Pro Commerce

Spontaneous Commerce

When Airbnb was first started in San Francisco, I had three friends who immediately got into the business.

Does that mean anything to you?

One was a game developer, no surprise.  He bought three condos and rented them out. 

The second was a salaryman who bought five houses in New Orleans with the intention of moving there to rent them out. 

The third was a psychotherapist who rented out her city apartment for $5,000 a month and stayed at her country farmhouse.

The interesting thing about this event was that two of these emerging entrepreneurs were not the kind of person one expects to start a business.  It says to me that America is a land of millions of potential entrepreneurs who will start a business if they are given the slightest genuine opportunity. This is truly America. Commerce is deeply American.

The first and third were almost immediately put out of business by the rules San Francisco put in place to make Airbnb unworkable. The first friend soon moved to Los Angeles.  The second was soon put out of business by the city government of New Orleans that made Airbnb unworkable.

The CEO of Airbnb is Brian Chesky.  He and his founding partner were both graduates of the Rhode Island School of Design. Neither one had any idea of how politics works. Both immediately conceded to the laws and regulations that the San Francisco government put in place.  Terrible laws that destroyed two-thirds of all the operating BnB rentals in operation.  The anti-business regulations were copied everywhere Airbnb went. The same horrible regulations nearly destroyed similar vacation rental businesses that had been operating for decades, worldwide.

Three lessons from this: 

1. Americans are deeply disposed to starting businesses; no matter who they are. Its American.
2. Government with trivial and irrelevant regulations is the greatest destroyer of business on the planet.

Travis Kalanick, the founder and CEO of Uber, didn’t start his business until he got a Statewide license to run a limousine business which served as a short-term protection against the politically connected and ferocious taxi cab bastards.

    3. Political skills are vital to innovation in business.  Otherwise governments will destroy you.

In the New Revolution, Teach Commerce

The revolution in higher education is coming.  There will soon be several new and very high quality universities that will protect and appreciate Jews.  It will be important to teach the realities of commerce.

There is no such thing as ‘capitalism.’ There is only ‘commerce.’ ‘Capitalism’ is a term that comes from Karl Marx who had an erroneous theory of labor as the source of prices.  Simply, the cost of goods sold is equal to the labor input to the goods and services plus a payment for capital, plus whatever the ruling class can force on to the top of the cost.  That explains virtually nothing in commerce, which is why the labor theory of capital was never taught anywhere in economics.  It doesn’t explain rent, the prices of land nor anything else. The market prices of commodities vary continually as do the price of equities. No relation to labor.  

‘Commerce’ on the other hand is not a homogeneous entity.  It has three separate components. Trade, Clientry, and Industry.  

Trade is usually a single proprietor often with hired workers.  The trader buys goods and marks up the price for sale based on the various costs, the volume of sales expected and the amount of lending needed to make the sales happen, plus a markup to keep the business running over time. A flower shop or a small bakery are good examples.  The French and the Overseas Chinese are masters of ‘trade.’ There are flower shops and bakeries anywhere there are French.  There are stalls or storefronts with single categories of goods wherever there are Overseas Chinese.

Clientry is the form of commerce that is designed to provide goods or services for the lifetime of the buyer.  A barber or dentist are good examples.  The price of the good or service is based on the market price and the level of skill of the seller. Clientry is based on a lifetime of service as the horizon for pricing. Surprisingly banking is a clientric business, with the intention of the seller or lender to maintain a long-term relationship with the customer, but bankers seldom have the sense of devotion to the customer found among lawyers and architects.

Industry is the type of business designed to maximize economies of scale. It is found wherever multiple stores, or large capital investments are operating.  Every chain business is designed to benefit from economies of scale as are all the entities we call industry; railroads, steel companies, airlines and McDonald’s.

Commerce thrives in societies that value markets, societies that restrain the power of government, and societies that are open to individual initiative.  

Government bans are a great restraint on the nature and quality of business.  Government’s absolute bans on silver restoration, cleaning solvents, and metal plating are a tiny example of the tens of thousands of businesses that are foreclosed by unreasonable and disproportionate government restrictions.

Commerce is 98.3% cooperative. The very nature of commerce is that hundreds, thousands, and sometimes, millions of people cooperate with each other daily. They cooperate within businesses, between businesses as suppliers, and as renters, advisors and colleagues.  

Yet the popular image of competition is the paramount mode of thinking about business. Commerce is cooperation on the grandest scale known to humans.

Lastly, commerce thrives where diversity of opinion, diversity of experience, and diversity of values are allowed to work together.  Merit is the milieu for commerce that creates vigor and innovation.

Someday more people will understand commerce and the world will be a better place.

Don’t Do What You Love

There has been a recent flurry of articles on the subject ‘Don’t do what you love.’  This is pretty much in response to an unattributed popular phrase ‘Follow your passion’ or its earlier version ‘Do what you love and the money will follow.’

As the father of this idea, I feel compelled to comment.  I introduced this idea to the world in my 1974 book The Seven Laws of Money.  The first law is ‘Do it. Money will follow if you’re doing the right thing.’

I wrote this theme in response to all the people who were coming to me soliciting help in raising money for their project.  Mostly hippies. It was the right response to the subject at the time.  Most of the thousands of projects I saw needed to be tried in the real world to know if there was a market. Simple, clear advice.

It promptly morphed into the ‘Do what you love and the money will follow.’ Which is a mystical statement that I couldn’t support. That morphed into Nike’s ‘Just do it.’   A very American sentiment.

Frankly, as advice for the corporate world it is nonsense.  Most people enjoy their work, because of its sociability and its challenges, but doing it as a passion is probably rare. For owners and top managers the business world is hard and stressful.  That is a reality.

If you are just starting out in the world and are a highly competent person, I would always encourage you to do what you love, but be prepared to do it for a long time without much monetary reward.

Documentary Film on the History of Earth

Netflix is running a documentary on the history of the earth called Life on Our Planet. It is an eight-part series with gorgeous CGI.

I recommend it to anyone.  

I have one serious problem with the story line.  The same problem I have with the consensus view of commerce.  The presumption in both cases is that competition is the dominant operating force.  Commerce is supposedly about competition.  Evolution is supposedly about competition with some species as the apex predator.

