Showing posts with label legal strategy. Show all posts
Showing posts with label legal strategy. Show all posts

Wednesday, June 02, 2010

Strategy Myopia

What is the Philippine's San Miguel Corporation doing lately? Are they following a strategic map? Who is their strategist? Exactly, 12 years ago, on June 2, 1998.... while everybody was praising San Miguel as one of the best managed corporations in the country, someone pointed out a different reality: SMC was a continuing failure, and he pointed out the solution - Strategy Myopia.

Of course, this idea was considered crazy a dozen years ago...

The genesis of a stormy idea and the birth of the Street Strategist

"Strategy is seeing what everybody else has seen and thinking what nobody else has thought.” – Sir Acid

One of the biggest thrills for a young person is meeting famous people.

Unfortunately, my experience of this kind is dismal – I haven’t met any famous people at all.

Oh, maybe jockeying with Richard Gomez for a taxi one late night in Kai Tak airport would count. Maybe handshaking with John Denver in Kowloon after a concert would count. Maybe calling out to Richard Branson to show him the walkway to Prince Charles’ royal yacht Britannia moored in HMS Tamar would count. Maybe getting an autographed poster from Jamie Rivera, because we stayed in the same hotel in Singapore, would count.

Or, maybe hatching out a plan to kiss Tetchie Agbayani in the Calesa Bar, which my friend successfully implemented while I sat wishing I did it myself, would count.

But these were nonsensical encounters. You can say mine is a pathetic case when it comes to meeting famous people.

One exception
There was a minor exception, though, during a student cocktail party. I was so young that I remember on this occasion I tied my hair into a ponytail. The champagne sure was better than the local gin I was used to.

Andres Soriano III was standing alone in a corner. I suppose he was trying in vain to be inconspicuous.

Looking back, it must have been really some important student cocktail party, or really some influential school, for San Miguel Corporation’s CEO to be present. I think Washington SyCip was there too. There were some corporate big shots but in my ignorance, I didn’t recognize a lot of them.

It was something like a “students-meet-corporate-bigshots” cocktails. It was a nice activity; all schools should have one.

Nobody talked to AS3. It was because we all knew it was AS3 and no one dared approach him.

For me, it was a rare moment. At that time, there was only one question burning in my mind. This was the same question that all students present wanted to ask the CEO of the biggest operation in the country.

The question of a hundred years
Anyway, I went over to AS3. We exchanged “hellos” and he was very polite. He can afford to be polite, he didn’t have anything he couldn’t win. I can afford to be intrusive, I didn’t have anything to lose.

Okay, that’s an unfair statement – I just wanted to say something witty. In truth, he really was a nice person and all. He was holding his champagne flute. I don’t recall if he was drinking wine, or water or beer. By this time, other students had milled around us, having seen the pied piper leading the way.

I asked the question of a hundred years: “Mr. Soriano, why is it that after 100 years, all that San Miguel can do is make beer?”

I knew I was speaking for everyone when I popped that question. This question was not an original. It was a common thread of thought among students and instructors who previously spent more than five sessions discussing SMC from its roots 100 years earlier through the Marcos years, to the present.

(By the way, that series should be required reading in all business courses as I know even SMC employees have not read it. It has very interesting behind-the-scenes accounts like when Cojuangco and Gokongwei waged board room battles with the Sorianos.)

Anyway, we never had the chance to ask this question except among ourselves. This was the chance for us to hear it straight from the horse’s mouth.

Incidentally, that year was also SMC’s 100th anniversary.

Holy management ground
He paused before replying. AS3 was now standing on holy management ground, which at that particular minute had the greatest density of the best young management talents per square meter in the entire country.

These were young people who thought they could function as CEOs of SMC, Metrobank, and Petron the next morning without flinching. If an earthquake swallowed that room, you’d think there would have been a management drought for the next five years.

Certainly, there was intelligent life out there but count me out, I was only biding my time, drinking their wine.
“We try to focus on our core competence. We still have room for growth even within our own business sectors. We still have so much to do.” This is not verbatim. I don’t recall if he used the McKinseyish term “core competence” or the phrase “what we do best.” But that was the gist of AS3’s reply.

The crowd grew larger, this time the other big shots and the other students came closer, too.
Jet Magsaysay, editor of World Executive’s Digest, who had been standing there for some time revealed himself to AS3, which prompted the latter to say in jest, “Oh, you might be hiding a tape recorder there somewhere.”

Magsaysay replied in the negative to assure AS3 that none of the conversations would see print.

There were some discussions on the SMC sequestration, and some discussions on SMC’s cost of capital. If you don’t know what “cost of capital” means, don’t worry, neither do I. Defining “cost of capital” is like defining “rate base” which MERALCO and the ERB are having religious battles about.

The CEO who only wanted to be inconspicuous was now reluctantly holding court. The foreigners feasted on his ideas, the other big shots extended their handshakes, and the black-tie waiters offered their drinks.

I felt a tinge of guilt. If I didn’t drag the guy into serious discussions, probably he would have been merrier simply exchanging hellos with the rest of us.

Once I asked the question of a hundred years, others chimed in with their own questions, testing their minds against AS3.

The perfect reply
Before you raise your objection that SMC is also into ice cream, bottles, and softdrinks – hear me out. That’s exactly my point. SMC is maybe Asia’s largest food and beverage conglomerate, but after 100 years is that all it can do?

AS3’s “focus on core competence” vision was the perfect reply. A company must not over extend itself beyond what it excels in doing. A company must first exploit the growth of its industry before it touches another business it knows nothing about. And, certainly, with its army of management consultants, this core competence strategy is the best option available.

Personally, I disagreed with his vision.

In my champagne-encouraged eloquence I privately confided to a few of my friends present, including one who ended up at Citibank and is currently one of the best young investment bankers in the country: “The vision of the CEO is the vision of the company. If the CEO limits his vision, the company’s future is limited by that vision. If his vision is limited to food and beverage, then the company will be forever in food and beverage. If he had the vision, he can easily buy talent to implement that vision.

As an example, if he has zero knowledge on high technology, then he can buy the brains who know about high tech.”

