40 posts categorized "economics"

August 13, 2009

A Case for Moral Selfishness

"[H]aving lived long, I have experienced many instances of being obliged, by better information or fuller consideration, to change opinions even on important subjects, which I once thought right, but found to be otherwise. It is therefore that, the older I grow, the more apt I am to doubt my own judgment of others." - Benjamin Franklin


I am a skeptic.

To an outside observer, my skepticism may look a lot like cynicism. I don't just believe people and companies are motivated by self-interest, I've seen it with my own eyes.

A person doesn't simply buy a book from Amazon because they believe it will help Amazon make money or employ more people. They buy it because they want or need the book for themselves -- either to inform, improve, or entertain. This is most often true when people realize that they're spending their own resources - they tend to spend it in a way that benefits them, not others.

If they're spending other people's money, they tend to be less careful with it.

This doesn't make everyone manifestly selfish, necessarily, because self-interest can indeed be naturally reconciled with service to others, without requiring one person to pick another's pocket to do so.

For instance, recently I bought and read A Project Guide to UX Design because I believed it would make me better at my job. Continuous personal improvement improves my marketability (self-interest), but only if my improvement leads me to help others get what they want (service to others).

I also get a lot of joy (self-interest) by making a tangible and substantial contribution to the financial success of other companies (service to others), their employees (service to others) and the satisfaction of their customers (service to others).

It's remarkable how often those things go hand-in-hand, when you work in a service industry, when regulations do not unnecessarily restrict your abillity to operate freely.

Once you realize that no one is more important to individuals than themselves, you tend to require stronger evidence that supports others' claims of all the great things you'll get if you just follow their lead.

A personality or "brand" may persuade you to be either less or more stringent with your requirements for evidence, which is just another way of saying that you trust those people and companies who have previously delivered on their promises, to the best of your knowledge.

However, healthy sketpicism, in light of moral self-interest, will allow the evidence to lead you wherever it may, even if it contradicts what you previously believed.

As a skeptic, I'll be the first to admit that the process is sometimes uncomfortable, but it also allows you to be less judgmental of other people's errors in thought and deed (which are intertwined), because you will realize that, in pursuit of your self-interest, you've managed a few whoppers yourself.

However, if there is a self-interest that should transcend all others, it should be the pursuit of the truth, which requires being capable of contradicting yourself when you find  your thoughts and deeds to be erroneous. Do not let love or hate of either personalities or brands to stand in the way of your dedication to think critically. - Cam Beck

July 28, 2009

Little Wallet. Big World.

The prevailing social climate suggests that the word "Big," put in front of everything, is arguably bad. Let's take a look at some of the bogeymen that pervade our popular lexicon:

  • Big Business
  • Big Tobacco
  • Big Banking
  • Big Media
  • Big Government

Opponents of such things derogatorily use the term when they're trying to incite public opinion against others. Typically (but not always), those who rail against what they describe in the first three groups are the same folks who are in or advocate the third and fourth.

Of the five groups, I've always tended to be more ambivalent to the first three than I have been to the last two, simply because they have the fewest opportunities to compel me to do anything.

  • Wal-Mart may be a big business, but I am not forced to shop there.
  • Phillip Morris may have a huge tobacco empire, and tobacco may be harmful to my health, but I'm not forced to smoke or to be around people who do, if I found the practice obnoxious.
  • Bank of America may have one of the world's largest banks, but I have plenty of options at my disposal if I did not care to use their services.

Freedom to Act
In each of these cases, I have meaningful choices. Collectively we determine the success of these enterprises, but someone else's choices, if he were to make different decisions, do not compel me to behave in the same manner as he.

By contrast, big government can compel both business and individuals to do any number of things. All they require is the full force of the law, the power to compel others, and either the willful compliance or apathetic acquiescence of the body of the people to get away with it.

In U.S. society, the durable power to compel is established through the Constitution of the various governments, and the particular powers and laws established under them represent the generational interests of society. However, the powers and laws of each generation have increasingly been created and enforced without respect to the durable law of the people.

Foxes and Hens: Natural Enemies
"That's democracy," you say.

But two foxes and a hen sitting around a dinner table voting on what's for dinner is not a durable basis for justice. A well heeled hen may be able to buy off the foxes for a while, but eventually all foxes reveal their true nature.

The Responsibility to Make a Profit
One would think that big businesses would recoil at the prospect of sharing a dinner table with those who can crush and are likely to eat them, but we've seen instead that they are more inclined to lie in bed with the foxes than try to fight them off.

