May 4, 2011

US set to regain industrial crown

Peter Marsh:

The era of widespread offshoring of manufacturing from the US to China is coming to an end, according to a study that forecasts a renaissance for American production industries over the next five years.

The report by the Boston Consulting Group (BCG) forecasts that, by 2015 - on the back of good productivity growth and relatively low wages - the US is likely to be slightly ahead of China as a base for making many of the goods destined for sale in North America.

Posted by jez at 10:03 PM

April 28, 2011

Seven tricky questions for Mr Buffett

Andrew Hill:

Until this week, only one topic was off-limits for questions to Warren Buffett at Saturday's annual gathering of Berkshire Hathaway shareholders in Omaha: how serious is the Dave Sokol affair?

On Wednesday, however, the company issued an 18-page report from its audit committee about the former star executive's trading in shares in Lubrizol, a chemicals group later bought by Berkshire, and declared open season for all questions to Mr Buffett.

Here are my seven:

1. How serious is the Dave Sokol affair?

You are the world's most famous long-term investor. Recently, Berkshire's shares have lagged behind the S&P 500, but your record of outperformance over more than four decades speaks for itself. Even big, conservative bets, such as the 2009 investment in Burlington Northern Santa Fe railway, have been well timed. But Mr Sokol was a frontrunner to succeed you as chief executive. You lauded him regularly in your annual letter to shareholders. His abrupt resignation and the circumstances surrounding it seem to suggest that this is more than just a blip.

2. Do you love some of your managers too much?

Posted by jez at 10:17 PM

Obituary: The man who gave the world CDs

Michiyo Nakamoto:

Norio Ohga, who was instrumental in bringing the world the compact disc and the PlayStation and is credited with building Sony into a global electronics and entertainment group, has died of organ failure aged 81.

"It is no exaggeration to attribute Sony's evolution beyond audio and video products into music, movies and games, and subsequent transformation into a global entertainment leader to Ohga-san's foresight and vision," Howard Stringer, Sony's chairman and chief executive, said in a statement.

"By redefining Sony as a company encompassing both hardware and software, Ohga-san succeeded where other Japanese companies failed," Mr Stringer said.

A musician by training, who was a close friend of Austrian conductor, Herbert von Karayan, Mr Ohga led Sony during perhaps its most successful years, as president from 1982 until 1995, when the Japanese electronics maker became one of the most admired companies in the world.

It was under Mr Ohga that the name Sony came to symbolise Japanese manufacturing excellence and to define what was "cool" in the world of electronics - an image encapsulated in the catchphrase, "It's a Sony."

Posted by jez at 1:18 AM

April 8, 2011

Reforming the Banks

Michael Pettis:

just got back from a very interesting but hectic week in New York and Washington, followed by two days at a conference in Hangzhou. During my meetings I noticed that much of the discussion, and many of the questions I was asked by both government officials and investors, focused on debt levels and reforms in the Chinese financial system. I have written a lot about rising debt in China and am glad that analysts and policymakers seem to be spending a lot more time thinking about balance sheet issues. Every case of rapid, investment-driven growth in the past century, as far as I can make out, has at some point reached a stage in which debt levels rose to unsustainable levels and precipitated either a debt crisis or a long grinding adjustment period.

The reason debt levels always seem to grow unsustainably, I suspect, is that in the initial stages of the growth model much if not all of the investment is economically viable as it pours into building necessary infrastructure whose profits and externalities exceed the cost of the investment. The result is real growth. At some point, however, the combination of subsidies, distorted incentives (in which investment benefits accrue to those making the investment while costs are shared broadly through the banking system), and very cheap financing costs leads inexorably to wasted investment and debt rising faster than asset values. This is when the debt burden begins to rise in an unsustainable way.

Posted by jez at 9:27 AM

March 8, 2011

A sugared pill

Andrew Jack:

When Daniel Carlat, a psychiatrist in Massachusetts, was flown to New York with his wife by Wyeth, the "training" weekend he attended in a luxury hotel was topped off with a Broadway show. It was early 2001 and he had just agreed to the US pharmaceuticals company's proposal that he give talks to doctors about its antidepressant Effexor.

During the following year, he was regularly paid fees of $750 a time to drive to "lunch and learn" sessions where he would speak for 10 minutes to emphasise the drug's advantages to fellow doctors, using slides prepared by the company. "It seemed like a win-win," he recalls. "I was prescribing it, educating doctors and making some money."

But within a few months, he became disillusioned with his co-option as a marketing representative. He was selectively presenting clinical data that put the drug in a positive light to physicians who had been targeted by the company through "data mining" techniques that identified their individual prescription patterns.

Posted by jez at 6:06 PM

March 3, 2011

Oil & Water, Jet Fuel & Labor

William Swelbar:

On June 25, 2008 I blogged asking the question: Is Oil A Cancer Or A Cure? At that time, the price of a barrel of oil had not yet reached its apex of $147 per barrel, but was well on its way. Based on findings by the Air Transport Association's superb economic analysis team led by chief economist John Heimlich, the U.S. airline industry paid the equivalent of $174.64 per barrel [price of a barrel of oil plus the equivalent cost to refine crude into jet fuel (the crack spread)] on July 11, 2008. By December 23, 2008 the price of a barrel of West Texas Intermediate had fallen to $30.28 per barrel. So far in 2011, we've seen a similar surge in oil prices, but based on current geopolitical events, I am not expecting another $117 drop in the price of a barrel of oil like we witnessed in 2008.

I'm actually wondering what happens if the wave of Mideast political upheaval washes over Algeria? Or Saudi Arabia? Some economic experts say the price of oil could rocket past the $200 threshold.

In 2011, the industry has paid an average of $89.15 per barrel of crude and another $25.80 in the crack spread for a total cost of "in the wing" jet fuel of nearly $115 per barrel. Since February 22, 2011 the industry has paid more than the equivalent of $120 per barrel for jet fuel. On March 1, 2011 the industry paid the equivalent of $132.17 per barrel for jet fuel including the crack spread of $32.54. For all of 2008, the industry paid the equivalent of $25 per barrel to refine crude into jet fuel. In the last five days of trading the crack spread paid by the industry is nearly $30 per barrel.

Posted by jez at 6:04 PM

February 9, 2011

Angela in Wunderland: What Germany's got right, and what it hasn't

The Economist:

THE West has rightly marvelled at China's economic miracle. Less noticed is a minor miracle in its own midst. It is time to pay attention to Germany's new Wirtschaftswunder.

Germany had a savage recession as manufacturing orders dried up, but its economy has since bounced back strongly, expanding by 3.6% last year, far faster than most other rich economies. For sure, this was partly a "bungee effect" after a particularly deep downturn, but it is no one-year wonder. By several measures, including keeping unemployment down (it is at its lowest since 1992) and the prosperity reflected in the growth of GDP per head, Germany was the star performer among the rich G7 countries over the past ten years (see article). Germans entered 2011 in their most optimistic mood since 2000, according to Allensbach's polls. Business confidence is at its highest since the Ifo institute began tracking it 20 years ago.

What's Germany's secret? It helps that the country did not experience a property or credit bubble, and that it has kept its public finances admirably under control. But above all Germany's success has been export-driven: unlike most other big rich economies it has maintained its share of world exports over the past decade, even as China has risen.

Posted by jez at 10:01 PM

January 25, 2011

Three faces of India (and two faces of Tata)

The Economist:

I STARTED the day on Tuesday by visiting Tata's steelworks in Jamshedpur. I found it awe-inspiring. The scale is mind-blowing: 2.5 hectares of industrial muscle. Even more mind-blowing is the steelmaking process itself: the giant cauldrons of molten steel, the huge trains shifting raw materials about, the fashioning of the molten steel into iron sheets. Three things struck me in particular. First, the relatively small number of people involved. Though based in a relatively poor company, this is a high-tech, high-skill, highly mechanised process. Second, the intelligence and enthusiasm of the people I talked to. These people love to talk about steel! And they love to recite war stories from their visits to other steel mills! (I apologise if I lost the plot every now and again). And third, the smoothness of the organisation. Every process seemed to be perfectly choreographed, and everybody seemed to know their role. Tata Steel has reduced its workforce from 78,000 in the mid-1990s to 35,000 today, while quadrupling the amount of steel it produces. We need a similar revolution in the public sector.

Posted by jez at 8:34 PM

January 19, 2011

Value of being 'Made in Italy'

Rachel Sanderson:

In Palazzo Strozzi, a Renaissance palace overlooking Florence's Arno River, Ferruccio Ferragamo, scion of luxury shoe brand Salvatore Ferragamo, is explaining why his shoes are "Made in Italy".

Mr Ferruccio's father, Salvatore, put handmade shoes on the feet of Marilyn Monroe and Sophia Loren, Lauren Bacall and Judy Garland. But his son is supposed to be living in different times, where rising Chinese and Indian manufacturing power has put Italians out of business.

When Mr Ferruccio meets the Financial Times in December, he has another problem on his mind. He is having to ask Ferragamo's workers, dotted in villages and factories around Florence, to keep working right up until Christmas day, almost a week longer than usual.

"We cannot make enough to keep up with the demand from the Chinese. They want their shoes not just made in Italy, but often made in Florence," he says.

A decade ago, many economists and industrialists, in Italy and outside, were convinced that the myriad small and medium-sized businesses that make up the backbone of the country's economy were in terminal decline. The Italians could not compete with rival manufacturing bases in Asia. Their productivity was too low and too costly. They did not have the infrastructure or heft to export their goods in the volumes necessary to ensure their survival.

Posted by jez at 9:59 PM

December 29, 2010

In the life of the Foxconn young workers

Jordan Pouille:

Under the Christmas tree, some of us will hopefully find a great Iphone 4 32G, an amazing 9.7 inch Ipad 3G, a Dell netbook, a Sony PSP® or a Nokia N8 smartphone. On the user manual, it shall be written how to handle it but certainly not how it has been made. Today, La Vie French magazine publishes a long story (including side boxes here and here) about life at Foxconn, main Apple's supplier. Sorry, it's only in French but let me propose you my comment in English.

Despite tragic suicides (14 officially - one last November, yet much lower than in others fims like France Telecom but when it comes to very young people in such a guarded area, it raises questions) and several promises for pay rises, Foxconn is still compared by Hong-kong ngo Sacom, as a "labour camp". How come?

So I went there in May and then back again lately, to check what really changed during this 6 months period of time. Salary is now high, better than any other factory around, but happiness is still not here, whatever swimming pool or tennis court you might have seen on tv, owing to Foxconn p.r. Is it due to Foxconn's military discipline (typically taiwanese, i have been told) ? to a rather hostile environnement (huge dorms, huge factory) that doesn't match with young workers expectations?

Posted by jez at 1:30 AM

November 28, 2010

Southwest's Great Culture

We are fortunate to have Southwest serving Milwaukee. Madison service would be that much better, of course.

Posted by jez at 2:14 PM

November 23, 2010

Rupert Murdoch Does Another Daily

Some of us count sheep, but Rupert Murdoch spends his sleepless nights dreaming up media properties.

It was late May, around 2 a.m., and Murdoch was in his New York penthouse on Fifth Avenue having a tough time falling asleep when a vision came to him: publishing a daily news report that would be exclusively made for the iPad and other tablet devices. There would be no print product.

Murdoch had done his homework, so he already knew that readers spend more time fully immersed with the iPad than they do with the Web. He believes that within a few years, tablet devices will be like cell phones or laptops -- consumers will go into Wal-Mart and buy the things at reasonably cheap prices (far more diminished than the $499 for an iPad now). In his mind, in the not-too-distant future, every member of the family will have one.

Makes perfect sense. Horace Dediu has more.

Posted by jez at 10:03 AM

November 17, 2010

Is OpenTable Worth It?


We've often been asked why Incanto is not listed on For those of you not familiar with the service, OpenTable is the most successful online restaurant reservation portal on Earth; a place on the Web where diners can search for and make reservations at leading restaurants, via a browser or smartphone. Restaurants like Incanto that chose not to offer their seats through OpenTable find themselves in a shrinking minority.

Let me start by stating the obvious: the convenience and immediacy of booking a table online anytime day or night is beneficial to both diners and to restaurants. This was my belief nine years ago, when we first approached OpenTable to inquire about becoming one of its early customers. It's also why we have found a way to offer Web-based reservations, through our own website, since we opened and why we've kept current and revisited OpenTable's offerings each year, to re-visit our decision.

It's possible, however, for convenience to come at too dear a price. I don't mean that only as it relates to the short-term economic price, but also in the sense that sometimes, what may at first seem like a straightforward benefit can in fact require the sacrifice of something much more precious over the long run. That judgment has always been at the core of our concerns about OpenTable, which has to its credit done such a masterful job building its business that it now holds the dominant position here in the U.S. among providers of online reservation services, with a market share estimated at greater than 90%. Whether or not your restaurant is an OpenTable customer, it's impossible not to feel its impact.

Posted by jez at 9:18 AM

November 3, 2010

Scientists unveil moving 3D holograms

Clive Cookson

More than 30 years after the famous Star Wars movie scene in which a hologram of Princess Leia appealed for help from Obi-Wan Kenobi, US researchers have unveiled holographic technology to transmit and view moving three-dimensional images.

The scientists at the University of Arizona say their prototype "holographic three-dimensional telepresence" is the world's first practical 3D transmission system that works without requiring viewers to wear special glasses or other devices. The research is published in the journal Nature.

Potential applications range from telemedicine and teleconferencing to mass entertainment.

"Holographic telepresence means we can record a three-dimensional image in one location and show it in another location, in real-time, anywhere in the world," said Nasser Peyghambarian, project leader.

Existing 3D projection systems produce either static holograms with excellent depth and resolution but no movement - or stereoscopic films, such as Avatar, which give the perspective from one viewpoint only and do not allow the viewer to walk around the image. The new technology combines motion with an impression of genuine solidity.

Posted by jez at 10:15 PM

November 1, 2010

Lands' End President discusses going the extra mile for the customer

Kathy Mance

From its beginning as a sailboat equipment company to its success in capturing the admiration and loyalty of legions of landlubbers, Lands' End has stayed true to its famous mantra, "Guaranteed.Period.®" In addition to the company's focus on quality, they have kept their eyes on their customer. In 2008 they were named to the NRFF-AMEX Top Ten for consistent excellence in customer service and retained that standing in 2009. To find out how this predominately catalog and Internet retailer continues to win accolades from consumers the world over, we caught up with Nick Coe, President of Lands' End. You'll find "quality" resonates through the answers of this top exec, who fell in love with retailing when he was intrigued by quality in "great tailoring or a perfect pair of jeans" - products he couldn't afford.

In the five years NRF Foundation and American Express have conducted the Customers' Choice survey, Lands' End has consistently been ranked in the top ten. How do you continue to delight your customers year after year?

Posted by jez at 9:29 PM

September 13, 2010

Foxconn: The Man Who Makes Your iPhone

Frederik Balfour & Tim Culpan:
The interview took place at Longhua, the entrance to which looks like a border crossing, with seven toll-booth-like lanes and uniformed guards. Although drab and utilitarian, the campus is a fully functioning city, with fast-food joints, ATMs, Olympic-size swimming pools, huge LED screens that flash public-service announcements and cartoons, and a bookstore that sells, among other things, the Chinese-language translation of the Harvard Business Review. Prominent on display are biographies of Gou, one of which collects his many aphorisms, including "work itself is a type of joy," "a harsh environment is a good thing," "hungry people have especially clear minds," and "an army of one thousand is easy to get, one general is tough to find."

Foxconn is now the biggest exporter out of China, and its general is the richest man in Taiwan, estimated by Forbes to have a personal fortune of $5.9 billion. He says he cannot confirm that figure, however, as he does not keep track. "I have one guy in charge," Gou says in heavily accented English that he picked up while touring the U.S. in the 1980s. "Every year he gives me a piece of paper and says, 'Hey, this is how much.' I think for me, I am not interested in knowing how much I have. I don't care. I am working not for money at this moment, I am working for society, I am working for my employees."