The fact is that both are overwhelmingly cooperation.  Commerce, which I know deeply, is better than 95% cooperation.  Workers, suppliers, customers, and landlords are cooperative nearly all the time.  Commerce couldn’t work unless everyone helps everyone else. Which is why tribal and communist societies are poor. Poor in every meaning of the word.

I’m not a biologist but I love mycology.  I know that the barren landscape after a mass extinction event would not be habitable without the mycelium processing the land surface to make it habitable for all the fauna phyla.  That is cooperation on a grand scale.  The Netflix documentary focuses entirely on competition and the grand master of competition; the apex species.

Sharks and big whales may be the apex predators in the ocean but together they are an infinitely small part of that biomass.  The same is true for lions and tigers on land and eagles and hawks in the air. 

Cooperation in life is the core reality in biology and commerce.  Why competition and the apex predator model are so popular escapes me.  It is wrong and absurd.  It doesn’t come from Adam
Smith.

Part of the problem is the word ‘cooperation.’  We don’t say a father and daughter are cooperating when they are behaving normally like family members, nor do we say the door man taking a message for a tenant is ‘cooperating’, the doorman is just doing his job. Cooperation is the norm of behavior, or vice versa, the norm of behavior is cooperation.  We just don’t have a word that acknowledges normative behavior in English. 

We Killed the Golden Goose

I wrote about this subject a year ago in June when the Biden Swamp banned American companies from doing business in Russia. The problem with this act of incredible stupidity is best understood with your own knowledge of the internet world that has come into being since 1995. A thousand major American companies have pulled out of Russia.  Some like McDonalds were sold to local providers. Others like Adobe, Apple, Cisco, Intel, Microsoft, Salesforce, and SAP are very different. They are gone from Russia and none of their programs will be updated.

What differentiates the last group is that they continually provide updates of their product.  Unlike McDonalds or Ford which change over time but can still function, as are the 1950’s American cars in Cuba, the software in the post-1995 era will stop working properly without updates.

The high tech world is the Golden Goose for America.  The tech sales globally provide $1 trillion dollars annually to America.  This extraordinary income from tech is the reason the U.S. has had the longest economic growth period in two centuries of the modern economy (13 years without a business cycle recession.)

Now think for a moment whether any business in the world outside of Russia would buy the tech product of an American company. They might not get updates for the product. Many would not buy American. Especially if an alternative comes from India, Singapore or Japan.

Every business in Africa, the Middle East, India, Asia, Latin or Central America is at risk of being put on an American ‘do not do business’ list.  That is a big risk.  When a tech product from China, India, or Singapore becomes available it will be preferred to an American product.  

That is why the Biden Swamp has killed the Golden Goose.  The American State Department was unable to see this disaster; it is a bureaucracy that is part of the swamp.  

We should move the State Department to East St. Louis and create a new department of International Relations in DC.  The current State Department is so muddled it strongly opposed the creation of Israel and allowed Iranian nukes, after more than two centuries of being pro-Arab and pro-Persian.

I Was Wrong

A few blogs back I attributed a large part of the current employment dump in high-tech to widespread understanding, from Elon Musk’s example, that more than half of tech employees are a waste.  I was wrong.  Musk found a commercial truth but his fellow tech managers are not smart enough to appreciate his discovery.

What is going on, and has been for half a year, is the consequence of the most ignorant idiotic government foreign action I’ve ever seen.  The Biden government directed American companies to stop doing business in Russia.  Many complied.  Far too many.  The U.S. government has no such power and even one company could have held up such a directive in courts for many years.

So now those American tech giants who pulled out of Russia have been slaughtered.  Microsoft, Adobe, Salesforce and a dozen others.  

Every business man on the planet looked at the American high-tech obsequiousness to a senile president and said ‘Am I going to buy high-tech software from a company that will not service me in the future if the American government is hostile to my government?’  The answer from any intelligent businessman anywhere in the world was ‘Hell no’.  Screw American high-tech, I’ll find a company somewhere else.

The American Democrat administration didn’t just do this stupid thing.  It banned Russia from using the global banking system SWIFT controlled by the U.S. which makes the dollar the universal planetary currency.

Now, the 100 nations on the planet, who are anti-American, are looking for ways to make the Yuan a major trading currency.  They will succeed and it will raise interest rates in the U.S., reduce American exports dramatically and cause a recession.  Maybe a long one. Good going, you Democrat anti-commerce idiots.

Business in Tokyo

The effects of covid on Tokyo are minor compared to the U.S.  Their schools were not impacted; education is far more important to the Japanese.  

Working from home on computers and Zoom was anticipated. The Japanese firm where I was the key partner (Dynax) did the research on distance working in the mid-1990s. The clients were Mitsubishi and Toshiba.

Only based on appearances in Tokyo, it looks like babies and strollers are everywhere.  My sources give credit to unlimited free child care and free education at very good schools.

Two interesting new businesses.  Vape shops and second-hand handbag shops.  

Vape technology comes from China and I’m told there is something new every month.  The American government has put vaping nearly out of business. We’re Puritans who act purely out of religious conviction.  But we’re missing an interesting global business which we have dominated for a century. The coffee shops are all responding with two separate smoking rooms.  One for tobacco-based products and another for vapes.

The second-hand handbags is a fascinating business. First, remember the richest man in the world makes his money in fashion handbags.  It's a big global money maker.  Second, Japan, to create real equity, and avoid social envy, has for centuries provided the poor with cheap versions of what the rich have. Cotton purses for one, silk for the other.

Foreign relations. I find many of my friends in the Japanese Foreign Office saying Japan has to have its own nukes.  The American nuclear umbrella no longer works with the American global suzerainty gone and a corrupt senile president in office. When Israel is forced to bomb Iran that will be a sign that the Japanese have to be prepared to act alone.

I congratulated one of my longtime friends on her most unusual contribution to society.  In the fifty years I’ve been coming to Japan I have seen a stunning change in clothing.  She played a role in that with many art and fashion shows, galleries and her close relations to Issey Miyaki.  The Japanese have always been cleaner and neater than any other people but they are now pure fashion.  Everyone.  

