Sunday, December 28, 2008

Market Forces

We’ve been hearing a lot about “market forces” in the news lately. A lot of people, including the self proclaimed experts, don’t understand what market forces are and how they really work.

One definition of market forces is: “in economics, the forces of demand (a want backed by the ability to pay) and supply (the willingness and ability to supply)”.

That’s fine but it leaves out some critical information, such as:

1. Market forces are only clear to history.
2. Market forces only react to events, they never cause them.
3, Market forces don’t react to small leading indicators, only to big
changes or events.

You can’t manage an economy using market forces since you won’t really know what market forces think about a decision for months or years and by that time it’s too late to change anything.

You’ve got to have yet a set of tools to estimate the direction that current events will drive you.

The decision makers saw the same little changes that the workers saw but the decision makers thought “That’s too small to matter.”

Well they were wrong. They were looking at the wrong leading indicators, and drawing the wrong conclusions.

It’s not about blame, it’s about recognizing the decision makers who were wrong and those who were right (darn few) and to start listening to the ones who got it right! In a manufacturing process, when the end product doesn’t pass the quality check, you look at where in the raw materials or on the production line the product first failed to pass the quality checks. I the case of our economy it’s the end result of a lot of small decisions that turned out to be wrong.

Now companies are going to have to look at who, within their organization, was telling them “Don’t do that” and start listening! That person was right and EVERYONE who said “Yes, we should” was wrong. Who do you want to follow, the one who turned out to be right, or the one who gave you the bad advice?

Monday, December 22, 2008

The product comes first!

I just checked the Honda website and found that the 09 Civic has a 140 HP 1.8 liter engine. 1.8 liter equals about 110 cubic inches.

By that standard a 350 cubic inch engine from Chevy should pump out 445 HP. In fact the current (09) model puts out 315 HP. Gives you some idea about how much effort GM has put into improving the efficiency of their products.

I have not investigated to see if the processes used to get that much horse power from the smaller displacement will scale to give the same results in an engine three times the Honda’s size but, absent proof to the contrary, we should be able to get very close.

We could all have the performance we want with much smaller engines (and smaller fuel bills) if auto companies' focus was on building cars and not just on profit.

Yes, all business must make a profit and to get large investments they must make large profits, but as Warren Buffet said, “Take care of your business and your stock price will take care of itself”.

I suspect that most of the problems are caused by the difference between 6% profit and 6.1% and not between profit and loss.

Far too many American businesses have forgotten a fundamental principle of business - profit is a byproduct of a the product, not the sole goal of business. If you don’t believe me, explain why people are flocking to Honda, Toyota, and others when the US car makers have products at the same price point that aren’t selling nearly as well. Why is Apple computer’s share of the market growing in spite of their higher price?

Saturday, December 13, 2008

About the Bailout

I have been following the auto bailout. Without discussing the pros or cons of the bailout, frankly I can make a convincing argument for either side, I really want to know what the companies will change TOMORROW to fix the problem.

I believe that we are the sum of all the decisions we’ve made. If you find that depressing, it’s a different discussion. If I’m right, then the auto manufactures are in their current state because of the decisions they made last year, 5 years, 10 years, 20 years ago.

Ford, Chrysler, and GM all spend huge amounts of money every year on market research. The cars they developed aren’t selling well against the competition and haven’t been for years. They’ve been spending a lot of money on manufacturing that is resulting in their customer’s perception of poor quality when compared to the competition. They spend a lot of money on negotiations with their workers yet their competition, at plants in the US, have lower labor costs.

Just for the record, I drive a Chevy 1/2 ton pick up truck, but before I’d loan any of these clowns a thin dime, I’d demand a clear statement of what they plan to do differently.

Either their focus groups were talking to the wrong people or the planners weren’t listening to the answers. Either they’ve been living in a cave or they are in denial cause somebody else's cars keep getting voted “Best Car of the Year”, readers choice, and selling better! The public’s perception of Detroit’s quality has been bad since the mid-1970s, deserved or not. The Big 3 haven’t aggressively worked to correct it.

They diluted their brands by trying to have a product from each brand in the same size/price segment. Any third year marketing student could have told them that’s a recipe for disaster. Plymouth and Dodge got so close that one became redundant and Plymouth, one of the oldest brand names, is gone.

Now they want me, through my elected officials, to “loan” them my tax dollars to keep making the same kinds of mistakes that got us here!

A good friend who is in the investment business told me that the president of GM’s job has nothing to do with building cars, it’s about raising money. Well pardon me, but NONSENSE! If he did his job building cars, he wouldn’t have to rase a bloody dime. His products would make enough profit to finance any improvements he wanted to make. If he needed bridging capital, he’d have people with cash standing in line to give it to him.

If you think of the car business as an assembly line (no, I’m not trying to be funny) and look where the process failed, it’s not with the workers building the product. It’s at the planning phase. We are building the wrong product, using the wrong methods and we have got no chance to fix it until we recognize that we are doing that because the people deciding what to build and how to build it picked wrong.

I’m not sure why they picked wrong and I’m not sure it matters at this point. Cause the cure is for the leaders to either admit they were wrong and that they can’t do it that way ever again or for the senior managers to get the heck out of the way so someone who will listen to the customers can lead.

Back when I was a very young child, my mother taught me that “I’m sorry” is an incomplete sentence. The complete sentence is “I’m sorry and I won’t do it again!”

This was originally written before the Senate rejected the proposed bail out - at least the Senate understood that if they can't articulate their ideas to the senate, then they probably don't really have a new direction.

Saturday, December 6, 2008

Catching up with reality

There is an old saying “When it’s time to railroad, people will railroad”. Which I take to mean that the technology and need must coincide with people being ready to accept the new idea. So how might that work with the public efforts toward a global, or at least a more global, economy?

When movement of ideas, people, and goods between countries was slow and relatively expensive we had highly independent nation states. As transportation of goods and people between countries became much less expensive the “separations” are much less important barriers between nation states. As we are witnessing in Europe, cultural, economic, and religious differences are breaking down and, albeit slowly, a more homogeneous society is being created.

The worlds financial markets are now so closely interlinked that China, which limits it’s citizens contact with foreign visitors and news sources, is feeling the impact of the financial troubles in the United States.

Have we reached a point where we are being forced by events to let go of an outmoded idea of who “we” are? Is the current terrorism the last violent gasps of a world view that no longer accurately represents how countries interact with each other?

It seems that just to “do business” on a global scale, we will need to globalize some of the support functions, like finance. If banks in New York are financing a factory in India, that may drive a closer relationship between financial institutions in both countries that will drive more conformity in the banking laws. That in turn may drive changes in tariffs and visa regulations to allow easier movement for citizens of both countries. We already have closer financial and visitation practices between the US and Canada and the US and Mexico than anyone would have predicted even 30 years ago.

We have changed the character of the United States in my life time. I remember my shock and surprise in the early 50s when I first saw black and white restrooms and drinking fountains the Memphis, Tennessee. In 2008 we elected a president who is African American, that’s was unimaginable 50 years ago!

The reality is that manufacturing is now global, with components and products made in locations around the world dictated by cost and ability. White collar jobs depend on the availability of trained professionals and their salaries not on the workers geographic location. Nearly instant audio and video communication is allowing people anywhere in the world to meet and work without actually being in the same room.

Like Pandora’s box, once this is “out of the box” it can never be put back in! It seems that we are all ready a global society but our institutions and thinking must catch up.

Tuesday, November 25, 2008

What is the new job market?

This article at Time business on line supports what I’ve been claiming for some time. That jobs lost now are not being replaced with new jobs at the same pay rates.

Studebaker built carriages and his sons built automobiles. That’s the way it worked in the past, the workers who built carriages became the workers who built cars. Now those jobs aren’t shifting industries as demand changes, those jobs are disappearing to cheaper labor countries with no replacement job where the job was lost.

The next big government failure is tracking workers. Only the government could create a system that says a worker who lost a $45,000 a year job and took a $35,000 a year job is still employed. The truth is they are underemployed. And not identifying that in your job statistics is a big part in why the experts were surprised by the current economic crisis. This failure is also why so many politicians kept saying “the economy is fundamentally strong” long after it became obvious to the people on the street that something important was going wrong.

This failure to measure the right things and to publish the information in a timely manner is a big part of the crisis, people without information or with incomplete information make bad choices.

Monday, November 17, 2008

What the news doesn't tell you

In describing the problems facing GM and the other auto makers, Ali Velshi the CNN economics commentator, mentioned one of the big issues is the heavy pension load the car manufacturers are carrying.

