Friday, February 27, 2015

Gasoline Prices

Cost at the pump down by a buck in the last year. My question is where did that buck you are saving come from? Or better still where did that buck go last year that it isn't going this year?

Fuel in the US is a fascinating product. Unlike many of the things we buy every day there is a long chain of stops between the oil in the ground and the fuel at the pump. With a dozen eggs there is a relatively short supply chain. The chicken “rancher” harvests the eggs and sends them to a wholesaler who delivers them to a market and you buy it from your local grocery store. OK, maybe there is a distribution warehouse in between but the point is there is little change in the eggs between the chicken and the store.

Gasoline on the other hand has a lot more stops. Pump out of the ground and then to a refinery. In many cases the buyer at the well is just a wholesaler and resells to a refiner who resells to a wholesaler who resells to a name brand who resells to a local gas station.

In many cases that local gas station is really a franchise holder for that national brand and is an independent business sell that brand fuel in the same way they sell packs of gum or candy bars.

With each step in the supply chain, each of those independent businesses add profit.

Anyone out there believe that those businesses are selling at a loss at today’s prices? At least for very long? Cheaper not to pump it out of the ground than sell at less than it cost to pump it up, right? Same thing, if I can’t buy it and refine it for more than my cost, I’ll shut down the refinery. If I can’t sell the gas for more than I paid for it, I won’t refill the tanks at my gas station.

So that buck you are saving was a few pennies profit for each of those steps in the supply chain. Remember they aren't taking a loss so you can save that buck, they are just taking a few cents less profit.

Here is the key to learn - all those companies could have survived nicely on a tiny bit less profit last year and boosted the entire economy in the US. All those extra dollars per gallon that the supply chain siphoned off into their bank accounts, could have been spent by consumers on new shirts, TV and all the other things that would employ workers and pay salaries.

Okay, that buck alone won't restore the entire US economy - BUT - that same process of siphoning off the last fraction of a percent of profit by every business in the US is locking up huge amounts of capital. Money that could be circulating throughout the rest of the economy and lifting every other person and business out of the current stagnation.

Tuesday, January 20, 2015

Pin the tail on the donkey

Many of us working with large corporations have IT departments that are centralized somewhere far removed from where we work. Getting a computer problem fixed can be an exercise in frustration. Emails that take hours to be answered, computerized forms that get shunted from problem group to problem group within IT, all those seeming impediments to getting what should be a simple permissions issue fixed.

It’s even more frustrating when I had access last Friday but no access Monday morning and IT can’t seem to figure out how to restore that access!

One of the biggest stumbling blocks to fixing these systems is not assigning the cost of my downtime to the actual cause. If we had a charge number for “computer problem” rather than a generic overhead time card charge number the problems would get fixed much quicker.

I call this piece “pin the tail on the donkey” because in most companies, assigning the cost of unresolved or lengthy computer issues ends up looking like the child’s game. A computer problem represented by the paper donkey tacked to the wall and all the people who are trying to get their computer solved pinning the cost of their down time like that paper tail, anywhere they can find a place.

Adding a charge number for “computer down time” as a unique collector would at least allow management to look with some precision at the real costs of IT issues rather than masking them with charges to generic overhead or burn project time on unproductive computer down time.

Sunday, November 23, 2014

Noblesse Oblige

My writing partner, Bryan, posted this to his blog (Profit at any Price) a couple of days ago and I thought I should repost here too.

Noblesse Oblige by Allen Laudenslager and Bryan Neva (March 2013)

This Blog was originally published on Thought Leaders on March 13, 2013.  The longer I work, 
the more I see good people who are promoted into positions of authority in organizations slowly 
give into the temptation of pride and privilege. They forget their obligations and squander the opportunity given them to serve others in their organization and improve the corporate culture. 

“Noblesse Oblige” is an old French phrase that literally translates as “nobility obligates.” It means that those who have power and authority, or who are privileged, rich or famous have a moral responsibility 

to display honorable, charitable, and exemplary behavior towards those less fortunate or to those dependent on them.

In other words, whoever claims to be noble must conduct themselves nobly. John D. Rockefeller, Jr. summed it up nicely when he said: every right implies a responsibility; every opportunity, an

obligation; every possession, a duty.

The idea of “Noblesse Oblige” was created out of enlightened self-interest. The nobility had serfs who 

were dependent on them for land to farm, a place to live and protection from bandits. In medieval 
times all the land belonged to the nobility; the enlightened noble recognized that while he owned the l
and, without someone to plant and harvest the noble had no income. Seeing to the wellbeing of his 
serfs was his “noble obligation.”

