# Monthly Archives: February 2010

## Go and get married…

Tomorrow I will be attending the birthday party of a friend who is getting married this year. In that party there will be another friends who will be getting married as well this year. I have yet other friends getting married this year as well. First thought: “Javier, you are in the age where most of those around you get marry…”.

Second thought: weddings cost money, lots of money. And they do not only cost money but produce many exchanges of cash from one side to another: Buying dresses, rental of suits, nuptial cakes, rental of luxury cars, hotel rooms and saloon, expensive menus, free drinks, buses back and forth for the invitees, professional photographers, flowers, hundreds of haircuts, long lists of gifts from El Corte Ingles, honey moon trip to Bali, musicians (with the corresponding cannon to SGAE, it couldn’t be otherwise…), a voluntary donation to the church…

The Federación de Usuarios-Consumidores Independientes (FUCI) releases every year a study of the cost of a wedding per region and how much each item is costing. The latest study dates back from 2009.

From the study we learn that in 2009 a wedding cost around 18,380 euros on average. They were most expensive in Madrid, and the average cost had decreased 11% from 2008.

The study takes into account the expenses incurred by the ones organising the wedding. Can we assume that those attending it will incur in as many costs in gifts, haircuts, cleaning of suits, hotel rooms, transport, etc…? (This hypothesis comes from the not written rule which states that presents should aim to account at least for the same value of the menu which is ~50% of the cost incurred by spouses-to-be, the main assumption is in the other costs incurred by invitees -transport, hotel…). If so, let’s settle the turnover of a wedding in 35,000 euros.

How many people do get married in Spain in a year? From 2006 to 2008 the average was 204,000 weddings, with a slight decrease of 3.4% from 2007 to 2008.

Now the math is already there: this industry generated in 2008 around 7,000 million euros. Is this much? The same year aerospace industry in Spain had a consolidated turnover of 5,577 million euros. So the wedding sector weighs 25% more than the aerospace sector in Spain or around 0.7% of Spanish GDP (let me not enter in this post in the discussion of the value added of the sector… I still want to get invited to those weddings).

In line with the recent campaign “esto solo lo arreglamos entre todos”, my contribution: please encourage marriages and do get married!

I have a good friend who used to be quite against marriage. I hope this may help turning his opinion.

Aerospace and Weddings, value-adding and value-requiring sectors.

Filed under Aerospace & Defence

## Most desired company to work for in Spain…

Today Spanish financial press gave some coverage to a study performed by Randstad, “Employer Branding: cuando la percepción puede convertirse en realidad”. To compile this study Randstad interviewed 10.000 workers between 18 and 65 years old in Spain.

Workers were asked what issues they considered most important at the time of choosing a company to work for, the highest rated ones were:

1. Long-term stability, 69% of respondents.
2. Better salaries, 67%.
3. Good atmosphere in the workplace, 57%…

Most important factors when selecting a company to work for

Randstad found a high variability between men and women respondents and between different age groups.

After this introduction… what I wanted to say: EADS CASA (Airbus Military) was rated by respondents as the most desirable company to work for. (period)

Other remarkable companies: GlaxoSmithKline, Nokia Spain, Pfizer, Correos, Coca-Cola and Iberdrola.

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Filed under Aerospace & Defence

## A Tale of Two Cities…

I’ve just finished reading the book “Hidden Madrid. A walking guide”, by Mark & Peter Besas, two Madrileños originally from New York. The book is terrific. It has hundreds of tales, anecdotes, curiosities, pictures, etc… of the city of Madrid:

• The origin of futbolin.
• The suicide mission of Eloy Gonzalo at Cascorro.
• The voices of Palacio de Linares (Casa de America).
• The origin of Atocha.
• The miracles of San Isidro.
• The priviledges of Paco the dog…

Last month I read a similar book about New York, written by another New Yorker (this one originally from Ohio), John Keatts, “Tales of New York: Some Will Surprise You”.

We met John at the Circle Line boat tour around the island of Manhattan last December. He was our guide. He not only had a very pleasant voice but kept telling more and more facts, stories and anecdotes about the city and the persons who marked the history of NY during the 3-hour journey.