In the short run, it's far less expensive to cope with unjust regulations than it is to fight them. Both turning public opinion and litigation are costly matters, especially when one of your opponents controls the lion's share of the media and the other can coerce even the unwilling to pay for investigations (no matter how rigged) and lawyers.

But large businesses have another motivation: The more regulations government passes, the more expensive it is to comply. The more expensive it is to comply, the better insulated larger businesses are against smaller competitors.

In other words, big businesses just stay big, or get bigger -- until at last the regulations by which they are bound strangle them out of existence, and government either lets them fail or "rescues" them with taxpayer money, with big business CEOs' willing hands extended, claiming they are "too big to fail," frightening just enough people to assent to the handout.

Just as Ayn Rand Predicted.
In this way, big business becomes virtually indistinguishable from big government in that, instead of relying on liberty-based market forces to determine their success or failure, they are able to manipulate the money right out of taxpayer hands, without respect to each person's individual choices to buy or not buy the products they make.

Everything has a cost, and sometimes we have to admit to ourselves that we can't afford it. The world is just too big to pay for everything for everybody.

We can mask the costs through layers of bureaucracy, but we cannot eliminate them. When we allow individual freedom to choose winners and losers in commerce, we can identify success and failure by the market's reaction to the collective personal choices each person willingly expresses for himself through his pattern of consumption. 

Or we can take the position of the foxes sitting at the dinner table -- eager to take from others something that by right does not belong to us -- all the while claiming moral superiority behind a specious ruse of "democracy." 

You can call that a lot of things, but it isn't liberty. - Cam Beck   

June 04, 2009

Marketing in a recession

Inside corporate America, marketing is often seen as just a sub set of sales or worse, as a bunch of liars. The Dilbert comic strip has expressed the feelings that a lot of people have toward marketing departments.  Given this perception, it's no wonder that I know so many great colleges who have been laid off, much more so than in other business disciplines.

The perception of marketing as just necessary when sales are booming or as a support function for sales misses the point. Marketing is about building brand, establishing a company's reputation and driving sales. It's not just a support for sales people but a strategic approach to guide customers through the purchasing funnel and deliver the right message through the right media at the right time.

The companies today that are cutting back their marketing budget are short sighted. There is tremendous opportunity to gain market share during a recession. Some of the greatest brands around, including Apple, we're built during recessions not too different from what we're experiencing now. Instead of just cost cutting across the board, companies that want to take advantage of the opportunity will look to make their marketing investments more efficient with a focus on market share. They'll also see the opportunity to snatch up some great talent that may not have been available to them during boom times.

Most companies however just cut across the board because they're too lazy to really develop a strategy and get into the detail of how they'll respond in these times. Look for new brands to be established and for companies and brands that are willing to go beyond just arbitrary cutting to rise above. Once the storm has passed, I'm looking forward to seeing which ones saw the opportunity.

- Paul Herring

May 28, 2009

Reason: The impotent antidote for the arbitrary whims of powerful and selfish people

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"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same." - Ronald Reagan

Have you ever had one of those dreams where you knew somebody you love was going to experience some major calamity, but you were unable to warn him or her about it, no matter how much you wanted to or how much you tried?

Usually it starts off innocuously enough, with only a minor sense that something is wrong. But as the dream progresses, your heart rate elevates as the events unfold, and by the end you're yelling and screaming but unable to touch or convince your loved one that they're in danger. You wake up, breathing heavily for a few minutes before your heart and breathing calm down, grateful that the dream is over, and go back to sleep.

I feel like I've been living that dream for the past decade or so. Only recently have I gotten to the part of the dream where my heart rate begins to elevate.

The problem has been two types of events that we should have predicted:

  1. Past events with consequences we should have seen coming
  2. Current events with consequences we should see coming

What's got me so worried? Let's take a look at some recent stories.

IRS Revenue Down 34%

600px-US-InternalRevenueService-Seal.svg The U.S. gets a good portion of its revenue by taxing a percentage of income and wealth. When income and wealth decrease, there is less to take. Therefore, tax revenues decrease.

x% of y-1 < x% of y, where x and y are real numbers.

In order for government to be able to collect revenue, it must have wealth and income to tax. The way to increase wealth is only to invest it. If they have less to invest, they cannot increase wealth. If they cannot increase wealth, the government has less to take.

x% of y+1 > x% of y

When people or companies have money to invest, they typically, in some form or fashion, transfer it to another, in the hopes (but not the promise) that they will be better off for what they get in return. They are free to succeed and they are free to fail.

They will have decreased, on their own accord, how much money they have at any given moment, and someone else will have taken possession of it.