My female partner and I sat in a coffee shop for over an hour just watching the passing fashion show. Colorful, gorgeous fabrics and tailoring, elegant choice of separate pieces including bags, hair and accessories.  But don’t be surprised by the common athletic shoes and weird socks.  A’la Helen Mirren.  One of our Tokyo friends got recognition from the Emperor for her lifetime achievements in art, fashion and design.  It is visible everywhere.

Taxis in Tokyo now use a special model from Toyota.  Large interior with space for baggage in front and very easy access.

I don’t want to go home. In Japan, everything works.  In San Francisco nothing works and everything is getting worse. Recently a security guard shot a black thief who attacked him and the DA who was recently elected by the outraged S.F. Asian electorate refused to charge the guard with murder.  The black criminal underclass went on full protest mode in response.

San Francisco needs the vigilantes we once had and another 1906 earthquake to start over again.

I would stay in Tokyo if it didn’t mean leaving my friends and a large family behind.

Bed Bath Bad Marketing

Bed Bath just escaped the second threat of bankruptcy. But it won’t survive.

“At its peak in 2017, Bed Bath & Beyond had 1,560 stores with 65,000 employees, bringing in $12.3 billion in revenue. But in the nine months through November 2022, it posted sales of just $4.2 billion, and its headcount dwindled to fewer than 30,000.” said a past CEO.

BedBath was founded in 1971. It filled an important cluster of niches that were formerly many of the niches filled by department stores.  It was a smaller version of Macy’s with a greater selection in each category. 

The big marketing mistake was sending millions of 20% discount cards to everyone in their marketing areas.  That is a terrible marketing mistake.  It has the following problems:

• It tells everyone that the prices without the discount cards are too high.
• That ALL the prices are too high.
• That it is only worth shopping at the BedBath stores when the shopper has a recent discount card.
• It made it very hard for the company to have an online store.  Would an online store be 20% less all the time? Would it have a 20% discount at checkout?  

All national stores need an online outlet. Bed Bath was foreclosed from this  vital business option.

Management knew the problem but was trapped in this marketing nightmare.

“Like any form of promotion, it becomes a drug,” a former CEO said. Over the years, attempts to pull back on the mailings or reduce the discount backfired. “Once you’re addicted to it and your customer is addicted to it, it’s a very difficult thing to wean them off of.”

It is impossible to stop mail-out discounts.

Discount mail-outs work for grocery stores because so much inventory is seasonal and the effect is to be a seasonal reminder. Such grocery mailers are also for specific items that are sometimes temporary real loss leaders.

This is a lesson for all businesses.  Sales of any type are risky unless done with a specific marketing goal in mind. Even then they are questionable.

Just Do It

Two events provoked this blog.  First was an obituary in the Wall Street Journal about a creative director in a Portland ad agency who convinced Nike to go with the ‘Just Do It’ theme.  The second was a response to an earlier blog that asked how the Seven Laws were formed from an old Chinese system.

The fellow who got credit for the phrase was the founder of a Portland ad agency who convinced the founder of Nike to use ‘Just Do It’  as a company logo.  

I see a connection to the first law of money in The Seven Laws of Money. The first law is ‘Do it. Money will come when you are doing the right thing.’  That law was in response to the most common question I got from people who sought my advice about starting a project.  The ad agency fellow in Portland, Dan Wieden, grew up in the hippie milieu and like nearly all hippies he knew the Seven Laws by heart. The founder of Nike, Phil Knight, was part of a running group I was part of in Menlo Park that was around when I first published the book in 1974.  He and everyone around there at the time knew the book very well. There is a connection.

A reader of my blog wanted to know what the seven laws were originally.  My poet friend, Jug n’Candle, actually a roommate from U. of Chicago, Charlie Roll, told me about them.  They come from the 450 BCE Chinese compilation of wisdom called Guanzi, where it is called the Seven Laws of the Universe.  

The first law, he told me,  was the most important but least appreciated fact of reality.  Based on the hundreds of questions people had asked me about getting started with their project or business was ‘How do I get the money to get started?’  The answer is the first law of money. “ Do it. Money will come when you are doing the right thing.”  Many people picked it up. The most common version was ‘Do What You Love and the Money Will Come.’  ( Not quite my advice.) 

The second law, Charlie said, is the opposite of the first. To me the opposite was “Money has its own rules.” It must be accurately accounted for;  debts and  bills must be paid promptly and there are many others such as keeping tight control of all financial functions.

The next four follow the same structure:

3. Money is a dream.
4. Money is a nightmare.
5. You can never really give money away.
6. You can never really receive money as a gift.

And Charlie explained that the last law was, like the end of a French PhD, an opening to the universe: 7. There are worlds without money.   

Those worlds  include drama, dance and deep breathing.

Advice for Restaurant Owners and Operators

Who am I to be giving business advice? I’ve never written or said this before:

I might be the most successful business consultant in history.  I have had nearly 2,000 clients over sixty years.  They have all recommended me to each other.  In a few cases of large and very large companies I was recommended by their existing consultants. 

I have published a dozen books, several by Random House and Nolo Press.  One by Nolo, Marketing Without Advertising, is the third largest selling book on business in the English language excluding textbooks.  Marketing Without Advertising made it to the 8th edition before we (Salli Rasberry and I) stopped revising it.

In terms of restaurants I was the first consultant to Buttercup in Berkeley, the origin of the Berkeley foodie world. Suze Orman was a waitress there but I never met her.

I founded Green’s Restaurant 43 years ago and am still one of the owners. Green’s was the first high-end vegetarian restaurant in America. Still going strong.  I was the main consultant to the first Victoria Station restaurant which became a chain of over 100 national restaurants.

I also advised the board of Starbucks on how to open their first and most successful coffee shop in Shibuya Tokyo; their first shop outside the U.S.

Preamble

That is the preamble to giving advice to all the restaurant owners and operators in America. 

Advice

My advice: unless you are primarily a vegetarian destination, you should consider having a separate yellow menu with all your vegetarian, vegan and gluten-free menu items.  Why?

Three reasons. 

