Do companies which try to do new things succeed and why? Phin Upham dicusses a seminal work on the topic

In Diversification, Ricardian rents, and Tobin’s q, Cynthia A. Montgomery and Birger Wernerfelt present a study on the ability of a multimarket firm to diversify its resources (factors). Montgomery and Wernerfelt test whether a multimarket firm’s average rents decrease the further a field they transfer resources from their core business. The results of this study have an important affect for the logic of a multimarket firm which is trying to maximize profits.Further, the essay speaks eloquently to the effect of factor specificity on firm profit. The more specified the factor assets, the less valuable alternate use derived from then but the higher their rents, the less specified and the more valuable the alternate use but also the lower comparable rents in their original use.

http://www.groundreport.com/Business/Stick-With-What-You-Know_1/2940253

Samuel Phineas Upham has a PhD in Applied Economics from the Wharton School (University of Pennsylvania).  Phin is a Term Member of the Council on Foreign Relations.  He can be reached atphin@phinupham.com.

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We face a prolonged economic slowdown, high unemployment and financial pain. Phin Upham discusses some of the reasons.

The current popular debate among the Federati in Washington and the Literati in newsprint is over whether the world will end in fire or ice – whether the US is headed toward hyperinflation or a continued downward spiral of asset deflation.

In the current crisis “unexpected” events keep popping up and requiring immediate government intervention. This happened again and again and the crisis continues to grow larger as each intervention fails. US governments efforts clear in the recent budget delates in Washington far are largely addressing the symptoms not the causes and certainly not the underlying structural causes of the financial crisis. Indeed, the idea that this situation can be “fixed” by more of the same (lending, liquidity, leverage, risk) and we can have a recovery very soon is deeply misguided, even dangerous. Indeed, this recession will be long and painful for the US and the outcome is not at all certain.

http://www.groundreport.com/Business/The-Federati-and-the-Age-of-Malthus/2940259

Samuel Phineas Upham has a PhD in Applied Economics from the Wharton School (University of Pennsylvania).  Phin is a Term Member of the Council on Foreign Relations.  He can be reached at phin@phinupham.com

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The surprising impossibility of steady growth. Phin Upham discusses the geopolitical dangers facing the world.

A gold coin invested at 3% above inflation at the time of Christ would be worth today as much as a sphere of gold four times larger than the world. This implies that over time even this growth rate is not feasible – not because it is high in times of stability but because every few hundred years the world goes through some event which results in the destruction of the stock of economic wealth. Forest fires are said to be essential to the health of hardwood forests, indeed firemen sometimes light them on purpose to “rejuvenate” a forest. It seems that perhaps economic forest fires may be a fact of life as well.

As peace and growth in the world occurred since 1950, and globalization became preeminent the wealth was funneled into developing the periphery nations where cheap labor and natural resources could be funneled back into the core. With this crisis the wealth has shrunk back into the core (only recently has some risk appetite returned) and the periphery is the most unstable. People worry about the EU but no feasible outcome of the PIGS crisis there will result in anything like global conflagration.

http://www.groundreport.com/Business/Caveman-Investing/2940260

Samuel Phineas Upham has a PhD in Applied Economics from the Wharton School (University of Pennsylvania).  Phin is a Term Member of the Council on Foreign Relations.  He can be reached at phin@phinupham.com

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Which tree will grow to be the tallest? A cautionary tale for investors by Phin Upham .

When looking at investing from a global perspective, sometimes it helps to see the forest rather than the trees. It is necessary to blend together different lenses to see what others are not seeing. If, for example, there were a competition to see what experts could predict what the tallest tree in a forest was in 10 years what would different experts say? An expert on tree species might choose the fastest growing species. An expert on tree disease might see disease in the forest and choose the tree that was resistant to it. An expert on soil might choose the tree in the most fertile ground. But they might all be wrong. Someone who stepped back and saw the dry brush might consider for a moment the possibility of a forest fire and choose the little lonely birch tree alone in the field – the only tree that would remain intact. Let us consider for a moment what happens if this crisis continues and something breaks on a global scale, what is the most likely equivalent of a global forest fire?

The depth of the global recession, perhaps even depression, and the structural dependency on globalization makes us think that “this too shall NOT pass” before some very ugly adjustments are made and the piper is paid. The great depression ended with WWII – indeed the US was lifted out not by FDR but by the war effort which used every factory, employed every man (and many women) and drove the economy with a feverish intensity. If that crisis was ended by a world war could this one too?

[Read more: EzineArticles]

Samuel Phineas Upham has a PhD in Applied Economics from the Wharton School (University of Pennsylvania).  Phin is a Term Member of the Council on Foreign Relations.  He can be reached at phin@phinupham.com

 

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In this article, Phin Upham discusses the relationship between science and history

Science seems to have caught up with, or at least challenged, many of the comforting assumptions mankind used to rely on to go to sleep at night the simple form of the belief that we stand on the apex of creation. The first two of the so called “Four Great Insults to Man” were that man – or at least the earth we live on – is not the center of the universe (thanks a lot Newton) and that man wasn’t (at least directly) descended from God (thanks a lot Darwin) were challenged before 1900. Well, one could argue, at least we transcend the base instincts and reach lofty and pure intellectual heights. Nope, said Freud in 1901, we don’t even control our own base nature or intellect, but the mind, with all its animalistic urges, follows its own hidden agenda which we often aren’t even aware of. Freud’s theories aren’t taken as seriously anymore, but the question he raised are ‘”most people no longer see mans mind as a pure reflection of rationality, but rather at least partly driven by conscious and unconscious lust, greed (and how much alcohol has been consumed in the last few hours) as well as by the less base emotions of hope, loyalty, and love.

[full story: Associated Content]

Samuel Phineas Upham has a PhD in Applied Economics from the Wharton School (University of Pennsylvania).  Phin is a Term Member of the Council on Foreign Relations.  He can be reached atphin@phinupham.com.

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