I saw that those companies in the best position to enter into high technology, value-added manufacturing or development were not into the game in a big way. SMC, for instance, was more focused on consumption-based not export-based industries.

Genius does what it must
After 107 years, SMC has only one world class product – San Miguel Beer.

Isn’t that a waste?

Talent does what it can. Genius does what it must. SMC merely does what it finds profitable to do – brewing beer. If we recall the parable of the talents, SMC was that person who merely buried his money in the ground, proud of his prudence, yet chastised by the master because he wasted his talent.

SMC is a unique company. It was the single most qualified private entity to lead the country into economic prosperity. It had all the chances to bring this country into high tech value-added manufacturing or services. It had the clear chance to lead but it failed to grab the baton.

Unfortunately, it was content with being just a beer company instead of being the global world-class powerhouse it could have been.

SMC could have created its own computer brand for domestic and export markets in a technological partnership with HP or Intel. If I assembled my own computer, there’s no reason SMC could not. Instead of Acer or Compaq, we could have been using SMC laser printers and computers this time developing Filipino new technology along the way.

SMC could have gone into power generation. This is not too remote for its management as it already owns and operates power plants for internal use. Even granting it has no expertise at all, then it could have partnered with BC Hydro – not that I’m passing judgment on BC Hydro, but I liked their beautifully landscaped offices in Vancouver.

Recently in Hong Kong, a bus network franchise was awarded to New World, a company with zero transportation experience.

However, the HK government saw it from the angle of New World’s management track record in other businesses coupled with the fact that its technology partner is one of the best bus manufacturers in Europe. The consortium that acquired MWSS is using this strategy. What did they know about water prior to this project? They brought in the foreign water brains.

San Miguel could have gone into banking and financial services maybe by first issuing SMC Visa credit cards after all it had 20,000 employees as captive market. It could have gone into telecom, software, and infrastructure. Don’t point me to ANSCOR which has an anemic brand name as against San Miguel’s.

For what it’s worth, SMC could have gone into record producing, or book publishing to promote Filipino talents to the world.

RP’s first chaebol
Indeed, it could have entered into anything just by the mere fact that its name was San Miguel. Which foreign company wouldn’t have cooperated, or provided technology expertise, or formed a joint venture with SMC?

All SMC had to do was to come up with an idea and everybody would have jumped into the project.

In Hong Kong, it is said that for every dollar you spend, 30 cents goes into Li Ka-shing’s pocket. That’s how diversified Cheung
Kong Holdings is. In Singapore, Temasek Holdings is leveraging its power into French bread, property, shipyards, media, and the internet.

Others are beating SMC to the draw. The Lopezes went into defensive investments as power, water, and telecom. While originally into media, now they added internet business. That Bill Gates signed an agreement with a Lopez instead of with a Soriano is a big blow to the country’s most popular brand name.

Concepcion wants to find out what a silicon chip looks like, and Sy knows shopping malls are not everything.

We have all these family-based groups yet all suffer from the same inward-looking syndrome. They are not aiming to become world-class players.

The Thais want to lay out our railways, the Indonesians are building our expressways, the Malaysians are buying our MacArthur suites and steel companies, and the Singaporeans would be erecting our office buildings.

Instead of San Miguel invading these economies, we are the ones being eaten. Come to think of it, we don’t even have the equivalent term of Korea’s chaebol or Japan’s keiretsu and sogo sosha.

Maybe AS3 was afraid that he would be spreading himself thinly. Does he really oversee the inventory of beer in Davao on a day-to-day basis?

Strategy Myopia
All told, SMC was poised to be the economic messiah; could have been the benchmark for Filipino companies with global ambitions; could have been our first chaebol.

Sad to say, even the biggest company sometimes depends on a single person’s vision.

Can the country’s only world-class, albeit single-sector, company afford to be myopic in its vision?

There could have been other factors that prevented SMC from getting into other businesses. Nationalization or outright confiscation under the Marcos regime could be one. Probably an unwritten code of not competing with its kin and friends who are in banking and property development could be another.

Strategy myopia could have been the greatest factor. Even during the Marcos years, San Miguel could have operated its worldwide expansion out of Hong Kong where it had a presence since the 1950s.

Salim of Indonesia used Hong Kong as its acquisition home base. Even now, that the political environment is business-friendly, what does SMC have in mind? Have you read SMC’s latest stockholder address? All talk about beer, milk, spirits, soda, and more beer, and a Johnny-come-lately act in property.

In March 1998 in New York, AS3 said that “although for the first 100 years we operated largely within the Philippines, and intend to continue our leadership in that market, we are transforming San Miguel into a major regional player.”

Hold it right there. After 107 years, SMC is not a major regional player yet? You would have thought SMC would have moved on to bigger playing fields and developed new technology and diversified away from beer.

The problem with beer is that it is consumption-oriented hence counter-cyclical to the push for savings needed for a strong economy. Beer technology is mature, therefore being ahead does not translate into an advantage. It is not a basic human need and very volatile in terms of demand particularly for low-income countries like the Philippines.

SMC’s too much dependence on beer is fragile. If I started a microbrewery tomorrow with a magic formula mixing chili and humulus lupulus that captures the palates of drinkers, creating the Viagra of beers, SMC could be out of business in five years.

Selecta’s assault on Magnolia is a harbinger of SMC’s beer future.

Chili beer – now that’s an interesting idea.

San Miguel could have been the Philippines’ answer to Hyundai or Daewoo. But then SMC’s management and external consultants would tell you that it should focus on its core competence.

San Miguel’s core competence
Let’s talk about SMC’s core competence. Let’s sit back for a moment, and look at the big picture.

Let’s answer the question: “Exactly what is San Miguel’s core competence anyway?” Is it brewing beer? Or making chocolate drinks or ice cream? Is that what you see?

In February 1998 in London, AS3 revealed that SMC relies so much on beer to a point that a huge portion of its total revenues, 38%, comes from beer sales.

In words and in deed, there’s no question San Miguel still talks, walks, and quacks like a beer company and will continue to be so in the near future.

