Labor Union Strategies for the 21st Century

Organized labor’s continued pursuit of a strategy created in the early-mid 20^th century has decimated—and will eventually finish off—organized labor’s remaining influence in the 21^st century. Labor’s influence increased dramatically starting the 1920’s, peaked in the 1950’s, and is now at its weakest level in more than a century.

Source: http://unionstats.gsu.edu/

The private sector labor movement is dying. The 20^th century model of labor unions destroys the employees in the 21^st century. The 20^th century model writes work rules that prevent the worker from performing multiple tasks. The 20^th century model creates very high overtime costs or forbids working more than a set number of hours. The 20^th century model couples high pensions with extracting as much immediate monetary compensation for the worker as possible, creating a burden that puts a company at a disadvantage compared to its non-union rivals. This model dooms the 21^st century employee because it prevents employees from being flexible, autonomous, and skilled in a variety of tasks. Instead of negotiating for training that would enhance a worker’s productivity and marketability, unions negotiated for a compensation and work rules package that emphasizes the wrong set of benefits.

Devoid of revenue, unions turned to the growing government sector to maintain at least some level of support. At face value, this strategy would seem to make sense. A union shop can go bankrupt when faced with non-union competition, but a city/state/country has plenty of revenue streams and almost no competition. However, this strategic shift was a mistake. A unionized government sector combined with shrinking private sector influence places the unions on the opposing side of the general public.
2009 was the first time government sector employees exceeded the number of private sector employees.¹ This is a psychological tipping point for the general population. For example, when the Department of Labor or the AFL-CIO tries to sell the labor movement to the general public, they use graphs such as this one:

Source: http://www.aflcio.org/Learn-About-Unions/What-Unions-Do
This graph appears to be a selling point. The hope is that the public might think, “If only I were in a union, then I would be making more money.”

However, once the tipping point between government and private sector employees has been reached, the labor movement is painted in a completely different light. The public begins to think, “Look at all the government employees taking money from my paycheck, working fewer hours, taking more vacation days, and making more than me.” Equating unions with public employees will continue to push public opinion against the labor movement.

Turning to the public sector allows the dinosaur labor model to survive, with no innovation necessary. However, the labor unions are now on the other side of the negotiating table from taxpayers. Every dollar is extracted from taxpayers’ pockets. Additionally, unions want trade barriers, which also harm the public. This creates a tight spot for the unions. An entirely different marketing strategy must be adopted. How do you not get everyone to hate you?

At this point the labor movement is left to appealing to emotion. In the last decade this message has distilled into two forms, a positive and negative message. The positive message focuses on a positive emotional tie to the public. For example, “[Insert public occupation with positive image] are priceless!” Regardless of performance or current rate of pay, vacation, hours, etc., more funds are needed. The other message is to marginalize or demonize opponents. For example, “[Insert political target or wealthy] hate [public occupation from first message].” Maintaining these two types of messages is costly and can still lose in the long run as the public realizes that a zero-sum game is essentially in effect.

What Other Option is Available?
First, a successful labor movement strategy must include the private sector in order to avoid the trap outlined above. Second, a successful strategy must prepare its members for employment in the 21^st century. This means that its members must learn to be flexible, autonomous, and skilled in a variety of tasks. In the long run, the labor movement will die out in the private sector if this is not the case. Non-union corporations will drive out the union corporations with greater productivity and better talent. Third, the labor movement must identify areas where it can utilize its core competencies of leverage and employee goodwill.

It is not in the best interest of a company to provide skills and training to employees that are not directly applicable to their current position and that would make the employees more marketable to outside firms. However, a worker needs to continually expand her skill set to succeed in the 21^st century. The labor movement would be in an ideal position to bridge this gap.

Instead of the anti-productivity slogan “People over profits!” the labor movement can adopt the pro-productivity slogan “Promoting people promotes profits!” This can be accomplished by the union voluntarily tying one of its hands behind its back. The union can reserve the right to represent, intercede on behalf of, and provide a channel of grievance from the employee, but the union can also include in its charter that it does not reserve the right to negotiate compensation or work rules. The union does not even need to refer to itself as union, but rather as a learning and training federation. The union can negotiate training funding and hours during the work day for training from the corporation, while at the same time requiring nominal union dues from members who wish attend the training. Employees will enjoy the break from work and appreciate the training and skills. The outcome for the corporation may be neutral or positive, as training and employee morale increase productivity. The labor movement can continue to live up to its mission as the supporter of “the working man/woman.” The public enjoys a positive economic benefit from a workforce that enjoys lifelong training and improvement. The transformation of the union into an educational enterprise will produce the positive message and impact that the public needs and wants.

