kottke.org posts about business
In response to a question on Quora of how significant transportation startup Uber is, Michael Wolfe offers an answer that isn’t so much about Uber in particular as it is a way of looking at businesses from the perspective of the owners/investors.
If you think of Uber as a town car company operating in a few cities, it is not big.
If you think of Uber as dominating and even growing the town car market in dozens of cities, it gets bigger. (Data point: there are now more Uber black cars in San Francisco than there were ALL black cars before Uber started).
If you think of Uber as absorbing the taxi markets, it gets pretty huge.
[…]
If you think of Uber as a giant supercomputer orchestrating the delivery of millions of people and items all over the world (the Cisco of the physical world), you get what could be one of the largest companies in the world.
Good companies always seem to be playing a different game than you think they are…outsiders see only the tactics and not the strategy. And the best ones succeed.
Jay Porter recently wrote a series of posts about his experience running a restaurant that abolished tipping. Here’s part one:
This is a summary of the experiences I had in our no-tipping lab, and in my next few posts I’ll dig a little deeper into each of them. Then I’ll finish this series by talking about what I’ve learned this year from a couple new friends who are researchers from the University of Guelph, and who have brought me in contact with some deeper thoughts about the tipping issue, from the social justice side. After seeing what they and their colleagues have uncovered, I’ve become convinced that thoughtful cultures who value civil rights will make tipping not just optional but illegal; and that this could actually happen sooner rather than later, when courts assess the reality of the situation.
If you want the Cliff Notes version, Porter wrote a shorter piece for Slate.
When we switched from tipping to a service charge, our food improved, probably because our cooks were being paid more and didn’t feel taken for granted. In turn, business improved, and within a couple of months, our server team was making more money than it had under the tipped system. The quality of our service also improved. In my observation, however, that wasn’t mainly because the servers were making more money (although that helped, too). Instead, our service improved principally because eliminating tips makes it easier to provide good service.
I loved every little bit of this letter that producer Steve Albini sent to Nirvana before the recording of In Utero, the band’s final studio album. In it, Albini clearly and succinctly lays out his philosophy about recording music and has specific suggestions for working with Nirvana. But the last few paragraphs, about his payment, are awesome. I’ve reproduced the selection here in full:
#5: Dough. I explained this to Kurt but I thought I’d better reiterate it here. I do not want and will not take a royalty on any record I record. No points. Period. I think paying a royalty to a producer or engineer is ethically indefensible. The band write the songs. The band play the music. It’s the band’s fans who buy the records. The band is responsible for whether it’s a great record or a horrible record. Royalties belong to the band.
I would like to be paid like a plumber: I do the job and you pay me what it’s worth. The record company will expect me to ask for a point or a point and a half. If we assume three million sales, that works out to 400,000 dollars or so. There’s no fucking way I would ever take that much money. I wouldn’t be able to sleep.
I have to be comfortable with the amount of money you pay me, but it’s your money, and I insist you be comfortable with it as well. Kurt suggested paying me a chunk which I would consider full payment, and then if you really thought I deserved more, paying me another chunk after you’d had a chance to live with the album for a while. That would be fine, but probably more organizational trouble than it’s worth.
Whatever. I trust you guys to be fair to me and I know you must be familiar with what a regular industry goon would want. I will let you make the final decision about what I’m going to be paid. How much you choose to pay me will not effect my enthusiasm for the record.
Some people in my position would expect an increase in business after being associated with your band. I, however, already have more work that I can handle, and frankly, the kind of people such superficialities will attract are not people I want to work with. Please don’t consider that an issue.
(via @akuban)
The Motley Fool collected 20 snippets of business wisdom uttered by Amazon CEO Jeff Bezos over the years.
All businesses need to be young forever. If your customer base ages with you, you’re Woolworth’s.
Totes agree with this, which is why I use words like “totes”. (Obvs.)
Solving the traveling salesman problem is difficult enough without having to consider the happiness of the salesman. But Tom Vanderbilt reports that’s essentially what UPS, FedEx, and the like have had to do.
People are also emotional, and it turns out an unhappy truck driver can be trouble. Modern routing models incorporate whether a truck driver is happy or not — something he may not know about himself. For example, one major trucking company that declined to be named does “predictive analysis” on when drivers are at greater risk of being involved in a crash. Not only does the company have information on how the truck is being driven — speeding, hard-braking events, rapid lane changes — but on the life of the driver. “We actually have built into the model a number of indicators that could be surrogates for dissatisfaction,” said one employee familiar with the program.
This could be a change in a driver’s take-home pay, a life event like a death in the family or divorce, or something as subtle as a driver whose morning start time has been suddenly changed. The analysis takes into account everything the company’s engineers can think of, and then teases out which factors seem correlated to accident risk. Drivers who appear to be at highest risk are flagged. Then there are programs in place to ensure the driver’s manager will talk to a flagged driver.
