Wednesday, April 23, 2014

On Governance & Leadership

Sometimes, as a contrarian, I find it easier to begin discourse with what something is not as opposed to what it is – from there one is obligated then to define what it is. Leadership is NOT walking out the door in the morning with you finger in the wind, leadership is NOT monitoring poles, leadership is NOT permitting yourself for popularity sake to relinquish principle and leadership is NOT letting one's core responsibilities  go wanting.

Leadership is permitting a harmonic to occur between one’s own knowledge and beliefs, and what emanates from the group sourcing exercise that is life. In other words, one needs to take direction and promote that direction – true leadership means defending and promoting that direction even in the face of adversity. We have a system that is called a reverse hierarchy in our democracy; the people in leadership are subject to the perceptions, wants, needs and desires of those “being led”. The challenge for those in leadership is to manage that interface, too often; direction is sacrificed in fear of the “loss of power”.  

The reality of the reverse hierarchy as it co-exists with democracy is, that leadership tends to migrate to influence; this pull is tectonic in nature, nearly impossible to withstand. This reality has generated a Faustian circumstance in public policy, where short term political survival is pursued at the cost of long term societal concern. We have a 1000 year management horizon with a 4 year accountability cycle, and accountability is viewed by leadership as the enemy, as it, as often as not, has negative outcomes in the world of public opinion.  

People are a product of their environment; let’s avoid “fundamental attribution error” here please. We have exceptional people in leadership, we have a system that takes them from being driven and on task, to fickle and popularity sensitive.  As political leadership contemplates the justification for a 180 degree turn on an issue, the people at large watch, they see incongruence in the actions of leadership – system integrity begins to wane and cynicism grows. Worst though, the important things fail to get done.    

We have to repair the environment that people are expected to work in, we need firstly to have leaders say,” mission is more important than my reelection” and most importantly we need accountability. Democracy has no commitment to truth, it spins dialog to curry favour with the electorate.  So we need to make metrics and monitoring a mandatory attachment to policy. When the leadership says we are introducing this legislation to generate a given outcome, then there needs to be objective monitoring of outcomes. With the introduction of legislation there needs to be a clear mission stated for the legislation, and the metrics and indicators that monitor the outcomes relative to mission. Then the unfettered and objective reporting to the public – then, like in business – leadership is tied to the bottom line, whether the bottom line is surplus or social welfare. 

More thoughts on management and leadership - Click link below. 


Saturday, April 19, 2014

British Columbia Forest Tenure Reform

Excerpt from 2008  letter to Minister of Forests "As Minister of Forests you've inherited a policy framework that has been forged over fifty years, by what I refer to as the Unholy Trilogy – big business, big labour and big government."

Link to Related Government Documents


Stephen Covey, in his book Seven Habits of Highly Successful People, counsels us to “begin with the end in mind”. The end I have in mind for forest policy is forged, in as large measure, by what I want to avoid “more of”, than what I want to see more off and is founded as much in the preservation of healthy societal realities that existed in the past, as opposed to the promotion of nouveau societal engineering.

Here is what I know for sure, if you generate a circumstance where every acre of forest land is meeting its potential, then societal benefit will be greater than it is now, so that is where the focus should be in forest policy.  In essence then, take care of the long term production interests of the forest and you take care of the people relying on the forest.  

I can know nothing of the forest and know how best how to manage it - because I understand people. All policy has to start with the realities of the individual, the realities of community and finally, the central administration. The cornerstone of a healthy community is a collection of prosperous individuals. In reading the materials generated in the policy process to date, this reality has been forgotten.

China tripled agricultural production in three years by merely giving people quasi property rights and the fruits of their labour. They also improved the overall stewardship of the land - we know that the incentives inherent in ownership and market driven enterprise work, it is amazing to me that so many seem to think they can engineer something better - the facts simply contradict them - ownership or in essence long term tenure, works, the capacity to hold rights to and manage assets in accord with our judgment, and the market, is the cornerstone of the western world’s success, embrace the reality and prosper.  I believe in markets and ownership, and the desire of the individual to better their lot, I make policy suggestions based on this reality.  The benefits of ownership are proven time again, this is no mere academic musing, we all enjoy the fruits given us by an environment that permits enterprise.

In British Columbia, Canada over actually, we are witnessing the de-ruralisation of our society, people are moving away from the land, away from natural systems, away from the Kadence of life that brings into visual relief the true realities of stewardship. With this reality, we have been left with a largely urban population convinced nature is a place of fragility, rather than a robust and generous provider.  An aft glance to the society that built a compassionate, self-reliant Canadian reality shows a rural / agrarian community as its point of origin. We would do well to look back and extract from history what best suites our future, in forest policy and other policy as well.  The rural agrarian Canadian society was a complex of self-reliant individuals, living miles from one another – but connected by a common living circumstance that made community. From this came a culture that forged the great generation, people who lived by one another for generations, held integrity in high regard and lived by their word, this stands in stark contrast to the popularity culture emerging out of the urban reality, where fickle seems to be the order of the day.    

It was with this backdrop that in 2008 I wrote a letter to then Minister of Forests Pat Bell in the hope that perhaps government would see the opportunity to prosper from our forest resource, truly prosper in the fullest sense of the word. I have been largely disappointed, a reality us idealists are often faced with. This is in no way a reflection on Mr. Bell or his efforts, in fact he achieved a great deal in this portfolio – the town of McKenzie thanks him for his efforts.  The culprit here, is the same as it is everywhere in government, institutional inertia just keeps the beast rolling – enshrined interests holding on to what they have at the expense of greater prosperity. 
In review of the discourse around forest policy one asks, what is in it for me, an individual who sees opportunity everywhere for forest related business and witnesses the entire thrust of forest policy directed toward incumbent actors – 5% of the land donated to woodlots or other means for the entrepreneur to access resource is as laughable as it is dismal and it is sure to produce more of the same mediocrity in land utilization that one has witnessed in the past. 

