Pow Wow Corner

Making Fire Light’s presence on the web brighter

For my final project, I will create an Online Strategy Document for The Fire Light Foundation (Fire Light) in New Zealand. Jenny Ewing, a trained healthcare worker and the mother of my friend Scott, established Fire Light in 2009. Jenny believes that medical care should be a fundamental right for all people and her mission is to provide emergency medical care training and education in Laos.

Laos’ medical facilities are described as “quite minimal [in the capital] and totally inadequate in remoter regions of the country”. Moreover, it currently has no pre-hospital first line emergency care (e.g. paramedic or first aid service) and knowledge of pre-hospital emergency care is non-existent.

Fire Light’s main initiatives are:

  • Sponsor Laotian doctors for up to three months of medical training at a partner Thai hospital;
  • Emergency medical training in Laos; and
  • Creation, translation and distribution of the country’s first emergency medical care handbook.

Like most nonprofits, Fire Light depends on donations. However, Jenny, the driving force of the organization, spends much of her time travelling between New Zealand and Laos. Moreover, her strength lies in the delivery of Fire Light’s initiatives and she has limited resources to devote to Fire Light’s online presence. With this in mind, using the POST format the Online Strategy Document will cover:

People: The target person is a wealthy donor who cares about the cause (access to medical care) and/or the country/region (Laos/Asia). Given that Fire Light is located in New Zealand, and New Zealand is a much more prosperous country than Laos (GDP per capita of $41,555 versus $1,646), it makes sense to focus on wealthy New Zealanders.

Objectives: The purpose of the strategy document is to increase donations, which can be directly measured by the amount of money raised.

Strategy: The overall recommendation is that Fire Light should adopt a donor engagement strategy. Currently its only digital presence is a static website, and there is no online donation functionality. Given the increasing focus on high impact philanthropy, Fire Light needs to find a way to showcase its work so that donors are encouraged to keep giving.

Technology: In order to execute the donor engagement strategy, various technological outlets will be explored including:

  • Email marketing: as discussed in class, this is an effective way of raising money and probably the best channel to reach wealthy donors. Fire Light could curate a sequence of emails that starts off with showing donors how they can have an impact on individual lives and cumulates with asking for money.
  • Improved website: currently the website is dark and text heavy, and should be revamped to be much more visual and simplified.
  • Donation function: Fire Light needs to set up a way to receive donations online. Furthermore, it should incorporate a feature that allows donors to set up recurring donations and/or to donate to a specific initiative (e.g. sponsor a specific doctor). Fire Light also needs to automate a timely follow-up with donors to keep them engaged.
  • Updates and engagement via the website and social media channels: the great work that Jenny and her team does on the ground is not reflected on the website. Weekly/monthly updates could help Fire Light keep donors up to date on their progress and encourage more giving.

With solid digital foundations, Fire Light will be able to more effectively raise funds for a very worthy cause.

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Censor or censure?

“Type “Tibet” into the search engine a couple of times and watch your Internet connection slow down!”

– An expatriate friend to me, China, 2009

Both Consent of the Networked: The Worldwide Struggle For Internet Freedom and Now I Know Who My Comrades Are, Voices from the Internet Underground promote the idea that the Internet should be free and uncensored. Moreover, they accuse foreign corporations of being co-conspirators in the restriction of information. This blog post looks at whether these two accusations are fair.

Freedom & democracy

The ideas of self-expression and freedom are very Western concepts – and it must be said, very American ideals – that are intimately linked with democracy. Imposing these values on China, which developed economies are partial to do, fails to acknowledge the inherent difficulties in governing a population of 1.4 billion people.

As Parker emphasizes, censorship is pervasive but not ironclad, and the Communist Party’s top priority is to “reduce the probability of collective action”. Civil unrest in a country of 1.4 billion inhabitants is a real problem. The largest single protest in US history is estimated at 1 million people taking to the streets, or 0.4% of the population. If 0.4% of the Chinese population marched in a single city, that would equate to 5 million people. One only needs to look at the recent Ferguson riots to realize that for the sake of law and order, it is just not a good idea to have wide-scale riots in a populous country.

When in Rome, act as the Romans do

Over the last decade, a number of domestic versions of international websites have emerged, such as Weibo (microbloggin), RenRen (social networking platform) and Alibaba (online marketplace). Some have attributed their success to China’s protectionist technology policy, others to a Chinese business environment that is difficult for foreigners to navigate. As Parker joked in class, many a foreign company has attempted to capture the lucrative Chinese market and failed.