In other words, the traveling salesman problem grows considerably more complex when you actually have to think about the happiness of the salesman. And, not only do you have to know when he’s unhappy, you have to know if your model might make him unhappy. Warren Powell, director of the Castle Laboratory at Princeton University’s Department of Operations Research and Financial Engineering, has optimized transportation companies from Netjets to Burlington Northern. He recalls how, at Yellow Freight company, “we were doing things with drivers — they said, you just can’t do that.” There were union rules, there was industry practice. Tractors can be stored anywhere, humans like to go home at night. “I said we’re going to need a file with 2,000 rules. Trucks are simple; drivers are complicated.”
I loved reading CEO Jonah Peretti’s most recent memo to the team at Buzzfeed.
But there are many exciting, tempting, glamorous, lucrative opportunities that we will NOT do in the coming year and as more of these opportunities present themselves it will take discipline to stay on track. We will NOT launch a BuzzFeed TV show, radio station, cable network, or movie franchise — we’ll leave that to the legacy media and Hollywood studios. We will NOT launch a white labeled version of BuzzFeed to power other sites or a BuzzFeed social network — we’ll leave that to pure tech companies in Silicon Valley. We will NOT launch a print edition or a paywall or a paid conference business — we’ll leave that to other publications. We have a great business model that has a bright future as social and mobile continue to become the dominate form of media consumption. We will stay away from anything that requires adopting a legacy business model, even a lucrative one like cable syndication fees or prime time television ads. What seems like a lucrative opportunity today is often a distraction from building something much more exciting tomorrow. We need to stay patient and focused.
Here’s his 2012 memo. I’ve worked at a desk in the Buzzfeed office for as long as they’ve had an office (Fay Da posse represent!), and it’s been fascinating watching Jonah and his team turn a big idea and small blog into a media juggernaut.
WinCo is an Idaho-based grocery chain that frequently beats Walmart on price while providing health care benefits for any employee working over 24 hours a week as well as an annual pension.
While all of these factors help WinCo compete with Walmart on price, what really might scare the world’s largest retailer is how WinCo treats its employees. In sharp contrast to Walmart, which regularly comes under fire for practices like understaffing stores to keep costs down and hiring tons of temporary workers as a means to avoid paying full-time worker benefits, WinCo has a reputation for doing right by employees. It provides health benefits to all staffers who work at least 24 hours per week. The company also has a pension, with employees getting an amount equal to 20% of their annual salary put in a plan that’s paid for by WinCo; a company spokesperson told the Idaho Statesman that more than 400 nonexecutive workers (cashiers, produce clerks, and such) currently have pensions worth over $1 million apiece.
In 2011, Toyota offered to donate their celebrated business management process to The Food Bank for New York City. After some initial skepticism, the donation has “proved transformative” for the Food Bank.
“They make cars; I run a kitchen,” said Daryl Foriest, director of distribution at the Food Bank’s pantry and soup kitchen in Harlem. “This won’t work.”
When Toyota insisted it would, Mr. Foriest presented the company with a challenge.
“The line of people waiting to eat is too long,” Mr. Foriest said. “Make the line shorter.”
Toyota’s engineers went to work. The kitchen, which can seat 50 people, typically opened for dinner at 4 p.m., and when all the chairs were filled, a line would form outside. Mr. Foriest would wait for enough space to open up to allow 10 people in. The average wait time could be up to an hour and a half.
Toyota made three changes. They eliminated the 10-at-a-time system, allowing diners to flow in one by one as soon as a chair was free. Next, a waiting area was set up inside where people lined up closer to where they would pick up food trays. Finally, an employee was assigned the sole duty of spotting empty seats so they could be filled quickly. The average wait time dropped to 18 minutes and more people were fed.
In Kuwait, people sell all sorts of stuff on Instagram, using the service as a visually oriented mobile storefront instead of using a web site or something like eBay. From an interview with artist/musician Fatima Al Qadiri:
BR: Kuwait is a crazy mix: a super-affluent country, yet basically a welfare state, though with a super neo-liberal consumer economy.
FQ: We consume vast amounts of everything. Instagram businesses are a big thing in Kuwait.
BR: What’s an Instagram business?
FQ: If you have an Instagram account, you can slap a price tag on anything, take a picture of it, and sell it. For instance, you could take this can of San Pellegrino, paint it pink, put a heart on it, call it yours, and declare it for sale. Even my grandmother has an Instagram business! She sells dried fruit. A friend’s cousin is selling weird potted plants that use Astroturf. People are creating, you know, hacked products.
I dug up a few examples: Manga Box is an Instagram storefront selling manga (contact via WhatsApp to buy), Sondos Makeup advertises makeup services (WhatsApp for appts.), sheeps_sell sells sheep, and store & more is an account selling women’s fashion items. There was even an Insta-Business Expo held in April about Instagram businesses.
