The biggest democratic failure of 20th century

The World War I was over. German Revolution was declared a success and Weimar republic was proclaimed. But the suffering from the Great Depression and unfavorable conditions of Treaty of Versailles couldn’t not help but widen the gap of declared system of parliamentary democracy and the harsh political and economic reality of the country. Important factor exacerbating the situation was a right-wing myth that Germany lost the war because of the German Revolution. Radical left-wing communists, on the other hand, were playing with popular emotions by trying to combat what they saw as capitalist policies. To quench the political instability, a rather controversial figure was appointed as Chancellor of Germany on 30 January, 1933.

His rise was difficult and littered with obstacles. It started when the German government received reports of an imminent terrorist attack. A terrorist had launched feeble attacks on a few famous buildings, but the media largely ignored his relatively small efforts. At the time the man who claimed to be the nation’s leader had not been elected by a majority vote and many claimed he had no right to the powers he coveted. Six years later, this leader did not only command popularity and patriotic feelings of his nation but was also hailed as the “Man of the Year” by Times magazine.

He was a simpleton and had a coarse use of language. His simplistic and inflammatory nationalistic rhetoric offended foreign leaders and the well-educated elite. And, as a young man, he’d joined a secret society with an occult-sounding name. The only visible talent he possessed was drawing.

“You are now witnessing the beginning of a great epoch in history,” he proclaimed, standing in front of the burned building, surrounded by national media. He used the occasion to declare an all-out war on terrorism, originating, according to him, in the Middle East and in their religions.

Four weeks later, the nation’s now-popular leader had pushed through legislation – in the name of combating terrorism – that suspended constitutional guarantees of free speech, privacy, and habeas corpus. Police could now intercept mail and wiretap phones; suspected terrorists could be imprisoned without specific charges; police could sneak into people’s homes without warrants if the cases involved terrorism. To get his patriotic “Decree on the Protection of People and State” passed over the many objections of concerned legislators, he agreed to put a four-year provision on it. Citizens who protested the leader in public – and there were many – quickly found themselves confronting the newly empowered police, jail cells.

He wanted to stir a “racial pride” (based on eugenics of Gobineau) among his countrymen and began referring to the nation by “Heimat” (Homeland). Playing on this implicitly racial nationalism, he argued that any international body that didn’t act first and foremost in the best interest of his nation was neither relevant nor useful. He withdrew his country from the League Of Nations in 1933, and in 1935 negotiated a naval armaments agreement with England. To further consolidate his power, he reached out to industry, bringing former executives of the nation’s largest corporations into high government positions.

His propaganda minister orchestrated a campaign to ensure the people that he was a deeply religious Christian. Every then German soldier was sporting a belt buckle with “Gott Mit Uns” (God Is With Us). Along the same lines, he declared that the nation had clear Christian roots, that any nation that didn’t openly support religion was morally bankrupt. Many government functions started with prayer.

His speech on April 12, 1922 included:

“My feeling as a Christian points me to my Lord and Savior as a fighter. It points me to the man who once in loneliness, surrounded only by a few followers … was greatest not as a sufferer but as a fighter.

“As a Christian … I have the duty to be a fighter for truth and justice…”

But after an interval of peace following the terrorist attack, voices of dissent again arose within and without the government. Students (later regrouped as White Rose) had started an active program opposing him and leaders of neighboring nations were speaking out against his racially discriminatove rhetoric. His propaganda minister ntensified the nationalistic campaign. Those questioning him were labeled “anti-German” or “not good Germans.” Another technique was to “manufacture news,” through the use of paid shills posing as reporters, seducing real reporters with promises of access to the leader in exchange for favorable coverage, and veiled threats to those who exposed his lies.

In 1939, to “attenuate” the economic decline and re-unify the nation, he pointed at an external threat: Czechoslovakia (despite English warnings). Shortly after, Poland was invaded in a “defensive, pre-emptive” action.

As his propaganda minister said:

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

This dictum not only became reality in Germany but also with it, the leader’s popularity grew as the nation plunged into yet another world war.

The leader of the nation was Adolf Hitler who put an end to the first democratic experiment in Germany.

Stories common and uncommon

Any conversation, casual discussion or even a short encounter might and usually is accompanied by a story. Some stories talk of peaks; some – of lows. All stories have one thing in common: their structure. Stories start by setting a context (location, main “players,” initial conditions), then proceed with developments (events, interactions) and conclude with an endnote. Many stories, like parables, impart not only useful information but also the between-lines, and unconsciously, an inevitable “conclusion.”