The good old days of companies treating their employees as their most valuable assets have been set 

aside in favor of expecting them to work harder for the same pay and fewer benefits. In place of 
rewards they’re told they should be glad they still have a job. Corporate management has developed an entitlement mentality (like the old French nobility) by remembering their privileges (power, prestige, perks, and pay) but forgetting their obligations to their employees.  So what does this mean for you?

Loyalty always starts with the person who has the power and authority and is earned not given. Power 

is the ability to grant or withhold rewards, and authority is the power to influence the behavior of a 
person with less power. And there’s no authority without a counterbalancing responsibility.

Some use their power and authority altruistically; unfortunately, many others use it capriciously or unfairly. Lord John Acton (1834—1902, British historian and moralist) famously wrote: Power tends to corrupt, and absolute power corrupts absolutely. So what tends to happen is that those in power begin 

to believe their own press releases and act as if their power is a natural right and their authority is to be unquestioned. After all, they must be right or they wouldn’t have been granted the authority in the first place, right?

The key to avoiding falling into the entitlement trap is simply by learning a little good ol’ fashioned humility. Start by walking over to your company’s customer service center and imagine there’s no one there to answer the phones, to take orders or to solve problems. You’re not going to sell anything.

Next, walk down to your company’s shipping and receiving department and watch the employees 

loading and unloading trucks. Now close your eyes and pretend that those workers aren’t there… your products are just sitting on the docks and the trucks are not getting loaded. How much money will you make if you don’t ship your products to customers?

It’s easy to think of all these workers as not being important because almost anyone could do these 

types of jobs. Answering the phones or loading and unloading trucks are cheap but also very critical. 
In other words, the labor costs are inexpensive but the work is valuable.

Now extrapolate these examples out to your entire organization. How much value are all your other employees contributing to your long-term success? Who really produces and who is overhead? 

Enlightened self-interest should tell you that without workers you’d have no income.

So while you may not be willing to pay much for a person working in customer service or shipping and receiving, enlightened self-interest should tell you that a relatively low paid employee might be critical 

to your long-term success and you should begin to treat that worker with the respect their contribution, 
not their cost, deserves.

Saturday, October 18, 2014

No man is an island

No man is an island

No man is an island entire of itself; every man
is a piece of the continent, a part of the main;
if a clod be washed away by the sea, Europe
is the less, as well as if a promontory were, as
well as a manor of thy friends or of thine
own were; any man's death diminishes me,
because I am involved in mankind.
And therefore never send to know for whom
the bell tolls; it tolls for thee.

John Donne

An emotionally satisfying poem, but what the heck does it mean to business? It means that your business, in too many ways to list, depends on the businesses around it and on your suppliers and customers.

A climate of success helps you to succeed while a climate of collapse makes it much more likely that you will fail. We have uncountable examples of towns that relied on a single economy. The farm and market towns of the midwest that were supported by the small family farms died with the advent of industrial farming.

Those large farms were operated by so few workers that all those support business that made the town exist weren’t needed.

We know of cases where small stores closed thru loss of business diverted to big box stores. Part of the problem is that the profits from a local store tend to stay in the community while the profits from big box stores tend to be aggregated in the financial centers of big cities.

This phenomenon constitutes a cash drain that eventually strips that small town of its cash and unless there is a constant influx of fresh cash then the community goes broke and the residents leave for richer ground.

If the cash is in the financial centers then that is where the cash gets spent and that’s where the jobs are. As the people collect where the money is those small towns slowly die out. Just like the gold rush ghost towns when the gold ran out.

We are witnessing the same thing on a national scale. As more and more products are made in far flung places the cash is being transferred from the developed nations to the developing.

The key here is that people who don’t have jobs can’t buy your product no matter how cheaply you can make it.

I can buy a life jacket for around 12 bucks but what is its value? If I don’t go out on the water I wouldn’t buy it at any price. When the boat sinks I might pay $100 for that same life jacket. If I don’t have even a single dollar, then I CAN’T buy that life jacket even if the boat is sinking under me.

The point to all this is that if you minimize your workers profits to maximize your  own, then they have less to spend with you. While it’s true your workers can’t buy enough of your product to keep you in business that money does circulate.

If your workers can’t buy from the local burger stand, the people who work in the burger joint can’t buy your washing machine or dish soap.

Every job you and your industry transfer to some far-away factory is one less local customer for your product. And when that transfer is to chase that last fraction of a percent of profit but is making your potential customer base smaller, are you really coming out ahead?

Once again, you are absolutely correct when you say that your business can’t make that big a difference and by yourself you are right. Add your choices to all the others making the same kind of decision and we have the current lingering recession.