Let’s take a snapshot of Samsung. In addition to foods, textile and chemicals subsidiaries, Samsung is the world leader in semiconductor memory technology. It is into computers, heavy industries, and other business sectors including financial services such as credit cards, insurance, and securities, and even fashion, hotels, movies, and magazines. Samsung even acquired universities.

We are not talking here about simply trading or distribution, either. We are talking about actually building, manufacturing or developing its own new technology.

The good thing about Samsung is that it has world-class quality. You think Intel manufactures the fastest CPUs? No, Samsung does with its Alpha 21264 CPU. You think only the US makes F-16 jets? No, Samsung makes it in Korea, too. It also makes helicopters, power plants and ships. It manufactures the world’s first 256 Megabit DRAM, the world’s first 128Megabit FLASH RAM, the world’s lightest PCS handset and the world’s first completely flat Braun tube. It is also the world’s largest manufacturer of color picture tubes.

Samsung Aerospace plans to build space stations in Mars. Now that’s vision. However, on Earth, Samsung Motors will first build automobiles. If Samsung followed the “core competence” strategy, then it would have remained selling fruits, dried seafood, flour, and noodles, and making beer as when it was founded.

After only 60 years, Samsung’s revenues is US$93 billion annually, while after 107 years, SMC’s revenues is a pitiful US$2.3 billion. In terms of contributing to the economy, Samsung employs over 260,000 in 68 countries compared to SMC’s 18,500.

Paradigm shift
Lubbock once said, “What we see depends on what we look for.” What do I see in San Miguel? You might have been thinking what a scatterbrain would suggest that SMC should have been producing Filipino rock stars.

Going back to core competence, here is my idealized vision of what San Miguel’s statement of core competence should be: “San Miguel’s core competence is not making beer but creating new businesses.”

I know that was easy, anybody could have seen that. What if nobody has thought like that? Seeing what everybody else has seen and thinking what nobody else has thought, is a talent I would like to have or anybody would like to have for that matter.

But it’s not easy.

Even if you have thought about it, it would have been hard to act on it. Even if you have the facts right, you’re not necessarily going to work on it. Facts alone do not form a belief.

Ever noticed cement companies are as inert as their products? They cannot change their mind-set away from being manufacturers of cement. They never thought of themselves as business creators.

Have you noticed we are contented with operating power plants instead of creating our own generators? We always thought of ourselves as users of technology instead of creators of technology.

How can we ride the paradigm shift if we are not aware what our real competence is?

Thinking that “creating businesses” is a company’s core competence is a revolution. This idea would not sit well with managers who are mostly inbred through years of evolution from the bottom ranks floating to the top.

If you spent 20 years breathing in and out thinking that your company has the best beer in the country, what would you say to somebody who tells you that it should open up a biotech division? You’d say, “What has sheep cloning got to do with Coke bottling?” Revolution from within is always the exception, not the rule. But can a company manage an exception?

Intellectual capital
Once you embed in your psyché that “creating businesses, not making beer” is your core competence, your perspective changes; your assessment of your intellectual capital changes; and your viewpoint on unrelated businesses changes. Things somehow fall clearly into their places.

You’d realize that your greatest asset is not the secret recipe of Pale Pilsen but your excellent management ability. No matter what the business may be, software or rocket assembly, it doesn’t matter any longer. You can go into banking or even into railway construction.

Usually intellectual capital stems from a company’s internally developed technology but since San Miguel failed to develop any notable technology after all these years, we can proceed to count its management skills.

Undoubtedly it has stable manufacturing skills, and if you heard AS3 in New York, he declared that SMC is one of the most efficient Coke bottlers worldwide.

The greatest intellectual asset of San Miguel is its brand name. Yet, one could sense SMC thinks that San Miguel is a beer brand and nothing more. If you shift your paradigm from “makers of beer” to “creators of business,” you’d begin to think your brand is no longer a beer brand but a management brand.

Cultural icon
San Miguel is probably the only corporate brand in the Philippines to qualify as a cultural icon. It is almost legendary. It is the most recognizable brand in the country enjoying instant recognition virtually anywhere. It has always been known with strong leading brands, high quality and excellent service. Its brand has no negative associations; not associated with bad management practice; not known for tax-evading practices nor linked to corruption. SMC has a clean and wholesome image.

To call SMC a beer company because it is famous for San Miguel beer is like calling Leonardo da Vinci a painter because he was famous for the Mona Lisa. Painting was only one of his talents and forgetting Leonardo’s other talents that made him the greatest genius mankind has ever seen is sacrilege. The same with San Miguel.

Consistently one of the most admired companies in Asia, it enjoys great respect and admiration. As such, it has the status of a super company – already a legend, an icon. SMC must cease thinking of itself as a food and beverage elephant. San Miguel should stop being a beer brand. San Miguel is a cultural icon and it should become a management symbol, a management icon.

Any project that carries the SMC imprimatur becomes golden, enjoying the support of the capital markets and technological partners. SMC is not an ordinary company that should focus on an operational activity such as making beer, as its core competence. It should rise above such mentality. It should leverage its excellent management skills, leverage the equity of its powerful brand, and leverage its access to capital to fire up other industries and sectors trailblazing the way for the other companies.

Portfolio management
Then SMC can dwell on the “portfolio management” approach to business. It can bulletproof its portfolio by business diversification so that cyclical downturns in other sectors can be softened by other sectors that are counter-cyclical. If the economy shifts from consumption mode to savings mode, meaning people drink less beer and put their money into banks instead, then SMC Bank would benefit from the loss of SMC Brewery.

Worries about spreading the CEO’s attention thinly can be answered by independently-managed businesses. I had the chance to meet in Seoul some senior treasury managers of Samsung Corporation (the trading arm) and during the discussion I realized that they had almost complete independence from the other subsidiaries of the group. Usually, treasury independence is a good indication of management independence.

Three days later, in my ignorance, I walked away from a meeting at Cheil wondering why one of Korea’s big companies was holding office in a Samsung building. Later did I realize Cheil was a subsidiary. You couldn’t have gathered that from our discussion, which centered on treasury decision making. I thought that was an isolated case but talking to treasury managers at Ssangyong Oil, Daewoo, LG, Sunkyong, Kolon and Tong Yang among others, made me think they are practically on their own, yet part of the same brand name established by the patriarch.