The fact that the likes of Microsoft censor material that the Chinese government may deem sensitive should come as no surprise. Just like you would not take MacDonald’s or Coca Cola into a foreign country without adaption, so too must technology companies adapt to the local operating environment and in China’s case, its “healthy and harmonious” Internet development.

Final word

The Communist Party has universal control. Party rules prevail over the rule of law. Party members are disciplined by a party mechanism called Shuang Gui which pays little attention to human rights and individual freedoms. . Shuang Gui (双规) is translated as stipulating the time and place (that is, double stipulation or 规定地点和时间) when you have to front up to account for your actions. It is a mechanism whereby members suspected of corruption are detained indefinitely and questioned endlessly

The power of the Internet to “do good” is not in dispute. As MacKinnon points out, it is a tool for promoting accountability and activism. Chinese netizens are increasingly using the Internet to enforce social justice, while the government gauges the sentiment of online communities to adjust its policies. In time, the Internet may present another avenue to exercise Shuang Gui.

Digital Campaigning in Australia

In every way, a good political campaign is like a well-oiled machine – there is the fuel (energized volunteers and organized managers), the machinery (campaign infrastructure that is becoming increasingly digital) and the output (votes). The Obama 2008 campaign is arguably the epitome of the new-age version of this machine – from Wagner’s predictive Survey Manager, to the grass roots Neighbor-to-Neighbor initiative to his use of My.BarackObama.com to create and online community and organize local events. In this blog post, I assess the extent of digital political campaigning – or the “machinery” – in my home country Australia.

Website

The official pages for the Australian Prime Minister (PM) Tony Abbott – his profile on his Liberal party’s page and the prime minister’s website – are both rather dull. It largely informational and it is clear that both the PM and his party see the website as just another broadcast medium. The only way to interact with him is via a “contact me” form – hardly engaging. Moreover neither of these pages is dedicated to campaigning for him and this perhaps reflects the fact that Australia has a parliamentary system rather than a presidential one, where people vote for the party more than the leader.

Social media

This infographic gives a nice summary of the social media presence of major political parties. Much like the websites, the use of social media in Australian political campaigns has been largely information and somewhat one-directional. Politicians on both sides have attempted to use social media as a more informal way to ingratiate themselves with voters. For example, Tony Abbot has posted pictures with Australian sporting legends, while former PM Kevin Rudd has posted self-deprecating photos of say, a shaving mishap. However, it feels somewhat staged in nature and there is a real lack of engagement with users; the leaders have failed to use it as a medium to swing voters convincingly.

Big data and micro targeting

The two major political parties – Labor and Liberal – both keep databases. However, more stringent privacy laws and distaste for “big brother” limits parties’ ability to capture data. With both a much smaller population (22 million) and a considerably smaller budget, it is difficult to replicate the Obama strategy. For example, instead of sampling 1,000-2,000 people, the sample size could be closer to 250. This could be particularly useful given that party membership has declined substantially over the last few decades.

Messaging

The most someone has ever tried to persuade me is by handing me “how-to-vote” cards as I walk into the voting booths – no phone calls, no door knocking and no emails. And unfortunately the online world is no different; politicians have failed seize the opportunity to use digital platforms to change the game. Rather, they see it as just another pulpit for espousing their party values and detailing policy initiatives. Where is the call to arms? And where are the youth?

Conclusion

Perhaps in part due to compulsory voting, the use of digital campaigning by Australian political parties lags behind that of our U.S. counterparts. A U.S. campaign is twofold – you have to convince citizens to vote for you AND you have to get them to the voting booths. Australia has compulsory voting, such that non-voters face a penalty of $20 and up to $170. Voter turnout at federal elections has been steady at c.93%; on average, 2-6% of the votes are invalid.

In addition, in some ways it is tough to strike a balance; I suspect the “in-your-face-rah-rah” nature of American campaigning would not suit the laid-back Australian culture. Moreover, as mentioned earlier, Australians vote for the party more than the person (especially since leaders can removed by the party anytime).

The next federal election in 2016 provides a real opportunity for parties to differentiate themselves based on their digital campaigns.

Game time

News is something someone wants suppressed. Everything else is just advertising.