The colossus that Gou (pronounced "Gwo") runs today started with a $7,500 loan from his mother. His first world headquarters was a shed he rented in 1974 in a gritty Taipei suburb called Tucheng, which means Dirt City in Mandarin. Gou, then 23, had done three years of vocational training and served in the military. He then worked for two years as a shipping clerk, where he got a firsthand view of Taiwan's booming export economy and figured he ought to stop pushing paper and get into the game. With the cash from his mother, he bought a couple of plastic molding machines and started making channel-changing knobs for black-and-white televisions. His first customer was Chicago-based Admiral TV, and he soon got deals to supply RCA, Zenith, and Philips (PHG).

Imagining his future success, he practiced signing his name in English over and over until he had perfected it. He remains proud of it today, walking over to a whiteboard during the interview and signing with a schoolboy flourish. It looked like the perfect cursive script from the credits of I Love Lucy.
Posted by James Zellmer at 7:36 PM

August 7, 2010

The Style of an Elegant Bookstore
Posted by James Zellmer at 9:47 PM

July 4, 2010

Lunch with Luca Cordero di Montezemolo

Richard Milne:
Screaming down the home straight of Ferrari’s test track at 200kmph an hour in a classic red 458 Italia, I suddenly don’t feel like lunch. The Fiorano track near Bologna in central Italy is, at 3km, not long. But, partly in an attempt to impress the test driver next to me with some fast cornering, I feel as if I have left part of my stomach on one of its hairpin bends. Matters fail to improve as, in heavy fog untypical of early summer, I take the car off the track and, rather more slowly, on to the winding roads of the Apennines, heading for Ferrari HQ in nearby Maranello.

I am still spinning slightly when we pull into the car park just before the company’s elegant and aristocratic chairman, Luca Cordero di Montezemolo, who somewhat incongruously arrives in a small Fiat. He explains that his journey from Rome has been a nightmare as fog diverted his helicopter and forced him to take trains and cars – hence the Fiat. Nevertheless he appears in characteristically enthusiastic mood. “I’ve just been to a conference at the Vatican [on the financial crisis]. Fantastic,” he explains. “Fantastic” is a word Montezemolo uses a lot. Ferrari is “fantastic”, Italian food is “fantastic”, his new high-speed train company, NTV, is “fantastic”, as is the 458 Italia I have been driving.

On my way out he hands me a white postcard. “This is what I give to all new employees at Ferrari,” he says. Looking at it in a Ferrari 599 on the way back to Milan, it looks to me like the perfect credo for Montezemolo. It starts: “The real secret of success is enthusiasm. You can do anything if you have enthusiasm ... With it there is accomplishment. Without it there are only alibis.”
Clusty Search: Luca Cordero di Montezemolo
Posted by James Zellmer at 10:28 AM

June 22, 2010

"The Time We Have is Growing Short"

Paul Volcker:
If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain the political cohesion of Europe. Amounts approaching a trillion dollars have been marshaled from national and international resources to deal with those challenges. Financing can buy time, but not indefinite time. The underlying hard fiscal and economic adjustments are necessary.

As we look to that European experience, let’s consider our own situation. We are not a small country highly vulnerable to speculative attack. In an uncertain world, our currency and credit are well established. But there are serious questions, most immediately about the sustainability of our commitment to growing entitlement programs. Looking only a little further ahead, there are even larger questions of critical importance for those of less advanced age than I. The need to achieve a consensus for effective action against global warming, for energy independence, and for protecting the environment is not going to go away. Are we really prepared to meet those problems, and the related fiscal implications? If not, today’s concerns may soon become tomorrow’s existential crises.

I referred at the start of these remarks to my sense five years ago of intractable problems, resisting solutions. Little has happened to allay my concerns. But, of course, it is not true that our economic problems are intractable beyond our ability to react, to make the necessary adjustments to more fully realize the enormous potential for improving our well-being. Permit me a note of optimism.

A few days ago, I spent a little time in Ireland. It’s a small country, with few resources and, to put it mildly, a troubled history. In the last twenty years, it took a great leap forward, escaping from its economic lethargy and its internal conflicts. Responding to the potential of free and open markets and the stable European currency, standards of living have bounded higher, close to the general European level. Instead of emigration, there has been an influx of workers from abroad.
Posted by James Zellmer at 9:49 AM

June 19, 2010

Incapable of Rational Thought

Ed Wallace:
It started with an email sent to the Chevrolet employees at their Detroit headquarters and warned them not to use the word Chevy in lieu of the far more formal Chevrolet. GM PR people added that there was a plastic jar put into the hallway there so that each time someone heard another use the now "forbidden" word, they would deposit money as a personal penance. This decision, they said, was simply protecting the brand image of Chevrolet, much the way Coke or Apple protected its image. The memo was signed by the President of Chevrolet and GM's Vice President for Marketing.

Apparently at Ed Whitacre's new GM, morons have retaken the institution.

Are they not aware that "Chevy" has been an affectionate nickname for Chevrolet for at least 80 years and is not likely to go away? Did these executives not know that "Coke" is to "Coca-Cola" what "Chevy" is to "Chevrolet"?

People don't call their computers "Apple" -- "Mac" being to "Macintosh" what "Chevy" is to "Chevrolet" -- and certainly nobody calls anything "my Apple iPod."
Posted by James Zellmer at 3:27 PM

June 14, 2010

America’s Car-Mart: Bentonville’s Secret Sauce Makers

The Financial Investigator: Most every day at 802 Southeast Plaza Avenue in Bentonville, Arkansas appears to be a pretty good one.

That’s because that address houses the headquarters of Americas Car-Mart, an auto retailer that has found the sweet spot, the intersection where a corporation’s business model meets consumer demand and the net income flows like cool, clear water.

Focusing exclusively on the sub-prime auto-buyer, their clean and efficiently-organized used-car lots throughout the south-central and southwest regions offer a stark contrast to the traditionally dodgy experience of buying a used-car; no one at any Americas Car-Mart locale is likely to be mistaken for the Kurt Russell character in Used Cars. The staff is friendly and well-turned out, there is a wide variety of cars, trucks and vans to choose from, the business offices are clean and air-conditioned and, perhaps best of all, the word “no” just doesn’t appear to be used all that often.

From an analytical standpoint, the business model appears to be simplicity itself.
Posted by James Zellmer at 1:01 PM

June 6, 2010

Wall Street's War

Matt Taibbi:
Congress looked serious about finance reform – until America's biggest banks unleashed an army of 2,000 paid lobbyists.

t's early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once- indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.

The real shocker is a thing known among Senate insiders as "716." This section of an amendment would force America's banking giants to either forgo their access to the public teat they receive through the Federal Reserve's discount window, or give up the insanely risky, casino-style bets they've been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street's most lucrative profit centers: Five of America's biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan's trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.
Posted by James Zellmer at 3:16 PM

May 31, 2010

Google has mapped every WiFi network in Britain

Duncan Gardham:
Google has mapped every wireless network in Britain in order to use the information for commercial purposes, it has emerged.

Every WiFi wireless router – the device that links most computer owners to the internet - in every home has been entered into a Google database.

The information was collected by radio aerials on their Street View cars, which have now photographed almost every home in the country.

The data is then used on Google's Maps for Mobile application to locate mobile phones such as iPhones in order for users to access information relevant to the area such as restaurants, cinemas, theatres, shops and hotels.

The project had remained secret until an inquiry in Germany earlier this month in which Google was forced to admit that it “mistakenly” downloaded emails and other data from unsecured wireless networks where they we
Posted by James Zellmer at 6:40 PM

May 19, 2010

The fate of a generation of workers: Foxconn undercover fully translated

Richard Lai: I know of two groups of young people.

One group consists of university students like myself, who live in ivory towers and kept company by libraries and lake views. The other group works alongside steel machineries and large containers, all inside a factory of high-precision manufacturing environment. These guys always address their seniors as "laoban" (boss), and call their own colleagues -- regardless of familiarity -- the rude "diaomao" (pubic hair) in loud.

After going undercover in Foxconn for 28 days, I came back out. I've been trying to tie the two pictures together. But it's very difficult. Even with people living in these two places sharing the same age, the same youth dream.

My undercover was part of Southern Weekend's investigation on the then six Foxconn suicides. We soon found out that most of Southern Weekend's reporters were rejected due to age -- Foxconn only recruits people around the age of 20. In comparison, being just under 23 years old, I was quickly brought into Foxconn.

The 28-day undercover work made a strong impact on me. It wasn't about finding out what they died for, but rather to learn how they lived.
Posted by James Zellmer at 10:09 PM

May 10, 2010

Interview: Jung Garden Center's Dick Zondag

Patricia Olsen:
MY grandfather started our mail-order company 100 years ago. In the early 1950s, customers were driving to Randolph, northeast of Madison, to see what they were purchasing by mail from us, and my dad saw an opportunity to start a local garden center.

One of my first jobs was to take the orders for shrubs from the garden center to a storage area and to take the shrubs to the customer. I was 11. I also hoed the weeds and detassled corn.

In the 1990s, the two branches of our family split the business. The Jungs received Jung Seed Genetics, which sells agronomic seeds to farmers, and the Zondags got the catalog division and the garden centers.
Posted by James Zellmer at 9:50 PM

February 12, 2010

The Legacy of Billy Tauzin: The White House-PhRMA Deal

Paul Blumenthal:
More than a million spectators gathered before the Capitol on a frosty January afternoon to witness the inauguration of Barack Obama, who promised in his campaign to change Washington’s mercenary culture of lobbyists, special interest influence and backroom deals. But within a few months of being sworn in, the President and his top aides were sitting down with leaders from the pharmaceutical industry to hash out a deal that they thought would make health care reform possible.

Over the following months, pharmaceutical industry lobbyists and executives met with top White House aides dozens of times to hammer out a deal that would secure industry support for the administration’s health care reform agenda in exchange for the White House abandoning key elements of the president’s promises to reform the pharmaceutical industry. They flooded Congress with campaign contributions, and hired dozens of former Capitol Hill insiders to push their case. How they did it—pieced together from news accounts, disclosure forms including lobbying reports and Federal Election Commission records, White House visitor logs and the schedule Sen. Max Baucus releases voluntarily—is a testament to how ingrained the grip of special interests remains in Washington.
Posted by James Zellmer at 3:30 PM

February 4, 2010

Google to enlist NSA to help it ward off cyberattacks

Ellen Nakashima:
The world's largest Internet search company and the world's most powerful electronic surveillance organization are teaming up in the name of cybersecurity. Under an agreement that is still being finalized, the National Security Agency would help Google analyze a major corporate espionage attack that the firm said originated in China and targeted its computer networks, according to cybersecurity experts familiar with the matter. The objective is to better defend Google -- and its users -- from future attack.

Google and the NSA declined to comment on the partnership. But sources with knowledge of the arrangement, speaking on the condition of anonymity, said the alliance is being designed to allow the two organizations to share critical information without violating Google's policies or laws that protect the privacy of Americans' online communications. The sources said the deal does not mean the NSA will be viewing users' searches or e-mail accounts or that Google will be sharing proprietary data.

The partnership strikes at the core of one of the most sensitive issues for the government and private industry in the evolving world of cybersecurity: how to balance privacy and national security interests. On Tuesday, Director of National Intelligence Dennis C. Blair called the Google attacks, which the company acknowledged in January, a "wake-up call." Cyberspace cannot be protected, he said, without a "collaborative effort that incorporates both the U.S. private sector and our international partners."
Posted by James Zellmer at 10:21 AM

A fight over freedom at Apple’s core

Jonathan Zittrain:
In 1977, a 21-year-old Steve Jobs unveiled something the world had never seen before: a ready-to-program personal computer. After powering the machine up, proud Apple II owners were confronted with a cryptic blinking cursor, awaiting instructions.

The Apple II was a clean slate, a device built – boldly – with no specific tasks in mind. Yet, despite the cursor, you did not have to know how to write programs. Instead, with a few keystrokes you could run software acquired from anyone, anywhere. The Apple II was generative. After the launch, Apple had no clue what would happen next, which meant that what happened was not limited by Mr Jobs’ hunches. Within two years, Dan Bricklin and Bob Frankston had released VisiCalc, the first digital spreadsheet, which ran on the Apple II. Suddenly businesses around the world craved machines previously marketed only to hobbyists. Apple IIs flew off the shelves. The company had to conduct research to figure out why.

Thirty years later Apple gave us the iPhone. It was easy to use, elegant and cool – and had lots of applications right out of the box. But the company quietly dropped a fundamental feature, one signalled by the dropping of “Computer” from Apple Computer’s name: the iPhone could not be programmed by outsiders. “We define everything that is on the phone,” said Mr Jobs. “You don’t want your phone to be like a PC. The last thing you want is to have loaded three apps on your phone and then you go to make a call and it doesn’t work any more.”

The openness on which Apple had built its original empire had been completely reversed – but the spirit was still there among users. Hackers vied to “jailbreak” the iPhone, running new apps on it despite Apple’s desire to keep it closed. Apple threatened to disable any phone that had been jailbroken, but then appeared to relent: a year after the iPhone’s introduction, it launched the App Store. Now outsiders could write software for the iPhone, setting the stage for a new round of revolutionary VisiCalcs – not to mention tens of thousands of simple apps such as iPhone Harmonica or the short-lived I Am Rich, which for $999.99 displayed a picture of a gem, just to show that the iPhone owner could afford the software.
Posted by James Zellmer at 10:06 AM

February 2, 2010

In the Next Industrial Revolution, Atoms Are the New Bits

Chris Anderson:
The door of a dry-cleaner-size storefront in an industrial park in Wareham, Massachusetts, an hour south of Boston, might not look like a portal to the future of American manufacturing, but it is. This is the headquarters of Local Motors, the first open source car company to reach production. Step inside and the office reveals itself as a mind-blowing example of the power of micro-factories.

In June, Local Motors will officially release the Rally Fighter, a $50,000 off-road (but street-legal) racer. The design was crowdsourced, as was the selection of mostly off-the-shelf components, and the final assembly will be done by the customers themselves in local assembly centers as part of a “build experience.” Several more designs are in the pipeline, and the company says it can take a new vehicle from sketch to market in 18 months, about the time it takes Detroit to change the specs on some door trim. Each design is released under a share-friendly Creative Commons license, and customers are encouraged to enhance the designs and produce their own components that they can sell to their peers.

The Rally Fighter was prototyped in the workshop at the back of the Wareham office, but manufacturing muscle also came from Factory Five Racing, a kit-car company and Local Motors investor located just down the road. Of course, the kit-car business has been around for decades, standing as a proof of concept for how small manufacturing can work in the car industry. Kit cars combine hand-welded steel tube chassis and fiberglass bodies with stock engines and accessories. Amateurs assemble the cars at their homes, which exempts the vehicles from many regulatory restrictions (similar to home-built experimental aircraft). Factory Five has sold about 8,000 kits to date.
Posted by James Zellmer at 10:18 AM

January 1, 2010

Banking after the kindness of strangers

Francesco Guerrera:
”Whoever you are, I have always depended on the kindness of strangers”. The last line of Tennessee Williams’ A Streetcar Named Desire – uttered by its desperate heroine to the doctor taking her to a mental asylum – is an apt summary of the US financial sector in 2009.

As the crisis abated, banks took maximum advantage of the kindness of taxpayers and regulators to return to their core business: making money for shareholders and employees.

Ultra-low interest rates, dwindling competition and pent-up demand for their services sparked a renaissance in profits and share prices of the financial institutions that emerged from the turmoil in reasonable shape.

The question is whether history will repeat itself, or even just rhyme, this year. Here are my ten, utterly personal and non-exhaustive, predictions for the year ahead in US finance.