Pensions are not a gift to workers, they are deferred compensation. If the auto manufactures had not offered pensions, they would have had to pay a higher hourly wage. The cost of the pension was figured into the labor cost for the cars or components built by that worker and included in the sale price of the individual cars.

Now the auto makers are claiming that paying the pension with money they already have, the money that was collected when the cars were sold, will break them.

I don’t know what the answer is, but stealing from the auto manufacturers’ former employees sure isn’t it!

My argument with the news media is that they don’t educate their viewers and readers by reporting the the true facts.

1. The workers already earned the money represented by the pension
2. The companies already collected the money that should pay for the pensions
3. Not paying the pensions is exactly the same your not paying for gas after you fill your car’s tank

Tuesday, November 11, 2008

Why the experts missed the leading indicators

In the movie Midway, the intelligence analyst played by Hal Holbrook was trying to determine the Japanese plans and found a reference in a single message to “AF”. By analyzing the location of the airplane sending the message they suspected that “AF” was the Japanese code for the island of Midway. By falsely reporting a problem with the fresh water distillation system on Midway, they tricked the Japanese into referring to Midway, using the code “AF”, in a subsequent message. Knowing that “AF” was Midway allowed the analysts to predict the Japanese attack on Midway in time for the US forces to be in place to defeat it.

The point is that in most cases the leading indicators are very small and easy to over look. By the time those small indicators grow to a size that can be analyzed with statistical tools it’s tool late to do much to fix things.

Without the almost insignificant reference to “AF” the US forces would not have known that Midway was the true Japanese target until it was too late to get the US forces into position to block that attack.

In the same way the “experts” missed the small leading indicators for the current economic woes. The sub-prime mortgage losses and the derivatives that fueled the collapse were not created by the people who bought the mortgages or derivatives, those were conceived of by the smartest people the banking and securities companies could hire. While the experts patted each other on the back and collected huge bonuses for the sale of those mortgages and securities, the leading indicators of factory closings, lay offs, and people who were now working below their experience, skill, and former salary levels got missed.

The problem is that the “experts” waited until the conditions were obvious, which would be like the US waiting for the enemy forces to attack rather than looking for those tiny leading indicators that would allow you predict events.

Are the experts stupid? Not at all, but I believe they fell into two traps, first they fell victim to their own expertise and only looked at the leading indicators within their specialties and only at the indicators that their theories told them were important. Second, like an expert witness in court, they got paid to justify decisions that their employers had already decided were correct.

In the case of the loss of manufacturing jobs and the switch to the “knowledge economy” they failed to recognize that there will never be enough knowledge jobs to support the shear number of potential US workers losing the old jobs. In the case of the financial markets, the got paid to come up with new financial methods to allow previously ineligible borrowers to get loans and credit.

In both cases the experts didn’t see that as jobs were lost those borrowers ability to repay loans was more and more at risk. Again, the experts watched as the leading indicators showed that the limits had been reached and the theory got pushed to a ridiculous extreme. As with most things when pushed to the extreme, the lending practices failed. But, since the decision makers income was tied to making more loans, they continued long after prudence dictated they should stop.

Upton Sniclair, may have said it best “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Monday, October 27, 2008

Modern shopping

I was at the supermarket this afternoon and tried to buy some bone in chicken breasts for dinner. I couldn’t find them in the chicken section of the meat department, so I ask the butcher for help. He check where he “knew” they should be but decided that they must have sold out and another product filled into the empty slot.

I commented that if there were a position holder for the item, I would have know they were sold out and not had to bother him. He agreed and replied that they used to be able to make the decisions about how much of what to stock and how to mark the bins in the store, but that now it was done from a central office.

I may not like the answer, but I’ll continue to shop their because at least I got an honest answer not a song and dance. Keep in mind that this is a store that thinks it’s my job to fill in their paper work for an item I’d like them to keep selling. A product that I regularly buy from them. I did my part as a customer when I told a store employee! Putting that into their system is the stores job, not mine.

The store thinks that they are saving money for the employee’s time and they are, by shifting that cost for time from their employee to me. My time to fill out their card is worth at least as much as their employees and since the profit from selling me the product accrues to them, why should they shift the cost to me?

Monday, October 20, 2008

It's always about salaries

I’m watching CNN this morning (Monday, Oct. 6) and their reporting the world wide impact of the current US financial crisis. Markets are responding to the projected lower spending of US consumers.

Lets put this in perspective:

The same kids who took a sandwich to school on Friday will take a sandwich to school today. The same people who drove to work on Friday will drive to work today. People will still wash cloths and use detergent. They will stop doing those things only when they loose their jobs and don’t have an income. The most likely reason for them to loose their jobs is companies that don’t understand that for every job they shed, the economy looses that worker as a buyer of that same companies products.

I remember a statistic that explained how many jobs were created by a single new manufacturing job. This was back in the days when manufacturing jobs were actively sought by communities instead of big box stores. The understanding was that if you created three (or five or some other number of) manufacturing jobs you created one additional job in the community.

Those jobs in the community were at the burger stand, the car dealership and the local grocery store. Create 3,000 manufacturing jobs and you get 1,000 (or what ever number of) support jobs. That’s the coffee shop, the grocery store, mechanics and sales staff at the local car dealership, the doctors office, etc.

What we’ve been doing is cutting $45,000 a year jobs, creating two $25,000 a year jobs. Do this at the same time that your government is spending more than it takes in and you’ve got a recipe for disaster.

The idea that we could create an economy out of “information” was proven false on a smaller scale in Pittsburgh, Pennsylvania when the steel mills closed. The idea there was to take those displaced workers and retrain them into high tech. Only a few actually made it.

Not because they were stupid, but because people are not all the same. Think about the people around you. How many are really smart but just not scholarly, they do well in practical, hands on stuff but not in classroom stuff? A lot of people just go nuts cooped up in an office all day.

I’m not particularly well educated, but I was taught in high school that the economy was interconnected. People with good paying jobs buy stuff, they buy houses, cars, cloths, etc. People who had good paying jobs take on some debt to buy big ticket items like houses, cars, major appliances, things like that. Far too many got down sized, out sourced or their benefits cut leaving less income than they planned for.

They try to keep up with their debt but unless they can get their income back to it’s previous level, they’re doomed to keep falling farther behind. At some point it gets so far behind that they loose their houses. If this sounds like what’s happening today, your right. But the root cause is low wages. Add to that predatory lenders and bad public polices and you’ve got the perfect economic storm.

Please remember that we created sub-prime loans because such a large percentage of people were earning such low wages that they couldn’t qualify for traditional house loans.

Tuesday, October 14, 2008

The stock market is bouncing back.

The point is that people are selling off stocks. I’ll say that again people are selling off stocks ----- that means that someone is buying.

Why did you pay $25 for your shirt? Because you think its a good price for the utility of the shirt. Why is someone buying the stocks that are being sold? Because they think that the stock is a good value at the offered price.

People are panicking and selling for what ever they can get. Someone else is looking at that price and saying “If I buy it now at that price, it will be worth a lot more later”. It’s like your house, before the bubble burst it was worth three hundred thousand dollars after the bubble it’s worth only $200,000. The only reason it matters is if your going to sell.

It’s value as a living machine is still the same, the same three bedrooms, two baths, same back yard. If your plan is to live in it, do you really care how much the house would theoretically sell for?

The same is true for your stock portfolio. The selling price only matters when you sell. If you’re not retiring this month, why sell your IRA? If your retiring this month, it’s too late to make any big changes.

Monday, October 6, 2008

Do you really want your retirement in the stock market?

Remember a year or so ago when all the experts were saying that we needed to create a system where individuals could put part of their social security money in the stock market? How good an idea does that seem now?

Yes, over a long enough time the stock market out performs the return on investment that we get through social security. Great, I’ll have a larger retirement income - unless I need to retire this year! Anyone starting to draw their money in this market will loose money, a lot of money. While the amount of income from social security is not as great as the potential income from the market, it is much more secure. Well, until the politicians decide that if it’s OK for United Airlines to renege on pensions then it must be OK for the United States government to renege on social security.

One thing no one wanted to talk about when they were pushing the stock market option was that risk equals return. As the market conditions today (Friday, October 3, 2008) show when the risk is too great, the market corrects by lowering the price. We spent a longer time than normal in the “sweet spot” where risk (and the associated reward) was at the higher end of the acceptable scale. Now, many of those risky investments are proven to be much higher risk than the market accounted for.

The leading edge of the baby boom will start “cashing out” in the next 3 years or so. What impact will that have on the already troubled financial market?

Friday, October 3, 2008

The "experts" really don't get it.