The Entrepreneurship and Business Club of the American University of Kuwait is holding an “INSTA BUSINESS EXPO” which will consist of all your favorite and newest popular entrepreneurs that grew their businesses through Instagram. Not only that, there will be guest speakers by Entrepreneurs that made it through Instagram as well!
(via @cmchap)
The Tampa Bay Times and The Center for Investigative Reporting spent a year investigating bad charities and this is what they found.
The worst charity in America operates from a metal warehouse behind a gas station in Holiday.
Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families.
Every year, it spends less than 3 cents on the dollar helping kids.
Most of the rest gets diverted to enrich the charity’s operators and the for-profit companies Kids Wish hires to drum up donations.
In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity’s founder and his own consulting firms.
No charity in the nation has siphoned more money away from the needy over a longer period of time.
But Kids Wish is not an isolated case, a yearlong investigation by the Tampa Bay Times and The Center for Investigative Reporting has found.
Using state and federal records, the Times and CIR identified nearly 6,000 charities that have chosen to pay for-profit companies to raise their donations.
Then reporters took an unprecedented look back to zero in on the 50 worst — based on the money they diverted to boiler room operators and other solicitors over a decade.
These nonprofits adopt popular causes or mimic well-known charity names that fool donors. Then they rake in cash, year after year.
The nation’s 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works.
Despicable. And a reminder that before you give, you should check on a site like Charity Navigator or GiveWell for organizations where a sizable portion of your contribution is going to the actual cause. For instance, the aforementioned Kids Wish charity currently has a “donor advisory” notice on their Charity Navigator page. (via @ptak)
Some interesting data about how protected bike lanes in NYC dramatically increased retail sales of local businesses.
A new study from the New York Department of Transportation shows that streets that safely accommodate bicycle and pedestrian travel are especially good at boosting small businesses, even in a recession.
NYC DOT found that protected bikeways had a significant positive impact on local business strength. After the construction of a protected bicycle lane on 9th Avenue, local businesses saw a 49% increase in retail sales. In comparison, local businesses throughout Manhattan only saw a 3% increase in retail sales.
And that’s just one of the many tidbits from a NYC DOT report released last November (right around the time of Hurricane Sandy, which is probably why no one noticed at the time); read the whole report here:
Among them: “retail sales increased a whopping 172% after the city converted an underused parking area in Brooklyn into a pedestrian plaza”, and traffic calming in the Bronx decreased speeding by ~30% and pedestrian crashes by 67%. (via @lhl)
Here’s a list of business ideas that seemed outlandish, ridiculous, and even downright stupid. See if you can match some of them to the billion dollar businesses they became before you click through.
Airlines are cool. Let’s start one. How hard could it be? We’ll differentiate with a funny safety video and by not being a**holes.
It will be ugly. It will be free. Except for the hookers.
We are building the world’s 20th search engine at a time when most of the others have been abandoned as being commoditized money losers.
Give us all of your bank, brokerage, and credit card information. We’ll give it back to you with nice fonts. To make you feel richer, we’ll make them green.
It is like email, SMS, or RSS. Except it does a lot less.
The world needs yet another Myspace or Friendster except several years late. We’ll only open it up to a few thousand overworked, anti-social, Ivy Leaguers. Everyone else will then join since Harvard students are so cool.
I really enjoyed this piece by John Siracusa about why Apple should continue to make a high-end personal computer (like the Mac Pro) even though it’s not a big seller or hugely profitable. Basically, the Mac Pro is Apple’s halo car:
In the automobile industry, there’s what’s known as a “halo car.” Though you may not know the term, you surely know a few examples. The Corvette is GM’s halo car. Chrysler has the Viper.
The vast, vast majority of people who buy a Chrysler car get something other than a Viper. The same goes for GM buyers and the Corvette. These cars are expensive to develop and maintain. Due to the low sales volumes, most halo cars do not make money for car makers. When Chrysler was recovering from bankruptcy in 2010, it considered selling the Viper product line.
But car companies continue to make halo cars in part because they are great cars, or at least have the potential to be great cars, and when a car company stops caring about making great cars, they lose their identity and credibility…with consumers, with employees, with investors, and with competitors. Halo cars are the difference between being a car company and being a company that sells cars.
Normally I’m not a big fan of advice like “do what big car companies do”, but what Siracusa’s piece demontrates is one of the things that’s problematic about data: there are important things about business and success that you can’t measure. And I would go so far as to say that these unmeasurables are the most important things, the stuff that makes or breaks a business or product or, hell, even a relationship, stuff that you just can’t measure quantitatively, no matter how Big your Data is. (via df)
Chairman and CEO Warren Buffett recently released his annual letter to the shareholders of Berkshire Hathaway for the 2012 fiscal year. In his estimation, Berkshire didn’t have such a good year.
