoid the state of desperation.

Death ground is a competitive situation where the encircled competitor is at a desperate situation. In order to gain new momentum and life, he or she focuses on fast wins through direct confrontation. Any delayed strategic action would guarantee the end of their endeavor.

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Following are the steps that we recommend to the advantageous competitor:

• Force the Dispersive circumstance into the heart of the opposition by commanding the Key ground and controlling the Communicating ground;
• Move intensively fast; and
• Secure the Serious ground while understanding that the grand settings behind the goal must not be destroyed.

This is the essence of Sunzi strategic concepts.

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NFL says Patriots claim of extra crowd noise unsubstantiated
ESPN.com news services

Updated: November 5, 2007, 3:21 PM ET

The NFL says no artificial crowd noise was pumped into the RCA Dome on Sunday during the New England-Indianapolis game, despite claims otherwise by Patriots team president Jonathan Kraft.

"CBS has informed us that the unusual audio moment heard by fans during the Patriots-Colts telecast was the result of tape feedback in the CBS production truck and was isolated to the CBS broadcast," NFL spokesman Greg Aiello said Monday. "It was in no way related to any sound within the stadium and could not be heard in the stadium." Yahoo! Sports reported earlier that the NFL was looking into charges Kraft made after Sunday's 24-20 New England win. Kraft told NFL vice president of security Milt Ahlerich -- the same man involved in confiscating the Patriots' videotape made in a Week 2 game against the New York Jets that cost Belichick $500,000, the Patriots $250,000 and a first-round draft pick -- that he felt there was extra noise in the stadium. Aiello said, according to Yahoo!: "We're aware of it and we're looking into it. It may just be the TV feed from CBS, but we're checking it out." Monday, he said that was indeed the case. Kraft is the latest in a line of people who have accused the Colts of enhancing crowd noise in their domed stadium. It has never been proven.
http://sports.espn.go.com/nfl/news/story?id=3095903

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q: How do you stop the opposition from utilizing this advantage?
a: From another Chinese strategy classic, "one uses 'Yin' (soft) methods to counter the opponent's 'Yang' (hard) methods."

q: What soft method could the Patriots have used to shut down the channeled loud noise?
De-accelerate the pace of the game by implementing a "long and tedious no-huddle run first" attack. The slower the game gets, the more bored the crowd becomes. Once one gets two long consecutive scoring drives and if the opposition fails in their scoring. Most likely, the crowd will no longer be involved in the game.

Water (soft methods) can isolate an enemy but cannot destroy his supplies or equipment (team unity or fan support). ... Those who use fire (hard methods) to assist their attacks are intelligent; those who use inundations (a combination of soft and hard methods) are powerful.
- Sun Tzu's The Art of War: Chapter 12 Attack by Fire (Use of Influence)


More examples on the maneuvering of Yin and Yang tactics will be covered in our Strategic Assessment book.

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