I know I’ve said this before and you may be getting tired of hearing it, but the “experts” I hear analyzing the current financial crisis really don’t understand the problem or the solutions that will really work!

The problem’s root cause is people not paying their loans. Why aren’t they paying their loans? They really would rather pay for and keep their houses, they would really rather pay their credit cards every month.

Most of them didn’t get into trouble by over spending, they got into trouble because productivity in the US is much higher than 10 years ago. This means that companies can produce the same amount of goods for less labor. It also means fewer workers in that industry. A lot of the manufacturing is now being done overseas and that means fewer workers in the off-shored industry.

How can unemployment be low if all those workers are being laid off? They are finding jobs, but the jobs don’t pay what the old job did. Or they had to pay their own relocation expenses and that big expense put them behind on the rest of their bills.

Easy credit made it possible to try and keep up their life styles by using equity in their houses and credit cards. That cash flow problem for banks caused by mortgage defaults is exactly the same problem that individuals have been having for several years just bigger and more concentrated.

The only solution is better paying jobs and lots of them. I watched a news piece on CNN where they were interviewing the owner of a gourmet popcorn shop and he was saying that because business was slow, he had already used his line of credit and couldn’t get an increase to help during his slow business season. He was not taking a paycheck so that he could pay his employees. Can you imagine the senior managers at any big corporation not getting paid so that they didn’t have to lay off workers?

Until the big corporations understand that capital circulates. Money in a bank is loaned to build houses and the paychecks for the carpenters and the carpenters buy the cars and washing machines that the big corporation makes and sells, some is put into the bank and loaned again. But that money is just a place holder for the hours of labor and if your not putting into the system (by hiring and paying your workers well) there will not be money in the bank for you to borrow to operate your own business.

Monday, September 29, 2008

Just who is the expert?

In reading a Time business on line article (I'd include the link, but Time already took the article off their site) about the AIG bailout, the author noted that one reason the government decided to jump in was the size and global reach of AIG.

On thing worth noting is that is that AIG got in trouble not because of it’s core insurance business, but because of it’s investments. Investments, what is an insurance company doing in the investment business?

Simple, investments are a place to park the huge profits from insurance premiums. All that money they collect from the people buying insurance is invested at the highest rates they can find. What did you think, they put it in a vault somewhere and let it sit?

Insurance companies put that money to work, keeping only the cash reserves the regulators tell them they need in case they have to pay you for a loss.

What this tell us is that the people making the investment decisions at AIG, the best and the brightest they could find, really didn’t understand the level of risk involved in their investments.

Now when the decisions made by the best and brightest minds we could find go bad, who do we turn to for advise, the same people who made the decisions and the people who trained them.

When I was still working, if I screwed up this bad, I’d be the last person my boss would ask for advice. After all, if my best thinking got us here, why would he expect my best thinking to fix it?

Monday, September 22, 2008

Why the financial savior plans won't work!

In reading about the current crop of “savior” plans for the US financial crises I realized why they won’t really solve the problem.

They are all top down plans and the problem is a bottom up problem. What the government is trying to do is like fixing the fuel pump on your car when the battery goes dead.

Take the mortgage melt down as one example. Bailing out the lenders with direct cash subsidies doesn’t do a thing to stop foreclosures, it only makes it possible for the lender to pay it’s bills and make new loans. A better use for the money is to subsidize the home owner who can’t pay the mortgage directly and let them keep paying on time.

The mortgage crisis is only a crisis if the people who have loans can’t pay them. A lot of the problem surfaced when ARMs (adjustable rate mortgage) reset and drove the monthly payments up. The rest of the problem is people who lost their jobs and can’t find another, or at least one that pays what the lost job paid.

At the core of our financial problems is the fact that peoples income has not kept pace with costs and the cure is to put money back in the hands of the people in trouble. Take the same 700 million dollars, pay it to the same banks, but pay it as assistance to individuals who need help keeping their homes and businesses. Take the interest rates back to where they were when people were making their payments, pay 10% or 20% of the mortgage and let the home owner pay the rest.

The next big example is US auto makers, who don’t need large influxes of cash, they need a large influx of customers. The best way to subsidize Detroit is to subsidize buyers. If you going to give GM, Ford, and Chrysler assistance, do it by making it possible for them to sell their product at a price people can afford. Again, lower interest rates or down payments using the same money you were going to give in the form of a subsidy.

When you prime a pump, you don’t pour a huge volume of water down the well, you pour just a little into the pump! The big companies are the well, the consumers are the pump.

Tuesday, September 16, 2008

Shareholder Value

I was just reading a question on Linked In, the business networking web site, about how to use the Balanced Scorecard method in business. One of the answers talked about “Shareholder Value” and it started me thinking.

Focusing on shareholder value has caused far to many American companies to loose sight of their real business. To paraphrase Warren Buffet “Take care of your product and your shareholder value will take care of itself”.

If you build a quality product, in a cost effective manner, and market it well, then shareholder value is an automatic byproduct. The more you focus on shareholder value as a goal, the less you focus on the product and the product drives your business.

For most businesses shareholder value is measured by stock price and If you manage your business to control your stock price, then your business is your stock price. If you manage your business to produce (and sell) your product, then your business is producing (and selling) your product.

One reason far too many companies focus on stock price is that the stock price and not product sales has become the measure of the senior manager’s success or failure. It’s the kind of thinking that causes Apple to beat all the analyst’s expectations and still have their stock shares loose $17.47, or 10.5 percent in after-hours trading.

Yes, earnings are down from last year, but with over a billion dollars in profit this year, Apple looks they they are making money when a lot of businesses aren’t. So anyone in the real world would say that Apple is successful and that if the market is rational then their stock should be valued to reflect success and their stock price should hold or rise while only failure would drive falling stock prices.

Wednesday, September 10, 2008

One more short sighted decission

Bell Labs ends fundamental research and focuses on applied research.

This article at reports that Bell Labs has ended it long history of basic research and shifted it’s focus to research that applies to it’s current business.

How does this jibe with the often reported stories that the US will become the idea “factory” for the rest of the world?

Bell Labs created the laser as part of their basic research and really didn’t know that it would apply to telephony as a way to send voice messages over fiber optic lines. The fundamental research more than paid for itself by allowing more messages over fewer lines and that supported Bell Telephone’s core business.

What profit making opportunities will Bell now miss because of this decision. We’ll never know but rest assured that just as Japan and China are investing is space they will invest in basic research and that research will result in products that outpace American products. I can’t tell you where or how, but history supports my position that basic research always pays off. It just may not pay off this week.

Thursday, August 28, 2008

Health Care

As a bonus to overcome World War Two wage and price controls companies began offering “fringe” benefits including health insurance. We came to expect that as a part of our compensation package. As health care costs increased, companies began increasing the employee payment and raising the co-pays. Now many companies are cutting health care coverage or eliminating it altogether.

Many (most?) employees would buy their own policies BUT when the companies stop offering the coverage, they don’t add the money they used to spend for non-cash compensation to your salary at the end of the week.

For those of you who are not sure what I mean, your have a compensation package which includes your salary, the value of your health insurance, paid vacation, sick leave and paid personal time (like for doctor’s appointments).

The value of the things your company pays for that you don’t have to pay for directly is call non-monetary compensation. But you must calculate it as part of your hour wage when comparing job offers. Think about one company offering a company car for business travel and another offering mileage. One package may be slightly better or worse than the other.

If your company stops paying for something like health care, you just got a pay cut since you’ll now have to take that amount off your weekly check to pay for the same coverage. Your take home pay went down and that is the real definition of a pay cut.

When a company claims that they need to "cut costs" and the cost is part of your compensation, what they are really saying is "we want you to take the loss so our profit won't". My question is always "why should I pay to keep your profit level above some arbitrary number?"

In most cases of cost cutting the issue is not keeping the company open it's 7% profit versus 9% and the company want's you to take the loss to keep that number higher.

Monday, August 18, 2008

Why I'm not rich.

Lets see if I get it. Apple beat all the analyst’s expectations and their stock shares lost $17.47, or 10.5 percent in after-hours trading.

So that’s why I’m not rich, when a company does better than projected, I expect that the value goes up, not down. Yes, earnings are down from last year, but with over a billion dollars in profit this year, Apple looks they they are making money when a lot of businesses aren’t.

Monday, August 11, 2008

More fuzzy thinking

In this article describing the presidential candidates positions on the economy I found the following quote.

"If you don't tax them, they can pay their workers more," said Taylor Griffin, the candidate's (John McCain) senior adviser.

