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On December 1, 2017, DGessese commented on Brexit and the future of the all-electric Mini Cooper :

Interesting and very topical read. I think if I were in BMW’s shoes I would very decisively look to relocate my operations to Germany (or another EU country). I do not think that there would be a significant benefit to producing locally in UK. According to AECA, the UK had 2.7 million vehicle sales in 2016 vs. 14.7 for the broader EU. From the lens of maximizing addressable market and minimizing business risk that makes me believe in strongly prioritizing access to EU markets vs. UK. The uncertainty of what post-Brexit UK-EU trade looks like exacerbates that and I think that even if it turns out that BMW would have been able to produce locally in the UK, I would imagine that the lost opportunity would be mitigated by the fact that Germany and the UK are still in relatively close geographic proximity. It’s not like thinking about the cost-benefit of having a plant in China, which would dramatically reduce costs of transporting goods to end markets. To the question you posed at the end, I do think that in practicality BMW would consider this differently if it was a UK company instead of German. I still believe that a sense of duty by corporations to contribute the greater good of their home countries changes perceptions of the “right thing to do” from a moral standpoint.

On December 1, 2017, DGessese commented on Maersk’s Shipping Lane in the Fight Against Global Warming :

Very interesting article addressing very pertinent questions about how to manage climate change. One figure that caught my eye from your article was the data point that shipping contributes to only 3% of global GHG emissions today but is expected to increase to 17% by 2050. It makes think that given the lack of overall contribution to climate change, Maersk should purse a leadership role outside of the shipping industry (attempting to influence energy and agriculture companies who make up the majority of GHG emissions) in order to have a stronger long-term impact. At the end of the day, the biggest sources of emissions need to addressed to meaningfully improve probability that we prevent global temperature from rising. I was also surprised that experts expect shipping’s percentage contribution to GHG emissions to increase over 5x through next 30 years. What is driving this? Is there an underlying assumption around a global shift away from non-renewable energy sources?

Great topic and write-up.
If the US were to go through with a drastic, unfavorable revision to NAFTA, it would be interesting to see whether not there is a large blowback on the Trump administration that potentially forces a repeal. Given how much the US auto industry is concentrated with and dependent upon its Mexican parts suppliers (Nemak is sole supplier of roughly 85% of the products that it sells) and the low likelihood of a low-cost alternative, this could lead to meaningful price increases for US automobiles and consumer outrage. When the average American ends up paying for this policy, will that reduce the nationalist fervor that is helping to give Trump’s NAFTA agenda legs.
In regards to the Europe/Asia expansion plan, I wonder if M&A as opposed to a greenfield strategy would be an effective way to build a foothold in these markets? Nemak is a large, well-capitalized company (though that could change if stock price keeps declining) and has financial wherewithal to acquire a big European and Asian player, which would not only further accelerate its global diversification but also provide local expertise that may be helpful in operating in these new markets.

On November 26, 2017, DGessese commented on Made-To-Order: Can Zara Make the Shift to True Mass Customization? :

Interesting essay. I agree with your concerns about whether or not this could ever become scalable or cost-effective. I also wonder whether adding this capability would end up actually improving Zara’s value proposition to customers. Zara’s business model is built on allowing consumers to follow the latest fashion trends (and get access to the newest en vogue items as quickly as possible), which seems somewhat antithetical to the concept of clothing personalization. I could see mass customization being more attractive for more timeless items, such as shoes, that consumers will keep for years but it’s hard for me to see customers being overly concerned with customizing a $40 sweater that they’ll likely only wear for a few months. Perhaps an effective way to implement this would be to apply it to only select product offerings for which Zara has high conviction it will be value-added for customers (which can be teased out in the slow, localized rollout approach you suggested). And perhaps over time the cost of 3D printing will deflate as technology providers become more efficient, which could create a completely different cost-benefit outlook.