With safeguards against fraud and the protection of private property, that process increases wealth, generates jobs, and is completely consistent with the free choices of the entities who earned it.

Rather than encouraging this sort of behavior that tends to increase wealth, our government has deemed it necessary to use a different equation. Instead of increasing wealth, they are working toward a mechanism to increase the percentage of the income they take from the people who are increasing it through a form of national sales tax called a VAT on TOP of all other sources of revenue.

The thinking goes that this will increase tax receipts.

x+2% of y > x% of y

However, this fails to account for the fact that people will have less to invest on their own, thereby hampering their ability to generate wealth. Initially, tax receipts will increase, but at the expense of the system's efficiency.

x+2% of y-1 ~ x% of y

The government gives very little consideration to the idea that they should spend less during these times, in spite of massive debt they accrue, which increases the interest their posterity will need to account for in the future, as demonstrated by its recent bailout of just-about-everything, including the U.S. automobile industry, which has been languishing for decades because of problems the government helped to create.

Government Will Now Own 72.5% of 'New GM'

Gm_general_motors_logo Back in December 2008, GM's president Fritz Henderson claimed that GM was too big to be allowed to fail. Showing a remarkable amount of chutzpa, Henderson went as far to say that bankruptcy was not an option and that the government had a moral imperative to inject GM with a ton of taxpayer money to keep it from filing bankruptcy.

What could he possibly have meant by that? Because now it looks like bankruptcy is indeed on the table.

Constitutional issues aside (and there are many of them), the problem with nationalization of enterprise is that it creates a monopoly, drags down innovation borne of market necessity, does not rely on profits or losses to determine its fate (see the Post Office vs UPS or FedEx for an example), which further decreases the efficiency of the system.

(Though I'm not addressing the constitutional issues here, that is not to suggest they are less important than the economic ones. In fact, the two are so intertwined that it's very difficult to leave one aside to talk about the other.)

What's more, since the government doesn't have the money to make the purchase, it must either borrow or print the money to do it. An excess of either tends to cause inflation, which requires the government collect more revenue to both:

  1. Service the increased debt
  2. Buy products and services

Even still, if the increased debt lowers the country's credit rating, it increases the interest rate the taxpayers must pay on that increased debt.

Faber: Inflation to 'Approach Zimbabwe Level'

Inflation under these conditions is unavoidable. Whether we will reach hyperinflation seems likely, but I don't know if investor Mark Faber is correct when he says it is a 100% certainty (If you don't know what hyperinflation is, or if you need a reminder, click the link above, but only if you don't mind that it will scare the Hell out of you). I hope he's wrong, but I'm not smart enough to know for certain.

In either event, inflation decreases the value of money generally. It destroys wealth, which decreases the amount that individuals are able to freely invest on their own accord.

As we've already shown, when wealth decreases, so does the value of what the the government is able to collect, even further exacerbating the problem.

This is true whether we get hyperinflation, garden-variety inflation, or something in between. One of them is certain.

What is the consequence of all of this? And what does it have to do with marketing?

Copypresse With a growing appetite and fewer resources to satisfy it, there is little that is out of our government's reach. Rather than curbing its diet, to satisfy this appetite, the it takes more from you and your clients.

  • This means you have less work.
  • This means you collect less revenue.
  • This leads to being able to hire fewer people.
  • This leads to higher unemployment rates.
  • This leads to diminishing tax receipts and, in the current environment, more government spending.

If you think a government can control everything and you can remain free, I'd like to know what you're smoking.

We've already seen that, with respect to the functional nationalization of the auto industry, the government can now determine who is allowed to run the company, how much they're allowed to pay their executive employees, and how much they're allowed to advertise.

If you're a marketer -- if you're human -- showing how this applies to you is as easy as drawing a short, straight line between A and B.

And unless we act, the worst is still ahead.

"Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other." - Ronald Reagan

What do you do when you see that a building is on fire? Do you sit back and watch it happen? Do you call 911? Or do you rush in to save anyone who might be trapped inside?

If you're stuck inside a burning building, do you resent the one who comes in to rescue you? The one who shouts from the ground to warn you to get out?

Nothing would please me more than to not feel this way, to go about my life as if nothing is wrong.

But the fire is burning. The effects are as predictable as the sunrise. And before I accept this fate as inevitable, I feel a growing sense of responsibility to at least say something. To convince one person.

Powerful and selfish people will tell you differently, and many people will believe them because either they have something to gain from what they say being true (after all, the consequent sure does seem painful) or they're just easily influenced by powerful people. No amount of logic or reasoning will dissuade them. They resent the bell ringer who warns them that their building is on fire.