• First, the number of young people who try to be vegetarians is large and growing. 
• Second, they prefer to be treated respectfully and that means that having footnotes (V, Vgn, Gf.) on the menu is not adequate. 
• Third, even in a dining party of four or more, one or two are vegetarians and the group increasingly defers to the food tastes of the minority.

Why a separate yellow menu?  Yellow highway signs have the meaning of ‘Notice.”  No other reason.

Am I Due Any Credit?

As a business advisor it is rare to get credit for good advice.  It is even rarer to get credit for advice that has a major impact.  Most people forget they got advice and assume they would have done the right thing of their own accord.  Which may be true.  From the advisor's perspective that isn’t how the world looks.  We don’t have alternative versions of life so the issue can never be settled.

I bring this up because I just drove from the East Bay back to San Francisco across the very beautiful rebuilt Bay Bridge.  Could I possibly deserve some credit for that bridge?  I think so.

The architect for the bridge was Donald MacDonald, a client of mine in the 1980s, and also a friend. Donald wanted to know how to get more recognition for his many years of creative work.  

I made sure I was right that he had designed many parts of the spaghetti freeway that enters the San Francisco Airport; one of the most attractive freeways I have ever seen.  He said, “Yes.” I asked if he had done any other government architecture.  He said he had done the pedestrian overpass in Berkeley. Also very attractive.

I said he had a unique talent that virtually no other architects had; the ability to work with governments. Consequently my advice was for him to become a bridge designer. He replied that that field was already taken in the U.S. by Calatrava.  I said “no’” there was plenty of room for him.  Of course he took my advice.

Donald was noted for being a little tight with money.  He often counted the nails on his projects. My bill was $1,500, which he was slow to pay. I went to his office and offered to take a framed drawing of his, on his wall.  Which he agreed to.  It has been in my living room ever since then.

Years later when he had designed the East end of the San Francisco Bay Bridge, and it was under construction, I suggested that he hire a person to put all the change orders during construction online with a short explanation of the meaning.  It would have been an incredible success. He didn’t do it.

Again, do I deserve any credit for that beautiful bridge?

I Sold Three Tech Stocks

I have never talked about my portfolio because I don’t discuss investments in any circumstances.  The problem with me giving investment advice is that I am not around when it is time to change the advice.  I could recommend that you buy a stock and a week later I sell it and forget that I told you to buy it.

My portfolio has several segments based on my half- century of managing portfolios, professionally.  One is medical/pharma, another is anti-green that includes nuclear, oil, coal and gas, a third part is tech.  There are two other parts. The anti-green has risen spectacularly lately.

I’ve talked recently about the tech stocks’ income to the U.S. because Seattle and The S.F. Bay Area are connected to giant pipelines from the entire world that pour tech money into the U.S.  That is coming to an end over the next few years.  Sooner than I thought.

I’ve sold all my holdings of Microsoft, Adobe and Salesforce.  These are companies that have announced their refusal to sell products to Russia because of the Ukraine invasion.

The shortsightedness of these announcements is that punishing Russia is an announcement to businesses in China, India and several other countries that American tech companies can be fickle suppliers.  American tech now means ‘unreliable.’

It is easy to replace these three companies’ products with home grown products quickly, especially since China, India and Russia have good indigenous computer professionals. One year and two years from now the products from these companies will have been replaced in many businesses all over the world.

The other problem I see with this fickle shortsighted corporate behavior and the associated government nonsense is that closing down SWIFT for international banking to Russia means that Russia, India and China will rapidly develop their own reserve currency and bank transfer mechanism.  

That means the loss of a great power position that the U.S. has held for more than half a century.  It is even possible that this will lead to the explosion of some crypto currencies to replace the dollar.  Our loss.

We are such a stupid country, particularly the Democrat Party, the same party that held on to slavery and Jim Crow for 150 years. The same party that cut off domestic exports of oil and gas the first month in office and then later begged the Saudis to increase their oil production after we had become an oil importer.  The same party that doubled the price of Russian oil exports to empower Putin.

Reminds me of the kid who killed his parents and then complained to the trial court about being an orphan.

On Giving Business Advice

The subject of my wonderful friend, Ed Roberts, came up today.  Ed died in 1995 and I wrote an obituary the following year.  You might enjoy reading the obituary I wrote.  It is important.  I wrote it because I knew the world would never understand who Ed was and why he was the most influential person of the 20th century.

What I remembered today was a lesson Ed Roberts taught me, inadvertently, about giving business advice.   The first lesson about advice I learned in my late 20’s, which applies to all of life: Never give something unless it is requested.  That applies to everything. (Gifts for birthdays, holidays and when visiting are implicitly asked for by custom.)  It certainly applies to advice; wait for a request.

Sometime in the 1980’s Ed asked for help.  He was running the World Institute on Disability which he and Judy Heumann had created. He was dissatisfied with his ability to get work done.

I went to Oakland and did my standard due diligence research on his office operations. I found three or four changes Ed could make that would increase productivity.  Normally I would expect the boss of an organization to put in a few extra hours of work to implement my recommendations. 

Ed was in a wheelchair with a motor that also pumped air into his lungs.  He could only move two fingers. After work Ed would go straight into his iron lung at home.

I was stunned when I realized that I always gave advice that required extra work by people for whom extra work would pay off generously.

That was not possible for Ed.  He couldn’t do extra work.  

I rethought my advice.  I came up with small incremental changes in the way Ed worked that would result in long-term changes. 

An example was having his staff post a daily and weekly list of projects they were all working on. That example created more esprit de corps and common effort with a better sense of priorities and deadlines.

From that I learned to think of business advice that didn’t require extra hours and extra work for the boss.  

That remains good advice for a business consultant. 

Confirmation of My Work

I wrote a book five years ago called The Most Important Book in Human History.  The title was not facetious.  I call attention to the unique series of accidents that made America the powerhouse that created the modern commercial world.  The congruence of the weak national government, the even weaker hereditary elite, the vast and abundant Great West with the egalitarian values of an immigrant populace brought about this unique historic miracle.

I wrote the book out of the fear that the centrality of our history to modern life is not understood by most Americans and can be lost in the wave of Luddite wokieism that has reared its ugly head in our wonderful country.