When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of $24.1 billion would be subpar, in terms of the comparison we present on the facing page.
But subpar it was. For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain (a calculation that includes dividends as well as price appreciation). In eight of those nine years, it should be noted, the S&P had a gain of 15% or more. We do better when the wind is in our face.
Perhaps with Anne Hathaway’s Oscar win in February, they’ll have a better year this year.
In 1997, Dell Computer CEO Michael Dell famously said of Apple:
I’d shut it down and give the money back to the shareholders.
Today, Michael Dell is part of a consortium giving the money back to the shareholders and taking Dell Inc. private.
Under the terms of the deal, the buyers’ consortium, which also includes Microsoft, will pay $13.65 a share in cash. That is roughly 25 percent above where Dell’s stock traded before word emerged of the negotiations of its sale.
Michael S. Dell will contribute his stake of roughly 14 percent toward the transaction, and will contribute additional cash through his private investment firm, MSD Capital. Silver Lake is expected to contribute about $1 billion in cash, while Microsoft will loan an additional $2 billion.
I love this description of Amazon by Matthew Yglesias:
That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon.
That’s the beauty of low margins. (via @tcarmody)
An insightful piece by a former Amazon employee about how the company’s low margin strategy helps them remain competitive.
Attacking the market with a low margin strategy has other benefits, though, ones often overlooked or undervalued. For one thing, it strongly deters others from entering your market. Study disruption in most businesses and it almost always comes from the low end. Some competitor grabs a foothold on the bottom rung of the ladder and pulls itself upstream. But if you’re already sitting on that lowest rung as the incumbent, it’s tough for a disruptor to cling to anything to gain traction.
An incumbent with high margins, especially in technology, is like a deer that wears a bullseye on its flank. Assuming a company doesn’t have a monopoly, its high margin structure screams for a competitor to come in and compete on price, if nothing else, and it also hints at potential complacency. If the company is public, how willing will they be to lower their own margins and take a beating on their public valuation?
Because technology, both hardware and software, tends to operate on an annual update cycle, every year you have to worry about a competitor leapfrogging you in that cycle. One mistake and you can see a huge shift in customers to a competitor.
Not having to sweat a constant onslaught of new competitors is really underrated. You can allocate your best employees to explore new lines of business, you can count on a consistent flow of cash from your more mature product or service lines, and you can focus your management team on offense. In contrast, most technology companies live in constant fear that they’ll be disrupted with every product or service refresh. The slightest misstep can turn a stock market darling into a company struggling for its very existence.
Eliot Spitzer has a pair of suggestions related to gun control: pressure the owners of gun companies and regulate the sale of bullets.
There may be too many guns to rid the streets of guns, but there are not that many bullets, especially in the calibers needed for the types of weapons used in these shootings. Let’s create a regime that makes sale of bullets to anybody not licensed to carry a gun illegal, makes resale illegal, micro-stamps bullets so they can be traced. No Second Amendment issues here.
There is some movement on the first issue already. Cerberus, a private equity firm that owns a large gun company, is selling the company because of pressure from their investors.
The private equity firm said it had made the investments in gun manufacturers on behalf of its clients, which include pension funds and other institutional investors. Cerberus added that it was the role of legislators to shape the country’s gun policy.
“We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so,” Cerberus said.
This is where the phrase “passing the buck” comes from.
Climate change, already on the hook for potentially killing spaghetti, will have a big impact on downhill skiing and snowboarding in the United States.
Under certain warming forecasts, more than half of the 103 ski resorts in the Northeast will not be able to maintain a 100-day season by 2039, according to a study to be published next year by Daniel Scott, director of the Interdisciplinary Center on Climate Change at the University of Waterloo in Ontario.
By then, no ski area in Connecticut or Massachusetts is likely to be economically viable, Mr. Scott said. Only 7 of 18 resorts in New Hampshire and 8 of 14 in Maine will be. New York’s 36 ski areas, most of them in the western part of the state, will have shrunk to 9.
Earlier this morning in a post about Apple manufacturing their products in the US, I wrote “look for this “made in the USA” thing to turn into a trend”. Well, Made in the USA is already emerging as a trend in the media. On Tuesday, Farhad Manjoo wrote about American Giant, a company who makes the world’s best hoodie entirely in the US for a decent price.
For one thing, Winthrop had figured out a way to do what most people in the apparel industry consider impossible: He’s making clothes entirely in the United States, and he’s doing so at costs that aren’t prohibitive. American Apparel does something similar, of course, but not especially profitably, and its clothes are very low quality. Winthrop, on the other hand, has found a way to make apparel that harks back to the industry’s heyday, when clothes used to be made to last. “I grew up with a sweatshirt that my father had given me from the U.S. Navy back in the ’50s, and it’s still in my closet,” he told me. “It was this fantastic, classic American-made garment — it looks better today than it did 35, 40 years ago, because like an old pair of denim, it has taken on a very personal quality over the years.”