Below is an excerpt from a letter sent to Pat Bell in 2008, it communicates the “end I had in mind” then, when you read it contextualize it contents to the time … in rereading the letter in preparation for this submission I have found little reason to change my position, nor has the situation that the functional aspects my suggestions were addressing found resolve.

Letter to Pat Bell – then Minister of Forests – 2008

Over the course of my lifetime I have worked in the forest industry, interfaced with it while involved in the tourism industry and gained some insight into its administrative side via participation at the Kamloops LRMP. This exposure has formed a perspective I think is worthwhile, and may be of use to you is some way.

As Minister of Forests you've inherited a policy framework that has been forged over fifty years, by what I refer to as the Unholy Trilogy – big business, big labour and big government. Political pragmatism in relating to the two primary special interest groups has created an industry that has perhaps underserved British Columbia, or left potential un-accessed. The weak US market and resulting waning of the forest industry presently, may offer a juncture where many of the interests that may have inhibited reform in the past, are now muted – companies gone or contracting and labour expectations reduced due to the stark realities presently facing the industry. The areas wanting of attention from my perspective are tenure reform, bug kill utilization and non-United States’ market development.

When one examines the forest industry, a glaring aspect that comes to view is the present domination by Volume tenure allotted to companies and then loosely tied (but tied to milling) to production facilities. The present policy has; failed to facilitate “the support of communities” in any real way, failed to facilitate the most effective use of timber assets, siloed lumbering functionalities in a manner I believe to be undesirable, and perhaps, most importantly, generated a log market that offends our best customer. A transition to an area based long term tenure format may address these issues.

I envisage area based tenure taking a form similar in nature to our present Woodlot tenure or Tree Farm tenure, existing completely separate and distinct from milling facilities (the actions of individuals may include milling activities but policy considerations would have milling separate and distinct). Tenure size would be moderate, perhaps in the order of an average annual timber volume accretion, in the context of long run sustainable yield, sufficient to generate net revenues in the order of $500,000 annually for proprietorship (based on historical data). The term of tenure (tree farming rights) would be ad infinitum, facilitating the future trade of tenure or perhaps intergenerational transfer. The industry would then be supported by an open log market that would emerge in much the same fashion as the cattle industry or other markets have. Government revenues would be garnered from the initial sale of these long term harvesting rights and then a royalty structure at the point of log sale. There are many issues that arise in designing tenure to meet the best interests of British Columbia, such as the nature of ownership of these tenure units, while these issues are extensive they are outside the scope of this communication. This brief outline of the created tenure type will, hopefully, serve to provide context and support to the points made with respect to tenure reform.  
Forest companies in the past have been able to secure the rights to harvest a given volume of timber; where, when and how, has been at the discretion of Ministry of Forests (MOF), and this right seems to be let often on the bases of a milling facility requiring timber. By observation, often the milling facility is closed, as production is concentrated to a more productive facility somewhere else or as the result of some other dynamic. Again by observation, the Forest Company retains the volume, often at the expense of local industry. This rationalization of production facilities may be necessary (for forest companies) to garner maximum efficiency under present industry conditions; however, the premise for the company’s garnering the tenure is no longer valid. This reality is not conducive to healthy public perception of government action and is breeding resentment, as evidenced by press coverage often referencing this occurrence in local media. An area based tenure format would extend to proprietors long term tenure based solely on harvesting and sale of timber to a free market. While area based tenure may fail to guarantee the logs will be milled locally, area based tenure and the related open log market will guarantee the opportunity for them to be milled locally. Additionally, the premise for tenure will always hold policy integrity (continuity with perceived public good) as policy is executed, allaying the valid public perception that local trees are unduly being milled in other regions. The pure physicality of the circumstance will extend advantage to local purchasers due to transportation advantage and local association.

The development of area based tenure, with tenure being focused to harvesting and growing trees, serves to fracture the tree farming tenure ownership from the milling function. This is desirable, as it extends greater influence to the tree farming process in the logging industry as a whole, by bringing “business” focus to tree farming process. Presently, the logging function is performed under contract to an entity absent long term interest for a specific area of operation and then the silviculture function is performed by another contractor who is overseen by the government (and with no long term interest in the area); the government of course being largely isolated from incentives associated with long term ownership and most certainly absent any real attachment to a profit motive.

The management of resources by “macro” entities, as is now the case, results in the siloing of activities in a manner that is both unnatural and unproductive. The present circumstance is analogous to government owning all the farmland and functioning as the monolithic manager of agricultural lands; the person milking the cows with no attachment to the cow’s long term health or wellbeing. The present circumstance then is absent the incentives that drive success generally in other sectors of economy - the ownership and interest in the profitable utilization of an asset. By designing the tenure in a manner that integrates the management perspective, resources will ultimately become better utilized. The tenure structure that provides incentive to proprietorship by integrating the profit motive with the full spectrum of tree farming activity, silviculture to logging in the context of long term ownership and appropriate logging practices, will surely result in better outcomes over time.    
A by-product of broad based “proprietorship focused” tenure will be an emergence of an open log market and a Royalty system for government revenues. This means of government interface with resources and revenues is commonplace and widely accepted by governments the world over. Our present mode of governance over the province’s timber resources is both an anomaly and irritant to the United States. …..