This kind of fuzzy thinking is what got us into this economic mess. In a capitalist society any savings will accrue to the company and they will hire workers at the lowest salary necessary to get the quality of worker they need.

The person making the statement either knows better and is just creating a sound bite or has no clue about how business really works.

Monday, July 28, 2008

Employee training

Lets see if I get it - American business have stopped investing in employees and expect them to arrive fully trained, but some Indian companies are investing in large scale employee training. This article at Fast Company describes one Indian company's efforts to build a world class work force and the amount of time and effort they are investing in their employees.

I’ve watched the transition in American business as employees went from being viewed as creating value to an expense. And as that change took place, many (most?) companies quit investing in training. Is this change in India part of a trend by those companies to view workers as partners in building profits? If so will American business pick up on this new view in time or lag behind as we have with so many other trends?

American business, at least the auto industry, was slow to recognize that continuous quality improvement was key to building world class products. We were slow to recognize rising demand for key resources, like oil,and didn’t invest in developing our resources. By lagging behind we not only have to play catch up, but our costs of adopting the new ideas and methods is much higher because we have to implement the changes as a crash program rather than evolving into them.

Big change made over a short time is almost always more expensive than a measured phase in of new processes or procedures.

Tuesday, July 22, 2008

Midwest floods and self reliance

Any ideas on why the people displaced by the midwest floods aren’t rioting and complaining that FEMA is not supplying coffee makers? I think it’s mostly because the flood victims are small business owners. Farmers, small store owners, small auto repair business; that kind of thing.

These people are used to solving problems themselves and making things work. When the floods destroyed their homes and businesses they started figuring out how to make things work again. Since they built it once they know they could build it again. All they really need is a little time and the cash to get started. The people who in New Orleans who rioted were mostly used to having a government agency fix things.

I live where my taxes don’t provide trash pickup. My choices are to pay a private company to pick up my trash or take it to the transfer station myself. I take it to the transfer station once a month and save about $20 a month over the cost of pickup.

This simple example multiplied by the number of things the people in the midwest did for themselves before the floods is why they are just fixing things and not rioting against the government when things go wrong.

Thursday, July 17, 2008

It’s not politics, it’s business

The recession the US is facing is the direct result of political choices we made over many years. While it is simplistic to claim that any single decision of the federal government is the point cause of our economic woes, the collection of legislation certainly caused the economic results we face.

Companies make operating decisions based on both what consumers want (market forces) and what regulations will permit (government control). We have not built an oil processing plant to make gasoline in something like 20 years. Was this because there was no market for product or because the government created regulations that made it too costly to open a new plant? We have curtailed oil drilling in the US not because the oil companies don’t see a market but because the regulations make the costs of drilling too high to allow a satisfactory return on the companies investment.

We use regulations to “adjust” public behavior routinely. No smoking laws are the most obvious case of blocking your legal behavior to accommodate your neighbor’s preferences. While the case for smoking as a health risk is clear, the case against second hand smoke is less clear. Still, we enacted legislation that defines where and under what conditions individuals can smoke in public. Debating if this is good or bad public policy is not the point of this article, the point is that legislation creates the environment that business operates within.

Another example is foreign trade agreements. The US routinely makes deals with other governments to allow US business low tariff access to foreign markets by allowing those countries businesses low tariff access to US markets. Some of those agreements made it cost effective to ship a lot of jobs out of the US.

When I was taught to analyze information, I was taught to speak not of what was certain to result, but of what was more or less likely.

Anyone who has managed their own small business (as I have) predicted as one obvious results of free or nearly free trade with Mexico (the most well known example) that Mexico will, most likely, sell a lot of inexpensive good to us while we will, most likely, sell fewer expensive goods to Mexico.

We have a huge trade deficit because we buy a lot more cheap stuff than we sell expensive stuff. The legislation that makes this possible was touted as “good for the country” when passed. Once again common wisdom was right and the expert analysis was wrong. We aren’t selling more than we’re buying and we are shedding jobs a an alarming rate.

If I’m right, how did a not very smart guy like me expect the results that we now have and the super smart experts miss it? Too much theory and not enough common sense. We’ve got far too many people making decisions who’ve never had to produce a product other than conversation.

The key to economic growth is not businesses making money, its workers making money and buying products made by other workers. The lessons you learned as a kid from your allowance still apply. Your allowance (income) is fixed and if you don’t have enough income to buy the things you want, you do without. If a candy bar is $1 and you only have 99 cents, you don’t buy. The store doesn’t sell and the manufacturer doesn’t produce. The key to economic growth is workers with money who buy things.

So, again if I’m right, how do we fix it? We use the same tools that got us into this position, we legislate - but we change our focus. We give incentives to companies that create jobs into the US and put disincentives on companies that rely on foreign labor. And if situations like Toyota who has big manufacturing plants in the US confuse you about who is a US company, try this - a US company is one that has its headquarters in the US, pays US taxes, and reports the bulk of their profits on their US tax returns.

When a company is bought by a foreign company it looses it status as a US company. Chrysler was a US company until it was bought by Daimler Benz then it became a foreign company. A foreign company because the profits (if any) go to a company that reports the income in a country other than the US. As with most things the simple answer is the most accurate.

The problem, truly, is not that the profits accrue to a foreign company, it’s that the cash goes out of the US and is then spent elsewhere. The Marshall Plan of post World War Two shipped boatloads of money to Europe and Japan but most of that money came back to the US to buy American products. The manufacturing base of most of these countries had been destroyed while America had a huge excess capacity.

So, what is that common sense answer? Give the companies an incentive to spend their profits in the US! The government should give incentives for spending in the US, generally in the form of tax or tariff reductions. The rules should also apply disincentives for taking profits out of the US economy, again in the form of higher taxes or tariffs.

For better or worse, we are part of a highly integrated global economy and there is no way to isolate the US economy from the rest of the world. With a little thought we should be able to create a system that rewards companies that keep their jobs (and purchasing power) at home.

Wednesday, July 9, 2008


I held off a while before posting this so I could see if I was writing something worthwhile or just knee jerk reacting to something that irritated me. So here are my thoughts, about a week out of date.

I was truly disappointed in General Wes Clark’s comment that Senator McCain’s military service doesn’t “qualify” him for commander in chief. It is certainly a form of experience that will be useful for a president.

John McCain’s service as a fighter pilot and prisoner of war may not “qualify” him for the office of commander in chief. But it does give him a unique understanding of some of the decisions he will have to make.

When I was in Viet Nam, we referred to someone being killed as “wasted”. In fact that term has now become a part of the language for almost anyone who is killed.

For any veteran, solders are not nameless, faceless “troops” they are the people that we lived and served with and one lesson the military instills in all its officers and noncommissioned officers is, while you may have to “spend” your people to reach your objective, GET YOUR MONEY’S WORTH!

Since Senator McCain has that unique experience, I should be able to rely on him not to waste our service people. Is that the only qualification for the office of President? Absolutely not! Is it an important consideration? Absolutely.

Monday, July 7, 2008

Labels matter

Why are so many American’s worried about the economy? Simply because the price of the things they buy every day are going up faster than their salaries. And all the talk by the “experts” about if it is a true recession or not is immaterial.

The accepted definition for a recession (according to wikipedia) is “a recession occurs when real growth is negative for two or more successive quarters of a year”. The street definition is “a recession is when your next door neighbor looses his job, a depression is when you loose yours”.

One of my favorite quotes is “If you call a tail a leg, how many legs does a Tiger have? Four, calling a tail a leg doesn’t make it one!”

The experts can create all the complex descriptions they want to, the truth is what is happening on the street to real people. Inflation is when I can’t buy the same thing today with the same amount of labor that I did yesterday.

If that sounds confusing, look at it this way. You make a dollar an hour and a gallon of gas costs thirty five cents. The next day you still make a dollar an hour and a gallon of gas costs fifty cents. That’s inflation, no matter what the dictionary says.

A recession is when people are getting laid off and can’t find a new job. Doesn’t matter how many legs the experts say the tiger has, real people know it has four!

As I write this, CNN TV is reporting that there is mild economic growth. If a lot of people are not able to buy the same things for the same amount of work; that’s not anyones definition of growth!

If you think I’m wrong, remember we got to where we are by following the advice of the highly trained experts! So if their advice is not producing the results we want, we need to look at that advice and see why it didn’t work. I submit that a big part of the reason is the inaccurate descriptions they use for real world events.

Just as calling a tail a leg and stating that a tiger has five legs confuses you when you see a real tiger with only four legs, the “experts” are now lost by their inaccurate descriptions of recession and inflation.