The Atlantic has a pair of articles in their December issue, Charles Fishman’s The Insourcing Boom:
Yet this year, something curious and hopeful has begun to happen, something that cannot be explained merely by the ebbing of the Great Recession, and with it the cyclical return of recently laid-off workers. On February 10, [General Electric’s Appliance Park in Louisville, KY] opened an all-new assembly line in Building 2 — largely dormant for 14 years — to make cutting-edge, low-energy water heaters. It was the first new assembly line at Appliance Park in 55 years — and the water heaters it began making had previously been made for GE in a Chinese contract factory.
On March 20, just 39 days later, Appliance Park opened a second new assembly line, this one in Building 5, to make new high-tech French-door refrigerators. The top-end model can sense the size of the container you place beneath its purified-water spigot, and shuts the spigot off automatically when the container is full. These refrigerators are the latest versions of a style that for years has been made in Mexico.
Another assembly line is under construction in Building 3, to make a new stainless-steel dishwasher starting in early 2013. Building 1 is getting an assembly line to make the trendy front-loading washers and matching dryers Americans are enamored of; GE has never before made those in the United States. And Appliance Park already has new plastics-manufacturing facilities to make parts for these appliances, including simple items like the plastic-coated wire racks that go in the dishwashers.
and James Fallows’ Mr. China Comes to America:
What I saw at these Chinese sites was surprisingly different from what I’d seen on previous factory tours, reflecting the political, economic, technological, and especially social pressures that are roiling China now. In conjunction with significant changes in the American business and technological landscape that I recently saw in San Francisco, these changes portend better possibilities for American manufacturers and American job growth than at any other time since Rust Belt desolation and the hollowing-out of the American working class came to seem the grim inevitabilities of the globalized industrial age.
For the first time in memory, I’ve heard “product people” sound optimistic about hardware projects they want to launch and facilities they want to build not just in Asia but also in the United States. When I visited factories in the upper Midwest for magazine stories in the early 1980s, “manufacturing in America” was already becoming synonymous with “Rust Belt” and “sunset industry.” Ambitious, well-educated people who had a choice were already headed for cleaner, faster-growing possibilities — in consulting, finance, software, biotech, anything but things. At the start of the ’80s, about one American worker in five had a job in the manufacturing sector. Now it’s about one in 10.
Add to that all of the activity on Etsy and the many manufactured-goods projects on Kickstarter that are going “Made in the USA” (like Flint & Tinder underwear (buy now!)) and yeah, this is definitely a thing.
As noted by Fishman in his piece, one of the reasons US manufacturing is competitive again is the low price of natural gas. From a piece in SupplyChainDigest in October:
Several industries, noticeable chemicals and fertilizers, use lots of natural gas. Fracking and other unconventional techniques have already unlocked huge supplies of natural gas, which is why natural gas prices in the US are at historic lows and much lower than the rest of the world.
Right now, nat gas prices are under $3.00 per thousand cubic, down dramatically from about three times that in 2008 and even higher in 2006. Meanwhile, natural gas prices are about $10.00 right now in Europe and $15.00 in parts of Asia.
Much of the growing natural gas reserves come from the Marcellus shale formation that runs through Western New York and Pennsylvania, Southeast Ohio, and most of West Virginia. North Dakota in the upper Midwest also is developing into a major supplier of both oil and natural gas.
So basically, energy in the US is cheap right now and will likely remain cheap for years to come because hydraulic fracturing (aka fracking aka that thing that people say makes their water taste bad, among other issues) has unlocked vast and previously unavailable reserves of oil and natural gas that will take years to fully exploit. A recent report by the International Energy Agency suggests that the US is on track to become the world’s biggest oil producer by 2020 (passing both Saudi Arabia and Russia) and could be “all but self-sufficient” in energy by 2030.
By about 2020, the United States will overtake Saudi Arabia as the world’s largest oil producer and put North America as a whole on track to become a net exporter of oil as soon as 2030, according to a report from the International Energy Agency.
The change would dramatically alter the face of global oil markets, placing the U.S., which currently imports about 45 percent of the oil it uses and about 20 percent of its total energy needs, in a position of unexpected power. The nation likely will become “all but self-sufficient” in energy by 2030, representing “a dramatic reversal of the trend seen in most other energy-importing countries,” the IEA survey says.
So yay for “Made in the USA” but all this cheap energy could wreak havoc on the environment, hinder development of greener alternatives to fossil fuels (the only way green will win is to compete on price), and “artificially” prop up a US economy that otherwise might be stagnating. (thx, @rfburton, @JordanRVance, @technorav)
According to CEO Tim Cook, Apple will start making some of its computers entirely in the US.
