Tag Archives: Market Psychology

Emphasis on Global Crossing Case; Good Health

A conclusion is the place where you got tired of thinking. –Steven Wright

Every man who says frankly and fully what he things is so far doing a public service. We should be grateful to him for attacking most unsparingly our most cherished opinions. –Sir Leslie Stephen

Know The Global Crossing Case Cold

I joke while presenting the Global Crossing case, but you should spend time to really understand what happened and why.  Always in these situations there is much noise and hoopla over new technology, massive growth, booming profits, etc. But you have to stand back to listen: http://www.youtube.com/watch?v=1INb5FM_1lE&feature=related.  Obviously, growth does not occur without investment, and growth without profits is DESTRUCTIVE.

….And think strategically. A friend took out margin to buy a huge bundle of out of the money puts on Global Crossing and Level Three (LVLT).   See the chart on LVLT here—the collapse will take your breath away. http://www.scribd.com/doc/77916697/Lvlt-Chart.

I asked him, “Are you out of your $%^&*! Mind? What the heck is the matter with you?” He replied serenely, “Have you ever read The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton M. Christensen and the Disk Drive Industry?” http://www.readinggroupguides.com/guides_i/innovators_dilemma3.asp

“No,” I said, “I am too busy reading the Lehman report on Global Crossing.”

Research by Lehman on Telecom, Fiber Optics and Global Crossing 1998 http://goodbadstrategy.com/wp-content/downloads/LehmanReport.pdf

“Too bad,” he replied. “Because it is the same situation with the telecom companies only worse.  (WHAT is the situation he is talking about____?) Ask yourself what is the WORST industry structure you could possibly design to destroy profits?  Sometimes it is easier to know which companies will face certain death than pick the winners. Also, here is the coup de grace—what happens when marginal costs decline to $0.00!?”

One more time: “Can anyone tell me in two or three words what is the first thing when looking at a company/industry? _____  _____  ______

At the end of the weekend, there will be an analysis of the Global Crossing Case.

So what happened to my friend? Here he is: http://www.youtube.com/watch?v=mmMS9nvi6eg&feature=related


At the age of 97 years and 4 months, Shigeaki Hinohara is one of the world’s longest-serving physicians and educators. His secrets to a healthy long life:


Podcast on Why We Get Fat by Gary Taubes: http://www.lewrockwell.com/lewrockwell-show/2012/01/11/247-why-we-get-fat-and-what-to-do-about-it/

Strategic Logic Case Study Part 2 Global Crossing


If you think nobody cares about you, try missing a couple of payments. –S. Wright

Everything has been said before, but since nobody listens we have to keep going back and beginning all over again.” –Andre Gide

Part 1 of this case was presented yesterday here: http://wp.me/p1PgpH-hj

If readers don’t grasp the significance of this case then I will QUIT posting and join them: http://www.youtube.com/watch?v=J_kRDcfTKrg

Invest in Global Crossing February 2000

Part 2: You are about to meet the fund manager in 30 minutes to give your recommendation.  Take a glance at Global Crossing’s 10-K. http://www.scribd.com/doc/77824423/Global-Crossing-1999-10-K What’s it worth?  The price is near $61 or about $37 billion in market cap.

Forget the financials you think, after reading Gilder’s Technology Report (background on George Gilder, the Guru of the Telecosm: http://www.wired.com/wired/archive/10.07/gilder_pr.html) on the telecosmic Global Grossing, your confidence increases because growth will double every 100 days.

Since you leave nothing to chance, you call up David Cleevely, the managing director of Analysys, in Cambridge, England. Cleevely is a well-regarded observer of the new telecommunications economics.  He tells you, “The key thing to understand is the huge advantage of the fat pipe (or high-capacity fiber optic channels).  Remember that the cost of laying fiber is mainly the cost of right-of-way and digging or of laying it under the ocean. Recent advances let companies install enormous capacity at no more cost than building a narrow pipe. The economies of scale of the fat pipe are decisive. The fat pipe wins.”

Next you pull a slide from the company’s power point presentation on Where is the Company is Going.

The company will be in a market with EXPLOSIVE growth, competition, capacity on demand, no capital required from telecom carriers, and responsive to market demands.

Your secretary knocks on the door and asks whether you want to read about strategic logic from csinvesing?  You are handed some papers, and you immediately slam dunk the research into the circular file (waste-basket). “Who needs this bullsh@t,” you mutter.


You are thinking of the riches you will make and what you will do with your new car: http://www.youtube.com/watch?v=uo5E-2_2mgg&feature=related

You know that economies of scale are important. The logic seems simple—the fat pipes of the new-wave telecom builders and operators gave them much lower average unit costs (Think about how average cost curves are formed). I sat back and thought a moment about fat pipes, scale economies, and telephone calls. What was the “cost” of moving one telephone call, or one megabyte of date, under the Atlantic Ocean?

But the thoughts of massive wealth kept interrupting my thoughts. “Would putting in a fur-lined sink be in bad taste?” I wondered.

What critical aspect of analysis is missing here? If you need a hint go back to the connection between industry structure and profit.

The time is late February 2000 and with your supporting materials and 10-K you wait here for the big boss to arrive. http://www.youtube.com/watch?v=TulxjdKsROI

Strategy Quiz and Case Study

Change is inevitable….except from vending machines.

A fool and his money are soon partying. –Steven Wright


Dear Readers:

I know the three of you out there will be wondering about replies to your questions. This week requires traveling so please bear with me until I can reply properly.  Meanwhile, continue your work towards completing the Wal-Mart case study and Competition Demystified reading pages 1-110.

This quiz is meant to reinforce concepts you should be thinking about. Whenever you first look at an industry and/or company what should be one of the first questions that you ask______________________?

Research Question

Now, you have been asked to research a new company that has a product where the demand is estimated to increase 10 fold and you must advise your $2 billion hedge fund on Park Avenue, in New York whether to invest.  After two months of 18 hour days, you find out that the research on growth estimates was wrong!  The demand for the service will increase 1000x fold!  You are so excited you can barely wait to speak to the portfolio manager.  How great an investment will this be? What further MAJOR questions should you ask if demand will grow so rapidly. Take five minutes to frame your questions and what you will say to the big boss whom you will be meeting soon.

OK, scroll down and click on the cases below to learn what happened. Surprised?  Why or why not? Let me know your thoughts.



http://www.scribd.com/doc/77775204/Global-Crossing-A –sorry this had to be placed in the Value Vault under Global Crossing A (36 pages) due to security restrictions. If you do not have a key then email me at aldridge56@aol.com with VALUE VAULT in the subject line.


For a different perspective and more context: http://www.scribd.com/doc/77780615/Bubbles-and-Gullibility-2008