Are you sure you want to keep listening to the experts who got us where we are?

Sunday, June 29, 2008

Using the social sites in business.

A CNN Money article titled "Business people find ways to save time and make money from social software pioneered by their kids.” provides further proof that web based job searches are still tech-centric. I tried to include the link, but once again the HTML that worked yesterday doesn't work today!

Job boards started with the tech world and tech jobs still lead the way for finding jobs and workers on website job boards. Far more programmers are placed through online boards than accountants. Will that change? Of course it will, just as e-mail is now a common business tool, so will the use of online services to find employees and jobs.

A lot will change in both how we list ourselves on line and how companies list openings before it becomes common in none tech industries, but it will get there eventually. Everything I’ve read talks about college students using the web but that misses a big part of the story. High schools are teaching computer use and a huge number of students that will not go one to college are just as computer savvy as the college grads. They use text messaging, they use Facebook, My Space and all the rest just as much as those college students and will expect to find a job using the same methods.

If your company is limiting it’s tech driven job search methods to the job classifications that demand a college education, your missing some great employees who will be trying to use the these methods to find your jobs that don’t require a college degree!

Tuesday, June 24, 2008

An open letter to both presidential candidates

The problems we face are not that complex nor are the solutions. Perhaps the implementation will be complex, but the concepts are quite simple.

It has been said that nothing happens until a sale is made, no raw materials are bought, no workers employed and no products produced until a sale is made.

And while thats true, it is incomplete. Nothing happens until someone buys something. Stated that way it makes your job much simpler - you, and all the other politicians must create and sustain an environment where I can buy things. I can only buy things if I have money and that means jobs. If jobs are running out of the country, you have to crate laws to make it cost effective for business to keep those jobs here. Incentives or disincentives is your job to decide but without jobs, people can’t by things and that’s bad for business.

Inflation is no big secret either, it’s simply when prices go up faster than salaries because of none-value-added costs. If that doesn’t match what you learned in school, remember that the labels you learned in school are some “great” thinker’s theory of how they believe things work, while my definition is based on the results of following those theories. No matter what your initial goals were or what your theory is, the results are what count!

The idea of buying a product today that will be produced tomorrow has value but when speculators take advantage of the process to make huge unearned profits, it unbalances the system. When speculators drive prices up much faster than salaries (think today's oil prices), I can’t buy and if I can’t buy, business can’t sell and that kills the whole economy.

Yes, the economy will self correct, but the time an unmanaged economy takes to self correct causes a huge dislocation in day-to-day living. So we expect the government to help. Just as building a physical dam keeps the river from flooding, economic dams (regulations) keep the economy from flooding.

If your doubt my theory, remember this part of Adam Smith's economic theory: "Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer."

Henry Ford is quoted as saying that the customer pays the wages, the factory owner only handles the money. In the same way the companies that pay the lobbyists only handle the money - it's true source is the people who by things. And one last time, no job no buying things.

Monday, June 16, 2008

Smart moves?

Watching the Military channel on cable TV an episode covered the Swedish aircraft industry. In talking about Saab they described the founding of the Saab Automobile company as a effort of the aircraft company to keep from laying off skilled workers and to keep the industrial base.

Now if the Swedes could understand the value of keeping skilled workers productive and their skills current and in keeping their industrial base current clear back in 1946, how come the US has forgotten these lessons?

Back in the day when I worked in electronics, we found a lot of product improvements and new products from building and repairing existing products. Without the input from the production floor, we would have missed significant improvements to our equipment.

Now, please explain to me why you would let go of the critical skills your business needs and eliminate one of the best learning laboratories your company has?

Wednesday, June 11, 2008


I just read a blog where the writer was talking about working hard but not on high priority items and it caused me to think - does low priority stuff need get done at all?

Well, of course it does. That’s why it on your list in the first place! If it didn’t need to get done, you wouldn’t put it on you “to do” list and assign it a priority.

Your high priority for today may be making the next sale or delivering the next order, but at some point you really do need to file those filled orders from last week and bill for the work you just finished. When we push stuff to a lower priority there is the natural human tendency to think its less important when the truth is its only less important AT THIS MOMENT. In far too many cases it's priority get higher the longer you put it off.

If you are constantly putting of stuff as “lower priority” you better make sure that some where, some how it gets done. Housekeeping tasks seem less important than the next sale or delivery, but how long can you function if with three feet of unfiled paperwork on your desk?

Saturday, May 31, 2008

One possible future for mobile computing

Before I got my smart phone I used a Palm Life Drive as my PDA. One neat feature was the wireless folding keyboard that let me work on documents without taking my laptop on the road.

The Life Drive was about the same size and weight as the I-phone which does everything my PDA did and a lot more. The I-phone coupled with applications over the internet and a bluetooth connected keyboard and mouse could replace the larger and heavier laptop for some mobil computing uses.

How about this:

The phone has at least 10 Gig of memory, a wireless link to your server and the internet, a bluetooth link to a keyboard, mouse, and monitor. When you get to work, you just touch the “work link” icon on the screen and automatically connect to the peripherals and your office network. When your done for the day you log out and take your phone home with you. At home, you touch the “home link” icon and you have access to all the files on your device and your home peripherals.

For people on the go, a folding keyboard and mini-mouse would allow you to use the small screen until they finally perfect the roll up flat screen. True mobile computing without having to carry a comparatively huge laptop.

Monday, May 19, 2008

Tech Support

I just had my first problem with my MacBook. I couldn’t send emial. I could receive but not send.

Step one was to look at the support page at Apple and after stepping through that, I still had the problem. I then called the help number and was told that while my hardware was still under warranty, I would have to pay for phone support (sounds more like Microsoft than Apple).

I was directed to the “dotmac” web site and used the chat function. Turns out that Apple is having problems with their mail server and that the “port 25” error message refers to that port on their server and not on my laptop! Now why should I pay for phone support if the problem is on the Apple server?

This called several issue to my attention.

First, Apple needs to make sure that they are not the problem BEFORE telling customer’s that they will have to pay for support.

Second, while we were able to fix my problem by simply changing which port my email application was attaching to, the chat process added a significant amount of time compared to a simple telephone call.

I spent 12 years supporting a large amount of hardware for one of the worlds largest defense contractor followed by 11 years creating technical documentation for big aerospace corporations. Getting the client’s concerns handled quickly and efficiently is the key to keeping customers. The times I’ve used the chat function for technical support it seems to take a lot longer, and I touch type 25 to 30 words a minute. Imagine how much time it will add for a hunt and peck typist! And it’s not just the customer’s time away from their work, you are paying the help desk person on your end of the chat.

A third item that will go along way to shorting the support cycle is plain english error messages. Microsoft is notorious for the “Error 404” kind of error message, but the “Unable to connect to port 25” I got in this case is not far behind. How about a message like “Unable to connect to the Mac mail server port 25”. Tells me it’s not my computer and when I do call or chat it tells your help desk exactly what’s wrong right away.

My last pet peeve is the failure of companies, both hardware and software, to have an explanation of their error messages. Just try typing the error message into the help query and all you get is the computer equivalent of a blank stare. If, for some technical reason, you just can’t use plane english for your error message, try putting the explanation in your help documentation.

Wednesday, May 14, 2008

Staying ahead of the game

I just saw a question on the Fast Company web site asking “Why didn’t AOL leverage its community to become what Facebook is?”

Since the people who makeup AOL are just folks like you and me, the problem has more to do with corporate culture than with the individuals within the company.

At the end of the 1970s I got tired of the get hired, work a few months and get laid off cycle common for an electrician working for small contractors. I started my own burglar alarm business, later going into partnership with another alarm company.

Owning and managing a small business taught me to pay attention to industry trends and always look for new ideas, methods, and products. My business partner was much older than I and ready to retire, but I couldn’t afford to buy him out and have enough cash to run the business. We sold the business and I went to work as a manager for a defense contractor.

Working for that large company, I found them focused on daily operations to the exclusion of looking for new ideas and methods. In the book “Barbarians to Bureaucrats” Lawrence M. Miller, the author, talks about the stages that organizations go through and some of those stages are driven by size. The bigger an organization gets, the more it must rely on people following the established processes. The upside is that it gets the daily work done efficiently and on time. The down side is that it makes it harder to get new ideas considered.

All businesses are started by an idea for a product or service, an individual or small group of individuals bring that idea to market. At some point the culture changes from getting the new idea to market and accepted to producing the product or delivering the service.

Profit abhors waste! Free time for your workers is not free, they are being paid for their time, so the system is designed to eliminate paid-for-but-unfocused free time in their daily schedule. The problem is that an awful lot of new ideas come out of just sitting and thinking “what if ..” or “what is a better way to do ...”.