Apple CEO Tim Cook announced one of the existing Mac lines will be manufactured exclusively in the United States next year. Mac fans will have to wait to see which Mac line it will be because Apple, widely known for its secrecy, left it vague. Cook’s announcement may or may not confirm recent rumors in the blogosphere sparked by iMacs inscribed in the back with “Assembled in USA.”
Well, those iMac pretty clearly state they are assembled in the US. And look for this “made in the USA” thing to turn into a trend…I think companies are finding that making stuff in the US is not as expensive as everyone thinks it is.
Update: BusinessWeek has a long interview with Cook about US manufacturing, among many other topics.
It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported-the engine, the processor. The glass is made in Kentucky. And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it. It will happen in 2013. We’re really proud of it. We could have quickly maybe done just assembly, but it’s broader because we wanted to do something more substantial. So we’ll literally invest over $100 million. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.
In the NY Times, Gareth Cook writes about the advantages some companies have found in employing people with autism.
To his father, Lars seemed less defined by deficits than by his unusual skills. And those skills, like intense focus and careful execution, were exactly the ones that Sonne, who was the technical director at a spinoff of TDC, Denmark’s largest telecommunications company, often looked for in his own employees. Sonne did not consider himself an entrepreneurial type, but watching Lars — and hearing similar stories from parents he met volunteering with an autism organization — he slowly conceived a business plan: many companies struggle to find workers who can perform specific, often tedious tasks, like data entry or software testing; some autistic people would be exceptionally good at those tasks. So in 2003, Sonne quit his job, mortgaged the family’s home, took a two-day accounting course and started a company called Specialisterne, Danish for “the specialists,” on the theory that, given the right environment, an autistic adult could not just hold down a job but also be the best person for it.
I particularly liked Tyler Cowen’s observations:
Tyler Cowen, an economist at George Mason University (and a regular contributor to The Times), published a much-discussed paper last year that addressed the ways that autistic workers are being drawn into the modern economy. The autistic worker, Cowen wrote, has an unusually wide variation in his or her skills, with higher highs and lower lows. Yet today, he argued, it is increasingly a worker’s greatest skill, not his average skill level, that matters. As capitalism has grown more adept at disaggregating tasks, workers can focus on what they do best, and managers are challenged to make room for brilliant, if difficult, outliers. This march toward greater specialization, combined with the pressing need for expertise in science, technology, engineering and mathematics, so-called STEM workers, suggests that the prospects for autistic workers will be on the rise in the coming decades. If the market can forgive people’s weaknesses, then they will rise to the level of their natural gifts.
From before the election, which seems like it was several months ago already, a piece from Clayton Christensen about how investors and companies should shift their thinking about allocating capital. Christensen’s gist is that efficiency is creating pools of excess capital which is not being reinvested into the types of industry that create jobs.
The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. And yet cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations. Billions in capital is also sitting inert and uninvested at private equity funds.
Capitalists seem almost uninterested in capitalism, even as entrepreneurs eager to start companies find that they can’t get financing. Businesses and investors sound like the Ancient Mariner, who complained of “Water, water everywhere — nor any drop to drink.”
It’s a paradox, and at its nexus is what I’ll call the Doctrine of New Finance, which is taught with increasingly religious zeal by economists, and at times even by business professors like me who have failed to challenge it. This doctrine embraces measures of profitability that guide capitalists away from investments that can create real economic growth.
Read all the way to end; Christensen offers some suggestions for shifting capital allocation.
Emeril Lagasse made an appearance on Treme on Sunday. I watched a clip of his scene a few days ago and have been thinking about it on and off ever since. In the scene written by Anthony Bourdain, Emeril takes a fellow chef to the building that used to house Uglesich’s, a small-but-beloved New Orleans restaurant that closed back in 2005. The chef is having misgivings about expanding her business, particularly about all the non-cooking things you have to do, and Emeril explains that the way the owners of Uglesich’s did it was one way forward:
You see, they kept it small, just one spot, just a few tables. There’d be a line around the corner by 10 am. You see, they made a choice. Anthony and Gail made a choice to stay on Baronne Street and keep their hands on what they were serving. They cooked, everyday they cooked, until they could cook no more.
But there’s also another way to approach your business:
The other choice is that you can build something big but keep it the way that you wanna keep it. Take those ideas and try to execute them to the highest level. You got a lotta people around you, right? You’re the captain of the ship. Or what I should say is that you’re the ship. And all these people that look up to you and wanna be around you, they’re living in the ship. And they’re saying, “Oh, the ship is doing good. Oh, the ship is going to some interesting places. Oh, this ship isn’t going down just like all the other fucking ships I’ve been on.” […] You’ve got a chance to do your restaurant and to take care of these people. Just do it.
kottke.org has always been a one-person thing. Sure, Aaron posts here regularly now and I have guest editors on occasion, but for the most part, I keep my ass in the chair and my hands on what I am serving. I’ve always resisted attempts at expanding the site because, I have reasoned, that would mean that the site wouldn’t be exactly what I wanted it to be. And people come here for exactly what I want it to be. Doing the site with other people involved has always seemed unnatural. It would be selling out…that’s how I’ve thought about it, as opposed to blowing up.