Below are two stories, which Ford Harding, the founder and President of Harding & Company, came across during his long and successful career path.

Bob Hillier, an architect who knows how to bring in business, showed how powerful the sadder-but-wiser anecdote can be, when a prospective client said to him, “I’ve had some bad experiences with architects. How can I be sure you’re going to bring this project in on budget.” Everyone in the room knew that the engagement hung on the answer to this question. I looked at Bob. He responded with the following story:

When I had only been in business a short time, I won a project to help renovate a classroom building at a local university. Our design substantially exceeded the client’s budget, but I thought it was so beautiful that I could talk them into spending the money. When I met with the facilities manager, he looked at my design and immediately asked what it would cost. I told him, and he handed me back my drawings and told me the engagement was over. I said I would redo the work to fit his budget, but he said no, he couldn’t work with someone who didn’t listen to him. I’ve never forgotten that lesson.

With that story, so much more effective than promises or statistics, he won the engagement.

Similar incidents litter professional careers and lives of everyone. Tale-like, informative and full of powerful implications, such events leave an indelible mark on those affected first-hand and make an unforgettable impression on those hearing their account.

Here is a story that I heard an attorney tell to an accountant he was hoping to get referrals from:

When I was a young lawyer, I was trying a case in front of the judge with a reputation for being hard-nosed. I found myself getting so wrapped up in my client’s case at one point that I stopped and apologized. The judge got mad at me right there in front of my client. “How dare you apologize,” he said. “If you don’t feel emotional about your client’s case, why should I?” Ever since then, I have never felt embarrassed about being emotionally committed to my clients’ cases.

This story is far more persuasive than a statement like, “I will really fight for any client you refer to me.”

These two anecdotes were illustrative of two people who had learnt from their previous mistakes the hard way. Stories are also a cure when facing awkward/frustrating but critical moments. There are many such stories associated to rainmakers. There is something visceral in our fascination with stories, especially when we feel relating to or identifying with them.

Stories can be inspirational and funny. In the business world, for example, Bill Gates is notorious for his association to a plethora of stories – some true, some exaggerated and some utmost lies. Here is one at the same time informative and entertaining.

“Bill Gates and the president of General Motors have met for lunch, and Bill is going on and on about computer technology. ‘If automotive technology had kept pace with computer technology over the past few decades, you would now be driving a V-32 instead of a V-8, and it would have a top speed of 10,000 miles per hour,’ says Gates.

“‘Or, you could have an economy car that weighs 30 pounds and gets a thousand miles to a gallon of gas. In either case, the sticker price of a new car would be less than $50. Why haven’t you guys kept up?’

“The president of GM smiles and says, ‘Because the federal government won’t let us build cars that crash four times a day!'”

Many other business anecdotes can be found here, here and here.

For all of those in the business world, remember that many stories, especially those with bad ending, are caused, ironically, by what Ambrose Bierce once defined in his Devil’s Dictionary.

Corporation: An ingenious device for obtaining profit without individual responsibility.

Happy storytelling.

Startups failed and will continue to fail, but how fast?

Current financial crisis starts showing growing signs of migrating to other industries and already causing anticipative layoffs and cuts in many well-established as well as small/startup businesses.

The figure on the left comes from the book by Scott Shane Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. The data comes from a special tabulation by the Bureau of the Census produced for the Office of Advocacy of the US Small Business Administration. While these data look at the 1992 cohort of new single establishment businesses, the failure rate percentages are almost identical for all the cohorts that researchers have looked at. These are the averages (considerable differences across industry sectors in business failure rates).

William Bygrave, Professor Emeritus of Entrepreneurial Studies at Babson College, in his book The Portable MBA in Entrepreneurship made the following assertion in 1997:

If you intend to start a full-time, incorporated business, the odds that the business will survive at least eight years with you as the owner are better than one in four; and the odds of its surviving at least years with a new owner are another one in four. So the eight-year survival rate for incorporated startups is about 50%.

The failure rate is high due to inclusion of sole proprietorships in the statistics. Sole proprietorships push up the failure percentage due to:

Many startups and new business venture are sole proprietorships.

Sole proprietorships are very easy to form and are a typical start for small businesses.

Many of the owners of sole proprietorships leave the business startup for different reasons, not including bankruptcy.

It is sometimes difficult to find external funding for sole proprietorships (VCs and angel investors have preference for limited liability partnerships with few competent and experienced founders).

Two-thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years, according to a recent study. The same research found that businesses that survive the first four years have a better chance of surviving long-term.