There are two key steps to ensuring that your company doesn’t fall in this trap. First, ensure that everyone has some time to look at your industry and seen what the trends are. I mean everyone, not just your senior executives and it must be part of their working day. If you’re not willing to spend your money (in the form of time) to keep up with your industry, why would you expect your employees to spend their money (in the form of their free time) to keep up with your industry?

Second, you must have a process for even the cleaning staff to suggest new ideas. Remember that people will tell you about things they think are useful and cool and that’s what your customers want. Things that are useful and cool. In most cases the person reporting the idea will not know how to present that new and cool idea or how to monazite it. They just know it’s cool and they like it.

Management’s job is to collect these new ideas, then research them, separate out the ideas that represent real opportunities for your business, and lastly to figure out how to make money from that idea.

If that sounds like a lot of effort, that’s why it’s called work. It’s also the cost you must pay to not be caught making wagon wheels while some modern day Henry Ford is producing the Model T.

Wednesday, May 7, 2008

Flex work locations and hours.

Why haven’t flex hours and working from home become much more common than they seem to be?

Someone writing about how and when new technologies are adopted said “People will railroad when it’s time to railroad”. Their position being that once the various technologies exist, someone will make use of them. If that gives them a competitive advantage, then others will follow.

Many people now collaborate using teleconference and online audio and video meetings even when the participants are in the same building. Most of the people I work with think it’s much better than looking over each others shoulders at a single screen. They also like it much better than gathering in a meeting room to look at a computer screen from an overhead projector. As managers see the effectiveness of teleconferences coupled with online computer screen sharing, they will accept that people’s physical location no longer matters. At least in some occupations.

Once all the technology to make steam engines and steel rails became available, and the methods of financing large projects became available, railroads were inevitable. So too, now that virtual workplaces are a proven technique, people will inevitably begin to use it. If this capability makes some companies more competitive, then, inevitably, other companies will copy the idea.

Friday, May 2, 2008

What the politicians don't know

I watch the news early in the morning and I’m just watching the politicians floundering around on CNN and noticed something interesting. One of the candidates was campaigning in Allentown, PA. That reminded me of the Billy Joel song of the same name, talking about job loss.

The politicians are just now talking about job loss and Mr. Joel released his song in 1982!

All the stuff that the politicians are now talking about “real” people have been fighting for over 20 years and seen it getting worse all that time. Doesn’t matter which candidate you favor, none of them have a clue as to how hard most people have been running just to stay in place for almost a full generation.

In case you don’t believe me, here’s a link to the lyrics.

Does this mean that the song writer is smarter than the politician? Not really, but it does show what living in the cloistered atmosphere of politics can do to intelligent people. It cuts them off from their sources of information and that gives them a distorted view of what’s really happening and of the possible solutions.

The founding fathers never envisioned professional legislatures, they expected small business owners, farmers, and regular folks to take time off, manage the business of government - then go home! They counted on the common sense of the common man. And too few common men and women are serving now.

Sunday, April 27, 2008

What do I want from my government in tough economic times?

Do I really want the government to give me a hand out? No, I expect my government to make sure the rules keep things fair. I do object to my government making rules that make it harder for me to make a living. When changes to the rules cost jobs, I expect the planners to include that eventuality and to have some process in place to replace those jobs.

That means if the government lowers tariffs on a foreign product, they must include in their plan new jobs for the displaced. Before you say “It’s not the government’s job to find work for citizens” remember the immediate cause of the job loss was the changes caused by the government.

If the government builds a dam to prevent down stream flooding, it routinely pays the cost of relocating people who lose their homes and business to the new lake. Just so, changing the economic rules destroys the homes and businesses of citizens. Shouldn’t the government pay for the dislocation it’s changes cause?

Tuesday, April 22, 2008

Profit and loss

This at made me think. If prices go up faster than wages - did I just get a pay cut?

Saturday, April 19, 2008

Turning failure into success

The person interested in success has to learn to view failure as a healthy, inevitable part of the process of getting to the top.
Dr. Joyce Brothers

The same principle applies to business.

Far too many companies are so risk adverse that their employees are unwilling to try something new. The companies have created a climate where a single mistake is a career killer. I believe it’s caused by a mix of short term thinking at the top and viewing employees as a cost not a revenue creator.

This short term thinking causes managers to cut costs even at the expense of things that would (if given time) create more income in one, two or even three years. If the pressure for results “this quarter” is too strong you can’t invest in tomorrow.

Over the last 10 to 15 years management has changed it’s view of workers from revenue producers to a cost. Think about the computer sitting in an empty cubicle and ask your self how much work it’s doing? The humans add the value to the equipment, and it’s that value that allows it to make you money!

Combining the two, how much did you invest in your physical plant last year to make it more productive? How much did you invest in your people? Before you say “But my punch press doesn’t go down the street for a nickel and hour raise!”, think about this; if they are worth an extra 20 bucks a week to your competitor, why aren’t they worth that same $20 to you?

Wednesday, April 16, 2008

Killing off your customers

The Labor Department now estimates that the economy has shed 232,000 jobs in the first three months of this year.

For all of you who are laying off workers a simple question:


The people with jobs in the United States are your customers and when they are afraid of getting laid off, they stop buying, the local stores don’t sell, and you don’t get orders. The more people you lay off the worse it gets.

Saturday, April 12, 2008

Grandma's wisdom

How did competent business men get themselves into the mortgage mess? It’s simple, they gambled, and they convinced their customers (home buyers) to gamble with them. We, in the guise of the government, helped by setting up the rules to allow them to gamble.

The lenders, the home buyers and the government gambled that the home buyer would not loose their jobs. They gambled that the home buyers would get raises that would be greater than the expected increase in payments caused by the increase in adjustable rate mortgage interest.

Anyone who has been working for a living knows that expenses have been going up faster than salaries for at least 10 years. Ask any carpenter, electrician, or auto mechanic. We’ve seen jobs running for low wage countries for at least 12 years and maybe 15 depending on what leading indicators you pick.

Every working man has seen this coming, it’s only the economists and politicians who are surprised. I think their surprised because they don’t live in the same world as the rest of us. Mostly, they live in a world of theory, which reduces real world actions to numbers on a page. That makes it easy to analyze events, but it also provides a buffer against the emotional impact.

That lack of connection makes it possible to miss the small leading indicators that those of us that have to figure out how to make a living spot and include in our assessments. When we see a large percentage of our industry being laid off, we suspect a problem. While it’s a significant percentage of my industry, it’s a very small percentage of the overall work force.

Where I see a leading indicator, the statistician hardly notices. I see a lot of very small leading indicators and recognize a potential problem. For the statistician, since each one is so small, it’s not a significant measurement.

Working people see the problem coming where the statistician misses it completely. Perhaps grandma’s wisdom is still more accurate than all the complex calculations.

Wednesday, April 9, 2008


“We read for information, with the hope that information we acquire will improve our minds, giving us the means to improve our lives.” John Wesley

The biggest trouble with education in the United States today is that the educators have lost sight of their purpose. People need education so they can contribute to society, and for that contribution, society will support them. While the medium of exchange is money, that is just a way to swap effort for goods without direct barter.

I agree that a broad education is necessary to prepare people for more than just their working careers, but until the basic need of “giving us the means to improve our lives” is served, that broader knowledge will always remain an unused potential.

The educators in the United States are focusing on the “broad” part of education, while many other countries are focusing their efforts on job related skills. That is one reason that so many US companies are complaining that they can’t find enough “qualified” workers and are lobbying heavily for more work permits for foreign workers.

Sunday, April 6, 2008

It is what it is

Are you as sick of business euphemisms that hide the facts or over simplify issues as I am? The current practice of calling problems challenges drives me nuts.

The thinking is (I think) that by calling obstacles challenges you energize your people to “meet the challenge”. I think this practice trivializes the complexities of your business and reduces your peoples sense of accomplishment;

We all “know” what words mean, even when we might not remember the exact dictionary definition. When we hear words misused we do recognize the misuse even if we can’t clearly say why that particular statement is wrong. There is an old Confusion saying “If you call a tail a leg, how many legs does a tiger have?” The correct answer is “Four, calling a tail a leg doesn’t make it one”.

It might be useful to look at the Webster’s definition of both problem and challenge.