“Promoting people promotes profits” is a radically different approach from the current strategy. However, the current trajectory of the labor movement will leave a handful of legacy industries and public servants demanding the general public to pay up and implement net negative economic policies. A positive transformation and strategic shift will create a lasting labor movement for the 21^st century.
¹http://www.bls.gov/news.release/archives/union2_01222010.pdf.

Lessons from Consultancy Project Evaluation

As a part of my work, I have had the opportunity to evaluate the completed projects of a variety of external consultancies. The principal purposes of this evaluation were to identify the value of, 1) realized benefits, 2) untapped opportunities, and 3) overpromised benefits.

And there were a lot of overpromised benefits. Although I learned many things in the course of this project, I would like to discuss two points in relation to these overpromised benefits:

1)      Consultant emphasizes immediate monetary benefits to sell the project, while the project actually results in strategic or long-term gains.

Some projects were hampered by a lack of concrete objectives or steps to attain the stated objective of monetary benefits. For example, one of the projects evaluated considerably overestimated projected benefits. I found the following quote by the consultant project manager describing the purpose of the project:
“Project Imperative: Design the organization structure and the cross-functional collaboration process that will be core to building a self-sustaining high-performance management team.”

Now, a sentence like the above could be fine if in the five minutes following that statement, the consultant describes what that exactly means and how it will apply in a concrete way to the organization. However, the quote was one sentence among many describing in elaborate consultant jargon what exactly the project would entail, while also describing how incredible the monetary benefits of the project would be in the near-term. From a theoretical perspective, the stated objective made perfect sense, but most clients would tune it out unless the consultant expanded upon the objective to create realistic goals and expectations. Unsurprisingly, the client and consultant had different concepts of “success” in the project. The client was disappointed by the lack of monetary benefits, while the consultant believed the client had achieved its long-term strategic goals.

I do not intend to be overly judgmental of a single line. However, that line was a symptom of the general problem – overpromising near-term visible profits when actually presenting a long-term strategy.

2)      Quick wins were presented and promised without a reality check.
Frequently “quick wins” were included in the final presentation of a project. Providing quick wins is a simple method for a consultant to demonstrate value and provide a more concrete signal of the team’s abilities. Quick wins also offer the client improvement in its near-term profitability and the recovery of the consultant’s billing cost, thereby providing an added incentive for repeat business. However, quick win recommendations were frequently infeasible in the short-term, absurd, or of questionable strategic value.
-          Short-term Infeasibility – Many quick wins required expensive and/or lengthy system implementations in order to achieve the value of the recommendation. By definition, quick wins must be quick. Many clients assume that implementation and benefits will occur in less than one year.
-          Absurd – Some quick wins would not have passed the “smell test” for an employee at almost any level in the organization. Bundling seemingly unrelated products and offering ancillary services with which the client has no experience belong in this category. The consultancies did not appear to have received feedback concerning these quick wins from lower level employees or individuals within senior management before presenting to senior management. “Way outside the box” thinking has its place, but it generally should not fall in the category of a quick win.
-          Questionable strategic value – The most common type of recommendation with questionable strategic value that fell into this category, which was true for a variety of consulting groups, was charging customers for services or products that were currently being offered for “free.” While there are many reasons to bundle or unbundle a product, the tradeoffs involved in this decision were ignored or discounted. It was common to assume that the number of transactions would not be negatively impacted, that no competitive reaction would occur, and that all incremental charges would be bottom-line profit.

Bottom line
Selling the client on wishful near-term results of a long-term strategic shift and including unrealizable quick wins demonstrate a lack of care on the part of the consultancy and consequently damage the results of the overall project and the client relationship.

Applying Value-at-Risk to Corporate Treasury Departments

Currency risk, and risk in general, is usually measured by standard deviations (i.e., variability). Many believe that the purpose for hedging is to reduce these standard deviations, and therefore the risk is reduced. However, this assumes an incorrect understanding of risk. Risk cannot simply be measured by standard deviation. For example, you can play a game where you can either have a 100% chance of winning $5, or a 50/50 chance of either winning $10 or $100.  The latter choice plainly has a much greater degree of variance. However, one cannot say it is more risky. Risk addresses the uncertainty of achieving an objective.