– Lord Northcliff

In my first blog post, I lamented the deteriorating quality of journalism because of the rise “free” media on the Internet. As Starkman points out, we are placing our “faith in the wisdom of crowds and citizen journalism, in volunteerism over professionalism”. Indeed according to the likes of Shirky and Jarvis, the investigative journalism prized by Starkman – the “something someone wants suppressed” – is giving way to peer production.

In many ways, true investigative journalism keeps us honest, and I for one am not willing to see it fall by the wayside. So where to from here? Well, one model I would look to is that of the research department within an investment bank. It is a curious part of the bank because it does not directly generate revenue. Clients do not pay per a research piece published; yet the research department often outsizes the sales team in headcount. And it is not that clients do not value the research – they use the insights published by analysts to make informed investment decisions. Instead, clients indirectly pay for research by channeling commissions to the investment banks whose research notes they value. In other words, research exists because the sales team can monetize their work, and by the same token, the sales team exists because research gives them an edge.

There are four key elements of this business model that we can apply to new media.

Focused, high quality content

First and foremost, it is the analysis that matters. Research analysts are typically organized into sector teams, for example, financial institutions or resources, and their deep knowledge of the subject matter and their relationships with key industry players gives them an edge. Similarly, new media players such as Quartz are focusing on “obsessions” to give them focus.

Responsiveness

Research analysts burn the midnight oil during reporting season in an effort to release their response to companies’ earnings announcements in a timely matter. Vox’s innovative content management system enables journalists to do just that – create user-friendly content on the fly.

Coverage

Banks often have multiple sector teams to ensure that they can deliver comprehensive coverage of the market they cover. The sheer volume of content on the Internet overwhelms readers and it is increasingly important that media outlets become a one-stop-shop. For example, Vox has added The Verge, Easter and Curbed in the last five years.

Keep it free, but get paid!

So long as there is the “possibility that other people might do what they [journalists] do, for no pay”, it will be difficult to monetize newspaper articles solely from publication. While third party advertisers support newspaper revenues, it is the end user who pays the research department via the sales team. In some cases, commissions are “tagged” with a specific name to recognise the good work of a research analyst.

While advertisers will probably continue to be a source of revenue, I think it is time to look beyond that and test models that make the reader pay. Some examples are already out there, such as Quartz’s conferences and Politico’s premium subscription. I suspect the business model will hinge on a high quality, free “basic” media outlet with paid additions such as in-depth analysis, extra offerings and delivery format. Or perhaps there is some sort of specialised information offering alongside the news outlet, as Bloomberg does. While I do not have the answer (otherwise I would be starting my own media company!), there are plenty of smart minds tackling this very question and I would urge them to think outside the ads.

Hybrid Securities on Wikipedia

In a previous life, I led the Australian hybrid securities sales and trading business. Hybrid securities (“hybrids”) is a catchall phrase for financial instruments that rank (in order of claims) below vanilla debt and above common equity. Any company can issue hybrids.

Unlike vanilla debt and common equity, the terms and conditions (“T&Cs”) of each hybrid can differ considerably. For example, some are perpetual, some have a fixed redemption date and others have a complicated call structure. Some give the holders the right to convert into common shares; others have a forced conversion if the issuing company hits a negative trigger (usually indicating that the company is in distress). Some qualify as Tier 1 capital for banks, while others count as debt for credit rating purposes. This is just a sample of the possible T&Cs and as you can see, this makes it difficult to write a comprehensive summary of all the instruments classified as hybrids.

In this post, I review the Wikipedia article on hybrid securities according to the Wikipedia guidelines.

Comprehensiveness

The Lead is succinct but factually incorrect. The definition of a hybrid is very narrow and fails to capture the broad array of T&Cs; for example, not all hybrids “pay a predictable (fixed or floating) rate of return or dividend”.