Challenge (From Webster’s)
1 to demand as due or deserved : an event that challenges explanation
2 to order to halt and prove identity: the sentry challenged the stranger
3 to dispute especially as being unjust, invalid, or outmoded : new data that challenges old assumptions
4 to question formally the legality or legal qualifications of
5 to confront or defy boldly :to call out to duel or combat :to invite into competition
6 to arouse or stimulate especially by presenting with difficulties
7 to administer a physiological and especially an immunologic challenge to (an organism or cell)

Problem (From Webster’s)
1 a :a question raised for inquiry, consideration, or solution b :a proposition in mathematics or physics stating something to be done
2 a :an intricate unsettled question b :a source of perplexity, distress, or vexation c :difficulty in understanding or accepting :I have a problem with your saying that

Challenge has 7 accepted definitions, none of which demands a solution, while the first definition of a problem includes the idea of a solution to a difficulty. Since we all know the generally accepted meaning of words, using the correct word to describe business events is critical to a common understanding and in creating a common purpose.

By styling something as a challenge and not as a problem, you loose your teams ability to overcome that problem. Remember, you can’t overcome a challenge BUT you can challenge your team to overcome a problem.

Friday, April 4, 2008

Belling the cat

There is an old story about a group of mice who were afraid of a cat. One mouse suggested that they hang a bell around the cat’s neck so they could hear it coming and hide. All the mice agreed that it was a great idea until one mouse asked “Who bells the cat”?

I was laid off in 2004 and have been working temp jobs and jobs outside of my career field because permanent work has been that hard to find. All the advice I get about finding work seems similar - great ideas but no concrete suggestions about how to get it done.

In my last post, I wrote about the CEO of AT&T’s complaint that he couldn’t find great workers. I’ve had some great comments and the suggestion that I teach HR departments how to do a better job of screening candidates. I could do that, but no one has any suggestions about how to market this as a service. The biggest stumbling block I see is the HR departments natural rejection of the idea that they need help.

As with all things in business, nothing will change until senior management recognizes the need for change and drives that change. Until someone comes up with a way for me to talk directly to Randall Stephenson (the CEO of AT&T) it’s just another great idea that can’t be implemented.

Which I guess is part of Mr. Stephenson’s problem - his whole system is designed to keep him from being bothered. Of course the people who his system sees as a “bother” are the very people that could help solve his problems.

Sunday, March 30, 2008

Finding great workers

AT&CEO Randall Stephenson made the statement that great workers are hard to find.

That’s only true because AT&T clings to an outmoded HR process. As all of us with a background in manufacturing know, if the end result isn’t right, first check your process.

The process most companies use to identify candidates is patterned on the old manufacturing model and looks for skills not abilities. Skills are typing speed, familiarity with software applications, or the ability to operate machinery. Abilities are leadership, problem solving, and building customer relationships. Evaluating skills is simply checking off items on a list, a relatively quick and simple process. Evaluating abilities requires careful reading and thoughtful evaluation followed by discussions with the applicant. Checking skills is fast while determining abilities is slow.

As we continue to shift to knowledge work, abilities not skills will define the great workers you need to help your company succeed. The only way you will find those great workers is to change your HR process.

If your satisfied with your results, don’t change if your not satisfied - change.

Tuesday, March 25, 2008

The four keys to solving business problems

1. Agree that your system is broken:
You can't change what you don't acknowledge
Dr. Phil McGraw

2. Accept that your system is the problem:
The definition of insanity is doing the same thing over and over and expecting different results.
Benjamin Franklin

3. Understand that your system will resist change:
Good ideas are not adopted automatically. They must be driven into practice with courageous patience.
Admiral Hyman Rickover

4. Remember that the person who bucks the system is the most likely to be a creative problem solver:
Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.
George Bernard Shaw

Friday, March 21, 2008

When companies cut jobs

I just read an article (I’d included the link, but when I checked the next day it was cut) about the rate of exchange between the US dollar and the Eruo and it talked about BMW cutting 5,600 jobs to “cut costs”. It only saves BMW money if: 1) 5,600 people were just standing around not doing anything, or 2) the work they had been doing suddenly stopped.

If BMW’s business slowly decreased and left them with 5,600 extra workers, this should have led to one or two people at a time being laid off over a longer time frame and would not have made the news. The other option is that some dramatic change in BMWs business suddenly made over 5 thousand peoples’ jobs disappear.

I leave it to you to decide which cause is more likely a slow change missed by management or a dramatic change.

Monday, March 17, 2008

We owe this to each other

I’ve stayed away from politics in this blog, but I just can’t ignore this one. A CNN video clip about an Iraq veteran.

Who is the United States? The preamble states “We the people of the United States..” So you and I are the Untied States. It doesn't matter if you agree with the war in Iraq or not, we owe the solders our support.

Who are the solders who serve the United States. They are our neighbors, our sons & daughters, our nieces & nephews, and our grandchildren, and we are not caring for them!

Once of our service women or men who is injured they deserve 100 percent support from our government until they are restored to full health. If they can’t be fully restored, they deserve free health care and financial assistance as long as they don’t have full health.

If you think that’s expensive, think about what the soldier agreed to do - “I’ll work for a lot less money than I could make in another occupation, I’ll go where you say, because you say, and give my life if you think it’s necessary”. They didn’t say “Only if it doesn’t cost too much” they said “I’ll go”.

Health care is not a gift from the government, it’s deferred compensation they’ve earned!

Sunday, March 16, 2008

Simple things

Sunday, March 16, 2008

I found this cartoon that clearly shows some of the problems out there.

It made me ask the following question: Why hasn’t someone created a single place on my computer that hold “form data”. The app would keep my name, address, phone numbers, etc that I want to be public and that will auto-load to any web site and form that I want to fill out. Seems simple to me since most web based forms use the same language. I suspect that the real problem is not with the technology, it’s a lack of imagination.

I believe that the simpler the idea the harder it is to sell because:

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
Warren Buffett

Tuesday, March 11, 2008

Stateless Corporations

An article at talked about American companies that by establish bogus headquarters in the Cayman Islands and in other nations, are avoiding paying their share of federal taxes, according to the Senate Finance Committee, which requested that Government Accountability Office investigators visit the Caribbean islands.

This is the tip of the iceberg, and a natural result of globalization. The eventual end result will be “stateless” corporations with no geographic roots. When companies had a national identity they drew their management primarily from citizens where their headquarters were located. The managers brought their cultural ethics with them, one result was that the corporation was seen as and thought of it self as part of the community.

We’ve already seen that as corporations think more globally they have been less concerned with the local impact of their decisions. After all, that location is a small part of their overall operation. What will the results be when the headquarters and managers stop thinking of themselves as “locals” and have no connection to the place where the company and they reside?

Monday, March 3, 2008

Amazing stuff!

One of the big elements in science fiction is thought control of your computer. That is, just think what you want the computer to do and it “reads your mind”.

It looks like the first step is here, check out this article at Wired Magazine on line.

While the control is rudimentary at best, it truly looks like the first step.

Wednesday, February 27, 2008

It's not a new thing

For those of you who think the issue of illegal aliens crossing the border to have their child born an American citizen, check this link to the Dick Powell Theater 1962 movie called “The Price of Tomatoes”.

The only people who think this is a new issue are the politicians, because as Upton Sinclair said, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Saturday, February 23, 2008

What happens to the average worker?

According to the Princeton Review a SAT score of the mid to high 500 seems to be the lower range most colleges expect. While the article takes pains to point out that the scores listed in the chart are not “cut off” scores, students with those scores are most likely to be considered.

All tests tend to have three major groupings, a small group with high scores, a large group clumped around the mean, and a group below average.

If the reports are true and education is the key to jobs and financial success in the future, what happens to the large number of people who score below the “minimums” for college admission?

Americans came to expect that most of us could find jobs that paid well enough for us to own our homes, have cars, TVs,and the rest of the possessions of modern life. Many jobs at the low end to the middle of the pay scale are disappearing as manufacturing and the associated support functions move to lower cost locations outside the US. Where do those displaced workers, and the new workers at the same level, find new jobs at similar pay rates?

This matters to you as a business because those are your customers. No job and they don’t buy and it doesn’t matter how inexpensive your product is.

Wednesday, February 20, 2008

Why we think politicians are nuts

CNN Money has an article which quotes Barack Obama on small business: “I will provide self-employed small business owners a $500 tax credit to offset their self-employed tax”.

Now how nuts is that, keep a tax but give a rebate! Just eliminate or reduce the tax so you don’t pay the $500 in the first place. Of course the answer is that he really doesn’t want to end the income stream, just make you feel good today. Tomorrow, when he doesn’t need your vote the tax is back.

We think the politicians are nuts because they think we don’t understand and will buy that line of nonsense.