The corporate raider
Acquire or be acquired. Since SMC failed to acquire other businesses into its portfolio, it is now in danger of becoming just another balance sheet item of a corporate raider’s portfolio.

Currently, San Miguel is right for the picking. Filipino managers, originally trained as investment bankers, camping out of Hong Kong, using Indonesian money, could be hatching the biggest, most ambitious, most flagrant corporate takeover in Philippine history.

Cash is power
If you were raiding SMC, you’d probably generate much cash for your war chest. First, you’d sell off your telecom operations in Hong Kong, your stakes in a US bank, and your investments in Europe. Wait for the right conditions such as undervalued stock price, depreciating peso, and lower profits, which means stock valuation will go down further. Look out for stockholders in a hurry to offload their shares primarily those wanting to unwind from legally disputed holdings. Use stealth by pretending you have no intentions of a takeover while at the same time using the lull to consolidate your takeover strategy with your investment bankers.

Use foreign currency to your advantage. If you were sitting on US$2.5 billion cash, and if today the Philippine currency depreciates by one peso, then you have an extra PHP2.5 billion to buy more SMC shares.

Let’s visualize how large that windfall profit is. Assuming a town has 50,000 residents, you can give PHP5,000 for each man, woman and child of 10 towns. By doing nothing you earn that obscene amount of money in one day just because of depreciation.

We’re not even talking about the original US$2.5 billion itself which can buy six units of Tamaraw FXs each worth PHP400,000 for each the Philippines’ 40,857 barangays. Indeed if you were the chap who’s sitting on this money right now, you could have won the presidential election easily by giving one Tamaraw FX per barangay with tons of money left over.

This is not child’s play anymore. We’re talking big league power play here.

By the way, how much is SMC’s market capitalization? A mere US$2.7 billion.

Hey, looks like somebody is storing just about the right amount of cash to buy the entire SMC shares.

Power, the ultimate high
Why would you raid San Miguel?

One reason is that you, as a raider, probably realized what AS3 and his current management still does not realize – that SMC has underutilized its brand, skills and position in a global market place. You can unleash SMC’s huge goodwill value. You can create a world-class company with world-class technology with world-class products.

Another reason is that, if you really have to spend all that cash and energy acquiring companies anyway, why not focus the best part of it on the biggest game in the land?

However, the best reason for targeting San Miguel for a takeover has less to do with money. The second most famous person in the Philippines, next to the country’s president, is the CEO of San Miguel. Being SMC’s figurehead brings power, popularity, and respect not only from Filipinos but from the international players as well.

It’s not even about the money. Dealwise, you can generate more money from acquiring other companies in dire straits.

Salarywise, it’s not enticing. Has anybody ever heard of Manny Pangilinan?

Probably not, but he was the highest paid CEO in Hong Kong in 1997, one of the richest places on Earth, with a yearly pay of US$14 million. To picture that amount, if you are a kindergarten teacher earning PHP30,000 per month, it would take you 1,556 years to earn that money. Yet, Pangilinan is practically unknown.

There’s something more important than money: Power.

Whoever gets to be chief executive of San Miguel gets instant recognition as the most powerful private individual in the country. There’s no doubt about that.

You can forget money but you cannot kill ambition. Some people have money but no power.

That is the seed of ambition. Power is the ultimate high.

Break it up
SMC’s break-up value is higher than its current market value as a group. It means the stock market players suggest that SMC is better broken up into pieces.

By way of illustrating the concept of break-up value, take Korean Airlines. Its total shares in the stock market are only the equivalent of a few jets.

However, it has 29 Boeing jets, 34 Airbus jets, and 16 MD jets. Therefore, you buy all its shares in the stock market and then you sell off its jets, office buildings, and equipment. Selling “chop-chop” would be more profitable.

However, since market valuation includes so much psychological factor, it doesn’t follow that instead of acquiring new businesses San Miguel must break itself up, but the pressure is there.

Still there are others ways of achieving the goal of breaking up as a means to liberate the company’s stored value. One of them is listing its major divisions as separate companies on the stock exchange, still making use of the same powerful San Miguel brand name. Expanding while breaking up is not necessarily inconsistent.

If the current management wouldn’t do this, the corporate raiders might.

San Miguel is the perfect takeover target for several reasons mentioned above.

We are watching how the Wassertein Perellas of the world are going to defend SMC in this colorful possible takeover battle.

Currently SMC is trading in the PHP46 range which might be a good buy for two reasons – current undervaluation as it is given its strong position in the sector plus future stock price appreciation as a result of a takeover skirmish.

In the event of a takeover battle in the next 18 months, it might good to buy stock now and hold it for your child’s high school graduation as a gift.

Res ipsa loquitur
Sorry San Miguel folks, I hope you won’t be cross. It’s easy to generate ideas. It’s easy for ideas to be formed into words. It’s easy for words to be written down. Yet it’s not easy to run a business, so I might have been unduly unfair to you.

But Hyundai transformed itself in only 50 years from an auto repair shop into a US$93 billion group with artificial satellites, magnetic levitation trains, ships and semiconductors, oil refineries and stockbrokerages giving employment to 200,000 people.

Why could SMC, after 107 years, only do US$2.3 billion employing only 18,500? Quite frankly, the chaebol model is under attack, but not after they became engines of South Korea’s spectacular economic success.

I’m not saying that Hyundai or Samsung are the best models, but look at their results compared to yours.

Maybe you really did miss out on being the single most qualified Filipino private entity to create world-class businesses making world-class products developing world-class Filipino technology along the way.

Res ipsa loquitur – the thing speaks for itself.

SMC’s greatest enemy
San Miguel’s greatest enemy is itself – it has strategy myopia.

Snap out of it. You are a Leonardo da Vinci capable of anything. Buy the brains, buy the skills and leverage on the brand that is already a cultural icon. Do not change the way you manage your business, rather, change the way you think about your business.

Anyway, I’m no MBA-staffed McKinseys of the world who gets paid hundreds of thousands of dollars by the SMCs of the world to strategize for them.