I am slowly finding good history books that fill in some of the details.  The best so far is The Dawn of Innovation: The First American Industrial Revolution by Charles R. Morris.

Morris understands the geometric growth of modern commerce in America in the pre-Civil War era and the decline of Britain in the half- century afterwards. He does a superb job of finding visitors to America who comment on the egalitarian drive of middle- class Americans and their natural commercial orientation.  He does an especially good job of showing the role of the Ohio Valley in generating nationally oriented businesses.  He identifies many specific industries and businesses that played important roles in innovation and in creating national and global markets.

At this point I would add what neither he nor I have mentioned, that the Masonic Order provided a national society that brought innovators and financing together on the vast continent.  The details of that remain to be written.

Speaking two languages

I joined a partnership in Tokyo that is described in an earlier blog post. It was the world’s first social think tank.  We solved business problems involving social structural matters.

What reminded me of this is a first rate book on language that I am reading. I learned there are many language communities, around the globe, where the inhabitants communicate in two languages.

That is how my partner and I communicated in our social think tank.  Takekawa san spoke modest English and I speak modest Japanese.  We were discussing very important business issues as we created new types of social research technologies. We had to be sure we understood each other correctly.  Our business success depended on it.

I spoke to Takekawa in my poor Japanese and he told me what he thought I said back to me in his poor English.  Since we were hearing the ideas in our native language we knew whether we were correctly understanding our partner.  I thought our language relationship was unique over the 15 years we used it.

It wasn’t.  We had started out many times using a translator but found using two languages we could understand each other better and more accurately.

In the earlier blog reference I mentioned several projects we worked on, but I forgot an important one. Our client was a recent Shinto-like new religion that was growing fast.  Japan has many of these. They needed a funeral ceremony and an in-home altar.  We used focus groups with their older members and surveys of the field and provided them with both the ceremony and the new altar.

Yes, Japanese people as a group have a higher IQ than most other cultures and they are social innovators. That is why they were the first to have a social think tank.

Saving shopping streets

I was invited to a northern Japan town to see the beautiful museum where a close friend has become the director.  The town has built a lovely modern building with a great permanent collection.  The theory is that support for the arts will revitalize this nearly dead town.  I’ve heard similar ideas proposed for Detroit.

Towns usually live, grow or die because they have all the ingredients of modern commerce. A qualified and relevant labor force.  Good local government and necessary resources for the lowest cost production.  Which is usually a traffic nexus.  Towns in agricultural areas are mainly for shopping.

Bad government and high taxes will destroy a city.  Detroit, New Orleans and Baltimore are examples.  

Small towns all over Japan and America have died because agricultural production got more efficient without labor.  Global agriculture.  Farmer’s children moved to cities for jobs and conviviality.  A two century long process.

The issue I saw in the Northern Japan town was that the main street in town was dead.  Abandoned. In the photo you can see the sidewalk area is covered with overhead plastic, the last time an effort was made to save the street from death.

There were shopping centers and retail businesses scattered around town.  The question was whether the older shopping street, four blocks long, could be revived.

I have watched shopping streets in all sizes of towns and city neighborhoods for decades.  I’ve seen a few revitalized.  

Union Street in San Francisco was brought back to life in 1964 by a wise commercial group and a good architect.  Beverly Willis  developed some design and color schemes that gave the whole street a continuity.  Empty stores were given several years of low rent.  A few good bars and restaurants brought life to the street.  

After 25 years, the street died.  Two main reasons.  Strong opposition to chain stores and bad night-day balance.

Chain stores are vital for tourism.  Tourist only feel safe and comfortable if they see a few chains that they know well from home such as the Gap, Wendy’s, Walgreens, etc.  Global brand names are signs of safety.

Also a balance of daytime shopping and night-time entertainment is necessary to keep street traffic high.  Too many jewelry stores with too many make-up stores and too few bars and restaurants changes the balance and traffic becomes inadequate for every type of store.

Twenty-fourth Street in San Francisco came near death and remains on life-support after the main local organic grocery store had an employee strike demanding a union.  The owner closed the store and two decades later it is still closed.  The store was the main source of foot traffic.  Every idea the Lefty city planners have tried to save the street have failed.  Outside chairs, trees, a weekend farmers market have all been futile.

The opposite can happen too.  On Sacramento and Presidio in San Francisco a small boutique with brilliant original hand made women’s clothes opened.  It was so good that rich women inundated it.  A dozen stores opened nearby within a year.  Including restaurants. The problem here was that street traffic increased so much it caught the attention of a bank.  The bank paid high rent for a corner location and consequently raised the rent at the next door  original magnet store.  When the magnet store closed the street entered a slow decline.

Lots of lessons.  The main one being the delicate nature of shopping streets.

Simple living and used clothes

I have been a simple liver for more than half my life.  When you live simply you have infinitely more options for leading your own life.  You don’t owe on a mortgage and you aren’t worried about losing a job.

I wrote a book on the subject. Simple Living Investments for Old Age which my wife dejour edited for the second edition.

So I am happy to see any increase in simple living in the great American marketplace.  It gives us more free and independent people.  More open minds and creative spirits.

Thanks to an article in the Wall Street Journal I found the online world of sales of used clothes.  There are more than a dozen popular sites, aimed at the young and mobile phone market.  

Selling used clothes has been the backbone of yard sales and consignment shops.  Now it is even easier, online.  The online sites even help with the money exchange and shipping for the young crowd.

Wonderful.   I keep trying to estimate the proportion of GDP that is made up of simple living trading.  My estimate just went up 2%.  It is rising.

Retail failure

The financial press has written the obituary for brick and mortar retail.   Macy’s and Nordstrom are gone along with many others.  These failures are blamed on Amazon and other on-line sellers.

Bookstores were the first to face this issue with early Amazon that only sold books and Barnes & Noble.  I had several bookstore clients.  I also had tea house clients who were being hurt by all the coffee shops opening around them.

I had no trouble showing brick and mortar clients how to cope with the changing market place.  They have enormous advantages over online stores.  Those that followed my advice did well.  The rest closed.  Mostly for the reason most businesses close: the owners were too old, too bored and unwilling to make all the necessary changes.