Returning to currency risk with a better understanding of what exactly risk is, what then is the objective of the corporation? For the sake of simplicity, assume the objectives are survivorship of the company (due to violations of assumptions found in the Modigliani-Miller¹) and maximizing after-tax cash flow. Currency risk can increase the probability of bankruptcy and can impede managers’ flexibility in having sufficient capital to make positive investments. Does hedging reduce this risk? If there is a manager who has better-than-the-market forecasting abilities, she is highly unlikely to be found in a non-financial industry, considering the degree of remuneration for such knowledge. Accordingly, a non-financial firm should assume the currency futures markets are priced at the best available risk-neutral rate. Therefore, because of premiums, currency hedging has a negative NPV. How does a treasury department make a “negative NPV” non-risk-neutral decision in order to outweigh what can seem like a very nebulous concept of risk?

This concept can be laid out in matrix format:

If the company remains solvent independent of the currency exposure, the premiums for the hedge are lost and the firm is worse off. If the company hedges, and this hedge saves it from insolvency or a significant impairment to operations, the firm is clearly better off. If the company hedges, and the currency gain is significant enough to save the firm, or if the cost of the premium is sufficient to impair the firm in a given scenario, the firm is clearly worse off. A few lessons can be drawn from this simple matrix:
For a given currency risk, if the probability of the “Insolvent caused by hedge” cell exceeds the probability of the “Solvent because of hedge” cell, any hedging both increases risk and is an NPV negative decision. For example, a multinational company provides a $100M intercompany loan from its United States operations to a subsidiary in Mexico. Before making the decision to hedge the “currency exposure,” at the cost of millions of dollars, how many treasury departments would first create a variance analysis that compares the potential currency exchange loss with overall company cash flows in a recessionary or depression environment? If the currency loss and company cash flows when the firm is under duress are negatively correlated, a hedge of the intercompany loan actually increases the risk of the company, and it does so at the cost of millions of dollars. Many treasury departments engage in wasteful hedging activities because of a fundamental misunderstanding of risk.

Even if the probability of the “Solvent because of hedge” cell exceeds the probability of the “Insolvent caused by hedge” cell, it does not mean a full or even a partial hedge should be used, considering the loss of the premiums and the fact that hedging is a negative NPV non-risk neutral decision. Essentially a treasury department must decide that given the violations to the assumptions to Modigliani-Miller, to what extent should hedging be used? If the probability of the red cell is remote, even if it exceeds that of the green cell, hedging might not make sense given the premiums. If the probability of the “Insolvent caused by hedge” cell is significant, hedging begins to make more sense. For example, the significant probability of the “Insolvent caused by hedge” cell event explains why hedging is prevalent in the finance industry. However, outside of the financial industry, hedging makes less sense as the probability of the “Insolvent caused by hedge” event falls.

Bottom line:

This type of methodology and risk analysis, a form of Value-at-Risk, applies to non-financial firms and can assist corporate treasury departments make optimal decisions for currency risk, as well as apply this methodology to other treasury functions.

Operating an effective corporate treasury department in a multinational company requires theoretical knowledge, strong internal review and control, and solid execution. Blanket policies concerning hedging can cost the company millions in unnecessary premiums and increase the risk of financial impairment and insolvency.

¹ http://faculty.haas.berkeley.edu/parlour/Teaching/corp_intro.pdf  A brief but sufficient outline of Modigliani-Miller assumptions.

Latin America Demographics - The Economist

I'm working on a few other items at the moment, but as I was flipping through an old Economist and found back to back articles on demographics in Latin America that related to my recent post on demographics.

Fast changing demographics in Latin America - "Autumn Patriarchs"
and,
Public policy move in an to attempt to spur Chile's birth rate

Demographics - Toolkit to Anticipate Potential Booms

Demographics is one of the key predictive indicators of a country’s economy, current and future. It can single-handedly explain a country’s circumstances better than almost any other macro variable. A solid understanding of demographics can readily help one clarify and evaluate different countries for product distribution, expansion, or acquisition. The primary purpose of this post is to demonstrate which countries currently have or will have the most potential for economic growth. However, secondary impacts of demographics on preferences of risk, consumption, and entrepreneurship should also influence the strategic decisions you take in these markets.

To better understand how demographics relate to a country, I break down a country’s demographic transition into three phases:
Stage 1 – High birth rate/low median age. Characteristics of this stage include poor GDP per capita, high infant mortality, low female formal workforce participation, and low-quality institutions and infrastructure.
Stage 2 – Low birth rate/medium median age. Characteristics of this stage include rapid growth, improving institutions and infrastructure, and a high degree of entrepreneurship.
Stage 3 – Low birth rate/high median age. Characteristics of this stage include slow growth of GDP per capita, less dynamism, and difficulties in fulfilling government spending on transfer payments.