Living proof that recessions are self-generated self-fulfilling  phenomenon. If business cut employees and/or salary/benefit packages than employees spend less and there are fewer sales.

Reminds me of an old Kingston Trio song, Desert Pete:

“You’ve got to prime the pump, 
you’ve got to have faith and believe
You’ve got to give of yourself 
before you’re ready to receive.
Drink all the water you can hold, 
wash your face, cool your feet,
Leave the bottle full for others, 
Thank you kindly, Desert Pete”

Tuesday, October 7, 2014


Bitcoin is a full on fiat currency supported only by the user’s faith that someone else will accept it at what they paid for it. Looked at one way it is a fraud since there it has no intrinsic value supporting it.

In another sense it has exactly the same value as an ounce of gold. The trust that someone else will accept the value and exchange it for something we both agree is an equal value.

I remember once when I was about 13 (1958) and traveling with my parents, we stopped for gas in a small town in western Pennsylvania where my father tried to use an American Express Traveler’s Check. That was a matter of trust - this small town gas station had never seen one and didn’t know if he could trust it or not. He did know and expect that he could trust a 5 or 10 or 20 dollar bill!

Back to that ounce of gold you trust so much. In the depths of antiquity certain types of sea shells drilled and strung like beads were a medium of exchange. They were rare and hard to get, at least far from the coast, and people accepted them in return for goods and services. As travel became easier and the shells lost their rarity they were supplanted by other mediums. Iron, copper, silver and gold coins for a long time were the standard and later were replaced by paper that could be exchanged for set amounts of the actual metal.

Gold, silver or any other metal has only the value we give it. Each of these has a use in manufacturing. You can build things from iron and steel or even copper. Gold and silver have industrial uses beyond their use in jewelry. But if you are in the wilderness, and need a meal, that ounce of gold will not feed you unless someone else has food AND is willing to exchange that food for the gold.

So why might they give up an immediately useful thing like a meal for an immediately useless thing like an ounce of gold? Because they trust that someone else, somewhere else will want to trade what they have for that ounce of gold. So in a very real sense, that gold relies on exactly the same “value” that a Bitcoin does - trust!

For good or ill, Bitcoin is now a permanent part of the financial landscape and will be a permanent part in some form or another from now on. So before you start wailing and moaning about Bitcoin being worthless and the ultimate fiat currency; remember that it rests on the same foundation as gold, US dollars or a can of soup. We expect that someone else will accept gold or soup as unit of storage of value. And that they will be willing trade whatever they have for that gold, US dollar or can of soup.

If you think this is a new concept think about this, approximately 800 years ago St. Thomas Aquinas said “Men could not live with one another if there were not mutual confidence that they were being truthful to one another”.

Thursday, August 28, 2014

Why the experts aren't helping

In August of 2009, the CNN web page ran an article titled “How to get a job in 100 worlds or less. In almost every case the professional career consultants gave advice that presumed the candidate had skills that very few real life candidates have.
These 7 people gave great advice. The problem is that they gave half the advice – strong on what and short on how! While the article was written to be short and fast, the very structure of the article causes more problems than it solves. Since it is written in the expectation that the reader can actually use the suggestions, when the unprepared reader bumps up against the reality of their own limited abilities they are left more discouraged than before they read the article.
Each of you reading this article, by the very fact of taking the time to read this article, are outliers. You are not “average”. If your response to what I am saying is “learn those skills” it’s because by nature or education you’ve gone that one step farther than most people either know how to go or have been taught to go.
My point is that you cannot apply your standards for yourself to those poor souls who are floundering in their job search.
The key to economic recovery is people working at well paying jobs. Working people with good salaries have money to buy stuff and companies need them as customers to survive. The out-of-work people need help do each of the following:
  1. Not just discovering companies that might use their skills, but companies that need those exact skills AND have a current opening. This is key because having exactly the right skills, presented in exactly the right way on Monday is worthless if the job closed on the preceding Friday or doesn’t open until the following Monday.
  2. Help analyzing job requirements and matching them to their own skills. A lot of people have to change career fields in today’s market and have great skills that will crossover to other industries or jobs. Since their expertise is in the work they do and not in marketing their own skills, most won’t know how to discover or explain how their skills crossover into the new fields and industries.
  3. Help tailoring their resume to showcase how their skills match the job requirements. Most people try to write a resume only once every few years and thus are not very good at succinctly explaining their skills and abilities. Most people don’t have enough practice to tailor their resume to showcase their crossover skills.
  4. Access to a wider set of contacts and information about which companies have current openings and whom to contact, by name. The helper must become the referrer. The vast majority of jobs don’t naturally build large networks In fact; most workers don’t have networks and don’t know how to build them.
  5. Lastly the HR people must learn that many of the best candidates are not and need not be the best professional job seekers. Unless job search skills are job performance skills, the candidates that have the best job search skills are not really professional engineers or clerks or whatever; they are professional job seekers and once they start work, they will immediately start looking for their next job.
Before you say: “Hire one of the companies in this article to teach you and to supply the contacts you need.” Remember you are talking to someone who has just lost his or her job, thus has no income and really can’t afford to pay for professional help. These kinds of support are what the state unemployment offices should be supplying and rarely if ever actually deliver.
The solution will come from one of two sources. Either from someone within the system who recognizes the deficiencies and has the authority to make the necessary changes, plus access to the funds to pay for the extra resources. The other possible source is some “genius” outsider who can disrupt the existing process in some unexpected way.
Since genius is where (and when) you find it, the most likely solution will be a slow process of small changes within the system as lone individuals discover ways to place one candidate at a time and try to formalize the things that work.
Don't just toss this aside as just another rant. Remember that defining the problem is always the first step in solving it.w 