For bookstores the need was to be more appealing to local customers than online could ever be.  Carry more locally relevant books and magazines.  Have live performances to bring people together with coffee and rolls.  Carry a good selection of local authors and used local books.  Focus on warmth and staff.  Have book clubs.  Have high demand objects in front of the store like newspapers and relevant magazines and maps.  Create a service that will get on-order-books the next day.  Have cards and magazines for local shut-ins and disabled.  Etc.  You get the point.  Become an important local institution.

Tea houses were faced with the problem that new customers could never figure out the absurd pricing system.  Constant tastings.  Simplified pricing.  Demos everyday. Tea pairings with relevant food.  Photos of tea history and video too.

Retailers have great advantages over online stores.  Macy’s has done nothing that is relevant to good marketing.  Brick and mortar owners need to go to Tokyo and look at the stores there.  Japan is the center of the greatest retail imagination on the planet.

The first floor of every department store has everything on wheels and the first floor changes completely every month.  Large tv screens are everywhere in clothing fashion stores and nearly everywhere in other retail stores.  One of my favorite fashion stores has rotating mannequins in outside windows on the facade on every floor and a similar display in the entrance area.  Another fashion store has an 11 story mural inside that relates to the sales staff and the way they dress.  

Samples are abundant in every store that can have samples like Costco, except more extensively. Classes and demos are going on everywhere and are open to passersby.  

Brick and mortar retailers have great advantages but they must change and be lively.  They also need to copy the online stores and have first rate efficient warehousing and inventory systems.  Walmart is going to do alright, so is Costco.

MasterCard redesign

I read an article recently on designers who are trying to redesign everything important and rarely finding a new design that replaces a powerful existing design.

One failure reported was a re-design of the MasterCard logo.  The designers succeeded in changing some element of one of the colors and using lines in the overlapping circles for low grade reproduction circumstances.  Trivial changes.  Insignificant.

Of course I was involved in the original design and naming of the card.  “Involved” is a misnomer or a braggadocio mistake. The advertising man on the case, Bob Footman at Foote, Cone and Belding was powerful and made all the decisions himself.  He used a little focus group research and asked close business allies their opinions.  The reality is that Bob made the decisions.  I was a close friend who always supported him.

Bob’s logic, with which I concurred, was that we were targeting a new market for charge cards: women shoppers.  Previous general purpose charge cards had been aimed at travelling business men: American Express, Diners Club and Carte Blanche.  

Therefore the card had to be white, the symbol of female, virginity and weddings.  It had to show the other symbol of female too: female genitalia.  Two overlapping circles.

We agreed on the design and never flinched in explaining the symbolism to the few higher ranking decision makers.  

With that kind of thinking and candor, no wonder the design had held up globally so well.

Chipotle and Wells

Be careful what you wish for.  Chipotle Mexican Grill wished for customers who cared for fresh, local and organic vegetables.  They got what they wished for.  Then had outbreaks of E. coli, norovirus and salmonella.  Just what many people associate with Mexico.

There is really little reason for Chipotle to open its doors everyday.  It is more than a year and a half since the food poisoning disaster.  There is virtually no longer any profit and a quarter of the customers have never returned.

The Chipotle management tried giving away free food and heavy advertising.  To no avail.

What is this all about?  Ask any man or woman who had a lover who had an ‘affair’ and lied when confronted.  Once trust is gone, it’s gone.

What should Chipotle have done?  And what should Wells Fargo do now?

In business you have to start fresh.  What Chipotle needed to do was close (in the U.S.) for a week, completely change the restaurant interior colors, plates and layout.  Bring in UV lights for the serving counter.  Change the name of the restaurant to ‘Chipotle Texas Brand’ and add some new drink to the menu like a free lemonade tea.  (A symbolic astringent.)

Wells Fargo needs to do something similar.  A new name, maybe ‘Wells Fargo B.’ Put a ‘Recourse hotline’ with phone number on every object including autos, ATMs, the back of checks and employee badges.  

Rapidly convert all retail customers to Wells Fargo B and include a small one inch diameter metal token to symbolize the change.

This is marketing that works when your core trust has been lost.

What about Wells Fargo?

Is it possible to know what happened without knowing any details?  I do.

In the early 1980s my minority community clients began getting phone calls from their members that farm workers who didn’t speak English were getting $30 monthly phone bills.  The same was true of Chinese who didn’t speak English.  The problem was reported in all parts of California where Pacific Telephone operated.

I was hired to do surveys in both communities to find out how widespread the problem was. What was happening was that Pac Tel. had a sales contest inside the company.  When a salesperson reached a customer who didn’t speak English they gave them a full package of phone services which included call-forwarding, conference calling and call return.  My research showed that the full $30 package had been foisted on 200,000 people who didn't speak English.

The California Public Utility Commission order Pac Tel to refund all the money.

Pac Tel was an established company that had never done sales promotion.  The same is true for Wells Fargo (150 years old).  Now aggressive sales were required nationwide for job promotion.  The new accounts people were responsive and opened credit card accounts for new checking customers and opened multiple accounts for customers who had families.

Wells Fargo had to reimburse more than half a million customers about $5 million.  Unlike Pac Tel, Wells had to pay the government fine of $185 million which went to charities that the Democrat Party favors.

I have created several sales promotion award programs for clients.  The first, simplest and most important rule is: in a short time the participants will figure out how to cheat.  Be prepared to change the rules often enough that the cheating can’t be figured out by the participants.

Easy to start a business

In an article sent by one of my wonderful readers there are charts showing the ease of starting and getting a business running. The U.S. comes out as a hard place to start and run a business.

I don’t know how these are measured but I have an important contribution to make.  

If you are starting a restaurant or a retail shop, the impediments can be great.  Especially in the union controlled cities of nearly every American city.   In communist San Francisco, a new business can take forever, depending on how well you know the bribery circuits.  A friend has spent two years trying to open her second ice cream retail shop.

For any other kind of business that is not true.  I worked with over 2,000 start up businesses over the past 45 years and most of them started as outlaws.  They didn’t get permits, they didn’t get licenses and they didn’t file the appropriate taxes.  