But the fire does not depend on one's belief. It either is or it isn't.

Let's just keep our eyes open and not  be afraid to see what we see. As long as we do, assuming we catch it early enough, we can correct the problem.

But first we have to be willing. - Cam Beck

May 22, 2009

The Perils of Bureaucracies

In his new book, Why The Mighty Fall, Jim Collins took some time to explore the characteristics of a "good fit" for any given organization. (See Appendix 5: What makes for the "right people" in key seats?)

  1. The right people fit with the company's core values
  2. The right people don't need to be tightly managed
  3. The right people understand that they do not have "jobs," they have responsibilities
  4. The right people fulfill their commitments
  5. The right people are passionate about the company and its work
  6. The right people display "window and mirror" maturity

This concept spotlights an important principle that Collins says makes good companies great: First who, then what. In other words, key positions must be filled by the right people before worrying about what exactly it is that they will do.

The right people, he says, do not need to be told what to do. They're self-motivated because they are competent and they buy into the mission of the organization. If you restrict their creative and intellectual freedom or their ability to freely advance with needless regulations and bureaucracy, you drive the right people off, leaving in their place unmotivated people who do need to be tightly managed.

In Collins' words, "When bureaucratic rules erode an ethic of freedom and responsibility within a framework of core values and demanding standards, you've become infected with the disease of mediocrity." (emphasis mine)

The bureaucratization of American industry
When reading this -- although Collins did not make the point himself -- I could not help but thinking of it in light of the quasi-nationalization of the banks and GM -- industries that have already been historically been tightly regulated and strapped by layers of red tape.

Throw into the mix the fact that officials are using this opportunity to more tightly manage them to the point that the government is dictating to them how much they're allowed to advertise and how much they can pay executives, and you have a sure recipe for not only mediocrity, but taxpayer-subsidized mediocrity.

Permanent mediocrity
Worse, still, it's a mediocrity that cannot be replaced because people are not allowed to use their own resources to find a market-based solution -- the government is removing the resources of the resourceful to prop up the mediocre -- thereby ensuring its continuation through even more layers of bureaucracy that tend to drive out the very ones who could save it!

Bureaucracy, either institutional or inflicted by the government, cannot replace good, resourceful, people. It just replaces one's sense of responsibility with mundane tasks.

Systems and rules can definitely help an organization, but only as much as they reflect, rather than replace, the company's core values and the people's inspiration to fulfill them. - Cam Beck

May 04, 2009

Don't Panic. Just Lead.

Bethharte_thom1 At MPDailyFix, Beth Harte related a story about how a friend of hers, who is a senior-level marketer, was offered employment with junior-level pay. She goes on to explain some of the reasons this is happening and why she believes it will become more commonplace if marketers don't show their value. She's right. But if I can add my own perspective here, the problem Beth identifies can be understood economically and solved in the same terms.

Unemployment means there are too many people for too few jobs. In other words, there is a surplus of labor.

Surpluses tend to drive down prices.

The price of labor is measured in wages. Thus, when there is a labor surplus in any industry (like marketing), it tends to depress the wages of the people in that industry.

This is especially true when the hiring manager believes it doesn't matter from which part of the labor pool he chooses. One person is just as good as another -- or in Beth's words -- a commodity.

Being good -- being great -- these things don't matter unless we distinguish ourselves from the rest of the pack. It is the perception of our expertise and effectiveness that will enable us to demand higher wages.

Actual expertise can help drive perceived expertise, but it does not guarantee it. Now, more than ever, a marketer must be both good and an excellent self-promoter.

Doing this effectively is about all the things Beth mentioned. Among them:

  • Be a leader.
  • Measure.
  • Document.
  • Foster and nurture relationships.
  • Continuously improve.

However, this effort shouldn't resemble a campaign -- which is temporary and smacks of insincerity. In order to assure others of our value, we must first strive to be valuable. We must both improve the product and promote the improvement.

Luckily, in our cases, the act of successfully promoting the improvement, in some ways, actually helps to improve the product -- especially when we're willing to make mistakes and learn from them.

Instead of curse the conditions that led to this difficulty, we must embrace it as an opportunity to revolutionize the way we practice marketing. And we can apply to our clients the wisdom we gained from the experience of practicing it on ourselves.

