Business Explained by Stever

The New York Times reported that sales of smaller compacts and subcompacts are on the rise, now that we’re in a gas crunch. Industry analysts (who are young enough that they don’t remember the 70s) are calling this “a first.”

I tried to tell a friend that we’ve had cars that got 50-60 mpg for at least 30 years. When I was a teenager buying my first car, in the middle of the gas crisis of the 1970s, I was looking at a Honda Civic that was rated at over 50 mpg city. Once the oil shock was over, we went right back to huge, hulking contraptions that get gallons-per-mile instead of miles-per-gallon.

Is there anyone who didn’t see this coming? If so, you’ve never had a milkshake through a straw.

When you’re drinking a milkshake, you’re drinking faster than the milkshake can be replenished. Eventually, no matter what, you’ll get to the end of the milkshake and start slurping noisily. Sadness and despair, no more milkshake. If you knew how fast you were sipping and how much the cup held, you could predict exactly when you’d run out of tasty dairy mouth treat.

The story with oil is a bit more complicated. We don’t know how big the cup is, so we don’t know when we’ll hit bottom. And while one problem is how big the cup is, another problem is that more and more people are trying to suck on the straw at once, and we haven’t know how fast they would all start wanting some of our milkshake. (Warning: metaphor breakdown imminent.)

But the trend is utterly, completely, unambigiously predictable.

Because we don’t know the specific numbers, we can’t predict when oil will become expensive. But we know that it will, and there’s simply no doubt about it. If you jump off the top of a building, you’ll fall. How long you’ll fall depends on the height of the building. If you jump from a very tall building, you might even have enough time to pretend that the ride will go on forever. But eventually, you’ll land. That’s pretty much guaranteed. And you might even survive the landing (heck, Michael Holmes fell from 12,000+ feet without a chute and survive). It seems like a pretty stupid thing to do on purpose, though.

The sub-prime banking crisis was also predictable. All these analysts saying no one could have predicted it should be out of a job. The trends were obvious in a single news article last year. I—a non-finance guy—even blogged about it.

Warren Buffett and Charlie Munger have been watching the rise of complex financial derivatives for years, noting that their accounting conventions allow people to get rich when there’s actually nothing supporting the underlying assets. They’re pretty sure (and I agree) that the derivatives market is headed for a meltdown. We can’t predict when, but we can predict that markets are very good at eventually bringing assets back down to their underlying value.

Humans seem hell-bent on believing what we want to believe and ignoring unambiguous trends until they actually become crisis. There’s a whole field called “system dynamics” that deals with the behavior of complex systems, and more importantly, with the ways people seem to be hard-wired to misunderstand complex systems.

We’re living in an era of complex systems. Growth (and melting ice caps) happens faster than we project. Every year. On the surface, it appears things change, but the underlying trends are remarkably constant.

What are the trends you can predict now, but don’t want to? What are the underlying forces shaping your industry, country, or family that will come home to roost? You may not be able to predict specifics of when, where, or how, but you can predict with near-certainty that they will. And when they do, life will be … interesting.

Some interesting trends with highly uncertain timing, and highly certain momentum:

• The interest payments on the national debt will continue to grow as a percentage of the national budget. (Think: compounding interest on variable rate loans.)
• Wealth will continue to concentrate in the hands of a small number of people. (With the tax rate on capital gains less than the tax rate on income, even if everyone makes 10% more each year, the rich will get taxed at a lower rate and keep a greater percentage of the overall pie.
• We’ll have increasing demand for energy of all forms. (Whether or not our total supply will increase at the same rate or faster seems to be unknown.)
• We have a generation of people in our workforce pipeline of whom somewhere between a quarter and 40% don’t even have a high school diploma. There are serious societal implications there…
• Precious and non-precious metals are being steadily mined at a rate greater than the rate at which they’re replaced. (For example, Copper may be finished in 61 years, within the lifetime of some of you reading this article.)

So go out and buy a subcompact. And while you’re planning for retirement, consider that the world may be very different then than it is now. Those differences will be driven by our actions today (and our actions of the last 40 years, when it comes to climate change). Are you taking action today that will set up the trends you want in your old age?