The article has eight sections. While they do provide general information about hybrids, there are key missing areas within the sections:

  • Important terms: major terms not included are dividend stoppers, change of control, step-up margin, call dates and maturity.
  • Traditional hybrids: this section only describes a convertible bond, which is not the only type of “traditional” hybrid. Moreover, this section is somewhat redundant and could be incorporated in the “Examples” section.
  • Latest style of hybrids: This section illustrates only one latest style of hybrids even though there are at last three types.
  • Usage and 6 Basket D security: These two sections provide current information on the Moody’s hybrids rating scale. However, Moody’s is not the only rating system that hybrid issuers pay attention to and S&P and Fitch both have different rating systems (not mentioned here).
  • See also: While the article does provide some useful links, I have found articles on specific hybrids that are not linked to this page (e.g. “Contingent Convertibles”)

Furthermore, sections to add include:

  • History of hybrids;
  • Guidance on how to price a hybrid;
  • Regulatory issues; and
  • Descriptive statistics on the size of market and the types of issuers.

 

Sourcing

The article only cites one source entitled “Introduction to Canadian Convertible Debentures”. Although this is a published source, it is not sufficient:

  • Firstly, there is only one source and it refers to one sentence in the article. The rest of the article is not sourced;
  • Secondly, the source is specific to Canada. The T&Cs of a hybrid are highly influenced by the regulatory environment of the issuing company, and therefore a hybrid in Canada could be very different to a hybrid in Europe; and
  • Thirdly, there are a number of newspaper articles, scholarly articles and textbooks that discuss hybrids, none of which are used here.

Neutrality

The article is written from a neutral point of view. The contents of the article are factual and the authors do not make any recommendations as to whether hybrids are a good investment or not.

Readability

The article is readable and well written. Key terms are bolded and bullet points are used for clarity and succinctness. Paragraphs are no longer than six lines long, making it easy to read and keeping the user engaged. The grammar also appears to be correct.

Formatting

The language, layout and format of the article adhere to the Wikipedia Manual of Style. There have only been four edits made to the article since inception.

Illustrations

The article includes one illustration, which is a photo of an old hybrid security certificate. While somewhat interesting, the certificate is outdated and not relevant to the discussion. A more useful illustration could be a sample term sheet; or an infographic showing how hybrids fit into a company’s capital structure.

Summary

In conclusion, the Wikipedia article on hybrid securities is incomplete. The article could be improved by filling in key missing sections, providing multiple reputable sources and using a more relevant illustration.

Social Media and the Stock Market

“Markets can remain irrational longer than you can remain solvent.”

– When Genius Failed (2000) by Roger Lowenstein

This was one of two lessons that I took away from my time on the trading floor (the other one being that every client will lie to you at least once). Both of these – irrationality and lying – remain true in the face of technological innovation, largely because they are innate human traits.

So what has changed? Much that has been written about technology and the stock market focuses on institutional investors and their technological advantages such as lightning-speed algorithms and dark pools. While some of this technology has trickled down, perhaps the greatest innovation from the perspective of retail investors is the rise of forums devoted to the stock market.

As both Rheingold and Christakis and Fowler point out, the Internet enhances – rather than detracts from – our social ties. By applying Christakis and Fowler’s framework, we can see that this is particularly true of retail investors:

  • Enormity: forums bring together retail investors who in the physical world do not have anywhere natural to gather since all the trading is done online.
  • Communality: not only can these (sometimes vigorous) discussions enable retail investors to become better informed but they also provide a platform for insightful retail investors to broadcast their views (which is how hedge fund manager Michael Burry got his start).
  • Specificity: these groups can facilitate discussion on a single stock or a single issue.
  • Virtuality: participants in these forums often have to create a short profile but can remain anonymous.

These forums depend on the two social norms highlighted by Rheingold – reciprocity, and to a lesser extent, trust. For the most part, forum participants are retail investors who trade for their own profit and often post their views to spur a “tit-for-tat” exchange – that is, to generate discussion and elicit views from others (there are some who post out of the goodness of their heart, but I suspect they are in the minority).

Rheingold focuses on the importance of “being a bridge”. The stock market trades on information and a “network-centered” approach is essential to gathering different opinions. In the traditional model, an institutional investor maintains relationships with investment banks that publish research pieces. Although research analysts arguably have an information advantage – they often have access to company management while retail investors must rely on published publically available information – using this channel alone lends itself to a filter bubble.