I'm afraid that this won't guarantee a happy ending for everyone -- even a lot of the good ones. However, being a jack of all trades (and more importantly, being the sort of person who can adapt to changing circumstances) all but promises that we'll find someplace to be of use. - Cam Beck

April 08, 2009

Conflicts of Interest

The skeptic is not one who doesn't believe anything without proof. He's just one who believes that people tend to act according to their own self-interests. Like the marketplace itself, this is neither good nor bad. It's just a force of nature.

Consider the following examples:

  • Google CEO's Eric Schmidt said that journalists should rely on online advertising. Did Schmidt make this assessment because it's right, or because 98% of Google's income is comprised of advertising revenue, and to state otherwise would be heresy?
  • College professors and administrators tout the benefits of a college degree. Perhaps they teach because they believe it's true. Maybe they believe it's true because they teach. What's clear is that without a steady stream of believers, they would have to find employment elsewhere.
  • Politicians want to prove they care about you by spending money on things that you care about -- and that the other guy doesn't care as much about you because he doesn't want to spend it on those things.  To maintain their position, however, they need you to forget that it's your money anyway, and their decision to take and spend your money removes your ability to choose what to do with it.
  • The voters who elect them are no different, of course. They will happily cast their lot with the person or people who appears to promise the most while taking the least -- from them. That these promises must be paid for by someone else appears to be of little consequence.
  • Companies want you to believe that owning their product or enjoying their service is better than the alternative, even if the alternative includes keeping your own money. Of course, their livelihoods depend on your being convinced of this.
  • Companies also have a strong desire to pay you as little as they can without causing you to leave, and you have a strong incentive to get the best compensation package the market will bear.
  • Unions want to convince you that market forces (including the freedom to choose where to work) are insufficient safeguards against abuse. Pay no mind to how increased union rolls fattens the pockets of the union bosses.

Powerful people can always mitigate the forces of self-interest, but it's useful to examine what their interests are before subscribing to their demands. - Cam Beck

Related video

March 26, 2009

Mike Rowe for President

If there's anything that can make you appreciate the people who create the illusion of civilized life, it's Mike Rowe's Dirty Jobs. I caught Rowe's TED presentation when I chanced upon this post at slide:ology. (Hat tip to David Armano). If you haven't seen it yet, take 20 minutes to watch it. Unless you cured cancer or some such thing (and in 20 minutes, no less), it may be the best 20 minutes of your week (though if you're a PETA member, it may make you a bit squeamish).

His delivery is flawless, but his point is profound and memorable. We have, he says, declared war against work. We marginalize it at best and quite often attack it outright with overly stringent regulations.

He makes the point more effectively than I can, so please watch the video and visit his new initiative, MikeRoweWORKS.com, including this brilliant, down-to-earth commentary about the AIG bonuses. - Cam Beck

Related posts:
Competence of Heroic Proportions
The World Is Just Awesome

March 18, 2009

Bucking the Funny High Horses (with or without Jay Leno)

Jay.Leno Recently, in a magnanimous gesture, comedian Jay Leno announced he would stage a free performance to people struggling in this economy. He called it a "Comedy Stimulus Package." On Monday, he expressed shock and indignation that people lowered themselves to accept the free tickets... and then charge for them on eBay. He demanded eBay take the tickets down.

Radio host Rush Limbaugh picked up on the story and had a few things to say about it.

Here's my take:

I respect and applaud Leno for trying to bring some measure of joy to people he perceives to be in misery. However, I have to question his decision to force others to define "joy" in the same way he does.

Is "joy" stand-up-induced laughter only?  Or can "joy" be $500 increase in capital one can use to pay for a heating bill for another month or two? Does it even matter if that $500 were used to buy a new computer, an iPhone, or a year's supply of Girl Scout Cookies?

Make up your mind, Jay. Are you trying to increase joy or promote yourself?

Either one is fine by me, but at least have the courage to admit and face the consequences of the restrictions you're placing on how your "beneficiaries" (the market) can use your "gift." - Cam Beck

Related Post:
Nothing is free. Not even this headline.


March 10, 2009

Your Only Two Options

When making a decision on a project that is going to impact your business, you have only two options:

  1. Pay for it.
  2. Pay for it.

Cost-cutting spendthrifts may eschew meaningful research in favor of their own dead reckoning for the presumed savings in time and money, but the results they engender will almost certainly reflect the shortcuts they took.

To be clear, not all answers can be derived from any old type of research, and sometimes the cost of performing the right research outweighs the benefits that can be expected from it.

But good, relevant research generally gives us something to test against -- a means to identify and challenge our assumptions.

You might think you're saving money by refusing such research, but it's often the only thing that can provide the basis for both not only creating a solution to a problem, but also identifying the right problem in the first place.

Don't skip it. - Cam Beck