I’m just a person in the street with naive opinions and wild generalizations; writing without thinking.

One nice thing though about street-based analysts is that we can freely dispense ill-informed ideas without having the corresponding punishment of losing our personal money if they bombed out.

Maybe that’s exactly why we are out here in the street merely talking about how to run SMC, instead of being in the penthouse actually running SMC.

Shades of the novel “Zorba the Greek” – there are people who want to write about “life” but those who are actually living “life” are too busy to write about it.

Just a precaution while I’m still here, please don’t take seriously what I wrote above. I have to say that because some ideas I wrote a while back about a fast food company wound up as clippings circulated among the senior management of its competitor, of all places.

On another occasion, I once wrote down some ideas privately to a friend which included creating a monthly strategy newsletter, and before I knew it the US securities house he worked in implemented it soon thereafter. Goes to show some guys take my words more seriously than I originally intended.

That’s bad and that’s why I have to warn you off. Spare yourself the trouble of analyzing and refuting my statements, as this is not a scholarly treatise. I’m just your unknowledgeable average armchair strategist with wild ideas that hopefully provided amusing reading, only this and nothing more.

Yep, quoth the Street Strategist, “Amusing reading, merely this and nothing more.”

Now, go to the world, start your own microbrewery producing Chili beer, and drink. I don’t.

Drink beer, that is.

Wait a minute, I started out with Richard Gomez so I might as well end with him.

I arrived from Taipei and he from Manila, one very late night. I didn’t know who it was until I saw a taxi coming and so I looked at my competition for the ride.

When I recognized Richard, I looked up at him, and he looked down at me, and then both of us looked at the taxi. We were about two feet apart standing side by side.

He probably was unaware that I knew he was a famous movie star; after all, he was a stranger in the city and I look just like the average Asian. I was torn between getting his autograph and getting a hard-to-find taxi.

In that area in Kai Tak, only alighting was allowed and the loading area was far away, one floor below, and easily an hour longer because of the queue.

The taxi stopped – it was not supposed to; Richard made his move, his lady assistant was too slow; I hopped into it.

Ah, sometimes boys can be petty when jockeying for a ride. Sorry Richard.

But then, I lost my Ormoc girl while you found yours. I guess life is more than just a taxi ride.

Then again, I found my best muse later anyway. And life can be so grand riding shotgun in the last taxi in Hong Kong.

(Exactly one month later, on July 2, 1998, Andres Soriano III resigned. Thads Bentulan, June 2 & 3, 1998.)
* * * * * *

Sunday, April 19, 2009

Legal Strategy for Ted Failon: Sue for millions

Ted Failon is now on the defensive, being hunted down for obstructing justice based on flimsy grounds. What I noticed though is the lack of strategy on the part of the lawyers of Failon and and that of his in-laws, and his helpers. Here's what I would do: I will turn the tables around by filing a case of violation of RA 7438 because the ''invitations'' by the police towards the helpers, in-laws, and Failon itself are illegal because: 1. No warrants of arrest 2. Not Mirandized 3. No counsel present 4. Against their will I will sue for millions. Arbitrary acts by the police should not be covered by immunity from suit. Unless, the hyperdamages are applied in this country, the big businessmen, the big people, and the big authorities will continue to trample our rights. Note that in People vs. Delos Reyes (1999) even an invitation by the barangay chairman is already considered 'custodial investigation' covered by the constitution (a much higher right than obstruction of justice) and RA 7438. ...................................................... REPUBLIC ACT No. 7438 April 27, 1992 REPUBLIC ACT No. 7438 AN ACT DEFINING CERTAIN RIGHTS OF PERSON ARRESTED, DETAINED OR UNDER CUSTODIAL INVESTIGATION AS WELL AS THE DUTIES OF THE ARRESTING, DETAINING AND INVESTIGATING OFFICERS, AND PROVIDING PENALTIES FOR VIOLATIONS THEREOF Section 1. Statement of Policy. - It is the policy of the Senate to value the dignity of every human being and guarantee full respect for human rights. Section 2. Rights of Persons Arrested, Detained or Under Custodial Investigation; Duties of Public Officers. - (a) Any person arrested detained or under custodial investigation shall at all times be assisted by counsel. (b) Any public officer or employee, or anyone acting under his order or his place, who arrests, detains or investigates any person for the commission of an offense shall inform the latter, in a language known to and understood by him, of his rights to remain silent and to have competent and independent counsel, preferably of his own choice, who shall at all times be allowed to confer privately with the person arrested, detained or under custodial investigation. If such person cannot afford the services of his own counsel, he must be provided with a competent and independent counsel by the investigating officer.lawphi1Ÿ (c) The custodial investigation report shall be reduced to writing by the investigating officer, provided that before such report is signed, or thumbmarked if the person arrested or detained does not know how to read and write, it shall be read and adequately explained to him by his counsel or by the assisting counsel provided by the investigating officer in the language or dialect known to such arrested or detained person, otherwise, such investigation report shall be null and void and of no effect whatsoever. (d) Any extrajudicial confession made by a person arrested, detained or under custodial investigation shall be in writing and signed by such person in the presence of his counsel or in the latter's absence, upon a valid waiver, and in the presence of any of the parents, elder brothers and sisters, his spouse, the municipal mayor, the municipal judge, district school supervisor, or priest or minister of the gospel as chosen by him; otherwise, such extrajudicial confession shall be inadmissible as evidence in any proceeding. (e) Any waiver by a person arrested or detained under the provisions of Article 125 of the Revised Penal Code, or under custodial investigation, shall be in writing and signed by such person in the presence of his counsel; otherwise the waiver shall be null and void and of no effect. (f) Any person arrested or detained or under custodial investigation shall be allowed visits by or conferences with any member of his immediate family, or any medical doctor or priest or religious minister chosen by him or by any member of his immediate family or by his counsel, or by any national non-governmental organization duly accredited by the Commission on Human Rights of by any international non-governmental organization duly accredited by the Office of the President. The person's "immediate family" shall include his or her spouse, fianc� or fianc�e, parent or child, brother or sister, grandparent or grandchild, uncle or aunt, nephew or niece, and guardian or ward. As used in this Act, "custodial investigation" shall include the practice of issuing an "invitation" to a person who is investigated in connection with an offense he is suspected to have committed, without prejudice to the liability of the "inviting" officer for any violation of law. Section 3. Assisting Counsel. - Assisting counsel is any lawyer, except those directly affected by the case, those charged with conducting preliminary investigation or those charged with the prosecution of crimes. The assisting counsel other than the government lawyers shall be entitled to the following fees; (a) The amount of One hundred fifty pesos (P150.00) if the suspected person is chargeable with light felonies;lawphi1©alf (b) The amount of Two hundred fifty pesos (P250.00) if the suspected person is chargeable with less grave or grave felonies; (c) The amount of Three hundred fifty pesos (P350.00) if the suspected person is chargeable with a capital offense. The fee for the assisting counsel shall be paid by the city or municipality where the custodial investigation is conducted, provided that if the municipality of city cannot pay such fee, the province comprising such municipality or city shall pay the fee: Provided, That the Municipal or City Treasurer must certify that no funds are available to pay the fees of assisting counsel before the province pays said fees. In the absence of any lawyer, no custodial investigation shall be conducted and the suspected person can only be detained by the investigating officer in accordance with the provisions of Article 125 of the Revised Penal Code. Section 4. Penalty Clause. - (a) Any arresting public officer or employee, or any investigating officer, who fails to inform any person arrested, detained or under custodial investigation of his right to remain silent and to have competent and independent counsel preferably of his own choice, shall suffer a fine of Six thousand pesos (P6,000.00) or a penalty of imprisonment of not less than eight (8) years but not more than ten (10) years, or both. The penalty of perpetual absolute disqualification shall also be imposed upon the investigating officer who has been previously convicted of a similar offense. The same penalties shall be imposed upon a public officer or employee, or anyone acting upon orders of such investigating officer or in his place, who fails to provide a competent and independent counsel to a person arrested, detained or under custodial investigation for the commission of an offense if the latter cannot afford the services of his own counsel. (b) Any person who obstructs, prevents or prohibits any lawyer, any member of the immediate family of a person arrested, detained or under custodial investigation, or any medical doctor or priest or religious minister chosen by him or by any member of his immediate family or by his counsel, from visiting and conferring privately with him, or from examining and treating him, or from ministering to his spiritual needs, at any hour of the day or, in urgent cases, of the night shall suffer the penalty of imprisonment of not less than four (4) years nor more than six (6) years, and a fine of four thousand pesos (P4,000.00).lawphi1© The provisions of the above Section notwithstanding, any security officer with custodial responsibility over any detainee or prisoner may undertake such reasonable measures as may be necessary to secure his safety and prevent his escape. Section 5. Repealing Clause. - Republic Act No. No. 857, as amended, is hereby repealed. Other laws, presidential decrees, executive orders or rules and regulations, or parts thereof inconsistent with the provisions of this Act are repealed or modified accordingly. Section 6. Effectivity. - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in any daily newspapers of general circulation in the Philippines. Approved: April 27, 1992