But Emeril’s “until they could cook no more” and “you’re the ship”…that got to me. I am a ship. I don’t have employees but I have a family that relies on the income from my business and someday, when I am unable to do this work or people stop reading blogs or all online advertising moves to Facebook or Twitter, what happens then? Don’t I owe it to myself and to them to build something that’s going to last beyond my interest and ability to sit in a chair finding interesting things for people to look at? Or is it enough to just work by yourself and produce the best work you can?
Or can you do both? John Gruber’s Daring Fireball remains a one-man operation…as far as I know, he’s never even had an intern. I don’t have any inside knowledge of DF’s finances, but from the RSS sponsorship rate and the rate for sponsoring Gruber’s podcast, my conservative estimate is that DF grosses around $650,000 per year. And with a single employee/owner and relatively low expenses, a large amount of that is profit. So maybe that route is possible?
I don’t have any answers to these questions, but man, it’s got me thinking. Emeril got me thinking…who saw that coming? Bam!
Occupy Wall Street continues to show that it’s more than just a simple protest movement. They have been doing amazing work with Hurricane Sandy relief and now there’s Rolling Jubilee. Here’s how Rolling Jubilee works:
OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (If you’re a debt broker, once you own someone’s debt you can do whatever you want with it - traditionally, you hound debtors to their grave trying to collect. We’re playing a different game. A MORE AWESOME GAME.)
This is a simple, powerful way to help folks in need — to free them from heavy debt loads so they can focus on being productive, happy and healthy. As you can see from our test run, the return on investment approaches 30:1. That’s a crazy bargain!
This has my vote for idea of the year. Well, until the debt sellers catch on and either raise the price due to demand or refuse to sell to untrusted brokers.
In this week’s New Yorker, Chrystia Freeland writes about how the ultra-rich have taken a dislike to President Obama and his anti-business policy and rhetoric, even though the President “has served the rich quite well”. This article is infuriating, a bunch of very powerful men (and they are all men) sitting around crying about their powerlessness. A few choice quotes:
Cooperman regarded the comments as a declaration of class warfare, and began to criticize Obama publicly. In September, at a CNBC conference in New York, he compared Hitler’s rise to power with Obama’s ascent to the Presidency, citing disaffected majorities in both countries who elected inexperienced leaders.
Strong argument there. Per Godwin, that should have been the end of it.
Evident throughout the letter is a sense of victimization prevalent among so many of America’s wealthiest people. In an extreme version of this, the rich feel that they have become the new, vilified underclass.
Underclass! Boo hoo! Do you want some cheese with that 2005 Petrus?
T. J. Rodgers, a libertarian and a Silicon Valley entrepreneur, has taken to comparing Barack Obama’s treatment of the rich to the oppression of ethnic minorities — an approach, he says, that the President, as an African-American, should be particularly sensitive to.
Yes, I can imagine the President nodding, upset at missing the obvious parallel here. The police chasing hedge fund managers through the streets of lower Manhattan with firehoses is a scene that I will never forget.
[Founding partner of the hedge fund AQR Capital Management Clifford S. Asness] suggested that “hedge funds really need a community organizer,” and accused the White House of “bullying” the financial sector.
Clifford S. Asness swinging from the bathroom door knob by his underwear. Clifford S. Asness called “Assness” in trigonometry class. Nude photos taken of Clifford S. Asness in the locker room and distributed to the freshman girls. Clifford S. Asness teased so mercilessly about his acne that he has to stay home from school throwing up from the emotional pain of being so thoroughly and callously rejected by one’s peers.
In 2010, the private-equity billionaire Stephen Schwarzman, of the Blackstone Group, compared the President’s as yet unsuccessful effort to eliminate some of the preferential tax treatment his sector receives to Hitler’s invasion of Poland.
Hitler again! Obama is obviously a fascist communist.
“You know, the largest and greatest country in the free world put a forty-seven-year-old guy that never worked a day in his life and made him in charge of the free world,” Cooperman said. “Not totally different from taking Adolf Hitler in Germany and making him in charge of Germany because people were economically dissatisfied.
Hitler, take three. Stick with what you know.
He was a seventy-two-year-old world-renowned cardiologist; his wife was one of the country’s experts in women’s medicine. Together, they had a net worth of around ten million dollars. “It was shocking how tight he was going to be in retirement,” Cooperman said. “He needed four hundred thousand dollars a year to live on. He had a home in Florida, a home in New Jersey. He had certain habits he wanted to continue to pursue.