On November 26, 2017, DGessese commented on Beauty Inspired by Nature: Can The Body Shop Continue to Deliver? :

Great piece. It seems that Body Shop is taking a pretty thoughtful and comprehensive approach to managing the climate change problem.
There are two main additional questions your essay made me think of:
1. Is there an opportunity here to partner with governments to help grow CFT program? The program’s focus on minimum demand/fair price/community development seem like things that would be the hallmarks of public policy. Perhaps there is a way to bring governments in on this, and provide thought leadership that helps them enact similar policies for other companies operating in their countries to have a greater net impact.
2. I wonder how the focus on modifying supply chain to reduce emissions will impact the customer experience, for better or worse. Will the shift to renewable power for its stores lead to changes in store layout? I think the aesthetic of its packaging is important for the body shop, so also curious as to whether there’s a risk that the company can go to far in removing packaging that it deems unnecessary and hurt the attractiveness of its products with customers.

Great essay, this is definitely a critical topic. Agriculture is often the first industry that comes to mind when I think about the impact of climate change, so it’s enlightening to hear about how pharma and other manufacturing industries are impacted by extreme weather events. I agree with your suggestion of diversifying geographic exposure in manufacturing footprint and am a bit surprised that big pharma companies have not already focused on this. I would think that having several manufacturing locations for a drug worldwide would make sense from a general distribution perspective and these are large, well-capitalized companies with financial wherewithal to invest in multiple facilities.
On how FDA/government policy should drive more manufacturing diversification, I wonder if there is a way to provide tax incentives for companies that build facilities in the US. The federal government has provided tax breaks to incentivize infrastructure investment in the energy sector (i.e. pipelines) and that framework may be applicable here. Another thought in response to the point on carrying excess inventory you mentioned is that the FDA could require that pharma companies have one ‘mothership’ inventory warehouse in a location that is not at significant extreme weather event risk. This does not have to be an actual manufacturing facility but rather just a place where companies can be forced to store some appropriate level of auxiliary inventory in the event of an emergency.

Super-interesting. It’s definitely a challenging situation to have to invest in a capability that you know will be hugely disruptive one day, but have no idea when the hammer will actually come down. If I’m sitting in Uber’s seat, I’d have a tough time developing complete conviction that an AV fleet is the way to go. A lot of the cost savings potential is driven by expected traffic reduction and I’m not sure I buy that we’ll suddenly need only a 10%-30% of the cars that we used to. I understand AV vehicles have high potential to improve traffic efficiency but AV could also drive an influx of many new zero-passenger cars (used by companies or individuals to run errands when they’re busy) which would increase car parc and keep traffic high. It also may still be better for the business model to retain human drivers instead of transitioning into a fleet manager. The human driver is asset light and shifts much of the operational risk to the driver. Shifting to AV model may make it harder to expand into new cities as rapidly and also end up taking a lot of management bandwith to manage AV vehicle fleet.

On November 25, 2017, DGessese commented on BP: Blockchain Petroleum? :

Great write-up. I can definitely see how blockchain can provide a huge value-add to the Oil & Gas industry given how global and complex it is. I’m sure that the recent challenging oil price environment has made operators more interested in hearing out the economic case for it.
Two main questions come to mind for me:
1. Parastatal Collaboration: You mentioned how BP has been teaming with Shell and Statoil to build momentum around this, but I wonder if pursuing partnership with Saudi Aramco and other OPEC suppliers as well as Russia would be an attractive path here. Given how much these parastatals dominate energy trading in their respective regions, it seems like that could be a way to speed up diffusion. On the flipside, I don’t know if there would be willingness from Aramco/Opec/Russia for that kind of collaboration and for blockchain generally.

2. Increased Oil Price Volatility: I wonder how the increased transparency from blockchain would affect how quickly the market absorbs supply/demand information and incorporates that into oil price, and if so whether it would make a meaningful or marginal impact on the industry.

On November 15, 2017, DGessese commented on Kellogg’s Leadership in Fighting Climate Change :

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