He mentioned that he had written a book with these stories and when we were leaving the boat, my partner Luca saw him handing his book to someone, so we decided to stop and buy it. Another terrific book. As he puts it in his web:

• A poor farm boy who began a simple ferry boat service, and became a millionaire
• A renowned bridge-builder whose work on a statue would change his life
• A newspaper man who seized an opportunity
• A man whose building forced our skyline upward…

And yet a month before I read “How to survive Holland”, by Martijn de Rooi. Another wonderful book explaining many facts (traditions, food, history, sightseeing, sports…) about the Netherlands delivered with some self-deprecating humour and irony.

All three books are strongly recommended.

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Filed under Books, Travelling

## Nothing like a good red wine…

The recent Tweet from Freakonomics http://bit.ly/9jsc3r, in which they tell how American supposedly fine wine aficionados could not tell the difference between the wine they were given and the one they were looking (and paying) for, reminds me of 3 different cases to point how we can be influenced in our perceptions:

• The first is a personal anecdote. I have always preferred Coca-Cola over Pepsi, one of these people who had never bought a Pepsi in a supermarket. In 2007-2008 I did a test at home to see whether I was able to distinguish one from the other. I did the test with my partner. I was blind-folded while she poured same amount of Cola and Pepsi in two identical glasses. She left them for some couple minutes in the fridge so they would get same temperature, etc, etc. Then I tasted them. After trying the first glass I said “Pepsi, I don’t even need to try the other”. Then I thought it twice. I tried the second glass. Thought for some seconds. Then again the first. Then… then… I mixed everything in my mind and couldn’t distinguish one from the other, to the point of changing my initial choice and being wrong.

Whenever I tell this story to my friends, they tell me “I can distinguish them”: I challenge you to do so. Find a helper and take the test. Please let me know the result.

If you thought my test is not representative, here is another story:

• This is a TED talk by Benjamin Wallace on the price of happiness. Benjamin goes exploring different luxury articles and finding that they don’t bring him or those close to him any special feeling. He indeed does a similar test to the one I did, this time with luxury oil, with more varieties to distinguish and more people to try them, the result… guess it.

After having read the case of the fake Pinot Noir, having suffered the non-distinguish ability of  Pepsi and hearing to the TED talk cases… we might wonder: why are we mislead so much by perceptions? Why do we pay more for something that doesn’t bring us any enhanced customer experience except for being able to tell that we paid that amount for this?

Last case I wanted to point…

• The Dutch are well known for being a very pragmatic nation. Here you have a case, again, for wines (just to close the loop). What do you care about the brand of a wine? Let’s remove it. What do you appreciate in it? Is it the grape type? Is it the fruit flavour, the tannins? So that’s what you need to know!! The rest… better to call it “4. Red Wine” and remembering that it comes in a blue bottle… check it: http://94wines.com.

Prost!

Filed under Marketing

## Three centuries of confusion

Last Monday I was reading an article in FT by Tony Jackson: “Is China an investment sweet spot or a sour lesson?”.

Not that I am thinking about investing there, but in this article I started reading sentences which rang bells… “the long-run correlation between real growth in gross domestic product and real equity returns is in fact slightly negative”, “reminder of the futility of long-range forecasting”, “how to explain the underwhelming performance of emerging equities, besides a simple propensity to overpay for growth?”…

Nevertheless, the best I got from this articles it wasn’t those reflections but that it referred me to the Credit Suisse annual study from the academics Dimson, Marsh and Staunton.

This annual study contains wonderful data and graphics. Let me share some of them.

Later on the report very well summarises what we have read and heard so many times from Graham and/or Buffet:

“Value stocks sell for relatively low multiples of earnings, book value or dividends. They may be mature businesses with an unexciting future, or they may have a depressed share price that anticipates setbacks. Growth stocks sell for relatively high valuation ratios, reflecting favorable prospects for the business, and their stock price anticipates cash flows that are expected to get larger in the future.

For larger US companies, over the longest available period (end-1926 to end-2008), the difference between the annualized returns on the Fama-French value and growth indexes is 2.5%. In other words, the premium for US value stocks, relative to large companies as a whole, is approximately +1.2%, while the «premium» for growth stocks is of the same magnitude but negative.”