1) Strangers will be a lot less kind. With banks boasting about their new-found health, regulators will pull the plug on most of the measures they introduced to drag the financial industry back from the brink. A host of acronyms (Tarp, Talf, PPIP, TLGP) will be forgotten but not missed.
Posted by James Zellmer at 10:56 AM

December 28, 2009

"Person of the Year" - Goldman Sachs' Lloyd Blankfein: "Doing God's Work"

John Gapper:
Under other circumstances, this would have been a year to savour in the long, rapid ascent of Lloyd Blankfein. Goldman Sachs, the investment bank he has led for three years, not only navigated the 2008 global financial crisis better than others on Wall Street but is set to make record profits, and pay up to $23bn (€16bn, £14bn) in bonuses to its 31,700 staff.

For Mr Blankfein, a scholarship boy from the Bronx whose first financial job at Goldman was selling gold coins in its commodities trading arm, has prospered to an extent that was implausible even 10 years ago, when it became a public company. Its influence has spread throughout the world, from New York and London to Shanghai and São Paulo.

A good slice of its success is attributable to Mr Blankfein, a tough, bright, funny (everyone remarks upon his unpretentious, wisecracking manner) financier who reoriented Goldman. Under his leadership, trading and risk-taking have pushed to the fore, reducing the influence of its investment banking advisers.

In 2009, however, Wall Street faced a wave of public anger at how banks that survived only with the assistance of taxpayers seemed unchanged and unrepentant. Goldman’s profitability, and suspicions that its deep links with governments around the world give it unfair advantages, made it a symbol of Wall Street greed and excess. It was described by the Rolling Stone writer Matt Taibbi as “a great vampire squid wrapped around the face of humanity”.
Posted by James Zellmer at 1:25 AM

December 17, 2009

Global Supply Chain for Boeing's New 787: The DreamLifter in Action

With the recent first flight of Boeing's new 787, I thought it timely to post a photo from it's supply chain: a converted 747 freighter known as the "Dreamlifter" that flies parts from around the globe to Everett, Washington for final assembly.
Posted by James Zellmer at 12:20 PM

December 14, 2009

Goldman's Collateral Damage

Tracy Alloway:

Cast your mind back to that SigTarp report, published last month.

Readers will recall there’s been a persistent stink over whether the efforts of the Federal Reserve and the US Treasury to prop up AIG had the effect of bailing out Goldman Sachs — its largest trading partner. Goldman Sachs always denied that idea, saying its exposure to AIG was collateralised and hedged against the mega-insurers’ fall. Others, were not so sure.

Last week the Wall Street Journal continued that particular line of thought with an article titled “Goldman fueled AIG gambles“, which examined GS’s role in acting as a middleman between the insurer and other banks. In short, Goldman offered banks protection on some of their investments (for instance on CDOs of home loans), which it in turn hedged with AIG in the form of CDS.

Posted by James Zellmer at 9:49 AM

December 6, 2009

Will Big Business Save the Earth?

Jared Diamond:
THERE is a widespread view, particularly among environmentalists and liberals, that big businesses are environmentally destructive, greedy, evil and driven by short-term profits. I know — because I used to share that view.

But today I have more nuanced feelings. Over the years I’ve joined the boards of two environmental groups, the World Wildlife Fund and Conservation International, serving alongside many business executives.

As part of my board work, I have been asked to assess the environments in oil fields, and have had frank discussions with oil company employees at all levels. I’ve also worked with executives of mining, retail, logging and financial services companies. I’ve discovered that while some businesses are indeed as destructive as many suspect, others are among the world’s strongest positive forces for environmental sustainability.

The embrace of environmental concerns by chief executives has accelerated recently for several reasons. Lower consumption of environmental resources saves money in the short run. Maintaining sustainable resource levels and not polluting saves money in the long run. And a clean image — one attained by, say, avoiding oil spills and other environmental disasters — reduces criticism from employees, consumers and government.
Much more on Jared Diamond here.
Posted by James Zellmer at 6:02 PM

December 5, 2009

Musée de l'Orangerie Panorama

Click to the image above to view this August, 2007 (hand held) panoramic image of Monet's water lillies. Musée de l'Orangerie website. This journey and image made possible by the generosity of my parents!
Posted by James Zellmer at 6:47 PM

November 27, 2009

Dubai's Debt Default

James Mackintosh:

Asking to delay repayment on your debt - or defaulting, as the world’s press is carefully not calling it - has turned out not to be a good way for Dubai’s Sheikh Makhtoum to win friends and influence lenders to Nakheel, the property arm of the state-owned conglomerate Dubai World. Markets have tumbled worldwide; investors, reminded that governments can be subprime too, have dumped the debt of other dodgy-looking economies (including Greece); and in Dubai… everyone is on holiday.

What is surprising here is not that Dubai is on the verge of default. It is that anyone was willing to lend them ludicrous sums of money in the first place. Calculated Risk points out that Sir Win Bischoff, then at the (US) state-controlled Citi and now, appropriately enough, at the (British) state-controlled Lloyds Banking Group, was raving about raising $8bn of loans for Dubai last year and as recently as December chose to go public with a “positive outlook on Dubai”. Another non-surprise: state-controlled Royal Bank of Scotland was Dubai World’s biggest loan arranger. In the UK, Dubai World has been buying up a long list of property, according to Anita Likus at The Source; the assumption is it will shortly be selling.

More here.
Posted by James Zellmer at 8:21 AM

November 26, 2009

Asia Trip Financial News

David Kotok:
Now to the regional takeaway from our trip

We believe that few trust the United States. This is obvious in private conversation. And it is clear to all that confidence in the dollar is low. This is mostly mentioned only in private.

In public there is quiet response when the Treasury Secretary of the United States utters words about a strong dollar. Asians have heard that for years and with the many different accents of the various Treasury Secretaries. Geithner would serve the country better by ceasing to mouth the same words that his predecessor Snow and others used. He is not believed. Frankly, in some circles he is actually seen as an incompetent political hack. He is blamed by some for the insufficiency of the New York Fed under his presidency to supervise the primary dealers that failed – Countrywide, Bear Stearns, and Lehman. And the ethics issues surrounding the NY Fed under his tenure are viewed as appalling; this continues to surface in private conversations. Some folks are puzzled about why Obama maintains his support for Geithner. Some just attribute it to the President’s inexperience as a leader.

My takeaway is that our present Secretary of the Treasury is seriously and sustainably injuring the image of the United States. He has lost credibility. His actions are real and they impact markets. My conversations with those who are attempting to market GSE securities to Asians and getting rebuffed are validation enough for me on this point. When the Fed stops buying GSE mortgage backed securities, this reality will hit the markets in a re-pricing of that asset class. Spreads are going to widen.

The American federal budget deficits are worrisome everywhere. Policy promises from Washington to reduce them are greeted with great skepticism. Often they are privately described as American arrogance. Publicly, Asians are very polite and do not often subject their guests to embarrassing criticism. Privately they are quite candid. In my view they are correct: America is arrogant and seems to pretend that it is still the best and most trustworthy financial and capital market in the world. There is no basis for the US to have such a view of itself. We have squandered our reputational capital as a financial center leader.
Posted by James Zellmer at 10:11 PM

November 25, 2009

Presidential Cabinet Appointments: Private Sector Experience 1900-2009

Nick Schultz:
A friend sends along the following chart. It examines the prior private sector experience of the cabinet officials since 1900 that one might expect a president to turn to in seeking advice about helping the economy. It includes Secretaries of State; Commerce; Treasury; Agriculture; Interior; Labor; Transportation; Energy; and Housing & Urban Development and excludes Postmaster General; Navy; War; Health, Education & Welfare; Veterans Affairs; and Homeland Security — 432 cabinet members in all.
Posted by James Zellmer at 9:37 AM

Auditing the central bank: a jolly good thing!

Willem Buiter:
What is so important about H.R. 1207: the Federal Reserve Transparency Act of 2009 aka the ‘Audit the Fed’ bill? This bill “To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.” may not sound terribly exciting, but in addition to making the Fed accountable for its quasi-fiscal activities, it could well set an important precedent for the enhanced accountability of operationally independent central banks everywhere.

The Finance Committee of the US House of Representatives has just passed this bill, which is an amendment sponsored by Representatives Ron Paul (Republican) and Alan Grayson (Democrat) to Representative Barney Frank’s HR 3996, the “Financial Stability Improvement Act of 2009″. The amendment allows the US Government Accountability Office to conduct a wide-ranging audit of the financial activities of the Federal Reserve Board. Specifically (and quoting from the website):

The Paul/Grayson amendment:
Posted by James Zellmer at 9:20 AM

Investigating The Card Game: Consumer Lending

As credit card companies face rising public anger, new regulation from Washington and staggering new rates of default and bankruptcy, FRONTLINE correspondent Lowell Bergman investigates the future of the massive consumer loan industry and its impact on a fragile national economy.

In The Card Game, a follow-up to the Secret History of the Credit Card and a joint project with The New York Times, Bergman and the Times talk to industry insiders, lobbyists, politicians and consumer advocates as they square off over attempts to reform the way the industry has done business for decades.

"The card issuers could do anything they want," Robert McKinley, CEO of, tells FRONTLINE of the industry's unchecked power over consumers. "They could change your interest rate. They could impose an annual fee. They could close your account." High interest rates along with more and more penalty fees drove up profits for the industry, Bergman finds, as the banks followed the lead of an aggressive upstart: Providian Bank. In an exclusive interview with FRONTLINE, former Providian CEO Shailesh Mehta tells Bergman how his company successfully targeted vulnerable low-income customers whom Providian called "the unbanked."

"They're lower-income people-bad credits, bankrupts, young credits, no credits," Mehta says. Providian also innovated by offering "free" credit cards that carried heavy hidden fees. "I used to use the word 'penalty pricing' or 'stealth pricing,'" Mehta tells FRONTLINE. "When people make the buying decision, they don't look at the penalty fees because they never believe they'll be late. They never believe they'll be over limit, right? ... Our business took off. ... We were making a billion dollars a year."
Posted by James Zellmer at 9:12 AM

November 17, 2009

Goldman apologises for role in crisis

Francesco Guerrera, Justin Baer and Tom Braithwaite :
Goldman Sachs apologised for its role in the financial crisis on Tuesday and pledged $500m over five years – or about 2.3 per cent of its estimated bonus and salary pool for 2009 – to help 10,000 US small businesses recover from the ­recession. The moves come as the bank tries to defuse a political and public backlash over its plans to share billions of dollars among top dealmakers after rebounding sharply from the turmoil and earning record profits in the first nine months of the year.

Lloyd Blankfein, Goldman’s chief executive, told a corporate conference in New York that the bank regretted taking part in the cheap credit boom that had fuelled the pre-crisis bubble. “We participated in things that were clearly wrong and have reason to regret,” said Mr Blankfein. “We apologise.”

Mr Blankfein also told the conference he wished he had not told the UK’s Sunday Times newspaper that Goldman did “God’s work” – a remark that was seized upon by the bank’s critics – and said it had been meant as a joke.

Mr Blankfein spoke hours before Goldman revealed plans to invest $500m over five years in business education, technical assistance and venture capital to help 10,000 small businesses across the US. The yearly amount of about $100m to be spent on the initiative – which will be overseen by a panel co-chaired by Warren Buffett, a Goldman investor – is equivalent to a good trading day at Goldman. In the third quarter, the bank had 36 days in which traders made more than $100m.

Mr Buffett told the Financial Times that the small business programme was not a response by the bank to recent criticism. “This is a big initiative,” he said. “This is not a one-day or one-year wonder. It’s a continuous programme.”
Posted by James Zellmer at 7:57 PM

November 15, 2009

GE Pursues "Stimulus Pot of Gold"

Elizabeth Williamson & Paul Glader:
The financial crisis hasn't been kind to General Electric Co. Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses.

But Chief Executive Jeffrey Immelt now has his eye on a huge new pool of potential revenue: Uncle Sam's stimulus dollars. Mr. Immelt, a registered Republican, quips about the shift in thinking in the nation's corner offices: "We're all Democrats now."

GE has high hopes for the strategy. It says that over the next three years or so it could bring in as much as $192 billion from projects funded by governments around the globe, such as electric-grid modernization, renewable-energy generation and health-care technology upgrades.

The company is just starting to see a payoff. Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.

The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government's growing reach -- and ample purse -- as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.
Posted by James Zellmer at 7:48 PM

November 9, 2009

Fond farewell to a brilliant thinker

Stefan Stern:
The scene is Detroit, a training room at the headquarters of one of the three great US car companies. A group of corporate vice-presidents is attending a course being given by a distinguished management thinker.

“What you are telling us is great,” the VPs say, “but you are talking to the wrong level. You should be speaking to the next tier up.” The next week, working with more senior managers, he hears the same thing. “This is great, but you are talking to the wrong level. You should be speaking with the chief executive.”

The week after that, our thinker finally gets in to see the boss. “This is great,” the CEO says, “but you should be speaking with my subordinates – I’d need their support in order to do it.”

This is a true story, as told by Russ Ackoff, the management thinker in question, who died a few days ago, aged 90. Two key Ackoffian ideas emerge from this tale. First, do not wait for others in the business to start changing things. Go and do it yourself. But second, and more important: never forget that everyone in the business is interconnected, that they are all operating as part of a system, that tinkering with one part of the company is never really enough, and may even make things worse. You need to see the business as a whole, as a complete system, if you want to make lasting improvements to it.
Posted by James Zellmer at 10:13 PM

October 27, 2009

The Inside Story of Wal-Mart's Hacker Attack

Kim Zetter:
Wal-Mart was the victim of a serious security breach in 2005 and 2006 in which hackers targeted the development team in charge of the chain’s point-of-sale system and siphoned source code and other sensitive data to a computer in Eastern Europe, has learned.

Internal documents reveal for the first time that the nation’s largest retailer was among the earliest targets of a wave of cyberattacks that went after the bank-card processing systems of brick-and-mortar stores around the United States beginning in 2005. The details of the breach, and the company’s challenges in reconstructing what happened, shed new light on the vulnerable state of retail security at the time, despite card-processing security standards that had been in place since 2001.

In response to inquiries from, the company acknowledged the hack attack, which it calls an “internal issue.” Because no sensitive customer data was stolen, Wal-Mart had no obligation to disclose the breach publicly.

Wal-Mart had a number of security vulnerabilities at the time of the attack, according to internal security assessments seen by, and acknowledged as genuine by Wal-Mart. For example, at least four years’ worth of customer purchasing data, including names, card numbers and expiration dates, were housed on company networks in unencrypted form. Wal-Mart says it was in the process of dramatically improving the security of its transaction data, and in 2006 began encrypting the credit card numbers and other customer information, and making other important security changes.

“Wal-Mart … really made every effort to segregate the data, to make separate networks, to encrypt it fully from start to finish through the transmission, ” says Wal-Mart’s Chief Privacy Officer Zoe Strickland. “And not just in one area but across the different uses of credit card systems.”

Wal-Mart uncovered the breach in November 2006, after a fortuitous server crash led administrators to a password-cracking tool that had been surreptitiously installed on one of its servers. Wal-Mart’s initial probe traced the intrusion to a compromised VPN account, and from there to a computer in Minsk, Belarus.
Posted by James Zellmer at 9:52 AM

October 3, 2009

One Year Later, Little Has Changed

Ed Wallace:
"By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market, but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets."

— "The Bernanke Market," Wall Street Journal, July 15, 2009

"In the last week alone, the European Central Bank allocated the record sum of $619 billion to 1,1,00 financial institutions – at a paltry 1 percent interest rate. And yet the money is not going where the central banks want it to go, namely into the pockets of businesses and consumers – at least not at reasonable interest rates."