I offer a less “industrialised” perspective than you're apt to be exposed to as Minister of Forests, a perspective I can proudly state has found its origins in being a farmer’s son and the desire to produce a societal circumstance well populated with independent people – well designed forestry tenure reform offers opportunity to create such a circumstance. Thank you for your consideration of the contents of this letter and I hope the election outcome gives you some extended tenure!

Industry Asset Security & Labour Interests

In reading the materials that have emerged out of the tenure reform process thus far, one sees repeated reference to “secure timber supply” for milling facilities and secure jobs for workers – This was dealt with to some degree above – but it requires further attention.

Sawmills and timber processing facilities will exist in relation to the timber supply regardless of whether sawmills and timber processing facilities hold tenure over forest or not. It is the coupling of the two operational modalities in conjunction with the siloing of growing, harvesting and marketing timber that is at the crux of miss management in the industry as a whole.  The process of growing and harvesting timber has no mandatory relation to processing timber into a finish product. It is the job of government in forging policy to attack the challenge of forest management with the maximum outcome of the committed land base and resource in mind.  If the government does this, the security of production assets will be inherent. Asserting that tying timber tenure to production facilities is necessary so secondary producers can have their assets secured is analogous to insisting that Cargill slaughter facilities hold primary production for cattle rearing on a 1/3 of Alberta. What secures assets is a supply of inputs and a market for outputs - timber tenure in no way is an imperative to have fiber supply - the willingness to pay fair market price at any point in time is.  BC forest policy has been held in stasis  by aforementioned  unholy trilogy - Big Government -  Big Business - Big Labour, what is key in policy reform it to remove ourselves from the limitations associated with industry actors perceived and often short term interests - and focus on maximizing the production of every acre of forest land slated for forest activity. 

The joy in fragmenting the timber supply management is that a 1000 flowers bloom; it is errant to try to anticipate management outcomes to a specific degree, one needs to realize that more actors means more innovation. At present there is a monolith called the BC Forest Service that manages the timber supply, by fracturing the management of the forest new best practices will emerge more often and in greater volume - it is the nature of large entities to have a low degree of absorptive capacity. 

One is compelled to voice strong objection to policy that would have tenure allocation at the behest of government only and directed toward established participants - we have stagnation now - what we need is to facilitate disruption and dynamism. Disruption, innovation, fast timber growth - dynamism will come from smaller area based tenure - same tenure area, more wood faster, needs to be theme of tenure reform.  There is no operational correlation between forest farming and secondary production - there is no practical rationale for continuing to attach the two in policy. Fiber garnered through an open log market and fiber garnered in the present modality is still fiber - the difference is an open log market fed by a large number of area based tenure holders, will see the timbered land base more intensively managed to grow timber and it will also align timber harvesting and marketing more intricately with demand. 

By detaching primary and secondary production there is no compromise made in primary production in the harvesting and marketing of timber to satisfy other interests - the market is the best determinant of when and what to harvest - certainly a better determinant than cashflow considerations of secondary producers or the sacred cow of "labour” quotas, tacit and omnipresent in the present policy mix. Let me assure all concerned however, that if policy is directed at maximizing resource value in the context of market imperatives, the wellbeing of those dependent on the industry will be better addressed - ultimately asset security and job security is a function of a strong industry overall that is rationalized to the market place.

The very best way to satisfy social and economic objectives is to have the value of the resources under management maximized.  The focus of land management policy needs to be on managing land, extract the maximum poetical volume and quality of timber from the land and you extract the most social benefit.  This is especially true when you have granted access to the land, to a large number of operators whose future is forged by the production choices they make – the new source of prosperity for British Columbia – the forest farmers. 

If policy makers have the courage to donate a significant portion of the a land base to the tenure profile suggested above, say 25 – 50 % of the annual allowable cut, much benefit will be derived. The trilogy will have a new partner, the independent business operator – the tree farmer. In the late 1970s there was a study conducted to find the most efficient business unit functioning in the US, they identified the 1200 acre family farm. It was efficient because the decision making processes where generated by the people executing on the land – knowledge was applied at the point of action. The realities of scale have driven farm sizes upward, but the efficiency remains.  Most importantly in relation to the suggested tenure however, is that the management perspective is lengthened along the full forest growth continuum to harvest, there is a steward that is intimately acquainted with a given acreage and the knowledge that can only be garnered by close association with a given stand of timber will drive a stem by stem market execution. 
One would think that this would be an agreeable proposition for incumbent timber companies; this proposal allows them to focus on their core capacities – processing lumber and value added products – and ensures unfettered and fair access to fiber via a free and open market.  

Letter to Mr. Thomson - Minister of Forests, Lands and Natural Resource Operations

April 20, 2014

Hon. Steve Thomson
Minister of Forests, Lands and
Natural Resource Operations
102 – 2121 Ethel Street
Kelowna, BC
V1Y 2Z6

Dear Sir,

In 2008 I submitted a letter to Pat Bell, the then Minister of Forests in the hope of calling attention to the opportunities associated with tenure reform. I encouraged him to contemplate the advantages of smaller area based tenure rather than the present circumstance of volume based tenure. Mr. Bell’s efforts as Minister of Forest were exemplary, he accomplished a great deal. The challenge is the inertia associated with entrenched industry interests – they have effected a stasis in forest management in BC. The recent forest policy review and the subsequent tenure review appear to have achieved very little reform. It seems your Ministry has embarked on a process of tenure reform as indicated by the Discussion Paper the ministry generated titled Area-based Forest Tenures; this document however, and the associated process, has defined the scope of discussion within the “status quo box”, when what is required is “real reform”.