Small Business Growth: Searching for Stylized Facts written by Brian Headd of the Office of Advocacy and Bruce Kirchhoff in October 2007 examines small business dynamics. It notes that growing firms tend to be a constant percentage of all firms and as a general rule, new employer businesses have a 50/50 chance of surviving for five years or more. Among other things, the authors’ analysis determined that:

Growing single establishment small firms are generally a constant percentage of industries and the economy

Over time, the percent of growing firms tends to be greater than that of decliners;

Fast growing firms tend to grow in spurts, then revert to average growth;

No significant relationship exists between fast growing industries and the number of fast growing firms with in those industries; and

Industries with many growing firms also tend to have many decliners.

And considering recent developments in the financial markets and their subsequent repercussions on the corporate world, Jason Calacanis, the founder of Weblogs Inc. and Mahalo asserted “that 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.“

Which one of the estimates and forecasts (mentioned or not mentioned) above will eventually prove to be accurate remains to be seen. In the meantime, what all entrepreneurs and startups have to do is to focus their energies, finances and best of their efforts on meeting market and customer needs efficiently and effectively and keeping in mind not to repeat some of commonly made mistakes because any or combination of such mistakes, perhaps not critical in past, might become become so in present and not-so-far future.

Failed states in 2008

The Fund for Peace is an independent nonprofit research and educational organization founded in 1957 by investment banker Randolph Compton. Since its inception, it aimed at prevention of conflicts and alleviation of causes of conflicts. Due to its historic role and analysis conducted in socio-economic, political and demographic fields, the Fund came up with the idea of evaluating countries based on indicators such as demographic pressures, economic development, and deterioration of environment, among others. From 2005 co-operating with Foreign Policy magazine, the Fund publishes its annual “Failed States Index” that provides results of analysing a large set of factors causing/contributing for a state to fail or become weak. While generally a good starting point of information for decision-makers, few criticize the notion of “a failed state” because its frequent references to countries considered a threat to the US government.

The index provides assessment only for sovereign states (determined by membership in the United Nations). Territories such as Taiwan, the Palestinian Territories, and Northern Cyprus are not figuring on the list until their political status and UN membership is ratified. Ranking is measured based on 12 indicators, which are divided into three categories: social, economic and political. For each indicator, the ratings are placed on a scale of 0 to 10, with 0 being the lowest (most stable) and 10 being the highest (least stable). The total score is the sum of the 12 indicators and is on a scale of 0 (least failed) to 120 (most failed).

Social Indicators

I-1. Mounting Demographic Pressures
I-2. Massive Movement of Refugees or Internally Displaced Persons creating Complex Humanitarian Emergencies
I-3. Legacy of Vengeance-Seeking Group Grievance or Group Paranoia
I-4. Chronic and Sustained Human Flight

Economic Indicators
I-5. Uneven Economic Development along Group Lines
I-6. Sharp and/or Severe Economic Decline

Political Indicators
I-7. Criminalization and/or Delegitimization of the State
I-8. Progressive Deterioration of Public Services
I-9. Suspension or Arbitrary Application of the Rule of Law and Widespread Violation of Human Rights
I-10. Security Apparatus Operates as a “State Within a State”
I-11. Rise of Factionalized Elites

I-12. Intervention of Other States or External Political Actors

In the words of the people from Foreign Policy:

Because it is crucial to closely monitor weak states—their progress, their deterioration, and their ability to withstand challenges—the Fund for Peace, an independent research organization, and FOREIGN POLICY present the fourth annual Failed States Index. Using 12 social, economic, political, and military indicators, we ranked 177 states in order of their vulnerability to violent internal conflict and societal deterioration. To do so, we examined more than 30,000 publicly available sources, collected from May to December 2007, to form the basis of the index’s scores. The 60 most vulnerable states are listed in the rankings, and the full results are available at ForeignPolicy.com and fundforpeace.org.

According to this year’s Index, Somalia is the number one failed state in the world while Norway is the most prosperous. Moreover, seven out of the ten most failed states in the world are from Africa (only exception being Afghanistan, Pakistan and Iraq). There are currently 35 failed states (marked in red) of which 19 are African.

The report claims Somalia is the most failed state in the world. Many researchers believe that Somalia is a collapsed state since the collapse of its national government in 1991. Somalia scored a record amount of points this year: 114.2 (out of maximum possible 120), which is also the closest a state got to complete failure since the Failed States Index was first published. The country report shows that none of Somalia’s indicators improved since the last year’s index.

