4th of June, 2010
Yesterday, we went to another Chinese family holding company. These holding companies are better known as conglomerates in the United States. Business theory tells you that these companies tend to be poor performers, as they cannot specialize and take advantage of economies of scale. They are best broken into smaller businesses and run independently.
In fact, that's exactly what happened in America. Larger corporations in the 1950's could no longer compete with more nimble competitors. The advent of capital markets (bonds and stocks) and their more widespread use ended anything that the conglomerates could have provided. However, the conglomerate structure has continued to flourish in these developing Asian economies, often structured around a single Chinese, Japanese, or Korean family.
Why? Well, I think the reason is actually quite obvious when we recognize that "inefficient" structures can exist in markets where we don't see the same "efficiencies" that we find in more developed markets. The holding companies actually operate as a mini-capital market, providing funding for all kinds of entrepreneurial activity. In a space with great government obstacles, and without the institutions that mark modern capitally developed economies, these structures are actually market efficient. Even in the United States today, GE manages to maintain a conglomerate structure only because it can take advantages of historical and governmental inefficiencies.
Lautan Laus
Lautan Laus is actually Bahasa for (wide ocean). I actually learned from that that the adjectives and most modifiers come after the thing that they are modifying. Same thing with the adverb "very", when used with "thank you".
Anyway, this was the huge Indo-Chinese holding company that we got to see. It was quite fun, we learned a great deal about doing business in Indonesia and the obstacles that are faced by the ethnic Chinese. Many of these Chinese don't speak a lick of their ethnically original language, bu they can still be treated as outsiders. During the riots about a decade ago, many took refuge by wearing full burquas and only going out when absolutely necessary. Interesting, in America, we often have trouble in our racism toward the lower classes. In Indonesia, there is institutional racism against the upper classes, which causes a lot of the money to get parked in Singapore and only a marginal amount gets reinvested in Indonesia.
We did a case study, had a wonderful lunch, nothing much to discuss there. However, after leaving, one of our professors bumped into an American who works for this company. He told him in somewhat confidence that the entire company actually makes something on the order of $41 billion (yeah, in US dollars). That would be something like 9 to 10% of the Indonesian economy. The company attempts to maintain a low profile as most of the government is controlled by ethnic Indonesians and would come down hard in taxes. Furthermore, the family could be targeted in the event that more riots occur.
The P&G Blunder
We made our way to the Proctor and Gamble headquarters in Indonesia. After all, we have a project due at the end of this. I'm suppose to consider the Downy brand in the context of SE Asia (I'll also be working with two people from China about their insights on Downy in China). Our meeting with P&G in Singapore was amazing and couldn't have gone more smoothly. Most of the people here in Indonesia have proven themselves beyond knowledgeable. However, we met with the head of operations here in P&G and he couldn't be more clueless. He didn't know many of their primary competitors and was completely ignorant of this project that we were doing for P&G. He was poorly informed, gave a poor presentation, and wasted a great deal of time.
However, some of the other folks managed to save things at the very end.
BINUS
We were rushed away off to this private Indonesian business school.. It's not yet accredited, and is desperately seeking UVA to partner with. This is unlikely to happen, but we were unprepared for what happened once we got there.
Jakartans are some of the nicest people you will ever meet. They put on a huge dinner spread with us and provided us a night of entertainment. They had ethnic dancing, singing, a case study presented in front of us, and all a manner of other small but important things that I cannot recount here.
They offered to teach us all how to do a "friendship dance", and I lept on that. I was the only guy who was brave enough to try for this, and was surrounded by women. I managed to have an amazing time. I learned a great deal. Ethnic dances are certainly a great way to interact with a culture.
I'm not sure what more to say.
Some of us went out to clubs. I might post some more stories about the adventures that we had. They were legion.
5th of June, 2010
Today was our one day off. I managed to get in some breakfast, work out, and even go to the pool. I managed also to digest some of the thoughts that I've been having over the last couple of days, but I won't bore you with all of them.
Finally, around 2:00, I met up with a group of students and professors, as some friends of OTHER professors that we knew were going to take us through to the Jakartan port where wooden boats called bogeys bring in most of the goods that come to Jakarta.
