Cars

Google car

Almost ten years ago, my prediction was, in next ten years neuro dynamic programming language will receive more adoption and become a common computer programming language. Variance in my prediction and actual result is significant. Recent announcement of unmanned car from google is very encouraging that my predication will become a reality one day.

In simple words, in machine learning field, there are two types of learning. Supervised learning and un-supervised learning. Unsupervised learning is a type of learning which  makes a  system to learn in dynamically changing  environment.  Neuro dynamic programming language concept is based on unsupervised learning type.  Whereas, supervised learning are widely used in voice recognition (in your voice phone directory at office), face recognition and etc. Techniques like neural network, Bayesian learning are used in supervised learning.

Q-Learning, Dynamical programming are some of the techniques available in unsupervised learning. It is a method used by humans  to learn and the framework is very simple. In a dynamic environment, the sequence of events are random and an action for the random events is taken. A feedback (reward) for the action is received and based on the immediate and long time reward of the action taken for the random event, a weight is assigned to the action. Based on the exploration and exploitation strategy of the system, weight assigned to the action in the past for the random event, the action is repeated if the same or similar random event happens.

In the current computation paradigm, programming logic is deterministic. In the future, deterministic logic is not sufficient in computation.  A car that uses set of techniques to drive itself will be used to learn about that specific car. At any given time, for a given VIN, all the necessary details about the car will be available. It applies to all entities including humans.

Captive Finance Stability Analysis – A simple model

 

As an IT strategist/Enterprise architect in a corporate America, understanding the cash position and cash flow prediction enables to align the IT strategy to support the over all business strategy. Generally, the business strategy, cash position and cash flow position are provided to IT from controlling or corporate finance or business strategy team.

I wondered, how difficult to study survivability, sustainability, stability of a captive finance and came up with a simple model. The model is broken into sub model and the attachment provides the details on the first sub model. The sub model provides the projection of available fund, accounts payable and accounts receivables.

Please click the excel to view the raw data of the model. Please go to “Results” tab to see the projection of the account’s portfolio.  The excel can also be downloaded from google doc. (Few columns were hidden just to ensure the better reporting)

In  scenario #1, the cash and fund flow of the captive company is shown.  If the general administration cost of the company is 1% of its accounts receivable, then company is not going to sustain in next 36 months for the given initial condition (accounts payable and recivable).  The payables are increasing, receivables are decreasing and fund reaches near equilibrium (steady state). This company will not survive in long run unless the G&A is reduced significantly.

In simple words, the company is spending too much of cash in administrating the loan portfolio. Company must quickly react and for a captial investment company, the company is not attractive unless investment company is an expert in reducing and managing G&A and use this projection as a good negogiation tactics for best bargain. 

In scenario #2, the operating loss of the company is 1% of accounts receivable. There is no HOPE for the captive finance company in scenario #2. The net loss of the company is increasing expoentially. Atleast in scenario #1, there was a hope. The company will incur losses only after 12 months and it can be turned around if the company quickly react to it.

Capital Investment company should not consider the company in scenario #2. The company already bought too many bad papers and it can not be reversed.  It is unmanagable risk unless the external factors like economical growth minimizes the credit losses and residual risk. A miracle need to happen for this company in scenario #2 to survive.

In scenario #3,  the company is paying the debts  aggressively. Company is not circulating the money to offer new loans. The company has a very strong balance sheet. If the company is planning to put themself for a sale, this approach given in the scenario #3 will attract more captial investment companies. For the captial investment companies, the company sits on high equity and steady fund flow. This is a good scenario if the company decideds to shut down (or run down) the business in next 36 months and make huge profit. If you are an employee and if you work for the company in scenario #3, better you float your resume since the company will close the doors after 36 months after making huge profit. There is no investment made in this scenario #3 for growth.

In scenario #4,  the company has very low operating losses, manageble operating expenses (G&A) and has a right mix of investment and payback strategy for both future and debt holders.  The company will be making profit for next 36 months and if the trend continues, the company will be in business for long time.  If you are employee working for this company, make more retirement investment with company’s option/plan. If you are captial investment company, buy this company to thrive. This scenario is a win-win scenario for all stakeholders, investors, management, employees, debt holders.

Auto finance is almost a trilion dollar industry. I believe the companies will be interested to buy a software to study the company status in long run given current situation and various scenarios.

Please post your suggestion on developing a software for this purpose will have scope in auto finance industry market..

iPod of the car industry

Few years ago, when I saw iPod for the first time, like many, I was stunned for its design, simplicity and quality. I had at least 5-6 different cell phones in my life and each of the cell phone manual was around 150 pages and when I got the iPod few years ago, the manual for that iPod was 2 pages. When I brought up this to my close friends during my Sunday chat sessions, some of them argued with me that iPod  and cell phone functionalities are different and hence the significance in the manual size. Those friends were speech less when Apple came up with iPhone.

I was wondering, why Sony did not come up with something similar like iPod. They dominate this market for so long and why they were not the first one to come up with something similar to iPod.

After some study, as I understand, most of the Japanese companies use the Japanese management style in all strategic and operational management. The key approach, as I understand, Japanese management style is more on consensus building. If there are 5 members in a team, all of them HAS to agree on the direction, approach, next steps before an action is taken. It makes a fundamental assumptions that all the 5 members are subject matter expert and kind of have an idea of the future prediction through approximation.

Obviously this management style is to limit the agility, innovation and time consuming. Statistically, this style proven to produce better quality products. In other hand, quick to market approach management style is proven to be more innovative but lack quality.

In Walter Chrysler biography, Chrysler stated one of main reason for his success and innovation was: make quick decision ,observe the results and adapt instead of taking long time to make a decision and realize it was not the right decision. Historically Chrysler company proven to produce most innovative car product in the car industry. Walter Chrysler management style is other spectrum of Japanese management style.

It appears, based on the recent JD power survey and consumer reports, American cars quality have been improving a lot but long way to go. They are on the right track. Particularly, Ford has been producing high quality product with best fuel mileage in last year. Like Ford, if the other American car companies figure out a way to drastically improve the quality of their product AND keep the innovation which has been in their roots they are going to produce the iPod of the car industry.

I wonder, the Japanese car companies are making any adjustment to their management style to be more innovative to achieve what Sony failed to do so.