I am concerned that there has been no real change in the tenure picture all these years later – there is no greater access to the land for individuals. There is no doubt that area based extended term tenure will generated a better stewardship circumstance for the industry. We know from experience that “extended ownership” encourages better behavior than temporary arrangements. We know that tightly run small business brings efficiency to any task. We know the merits of enterprise. We know that we need to extract maximum benefit from the land base. It is time we put what we know to work in forest policy.

Please see my response to your tenure review process at the link below.

We need to do better than the status quo, we need new blood and dynamism in the forest industry, please have a look at what I’ve proposed. It takes courage to change, we need leadership here.       


Neil E. Thomson

Wednesday, April 9, 2014

Real Estate - An Industry Perspective

Real property finds harmony with my strongest inclinations in life and business, land ownership sits at the foundations of my cultural mooring. It seems that our culture, that of the European Americans, has ownership in general and especially land ownership as a cultural expression of belonging. There is a propensity in the post modern Canadian culture to minimise ownership, ownership is viewed as a separator from community. My appreciation for the Canadian rural agrarian culture has taught me that community is more effective when composed of a collection of owners, ownership brings with it investiture and as a uniform identifies the person and dictates their role - so does ownership. Ownership by its very nature instills responsible societal conduct, it does because, its retention and value are dependant on society at large. Everyone needs to be an owner, look where you find societal discord, deprivation - they are invariably occurring in the absence of property - oft times because of the absent of property rights. I am most grateful that Canada has as a the keystone of our societal functionality the capacity to own and trade assets, and also grateful for the abundance of real property we have and the opportunity it brings.

The Real Estate industry is a hubbly bub of trends, every sub sector has its own influencing factors, sub sectors are as diverse as the people that inhabit the market. The majority of my contemplation in the real estate space has been; agricultural land or rural land opportunities in general, tourism development land and the full spectrum of residential development. 

There is an exciting arena of participation when one looks at a piece of property, assesses its geophysical values and begins to design the altering of the landscape toward its perceived best use. The land development space puts one in touch with people's interface with environment, each other and how environment can enhance human exchange. There is a propensity in modern society to put people so close they are unable to see each other; how is it, in the modern urban setting we have human densities measured in thousands per acre and people are isolated, and just one generation before, we lived miles apart and were connected - much of the answer lies in the design of our build environment. 

See this links for assessment of rural land opportunity .
The rural land space has a number of significant opportunities. If you believe as I do, that the agricultural space with be a place of paced growth for the next thirty years, then you will share my enthusiasm for rural land. If you believe as I do, that urban populations will be seeking the rejuvenation that comes with time in rural / wilderness settings, then you will share my enthusiasm for rural land. I hold a passion for extensive landholdings and their management, they provide a unique lense to the world - one forges their successful management from contemplation of the full spectrum of human enterprise, all the sciences are encountered and human concern is the culmination of effort. 

In the rural land space in my immediate region, there are a number of trends supporting investment. There are a number of properties for sale due to a period of reduced activity in the space, these properties present opportunity as self supporting holdings, as amalgamation opportunities, as developments, as ALR title transfer opportunities, tourism opportunities and as enhanced agricultural enterprises. The assessment, purchase and configuration of viable models for given lands has become a specialty of mine due in large measure, to a real passion I have to own a large land holding. 

Opportunities in the residential development space are abundant, straight subdivision, subdivision and building, multi family, rural acreage, all this space is good, success here weighs heavily on playing the cycles properly. There is a healthy space in several markets for the condominiumization of aged rental apartments, I have found these deals give great margin in the active market and relative to the prevailing new inventory. The time is right for the make ready space due to where we are in the residential real estate cycle, this space really plays nicely with rural land purchase and reconfiguration.   

I am generally optimistic for the real estate categories I am familiar with, there is a lot to be done in this space - and right now is the critical entry point for a lot of them.     


Not For Profit - An Industry Perspective

If not for profit then what for, profit by a different name for a different reason. The point is, that regardless of the intent with respect to a accumulation of funds and their use, the functionality of getting the funds requires a common skill set. One can draw parallels from business readily. 

There are in the not for profit space great ideals, altruistic intent is always at the fore. Altruism though tends to be interpreted as placing the good of the whole, or the cause, before self. There is a danger in elevating sacrifice of self though, that danger is that in sacrifice you limit yourself. Bill Gates pursued profit, as any businessman should, with vigour and an unabashed desire to get more. Bill Gates has brought metrics and performance measure to the not for profit space from the business world. Mother Teresa sacrificed, she lived in squalor and cared for children. Mother Teresa may have saved 2000 children at best, Bill Gates at the last count I saw was at 7 million children saved - ask yourself which benefactor you would rather have. Ask yourself now, which philosophy is better, one of altruistism or one of philanthropic pursuit - I know which I prefer.  

There is embedded in our society a meam that holds sacrifice as sacrosanct, as worthy, as a prerequisite to progress; this meam flows from the Christian narrative and the Christ story. Christ had a belief, and a circumstance, and the will to distribute the word, his circumstance and opposition from others was the cause of his sacrifice. Christ, and the world, would be better off now, if someone would have gave him $60 Billion to do his work. Christ's word would have traveled to us untarnished by power struggles, undistorted by institution and absent his, and millions of others blood spilt. There is no productive outcome from sacrifice, it is inherently destructive. 