 

 Ryan Allis interviewed by Stever Robbins [21:39m]: Play Now | Play in Popup | Download

Ryan Allis is the 23-year-old founder of iContact.com, the web’s second biggest marketing website. Ryan spoke in this podcast about how he ended up where he is and the role passion plays in business. This is a companion interview to the Get-it-Done Guy podcast, “Passion Play.”

I grew up in the era of the Apollo moon launches. One of my earliest memories is traveling to Cape Canaveral and watching from the beach as one of the missions was launched towards the moon. It was pretty incredible.

Despite frequent moves and attending six schools between elementary school and college, science was in the air. I got a firm grounding in how to think critically, how to use data, and how to observe the physical world around me in pursuit of Doing Great Things. Whether my school was in a failing Pennsylvania steel town or in a full-on major city, science was present.

Science has given us great things. And therein lies the problem.
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I just ran across an article by Mark Cuban about CEO pay and how stock and options have distorted it beyond all recognition. I go a step further and suggest … well, read for yourself.

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We’re spending a billion dollars a day on the Iraq war. Elsewhere in the world, we’re having food riots, because poor people can’t get enough to eat. The U.N.’s World Food Programme estimates the food gap at $500 million. That’s half a day’s worth of the Iraq War to keep millions of people from starving to death.

You can argue all you want about whether it’s our job to feed the world, but as long as we’re racking up a $7 trillion dollar debt spending money on other countries, you’d think we could spare a few hours’ worth of our war budget for humanitarian causes.I feel rather sad that my childhood image of America as a prosperous country that was a world protector and helper doesn’t resonate with our current policies(*).

I guess we all have to stop believing in Santa Claus sometime…

(*) Heck, the chairman of Bear Sterns could fund a significant chunk of that world hunger policy just with the money he took home from the sale of his company at $2 per share. Or John McCain (reported net worth: $100 million). Then there are all our wonderful folk heros who could pick up the tab personally and never even notice: our much-ballyhoo’d Google founders, Larry Ellison, John Kerry, Warren Buffett, Bill Gates, Steve Jobs, or any of our other iconic multi-multi-billionaires.

It’s almost April 15th, that wonderful time of the year when we pay taxes.

And I say this time of year sucks!! It doesn’t suck because of taxes; they’re inevitable. It sucks because of all the whining people do about taxes.

People complain about taxes all the time. We’re pretty ungrateful, here in America. We have among the lowest tax rates of any first-world country. Other countries get some dramatically visible services (mainly social safety net and healthcare) for their taxes, while a full 60% of our taxes go to military, social security, and medicare/medicaid, which most of us never see directly.

Of course, there’s plenty we do see but don’t connect with our tax dollars: our tax dollars pay for the war in Iraq (*), our schools, the people who clean the graffiti off walls, our sewer system, our water systems, our sidewalks, our policemen, our firemen, the interstate freeways that deliver our food, our oil supply, the court system, etc.

If you don’t like the way your tax dollars are spent, take a few minutes to look over the federal budget. Decide what you’d like cut and write your senators and congresspeople. It won’t make any difference(**), of course, since you aren’t a lobbyist with big dollars behind you, but at least you’ll have the moral high ground of complaining after actually having tried to do something real to affect the issue.

(*) I know, I know, you, personally, were never in favor of the war, but almost half of you voted to keep the wartime administration in 2004. Some of you voted for Bush and have genuinely convinced yourselves you didn’t. Some of you did and hope that by claiming opposition loudly enough, no one will call you to task over it. And some of you gave money to Kerry and assumed writing a check was all the action it would take to change course. Oh, well; welcome to reality. One thing I’m sure of: none of you stopped to analyze the quality of your 2004 decision-making and explicitly change the criteria you used to make your bad decision. It may be 2008, but you’re about to use the same broken decision-making process in November and you’ll wonder why politics doesn’t change.