— "How German Banks are Cashing In on the Financial Crisis," Der Spiegel, July 1, 2009

Two weeks ago, in meetings with their North Texas dealers, both Toyota and Honda voiced concern about how the economic recovery was going to hold up over the next few quarters. It wasn’t public news yet in the States, but Japanese executives already knew that their imports and exports had fallen sharply through the summer. And, while our business media were cheerleading because the Dow Jones was once again flirting with 10,000, in Japan their exports had just fallen 36 percent; metal shipments to the U.S. were down by more than 80 percent, automobile shipments by 50 percent. This was a problem here, too: In August America’s dealers seriously needed Japanese vehicles to restock their depleted inventories.

Toyota and Honda took different tacks for the fourth quarter. Toyota said it will spend $1 billion in advertising to move the retail market. Honda, always more cautious in difficult times, said it would spend nothing during the same period. Honda added that it will keep dealer inventories at a 30-day supply of unsold vehicles, half the inventory considered normal.
Posted by James Zellmer at 10:50 PM

September 13, 2009

The Ghost Fleet of the Recession

Simon Parry:

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year.

The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs.
His appearance, in a peaked cap and uniform, seems rather odd; an officer without a crew. But there is something slightly odder about the vast distance between my jolly boat and his lofty position, which I can't immediately put my finger on.
Then I have it - his 750ft-long merchant vessel is standing absurdly high in the water. The low waves don't even bother the lowest mark on its Plimsoll line. It's the same with all the ships parked here, and there are a lot of them. Close to 500. An armada of freighters with no cargo, no crew, and without a destination between them.

Posted by jimz at 7:51 PM

September 3, 2009

Paranoid Survivor: Andrew Grove

The Economist:
EARLIER this year Andrew Grove taught a class at Stanford Business School. As a living legend in Silicon Valley and a former boss of Intel, the world’s leading chipmaker, Dr Grove could have simply used the opportunity to blow his own trumpet. Instead he started by displaying a headline from the Wall Street Journal heralding the recent takeover of General Motors by the American government as the start of “a new era”. He gave a potted history of his own industry’s spectacular rise, pointing out that plenty of venerable firms—with names like Digital, Wang and IBM—were nearly or completely wiped out along the way.

Then, to put a sting in his Schumpeterian tale, he displayed a fabricated headline from that same newspaper, this one supposedly drawn from a couple of decades ago: “Presidential Action Saves Computer Industry”. A fake article beneath it describes government intervention to prop up the ailing mainframe industry. It sounds ridiculous, of course. Computer firms come and go all the time, such is the pace of innovation in the industry. Yet for some reason this healthy attitude towards creative destruction is not shared by other industries. This is just one of the ways in which Dr Grove believes that his business can teach other industries a thing or two. He thinks fields such as energy and health care could be transformed if they were run more like the computer industry—and made greater use of its products.

Dr Grove may be 73 and coping with Parkinson’s disease, but his wit is still barbed and his desire to provoke remains as strong as ever. Rather than slipping off to a gilded retirement of golf or gallivanting, as many other accomplished men of his age do, he is still spoiling for a fight.
Posted by James Zellmer at 10:09 PM

Documenting the decline of two US industries

Claire Holland:
Eirik Johnson’s quietly theatrical photographs carry the sense of a way of life and work that is on the cusp of slipping away. For four years, Seattle-born Johnson travelled through Oregon, Washington and northern California, around the former boomtowns that were built on the now-declining salmon and timber industries.

He describes the resulting series, published as Sawdust Mountain, as “a melancholy love letter of sorts, my own personal ramblings”. Many of Johnson’s works are informed by the epic, picturesque 19th-century landscapes of Carleton Watkins, who took some of the earliest known images of the region. In others, his use of space and colour pays homage to several living photographers.

Johnson’s images are rendered all the more intense by his palette, through which he uses the region’s faded light to emphasise the down-at-heel tones of the man-made environment. His muted colours are a counterpoint to William Eggleston’s photographs of the American south, whose “harsh bright light and colours … seemed like the mirror opposite of what I saw present in the northwest,” says Johnson.
Posted by James Zellmer at 10:02 PM

August 31, 2009

The Iraqi who saved Norway from oil

Martin Sandbu:
When he boarded his flight from London to Oslo, Farouk al-Kasim, a young Iraqi geologist, knew his life would never again be the same. Norway was a country about as different as it was possible to imagine from his home, the Iraqi port city of Basra. He had no job to go to, and no idea of how he would make a living in the far north. It was May 1968 and al-Kasim had just resigned from his post at the Iraq Petroleum Company. To do so, he had had to come to the UK, where the consortium of western companies that still controlled most of his country’s oil production had its headquarters.

For all its uncertainties, al-Kasim’s journey to Norway had a clear purpose: he and his Norwegian wife, Solfrid, had decided that their youngest son, born with cerebral palsy, could only receive the care he needed there. But it meant turning their backs on a world of comforts. Al-Kasim’s successful career had afforded them the prosperous lifestyle of Basra’s upper-middle class. Now they would live with Solfrid’s family until he could find work, though he had little hope of finding a job as rewarding as the one he had left behind. He was not aware that oil exploration was under way on the Norwegian continental shelf, and even if he had known, it wouldn’t have been much cause for hope: after five years of searching, still no oil had been found.

But al-Kasim’s most immediate problem on arriving in Oslo that morning was how to fill the day: his train to Solfrid’s home town did not depart until 6.30pm. “I thought what I am going to do in these hours?” he says. “So I decided to go to the Ministry of Industry and ask them if they knew of any oil companies coming to Norway.”
Posted by James Zellmer at 9:35 AM

August 22, 2009

A Not Positive Outlook on Land's End Parent Sears Holdings

Jonathan Laing:
For many investors, the ultimate value of Sears resides in its liquidation value rather than the cash flow it can generate as a going concern. Much hidden value is seen in its valuable brands, like Kenmore, Land's End, Craftsman and DieHard, and the 73% interest in Sears Canada. A major holder "conservatively" estimates the retailer's breakup value at about $75 to $100 a share. (A confession: In an Oct. 22, 2007, article in Barron's, I surmised that there might be more than $300 a share in hidden value in Sears stock.)

Given the recent performance of the company and the agonies of the U.S. consumer and credit markets, these sum-of-the-parts estimates have plummeted. In a May report, Morgan Stanley's Greg Melich came up with a value of $33 a share. Last week, he said that the new value would be somewhat but not dramatically higher when he releases his latest calculations in the next few weeks.

Nonetheless, the entire exercise is somewhat academic, according to Melich. Sears, for example, couldn't dump all its 250 million square feet of retail space without destroying the values of retailing properties for years to come. Likewise, who knows when shell-shocked mall-owning real-estate investment trusts and once-expansion-minded rivals like Target, Kohl's and Lowe's will be buying again, particularly with the current glut of space on the market and the drying up of mortgage financing. And the Kenmore, DieHard and Craftsman brands (but not Land's End) are so closely identified with Sears that it's difficult to ascribe much value to them if they are offered independent of Sears.
Posted by James Zellmer at 2:03 PM

August 21, 2009

Britain's National Medical Records Project - "No money spent on training"...

Nicholas Timmins:
“If you live in Birmingham,” declared Tony Blair when he was UK prime minister, “and you have an accident while you are, for example, in Bradford, it should be possible for your records to be instantly available to the doctors treating you.”

Not any more. Or not, at least, if the Conservatives win the next general election. For the Tories have pledged to scrap the country-wide version of the National Health Service’s electronic patient record.

Back in 2002, the idea of a full patient record, available anywhere in an emergency, was the principal political selling point for what was billed as “the biggest civilian computer project in the world”: the drive to give all 50m or so patients in England (the rest of the UK has its own arrangements) an all-singing, all-dancing electronic record. Roll-out was meant to start in 2005 and be completed by 2010.

Under a Conservative government, development of the local record – exchangeable between primary care physicians and their local hospitals – would continue. Nationally, clinicians would still be able to seek access to it when needed from the doctors who would hold it locally. But the idea of a national database of patients’ records, instantly available in an emergency from anywhere in the country, would disappear.

This may or may not matter, depending on your point of view. For many clinicians, the idea of an instantly available national record was always something of a diversion. It is access to a comprehensive record locally that is crucial for day-to-day care.

Nonetheless, the Conservatives’ decision to scrap the central database is a symbolic moment for a £12bn ($20bn, €14bn) programme that has struggled to deliver from day one. It is currently running at least four years late – and there looks to be no chance in the foreseeable future of its delivering quite what was promised.


On top of that, while there was a £6bn budget for the 10-year central contracts, no money was earmarked for training, in spite of the lesson, from the relatively few successful installations of electronic records in US hospitals, that at least as much has to be spent on changing the way staff work as is spent on the systems themselves.
Posted by James Zellmer at 9:33 AM

July 25, 2009

2009 Wisconsin Farm Technology Days VR Panorama Scenes

View five vr scenes from "Tent City": Scene 1 / Scene 2 / Scene 3 / Scene 4 / Scene 5. After clicking, place your mouse in the image and pan in any direction.

View a still image library here.

More photos and vr scenes from the Craves Brothers farm, taken last fall.

Crave Brothers website and the Wisconsin Farm Technology Days website.
Posted by James Zellmer at 8:01 PM

July 6, 2009

The Rise and Fall of Henry Ford's Forgotten Jungle City By Greg Grandin

Brian Ladd:
We revere Henry Ford: the inventor of modern mass production; the man who put Americans on wheels; the stolid Midwesterner whose ingenuity, common sense and hard work built an empire. Yet this same man was a bundle of contradictions: a pacifist who built tanks and warplanes, and who unleashed frightful brutality against his own striking workers; a hardheaded tycoon who strove to restore a sentimental vision of small-town life. He was, in short, the quintessential American: a hero and a fool.

"Fordism" also became a beacon for the world. Lenin's Russia, Hitler's Germany and many poor countries looked to the magic of mass production - and the magic of automobiles - to catapult their way to prosperity. Still, it's a little surprising that Greg Grandin wants to explain Henry Ford's America by taking us up the Amazon, where an old-fashioned water tower rises out of the jungle, hinting at a lost utopia.

Grandin, author of "Ford-landia," has rediscovered one of Ford's most ambitious but least known ventures. In 1927, Ford obtained a Connecticut-size chunk of the Brazilian jungle. His immediate goal was to establish a rubber plantation to supply his factories' insatiable demand for tires and gaskets, but he also saw an opportunity to bring Brazil the same blessings that he prided himself on bringing to his Michigan workers: good wages, plus the standards of middle-class propriety that spelled the difference between civilization and chaos.
Posted by James Zellmer at 8:53 AM

June 17, 2009

Who Switched the Playbooks

Jack Perkowski:
When I was starting up in China, many experts cautioned me on what I would encounter. “It’s not a free market and there’s no rule of law, they told me. “The government controls the courts, the companies and the banks. Central planners in Beijing, not the marketplace, decide what goods to produce and which companies should produce them.”

“Decisions are made for political, not economic reasons,” they went on to explain. “The heads of China’s state-owned enterprises serve at the pleasure of the Party, the banks are told what loans to make, and making a profit is secondary to ensuring employment. That’s the reason why China’s banks are a mess and full of non-performing loans.”

Occasionally, I would push back, noting the economic progress that China had made since Deng Xiaoping opened the economy in 1978. “You don’t believe the government’s numbers, do you?” they would ask incredulously. “Everyone knows they’re manufactured to convey whatever message the government wants. And, when it comes to financial statements, forget it. Chinese companies have at least three sets of books, and you can’t believe any of them.”
Posted by James Zellmer at 10:17 AM

June 16, 2009

Peter Bernstein's Lasting Lessons

Julia Kirby:
The news came to us at HBR just after our newest issue went to the printer; that issue contains, sadly, the last article he wrote for our pages. Because it is the July-August issue, and will arrive on newsstands two weeks hence, it will seem strange to many readers that the byline makes no note of his passing -- and worse, that the editor's letter is mute on the many accomplishments of his rich and long life. Such are the perils of print publishing, and for that we apologize.

But here let it be said that, when work began last January on envisioning the July-August issue -- a special, double-sized issue devoted wholly to exploring how the business landscape would be transformed by the financial crisis and recession -- Peter Bernstein's voice was the first we sought to include. He was the master at explaining issues of financial risk, and there has scarcely been a time when the world needed his kind of clear analysis more.

In response to a vaguely worded invitation from us (deliberately so, in the interests of giving Peter full license to address what he felt needed to be addressed), he came back with a tightly crafted essay called "The Moral Hazard Economy."
Posted by James Zellmer at 4:42 PM

May 30, 2009

The End of the Affair

PJ O'Rourke:

The phrase "bankrupt General Motors," which we expect to hear uttered on Monday, leaves Americans my age in economic shock. The words are as melodramatic as "Mom's nude photos." And, indeed, if we want to understand what doomed the American automobile, we should give up on economics and turn to melodrama.

Politicians, journalists, financial analysts and other purveyors of banality have been looking at cars as if a convertible were a business. Fire the MBAs and hire a poet. The fate of Detroit isn't a matter of financial crisis, foreign competition, corporate greed, union intransigence, energy costs or measuring the shoe size of the footprints in the carbon. It's a tragic romance--unleashed passions, titanic clashes, lost love and wild horses.

Foremost are the horses. Cars can't be comprehended without them. A hundred and some years ago Rudyard Kipling wrote "The Ballad of the King's Jest," in which an Afghan tribesman avers: Four things greater than all things are,--Women and Horses and Power and War.

Posted by jimz at 1:43 AM

May 28, 2009

Organic Dairies Watch the Good Times Turn Bad

Kate Zezima:
When Ken Preston went organic on his dairy farm here in 2005, he figured that doing so would guarantee him what had long been elusive: a stable, high price for the milk from his cows.

Sure enough, his income soared 20 percent, and he could finally afford a Chevy Silverado pickup to help out. The dairy conglomerate that distributed his milk wanted everything Mr. Preston could supply. Supermarket orders were skyrocketing.

But soon the price of organic feed shot up. Then the recession hit, and families looking to save on groceries found organic milk easy to do without. Ultimately the conglomerate, with a glut of product, said it would not renew his contract next month, leaving him with nowhere to sell his milk, a victim of trends that are crippling many organic dairy farmers from coast to coast.

For those farmers, the promises of going organic — a steady paycheck and salvation for small family farms — have collapsed in the last six months. As the trend toward organic food consumption slows after years of explosive growth, no sector is in direr shape than the $1.3 billion organic milk industry. Farmers nationwide have been told to cut milk production by as much as 20 percent, and many are talking of shutting down.
Posted by James Zellmer at 10:31 PM

May 22, 2009

An Interview with George Roberts & Henry Kravis

Henny Sender interviews KKR founders George Roberts & Henry Kravis on the economy, buying "defensive" companies and government intervention.
Posted by James Zellmer at 8:56 AM

May 21, 2009

A Letter to America from a Dodge Dealer

George C. Joseph:
My name is George C. Joseph. I am the sole owner of Sunshine Dodge-Isuzu, a family owned and operated business in Melbourne, Florida. My family bought and paid for this automobile franchise 35 years ago in 1974. I am the second generation to manage this business.

We currently employ 50+ people and before the economic slowdown we employed over 70 local people. We are active in the community and the local chamber of commerce. We deal with several dozen local vendors on a day to day basis and many more during a month. All depend on our business for part of their livelihood.

We are financially strong with great respect in the market place and community. We have strong local presence and stability. I work every day the store is open, nine to ten hours a day. I know most of our customers and all our employees. Sunshine Dodge is my life.

On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them.
Posted by James Zellmer at 10:22 PM

May 20, 2009

Southwest Airlines Enters Milwaukee

Good news for travellers and business:
Today, Southwest gave the residents of Wisconsin something to talk about around the bubbler.