Finally the report reviews the case for different countries and regions. Among them The Netherlands, where the stock exchange originated with Dutch East India Company. Here we find a reference to the book “Confusión de confusiones” by Jose de la Vega (1688), an Spaniard who wrote the first book ever on the stock exchange business.

I will end this post with one quotation from the book: “What really matters is an awareness of how greed and fear can drive rational people to behave in strange ways when they gather in the marketplace.” (We have heard this lately from someone else as well).

Filed under Books, Investing

## From climbing to merely walking

On Saturday 13 February, some friends and I joined the “Grupo de Empresa” hiking group in a walk around the Sierra. It’s been years since I haven’t gone walking one of these routes. I kind of missed it.

This time we went to La Pedriza, close to Manzanares El Real. The march took almost 6 hours. At moments we found it quite complex and very exhausting. Maicol kept telling us that the difficulty was 3… but 3 what?

I did some research.

First, from the Wiki we learn that what we did was just senderismo. We indeed saw all the signs described in the Wikipedia, thus that path was registered in the Federation.

From the colour of the signs we saw, we can also learn that we did a Pequeño Recorrido  instead of a Gran Recorrido. Following this lead, we can find that there are 37 of those in Madrid, and that the one we did was: “PR-M-1, Circular a La Pedriza” (the M stands for Madrid). Those are supposed to have between 10 and 50km length, thus ours is just within the minimum distance of that margin.

I found another site (in Spanish as well) with different ways to rate these paths:

• Rating the kind of terrain: ours would be type 3 (from 1 to 7).
• Rating the differences in height: it would be no more than 3 or 4 (from 0 to 7).
• All in all, the web proposes one single rating: in which difficulty 3 would be just “moderate” (from 1 to 6).

Next time, we might consider giving less drama to such a heroic achievement.

Filed under Sports, Travelling

## New marketing

Some weeks ago I attended the presentation of a book at EOI business school, “Claves del Nuevo marketing” (which can be downloaded in pdf freely).

At the moment of writing this post I have not yet read the book, though it seemed quite interesting: Eighteen different authors just gathered to write different chapters on their area of expertise.

The conference itself was quite entertaining. Two of the authors were commenting their views on metrics and on viral marketing.

They quoted some articles, videos and examples that I want to quickly refer here:

• Article from Marshall Sponder & Cecilia Pineda Feret in Customer Intelligence, discussing the possible entry of Google on Social Media monitoring and what could this mean.
• On viral marketing it was interesting the questioning of whether it really reaches that many people. We tend to think so, but does it really do so? Check out this funny video (in Spanish).
• Another very interesting video: “Redes Sociales – ¿Revolución o Moda?” (the video is in English, “Social Networks – Revolution or Fashion?).

I’m just referring to these topics as discussing them at length would need many different posts. I hope you enjoy them.

That day, EOI was distributing the latest issue of the marketing magazine “Yorokobu”. I will comment in a near future different things I read there (e.g. 94wines…).

One last thing I wanted to share with you: my Lego. I had seen advertisements about cartoonfying yourself, but I found this one in the Yorokobu magazine even funnier. This is as close as I could get to myself.

Lego of myself

Filed under Books

## Augustine’s Laws

Last summer I read a book, a classic: “Augustine’s Laws” by Norman Augustine. Norman served in many positions both in the Administration (Under Secretary of the Army) and in the Aerospace & Defence industry (CEO of Lockheed Martin). Lately he lead the Committee that was reviewing the US Human Space Flight Plans.

I first learnt about this book from a teacher in Seville in 2006. He used a couple of his graphics in the course. One was plotting the trend of fighter aircraft acquisition costs per unit. I remember that the extrapolation of the trend pointed that somewhere in 2054 the whole DoD budget would allow to procure one single aircraft, that would have to be shared by US Air Force and Navy, with the 29th February of the leap years availabe for the US Marines.

Since that moment I wanted to read it, and it was only 3 years later that I had the opportunity to do so. The book reviews A&D programs, especially their mismanagement and failures from the Wright brothers times till the early 80’s, when the book was written. The book is hilarious. Really. Let me show you this by concatenating some of its “findings”:

• The first one was commented above: aircraft are more and more costly with time.
• At the same time aircraft developments turn in aircraft always becoming heavier than initially designed, producing more capable and heavier aircraft.
• Another trend points out that avionics and electronic components are of greater importance in the aircraft of today. Wright brothers didn’t make use of avionics or electronics, however in the 80’s the percentage of OEW dedicated to them was around 20%, and increasing.
• We also find that electronic components themselves become smaller and cheaper with time (just think of room-size computers of decades ago compared to today’s smart phones).