I raise this point for contemplation in developing a modality of interface with the world at large in the recruitment of funds for a cause, it is much more productive, positive and beneficial if as a result of participation in satisfying the goals of a cause, that the people approached to participate derive benefit. There is no better solution than a win win solution, and doing good while doing well, is the perfect formula when it can be made to function. 

The balance of the not for profit endeavour is really a marketing function, once the overall program is designed the only thing left to do is to tell your story in a compelling way - or at least the story of those whose interests you represent. 


Tuesday, April 8, 2014

Media - An Industry Perspective

The media business, from flyers to movies, from consumption on paper, then the big screen and the little screen, from Gutenberg  to Gates, never ceases to amaze at its ability to effect the direction of human endeavour; it is undoubtedly the key modality of influence. If the the message is the media, then we are the sub-straight - both in our ability to generate media and to consume it. While some of the "old" medias are challenged, in large part, new media means we consume more - the slate is in use, electronic tablets are in use. While  we are the true media sub-straight, the digital reality has generated a universal medium on which the entire human enterprise is now represented. 

There is a beauty in the fact, the every person now can effect their ripple of influence in the ocean of human activity, the digital revolution is effecting the democratization of the people in an unprecedented way, as there is less opportunity now to withhold, shape or obstruct information flow to the masses by the established. We have moved from Walter Cronkite to the flash mob, from bastions of credibility to authority in question, from Lord Beaverbrook to the personal website - this transformation in media, in the same way that life intimidates art and life gives birth to art - is disrupting the entire social construct. No other event in history has fragmented the meta narrative so rapidly - it has replaced the idol rockstar with the a rebirthed traveling mistral, it has given rise to the digital artisan, it has given wings to the tradition artisans, it has given the individual access to the masses. 

There is promise and peril in these events. The traditionalists are fearful of the disintegration of long held narratives, fearful of a moral reformation, fearful that the dark side of humanity will somehow gain traction absent long held authorities sway over content. The promise in a liberated medium is that the beauty in humanity will find its full expression, that the ideals of youth will be given voice, that the march of enlightenment will be accelerated, that Stephen Hawking and Winston Churchill will be given equal billing - there is no more exciting or dynamic space than the new media space.  

The observation of most significance to me, more even than the power of the new media, has been the sustained durability of the old, Who would have thought newspapers would have survived five minutes against a medium as rich as the internet. The takeaway in large measure is that technology can only penetrate those it can touch, media's users block medias introduced by indifference. The floodgates are opened now for new media, as digital delivery has reached critical mass - the interactive screen is as ubiquitous as the quart of milk. 

Excerpt From Business Concept - Written in 2006

Media integration to date has had mixed results and in many cases limited success. It seems however, that “Convergence”, which represents the attempts at media integration to date, has been a logical course of events with only partial implementation. 

Convergence to date has been pursued by large firms purchasing various traditional media outlets and allowing those outlets to operate in much the same way as they have in the past. “Convergence” as it has manifested today has produced no real benefit, other than perhaps small synergies associated with administration, a bit of cross marketing and the increased access to profits via acquisition. The process of convergence has been a television broadcaster purchasing a newspaper, with the two entities functioning under common ownership in parallel, with little real INTEGRATION. 

It is the observation of the writer that the greater an industry is taxed by competition, the more integrated it becomes and hence the better it responds to competition. This integration can occur vertically intra-company or along a supply chain inter-company. In all cases the segmentation of production or process occurs along the various elements of delivery of product or service. Convergence to date in the media industry has siloed the elements of process by media type and failed to access synergies that could occur by collapsing inter-media type outlet barriers and integrating processes (still true in 2014 in many cases).

All media consists of fundamental elements; the collection of information, the assembly of information into a marketable form and the delivery of information to the market. To date there has been a weak evolution of companies toward convergence (integration), when there exists an opportunity to engineer a completely integrated media company, with a business model that addresses the key elements of information delivery, utilizing the full panoply of media available in the digital age. One needs to view the various present media types, TV, Radio, Newspaper, internet as mere substrates; functioning under a single digital umbrella. (The industry is still siloed, in Canada that is due in large measure to our regulatory regime)   

The design of a New Media company begins by accessing the foundation elements and exploring human functions associated with them, and then exploring methods of levering that human function through a completely integrated format.

Content is king, from its inception, either via a creator or happenstance, to its delivery to its consumer; original, compelling content drives user-ship. The key with content, more than ever, is capturing it early and attaching your monetization mechanism in as integrated a manner as possible. This process begins with building business at the grassroots, this is a 180 degree turn from traditional media, where the grassroots needed to like what you fed them, now, the grassroots generate content that you can enhance, manipulate - it is the most massive green vegetable exercise in human history.  

Excerpt from 2006

The integrated media company brings the marketing function to the advertiser as opposed to just advertising. This degree of integration also removes media type bias in the marketing product offering; allowing greater opportunity for any one sales person to deliver results to the advertiser. Presently when an advertising offering is delivered to the market it arrives fragmented into media types, integration provides a multi media opportunity from a single source.

As a result of the digitalization of the media process, the full scope of product can now be accessed within a common skill set. The ability to edit digital images stationary or moving - for print, TV, or a subway poster, can be readily managed by a single person who understands the digital world. Naturally there is specialization efficiency that befalls these tasks, and as market magnitude allows organizational specialization can occur, digital technology provides opportunity for perfect scaling in any market. 