We’re adding Milwaukee and General Mitchell International Airport to our network!!! Starting late this year, the home of the Cunninghams, the Fonz, Laverne and Shirley, the Bucks, the Brewers, and the Packers will become the 68th airport on the Southwest Airlines route map. (Yeah, I realize the Packers are technically based in Green Bay, but they're the professional football team for the whole state of Wisconsin, so I'll include them here!)

We know many of you in the Milwaukee area are already familiar with Southwest (low fares and GREAT Customer Service!)—but for our Customers that aren’t familiar with Milwaukee, you’ve got a treat in store for you. Besides having a vibrant business base, Milwaukee is just a lot of fun. Amazing food (please, PLEASE visit Mader’s for German food!), the arts (the Milwaukee Art Museum has masterpiece buildings designed by both Saarinen and Calatrava!), the home of Harley-Davidson (don’t miss their museum!), sausage, cheese, beer, sports, the lake….and of course, the people. Good people. Just don’t plan anything other than watching football on a Sunday afternoon when the Packers are playing. You could be very lonely…. *grin*

Milwaukee is going to be a GREAT addition to our network. Wisconsin’s legendary work ethic, which mirrors Southwest’s exceptionally productive Culture, is going to make us a great fit in the land of the Cheesehead.
Likely not so hot for Madison's airport traffic....
Posted by James Zellmer at 1:33 PM

May 9, 2009

Khosla on Renewable Energy

Robert Rapier:
EC (13:40): In the past 90 days we have seen something like a billion dollars being put into solar investments - whether in the form of equity or debt. Is that stupid money?

VK: The people who are putting in gobs of money, behind people chasing First Solar at billion dollar valuations - I won't say it's stupid but it's not something I would do with my money. (EC: That pretty much counts as stupid). A diversity of opinion is good. I am often wrong. (EC: Sometimes you are). You only need to be correct once in a while because in our business you only lose one time your money but you can make 100 times quite easily. I don't have to be very right.

(RR: I would like to hear that during his next congressional testimony where he is trying to drive the direction of energy policy: "I am often wrong." But this also gets to the heart of why I often object to what he is saying. If he uses his high level of influence to help put us down the wrong path on energy policy, then what are the consequences of being wrong? They could be severe.)

EC (14:38): How many companies do you currently have in your portfolio?

VK: Our clean tech portfolio has probably about 50 companies.

EC (15:48): Which was the biggest disappointment?

VK: We have not had any large cut-offs - I am trying to think - in our clean tech portfolio. When we have invested a lot of money, there's one or two places - well one we wrote off; one called Altra. (RR: Altra is a corn ethanol producer that is on the ropes). There's one place we actually decided to change the plan - Cilion - and made it capital neutral, so they don't need a lot of cash. Got rid of the debt; the company is going fine, but sort of on the slow boat.
Posted by James Zellmer at 7:00 AM

May 2, 2009

Flawed Credit Ratings Reap Profits as Regulators Fail and a Wachovia Photo

David Evans & Caroline Salas:
Ron Grassi says he thought he had retired five years ago after a 35-year career as a trial lawyer.

Now Grassi, 68, has set up a war room in his Tahoe City, California, home to single-handedly take on Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. He’s sued the three credit rating firms for negligence, fraud and deceit.

Grassi says the companies’ faulty debt analyses have been at the core of the global financial meltdown and the firms should be held accountable. Exhibit One is his own investment. He and his wife, Sally, held $40,000 in Lehman Brothers Holdings Inc. bonds because all three credit raters gave them at least an A rating -- meaning they were a safe investment -- right until Sept. 15, the day Lehman filed for bankruptcy.

“They’re supposed to spot time bombs,” Grassi says. “The bombs exploded before the credit companies acted.”

As the U.S. and other economic powers devise ways to overhaul financial regulations, they have yet to come up with plans to address one issue at the heart of the crisis: the role of the rating firms.
I noticed this Wachovia building recently and thought the sunset scene was, perhaps appropriate.
Posted by James Zellmer at 2:19 PM

February 24, 2009

A Scion Drives Toyota Back to Basics

Norihiko Shirouzu & John Murphy:
Toyota Motor Corp.'s incoming president, Akio Toyoda, has a sobering message for the giant company founded by his grandfather: It has gotten too fancy for its own good.

On Monday, three top executives who helped lead Toyota the past four years -- including Mitsuo Kinoshita, one of the primary architects of the company's global expansion -- announced their retirement. The departures clear the way for Mr. Toyoda's planned makeover of the world's biggest auto maker.

He is expected to focus, most of all, on abandoning kakushin, or "revolutionary change," current president Katsuaki Watanabe's term for changing the way Toyota designed its cars and factories. It spawned technological advances, but led to cars that were often costlier to produce.

The 52-year-old Mr. Toyoda is also working to fix a pricing strategy that put the company at odds with some U.S. dealers, who felt its cars were getting too expensive, according to people familiar with the situation.
Posted by James Zellmer at 5:57 PM

February 22, 2009

An Interview with FedEx CEO Fred Smith

SF Chronicle:
Frederick W. Smith, the founder, president, chairman and CEO of FedEx, built the first overnight express delivery company in the world, starting in 1971. Today, FedEx, based in Memphis, has service in more than 220 countries and territories.

Like most other businesses, FedEx is encountering economic turmoil and is operating by Smith's belt-tightening orders. He cut his own salary by 20 percent.

Legend has it that Smith, 64, outlined his concept for FedEx in a paper in an economics class at Yale University for which he earned a C. (He corrects the record in this interview.) At Yale, he was a friend and fraternity brother of former President George W. Bush, to whom he believes history ultimately will be more kind.

In the Marine Corps in Vietnam, Smith received the Silver Star, the Bronze Star and two Purple Hearts as a platoon leader and forward air controller. It was there that he observed military procurement and delivery procedures and thought he could improve on them.

Smith is unwavering in his belief that U.S. corporate tax policy must change, but practical enough to know that the new administration and Congress will not go along with the idea. He still believes one aspect could be enacted - accelerating the expensing of capital investment that would put money into corporate hands sooner.
Posted by James Zellmer at 8:21 PM

February 7, 2009

Chuck Taylor

Joanne Von Alroth:
Charles Hollis "Chuck" Taylor looked down at his shoes and saw opportunity.

His Spaulding basketball sneakers were killing his feet.

Tired of the pain, the player hobbled into Converse Rubber Co. in 1921 and told owner Marquis Converse what he wanted — a sneaker with a higher ankle and a patch for better support, and a rubber sole with treads that made for a better grip for faster running and breaks.

Converse agreed to cobble one together. The upgraded All-Star shoe was born.

Over the next half-century, Taylor almost single-handedly established the Converse All-Star as the most popular athletic shoe ever.

Known as Chucks in tribute to Taylor, the shoes sold 750 million pairs before Converse was bought by Nike in 2003.

Taylor didn't just build a brand. He also changed the face of basketball through integration, boosted the careers of some of the game's most legendary coaches and helped make roundball one of the most popular sports in the world, notes Abraham Aamidor, author of "Chuck Taylor: Converse All Star."
Posted by James Zellmer at 9:26 AM

January 21, 2009

Madison's Building "Boomlet"

Maura WEbber Sadovi:
Even as Madison, Wis., suffers arctic-like temperatures, there is a warm ray of hope for the commercial real-estate industry.

The city's academic sector is seeing a building boomlet while developers in other parts of the country slam the brakes on new office buildings, stores and shopping centers.

A student-services hub at the University of Wisconsin-Madison is part of a larger mixed-use project called University Square. About $600 million of new building projects are under construction on the University of Wisconsin-Madison campus and more than $450 million of additional projects are in the planning stage, said Alan Fish, associate vice chancellor of facilities planning and management at the university.

A student-services center will officially open to students this week in a larger mixed-use development called University Square. The 1.1-million-square-foot project developed by Executive Management Inc., of Madison, also includes a rooftop garden, rental housing and about 125,000 square feet of retail space that is about 55% leased. The project, on the edge of the campus, is on land previously occupied by a one-story retail property, Mr. Fish said. Also under construction is the $150 million Wisconsin Institutes for Discovery, an interdisciplinary research complex scheduled to open in 2010.

The construction, part of a continuing effort to update the campus's facilities since the 1990s, isn't just changing the face of secluded ivory towers. "We're smack dab in the middle of Madison," Mr. Fish said. "Clearly the dynamism the campus has exhibited in the last five years has had a big ripple effect."
Posted by James Zellmer at 8:36 AM

January 12, 2009

Failure: The Secret to Success

A useful video from Honda:

Posted by James Zellmer at 4:40 PM

January 5, 2009

Can the US economy afford a Keynesian stimulus?

Willem Buiter:
Economic policy is based on a collection of half-truths. The nature of these half-truths changes occasionally. Economics as a scholarly discipline consists in the periodic rediscovery and refinement of old half-truths. Little progress has been made in the past century or so towards understanding how economic policy, rules, legislation and regulation influence economic fluctuations, financial stability, growth, poverty or inequality. We know that a few extreme approaches that have been tried yield lousy results - central planning, self-regulating financial markets - but we don't know much that is constructive beyond that.

The main uses of economics as a scholarly discipline are therefore negative or destructive - pointing out that certain things don't make sense and won't deliver the promised results. This blog post falls into that category.

Much bad policy advice derives from a misunderstanding of the short-run and long-run impacts of events and policies. Too often for comfort I hear variations on the following statements: "The long run is just a sequence of short runs, so if we make sure things always make sense in the short run, the long run will take care of itself." This fallacy, which I shall, unfairly, label the Keynesian fallacy, compounds three errors.
Via Yves Smith.
Posted by James Zellmer at 11:34 AM

December 27, 2008

The Marshfield Clinic's Electronic Medical Records System in the News

Steve Lohr:
Joseph Calderaro, 67, is one of health care’s quiet success stories. Over the last four years, he has carefully managed his diabetes by lowering his blood sugar, blood pressure and cholesterol with diet, exercise and medication.

To keep on track, Mr. Calderaro visits his doctor, attends meetings for diabetes patients and gets frequent calls from a health counselor. It is a team effort, orchestrated by the Marshfield Clinic here. And it is animated by technology, starting with Mr. Calderaro’s computerized patient record — a continuously updated document that includes his health history, medications, lab tests, treatment guidelines and doctors’ and nurses’ notes.

To visit the Marshfield Clinic, a longtime innovator in health information technology, is to glimpse medicine’s digital future. Across the national spectrum of health care politics there is broad agreement that moving patient records into the computer age, the way Marshfield and some other health systems have already done, is essential to improving care and curbing costs.
There has been some loose talk about the Obama administration providing "incentives" for health care automation. These investments should be made on their merits, rather than funded by yet another taxpayer give-away.

Marshfield apparently built their own system, a competitor to Verona based Epic Systems.

Might this article be part of their initial marketing efforts to other health care organizations?
Posted by James Zellmer at 7:45 AM

December 26, 2008

Milwaukee's Eisner Museum of Advertising & Design

Current exhibits include: "Ads from the past: Coca Cola". This fascinating museum is a gem in Milwaukee's Third Ward, and at $5.00 a bargain as well.
Posted by James Zellmer at 9:06 PM

December 19, 2008

The Year in Business: 2008

The Economist:
Party of the year: The $86,000 partridge-hunting trip funded by AIG, a government-rescued insurance firm, for some top clients. They had fun, but the public outcry was such that lots of other firms cancelled their holiday parties lest they be accused of wasting money in tough times. Cheers!

Badly-timed nickname: Awarded jointly to Whole Foods Market and Starbucks. Being known, respectively, as Whole Paycheck and Fourbucks is fine when the going is good, but not when consumers are obsessed with value for money. Both of these pricey retailers have had a miserable year. Whole Foods’ shares are down by 75% so far in 2008, and shares in Starbucks are down by over half.

In memoriam: A posthumous award for this year’s notable departures. Contenders include Alan Greenspan’s reputation as a great central banker; investment banks; the newspaper industry; sport-utility vehicles; fiscal prudence; the inexorable rise of BRIC economies and the theory that BRICs had “decoupled” from rich world economies; pay increases; and capitalism. But the winner is economic growth—gone, though one hopes not forever.
Posted by James Zellmer at 7:25 AM

December 12, 2008

Delight Your Customers

Perhaps it is a sign of the times. Air travel, but for private jets that the very rich and our politicians use, rarely involves "delighting customers". Happily, I can report an exception to this "rule". While on travel recently, I visited the tourist class lavatory, only to find this flower gracing the cammode. Props to the United Airlines employee who took the time to add a smile to my face on that journey. More, please!
Posted by James Zellmer at 9:17 PM

November 25, 2008

America’s Debt to Income Ratio as Compared with Other Countries

Credit Loan Blog:
Seven of the top ten debtor nations are included in the world’s top ten economies. Not surprising. This is largely a result of widespread availability of affordable credit, and relatively large middle classes in these countries, and consequently a large ratio of home/property owners. Most popular rhetoric on the topic would claim that wealthy countries have grown accustomed to being wealthy and they are enthralled by consumerism – it could be argued that this high level of debt could be a result of a culture that is used to and willing to buy now, and pay later…even if it means with interest.

According to our data, Japan has the highest positive income (in gross terms) at US $2,892 Billion. Similarly, the US economy is $1,594 Billion. At the other side of the spectrum, Great Britain’s income to debt ratio is a US -$7,677 Billion, and that of France is -$1,890 Billion. But what do these statistics mean on an individual level? Well, if you were to boil down what each person in this country contributed to the nation’s income vs. debt ratio, the results would be startling. We would have to take into consideration the nation’s population to better understand this. And some may be surprised to see that the US does not fare quite as bad as imagined, comparatively:
Posted by James Zellmer at 10:39 AM

November 21, 2008

Time to look at bonds but keep an eye on our heroes

Hugh Hendry:
Someone once said there are certain things that cannot be adequately explained to a virgin, either by words or pictures. It is therefore with some trepidation that I attempt to outline our investment policy. We are bullish on agriculture and bearish on the financial community. For 10 years we have contended that equity markets can, and do, stagnate for periods as long as a quarter of a century. Accordingly, we have refused to follow the market, choosing instead to invest in unleveraged sectors which have endured long bear markets.

However, there are complicating cycle considerations. A process of debt liquidation is under way that resembles a turning point heralding weaker global growth. This undermines almost all risk taking, including agriculture, and for this reason we presently favour only government bonds.

According to Prada: "There is a rejection of fakeness - the fake avant-garde." And the inflation scare that took the price of oil to almost $150 per barrel, and created a hawkish central banking community, was perhaps the biggest head-fake of all. Certainly, the market for 10-year government bonds is beginning to think so. It is trading near a record high.

And today, even those regional Fed governors and hawkish European central bankers seem to see it as well. As I say, this is the time to own government bonds. But we are aware of just how out of sync we are with our heroes. Can the combined intellectual weight of Mark Faber, George Soros and James Grant all be wrong? Why do they insist on shorting Treasuries during the worst financial crisis since the Depression? I blame the Romans.
Posted by James Zellmer at 10:21 PM

November 17, 2008

Memorandum to US Treasury Secretary Hank Paulson

Michael Lewis:
A former chief executive officer of Goldman Sachs Group Inc. does not mingle with boat dealers; he mingles with investment bankers; and the first rule, before handing out taxpayer money, is to have mingled with the people you want to hand it to.(That way they know whom they owe). I admire your ability to recognize your “circle of competence” and live within it.

Still, I do feel that in me, and my little literary business, there is opportunity for you, and your $700 billion. Allow me to explain why.

Be Fair

1) By giving the money to me, instead of someone less deserving, you will make the world a fairer place.

As much as I admire all of your decisions I can’t help but notice that the main qualification of the bankers to whom you have been giving money, so that they might make smart loans, is that they have gone almost bankrupt by making stupid loans.

As your mind is subtle, I can only assume that you secretly believe that the American economy right now needs not smart loans, but more stupid ones -- and thus that you have targeted the bankers who have proven they can make them.