Stage 2 is referred to as a “demographic dividend.” The demographic dividend and the transition between stages can be understood in terms of an economy of 100 people on an island. The economy begins with 60 people picking coconuts, and most of the remaining 40 are children. Families assume voluntary responsibility for the raising and support of their own children. However, as the birth rate declines, a large proportion of the population is of working age. An unprecedented boom develops, and 80 people are picking coconuts, children and the elderly are divided among the 20 non-working portion of the population. The children and elderly can easily be provided for during this period of prosperity, and the economy becomes more dynamic as barista-staffed coconut juice bars begin to dot the island. As the population ages, the economy becomes less dynamic and the percentage of the population working declines until it arrives at 60 again. However, there are some key differences between this stage and the first stage. Most of the non-workers are elderly, and individuals do not generally voluntarily provide for them, so government transfers coconuts from the younger population to the elderly, creating more disincentives and deadweight social loss than previously. The economy is less dynamic with a diminished risk-appetite. Although much richer in the final stage than the first stage, growth prospects are not as strong as previously. Some of the key factors that change during this stage include percentage of the population working, voluntary versus involuntary transfers, and appetite for risk.

This relationship becomes apparent in a straightforward demographic analysis of countries worldwide.¹ The demographic dividend occurs when the birth rate falls, but the median age has not yet significantly shifted.²

“Demographic Dividend” – Breaking Down the Winners and Not-So-Winners
Certain countries have birth rates that drop rapidly. When this occurs, the opportunities from the demographic shift are greater than usual. Identifying countries that are experiencing and will soon experience this optimal period of growth can assist one in making the correct expansionary decisions. By placing a value for the optimal set of conditions (population, median age, and birth rates), I have created a narrow list of countries experiencing a phase of demographic shift.

I. The Current Crop

 

The first category is the current demographic dividend countries that experienced an especially sharp change in birth rate and median age. This represents the current crop of highest potential economies based solely on its demographic profile.
1) Primetime (red): These names appear in publications either as the “who’s who” of developing nations or as autocratic wrecks
2) The exception (purple): Brazil. Although Brazil should be pushing to the next category, “moving on,” it experienced a sharper change in median age and births than any other country in the group. Accordingly, the boom will last longer, but the eventual landing will be harder.
3) Moving on (greenish gray): The drop in birth rate is catching up to this group, and they will soon join countries like Chile and Uruguay, which are enjoying a more natural and level stage of the demographic dividend. Unfortunately, none of the three countries experienced growth during its sharp demographic dividend compared to the top performers in Primetime.
The interesting element of these 19 countries is that almost without exception they have either been growing quite quickly or have been managed by extremely poor institutions (and even then sometimes still experience solid growth).

II. Generation X

 

The next wave of countries have smaller populations and are just beginning to hit a sharp period of demographic transition. This beginning phase represents an opportunity for each one of these countries to break away from its historical performance.

III. Next-Generation Hopefuls

 

The last wave of countries projected to begin a sharp period of demographic transition (2020-2035) is perhaps the most interesting bunch. Most of the countries have obvious drawbacks (civil war, highest homicide rates in the world, minimal infrastructure, high corruption, lack of or extremely poor institutions, etc.). However, because the demographic shift is still far enough in the future, these countries could change sufficiently before the favorable demographic change arrives. Could Syria follow a path similar to Peru? Could Bangladesh be the next Mexico? Many forget that a number of countries that are currently rising stars were in deplorable conditions just a few decades before.


IV. Gramps

 

Seven major countries have arrived at the final stage of the demographic shift. While not all of the seven are performing horribly, I believe it is safe to say that any degree of per capita real GDP growth among these countries is considered a success.

Interesting, but this is relevant to my company because ...
The world is a big place with a lot of opportunities to work, invest, expand, etc. Demographics heavily influences growth, politics, and entrepreneurship. While every place is unique, demographics is a simple and reliable lens through which to observe and evaluate a situation, as well as anticipate potential booms. 