(**) I think campaign finance is the rot in the system. A billion dollars on Presidential campaigns this year. What else could we have done with that money? As long as campaigns are that expensive, and as long as corporations and special interest can pool dollars to make a big impact, the legislation will benefit them, not us as individuals. So stop your bitching and do something about it or recognize that you’re living in the world of your own creation, take responsibility for your own situation, and spare us your piteous sobbing.

What a great idea! Twitter is a little one-to-many text messaging tool. I can send out a text message to Twitter, and everyone who has elected to “follow” me gets the message. The intent of Twitter is that you send out a message answering the question, “what are you doing right now?”

Initially, it was fun. I followed some friends from college and this oh-so-mundane peek into the trivia of their lives sparked several impromptu phone conversations (”Waiting in line and can’t decide which movie to see? I’ll call him and suggest something!”) We’ve reconnected and it’s been wonderful.

Grammar Girl has a gazillion followers. She uses her Twitter friends as a resource for examples, research, etc. She sends out occasional “here’s what I’m doing” tweets, and then she sends out, “Has anyone every been confused by a sign that used quote marks?” and voila–she has a dozen examples for her book.

Since I’m starting on the Get-it-Done Guy book, I’ve decided to start Twittering as a research and outreach tool. Furthermore, I’ll be creating a new BLOG where I post ideas, sample chapters, and questions for my community to share ideas with me.

I’d love to invite you to be part of my Twitter group. Simple text “follow GetItDoneGuy” to 40404, or go to my Twitter page and follow me. I’ll send along my BLOG URL once I have it, as well. We’ll see how this works. It could make collaborative book writing a great way to synthesize, craft, and polish ideas!

I upgraded to a LinkedIn premium membership last year when I wanted to use it to make a couple of introductions. It was interesting, but hasn’t become a staple of my networking strategy. After paying $240 over a year, it seemed prudent to downgrade back to a free account.

Unfortunately, LinkedIn provides several automated ways to upgrade, but no obvious way to downgrade. They seem to believe that no one would ever want to leave the fold (unrealistically absurd). Or perhaps they actually think that by making it hard to downgrade, people won’t.

To some degree, it worked. They made $240 from me that they might not have made had I had an easy way to downgrade before today. But now I’ve wasted a lot of time discovering that the only way to downgrade is to contract Customer Service through a web form. The message has been sent, and no response yet received…

What are they thinking? I wanted to downgrade because the membership hasn’t served me well. My feelings about LinkedIn were neutral to positive. Now, they’re negative. Really negative. LinkedIn has gone from “not getting much value from it” to “actively stealing my money.”

Will I return in the future? Probably not. This has left a bad taste in my mouth.

What could they do instead? Make unsubscribing easy. And give people a 3 or 4 question, super-fast-to-answer (radio buttons?) survey to find out why people defect. They will leave with a memory of begin supported and helped and might give useful info for improving the service.

When your customers leave, make it easy. Help them out the door. And as they leave, ask where they’re going, so you can call a cab. And once they’re happily on the way, use that information to find out how you can meet their needs better next time, so customers are leaving your competitor and flocking to you.

Hey! Can only type for a minute. Very exciting stuff happening. I’ve closed a book deal for a book based on the Get-it-Done Guy podcast. Starting to write next week! This week was too exciting. Burst hot water heater. Had to have the whole thing ripped out and replaced. Back went out, couldn’t walk. Car died. Yada yada yada. It’s a testimony to all the work I’ve been doing on myself that my main reaction was amusement as all my best-laid plans were washed into a maelstrom of plumbers and the like.

The time commitment to keep up a high-quality podcast (Get-it-Done Guy) and write a book is huge. I’m still working out exactly how I’m going to keep this BLOG going in a meaningful way. There’s only so much content I can generate per week before my brain explodes. (And remember that currently, all of this content is free. My actual income comes from coaching, so I still need time to run the darned business.)

We’ll see how it goes.

Cheerio!

A friend pointed me to this simple graphic in the Washington Post that explains the whole subprime mortgage mess. The only missing piece is that Joe the Hedge Fund manager and Bob the Banker both took home hundred-million-dollar salaries and bonuses before the house of cards collapsed. And even though their businesses may have tanked, they don’t have to give those bonuses and salaries back.