The market thrives on a difference of opinion (after all, you need a buyer and a seller to execute a transaction!). To overcome the filter bubble and to make informed decisions, institutional investors are increasingly turning to the plethora of information on the Internet in an effort to bridge the gap. The impact of social media on the stock market has been acknowledged by the likes of Bridgewater, one of the world’s largest hedge fund managers. Sophisticated investors have created algorithms that scrape social media sites to take a “real time pulse” of key trends. For example, instead of waiting for monthly car sales data to be published by National Automobile Dealers Association, investors can tally up the number of people who post about buying a new car online, and compare the aggregate statistics on a day-to-day basis

Some institutional investors look down upon their retail counterparts (sometimes called “dumb money”) and there have several academic research papers published on the underperformance of individual investors. However, technology has enabled retail investors to find a common gathering place and to benefit from collective intelligence. The question going forward is whether online forums will just be another way for Wall Street to exploit Main Street, or whether the forums will give retail investors a voice that institutional investors can no longer afford to ignore.

New News

powŸ•wow noun \pau̇-wau̇\

– a brief discussion about a matter concerning a person or an event.

That people gather to organize, collaborate or simply gossip is nothing new. However, the Internet – or more precisely, Web 2.0 – has fundamentally changed not just the way we connect, but more importantly, what we connect about.

Who?

You, me and everyone we know

In his book “Here Comes Everybody”, Clay Shirky marvels at the “new ease of assembly” that the web has brought about. More specifically, the ability of users to find like-minded people, via applications such as Twitter, Flickr and Facebook, circumvents the need for institutions and traditional organizational hierarchy. Groups can communicate, co-operate and even implement collective action without the need for directives.

This has been enabled by the rise of Web 2.0, which can be characterized by the shift from static web pages to dynamic or user-generated content. In other words, it represents the ability to not just to publish, but to also interact.

There are two key effects.

  • The long tail, without a profit motive. The significant decrease in transaction costs allows for issues that are not economically justifiable at an institutional level to be taken up groups on the web – or in more technical terms, activities that previously lay under the Coasean floor are now viable (as was the case with Ivanna’s Sidekick).
  • The mass amateurization of the media. In many ways, Web 2.0 has shifted the power to the people – users can create news and influence the content of traditional media.

What?

If you don’t like the news, go out and make some of your ownWes Nisker

Perhaps it is prudent to step back and ask ourselves, “Is it always a good outcome that groups – made up of anyone, anywhere – can influence the news?”

The advent of Web 2.0 has clearly lowered the threshold of what might be considered newsworthy, and media outlets are increasingly covering issues that are trending on social media to generate more eyeballs – and more advertising dollars. A fundamental assumption of this filter is that the group mentality is right. However, as history has illustrated, herd mentality can be wrong or even dangerous.

One of my favorite litmus tests is to compare the headlines of my home newspaper, The Sydney Morning Herald (SMH) with that of The Wall Street Journal (WSJ) at the very same moment in time. For example, on Tuesday 9 September 2014 at 23:00 EST, the top articles on the SMH homepage included:

  • “Hands on with the new iPhones”
  • “Katy Perry’s tweet fuels talk of bad blood with Taylor Swift”
  • “The baby signs we missed from William and Kate”

On the WSJ homepage, the top articles were:

  • “Almost Two-Thirds Support Attacking Militants”
  • “Combat Reversals Pressure Syria’s Assad”
  • “Apple Boss Makes His Boldest Bets Yet”

While the World Wide Web has increased access to information, the sheer volume of information is overwhelming, so much so that users often default to a handful of sources. In other words, the fact that the SMH filters out key world events means that this news may not reach many of its readers.

As the relationship between social media and the news grows even more intertwined, the role of the editor becomes even more crucial. In some cases, online activists can bring much needed attention to issues that have been underreported by traditional media, as was the case with Voice of the Faithful, but at the same time, editors and journalists must use their professional judgment to ensure that important world news is not overshadowed by inane but popular stories.

Where?

Down the rabbit hole we go

In many ways, the Web is the greatest social experiment of all time. The creators of the most popular applications could not have foreseen how these applications would be used. For example, it is very unlikely that back when Mark Zuckerberg was coding Facebook in his dorm room he could have fathomed that it would be instrumental to multiple uprisings in the Middle East a mere seven years later.

The Web continues to evolve in wonderful, weird and (sometimes) worrisome ways, and there is plenty of talk about the long tail – but what about the head? In the case of news, one thing is clear: “old’ media has to work harder to justify its economic existence when “free” is the alternative. My prediction is that the world of news will bifurcate: users will only pay for high quality, well-curated journalism, and the rest will be free, and it will be the middle – the newspapers that are straddling world news and pop culture – that will suffer.