Due to ongoing crisis in financial markets, Iceland (172nd on the 2008 list), considered one of the least failed or best countries in the world (the best country to live according to the UN Development Index 2007) turned in a matter of few weeks (mainly due to its almost exclusive economic reliance on the global financial markets) into a state on the verge of national bankruptcy.

Iceland is a glaring example of how “well” globalization works its magic in the modern era of interconnectedness and interdependence.

Bad Ideas To Make Money

It is not easy for most entrepreneurs and businessmen to talk about their own failures. When they do, they tend to be indulgent or lenient about their past experiences and are inclined to shift some of the “blame” on environment, tendencies, people or just plain luck (lack of it). Only few speak candidly and admit their errors openly with intention of contributing to the accumulated business wisdom and in hope of providing useful information for those aspiring and resourceful entrepreneurs who are at the beginning of their paths. The first step to overcome a failure starts by admitting that we are not perfect.

Jeremy Schoemaker, the founder of ShoeMoney Media Group, is one of the entrepreneurs who had many ideas, which could potentially lead to business successes but instead turned out to be business failures.

Anyway I came up (in about 10 minutes) my top 10 worst ideas to make money that totally were a waste of time and effort (and money in some cases).

Below are some of his top 10 worst money making ideas he came up with.

10 – FireFox Forum (firefoxforum.com) – I purchased this site on digitalpoint ($800) after getting some inside information that FireFox was going to team up with Google on a per download affiliate program. Well all that happened and I think I made about 50$ the first year. FLOP

7 – Omaha-Used-Cars.com – Now here we go! This is easy. Just make a used car site and charge dealers a .25cent per car listing fee right ? ehhh none interested… FLOP

6 – SMS Text Dating textdating.com/texting.com – I was soooooooo sure this one was going to be it! The concept is simple basically you subscribe to this dating website. Make a profile then you could send a message to the person from the website to there mobile phone without having to know there phone number. I had this totally done and nobody every signed up… FLOP

5 – St. Marry’s Bar & Grill – Ok this has nothing to do with the internet. After the Hooters closed down in Lincoln I tried to re-open it then when that did not work out I thought about making a restaurant called St. Marrys where it was like a church and the waitresses dressed like catholic school girls and like the nuns would be the managers and spank the waitresses if they were bad?!? Yes I know bad idea and I never really pursued it…. I like in one of the most conservative catholic communities in the country so no way it would fly… and yes i know im going straight to hell.

3 – Ads Or Not
Simple concept. There is 5 ads on a webpage only one of them is NOT REALLY A AD! Each time you successfully spot the fake ad you get some money built up into your account. – I had issues finding advertisers who were down for this =P FLOP

1 – ShoeMoney Petroleum Company –
(I cant believe im actually telling these in public)

Ok Follow me here –
I want to purchase a Gas Station and Give away Free Gas
The catch is like the gas would come out really slow and also you would be limited as to how much you could get per week. (Like max 50 gallons a week).
How do I make money ? EASY – I would setup paintball guns around the gas station with webcams that would let people from the internet take shots at the people filling up there cars with gas. You could charge per shot or a xxxx amounts of shots per month for a set fee. PROBLEM – I talked to a city council member about this and he told me there was a “no flying ordinance” or something rule within city limits however I could maybe do it in the country…

As you see the breadth and width of ideas is not lacking in originality and ambition. Some of the ideas above would surely seem killer to me and many other entrepreneurs. However, not all, even brilliant and innovative, ideas become equally successful and growing businesses. In face of the ongoing financial crisis and shrinking funds, quite a few investors and VCs go as far as clearly outline what an idea needs to have to obtain a backing. For those who cannot reach VC/investor pockets or are simply willing to build their business without initial VC/investor funding, there is also a way. Whichever way you choose, make sure to check out the startup rules of Loic Le Meur, the founder of Seesmic, and those of Sequoia Capital, a leading VC firm, and do not be afraid to fail. Embrace your failure, learn from it, and remember the words of one of the most profound thinkers of 19th century, Friedrich Nietzsche, who mused, “What does not kill you makes you stronger.”

Good luck.

Some eponymies in science

In history, it is rare that scientist achieve notoriety and fame during their lifetimes. If they nonetheless do, they get credit and lasting recognition by having a scientific discovery named after them.

However, there happen to be wrong naming attributions. Indeed, naming disputes are so common that there is even a rule of thumb called the Zeroth theorem, which states that eponymous discoveries are, more often than not, wrongly attributed. Appropriately enough, the theorem is also known as Stigler’s law of eponymy even though it was originally formulated by Robert Merton.

Below are few examples.