Wednesday, March 11, 2009

Portrait of the Street Strategist as Bar Examiner Part 1

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Note: This series was first published in 2004 in my column in BusinessWorld. 
Several of the suggestions in this series have been adopted by the incoming Examiners as early as 2005, the least of which are simple but helpful suggestions such as the use of proper names like Juan, Jose, and Maria, instead of A, B, C; and the use of problem solving rather than memorization and the use of the Discriminating Question. 
Also since then, the two bar topnotchers mentioned in Part 1 have become prominent; one of them is now a presidential hopeful for 2010, and the other, now a Justice of the Supreme Court. 
Who has read this series way back in 2004? The readers of the newspapers and the law students and some professors back then. 
1. The Supreme Court justices were furnished CDROM versions of this series. There is no proof they actually read it. 
2. Many law deans and professors as stated in this letter below sent to me way back in 2004:

Consultant’s consultant 
Before we proceed, I was amused by a letter I received from a senior lawyer of a very powerful law firm. He was a 7th placer in the bar. He wrote: “I thoroughly enjoyed your series of articles on the bar exams. I was wondering how I could get a complete copy of the series, as I would like my colleagues, some of whom are members of the Philippine Judicial Academy and consultants of the Supreme Court on reforms, to read it. “Sometimes, it takes someone from the outside looking in to remind those inside of plain common sense and reason. “I do intend, with your permission of course, to give a copy of the print out to the following people who I either work with or deal with on a regular basis: 
Former Dean Eduardo de los Angeles (Ateneo) 
Former Dean Cynthia del Castillo (Ateneo) 
Dean Andy Bautista (FEU) 
Dean Perry Pe (Palawan State University) 
Dean Dante Cadiz (Enverga) 
Dean Jud Roy (Pamantasan ng Lungsod ng Maynila) 
Dean Cesar Villanueva (Ateneo) 
Fr. Joaquin Bernas 
I'm not sure if they've read it but I strongly believe they should.” 

Thank you sir, for your letter. As for common sense and reason you may like to read my article called the Seventh Sense written in 2003. 
And if ever the consultants of the Supreme Court and the Philippine Judicial Academy eventually find the Street Strategist’s Kennen und Wissen (SS-KW) philosophy useful in one way or another, what does that make the Street Strategist – a consultant’s consultant?)
Portrait of the Street Strategist as Bar Examiner