Wednesday, February 13, 2008

Government wire tapping

This article about the government’s wire taping and the telephone company’s and internet provider’s liability for assisting the government.

I don’t have much problem with the government looking at my phone calls or even listing to determine that I’m not doing anything illegal. I do have a problem with them using the information gained that is embarrassing while not illegal. I also have a problem with some government employees having access and the potential for misuse.

We all saw one of then President Clinton’s staffers request confidential files about some Senators and Congressmen from the FBI. It got public and the information was not released, but how much can we trust a process with no check and balances?

What kind of use might former President Richard Nixon or his staff made of this kind of power? What is the potential for misuse by future Presidents or their staff?

Friday, February 8, 2008

An amazing lifetime

I always envied my grandfather for the changes he saw in his lifetime. From the first flight of the Wright brothers to Neil Armstrong walking on the moon.

This presidential election is just as great a leap. From segregation in the 1950 to a serious African American candidate. From the glass ceiling that limited how far in life a woman would be allowed to climb to a serious female candidate for president.

For all those pockets of racism and sexism that still exist, we as a nation are now prepared to judge our presidential candidates “by the content of their character”.

Maybe I don’t need to envy my grandfather after all.

Wednesday, February 6, 2008

Real recession or just press?

Bill Watkins of Seagate (the hard drive people) said in a article “I think we're going to talk ourselves into a recession (rather) than there's an actual one there. But you talk with IBM or other people in the Valley and they're not seeing world recession.”

What we’ve always know - people get up, get dressed, eat breakfast, and go to work. They still use all the same things they always did. A recession is all in the mind if people still need all the same stuff they always did.

The only people who should hurt by a recession are the people who are directly loosing money in the stock drop. Everybody else is still producing and consuming. The people hurt indirectly get caught up because the producers panic and stop making the things people still want, so they lay off and now their customers don’t have paychecks to buy with.

Saturday, February 2, 2008

Job flight nonsense

I just read an article at CNN about the problems of the long term unemployed. This is not new, for those of us who’s jobs disappeared the job market has been bad for years.

It’s the newspapers that are just now recognizing what the politicians started years ago with their policies. The lost jobs are not being replaced with enough jobs at the same pay grade. It’s called the law of unintended consequences. Laws were enacted to make it cost effective to ship jobs out of the country, now pretend to be surprised that there aren’t enough jobs!

I mean pretend because all of us (workers) have seen the truth for years.

Thursday, January 31, 2008

It's about jobs not politics

Sen. John McCain talked about the Michigan job flight and told the state that “the jobs aren’t coming back”.

Tough talk, and the truth. Just like the textile jobs that left New England for the south and then fled to Mexico, and points east once the jobs are gone and the factories closed, the cost of restarting is just too high.

My question for Senator McCain is - As a leader with vision, what’s next?

Since the federal government set up the rules that make shipping those jobs out of the US cost effective for the businesses, how will the federal government step up, accept responsibility, and restructure the rules to create replacement jobs that pay as well as the ones lost?

If you think that it’s not the governments job to take these steps, read the preamble to the US Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquillity, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. (Italics added)

So, Senator John, what is your plan?

Monday, January 28, 2008

Employee turnover and your choices

I just noticed an infomercial about training to be a motorcycle mechanic. It reminded me that most mechanics, when I was young, were hired with little or no formal training and trained by the employer. In the last 40 plus years (told you how old I am didn’t I) employers expect workers to come fully trained at their own expense.

I guess they objected to the training costs. But like most things, the cost didn’t go away it was just shifted to the employee. If I bear the cost of my training, why shouldn’t feel free to run down the street to the next job that offers me even a slight advantage.

I don’t owe the company anything because I brought my skills with me, you just want to rent with no long term commitment. If that drives up your cost through turnover - you decided this was the relationship you wanted with your employees.

Friday, January 25, 2008

An open question to those of you who would be President

Remember when the hot idea was to shut down social security and have us all invest in the stock market?

I’d like to hear your explanation of how that would work during an economic down turn like the one we are feeling now.

The problem with social security was never not enough money, it’s that the money was “invested” in IOUs when congress “borrowed” it for the general fund. The the real problem is that congress now wants to default on that debt to the American people

Tuesday, January 22, 2008

The media does it again

Once again the media underrates peoples intelligence and tries to frame the debate to the lowest common denominator. See this article at

Once again the link works in preview but not on the blog. Heres the url so you can see the article -

Monday, January 21, 2008

Focus on the right stuff

Since I recently retired I find I read the job search articles with a very different perspective. When I was really looking for a job, I looked for ways to improve my job search but now I find I am just amazed at how little the advice matches my experience as a hiring manager. A great deal of the advice relates to presentation.

When I was hiring technical workers and engineers one of the last things I cared about was presentation. One great maintenance technician sent a hand written resume on lined notebook paper. This would have hardly been read by the HR department because of it’s presentation. The point is I wasn’t hiring a resume writer, I was hiring a maintenance technician. The skills in fixing complex electronic equipment was the ONLY criteria. PS. I hired him and he was great!

Yes, I know that written communication is important in many jobs, but resume presentation has little to do with daily business correspondence.

Wednesday, January 16, 2008

Hiring the millennial generation

I keep reading about business having to hire consultants to help understand the new crop of workers. Seems to me the attitude of the new workers is really a reaction to the attitude of the companies.

Over the last 20 years I’ve watched companies shift their view of workers from a resource to a cost. Part of that shift has caused companies to use more and more temporary help agencies and contractors to fill job openings.

Since companies view workers as easily replaceable, the workers have accepted that view of themselves. With the advent of sites like connecting workers withe jobs, workers view them selves as a commodity for sale to the highest bidder AND with lots of bidders. While this may not be true for all jobs, it certainly is for high tech.

Sending the jobs off-shore is accelerating this view. The simple truth is companies (or at least their employees) understand what is happening, and how to fix it. The companies are still in denial and are trying to get different results without changing what they are doing.

Benjamin Franklin said “Insanity is doing the same thing the same way and expecting different results”.

Friday, January 11, 2008

People and the environment

Make the tools and information available and people will understand the right thing to do and do without government regulation.

See the article at Red Herring.

Tuesday, January 8, 2008

Shock Doctrine

I just finished reading Shock Doctrine by Naomi Klein. First the references to the events and documents are well and clearly identified with resource information to allow fact checking. Second the facts matched my memory of the events as reported at the time. It really paints a clear picture of why my career seems to have been so tough in the last 10 years or so.

I think Ms. Klein has clearly identified the problem - politicians who have accepted a now failed economic theory and who can not or will not reexamine that theory in light of real experience. She also identified that the middle ground between the two competing theories has been the most productive in the past.

Read this book.

Sunday, January 6, 2008

The balance between business and workers

Perhaps I’m over reacting to “The Shock Doctrine” , the latest book I’m reading. It deals with the practice of introducing laissez-faire practices during a crisis. The crisis could be a natural disaster or an economic down turn but the theory is that while people are focused on the crisis they won’t notice the changes in policy.

While not a formal student of history, I do read a lot and try to pay attention and my simple analysis is that the US middle class has prospered in a managed economy not a laissez-faire one. Right now we seem to be moving back to the days when big business had few restraints and treated workers as disposable.

It seems to me that when the founder (or the small group of founders) still control the business, enlightened self-interest can guide good business policy AND good social interaction. When you have share holders and a board of directors is seems that society has to provide the enlightenment.

Of course if society gets too “enlightened” the pendulum swings too far the other way and business can’t survive. So we have to try and walk that delicate balance between what’s good for business and what’s good for workers.

Tuesday, January 1, 2008

Why I oppose torture

I keep hearing references on the news about the propriety of torture. Should we or shouldn’t we? I really don’t understand the question. Torture really doesn’t work against a trained subject. One of the classes I took before being shipped to Viet Nam way back when was how to deal with being tortured.

The theory is 1. Don’t talk. 2. OK, you can’t keep quite faced with any more pain, lie. 3. OK, you can’t lie any more - tell all you know. By now the torturer doesn’t know the truth from a lie and you’ve bought enough time for your side and what you knew is now obsolete. Now if I know that, so do the people the advocates of torture want to question. How effective can torture be if it’s going to take a long time to get unreliable answers?

Even if we do agree that torture is necessary, who is going to be your torturer? Your husband, son, wife or daughter? What will inflicting pain on another human being do to the torturer? Do you really think you can teach someone to hurt other people and not change them?

All our lives we are taught not to hurt our playmates, now you’ve broken that training to create a torturer - how do you de-train them? I don’t want my kids or my friends kids or your kids to be that torturer.