Fun fact, the bogeys are actually the source of the word "bogeyman".
Anyway, these boats are mostly made out of wood and even have wooden nails most of the time (traditionally they do). That's either because wood is cheaper or they're worried about Magneto. I managed to go on one of the boats and talked with one of the shipmates. I knew enough Bahasa and he knew enough English that we managed to communicate quite effectively. There was a Muslim sutra about the helm of the boat, and I inquired. As expected, it read "Inshallah" (I don't know where the spaces go), which, for those of you not in the know, means, "God willing". They were impressed that I knew what that meant, and we managed to get along swimmingly.
After the boats, we were taken by canoe (or canoe-like 3-person boat), to a slum. It was really amazing walking through an noticing everything going on. There were some positive signs. I noticed something important too. Of course, without theory, these things are meaningless; however, everything that is provided by the private sector, these people had some kind of access too. Soap, shampoo, food, and more were made in small enough quantities and with inexpensive enough materials that each person there had some kind of access and use of them. However, everything that is supposed to be provided "free" by the government was non-existent. Water supply was not there, there was no garbage collection, and, worst of all, there was no sewer system. The water was filthy and wreaked. Disgustingly enough, many of the small children would swim in the water!
With the government expected to provision these resources (but never delivering), high taxes, and all a manner of disincentives, it underscored to me the importance of finding private sector solutions to all of these. In fact, several chemical companies have made relatively inexpensive water cleaners, but the lack of education about basic germ theory has hindered the work. These people don't understand that the water is polluted or will make them sick. We saw today a woman scratching deep scars into another man with a coin in order to "release the air" and solve his health problems.
Indonesia has some extremely restrictive labor laws. Making it enormously difficult to fire an employee and there are massive layers of federal bureaucracy. Companies are often unwilling to hire, and will often hire only among trusted colleagues. If Indonesia is to rise out of this poverty, it will need greater liberalization still. It's good to see that what little it has done is growing a middle class, but the slightest economic bump is going to be blamed on the free market and this place could end in chaos.
I hope not. I hope these people hold together and push forward. Times are going to get hard when America experiences a more severe depression, which could be triggered sooner rather than later if Europe doesn't start getting itself together. If, and this is a big if, this place continues forward, it could become an economic powerhouse. There are abundant natural resources and over 240 million people, the 4th largest population in the world.
QUEEN CENTRAL!!!
After all of that, we ended up in an older part of Jakarta with old Dutch buildings and went to a swanky cafe. Adorning the walls were pictures of men and women in very suggestive poses, often very familiar to what I've seen in other places.
Going to the bathroom, there were explicitly homo-erotic pictures, and the place was generally decorated in a conspicuous manner. I asked one of our tour-guide teachers if this place was a homosexual hang-out. Even better, it was, and possibly still is, owned by a homosexual. He was even known as an eccentric type. In other ways, the place screamed of queens.
I asked the teacher about homosexuality in Indonesia. They seemed to have inherited a great deal of tolerance from their fellow Polynesians. I was shocked that he said they didn't seem to have a problem with open homosexuality. Again though, they seem to deal with it in certain ways and I really doubted that things are peachy-keen here.
Anyway, I definitely learned something.
Afterwards, we went off to the streets, where we managed to entertain a group of Indonesians. I say "we", but I really mean that Charlie managed to find an Indonesian with a guitar. Not having a galaxy yet orbiting him, Charlie had to find a way to hold the guitar and began playing all the American pop that he could. Soon enough, he had a crowd around him and everyone was having a good time.
We got back to the hotel via the bus, I took a shower, and soon, we're going to head out to a popular club called Blowfish. Charlie and I scored free tickets after talking to some very nice girls at another bar/club called Immigrant. He'll get to have fun with girls, I'll hopefully get to dance, and all will be right in the world.
(Note: WAY too much happened between these two days for me to write everything down, and there are plenty of stories that have to be told with better narration, but I'm really pressed for time everywhere. I hope you all are doing well)
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