Antonio Meucci – who despite developing the first telephone spent his whole life in poverty (“if Meucci had been able to pay the $10 fee to maintain the caveat after 1874, no patent could have been issued to Bell”), while Alexander Graham Bell got all the glory.

Alan Turing – whose huge strides in the conception of the first generation of computers (his work for the Colossus computer, the world’s first programmable digital electronic computer) were destined to never to be fully attributed to him, due to his untimely death.

Nikola Tesla – who died almost totally penniless, while the ideas he had put forward for radio (he demonstrated a wireless communication – radio – in 1894) made Guglielmo Marconi (who received Nobel Prize in Physics for radio in 1909) a fortune.

Jean-Baptiste Lamarck – who correctly surmised that living things evolved, over sixty years before Charles Darwin publicized the fact, but was to die in ignominy with his ideas not appreciated (but tacitly considered by Darwin in his On Origin Of Species).

Geoffrey Dummer – whose musings on the development of the integrated circuit preceded those of Bob Noyce and Jack Kilby by almost a decade, but due to lack of vision by the British Government his plans were never to make it off the drawing board.

Joseph Swan – who despite having the technical expertise that allowed him to design the first workable electric light bulb, was no match for the commercial machinations of adversary Thomas Edison.

Johann Loschmidt – an Austrian scientist who calculated in 1865 the number of molecules in a mole but it was Italian chemist Amedeo Avogadro, whose name became associated with the number.

Albert Neisser – who discovered leprosy (officially known as Hansen’s disease, in honour of the Norwegian physician Gerhard Armauer Hansen, who discovered the bacterium responsible but did not manage to cultivate it, or show that it was truly linked to leprosy), and who obtained from Hansen a large set of samples from people with leprosy. Neisser succeeded in staining the bacterium and, in 1880, announced that he had discovered the cause of leprosy. Hansen wrote a lengthy article about his own research for a conference on leprosy, which credited him, not Niesser, for the discovery.

Robert Hooke – Who postulated, amongst other things, the true nature of planetary motion, only to witness his rival Isaac Newton take all the praise for it.

Sources: New Scientist, ECNmag

The greatest economic failure of 20th century

The Great Depression has central place in twentieth century economic history. All other depressions and recessions are from an aggregate perspective little more than ripples on the tide of ongoing economic growth. The Great Depression cast the survival of the economic system, and the political order, into serious doubt. A serious recession in modern times would be when gross domestic product (GDP) falls by 3% or 4% over two years. Between 1929 and 1932 America’s GDP fell by 30%.

Winston Churchill was on a visit to New York in 1929 on one of the worst days for share prices. Churchill was surprised not to see more frenzy among the brokers until he was told that rules prevented them from running, shouting or gesticulating. Churchill did witness something, though, that has become part of the grim history of the era: a man jumping to his death from a nearby hotel window.

Three days — Black Thursday, Black Monday, and Black Tuesday — come to to describe this collapse of stock values. The initial crash occurred on Black Thursday (October 24, 1929), but it was the catastrophic downturn of Black Monday and Tuesday (October 28 and 29, 1929) that precipitated widespread panic and the onset of unprecedented and long-lasting consequences for the US. The unemployment rate rose above 25%, with little social protection for the victims. Workers were idle because firms would not hire them to work their machines; firms would not hire workers to work machines because they saw no market for goods; and there was no market for goods because workers had no incomes to spend. Furthermore, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many people in the region became unable to pay taxes or other debts and had to sell their farms for no profit to themselves.

The crash followed a speculative boom of the American economy that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market (in the period of 1923-1929 corporate profits rose 62%, dividends rose 65% and the average output per worker increased 32% in manufacturing), a significant number even borrowing money to buy more stock. The Roaring Twenties, as this period came to be known, was a time of prosperity and excess, and despite warnings against speculation, many believed that the market could sustain high price levels. The rising stock prices encouraged more people to invest; people hoped the stock prices would rise further. Speculation thus fueled further rises and created an economic bubble (at the market peak in September 1929 about 40% of stock market values were pure speculation). Shortly before the crash, Irving Fisher proclaimed, “Stock prices have reached what looks like a permanently high plateau.”

The euphoria and financial gains of the great bull market were shattered on Black Thursday, when share prices on the NYSE collapsed. Panic selling started. More than 12 million shares were traded in a single day as people desperately tried to mitigate the situation. This mass sale is often considered a major contributing factor to the Great Depression. The market lost $14 billion in value on that day. Some 9,000 banks, accounting for nearly half of America’s banking capital, failed in less than a year later.

