Synthesis

1PAGERTM Synthesis

The most powerful use of TST China Systems is comprehensive, multi-scenario analysis that prepares you for virtually any set of circumstances.  The ultimate output is the 1PAGER, a synthesis of your most important assumptions for the scenarios on one dynamic page.  For example, assume you are using the Multi-Tier Model to determine the risk/reward of investing in China relative to Brazil, EU, India, Japan, Russia and the US.  You can develop 3 China scenarios, such as Soft Landing, Middle Landing and Hard Landing, and then:

  1. assess their probability
  2. make alternative assumptions
  3. take those assumptions to their logical conclusion
  4. see your thought process and the results
  5. play “what if” until satisfied your reasoning and results are correct
  6. make the decision taking all scenarios into account
  7. react to rapidly-changing conditions with maximum efficiency

You can visually compare the scenarios as illustrated by the Soft & Hard Landing comparisons below.

ChinaScenarioComparison2

You can see at a glance that China ranks 2nd with an 86% score under the Soft Landing Scenario and last at -100% under the Hard Landing Scenario.  Also that the relative probabilities are 45% for the Soft Landing and 35% for the Hard Landing.

Catalysts

ChinaCatalystsComparison

You can see the alternative catalysts and weights: (1) Soft Landing: 20% Weight + 400-600 Million Into Middle Class +++ and (2) Hard Landing: 30% Weight + Empty Cities – – -.

In reaction to the global financial crisis in 2008-9, the Chinese government stimulated the rapid growth of China by pouring vast sums into real estate and infrastructure development, leading to vast new cities named empty cities or ghost cities.

Catalysts & Risks

The issue then becomes the logical effect of the catalysts on the other factors within the context of each scenario.

ChinaCatalystsRisksComparison

The Risks weights, sub-risks and judgments are different for the two scenarios. The Risks weight for the Soft Landing is 15% and the sub-risks are BRICs, Inflation and Oil – in order of seriousness. The judgment is that China has 2 of the 3 risks; the neutral color indicates that China has average risk relative to the other 6 countries.

The Risks weight for the Hard Landing is 30% and the sub-risks are Middle Class, Policy and Currency – in order of seriousness. The judgment is that China has greater than average risk for all three sub-risks and the red color highlights it very negative impact on the score.

X Factors – The Final Connection

ChinaDynamicDriversComparison

Notice the weights and 3 sub-risks are different.

The X Factor metric  functions like a wild card in poker.  Its versatility enables you to connect all of the assumptions for each scenario in a logically consistent way.  The judgment for the Soft Landing Scenario is that the work ethic of 1.3 billion people, their emphasis on science, and their deep level of savings will, in combination with the other assumptions, result in a Soft Landing.

The opposite is true for the Hard Landing. If the cities remain empty, the 9% GDP growth was a counterfeit. The cost of the Empty Cities was included in GDP on a dollar for dollar basis; however, if they remain empty, then their true economic value is a fraction of their cost.

The Communications Power of the TST Visual Story

TST China Systems is designed to maximize professional intelligence.  One of the highest forms of professional intelligence is story-telling.  TST Models are the only models that visualize the stories professionals tell in the same rich language they use in speech and writing.  We call these stories TST Visual Stories.

Story-Telling

“The human mind is built to think in terms of narratives, of sequences of events with an internal logic and dynamic that appears as a unified whole. Effective storytelling, far from being some trick of persuasion, is hard-wired into the human mind. It is inescapable and ubiquitous across all of society and culture.”

Animal Spirits“, Akerlof & Shiller

Make the Story Short & Make it Sing!

Great communicators distill complex issues into easy-to-understand stories – as Warren Buffet mandates in his quote above. However, they cannot make the story complete, precise and dynamic due to the intrinsic limitations of language alone.

1PAGERs are Most Effective when Combined with other Presentation Media

The 1PAGERs have extraordinary analytical and communications power due to their combination of rich language, mathematics and visualization on one dynamic page. However, they are not designed for detailed assumptions – only your most important ones.  For detailed analysis, you combine them with TST sub-models and other media, such as notes, research reports, PPT presentations, charts, indices and videos.  See TST Equities – Morgan Stanley Research Reports  for examples of research reports that leverage embedded TST models to make the reports both shorter and more comprehensive.
ChinaScenarioComparison2

Benefits of TST’s Unique 1PAGERs and Drivers-Focused System

As described on the TST China Home page and illustrated below, TST China Systems features a powerful Drivers Management System designed to help you prioritize the drivers of your decisions at all times.  In addition to our unique TST Models and their signature 1PAGER output, the system integrates taxonomies, databases, traditional numerical models. research reports, PPT presentations and other traditional tools to help you collaborate with colleagues and constituents in the most organized way.  The benefits of the TST China Systems include state-of-the-art organization, transparency, efficiency and improved decision processes, which together increase the probability of greater accuracy.

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