Open letter to the Chief Executive Officer of EasyJet

Sep 12, 2019

Attention: Johan Lundgren

The Chief Executive Officer
EasyJet

Dear Mr Lundgren

The study conducted on strategies to improve aircraft boarding and their impact on airline profitability makes for interesting reading.

My recent experience on EasyJet runs contrary to those findings. Customers in the boarding queue traveling with a hand-bag and cabin luggage were instructed that this was contrary to EasyJet policy, and that the handbag must be packed in the cabin luggage. Those of us who travel frequently separate our luggage in a way that security, boarding, and in flight inconvenience are minimised, and the handbag is an effective part of the tactic.

Fitting the handbag into the carry-on was not an issue. But there were issues, as other passengers were held up as I retrieved my passport from the handbag as we were leaving the terminal, and again when extracting the handbag before putting the carryon into the overhead.

After discussing these issues with the senior cabin attendant, a number of passengers who were on their first flight with EasyJet expressed their support. Never again, was their common refrain.

Given that getting new customers is approximately ten times more expensive that retaining existing ones, the EasyJet policy is unsound business practice.

In the short term, the additional charges for excess luggage may conceal the long term losses that this strategy generates.

The EasyJet policy certainly derives from the profitability of ancillary services when they were introduced by airlines early in this decade. But charging customers at the airport is a delicate balancing act, if one values customer loyalty.

Being informed by the ground crew that the inconvenience of packing a handbag into one’s carry on is the customer’s fault, because of the way they booked the flight, does not generate any goodwill.

There are low cost carriers that treat their customers well, and their ongoing profitability proves its value.

There is increasing evidence that the world’s economies are headed for recession in 2020. The economic implications of the quantitative easing strategy used to recover from the great recession of 2007/8 will be felt at that time. Businesses that have not built good customer relationships will suffer most.

Good luck.

Yours sincerely,

Roy R Dalle Vedove

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Open letter to the CEO of Webhostinghub.com

July 5, 2019

Attention: Mr Todd Robinson
CEO
Webhostinghub.com

Dear Mr Robinson

Int-forex.com

Changing service providers is challenging. Webhostinghub promised the services that I needed, and I subscribed. Your technical support team is excellent. Not only that, your documentation is detailed, and easy to follow.

But I’m unhappy. The transcript of the initial conversation with your sales agent, Adam Block, confirms that you provide event scheduling on MySQL on the Nitro package that I purchased. The conversation confirmed that Webhostinghub will meet the explicit requirement to create events from within applications, without manual intervention.

Following the principle of “Caveat Emptor”, the needs were specifically stated, without any opportunity for misunderstanding.

Now, I have been informed that the service is not available unless I upgrade my package. That’s a bait and switch strategy. Tarnishing Webhostinghub’s hard-won reputation like that is undesirable.

I have been reminded that you have a 90 days money back guarantee. What I want is what I was promised. Technically, this is a simple using a single command with super admin privileges. My needs place no additional load on the server. Yes, other users might, but that cannot be used to force me to pay for an upgraded service.

We have routes to a sensible solution. Please contact me if you wish to explore them.

Yours sincerely,

Roy R Dalle Vedove

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Financial modeling

It struck me as peculiar that my accounting degree did not include any financial modeling. It was in the real world that I learned, initially as a CFO, and then in finance.

As a working capital financier, you see plenty of cash flow projections. Working capital finance is usually needed because people have made mistakes with their modeling at the outset. Financiers have to have own models into which they plug the numbers. It’s better than trusting the sanguine figures that are usually presented.

So that’s what we did.

As the spreadsheet guru, I was tasked with creating a model that integrated the balance sheet, income statement and cash flow projections.

Getting all three to balance is tricky, but crucial. Errors in assumptions become evident as the ratios go out of kilter, and that let’s you know if the numbers can be trusted.

Once the model is working, the starting point is to enter the last three months figures. If the assumptions and calculations are right, the most recent balance sheet will pop out from the input. If it doesn’t there are errors. Fix them, and you’re on your way.

The assumptions are key. They will guide the strategic planning, and the executive that has a grip on them is likely to succeed.

One of the best tools for getting a feel for the key factors in a business is also one of the simplest: break-even analysis.

To the uninitiated, break-even analysis is like a magic trick. Sitting in a pub, you can scribble down the variable expenses, then the fixed expenses, calculate the contribution, and tell a desperate friend why his business is struggling, and how long it will take to fix.