The first instinct of governments and central banks faced with this crisis was to do nothing. Businessmen, economists, and politicians (Secretary of the Treasury Mellon who said ‘Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate’) expected the recession of 1929-1930 to be self-limiting. They expected workers with idle hands and capitalists with idle machines to try to undersell their still at-work peers. Prices would fall. When prices fell enough, entrepreneurs would gamble that even with slack demand production would be profitable at the new, lower wages. Production would then resume. Except that this scenario never materialized. Stock prices fell on Black Thursday and they continued to fall, at an unprecedented rate for a full month, bringing the entire economy to its knees.

When politicians and businessmen finally decided to act, their actions plunged the country into a longer, self-sustainable crisis. They reacted by introducing protectionist policies such as the passage of the Smoot-Hawley Tariff Act (raising import tariffs – in average by 60% – on more than 20,000 items and causing protectionist policies in the rest of the world in retaliation) through the Congress (purportedly resulting from Republican policies in 1928), causing more harm than the crash itself.

In 1931, the Pecora Commission was established by the Senate to study the causes of the crash. The Congress passed the Glass-Steagall Act in 1933, which mandated a separation between commercial banks and investment banks. After the experience of the 1929 crash, stock markets around the world instituted measures to temporarily suspend trading in the event of rapid declines, claiming that they would prevent such panic sales.

There is no fully satisfactory explanation of why the Depression happened when it did. The causes of the Depression are still actively debated among economists due to lack of consensus in describing the causal relationship between various events and the role of government economic policy in inducing or preventing the Depression. Milton Friedman and Anna Schwartz argued that the Depression was the consequence of an incredible sequence of blunders in monetary policy. Another popular theory is that the Depression was caused when investors became fearful of their stocks as markets expanded some focus to Europe, which still had nations that were economically damaged from WWI (war-induced inflation, brief recession in 1920 and 1921, chronic overproduction of food and resulting low prices, nationalistic selfishness).

How things sometimes turn out

This is a story about David, a good friend of mine from university days.

David was an unsmiling, straightforward, lonesome, and very candid person. From day one, it was obvious that his interests did not lie in physics (his domain of specialization). He didn’t have a knack for physics, math or computers. His knowledge of English was scarce. The results of his exams varied from mediocre to average. He neither tried to excel nor allowed himself to fail the courses he took. He floated…during four years of undergrad studies.

He finally obtained his bachelors in physics. After these four years, he had no knowledge, experience or aspiration in any particular field including physics. He didn’t want to continue in physics, but the alternative of serving two years in the army compelled him otherwise. He continued his studies on graduate level. In the meantime, he became restless. He wanted to quit the country and take a job in some place calm where he could drive trucks. “Me, the road and nothing else” he used to say. He preferred solitude.

Seeing many young people going to America, David decided to take his chances. One day he informed me that he found a “great opportunity to go to the US.” It was the American green card lottery. He read that there is a good chance of winning the lottery and getting a green card. He got very enthused and optimistic. He applied for it and some time after, surprisingly for everyone, he received a notification that he passed the first stage of selection. The second stage of the lottery was to take place in Moscow, Russia. David’s family was not financially stable, but he managed to scrap together ticket money, borrowing from friends and family. When he came back from Moscow, he announced that he had a good chance of obtaining the green card. There was a big change in David. A joking, superstitious and overly confident David seemed completely unrelated to the formerly grave, isolated life-hater he once was.

After two years and a Masters degree, David left his family – he was 24 then – and took off to America in search of good career path and money.

Months passed. I got an email that he settled with a Russian girl and undertook a long chain of short-lived temporary jobs on gas stations, cafés and trade centers. He didn’t sound happy or content. He was surviving. He wrote he spared some money and sent it to his family. No mention of trucks.

More months passed. Another email. He enrolled in a PhD programme in physics. What? Why? He said: “They pay well to doctoral students, and I don’t have to do crappy stuff.” He was in desperate need to bone up his computer skills in order to advance in his studies. He needed to learn computers from scratch, which he didn’t feel like doing. He managed to buy some time from his supervisor. However after six months or so, he quit. His supervisor finally understood that David would not be able to complete his studies. In addition, a sad incident, a quarrel with his Russian girlfriend who fabricated some false evidence, resulted in David’s incarceration in a local prison for a week. He didn’t have money; he was in prison; his family was not aware; few friends were aware and bailed him out. Shortly after, he was put into prison for three weeks, again based on false witnessing. After jail, he wouldn’t be able to find a job in that state because of his criminal record.