Given modern technological realities, a complete product offering is defined by what technology allows, as opposed to the traditional media business models that have evolved as separate companies in an atmosphere of disparate technologies. Given the unifying quality of digital media, the product scope can include everything from the sign  on the front door, the thirty second TV ad, the newspaper, the website, internet TV sports cast or the regional magazine … the full media breadth is now available under one technological umbrella. 

In 2014 there still is an absence of real integration in the media space, even with the digital reality. This is due in part to the fact that people are committed to media by habit, they simply go to the same place as they are accustom to, as electronic hardware is gaining penetration, the opportunity for integration increases. The siloing that exists at present will break down, it is being maintained by the CRTC and because the industry leadership, and industry participation in general, has yet to evolve away from traditional delivery models. To some degree, stranded capital has stranded the industry. 

The media space, now more than ever, is a purely intellectual space - in effect media companies only have one asset line item - GOODWILL. When an opportunity comes out of the ether to actuate a business model that negates a company's entire GOODWILL and renders its functionality moot, its rare that the management has the courage to look that kind of disruption in the eye. Couple this reality with the fact that the media space's ownership is highly concentrated, perhaps more so in Canada relative to other OECD countries, and one begins to see the why the evolution to a fully integrated use of the digital space has yet to find full expression. 

The key from my perspective is to own and consider, the collection and delivery of information as the primary activity of a media enterprise. Information collection and delivery: from public to the public, from the advertisers to public, from the public to the advertisers, from business to business is the grist of media, there needs be no attachment anymore to media type - the only determining factor now in the media space is how one collects and packages data in a manner that it is consumed. This seem so obvious, one might be afraid to say it outloud, but look at the industry and one sees no one really has. 

Data Collection and Delivery Synergies 

Historically there was a delivery process called the paperboy, they delivered the newspaper full stop; in a fully integrated media company he is a data collector, as there may be no paper to deliver at all. When one views the paperboys function through the lens of basic functions in the context of an integrated media company, what was the paper delivery person becomes a highly skilled individual utilizing the full digital opportunity. What was once a function to deliver newspapers, is now a function to  collect digital images of residences to be input into a database where the image bank is mined latter for information. For example, the presence of a boat may indicate a given homeowner may be interested in boating related data or the shabby exterior may represent an opportunity of a renovation contractor. The accumulation of detailed market data is valuable as product to the advertiser and represents value addition in the process. This value addition can occur because the collection of this data gains value when leveraged by several media delivery opportunities, as opposed to just a single traditional media venue; the collection of data becomes more efficient. The paper boy’s role may now be described as Public Representative and Data Collection person; their duties may, for some time to come in include delivering the newspaper or some printed materials. More likely however, they will be photographing the residence, offering instruction on how to use media delivery equipment, reading the gas and electric meter, doing a thermal scans of buildings, soliciting the completion of a questionnaire, delivering a package, offering neighbourhood security, informing the city of a leaking irrigation line  and informing the family that an elderly person needs attention. While an increasing number of duties are becoming automated, there is no substitution for a regular personal contact than can be cultivated via the right people on the ground and physical goods need to get delivered - house to house contact is still required, the package has to change - street level data that is current is a content source, content is where value starts - the "newspaper circulation" function is still required, the value of participation has to be intensified.
The natural extension to the "new paperboy" are other mechanisms for accessing community in a manner that channels content through a given media "outlet". There are many such opportunities to access community through interests, when one contemplates the variety of groups and ways to access them, small specialised markets gain resolution - there is money to be made by mining the "tail" - the "tail" is relatively untapped by the present media complex. 

There are herculean players competing in this space and while engrossed in their awareness of each other, the seeming crumbs they leave unattended may well feed the creation of the a disruptive business model that means there demise. If that occurs, they will have failed where many companies have, they will have failed to sow the seeds of their own disruption - and missed the opportunity. 

Monday, April 7, 2014

Finance - An Industry Perspective


Macro Contemplation

I view finance as the activity associated with the management and direction of the abstract representations of the economy. That would include currency through the spectrum to asset backed securities. In the world of finance speculators look after the risk taking and others secure a production related net income target. We all, as investors, speculate to varying degrees, we choose a risk profile and invest in accord with it. The first contemplation one needs to undertake when entering the arena of finance is to clearly define your mission there, is it to secure a profit position, is it to invest, is it to be a trader, is it to speculate - clarity here allows one to enter the space and govern one's self in accord with the mission, as opposed to being a news windsock with one finger over the enter button and one over the exit button.  

As an investment philosophy, the broader your scope the better, full spectrum of sectors, companies, instruments - all pursued with the tireless assessment to identify best of breed. Investment for me begins with the contemplation of the macro elements of economy; geopolitical, economic cycles, demographics, monetary policy, general product cycles ... etc.. From the macro data one discerns where the macro trends lie, Warren Buffet, when he sees a commodity supper cycle, he thinks railroads - so a economic dependent origination assessment is required, to see how a given trend will filter through the economy. Having determined the your best prediction of the economy and societal trends, one needs to find how the trends will find satisfaction for the demand they will generate in the arena of products and services; from here a list of companies or financial instruments while emerge. At this point one would choose best of breed in the company space or, for example, if gold was indicated as a holding - one would choose the appropriate ETF or instrument to take a position is gold.  At this point "trading" plays a role insomuch, as technical data will inform the best entry point to a given stock or instrument within a specified period, perhaps 0 to 12  months; during the period technical data will inform the purchase of investments intended as holdings. This is effectively, a deep value strategy, this is an investment strategy - the investments you make are intend to hold and generate growth - the only activity in your portfolio is to maintain balancing for proper sector diversification and winnowing of laggards and selection of replacements. This is conservative investing, it can be profitable, during the Japanese malaise the best 10 Japanese "blue chips" generated nearly 300% return, 10 to 15% annually, when the general economy was in deflation. 