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he bar examinations is the single most important criterion for the Supreme Court to admit law school graduates into the practice of law.
The bar examinations is the single most important reference performance metric to measure the candidate’s total knowledge of the law and jurisprudence.
And this pseudo-treatise is the sum total of the wisdom of the portrait of the Street Strategist as a bar examiner on the subject of how to maximize the effectiveness of the bar examinations as the only reference performance metric of the candidate, and how to minimize its inherent shortcomings.
None of the qualifications
The Street Strategist has never been appointed by the Supreme Court as a bar examiner. But then, this is not a strange omission.
Indeed, appointing him would be a bizarre commission. He is not known. He is not an expert. And, most importantly, he is not qualified.
Yes, I am not known, but, then again, I am the most famous unknown, proof of which is my essay Famous Man.
Yes, I am not an expert, but then, there were a few occasions where my pseudo-treatises were used in corporate brainstormings, assigned as readings in business schools including an American university, and quoted in PhD papers abroad, the latter case, at least in one occasion.
And don’t forget The Accounting Wizard, my deconstruction of the accounting debit and credit, that has been formally adopted by an accountancy school, and later, by a law school, and was subject of a paid full-page criticism by the accountancy organization.
These mental calisthenics were distillations of my curiosity as an amateur always trying to defy the experts.
But then, that’s me.
As much as possible I don’t accept the experts right away, although I use their judgment as my initial reference point. Being experts, they are almost always right; yet in isolated instances, I discover fresh viewpoints; and in all cases, I learn, anyway. It’s a no-loss situation.
Yes, I am not qualified. There’s nothing that the Supreme Court can do about it, even if it wanted to.
Yet, after proving that I have none of the qualifications and all of the disqualifications, why insist on this treatise on the portrait of the Street Strategist as a bar examiner?
All the disqualifications
Yes, the Street Strategist has none of the qualifications and all of the disqualifications of a bar examiner, yet, there is one single reason for you not to throw this treatise outside the window.
This portrait is the definitive sum total of the wisdom of the Street Strategist on the issue of the bar examinations.
So what?
The portrait of the Street Strategist as a bar examiner is valuable by virtue of one single most important raison d’etre: He is the Street Strategist and he can see what everybody else has seen and think what nobody else has thought.
Court of final resort
First, I would like mark out the parameters of this disquisition. I am not questioning the integrity of the Supreme Court; I am not questioning the competence of the Supreme Court; neither am I am questioning the wisdom of the Supreme Court and its appointed bar examiners over the years with respect to the bar examinations.
The Street Strategist is not questioning the wisdom of the Supreme Court, instead, he is summarizing the definitive total wisdom of his own.
And if in the process, the wisdom of the Supreme Court clashes with the wisdom of the Street Strategist, there can be only one final reigning wisdom – the infallible wisdom of the Supreme Court, the court of final resort.
The Supreme Court’s wisdom is final not because it is infallible; rather, its wisdom is infallible because it is final.
Law of entropy
Now, that we have established that the wisdom of the Supreme Court is final in case of conflict with the wisdom of the Street Strategist, is there still any residual value at all in listening to his portrait as a bar examiner?
Yes, there is. Unlike the quaternions of physics, which are subtractive when contrapuntal, the vectors of wisdom are additive, despite being contrapuntal.
Contrapuntal vectors of wisdom never destroy, obliterate, or annihilate each other. Wisdom is invariably additive, never subtractive. Contrapuntal junctions of wisdom have a natural way of augmenting, adding, clarifying, and refining the original opposing wisdoms.
After listening to the wisdom of one party, the adverse party will either succumb to the opposing vector of wisdom, or assimilate the weakness of such wisdom as a positive reinforcement of his own.
In other words, if the opposing vector of wisdom is intellectually superior, you succumb to it. If it is weak, you can use its weakness to reinforce your own wisdom.
Either way, the accumulated wisdom in the universe is always increasing, never decreasing. This is called the Law of Entropy of Wisdom.
At this juncture, I have to make a confession of judgment.
I have to apologize for having dragged you this far into this treatise. You may abandon this journey, right now.
It is ridiculous for the Street Strategist to possess any wisdom at all that is worth the precious time of those who may have been seduced into thinking that I have some brilliant strategy to offer.
Indeed, at the outset, I may have made false promises. I have promised to redeem the cumulative wisdom of the Supreme Court with respect to the bar examinations.
In so doing, I may have seduced some people into thinking I can offer more than the current fare of wisdom, and these unsuspecting people may include justices of the Supreme Court, the justices of Court of Appeals, members of the bench, members of the bar, and the bar candidates.
Therefore, before I seduce your further with false advertising, I pray that you abandon this journey.
I’m sorry for wasting your valuable time this far. This disquisition is designed as an exercise of thought, mind, logic, wisdom, and more importantly, an act of entertainment.
Nothing more.
Again, I’m sorry. But you didn’t really, seriously, expect that I have wisdom enough to purify the cumulative wisdom of the Supreme Court, did you?
That would have been a ridiculous expectation, right? Now, you can throw this treatise out of the window.
Bye, bye. It was nice meeting you.
By the way, whenever there is an audience, there are always queer ones who want to be part of the seduction.
Yes, you can fool some people all of the time.
With this in mind, just before you decide to abandon our amusing journey, bear in mind that some people do find wisdom in the ideas of the Street Strategist.
Speaking of the bar exams, I can think of at least two people who may try to stick it out with this pseudo-treatise.
Why? Because, previously, they wasted some of their extremely precious time reading my stream-of-consciousness ramblings.
What can I say? I think these two are among those with refined intellectual taste by reading the Street Strategist.
The Justice
The first one who I think will stay with me in this journey, and I hope I’m not mistaken in counting him as one of the residual voyagers, works in the judiciary.
Currently, he is now a Justice of the Court of Appeals. Oh, yes, he does read the Street Strategist whenever he could, I presume.
Now, now, Justices of the Court of Appeals are not a dime a dozen. This person alone is probably the equivalent of 10,000 readers. I don’t need thousands of readers to justify my existence; I need only one Justice of the Court of Appeals.
But you might question the propriety of counting him as one of the serious followers of the Street Strategist. What is my basis for such a claim?
Well, all I can say is, he went as far as ordering the first edition of the first book of the most famous unknown. I think that should count. Fair enough?
And yet, that is not enough. This Court of Appeals justice was a bar topnotcher, Yes, number one in the bar exams.
It should be easy to identify him if you want. How many number one topnotchers could there be in the Court of Appeals? Several? Okay, granting there are several, but how many of these number-one topnotchers have copies of Strategy Myopia in their bookshelves?