Three weeks later, he was out of prison. He had no money and no job. He managed to borrow enough money for a return ticket to Armenia. Four years passed since he left. What changed? David now spoke English fluently. He brought back with him no money, no promises for a job, no valuable knowledge, but many memories of unpleasant experiences, glimmers of which could be seen in his shadowy and grave expression of face.

He was 28… I met him when he was back few weeks prior to my visit. We had a drink and a long conversation. He was looking for a job; he needed a fresh start…

How boo.com got booed

Boo.com was a European company founded in 1998 and operating out of a London head office founded by three Swedish entrepreneurs: Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leander had previous business experience in publishing where they created an online bookstore, bokus.com, which in 1997 became the world’s third largest book e-retailer (according to Investor’s Week, 26th May 2000) behind Amazon and Barnes & Noble. They became millionaires when they sold the company in 1998.

Then came boo.com.

The owners of boo.com wanted to develop an easy to use experience which re-created the offline shopping experience as far as possible. Boo.com wanted to become the world’s first online global sports retail site. The name of the company (according to Malmsten) originated from filmstar ‘Bo Derek’, best known for her role in the movie ‘10’. The domain name ‘bo.com’ was unavailable, but adding an ‘o’, they managed to procure the domain boo.com for $2,500 from a domain name dealer.

Boo.com was to target mostly ‘young, well-off and fashion-conscious’ 18 to 24 year olds. Boo marketed itself as a premium sports, urban street wear and fashion retailer, stocking quality products for the fashion conscious young individual. However, with premium products came expensive charges. The market for youth clothing was viewed as large: according to New Media Age (1999) and projections from retail analysts such as Verdict. An initial round of funding included investments from the JP Morgan, LMVH Investment and Benetton amounting to a total of around $125 million.

To make things as close to reality as possible, the virtual salesperson, Miss Boo, would great online visitors and guide them through the site, giving helpful tips and advice. When selecting products, visitors could drag them on to models, zoom in, and rotate them in 3D. The technology to achieve this was built from scratch. With all visual gimmicks and stylish add-ons, boo.com promised 8 second waiting time for the website to load.

Immediately before the launch, management team met with Larry Lenihan from Pequot Capital. The boo.com team provided revenue forecasts but were unable to answer questions about potential of the business such as “What kind of conversion rate are you aiming for? What’s your customer acquisition cost? And what’s your payback time on customer acquisition cost?” When these figures were obtained, the analyst found them to be ‘far fetched’ and reputedly ended the meeting with the words, “I’m not interested. Sorry for my bluntness, but I think you’re going to be out of business by Christmas.”

Boo.com officially launched on 3rd November, 1999, after a six-months delay. The homepage was featuring Miss Boo, as planned, but the user experience of the website turned out to be disasterous: slow site browsing, poor navigation and irritating technology.

ZDNet created a report of their experience of using the Boo.com. They describe an example search for product information, which took five user actions, including escaping past annoying animated graphics, to reach the desired location. “With products zooming all around the page, customers practically have to play target practice in order select the product they want” (ZDNet, 29th November 1999). The FT reported that one customer had been advised by Boo to “limit the amount of transactions they made, to three per twenty minutes” (Financial Times, 4th November 1999). There were also other problems. Studies sponsored by KPMG, Hewlett-Packard and VNU Publications (Computing, 30th November 2000) show the three main reasons for web purchases in the European market (UK, France, Germany) as “Ease/Convenience”, “Better Prices” and ‘Speed of Process’. Boo.com seemingly failed on all three dimensions.

A quick glimpse inside boo.com reveals some of most fundamental underlying problems, which were to affect and become critical in the post-launch period (as they did). These included unrealistic revenue projections, ambitions to immediately start globally, excessive employment benefits in pre-launch period and luxurious spending.

Few months after the launch, sales results were disappointing in some regions with US sales accounting for 20% compared to the planned 40%. The management team felt that further investment was required to grow the business from a presence in 18 countries and 22 brands in November to 31 countries and 40 brands the following spring.

The end of boo.com came on May 18th 2000, when investor funds could not be raised to meet the increasing marketing, technology and wage bills (and projected expenses for business expansion). In May 2007, Boo.com re-launched as an online travel community and review site under new ownership by Web Reservations International (WRI), unrelated to the original Boo.

Bismarck’s struggle for unification

In the history of Germany no one man has single-handedly accomplished more for his country than Otto von Bismarck who, among his other achievements, orchestrated the foundation of the German Empire in 1871. As Prussian prime minister and German chancellor, he was determined to unite all of Prussia. In this struggle, he sought to make Germany the greatest power in Europe, but realized that to achieve this goal, national (cultural, religious, political) unity was essential. He identified the main obstacle to German unification the extensive presence of Catholicism in the southern Germany. Thus, he undertook measures dealing with threats of division.