I, unfortunately, have not flirted with bankruptcy, or made any stupid loans. But here’s my point: I haven’t been given the chance! Allow me to prove my financial ineptitude to you. I swear to you that when I return for my second round of assistance I will have proven myself fully qualified to receive it.
Posted by James Zellmer at 8:11 AM

November 12, 2008

The End of Wall Street's Boom

Michael Lewis:

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital--to decide who should get it and who should not. Believe me when I tell you that I hadn't the first clue.

I'd never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous--which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people's money, would be expelled from finance.

When I sat down to write my account of the experience in 1989--Liar's Poker, it was called--it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Posted by jez at 9:18 AM

November 9, 2008

The Crisis Last Time

Richard Parker:
For writers who seek to influence public affairs, timing plays a paramount role. And few writers have had better timing than Adolf Augustus Berle.

In the summer of 1932, with America trapped in the greatest financial crisis in its history, Berle published “The Modern Corporation and Private Property,” a scholarly yet readable analysis of America’s largest companies and their managers. Berle is largely forgotten today, yet with that book he succeeded in persuading Americans to see their economic system in a new way — and helped set the stage for the most fundamental realignment of power since abolition.

The stock market had plunged vertiginously three years earlier, and by 1932 Americans were desperate to reverse the much wider collapse that had ensued — and to make sure it wouldn’t happen again. The New Republic was soon hailing “The Modern Corporation” as the book of the year, while The New York Herald Tribune pronounced it “the most important work bearing on American statecraft” since the Federalist Papers. Louis Brandeis would cite its arguments in a major Supreme Court ruling on corporate power. Running for president, Franklin Delano Roosevelt recruited Berle — a Republican Wall Street lawyer who had supported Hoover — to join his “brain trust,” and that fall entrusted him with drafting what became the most important speech of the campaign. After the election, Berle remained in New York, yet his connection to the president he audaciously addressed as “Dear Caesar” was such that Time would characterize “The Modern Corporation” as “the economic bible of the Roosevelt administration.”
Posted by James Zellmer at 10:02 PM

November 7, 2008


Johann Johannsson:
The album has a theme, although it's more loose and open to interpretation than on my last album, IBM 1401, a User's Manual.

One of the two main threads running through it is this idea of failed utopia, as represented by the "Fordlândia" title - the story of the rubber plantation Henry Ford established in the Amazon in the 1920’s, and his dreams of creating an idealized American town in the middle of the jungle complete with white picket fences, hamburgers and alcohol prohibition. The project – started because of the high price Ford had to pay for the rubber necessary for his cars’ tyres – failed, of course, as the indigenous workers soon rioted against the alien conditions. It reminded me of Werner Herzog's Fitzcarraldo, this doomed attempt at taming the heart of darkness. The remains of the town are still there today. The image of the Amazon forest slowly and surely reclaiming the ruins of Fordlândia is the one that gave spark to this album. For the structure and themes of the album I was influenced by the films of Alejandro Jodorowsky, Herzog and Kenneth Anger. I was interested in a kind of poetic juxtaposition and an alchemical fusion of themes and ideas, which I feel is similar to the way Anger uses montage as an alchemical technique - as a way of casting a spell. During the making of the album, I also had in mind the Andre Breton quote about convulsive beauty, which he saw in the image of "an abandoned locomotive overgrown by luxurious vegetation". There is a strong connection to the IBM 1401 album in terms of both thematic and musical ideas and I see the two albums as belonging to a series of works.
Fascinating and quite pleasant. Clusty Search: Fordlandia.
Posted by James Zellmer at 8:28 AM

The Manufacturing Spectrum: Ariens & BMW

Two interesting articles today reflect polar opposites in the manufacturing world, first up - Wisconsin's Ariens: Timothy Aeppel:
Daniel Ariens's biggest concern right now isn't the financial crisis. It's getting his hands on snowblower engines.

The chief executive of Ariens Co., a maker of mowers and snowblowers, got a curt email last month from the company that for decades supplied engines for his line of snow machines, telling him they're halting production in 60 days -- essentially cutting off motors at the peak of his season. A host of problems hobbled that supplier, including the loss of a huge customer and problems obtaining crucial parts, such as starters, from the engine maker's own supply base.

"I'm quite sure we have other suppliers that won't make it through this cycle," says the 50-year-old Mr. Ariens.

This highlights a grim reality now dawning across the U.S. economy. Deep problems existed long before the meltdown on Wall Street and won't be fixed by the government's injection of taxpayer money into the nation's banks. Even if the credit crunch eases, as now appears to be happening, companies such as Ariens are bracing for a painful recession and taking steps to survive it.

Car sales and industrial production have plunged, consumer confidence has wilted, and companies have accelerated layoffs. Manufacturing, particularly autos and machinery, is leading the way down. Exports can't be expected to cushion the impact because the slowdown is global.
Dan Neil channels Karl Marx & Leon Trotsky while tooling around in the latest BMW 750Li near Chemnitz:
My driving partner and I were in the vicinity of Chemnitz, a somewhat dire little city in the former East Germany known for its alcoholism and an enormous monument to Karl Marx. Naturally, we had to see it.

"Bitte, kennen Sie, wo ist der grossen Kopf vom Karl Marx?" we asked passersby.

The former East Germans, standing in chilly drizzle, were delighted to help the capitalist running dogs in their gigantic limousine, a 2009 BMW 750Li. They pointed us down one of the main streets -- Lumpenprolitariatstrasse, maybe? -- and there it was: A huge, glowering stone bust of the German political philosopher, about the size of a FEMA trailer. Now there, there's a redistributionist.
I have an Ariens snowblower.
Posted by James Zellmer at 8:25 AM

October 21, 2008

Buy a GM Car, Get GM Stock

Edward Niedermeyer:

With GM's resale values and stock price hovering at record lows, two Texas dealers have come up with one hell of a sales gimmick. Buy a GM vehicle at Frank Kent Motor Co. in Fort Worth, Texas by the end of the month and the owners will give you 50 shares in General Motors. The scheme is advertised as a celebration of GM's 100th anniversary, but when asked by Automotive News [sub], Frank Kent Motors owners admit that the promotion was actually inspired by the depths to which GM stock had sunk. And while "50 shares of General Motors" sounds better than "$327″ (based on GM's $6.54/share price at the time of writing), the dealers see the stock as (get this) a hedge against depreciation.

Posted by jez at 8:54 AM

September 28, 2008

Updates on the $700,000,000,000 Fed / Wall Street / Mortgage Bailout

Lori Montgomery & Paul Kane:

The proposed legislation would authorize Treasury Secretary Henry M. Paulson Jr. to initiate what is likely to become the biggest government bailout in U.S. history, allowing him to spend up to $700 billion to relieve faltering banks and other firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates.

The plan would give Paulson broad latitude to purchase any assets from any firms at any price and to assemble a team of individuals and institutions to manage them. In wielding those powers, Paulson and others hope to contain a crisis that already has caused the failure or forced the rescue of a half-dozen major Wall Street firms and unnerved markets around the world.

  • Draft Bailout bill (200K PDF)
  • Letter to Paulson & Bernanke
  • Larry Summers:
    Congressional negotiators have now completed action on a $700bn authorisation for the bail-out of the financial sector. This step was as necessary as the need for it was regrettable. There are hugely important tactical issues regarding the deployment of these funds that the authorities will need to consider in the weeks and months ahead if the chance of containing the damage is to be maximised. I expect to return to these issues once the legislation is passed.

    In the meantime, it is necessary to consider the impact of the bail-out and the conditions necessitating it on federal budget policy. The idea seems to have taken hold in recent days that because of the unfortunate need to bail out the financial sector, the nation will have to scale back its aspirations in other areas such as healthcare, energy, education and tax relief. This is more wrong than right. We have here the unusual case where economic analysis actually suggests that dismal conclusions are unwarranted and the events of the last weeks suggest that for the near term, government should do more, not less.

  • Tom Wolfe's latest is worth a read.
  • My email to our Washington delegation.

Posted by jez at 10:22 PM

September 22, 2008

"The Era of Leverage is Over"

Gillian Tett:

A few years ago, senior officials at the Bank for International Settlements started ringing alarm bells about the scale of leverage that was quietly building up in the financial system. Back then, though, it was fantastically hard to get American policymakers - let alone bankers - to listen.

In the go-go days of the credit bubble, Washington policymakers blithely assumed that the Western financial system had plenty of capital to cope with any potential risks. Consequently, as one former BIS official admits: "Worrying about leverage wasn't fashionable at all - no one wanted to hear."

Fast-forward a couple of years and, my, how those Western financiers are having to eat humble pie (even to the point of accepting a helping hand from the once-ailing Japanese). After all, the events of the past year have now made it patently - horrifically - obvious that the Western banking system has become dangerously undercapitalised in recent years, to the point where even the Federal Reserve is having to shore up its defences.

Moreover, it is now also clear that Western policymakers are belatedly trying to correct this state of affairs. The days when high leverage, mega bonuses and wacky instruments were equated with financial virility have gone; instead a more humble, back-to-basics and slim-line approach is what investors are demanding. Thus, deleveraging is now all the rage - in whatever form it might take.

Posted by jez at 6:13 PM

Five Reasons to Give Thanks for the Financial Collapse of the Decade

Michael Lewis:

One of life's rules is that there's bad in good and good in bad. The total collapse of the U.S. financial system is no exception. Even in the midst of the current financial despair we can look around and identify many collateral benefits.

A lot of attractive office space seems to be opening up in midtown Manhattan, for instance, and the U.S. government is now getting paid to borrow money. (And with T-bills yielding 0 percent, they really ought to borrow a lot more of it, and quickly.)

And so as Morgan Stanley Chief Executive Officer John Mack blasts short sellers for his problems, and Goldman Sachs CEO Lloyd Blankfein swans around pretending to be above this little panic, we ought to step back and enjoy the positives.

Posted by jez at 11:47 AM

September 2, 2008

Former housemates John Mackey and Kip Tindell talk about poker, retailing, and the limitations of shareholder capitalism

Justin Fox:

My column in this week's Time is about John Mackey, the CEO and co-founder of Whole Foods Market, and Kip Tindell, the CEO and co-founder of the Container Store, and their shared belief that corporations perform a lot better over time if their executives focus more on employees and customers than on shareholders.

Mackey and Tindell go way back--they shared a house in Austin with three friends one year in the mid-1970s as they worked their way through the University of Texas on the eight-year plan. They've recently begun hanging out together a bit, and when I met Tindell at a National Retail Federation event in New York late last year, he invited me to come down to Texas to talk to the two of them. So I did. We met at Whole Foods' headquarters in Austin, which is perched atop the chain's flagship store, and we talked, and talked. Tindell is stereotypical laid-back, slow-talking Texan. Mackey is a not so stereotypical hyper, fast-talking Texan. But they seemed to get along pretty well. As for me, I mostly just stayed out of the way.

What follows is an edited transcript of the conversation. I cut some stuff out, moved a few passages around, and removed a lot of "uhs" and "you knows" (mine as well as theirs). Beyond that it's a pretty faithful representation of what was said. It's pretty long, too. But most educational.

Posted by jez at 4:07 PM

August 21, 2008

Confessions of a Risk Manager

The Economist:

Why did banks become so overexposed in the run-up to the credit crunch? A risk manager at a large global bank--someone whose job it was to make sure that the firm did not take unnecessary risks -- explains in his own words

IN JANUARY 2007 the world looked almost riskless. At the beginning of that year I gathered my team for an off-site meeting to identify our top five risks for the coming 12 months. We were paid to think about the downsides but it was hard to see where the problems would come from. Four years of falling credit spreads, low interest rates, virtually no defaults in our loan portfolio and historically low volatility levels: it was the most benign risk environment we had seen in 20 years.

As risk managers we were responsible for approving credit requests and transactions submitted to us by the bankers and traders in the front-line. We also monitored and reported the level of risk across the bank's portfolio and set limits for overall credit and market-risk positions.

Posted by jez at 8:48 AM

August 19, 2008

Big Box Retail 2008: Costco Arrives in (Madison) Middleton

Costco held a very well attended party this evening celebrating the opening of their new Middleton warehouse club [Map].

I did not see a stand to purchase law degrees.

Middleton provided a TIF (Tax Incremental Financing) agreement to the site developer. A related Isthmus article can be found here.

A few additional photos:

Clusty search: Costco.

Posted by jez at 8:58 PM

August 6, 2008

Air Travel: 2008 - A Time When Standing Still Dominates

This is one of those moments when a camera in hand meets a scene waiting to be photographed: a beleaguered traveller resorting to solitaire on his PC while waiting for the promised next flight. The blue sky ignores the chaos below. Air travel is certainly, as a fellow passenger lamented, "not what it once was".

Posted by jez at 9:17 PM

August 4, 2008

Nassim Nicholas Taleb: the prophet of boom and doom

Bryan Appleyard:

"You have to worry about things you can do something about. I worry about people not being there and I want to make them aware." We should be mistrustful of knowledge. It is bad for us. Give a bookie 10 pieces of information about a race and he’ll pick his horses. Give him 50 and his picks will be no better, but he will, fatally, be more confident.

We should be ecologically conservative – global warming may or may not be happening but why pollute the planet? – and probablistically conservative. The latter, however, has its limits. Nobody, not even Taleb, can live the sceptical life all the time – “It’s an art, it’s hard work.” So he doesn’t worry about crossing the road and doesn’t lock his front door – “I can’t start getting paranoid about that stuff.” His wife locks it, however.

He believes in aristocratic – though not, he insists, elitist – values: elegance of manner and mind, grace under pressure, which is why you must shave before being executed. He believes in the Mediterranean way of talking and listening. One piece of advice he gives everybody is: go to lots of parties and listen, you might learn something by exposing yourself to black swans.

I ask him what he thinks are the primary human virtues, and eventually he comes up with magnanimity – punish your enemies but don’t bear grudges; compassion – fairness always trumps efficiency; courage – very few people have this; and tenacity – tinker until it works for you.

Posted by jez at 5:33 AM

July 30, 2008

TDS Telecom sues Monticello over city's plan to build its own high-speed network

Heron Marquez Estrada:

A failure to communicate between Monticello and TDS Telecom, its chief phone and cable provider, is threatening to short-circuit plans to make the city one of the most wired communities in the nation.

Both Monticello and TDS Telecom are constructing multi-million dollar fiber-optic networks that will directly connect to every home, office and business in the city.

When the networks come online in the next year or so, they would be among only about 45 in the country that provide such connectivity.

But Monticello -- a city of about 11,000 in northern Wright County -- also may be the only locale where the public and private sectors are competing so directly for paying customers.

The acrimony from such direct competition has led to the filing of what may become a precedent-setting lawsuit by TDS questioning whether municipalities can use revenue bonds to create fiber-optic networks.

Fascinating. It's not like TDS is building fiber to the home here. We're stuck with (and continue to pay for) nearly century old copper networks. Much like roads, I believe that public fiber networks (open to any player) make sense, particularly when there is no evidence that the incumbent telcos plan to upgrade their infrastructure.

Posted by jez at 2:48 PM

July 15, 2008

Flight's 100 Greatest

Flight Global:

It is always a slightly nerve-racking moment for an editor to commission a reader’s poll. Quite simply, what happens if so few people participate that the exercise becomes a farce?

It very quickly became apparent that no such ignominy awaited the 100 Greatest exercise marking's print edition, Flight International’s centenary. Votes poured in for your choices in the fields of most influential Civil Aircraft, Military Aircraft, Person, Engine and Moment.

By the time the poll closed on 20 June, no fewer than 18,000 of you had voted – thank you for having taken the trouble to do so and making this a more than worthwhile exercise.

Space is always limited in any publication, so the temptation to write mini-articles on every entry in our list had to be resisted. To those of you whose favourite personality or piece of machinery does not receive the words you feel he, she or it derived, our apologies.