¹Many variables are used to understand the demographic distribution of a country (working age per dependent, percentage between 20 and 65, etc.). However, for sufficiently large countries, birth rate and median age are sufficient to being to understand demographic phenomenon as well as predict economic potential.
²I used a fairly straightforward evaluation system to determine the favorability of a country's demographic profile. Each country's graphical distance from the theoretical optimal growth point in the curve was calculated. Distances were then ranked and cleaned for population size. For simplicity and consistency, all data used in this post came from cia.gov.
Population: https://www.cia.gov/library/publications/the-world-factbook/rankorder/rawdata_2119.txt
Median Age: https://www.cia.gov/library/publications/the-world-factbook/fields/2177.html
Birth Rates: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2054rank.html

Investing in Brazil - The Limiting Factor in Brazil's Economic Potential

When first approaching a developing market, many begin with the following questions: 

• "How big is the market?" 
• "Is the industry growing?" and 
• "What are the short- and long-run prospects for a given project/acquisition/initiative in this country?" 

These questions are often dismissed with an appeal to "everyone knows," a reference to the acronym "BRIC," perhaps a mentioning of natural resources or oil reserves, and no mention of the underpinnings of that economy or post-2008 growth rates. Speaking from personal experience, the experience of colleagues, and exposure to a few key data sets, I would like to focus on just one key facet of the Brazilian economy—education—and how it should be an integral part of strategic decision-making in Brazil.

An economy is inextricably linked to the underlying productivity of its labor force. One primary factor driving labor force productivity is the underlying education of the population. Education improves literacy, work ethic, communication, problem-solving, critical thinking, and innovation. These in turn increase the productivity of labor, which then drives the economy. With this in mind, consider below the three graphs depicting Brazil’s education and related wage levels for different segments of its population. The figures below are from the OECD’s Education at a Glance 2011: OECD Indicators.¹

1)      Secondary Education:

Brazil is behind the majority of its OECD peers in terms of secondary education. Although the education level has improved for younger people, the younger generation is still significantly behind the older generation of Brazil’s OECD peers.

2)      Tertiary Education

Brazil’s improvements in secondary education have not coincided with improvements in tertiary education, which is at one of the lowest levels in the OECD. Additionally, both the younger and older generations remain at about the same low level. Poor educational performance and lack of improvement are two of the greatest long-term impediments to the Brazilian economy.

3)      Education and Wages

Because of the small pool of educated labor, the premium for tertiary education and the discount for sub-secondary education are the greatest in the OECD pool. This one statistic helps illustrate the difficulty of attracting and retaining talent in Brazil. Supply is dear and the bidders are many.

The bottom line:

Short term: Top-notch skill within Brazil is both expensive and scarce. Additionally, effective and efficient local monitoring and controls may be ineffective due to the lack of experience and education of those governing the control environment. Global corporations should be aware of these limitations before committing to greenfield or acquire, and they should also seek out methods to mitigate these risks. In this type of environment, risk mitigation can be best approached through global IT systems with external monitoring, frequent auditing, and realistic strategic cost-benefit analyses.

Long term: Not only have Brazil’s rates of secondary and tertiary education completion been historically low for previous generations, but Brazil has also demonstrated only modest improvements in secondary education attendance for younger people and has not demonstrated any improvement in tertiary education attendance.

These problems in Brazil's education levels both intensify wage inequality and limit the productivity of labor, placing an upper bound on the economy. This can be overcome in the near term for resource economies (e.g., Venezuela and UAE), but high-value, easy-to-extract resources will eventually diminish, and world prices can change. Additionally, limited workforce education confines the majority of Brazil’s manufacturing sector to low-skill, low-productivity, and low-wage workers.

Brazil has always had plentiful natural resources, and the somewhat recent discovery of vast oil reserves off its coast represents a tremendous opportunity.  These resources, combined with institutions that allow private capital to grow and invest, have aided Brazil in achieving an above-average per capita GDP compared to its South American neighbors. However, long-term economic growth will ultimately depend on Brazil’s ability to improve the underlying education—and therefore productivity—of its workforce, which Brazil has not credibly demonstrated, as shown in the OECD figures. Consequently, industry growth projections should be realistic, given both the opportunities and limitations of the Brazilian economy.

¹ http://www.oecd.org/dataoecd/61/2/48631582.pdf Definitions are found on page 26. The graph concerning tertiary education is found on page 30, the graph concerning secondary education is found on page 32, and the graph concerning relative wages is found on page 138.

Granularization: A Case Study of Zipcar

Granularization is what I call the method I utilize to deconstruct and question the fundamental assumptions of a strategy. Here are the steps:
1) Break down the product's value proposition and identify how it interrelates with the company's overall strategy.
2) Determine the most basic variables that would confirm the assumptions that underpin the strategy.
3) Once this determination is made, then discover the company's justification for the strategy. Use this information to further refine your results on top of the basic assumptions that you analyze.