Shocking. Needed. Certain habits.
People don’t realize how wealthy people self-tax. If you have a certain cause, an art museum or a symphony, and you want to support it, it would be nice if you had the choice.
We didn’t realize that. And it’s such an either-or thing too…can’t pay your taxes *and* help the Met buy a Vermeer.
Paul Graham explains what a startup is and how it differs from other types of businesses.
That difference is why there’s a distinct word, “startup,” for companies designed to grow fast. If all companies were essentially similar, but some through luck or the efforts of their founders ended up growing very fast, we wouldn’t need a separate word. We could just talk about super-successful companies and less successful ones. But in fact startups do have a different sort of DNA from other businesses. Google is not just a barbershop whose founders were unusually lucky and hard-working. Google was different from the beginning.
To grow rapidly, you need to make something you can sell to a big market. That’s the difference between Google and a barbershop. A barbershop doesn’t scale.
For a company to grow really big, it must (a) make something lots of people want, and (b) reach and serve all those people. Barbershops are doing fine in the (a) department. Almost everyone needs their hair cut. The problem for a barbershop, as for any retail establishment, is (b). A barbershop serves customers in person, and few will travel far for a haircut. And even if they did the barbershop couldn’t accomodate them.
Writing software is a great way to solve (b), but you can still end up constrained in (a). If you write software to teach Tibetan to Hungarian speakers, you’ll be able to reach most of the people who want it, but there won’t be many of them. If you make software to teach English to Chinese speakers, however, you’re in startup territory.
Most businesses are tightly constrained in (a) or (b). The distinctive feature of successful startups is that they’re not.
Over at Hacker News, npguy asked Y Combinator co-founder Paul Graham about “the most frighteningly ambitious idea” he’d ever been pitched. Graham declined to answer, citing confidentiality, but Eliezer Yudkowsky responded with what another commenter called the Yudkowsky Ambition scale:
1) We’re going to build the next Facebook!
2) We’re going to found the next Apple!
3) Our product will create sweeping political change! This will produce a major economic revolution in at least one country! (Seasteading would be change on this level if it worked; creating a new country successfully is around the same level of change as this.)
4) Our product is the next nuclear weapon. You wouldn’t want that in the wrong hands, would you?
5) This is going to be the equivalent of the invention of electricity if it works out.
6) We’re going to make an IQ-enhancing drug and produce basic change in the human condition.
7) We’re going to build serious Drexler-class molecular nanotechnology.
8) We’re going to upload a human brain into a computer.
9) We’re going to build a recursively self-improving Artificial Intelligence.
10) We think we’ve figured out how to hack into the computer our universe is running on.
1. United recently lost a 10-year-old girl (flying as an unaccompanied minor) and didn’t care and didn’t do much of anything to remedy the situation.
Annie and Perry only discovered that something was wrong a few hours later when the camp called to say that Phoebe was not on the expected plane in Grand Rapids. At the point, both Annie and Perry got on the phone. Annie got someone in India who wouldn’t help beyond telling her:
‘When I asked how she could have missed it given everything was 100% on time she said, “it does not matter” she is still in Chicago and “I am sure she is fine”.’
Annie was then put on hold for 40 minutes when she asked to speak to the supervisor.
2. Matt Fisher’s sister was killed in a car accident and not only did her insurance company, Progressive, refuse to pay the value of her insurance policy, their legal team defended the guy who killed his sister in court.
In Maryland, you may not sue an insurance company when they refuse to fork over your money. Instead, what they had to do was sue the guy who killed my sister, establish his negligence in court, and then leverage that decision to force Progressive to pay the policy.
Now my parents don’t harbor much venom for the guy who killed my sister. It was an accident, and kicking that guy around won’t bring Katie back. But kicking that guy around was the only way to get Progressive to pay. So they filed a civil suit against the other driver in hopes that, rather than going to court, Progressive would settle. Progressive did not. Progressive made a series of offers (never higher than 1/3 the amount they owe) and then let it go to a trial.
At the trial, the guy who killed my sister was defended by Progressive’s legal team.
If you are insured by Progressive, and they owe you money, they will defend your killer in court in order to not pay you your policy.
(via @cshirky & @hchamp)
A report from the Credit Suisse Research Institute shows that companies that have women on their boards of directors out perform companies with all male boards in a number of different metrics. The report looked at 2300 companies with a market cap of over $10 billion, and found that stocks of companies with women on the board outpaced companies without by 26%. These companies also had net income growth of 14% vs 10%.
“Companies with women on boards really outperformed when the downturn came through in 2008,” Mary Curtis, director of thematic equity research at Credit Suisse in Johannesburg and an author of the report, said in a telephone interview. “Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.”
(via @alexmleo)
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