Thus we find ourselves in front of a paradox: Aircraft that will be heavier and more expensive, but that a certain point will be entirely made of avionics and electronic components which are lighter and cheaper with time! How can this be? As Augustine points out: engineers came to the rescue, they came up with “something” that it’s very expensive, doesn’t add weight and helps to solve the paradox without violating 2nd law of Thermodynamics. They came up with software. Neverending of lines of software… which also contribute to delay developments.

Here you may read the different laws, I’ll just copy the ones I like the most:

• Law Number V: One-tenth of the participants produce over one-third of the output. Increasing the number of participants merely reduces the average output.
• Law Number XIII: There are many highly successful businesses in the United States. There are also many highly paid executives. The policy is not to intermingle the two.
• Law Number XXVI: If a sufficient number of management layers are superimposed on each other, it can be assured that disaster is not left to chance.
• Law Number XXXII: Hiring consultants to conduct studies can be an excellent means of turning problems into gold, your problems into their gold.
• Law Number XXXVII: Ninety percent of the time things will turn out worse than you expect. The other 10 percent of the time you had no right to expect so much.
• Law Number XLIV: Aircraft flight in the 21st century will always be in a westerly direction, preferably supersonic, crossing time zones to provide the additional hours needed to fix the broken electronics.
• Law Number LI: By the time of the United States Tricentennial, there will be more government workers than there are workers.

Clearly this is not something I learnt today, but then, last summer I didn’t have a blog to comment on this. Enjoy the book.

Filed under Aerospace & Defence, Books

## Elegies and eulogies

In the previous post I mentioned Toastmasters. This is a public speaking non-profit association I joined in December 2007. Its mission is mainly to provide a mutually supportive environment in which members can grow their communication and leadership skills. It sounds great, and it is indeed.

I say it is great because of the comprehensive program it follows, the amount of manuals it has to polish different skills, the variety of the assignments you have to complete, the details within a meeting that help you polish your public speaking… and also because of the amount of things you learn.

My club, Toastmasters Madrid, meets twice a month, but yesterday I was attending other club’s meeting, Excelencia Toastmasters. I especially liked one of the speeches. It was about elegies (a mournful poem, a lament for the dead). You may think it’s a sad topic to talk about. I saw it as a very useful one. We may not have to give elegies many times in our lives, we certainly wouldn’t like so. However, the times we will be faced with it, we better be well equipped.

Some quick tips the speaker gave:

• Intro: Tell some story that happened to both the deceased and you together, or how you met each other. Even something moderately funny might be good (explanation behind was the possitive biological stimulus that some smile, small laugh can give to a crowd under stress or even crying).
• The body: Anything could work, try to avoid generalizations.
• Conclusion: Talk directly to the deceased. Tell her something you wanted to have told her in live but failed to do so.  You may also read a poem.
• Plan B: under the stress of that day, anything can happen. Plan ahead. Practice it more than ever: by practising it you will have lived it beforehand and probably will have released those emotional moments in the safe of your place instead of in front of the audience.  Have your script in written at hand, in case you cannot continue by heart you may still read it. Have some water nearby. Have a back up person with instructions of what to do in case you become blocked.

To finish his speech, the speaker recommended the eulogy B. Obama gave in Ted Kennedy’s funeral.  His evaluator read out:

Recuerde el alma dormida,
avive el seso y despierte
contemplando
cómo se pasa la vida,
cómo se viene la muerte
tan callando;
cuán presto se va el placer,
da dolor,
cómo a nuestro parescer,
fué mejor.

Y pues cemos lo presente
cómo en un punto es ido
si juzgamos sabiamente,
daremos lo no venido
pensando que ha de durar
lo que espera
má que duró lo que vió,
porque todo ha de pasar
por tal manera.