The financial model must include the results of a proper break-even analysis. Then, slotting in past figures will immediately reveal any misallocation of fixed and variable expenses.

The exercise of entering past figures has another benefit.

It provides the executives with confidence that the model works, and the understanding that by continuing to enter results they will know in advance whether something is out of line.

They become proactive.

They look good.

They are good.

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The Excel mistake that changed the world

In 2010, two leading Harvard economists, Carmen Reinhart and Kenneth Rogoff, published a paper. They had found that debt levels exceeding 90% of GDP led to a decline in economic growth. Governments took notice, and policies were implemented to reduce debt, with sometimes draconian austerity measures.

George Osborne quoted the paper as he introduced his measures to repair Britain’s economy. We are still living with the consequences.

The problem is that their results were wrong.

The Harvard professors had used Excel, and had accidentally only included 15 of the 20 countries under analysis in their key calculation. It made a big difference to their results. Their finding of a decline in GDP of 0.1% was really a increase of 2.2%.

As their data had grown, they had failed to change the formula.

Excel is a great tool. It’s intuitive, easy to work with, and presents results well with graphs and pivot tables.

It’s the best tool for creating and checking complex algorithms, doing financial projections, and quick and dirty calculations.

It falls down when handling big data, data that grows over time, or there are multiple users making updates.

It’s easy to end up with multiple versions of the data, and then have to decide which is correct.

Excel makes entering data easy. But it’s also easy to make mistakes. Validations to guard against bad data have to be programmed in. Garbage in – garbage out.

Ray Panko, a professor at the University of Hawaii and the elder statesman of small coterie of research academics who study Excel errors, claims that 84 percent of spreadsheets contain some kind of materially significant error. Other economists agree.

Databases are not visual, not in the way that Excel is. The terminology and design can seem arcane. You can’t just open a database and start entering data. They’re not intuitive. They are also not as complex as they seem.

So, which should you use? – The answer: both.

It’s a matter of deciding which is the right tool for the job. It’s not necessary to decide up front. Using Excel to become familiar with the data is a great way to start a database project. When you get going, importing the initial data into the database is easy. so nothing’s lost.

Having an existing spreadsheet that should be a database is an excellent way to learn. The best choice for a project is one where you’re struggling to tie up the relationships in the data. What’s difficult in Excel is easy in a database.

Great, now the data is in a database, but now you need to present the result of your analysis. Simple. Export the summaries into Excel and do it there. It’s easy to do, and it’s the best tool for the job.

What about the cost? Unlike Excel, many of the best databases are open source and free.

So, how do you get started. Next time.

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A surprise solution

Like many wealthy countries, Switzerland’s population is aging fast. In 1960, the median age was 32.7. Now it’s close to 43. The fertility ratio is well below the 2.1 replacement level, at 1.54. The age dependency ratio has moved from 15.5% in 1960 to 27.6% today. But Switzerland’s incredible wealth hides the growing problem.Switzerland age dependency ratioSwitzerland fertility rate

The country is attractive. It’s close to the top of most global rankings. The immigration queue is long. Few get in. Even the very rich can struggle. Roman Abramovich was refused citizenship because he posed a “reputation risk”. And for those who aren’t in the 1%, the cost of living is a concern.

The growing shortage of young working people shows up fastest in the job categories that are least attractive. When demand exceeds supply, the price goes up. That’s happening.

A recent experience provides an example. We had a problem with hot water. The plumber quoted CHF4,148 ($4,160) to replace the hot water cylinder, an extraordinary amount in any other country. Not only that, a little experimentation revealed that the hot water cylinder was not the source of the problem.

Refugees offer the solution. In a conservative country, that seems like political suicide. Not handled properly, it is.

Xenophobia aside, refugees become a real problem when they can’t or won’t integrate. Integration works best at the community level. National policies cannot create community acceptance. Acceptance requires leadership at the community level, and a community that is a community.

Switzerland accepts refugees. Anecdotal evidence suggests that refugees are increasingly turning to crime. In the past 9 years Switzerland’s overall crime rate has dropped by over 20%. That improvement hides the growth in some categories of minor crime. If the anecdotal evidence is correct, then some refugees are not integrating.

The two problems have one solution. Train the refugees to provide services that are becoming overpriced. To be sure, it’s not that simple. That’s where the community comes in. People working together find answers to challenges that initially seem intractable.

And working towards a common goal integrates the community.

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