Skip to main content

Kodak's Final Moment

As someone who is interested in the long run, the bankruptcy of Kodak raises some interesting questions.  Kodak, in its prime, was a very profitable business, with one of the most recognizable brands in the world.  Its main product during its 138-year history was film for handheld cameras, a market which it dominated and which had large margins.  However, the development of the digital camera and mobile phones with in-built cameras has resulted in a huge decline in demand for film.  Although Kodak was instrumental in developing digital camera technology, this industry was very competitive and had low margins.  Could Kodak have avoided bankruptcy by moving into different product markets?  Can old-technology firms transform themselves into new-technology firms? Should Kodak's shareholders and managers have wound their business up voluntarily a decade ago?
As someone who has studied companies in the nineteenth century, I have a unique perspective on company longevity.  Few of the top companies traded on the London Stock Exchange in 1870 exists today as an independent entity - most have disappeared, some have been taken over or have merged with other companies, and the assets of some are now owned by the UK taxpayer (e.g., Bank of England).  From this perspective, Kodak was a long-lived company.

Popular posts from this blog

The Economics of Global Warming

The Berkeley Earth Project , an independent study of global warming, has found that the earth has become a degree warmer over the past half century.  However, the statistical uncertainty surrounding pre-1920 estimates makes it very hard to say much about long-term trends - click here for graph .  This is one of my concerns with the global warming debate - we simply don't have trustworthy long-run data which looks at temperature changes over the last millennium (or two).  My second concern with the global warming debate is that it is very hard to prove any sort of casual link between global warming and human activity.  The scientists may be able to show correlation between global warming and our production of carbon dioxides etc., but correlation is not causation. My third concern with the debate is  that those who are sceptical or agnostic are stereotyped as flat-earthers or intellectually-challenged crackpots.  This only stifles debate and the progress of science itself. 

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 

The Failure of Herstatt Bank

As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of