Tuesday, August 19, 2014

Startups are fundamentally different from anything else you can do in business.

In many ways a starting a company is just like raising a child. Everything is for the first time - new and untried. No matter how much experience the people have designing the product or servicing the customer; with a startup it’s still the first time that particular task has ever been done with those people in exactly that way.
Just as an established company has to build a relationship and reputation with a new customer, a new company has to build a relationship and reputation with every customer. An established company has staff interrelationships that are just being built in a startup and will inevitably impact how and how well those people work together.
Every new product or service will have problems to solve. Just think about the last time you bought a new TV or a new car. You had a learning curve just to figure out how to set the clock or the date since every TV or car has a slightly different procedure.
An established company has processes and procedures for most of its day-to-day operations. A policy for handling customer complaints and refunds, and a set dollar amount that the service person is authorized to spend without asking permission and so on.
The first key lesson for a startup to learn comes from the French philosopher Rene Descartes – Each problem that I solved became a rule, which served afterwards to solve other problems.
The takeaway from this is for you to keep close track of problems and successes to develop processes, procedures and guidelines to deal with future issues. This deceptively simple practice is the key to scaling your business and allowing you to add staff without losing the very things that set you apart from the competition.
Every startup begins with an idea and that must be turned into a plan to actually create a product or to deliver a service. Depending on the business that plan might be very simple or complex but just like planning a trip to the grocery store without a list you end up forgetting the lunchmeat!
While a better plan generally leads to better results, its far too easy for you to get caught up in trying to write the perfect plan and to account for every possibility, leading to the well known “analysis paralysis”.
The second key lesson for a start up is - A good plan implemented today is better than a perfect plan implemented tomorrow.
George Patton
Your takeaway this time is that while you must do enough planning to know were to start, what you need to start with and where you are going, you should start actually doing something as soon as practical. Just like that mythical trip to the grocery store I mentioned earlier, you can always add or subtract items from the during your shopping trip, but start filling your cart!
Reading the startup advice in most business magazines you will see the reoccurring theme to not let finance hold you back. While this is good advice in the main you still need some cash to get started.
I can start a ditch digging service with a car or truck (or a bus ticket) to get to the job and a $15 shovel. Without that transportation and the shovel I can’t start a ditch digging business! I specifically chose a ditch digging business since the cost of tools is just about as low as you can get, but as you can see there is a minimum you need to get started.
How many times have you seen a need for a service or product that you’ve thought “I could make a lot of money building that or doing that for that customer”? In looking at exactly how you could make the product or deliver the service you find that you need some cash up front to buy the raw materials and tools to actually build the product or deliver the service (and by the way feed yourself till you get paid) and decide that you just don’t have the cash to make it work?
Most of us have shelved the idea and moved on looking for something we can do with the resources we already have or use what we do have to get a sample together to get more funding.
Its OK to look for opportunities within your budget or skill set, it is also OK to look for ways to expand your budget or acquire new skills but to you really only have those two choices. My business experience has taught me that more ideas fail for lack of funding than funding is wasted on bad ideas.
The key to places like Silicon Valley and Austin, Texas is not the universities that turn out educated people, although that helps, Its not the co-location of research and development branches of big businesses although that helps too. The “secret sauce” is the people willing to risk their cash on new ideas!
The last takeaway is that you should never saddle yourself with so much debt that you lose control; but never borrow just enough to give yourself a case of the shorts. You've got to have enough cash to finish!