Kulturkampf (as this “struggle for unification” came to be known) was a struggle between Bismarck and Catholics beginning as early as 1864 when Pope Pius IX issued the Syllabus Errorum. The pope in this papal statement condemned the practices of modern actions such as civil marriage and civil education. This was the response of the Church to the Industrial Revolution and modernization sweeping aside their conservative, tradition-bound views of life. Liberal feelings were more exacerbated when the First Vatican Council in 1870 adopted the doctrine of papal infallibility (on issues of faith and morality). There were fears the pope will declare himself infallible on all matters and try to establish a new Holy Roman Empire.

These two proclamations angered Bismarck, but his hands were tied with the war (Franco-Prussian War, 1870-71). His first aim was to unify Protestants and Catholics under one State. But even though he included the Protestants, the concern was the rising Catholic vote. The war brought Catholic Alsace and Lorraine into German hands, resulting in a large (30%) Catholic representation in the new Empire. These Catholics established the Catholic Centre Party to reassure themselves of the support of the Church. In a short period, it became the second strongest political party in Germany. Bismarck used these inconveniences of the political rivalry with the Centre Party and authorized his anti-papal campaign. “He objected to the existence of a confessional party because it seemed to stand for allegiance to an authority other than the national state.” Bismarck simply “could not conceive that a faithful child of the Church could also be a loyal son of the fatherland.” Bismarck himself was a very religious man who sought out the guidance of God in his administration of state affairs.

The National Liberal Party was what Bismarck needed to campaign against the Pope and the Catholic Centre Party. They too saw the doctrine of papal infallibility as unacceptable. Thus without any hesitation, they carried out the plan of Kulturkampf and made it their campaign platform, being encouraged by Bismarck.

With the abolishment of the Catholic department of the Prussian Ministry of Public Worship and Education and the appointment of Adalbert Falk to the position of Prussian Ministry of Public Worship, Bismarck was ready to disperse his anti-Catholic measures throughout Germany. Falk was an anti-clerical rationalist who desired to please Bismarck and managed to bring the Liberals closer to Bismarck. Falk began by trying to get the school inspection provisions made into law, passing the School Inspection Law in 1872. The law required that a special school inspectorate be established, which would allow the Prussian authorities mandatory power to inspect all schools instead of the Church. Falk then brought a law directly against the liberals traditional enemy, the Jesuits. This was a blow towards the education of Germany, since from the Counter Reformation, the Jesuits had established themselves firmly in education. Furthermore, in 1873, he passed the May Laws intended to remove all the priests from state service, legalize civil marriage and education, and make the inclusion of political propaganda in sermons illegal. As a result of the May Laws, two archbishops were imprisoned and 1300 parishes found themselves without priests. German people were becoming more and more alienated and while many German Catholics resented the pope’s assumption of infallibility, they resented even more what Bismarck and the National Liberals did. Instead of going to Bismarck’s side, they rallied behind the Church. The Centre Party increased, and persecution and imprisonment only strengthened their numbers to 94 seats by 1874 (from 58 in 1871).

The outcry of the Kulturkampf finally came on July 13, 1874, as Bismarck rode by in his carriage in Bad Kissingen. A Catholic cooper Eduard Kullmann attempted to assassinate him (managed only to wound his right hand). Bismarck charged the Catholic Centre Party for inspiring the would-be assassin. But the desired affect was not achieved. The hatred and failure of the Kulturkampf was still felt over the nation.

In 1879, Bismarck finally reversed his domestic policies and scrapped the Kulturkampf. He repealed most of the May Laws and allowed the religious orders to return and for the Roman Catholic Church to recover control of its seminaries. He made Falk appear the mastermind of the entire Kulturkampf (claiming he did not have the time to read the May Laws that Falk had published). Knowing that he needed the support of the majority in order to pass his new economic reforms, he abandoned Liberals and began to negotiate with the Centre Party. His recovery allowed him to adopt a new interest: the welfare of German industries and reforms to the government’s policies of free trade. In the process of erasing the failure of Kulturkampf from the minds of the people, Bismarck introduced protectionist tariffs, which alienated the National Liberals who supported free trade but brought a much-sought support of embattled German industrialists in addition to working and middle classes, which was what eventually united Germany.

Bismarck had indeed made Germany into a world power and proved himself once more to be a remarkable statesman even in the aftermath of Kulturkampf.

Source: Heather Statton