While granularization's use is limited and subject to confirmation bias, I have found it very useful for evaluating a strategy from a fresh perspective.

I followed Zipcar's progress since before its IPO in early 2011. Innovative, hip, a bit edgy: what's not to like? Only when I bored down into the details did it seem off.

1) Value proposition: car sharing (many "members" paying to share the same cars). Zipcar maintains a minimal physical presence to occasionally service the vehicles. Systems and call centers handle the rest. This could, in theory and when operating in large cities, hold costs to less than traditional rental car companies, but with more locations.

2) Basic Assumptions:

     A) Density. Zipcar needs a sufficient number of people within walking distance of the vehicle. Because of Zipcar's minimalist physical presence, the company isn't structured like a hub and spoke rental car company with the infrastructure to support scattered locations. The cars have to be where the people are, and the economies of scale need to be such that the cars can be serviced and cleaned on a regular basis by relatively few people. 

    B) Money. Providing a $15k-$25k piece of insured equipment isn't cheap, even with innovative technology and a creative business model. A $30 fee to transport items from a grocery or supply store and back isn't attractive for most of the population. There are far more substitutes in this segment than most people initially imagine (delivery service, taxis, friends, family, bikes, walking, rental cars, public transit, or simply going without and pursuing more local options).

The Data:

A) Density:

Cities with more than 4,000 housing units per square mile are uncommon in the US. All cities with more than 10,000 housing units per square mile are located in the greater NYC area. Accordingly, one would expect atypical results from this region. To give an idea on scale, the 200-250 range contains cities such as Las Vegas, Norfolk, and Grand Rapids; these are all moderately sized cities, but they have relatively few buildings above five floors.

B) Income:

The above graph shows all cities with a density of over 4,000 households per square mile (excluding the NYC region cities above 10,000 for truncation purposes). Each of these cities is then grouped into major metropolitan areas.

Looking at the data available, I believe there are two key points: (1) there are very few dense cities in the US in which Zipcar can optimally operate, and (2) as Zipcar expands into cities farther  from the high-density/high-income quadrant, one cannot expect similarly good results from these cities.

3) Company Reasoning (at least the publicly available information): Soon after Zipcar's IPO, I reviewed a number of explanations and projections given by management for the company's progress and future (each is paraphrased).
     A) In time Zipcar's newer cities will mature and obtain results similar to NYC, Boston, etc. Zipcar initially launched its operations in most of its ideal markets (NYC, Boston, DC). Because Zipcar's mature markets are outliers in terms of density and income, replication of NYC per-car-volume and margins in Cleveland, Denver, or Austin can't happen.
     B) Specific sub-market segments (e.g., university campuses) can be targeted and profitable. Zipcar lacks the infrastructure to execute on this very well, and this opportunity does not appear significant enough to drive the aggressive forecasts. It is a possibility though, and specific market research and pilots should bear out this further refinement of the data.
     C) Primary cities will grow at a fast pace.  This is reasonable and should be very easy to show with data. Continued fast-pace growth can be demonstrated with gross hours rented by month in that city (not just members enrolled).
     D) Opportunities outside the US will continue the growth trajectory. Certainly possible, but the execution would be quite complicated, and up until the IPO Zipcar had not demonstrated complex international expansion as a core competency.

The Result: Zipcar IPO'd at $18 and popped to almost $30 based on buzz and aggressive projections. It then steadily fell over the next couple years to $7 as Zipcar continued to essentially break even without achieving its aggressive revenue targets and could not demonstrate success in the four projections shown above. Zipcar was eventually bought out by Avis with a premium that amounted to approximately 25% less than Zipcar's then 52-week high.

Granularization is especially effective at breaking apart "but this time it's different" arguments by beginning with a straightforward "blunt instrument" and then taking into account company justifications after the fact.

From Bloomberg:

Notes on Data: In order to get a consistent and complete data set with minimal judgement calls, income was pulled on a metropolitan area basis from FRED, while housing density was pulled from the census (GCT-PH1-Geography-United States: Population, Housing Units, Area, and Density:  2010). While better (public) data sets for an exercise such as this do exist, too much discretion on data classification than I am generally comfortable with would need to be used in order to generate an "apples-to-apples" comparison. Additionally, housing density by metropolitan area was not used because the results can vary considerably depending on how metropolitan area is defined. Accordingly, the more specific city-level unit of data for housing density was used.