When he purchased my book he was not yet a Justice, and I didn’t know he was number one in the bar. I just read his name in the paper upon his appointment. And even to this day, I have not met him.
Now, guys, are you really going to abandon this journey of ours?
The Congressman
Wait, a minute, I mentioned there are at least two.
I know there are staffers in Congress who follow my misadventures; however, I didn’t realize that this fancy extends to the congressmen themselves. Okay, I admit, at least, one.
There is this congressman who asked his executive assistant to call all the bookstores to obtain a copy of my book to no avail because it is not distributed publicly. Eventually, the wonders of e-mail short-circuited her work.
This young congressman liked some of my ideas that he wrote a letter, which was eventually published in BusinessWorld. Never mind that he is very rich, as that does not necessarily transform him into a certified Street Strategist cult member.
However, there was this one additional information that I gathered from my friends. They said, “You don’t know who he is? Do you know his middle name? And do you know that he was a bar topnotcher?”
Ah, pardon my ignorance, sir, but you were really number one in the bar examinations, I finally found out. That’s something.
So it is easy to identify my readers. How many rich young congressmen out there who placed number one in the bar? Several, again? If so, how many of these have copies of Strategy Myopia in their bookshelves?
Now, guys, are you really going to abandon this journey of ours? If these two bar first placers went out of their way to tell me they enjoy our pseudo-intellectual games and purchased my magnum opus with my golden autograph, who are you to defy their intellectual taste?
By the way, before we leave these topnotchers, whom I have never met, there’s just one minor thing.
I have a theory that the reason the young congressman became a bar topnotcher on that year was due to a very fortunate incident. He was so blessed because the life schedule of the Street Strategist was shattered to random chaos, otherwise, if my earlier plan wasn’t yanked out of me, he and I would have clashed on that particular year, and he wouldn’t have been number one, I tell you.
And for the first time in the bar exams there would have been three persons in the top ten with the same first names and the same middle initials.
Cheer up, guys, just theorizing on the possibilities. So, are you really abandoning me? Come on, you’re in fine company.
Real reason
Seriously, guys, before we delve into my portrait as a bar examiner, the real reason why I feel competent to offer my wisdom is that I have a far greater experience in the area of examinations.
Not so much as the experience of constructing examinations but in the experience of taking them. The problem with those charged with constructing examinations is that they are experts in their fields, therefore narrow-minded.
They have limited experience in how the exams in other fields are being designed, constructed, and conducted.
Besides, since they have been chosen as examiners, there is a conclusive presumption that they are brilliant and intelligent.
Therefore, they are probably out of touch with reality of the mediocre, average candidate. And they are not accustomed to taking the same exams over and over again, or taking many different exams.
These people are the statistical outliers, they are aberrations, and lo and behold, we use their aberrant experiences as the basis of a general examination.
On the other hand, I have probably taken more examinations than 90% of the population. And these examinations were not confined to a particular discipline. Some science, technology, mathematics, some economics, some law, some finance, something of everything, I’ve tasted them inside or outside the classroom.
Furthermore, my experiences were vicious mental struggles. Like many other candidates, in those examinations, I felt that the questions presented were far from the real state of my knowledge. In other words, I could have passed those exams, or performed better, if the questions were representative enough.
During those exams, I always felt that I was being unfairly assessed.
Again, to summarize, my expertise is not in the subject of the exams, but in the examinations themselves, how they could be designed better, and how they could assess an ordinary examinee like me.
The experiences of the topnotchers do not count. They are the statistical aberrations.
I hope that my dismal experience as a struggling examinee will transform me into a brilliant examiner. And that is exactly what the portrait of the Street Strategist as bar examiner is all about.
Bar none
Should the bar be abolished? No. Despite all its shortcomings, the bar exams serves as a reference performance metric against which all law graduates must be measured. Given the sacred nature of the bar exams, it should not be trifled with, especially by the bar examiners themselves. Now, that’s a hint.
As a performance metric, the bar exams has two major phases that are beneficial to the bar candidates.
The first phase is the comprehensive review called the pre-bar review. It is judicial notice that after the pre-bar review, the average candidate has more knowledge on hand at their command than someone with a decade of experience as a Regional Trial Court judge.
Unfortunately, I feel that the Supreme Court and the bar examiners ignore the value of this phase. Or even if they do, they have no ostensible procedure by which this is measured. There are 20,000 possible questions on Political Law alone, yet, only 20 are asked in the bar exams, or 40 questions, if we include the follow-up sub-questions.
This is an unfortunate situation because such 20 questions are a narrow-band measurement.
The truth is, the greater the number of questions bombarded at the candidate, the greater the probability that the bar exams is going to capture a broader spectrum of his knowledge of the law and jurisprudence.
Just as in a market survey, the greater the sample, the more accurate the representation, subject to the law of diminishing returns on accuracy given the same confidence level and error of margin.
By the way, for the uninitiated, the entire fourth year in law school is actually dedicated to review.
Thus, some of the subjects are Civil Law Review, Criminal Law Review, or Mercantile Law Review.
In other words, the six-month pre-bar review is a review on top of the fourth-year law school review.
The second phase of the bar exams as a performance metric, is the actual examinations itself. Despite its shortcomings such as being limited to only 20 questions per bar subject, inter alia, the candidate has no recourse but to capitulate to the process.
By the way, do not forget that this pseudo-treatise is a reflection of the sum total of the wisdom of the portrait of the Street Strategist as a bar examiner about how to maximize the effectiveness of the bar exams as the reference performance metric of the candidate and how to minimize its inherent shortcomings.
Oral bar
In other jurisdictions, the bar consists of a written phase and an oral argumentation phase but then, these countries do not have 5,000 candidates annually. As such, oral exams is impractical.
The trial practice of law does not mean practice for trials. It does not mean trial and error exercise of the profession. Yet this happens because there are many candidates who later become lawyers without ever observing any case being tried. Some lawyers haven’t even seen nor set foot in any trial court at all. It’s true.
Thus, the written bar exams has an additional mandate: It should rise up the challenge of being an equitable proxy to an oral bar examination. Pursuant to such mandate, the written bar must ask questions that approximate the candidate’s thinking analysis rather his photographic memory.
Thus, the written bar should approximate the ability of the candidate to think on his feet as would have been obtained in an oral bar.
To be continued
(see the other parts of this series already posted in the blog)
(Thads Bentulan, June 3, 2004)
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