#1: Apollo 11 Moon Landing

#2: Boeing 747

#3: The Wright Brothers

Posted by jez at 3:49 PM

July 1, 2008

Southwest Flies Past High Oil Prices


BOB MOON: We're seeing the results of all this financial turbulence in the not-so-friendly skies lately. Both American and United have announced they're cutting flights domestically and internationally.

Across the industry, companies are trying to nickel and dime their way to profitability, hitting consumers with fuel surcharges or extra fees for baggage, but one carrier has managed to navigate a relatively smooth flight path.

Marketplace's Jeff Tyler looks at how Southwest has steered clear of trouble.

Perhaps one day, Madison will be fortunate to enjoy Southwest service.

Posted by jez at 4:33 AM

June 27, 2008

Verizon's fiber guru talks strategy

Marguerite Reardon:

Fios also has helped future-proof Verizon's network. While its cable competitors buckle under the pressure of peer-to-peer traffic on their networks, Verizon has enough capacity in its network, thanks to its fiber upgrades, to weather the storm unscathed and work on its own timetable to find more efficient ways to handle peer-to-peer traffic.

Mark Wegleitner, Verizon's senior vice president of technology in charge of broadband and consumer services, has helped develop and drive Verizon's fiber strategy. I sat down with him at the Nxtcomm trade show in Las Vegas last week to talk about a wide variety of topics, including the controversy over Comcast's treatment of BitTorrent traffic, faster speeds for Fios, and what the company plans to do next when it reaches its 2010 goal of passing 18 million homes with fiber.

The Madison area is stuck with an aging telco infrastructure. Neither AT&T, nor TDS have any plans to upgrade their networks to the home. Not good.... Verizon FIOS Deployment Map.

Posted by jez at 2:10 PM

Midwest Airlines Employees - Between A Rock And A Hard Place

Benet Wilson:

I had to sigh when I read this article in the Milwaukee Journal-Sentinel on the draconian pay cuts Midwest Airlines is asking its employees to take in order to survive. Having worked at two airlines during turbulent times, I too faced the decision on what to do when management imposed pay cuts.

In the first case, I took a temporary cut at Mesa Air Group after the horror of 9/11, when airlines didn't know how long it would take to recover from the week-long shutdown of the air system and travelers deciding to fly again. The second time found me swallowing hard as I took a pay cut at Delta Air Lines after the carrier filed for Ch. 11.

But these cuts were nothing compared to what Midwest is asking of its employees -- pay cuts of up to 65% for union pilots and flight attendants to avoid filing for bankruptcy. And this is on top of grounding its MD80s -- almost half the fleet -- and laying off hundreds of workers.

I suspect the days of Midwest's extraordinary service are over.

Posted by jez at 12:07 PM

Cisco TelePresence Coming to a Living Room Near You

Jennifer Hagendorf:

co Systems (NSDQ:CSCO) is set to deliver its TelePresence high-definition videoconferencing technology to the home market within the next 12 months, said the company's top executive this week.
The technology will be available via the channel, including via retailers the likes of Best Buy (NYSE:BBY) and Wal-Mart and service providers such as AT&T (NYSE:T), said Cisco Chairman and CEO John Chambers at the Cisco Live conference in Orlando, Fla.

"It will probably evolve. At first we'll do it ... where we're very careful on how the channel sells TelePresence and very careful that the rooms are set up right and the cameras are set up right," Chambers said. "Having said that, I think that you will see a combination of distribution points."

Chambers expects pricing of Cisco's home-use TelePresence units to come in below $10,000 depending on what functionality the user wants.

Promising, particularly as the air travel experience continues to deteriorate.

Posted by jez at 8:38 AM

June 26, 2008

A Look Back at The Bill Gates' Era; and a few lessons

The Economist:

Mr Gates also realised that making hardware and writing software could be stronger as separate businesses. Even as firms like Apple clung on to both the computer operating system and the hardware—just as mainframe companies had—Microsoft and Intel, which designed the PC’s microprocessors, blew computing’s business model apart. Hardware and software companies innovated in an ecosystem that the Wintel duopoly tightly controlled and—in spite of the bugs and crashes—used to reap vast economies of scale and profits. When mighty IBM unwittingly granted Microsoft the right to sell its PC operating system to other hardware firms, it did not see that it was creating legions of rivals for itself. Mr Gates did.


And look at what happened when Mr Gates’s pragmatism failed him. Within Microsoft, they feared Bill for his relentless intellect, his grasp of detail and his brutal intolerance of anyone whom he thought “dumb”. But the legal system doesn’t do fear, and in a filmed deposition, when Microsoft was had up for being anti-competitive, the hectoring, irascible Mr Gates, rocking slightly in his chair, came across as spoilt and arrogant. It was a rare public airing of the sense of brainy entitlement that emboldened Mr Gates to get the world to yield to his will. On those rare occasions when Microsoft’s fortunes depended upon Mr Gates yielding to the world instead, the pragmatic circuit-breaker would kick in. In the antitrust case it did not, and, as this newspaper argued at the time, he was lucky that it did not lead to the break-up of his company.

Posted by jez at 6:05 AM

June 19, 2008

Walter Bagehot Was Wrong

James Grant:

The governor of the Central Bank of Luxembourg raised some eyebrows when he questioned the integrity of the fast-growing balance sheet of the European Central Bank. Yves Mersch, a member of the ECB's governing council as well as the Ben Bernanke of the Grand Duchy of Luxembourg, raised the issue at a gathering of the International Capital Market Association in Vienna two weeks ago.

Insofar as a currency derives its strength from the balance sheet of the issuing central bank, the euro is unsound and becoming more so, as Mr. Mersch did not quite say. We, however, will say it for him. In fact, we will say the same for most of the leading monetary brands, that of the United States not excluded. The mortgage mess is the immediate cause of the new debasement. A long-held article of central banking dogma is the remote cause.

Mr. Mersch landed on the front page of the Financial Times by acknowledging that the ECB is accepting a dubious kind of mortgage collateral in exchange for loans to the world's liquidity-parched financial institutions. In so many words, Mr. Mersch charged that the commercial banks are gaming the central bank, a situation he called of "high concern." Reading Mr. Mersch, we thought of Thomson Hankey.

Posted by jez at 11:00 PM

June 17, 2008

May 29, 2008

Why Rivals Don't Copy Southwest's Hedging

George Anders:

David Carter, an associate professor of finance at Oklahoma State, has an interesting perspective on why rivals haven't caught up to Southwest. Prof. Carter helped write a 2004 case study on Southwest's hedging that is taught in business schools. Although the study details how Southwest uses home-heating-oil futures and other instruments to make its hedges work, Prof. Carter says he has heard from only one other airline that seemed interested in putting that knowledge to work: the German carrier Lufthansa.

Other carriers may have opted for caution because it is psychologically hard to switch strategies when prices are moving against you, Prof. Carter says. Airlines that didn't hedge much when oil was at $25 or $40 a barrel might have felt uncomfortable launching a big hedging program when oil got above $60.

Frequent management shuffles at many airlines also might have made it harder for carriers other than Southwest to jump into hedging in a big way, Prof. Carter adds. A hedging blunder early in a CEO's tenure might overshadow whatever else that boss might be accomplishing.

Southwest's treasurer, Scott Topping, offers another possible explanation of why his airline has stayed ahead of the pack so long: Since the late 1990s, Southwest's hedging strategy has been set by two or three people, rather than by committee, making it easier to act decisively.

Posted by jez at 9:01 AM

May 18, 2008

Cities Startup Broadband Efforts

Christopher Rhoads:

Internet traffic is growing faster than at any time since the boom of the late-1990s. Places like Chattanooga are trying hard not to get stuck in the slow lane.

Some 60 towns and small cities, including Bristol, Va., Barnsville, Minn., and Sallisaw, Okla., have built state-of-the-art fiber networks, capable of speeds many times faster than most existing connections from cable and telecom companies. An additional two dozen municipalities, including Chattanooga, have launched or are considering similar initiatives.

The efforts highlight a battle over Internet policy in the U.S. Once the undisputed leader in the technological revolution, the U.S. now lags a growing number of countries in the speed, cost and availability of high-speed Internet. While cable and telecom companies are spending billions to upgrade their service, they're focusing their efforts mostly on larger U.S. cities for now.

Smaller ones such as Chattanooga say they need to fill the vacuum themselves or risk falling further behind and losing highly-paid jobs. Chattanooga's city-owned electric utility began offering ultrafast Internet service to downtown business customers five years ago. Now it plans to roll out a fiber network to deliver TV, high-speed Internet and phone service to some 170,000 customers. The city has no choice but to foot the bill itself for a high-speed network -- expected to cost $230 million -- if it wants to remain competitive in today's global economy, says Harold DePriest, the utility's chief executive officer.

Madison's pitiful broadband infrastructure could certainly use a shot in the arm.

Posted by jez at 10:30 PM

May 12, 2008

The mother of all on-board ideas, or Why Southwest Airlines Should Fly to Madison

Terry Maxon:

Southwest Airlines, saving passengers' necks since 1971.

Colleague Karen Robinson-Jacobs, who flew to Chicago on Saturday, said the airline had an interesting on-board amenity: free Mother's Day cards for anybody on the airplane who needed one.

Flight attendants announced during the flights that anyone who needed a Mother's Day card should hit their flight attendant call button. On both her flights, Dallas-Little Rock and Little Rock-Chicago, Karen reported the airplane immediately sounded like slot machines hitting the jackpot as numerous forgetful passengers hit their call buttons.

The idea reportedly came from Southwest president Colleen Barrett, who had each originating flight Saturday provisioned with about three dozen cards. But that was not enough to fill the last-minute demand on the Little Rock-Chicago leg, as Dallas-based flight attendant June Zapata ran out mid-plane.

Posted by jez at 1:25 PM

April 22, 2008

Another Round for the Guild

Private Equity Hub:

The Guild Inc., a Madison, Wis.-based online art retailer, has raised $2.5 million in Series C funding, according to a regulatory filing. Shareholders include Dolphin Equity Partners
The Guild, a company with many lives, must be north of $50,000,000 (!) in funds raised over the years.

Related: A Pravda View of Guild and 1/11/2006: Guild Raises another $6M.


Posted by jez at 8:35 AM

April 18, 2008

The "Rebirth of the Rust Belt"

CNBC video of Matthew Simmons on the "end of the Starbucks' economy". Bottom line, from Simmons: good for the midwest.

Posted by jez at 11:01 AM

April 16, 2008

Innovation lessons from Pixar: An interview with Oscar-winning director Brad Bird

Hayagreeva Rao, Robert Sutton, and Allen P. Webb:

If there’s one thing successful innovators have shown over the years, it’s that great ideas come from unexpected places. Who could have predicted that bicycle mechanics would develop the airplane or that the US Department of Defense would give rise to a freewheeling communications platform like the Internet?

Senior executives looking for ideas about how to make their companies more innovative can also seek inspiration in surprising sources. Exhibit One: Brad Bird, Pixar’s two-time Oscar-winning director. Bird’s hands-on approach to fostering creativity among animators holds powerful lessons for any executive hoping to nurture innovation in teams and organizations.

Bird joined Pixar in 2000, when the company was riding high following its release of the world’s first computer-animated feature film, Toy Story, and the subsequent hits A Bug’s Life and Toy Story 2. Concerned about complacency, senior executives Steve Jobs, Ed Catmull, and John Lasseter asked Bird, whose body of work included The Iron Giant and The Simpsons, to join the company and shake things up. The veteran of Walt Disney, Warner Brothers, and FOX delivered—winning Academy Awards (best animated feature) for two groundbreaking movies, The Incredibles and Ratatouille.

Ten days before Ratatouille won its Oscar, we sat down with Bird at the Emeryville, California, campus of Pixar, which is now a subsidiary of Disney.1 Bird discussed the importance, in his work, of pushing teams beyond their comfort zones, encouraging dissent, and building morale. He also explained the value of “black sheep”—restless contributors with unconventional ideas. Although stimulating the creativity of animators might seem very different from developing new product ideas or technology breakthroughs, Bird’s anecdotes should stir the imagination of innovation-minded executives in any industry.

Posted by jez at 1:24 PM

April 14, 2008

On Energy: "Some home truths about tomorrow"

Ed Wallace:

It’s about 179 miles from Fort Worth to the campus of Texas A&M in College Station, and I drove there to speak at the Student Conference On National Affairs on Thursday, February 21. It was not lost on me that making the round trip between the Metroplex and A&M’s Memorial Student Center meant that I would use the equivalent of one barrel of oil to discuss the fallacy of America’s quest for energy independence.
My slight amusement continued when one of the first students I met had arrived late from Chicago because his luggage had been misrouted and lost by the airline. I doubted that he got the irony of how much fuel it took to bring him the 1,100 miles from Chicago to Texas to attend SCONA 53, which was titled "Creating A Sustainable Global Energy Policy."

Simply Selfish: Ethanol or Food

My talk came after an address by the Ambassador of Azerbaijan and before talks by Mark Albers, a senior vice president of Exxon, and by Virginia Governor George Allen. I had been asked to speak that afternoon about the magic of alternative fuels’ saving the day and alleviating the current energy crisis – assuming that high price is the sole determining factor in today’s energy debate. I felt the best way to do that was to discuss the beginnings of the automotive age in both America and the world, to relate to the students and professionals attending how, in the 1920s, these exact same circumstances led to a campaign to wean the American public off of oil – and why today the debate is back, but the end results will be the same.

I usually find it best to use 4th-grade math to show the fallacy of the again-current line of thinking about alternative fuels such as ethanol. After all, most people seem shocked to learn the fact that a new 2008 Suburban, designed to run on E85 ethanol and in which the owner uses only E85 as fuel, requires four acres of farmland be dedicated to corn production to keep that one vehicle running. But it’s true: That Suburban owner may live in a beautiful home on a quarter acre in the Metroplex, but somewhere in America four acres of corn must be set aside to provide fuel for just that one SUV.

Posted by jez at 9:07 AM

April 12, 2008

Taxis in the Sky

Jim Fallows:

True, a cover story I wrote for this magazine seven years ago, contending that the era of tiny, convenient, and relatively affordable jet airplanes was at hand, won an Article of the Year award from an aviation lobbying group. But it would be fair to describe the broader reaction as: Oh, sure! (“Freedom of the Skies,” June 2001, was excerpted from my book Free Flight.) New and more fuel-efficient jet engines; new, quieter, and more comfortable small airplanes; new and more-automated ways of routing aircraft around bad weather and away from congested areas—these and other innovations, I wrote, might make a new kind of air travel more practical for more people. This wouldn’t mean personal aviation in the Jetsons sense—a plane in every garage, people zooming around at will. But it might provide business travelers with something that until then only the truly rich had enjoyed: a fast and personalized alternative to the ever less delightful experience of travel on commercial airlines.

Most readers thought that personal airplanes, like personal yachts, would always be the playthings of the very rich. The familiar (and aptly named) Airbus or Boeing aircraft would have to do, as would impenetrable modern fare structures and the grind of big-airport congestion. It obviously didn’t help that three months later, the use of passenger airplanes as terrorist tools put aviation in general under new limits and scrutiny. Allow new routes and possibilities for air travel? Ha! Everything air-related was destined to be more controlled.

Posted by jez at 8:41 PM

April 11, 2008

Waterloo's Crave Brothers Featured on NBC Nightly News

Roger O'Neill video takes a look at the Crave Brothers use of methane - from their cow poop - to power the farm and 120 neighboring homes. The farm includes a cheese factory.

Posted by jez at 6:46 PM

March 27, 2008

Addressing: The Revenge of Geography

Timothy Grayson:

Pondering a future for location intelligence is a speculative journey through geographic permanence and human transience that ends with proving location intelligence to be evermore crucial to businesses and governments.