There is reward in risk, the above strategy is for the money one needs to secure them self in their none productive years, then there is the fun money, the money you can afford to loose, the money it is ok to risk. Here you can take an aggressive option position or play in the more aggressive instruments. 

In the world of risk management, the mission is clear, secure an agreeable operational outcome - hedge inputs and sales, secure a profit level and review the position at intervals and adjust if a better outcome is indicated. 

When working in the financial space one is working with the abstract representations of the economy on the one hand, and the expansion and contraction of human sentiment on the other. The challenge with this reality is gaining resolution on which is affecting which and what is going to trigger an event. This contemplation is important in trading of course, it comes to play also in shorter term financial system participation, like managing risk - hedging production inputs or commodity sale prices for example.  

We accept cycles in nature – spring, summer, fall, winter – the predator prey cycle, etc. People not only accept these cycles, they want to preserve and protect them. Cycles are an inevitable element in the interface with the environment, the economy is an extension of the environment - ergo, the economy will have cycles – this is a good thing; we burn more heating oil in winter there is an affect on heating oil prices every year. There is a cattle cycle, absent extenuating influences, it runs ten years - it runs ten years because the gestation period of a a cow is nine months - for the overall herd to build from a low, to affect increase in supply enough to reduce prices to effect the sale of the cow herd, to increase demand etc .. takes ten years - the Real Estate Cycle 5 to 7 years, the business cycle 7 years. Government interventions work at times to lengthen or shorten cycles, the US governments monetary policy in conjunction with its inadvertent underwriting of home lending extended the housing real estate cycle with a calamitous outcome. The point here is that real world cycles are anchored in real events, there is a degree of predictability here - one needs only inform them self of there presence and act in accord with them.      

Public sentiment is a challenging element in the assessment of market behaviour, it shows up in technical assessment, news and the like, vigilance is key here, history helps, as was said once - events, dear boy, events. Public sentiment does way on entry points for trades or positions in the risk management sphere and or general investing - it is a critical point of contemplation. Public sentiment, I believe is best managed by, technical assessment, historical observations and vigilance. 

Micro Contemplation 

In the micro financial space, contemplation centers around decision making; predicting, to the degree possible decision outcomes and the assessing of financial outcomes of decisions to inform future undertakings. To lease or not to lease, to borrow here or there on what terms, to engage in expansion or not, to do capital improvements or not. The joy in currency, and the other abstract representations of the economy, is the ability to see clearly in a concentrated way what is occurring as a result of your actions. There is always the bottom line, the cumulative outcome of choice, financial assessment when done correctly, gives resolution to or puts a fine filter on, the financial outcomes of operational decision making. 

I believe in taking the time to quantify and qualify business choice, to apply as much objective assessment as possible - science and data. When the science ends however, judgement takes over, as the saying goes - it is the eye of the master that fattens his cattle - to put another colloquialism to work, two heads are better than one - an outsourced perspective is help in this space.  

General Comment on the Financial Space

In 1980, the abstract representations of the economy were at about par with world GDP, by 2006 they exceeded world GDP by approximately %300 - a phenomenon referred to by some as financial deepening. There are very real repercussions the emanate from this reality, John Kennith Galbraith in his book on the causes of the Great Depression, used another name, but sited financial deepening as one of five causal elements of the great depression. The financial fluff that was created in those years, in large measure still exists, the challenges that arouse from opaque trading systems and layered abstract representations of the real economy have found no real redress, window dressing and lip service mostly. With that in mind, in the context of business management, the financial system should be viewed as a short term tool to manage the financial matters. 

The financial sector requires representation in a investment portfolio, but vigilance is certainly required. At some point there will be a rationalization of the abstract and the real economies, and tactile assets will be your friend. We have recovered in large measure from the ills of exuberance, the recession took care of that, the un-anchored collective human psyche will come to play again - that is the reality of currency volume that is in no way dependent on the volume of goods and services in the economy - instability will be our constant companion - the key is to have it work in our favour.  


Sunday, April 6, 2014

Forestry - An Industry Perspective

The forest industry was the mainstay of British Columbia's economy for generations; while it's percentage of provincial GDP has fallen, it's importance remains. We are generally healthier for less predominance over the economy by the forest industry, we are more diversified now. 

I prospects for wood-fiber are good, stick frame construction - long a North American preference - is gaining traction in the emerging markets - the BRICKs and the like. It is the adoption of stick frame construction in China and the resulting demand for fiber that has shored up an otherwise challenged US-centric market. It is the sense of the writer that the US housing market will show mild improvement until about 2018 and at that point it should move into a long and strong growth pattern. This prediction is based on the belief that there was a confluence of cycle ends – major economic cycle, business cycle and technology cycle and well as, the resulting the commodity supper cycle correction or slowing – all of which collided with a grotesques financial deepening to create the down turn in 2008 – the real world economic cycles are now, one by one, running their course. One would anticipate that the inverse of 2008 will be true in 2018 – this thesis is shored up to some degree by severe downturns, 1930 etc., normally taking a decade to recover from. The future is bright for the forest industry in terms of product offering and a broader deployment of wood fiber in regional diversity, and in existing and new uses.

The challenge for the industry at large, but an opportunity for some, is the reductions in Annual Allowable Cut the are sure to follow the devastation that the Pine Beetle infestation inflicted.  The post infestation pine forest viability is extending as the industry adapts processing and marketing to the present reality, soon however, stand viability will be gone and with it timber supply. This will leave a lot of stranded capital in milling plant sitting or looking for fiber to feed it - the combination of excelled demand for fiber and reduced supply is sure to drive fiber prices upward. This reality bodes well for privately held and managed stands of timber.