The nature of America is that government is local and local government is usually so incompetent that you can do whatever your want by going to a bad neighborhood where neighbors don’t bother you.  That is where nearly all new businesses get started.

Most don’t bother to get  permits, licenses, or pay taxes until they have an established market and know their business will succeed.

So the American way we deal with the horrors of our communist local urban government is to go rogue and ignore the assholes.

I got Muji wrong

Muji is the Japanese global retailer that opened a premier store on Park Avenue in New York recently. It has always been called ‘No brand’ because the products don’t display a brand name and are made of cotton, wool, wood and other no frills components.

I advised the Muji creators back in 1982 when they were just getting started with one store in Tokyo in Omotesando. The store was an experiment of the giant Seibu department store chain.

Because Muji was ‘natural’ and anti-ostentatious in a hippy way, I suggested that the first international store should be opened in San Francisco.

The Muji creators wisely ignored me and opened the first international store in a stylish area of Paris. It was an immediate hit and has grown ever since.

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Muji finally came to San Francisco, after 25 years, and is in an obscure location. Nobody, ncluding hippies, seems to have found it, yet.

I was wrong. In marketing it is almost always best to start at the top of the hierarchy, where trends often start.

Navigating international commerce

I bring up this subject because of my experience with Starbucks more than twenty years ago.

Starbucks was ready to expand internationally. A board member came to me for advice about opening in Japan, the first country they had chosen.

Since Starbucks depends heavily on location, and location everywhere in the world, is deeply connected to the corruption of local government, I advised partnering with a local business to get good locations.

Starbucks wisely partnered with the Sazaby brothers, who came from a family with 200 years in the food industry. Since the Sazabys were in the process of expanding their tea cafe’s, Starbucks was able to get some of the best foot traffic locations in Japan.

The Sazaby Co. recently bought out Starbucks in Japan. The same thing happened earlier when 7-11 Japan bought out the Japanese chain and then bought the U.S. parent company, Southland.

I watched Peet’s coffee fail promptly in Japan; a few years after Starbucks. They hired a Chinese man as the regional manager, assuming he would later handle Korea and China efficiently. Wrong. The Chinese are not Japanese, in anyway. He got many things wrong in the marketing. Failure built in from cultural stereotypes.

My choice in a restaurateur

Did I make a mistake or did Hassan change?

A few years ago I was asked to help select a tenant for a store front.  The storefront was in a location that had been a small grocery and was suited for a coffee shop or sandwich shop.

One of the applicants was a fellow named Hassan who had a large coffee shop on Fillmore near Haight.  

I was not impressed with Hassan’s operation.  It seemed to have too much old raw wood on the walls and floor (hard to clean) and many of the tables had cracks that looked unsanitary to me.  Simply on the basis of the cleanliness issue, I didn’t recommend Hassan for the new tenant.

The exact opposite is the case with my old client La Taqueria which I described in this blog.  One of the restaurant’s strongest points was its cleanliness.  Not something often found in Mexican restaurants.  In the earlier blog I pointed out that my advice had been right and La Taqueria was still packed to the walls with customers every hour they are open, 40 years later.  Since that blog La Taqueria has been named the best burrito in America.

The point of this blog is that Hassan has since opened three other restaurants.  They are favorites of mine.  All three are immaculate and successful.  The name is Squat and Gobble in the new locations.

Did I misjudge Hassan?  Was his first shop appropriate for the neighborhood and I didn’t understand that necessary funkiness.  Or did Hassan change?  

Problem client parable

Honesty in business yes, candor no.

Mona is an architect friend who had a problem client.  The client, Betty and her husband, had a small job remodelling their garage.  After the garage was finished Betty and her husband planned to make it into an illegal apartment.  Mona did some drawings, got little feedback and no response to an invoice for the next four months ago.

Mona is busy, doesn’t need a small job and doesn’t like projects that are intended to be illegal.

Betty phoned recently to ask about the garage job.  Mona, the architect, asked my advice.

My view is that honesty is important to business but candor isn’t.  Candor would mean saying: ‘your invoice is overdue, you are wasting my time and I don’t want to work with you, fuck off.’

Since many people have no understanding of business, especially sole proprietor businesses, we can’t expect them to understand that sole proprietors only have their time to support themselves with.  I’ve never found explaining that issue of any value.  Education is not something businesses can afford to do; big or small businesses.

To me the solution is to phone the client back, I always recommend phone calls because writing emails can be misunderstood too easily.  Mona can explain that she never got paid for the last invoice.  Then explain that she is too busy now to do anything on the job for the next few months (that is true).  Mona  would appreciate getting paid and be happy to discuss working on the project in a few months.

The best outcome is to get a check in the mail and never hear from Betty again.  

The best outcome happened.  The invoice was immediately paid; the client never called back.

Why businesses merge?

We are in a period of merger frenzy.  

The modern world of mergers was created in the 1960’s when International Telephone and Telegraph showed that a giant conglomerate could run profitably with a wide range of disparate holdings.  Harold Geneen was the man who developed the accounting and financial statement based management system that made it work.  

Business people began to see that any viable businesses could be packaged for sale to the growing market of companies that wanted to expand by buying other firms.  What was needed was an excellent accounting and financial system, a president who had a team of managers who formed a coherent cluster of experience and a structure that was working well together.

Why merge?  In the 1960’s a major reason was the volatility of stock prices that made some firms very desireable when bought in a low market.  All that was needed was for the purchasing company to have a higher multiple of earnings to stock price.  Adding a new company with good earnings, even from fields where such multiples were historically lower, meant raising total earnings and consequently the stock price of the purchaser.

That is less reasonable today because management of a diverse conglomerate is much harder when there are more competent managers in the market who can run independent companies well and aggressively with independent sources of capital.

Mergers today make sense for several new reasons.  First and foremost, in the U.S., government regulation is so intrusive and odious that a corporation needs to be very large to cope with the cost of fighting a bureaucracy.  That is true in the banking world and most true in the pharmaceutical world.  It is now, thanks to Obamacare, true in the medical, hospital and senior care world.

Second, large companies need mergers in any industry that is prone to labor harassment and perennial lawsuits (autos, international construction).  This is because the legal department has to be big in real numbers but small as a percentage of the total expenses.