Nuestras vidas son los ríos
que van a dar en la mar,
que es el morir;
allí van los señoríos
derechos á se acabar
y consumir;
allí los ríos caudales,
allí los otros medianos
y más chicos;
los que viven por sus manos
y los ricos.

Jorge Manrique

Filed under Toastmasters

## Intro

I wanted to start the blog with some introduction of myself… but I did not feel like preparing a piece for this purpose. Then I thought: “I could use the icebreaker speech I gave in Toastmasters when I joined”… this was a better idea. Since this not only introduced myself but started creating topics for next posts, e.g. what is Toastmasters? Speeches?…

The only objection: I went through that speech and I don’t like it much anymore, nevertheless I came to see again another speech, which even though hasn’t been the best one ever since, it talks about some of the things I like the most: a bit of aircraft, another bit of travelling and some numbers here and there. Since that is what this blog will mostly talk about in the future… here it goes that speech (given on May 7th 2008):

“May 2nd is a very important day for Madrid. It is the day of the uprising. The day, in which the people of Madrid rebelled against the occupation of the French troops. A day that changed our history.

I will talk about another 2nd of May that changed our history as well. The 2nd of May of year 1952. That day took place the first commercial flight of a jet plane, the De Havilland Comet.

In this speech I will talk about that flight, about how it changed the history and I will finish explaining one of the Comet’s biggest contributions to engineering which at the same time caused the very end of the aircraft.

BOAC’s De Havilland Comet

That first flight departed from London to Johannesburg and was operated by BOAC, British Overseas Airways Corporation, one of the companies that later merged in today’s British Airways.

BOAC used a configuration of 36 seats (a luxurious configuration for the size of the aircraft). The galley could serve hot and cold food and there was even a bar. There were separate men’s and women’s washrooms. The passenger cabin was quieter than those of propeller-driven planes.

Many people thought jet engines wouldn’t be economically viable on a commercial plane since jets had higher fuel consumption. However the Comet was able to fly at an altitude of 35,000 feet where the air is less turbulent. The Comet was smoother and faster. Hours were cut off in flights. New York was only twelve hours flying time away from London instead of the eighteen hours it took piston-engine planes.

Now let’s see how it changed the history by comparing some differences from that first flight to commercial aviation today!

• It took only 3 years from the first design work till the first flight of the Comet; it took about 14 years for the A380.
• The Comet could take 36 persons to a distance of 2,700 kilometres, compared to the more than 800 passengers in a 3-class configuration to 15,000 km of the A380.
•  If we take a look at that first flight, London – Johannesburg, it took more than 23 hours!! With 5 stops in between (Rome, Beirut, Khartoum…) like a frog jumping from one water lily to the other. Now, the same company, British Airways, operates the flight with a B-747 and takes less than 12 hours (half the time) in a non-stop flight!!
• A ticket in that first flight cost 175 pounds, while a ticket for tomorrow’s flight in the afternoon would cost you 240 pounds taxes included! That could seem just a bit more expensive, but in fact if we discount the effect of the inflation throughout the 50 years now it is about 4 times cheaper!
• The Comet needed a crew of four men: including two pilots, a flight engineer, and a navigator. Nowadays planes need only 2 pilots… if any.
• 114 aircraft of the different models of Comet were produced compared to the more than 5,200 Boeing 737 built to date plus the 1,500 in waiting list.
• The estimated price of a Comet 1 was a quarter million pounds, while the B-747 costs 120 million pounds (hundred times more expensive after discounting the effect of inflation).

Only a year after it began commercial service, Comets started to fall out of the sky. Thirteen aircraft were lost in fatal accidents with hundreds of victims. Extensive investigation revealed a devastating design flaw – metal fatigue. This problem had never been encountered in aviation.

The constant stress of pressurization weakened an area of the fuselage in the corner of the windows. All Comets were grounded until the jets could be redesigned. This was a tragic but great contribution of the Comet to aeronautical engineering.

The Comet re-entered commercial service in 1958, but its reputation was forever damaged. The Comet 1 disasters contributed to archrival Boeing’s domination of the jetliner market.

2nd of May. A special day both in the History of Madrid and in the History of commercial aviation. A day that changed the lives of madrileños in a good way. The uprising in Madrid and the Comet’s first commercial flight.”

May this serve as introduction.