There is going to be a girth of "none-viable" fiber laying in waste thought out the province for years to come, as transportation costs drive reduced the viability of the fiber source and or the fiber source decays; there is opportunity here, I've donated considerable thought to how one might unitize this material - I believe there are many. There may be some answers in the history of logging and milling in the province, perhaps mobile milling and other mobile utilization holds the answer to overcoming the transportation challenge. Transportation holds a high degree of sensitivity in material value being hauled - this presents an opportunity.
I have contemplated extensively, forestry as an adjunct to an agricultural enterprise, a companion enterprise if you will. Forestry works well in this space, many forestry activities labour demands are counter-cyclical to agriculture or can be made to be so. There is skill cross over between agriculture and forestry that permits work force substitution. The two industries have operational similarity and in the longer term, growing trees is really just crop management. The challenge here to some degree is government policy, an over emphasis on volume based timber tenure, rather than area based timber tenure, has taken the long term management of the forest out of the hands of people and put it in the hands of government. A number of distortions have emerged out of the province's forest policy, there are avenues to access timber supply in the longer term. I believe the government will be compelled in the years to come to give area based tenure its due in forest policy - perhaps there is a new era about to emerge. 

There are a number of opportunities now; wood electrical generation, private portfolio of timber properties, localized milling, harvesting technologies geared to low volume salvage of fiber in conjunction high efficiency remote mobile milling - the list is extensive - all it needs is the confluence of capital and people.  

I am excited about the prospects for forestry, if you are too, the opportunities are waiting.  

Tourism - An Industry Perspective

Tourism is an industry about sharing, sharing experience - culture, history, nature, each other, tourism is all fun all of the time. It is often asserted that WW2 saved the economy, brought the world out of  a depression - if that's true, it should the tourism industry's mission to effect prosperity through happy human exchange. 

To some degree it is the case that tourism is generating prosperity, tourism's "multiplier effect" is better than most industries. Tourism has a good capital invested versus revenue generated ratio relative to other industries - good margins. Tourism has an excellent environmental footprint versus revenue generated ratio, in the main tourism's environmental foot print is light or rides on whats in place anyway - by way of example - the transportation network is there anyway.  Tourism holds as a priority the athletics of its operating area, in British Columbia, it has been the tourism industry that has lobbied for visual quality maintenance  and enhancement along major transpiration corridors for example.   

The tourism industry spans camping at one end of the use continuum and 5 star resorts at the other, the common theme throughout is people. People and expectations, meet expectations - people have what they expected, exceed expectations - people are pleased. The definition of excellence is as diverse as the people people involved, this is both the challenge and the interest of the business. The key in to success in the tourism is an intimate - in-depth understanding of your patrons. In provisioning opportunity for enjoyment, it almost becomes necessary to know the patron better than they know themselves. People live with ostensible interests, the ones that market them socially and then they have their real wants, needs and desires. It is the marrying of the ostensible with the underlying interests, while ensuring expectations are met, that finds success. 
My background in tourism stems from operating a fly fishing resort for a number of years, the resort was remotely located, fly in or horse in only. The largest number of guests was 20, but rarely did we exceed 12 people, the day rate was $200 / day plus transportation, normally helicopter. It was a highly personalized environment, one came to know the guests - this was a unique industry circumstance in that many guests came for years. The ostensible rationale for attending the resort was fly fishing, and there where some fly fishing fanatics to be sure, where I witnessed the most joy however, was at the dinner table or visiting at the lodge. For the most part, the joy emanated from a fresh social environment, the unique coalescence of as social opportunity absent history or baggage and a socioeconomic natural zone - it really gives people the opportunity to be the best version of themselves. The point of the discourse is that the underlying interests where more important than the ostensible interest for coming, this was particularly true in this operations case, as this fishing resort was atypical in that a large number of our patrons were women. An effort to engineer a group of people to facilitate fulfilling exchange was, as important, perhaps more important, than people having the opportunity to catch fish. 

In life, people have needs, wants and desires, in tourism people have wants and desires - see to them and success will come.  

As tourism is a business about people, it is, like no other, a marketing dependent business - unless you've established a clientele. A start up tourism enterprise requires a large marketing budget, and in a normal tourism offering with flux and change in clientele, maintenance marketing efforts need to be as high as 10% of gross revenues. In pursuing marketing venues or avenues, vertical efforts nearly always out perform non-specific or horizontal venues - this industry likes targeted efforts. The goal of course is to establish a steady group of patrons that share the love of the experience offered, that happens readily in some operating circumstances. 

In Canada, we have seasonality that affects our offerings, likely in a larger degree than other jurisdictions. The challenge we face in the industry is to ensure complete asset utilization - destination resorts often see assets at or near idle for half the year. The key then is to seek means by which to build out usage into the shoulder seasons and off seasons. In designing a business approach to tourism, one needs to be cognisant that the excellent margins in the business can be challenged by overhead and plan accordingly. 

I've always been a believer in essentials, invest in essentials because people always need them, the tourism industry has challenged that thesis - even in economic downturns, people need fun and seek it out. There are instances where the utilization generally migrates to areas of less compensatory requirement, but if you positioned yourself in the right space you can skirt this as well. 

The tourism industry is a exciting space, people pursuing their passions, escape, adventure - it is all people all of the time - you just have to get to know them.