Third, mergers are an efficient way to buy research.  Often creative people and entrepreneurs develop new products and markets on their own better than in a large company.  So they are bought after they have developed and tested new products.

Fourth, American corporate taxes are among the highest in the corporate world.  This means mergers with overseas corporations in lower tax domains can increase the merged company’s after tax earnings.  More commonly it means that a large lobbying operation within the business budget can get specialized favorable domestic tax treatment.

Finally, but not lastly, some volatile industries are ripe for mergers into bigger firms to create some form of stability.  True in advertising and food products.

The current merger frenzy comes at a time of gross government bureaucratic expansion and low domestic economic growth. 

Shoe Goo

I met a couple at the next table at dinner in a neighborhood restaurant.  They had owned a shoe repair shop nearby since the early 1970’s.  We connected when I mentioned being one of the founding partners in a business called Shoe Goo.

A group of us founded Shoe Goo in 1973 in Menlo Park California.  A group of us were runners who ran together on the track between the Portola Institute and the Stanford Research Institute. I was one of four board members of Portola, an education research group.  The chief was Dick Raymond who was a key runner (Dick died a few months ago).  Others included Doug Engelbart from SRI now noted for inventing the ‘mouse’ and Bill English, first manager of Xerox Parc where the modern computer screen interface was invented.  Another runner was the founder of Runner’s World magazine who moved to Portland and helped found Nike.

The importance of this running group has to do with the shoes we all wore: sneakers, also called tennis shoes. Sneakers, when used for running, wear out quickly.  We were running long distances in those days.  I ran 6 miles around Golden Gate Park every Saturday and Sunday with friends, in sneakers.

The solution was found by Dick Raymond who created a product called Shoe Goo.  A black plastic gel in a tube that we used to put on the worn out heels of our shoes.

We started marketing Shoe Goo in the same designed tube that still carries its name.  Another friend who was a hot shot in marketing, Paul Hawken, offered to be one of the partners and do the marketing which was becoming hard for Dick who had plenty of other things we were doing.  Sales grew rapidly for two year, then Paul announced that we had to sell the product to Kiwi because we were in too vulnerable a spot with only with one supplier of our raw material.  

We all took double or triple our investment (a few thousand dollars) and thanked Paul.  Dick was not so obliging and held a grudge against Paul for years.

Our new friends in the shoe repair business told a story that I had never heard about Shoe Goo.  They said Shoe Goo was great for creating an adhesive surface.  If you couldn’t get a new sole or heel to attach to a shoe bottom, put Shoe Goo on the surface and leave it overnight.  The next day anything could be glued to it with traditional shoe repair glues.

Now you’ve read my story.  Look on Wikipedia.  You’ll find a product of the same name with the same design with a completely different history from Southern California.  It is in the top hundred products by sales volume on Amazon in sports goods.

Kiwi had a similar product on Amazon called Kiwi Shoe and Boot Repair which now has a different label.

What is the real story about Shoe Goo?

Parable of Tokyo cleaning service

 

In the mid 1970’s I had one of my favorite painting contractors develop a technique that has become a standard in the painting contractor industry.  

I looked at the individual estimates he made for prospective clients and saw that he could use one standard checklist form.  He did.  The form emphasized the interconnectedness of many paint issues.  Fail to repair gutters and the lifespan of the painting job goes down.  Use a darker color and the lifespan of the painting job goes down. Cut back shrubs and the job costs less. There were a whole range of job components that had an impact on the total price and quality.

A few years later I got a building cleaning service client in Tokyo.  The fellow was just starting out.  That is uniquely difficult in Tokyo where corporate loyalty is deeply ingrained.  Fortunately there was a building boom in Tokyo at the time and some new buildings were potential clients.

My client had a few buildings to clean as a start.  I modified the painting contractor idea to fit this Tokyo client.

I had his workers complete a checklist for each office that was cleaned to be left in the office every month.  The checklist showed all the detailed and intricate cleaning functions that my client’s workers performed.  Japanese are the most fanatic cleanliness people on the planet.

These cleaning checklists became very popular and resulted in countless letters of recommendation for my client as well as frequent conversation in the buildings with employees expressing their thanks.

In less than two years, my client was a major cleaning service in Tokyo.  He is now, decades later,  one of the top three maintenance companies in Japan.

Parable of Michael

I think my readers owe a debt of gratitude to Michael Padway.  

Michael is a long  time friend and client.  We often have a chance to relax and chat about his latest brilliant business exploits.

I sometimes add a few stories from my several thousand business clients to the discussion.

Yesterday, Michael suggested that these stories are parables.  People whose parents are in business get to hear stories like these at home and at meals.  Michael’s parents were both in business.  With Michael’s introduction, I once did a job for his father’s insurance headhunting firm.  

Others, without business parents, may need parables like these to succeed in business.

The first parable is about Michael’s law firm, which he ran with his brother.  The firm did auto liability claims.  Usually a victim of an auto accident was the plaintiff against an insurance company.

Michael ran a powerful ad on post-mid-night TV that generated many responsive phone calls every day.  The firm had lawyers on the phones full time screening callers to see if they had viable lawsuits.  This phone answering was costly to the firm, because it required expensive lawyers to do the screening.

Michael’s solution was to make a high quality professional video tape (an important medium in the days before DVD’s and the Internet) and sent it immediately to everyone who phoned in with a case.  The video helped the potential plaintiff decide if they had a viable case.  If they did, they were given a quick pitch on why Michael’s firm could be good for them and what they could expect on the way a lawsuit would progress with medical exams and legal filings.

It was a brilliant screening, selling and training mechanism and increased the number of viable cases while reducing legal hours in getting good clients.

With that success in hand, Michael added an even more brilliant video.  

He created a video to prepare his plaintiffs for depositions.  Depositions with cross examinations are part of nearly every lawsuit.  They require preparation time that is expensive; most clients are anxious about being cross examined under oath.  The deposition video was a stunning success in preparing plaintiffs.

Such a success that Michael’s firm was able to sell the video far and wide in the legal profession.

In-house money saving option becomes outside revenue producer.