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The luxury business: Gucci Gucci is a multi-brand conglomerate with a collection of high-fashion brands. They have directly operated stores around the world as well as outlets licensed to sell their products. Guccio Gucci opened an exclusive leather shop in 1921, after he died his sons took over the management and they succeeded extremely well in promoting the brand to the rich and famous. They took note of this and expanded opening stores in glamorous locations. In the mid-eighties the brand began to get pulled in different directions and decisions were made about product distribution that affected the brand’s reputation. Eventually retailers were selected more judiciously and the brand’s reputation returned. Smart leadership has driven the Gucci brand to more visibility and success than ever before. Tom Ford and Domenico De Sole were responsible for placing the brand back on the backs of the wealthy through Tom Ford’s elegant designs and advertising campaigns and Domenico de Sole’s marketing strategy that placed the focus on Gucci’s core leather products and ready-to-wear. The rocky economic climate of the past few years has made for a really bumpy ride for the luxury goods market, however Gucci-stock is still considered as one of the stocks with the greatest upside potential.

Freud, folly and finance People make strange decisions about the future, they are consistently bad at dealing with uncertainty, underestimating returns from some investments and overestimating others. Daniel Kahneman, a nobel prize winner and expert of behavioral finance, a science which applies psychological insights to economics, says that what surveys have shown is that people’s forecasts of future stock market movements are far more optimistic than past long-term returns would justify. They seem to ignore evidence and prefer to trust their inner instincts. First encounters are decisive in negotiations over how much money to invest in new ventures. People find it difficult to question their first impressions. Similarly, no one likes to abandon the generally accepted idea that the earlier a decision has been taken, the harder it is to give up. The problem is that they often find it difficult to admit they have made a mistake and this costs money. Another problem is that people put a lot of emphasis on things they have seen and experienced themselves, which simply may not be the best guide. Home bias is a tendency by most investors to invest only within the country they live in, even though they know that this is not responsible behavior and that diversification is good for their portfolio. More information is helpful for making a new investment but people spend too much time on small decisions and not enough on big ones. Regretting past decisions is not just a waste of time; it also often colours people’s perceptions of the future.

Fossil fuel dependency An increasing number of prominent petroleum geologists have warned that official estimates of available global oil reserves are dangerously exaggerated. Energy companies have every incentive to boost reserve estimates: the more oil they can claim, the more competitive and attractive to shareholders they appear. Today, the more oil a country can claim, the more influence it has on the global energy scene. As a result, there may be considerably less oil in the world than the oilproducing countries and energy companies claim. As the oil supply shrinks, essential petroleumdependant products are rendered either unavailable or unaffordable. Of course, all major players in the oil business insist that there will be enough oil to last well through the 21st century. However they define an oil shortage as something that occurs when the final drop is pumped from the ground. The optimistic oil-reserve estimates also fail to take into account one vital question: what will happen if global demand for energy continues to rise, particularly among developing nations. The consequences of overestimating the global oil supply would be devastating. Granted, it’s possible that there will never be an oi shortage, given that global reserves are healthy enough to last until well after a replacement energy source is found.

Wall street wonderboys: Page and Brin’s daring IPO Larry Page and Sergey Brin, the founders of Google, are doing something that has never been risked before. They are telling Wall Street to drop dead. Before Google came along, when a company was ready to sell shares, it hired bit Wall Street investment firms such as Goldman Sachs and Morgan Stanly. The firms offered the stock to their favorite customers at a big discount. The privileged few were guaranteed quick profits, but the company received less money for its IPO (initial public offering). Page and Brin aren’t putting up with this racket. Their plan is to use a public auction to offer Google’s shares to anyone willing to pay the market price. Major firms like Morgan Stanley will be managing the auction but their role (and fees) will be much diminished. Before LP and SB, the brokerages were able to act like a cartel because they held a near monopoly on information. CEOs had no idea what was happening to their stock price unless they called their brokers. Cracks began to appear in that cartel in the late 1990s, when WR Hambrecht & Co and Wit Capital pioneered the auction approach. Few enterepreneurs chose these Wall Street reformers for their IPOs though. The huge popularity of Google’s brand makes it possible for the company to bypass Wall Street. Alienating the powers that be in investment banking has risks too. Google has put its future in the hands of the people, not Wall Street.

Crunch time for Apple Instead of settling for being a niche player selling beautiful but expensive computers, Apple is returning to contest the mass market that it long ago ceded to Microsoft, Dell and others. That this challenge is even conceivable is due entirely to the iPod, which is going from strength to strength. The iPod’s market share has grown from about one third to two thirds in the past year, at expense of cheaper flash players. But Mr. Jobs wants to attack even that remaining third of the market and this week he unveiled an Apple flash player, the iPod Shuffle. Even though the iPod now outsells Apple’s computers by volume, most of the firm’s revenues still come from the computers. Using the iPod’s success to convert mainstream computer users might be a way to fix Apple’s long-standing problem in its core business. This is why Mr. Jobs also announced the mac mini, a fully-fledged but tiny computer. The twist is that it’s BYODKM, or bring your own desktop, keyboard and mouse. Leaving out these bits makes the Mac mini Apple’s first truly low cost computer. Cutting the price tag by leaving out the peripherals is a shrewd way of minimizing two risks: it’s unlikely to cannibalize the sales and profit margins of Apple’s more expensive models; and it’s likely to snap many Windows users out of their inertia and into making the switch....