The Canadian postal context
The post office has a natural connection to location and an unbeatable advantage over geo-matics, spatial mapping and so on: postal carriers go regularly to all locations.

Opened in 1755, the first Canadian post office facilitated commerce and nation-building at a time when locating people and places among the buffalo and beaver was a real challenge. By 2005, Canada Post was delivering 11.1-billion letters and packages - about 37-million pieces every day - to over 31-million individual Canadians plus over 1-million businesses and institutions at some 14-million points-of-call.

Canada Post has established an electronic pedigree as well. epostTM serves about 4-million subscribed Canadians, delivering electronic bills for over 90-percent of Canadian large volume mailers. Canada Post also provides both an electronic courier service to securely transmit large electronic documents and an Electronic PostMark.

Posted by jez at 2:10 PM

March 15, 2008

Let's Talk About Your Big But But

Paul Orfalea:

My December 31, 2007, blog entry was called What Do You Listen For? I wrote that if you listen for errors and offense, you will find them, but if you listen for truth and meaning, you will find them instead.

How can you tell when someone is not listening for truth and meaning? One sign is the word, “but,” which suggests one has listened only for something to contradict. The Entrepreneurial Investor co-author Dean Zatkowsky calls the expression “yeah, but…” a “reflexive rebuttal,” a knee-jerk need to trump another’s point with one of your own.

Posted by jez at 4:33 AM

March 10, 2008

Evaluating the Proposed Delta/Northwest Merger

Victor Cook:

Doug Parker had a vision. His successful America West had completed a merger agreement with bankrupt US Airways Group on May 19, 2005. With this deal he planned to become the dominant low cost carrier in the country as the new US Airways (NYSE: LCC). And he would be its CEO. The next day CNN reported that "Parker thinks he can buck history and make a success out of merging his more successful airline with one in bankruptcy." The company's press release said:
Building upon two complementary networks with similar fleets, closely- aligned labor contracts and two outstanding teams of people, this merger creates the first nationwide full service low-cost airline.
On September 29, 2005 trading began for Mr. Parker's new carrier. On that day its stock closed a little above $20. Then in a remarkable run-up to November 24, 2006 it was trading at around $63. Doug Parker seemed close to realizing his vision. Close, but no cigar. The run-up was followed by a steady erosion in shareholder value that on Friday March 7, 2008 saw his stock close at just under $11. That represented an 82% loss in value from its peak and a 46% loss from its initial price. What went wrong?
Northwest is Madison's largest carrier. This proposed merger, combined with high oil prices that will dramatically reduce the number of small jets servicing airports like ours may require rethinking local air service.

Posted by jez at 11:20 AM

The "500 True Believers"

Tom Peters:

The deal is, we've been told, that CEO pay is so high because demand for the 9-sigma talent of these Water Walking Wonders, so very beyond your and my shriveled imaginations, wildly exceeds supply when it comes to the 500 jobs as Fortune 500 CEOs. I contend that there are exactly 500 Guys (almost all guys, hence I can safely use the term) who believe that line of reasoning—namely the 500 CEOs of the F500 companies. (I guess I could also throw in the heads of the biggest search firms, who unearthed many of these so-far-beyond-the-pale dudes, which perhaps puts the total at 505 True Believers.)

The Inspiring Invincibles! Chuck Prince (Citigroup, formerly head of)! Stan O'Neal (Merrill Lynch, formerly head of)! Angelo Mozilo (Countrywide, formerly head of)! Tough cookies, each one. And yet, somehow, on their watches, The Three Geniuses allowed their firms, through grotesque negligence—maybe silliness or Theaters of the Absurd would be better words if the stakes weren't so high—to get into positions in which tens upon tens of BILLIONS of greenbacks had to be written off from their books of account. Dodger, my 5-year-old Aussie, could have done a better job. (He could have bitten anybody who tried to make a $500K loan to someone who had never had a job or paid a bill and signed his name with an "X"; and peed on the pants of any 22-year-old University of Chicago PhD who said, "With my clever algorithm I've designed what's called a 'derivative'—it'll make risk a thing of the past." Yes, had Dodger bitten and peed on schedule, the likes of Citigroup would be ten or twenty billion ahead of their current position.) But, since the demand is so strong for the 500 different-from-mere-vice-presidents-Monumental-Management-Marvels, and the supply is so short, The Three Geniuses, on the basis of "Upside Potential," were able to chalk up about a half BILLION buckaroos on their pay stubs over the last five years, while busily installing the tools necessary for Global Economic Meltdown. Well, I guess that means they're "excellent" at something. Isn't there some line about wool & eyes & pulling? (In most cases, their pay deals, especially the parts about "if you turn out to be an idiot, we'll pay you a king's ransom to clean out your desk," were effectively set before they set foot in the executive suite. Wow, I wanna piece of that action!)

Posted by jez at 10:22 AM

February 28, 2008

Has the Pyramid Inverted?

Jay Deragon:

The term media has many different definitions. Published media is any media made available to the public. Mass media refers to all means of mass communication. Broadcast media refers to communications delivered over mass electronic communication networks.

News media refers to mass media focused on communicating news. Media meshing refers to the act of combining multiple independent pieces of communication media to enrich an information consumer’s experience. New media refers to media that can only be created or used with the aid of modern computer processing power.

The history of “media” has been designed, developed and pushed from a few at the top to the masses at the bottom. This model has been used to influence public opinion about anything, everything and everywhere. The old model was an important factor in driving historical economies.

Posted by jez at 10:32 AM

February 17, 2008

"Google's Addiction to Cheap Electricity"

Ginger Strand:

"Don't be evil", the motto of Google, is tailored to the popular image of the company--and the information economy itself--as a clean, green twenty-first century antidote to the toxic excesses of the past century's industries. The firm's plan to develop a gigawatt of new renewable energy recently caused a blip in its stock price and was greeted by the press as a curious act of benevolence. But the move is part of a campaign to compensate for the company's own excesses, which can be observed on the bansk of the Columbia River, where Google and its rivals are raising server farms to tap into some of the cheapest electricity in North America. The blueprints depicting Google's data center at The Dalles, Oregon are proof that the Web is no ethereal store of ideas, shimmering over our heads like the aurora borealis. It is a new heavy industry, an energy glutton that is only growing hungrier.
I wonder how the economics and energy consumption details compare between growing web applications and legacy paper based products?

Posted by jez at 8:24 AM

February 11, 2008

Microsoft will pay high price for failing to learn history lessons

John Naughton:

It's the metaphors and similes that get me. It's a shotgun marriage, declared one commentator, 'with Google holding the gun'. Putting Microsoft and Yahoo together, said another, was like trying to produce an eagle from an alliance of two turkeys.

T his is unfair. Microsoft isn't a turkey, but a profitable, boring mastodon that entertains fantasies about being able to fly. Yahoo, for its part, is an ageing hippy who invented hang- gliding but aspired to fly 747s and then discovered that he wasn't very good at it. The mastodon hopes that by employing the hippy it will learn to hang-glide. The hippy's feelings about the whole deal are plain for all to see.

Microsoft's $44.6bn offer of cash plus shares for Yahoo has got everyone in a spin, partly because of its sheer size but mostly because they fondly imagine it heralds an exciting future. At last, they think - something that might stop the inexorable advance of Google toward world domination! If that's what they're hoping for, then this ain't it, alas. This isn't the opening of a new chapter in the history of the computing business, but - as John Markoff observed in the New York Times - 'the final shot of yesterday's war'. And even if the merger does take place in a reasonable timescale - and if it can be made to work - it won't make much of a dent in Google.

Posted by jez at 8:35 AM

February 3, 2008

Eureka! It Really Takes Years of Hard Work

Janet Rae-Dupree:

WE’VE all heard the tales of the apple falling on Newton’s head and Archimedes leaping naked from his bath shrieking “Eureka!” Many of us have even heard that eBay was created by a guy who realized that he could help his fiancée sell Pez dispensers online.

The fact that all three of these epiphany stories are pure fiction stops us short. As humans, we want to believe that creativity and innovation come in flashes of pure brilliance, with great thunderclaps and echoing ahas. Innovators and other creative types, we believe, stand apart from the crowd, wielding secrets and magical talents beyond the rest of us.

Balderdash. Epiphany has little to do with either creativity or innovation. Instead, innovation is a slow process of accretion, building small insight upon interesting fact upon tried-and-true process. Just as an oyster wraps layer upon layer of nacre atop an offending piece of sand, ultimately yielding a pearl, innovation percolates within hard work over time.

“The most useful way to think of epiphany is as an occasional bonus of working on tough problems,” explains Scott Berkun in his 2007 book, “The Myths of Innovation.” “Most innovations come without epiphanies, and when powerful moments do happen, little knowledge is granted for how to find the next one. To focus on the magic moments is to miss the point. The goal isn’t the magic moment: it’s the end result of a useful innovation.”

Posted by jez at 2:24 PM

January 27, 2008

33 Things That Make Us Crazy

Wired on air travel, and 32 other modern annoyance:

Ticket Counter: Expensive? If anything, flying doesn't cost enough: The average domestic fare in spring 2007 was $326. That's $50 less than a decade ago, after adjusting for inflation. During the same period, fuel costs nearly tripled. To stay in business, major carriers have aped the strategies of budget operators like Southwest. Largely gone are the free meals, blankets, and pillows. The savings have been passed along as lower ticket prices — at the price of your comfort.

Posted by jez at 4:57 PM

January 21, 2008

Oil Demand, the Climate and the Energy Ladder

Jad Mouawad:

Energy demand is expected to grow in coming decades. Jeroen van der Veer, 60, Royal Dutch Shell’s chief executive, recently offered his views on the energy challenge facing the world and the challenge posed by global warming. He spoke of the need for governments to set limits on carbon emissions. He also lifted the veil on Shell’s latest long-term energy scenarios, titled Scramble and Blueprints, which he will make public next week at the World Economic Forum in Davos, Switzerland. Following are excerpts from the interview:

Q. What are the main findings of Shell’s two scenarios?

A. Scramble is where key actors, like governments, make it their primary focus to do a good job for their own country. So they look after their self-interest and try to optimize within their own boundaries what they try to do. Blueprints is basically all the international initiatives, like Kyoto, like Bali, or like a future Copenhagen. They start very slowly but before not too long they become relatively successful. This is a model of international cooperation.

Posted by jez at 7:22 PM

January 16, 2008

Credit Squeeze: The Press Meets the Wrench

Suddent Debt:

The NY Times today has an excellent article that starts: Ben Bernanke, meet Gary Crittenden. While you're easing credit, he is tightening it." In two brief sentences the writer (Floyd Norris) speaks volumes: Gary Crittenden is Citigroup's CFO, who just told analysts the largest bank in the US is reducing consumer lending and raising interest rates. Asked whether credit card lending was an area where Citi might want to “pull back or increase pricing,” he responded, “All of the above.” Mortgage lending is also being cut.

That's what a credit crunch looks like, in the ground: lenders working to repair damaged balance sheets end up throwing monkey wrenches into the Fed's "printing press". And that's also how economies slide to the bottom of a liquidity trap, staring in frustration at a useless ZIRP .

Posted by James Zellmer at 10:05 AM

The Dealer Made Me Do It

Steve Finlay:

First off, I’m not excusing auto dealers. Or lenders.

They have a moral and business responsibility to try to stop their customers from doing something stupid, such as buying a vehicle with a sticker price that will stick them with an oppressive debt.

But customers have responsibilities, too. It is their purchase, their money and their car payments. It is up to them, more than anyone else, to know their financial limitations and not cross them.

Yet, so many consumers today buy too much vehicle. Then, when the financial squeeze becomes eye-popping, they look for someone to blame. The dealership and lender make nice targets. Seldom do the debt-ridden blame themselves.

I pondered that while reading a Los Angeles Times article headlined, “New Cars That Are Fully Loaded – With Debt.”

The story tells how some Americans of average means roll over an existing loan on an expensive vehicle in order to get another expensive vehicle. They end up with two loans in one, when they couldn’t afford one.

From the LA Times article:
Americans haven't just been taking out risky mortgages for homes in the last few years; they've also been signing larger automobile loans for significantly longer terms than they used to.

As a result, people are slipping into a perpetual cycle of automobile debt that experts think could lead to a new credit crunch extending from dealerships to driveways and all the way to Wall Street.

Posted by James Zellmer at 9:44 AM

January 15, 2008

On Sears & Lands End: Retailer's Profit Warning Signals a Persistent Slide

Gary McWilliams:

Sears Holdings Corp., the storied retailer that helped civilize the American frontier with its catalog sales and later defined the modern department store, is searching for a new compass.

The retailer yesterday warned results for its fiscal fourth quarter and year would fall well below its expectations, continuing a sharp slide in sales and profit. Even during the best two months of the year, sales at stores open at least a year fell 3.5% compared with a year ago, the company said. Shares tumbled 5% to a more than two-year low, down $4.79 to $91.38 on the Nasdaq. The stock is off 49% in the past year.

But its record in acquisitions has been dismal. In 2002, it paid $3 billion for mail-order firm Lands' End, a business that has declined since the deal.

Lands End is based in nearby Dodgeville. The post Sears acquisition of Lands End is a story waiting to be told.

Posted by James Zellmer at 12:00 AM

January 8, 2008

Can Burt’s Bees Turn Clorox Green?

Louise Story:

IN the summer of 1984, Burt Shavitz, a beekeeper in Maine, picked up Roxanne Quimby, a 33-year-old single mother down on her luck, as she hitchhiked to the post office in Dexter, Me. More than a dozen years Ms. Quimby’s senior, the guy locals called “the bee-man” sold honey in pickle jars from the back of his pickup truck. To Ms. Quimby, he seemed to be living an idyllic life in the wilderness (including making his home inside a small turkey coop).

She offered to help Mr. Shavitz tend to his beehives. The two became lovers and eventually birthed Burt’s Bees, a niche company famous for beeswax lip balm, lotions, soaps and shampoos, as well as for its homespun packaging and feel-good, eco-friendly marketing. The bearded man whose image is used to peddle the products is modeled after Mr. Shavitz.

Today, the couple’s quirky enterprise is owned by the Clorox Company, a consumer products giant best known for making bleach, which bought it for $913 million in November. Clorox plans to turn Burt’s Bees into a mainstream American brand sold in big-box stores like Wal-Mart. Along the way, Clorox executives say, they plan to learn from unusual business practices at Burt’s Bees — many centered on environmental sustainability. Clorox, the company promises, is going green.

A classic American story.

Posted by James Zellmer at 12:00 AM

December 31, 2007

Innovative Minds Don't Think Alike

Janet Rae-Dupree:

IT’S a pickle of a paradox: As our knowledge and expertise increase, our creativity and ability to innovate tend to taper off. Why? Because the walls of the proverbial box in which we think are thickening along with our experience.

Andrew S. Grove, the co-founder of Intel, put it well in 2005 when he told an interviewer from Fortune, “When everybody knows that something is so, it means that nobody knows nothin’.” In other words, it becomes nearly impossible to look beyond what you know and think outside the box you’ve built around yourself.

This so-called curse of knowledge, a phrase used in a 1989 paper in The Journal of Political Economy, means that once you’ve become an expert in a particular subject, it’s hard to imagine not knowing what you do. Your conversations with others in the field are peppered with catch phrases and jargon that are foreign to the uninitiated. When it’s time to accomplish a task — open a store, build a house, buy new cash registers, sell insurance — those in the know get it done the way it has always been done, stifling innovation as they barrel along the well-worn path.

Elizabeth Newton, a psychologist, conducted an experiment on the curse of knowledge while working on her doctorate at Stanford in 1990. She gave one set of people, called “tappers,” a list of commonly known songs from which to choose. Their task was to rap their knuckles on a tabletop to the rhythm of the chosen tune as they thought about it in their heads. A second set of people, called “listeners,” were asked to name the songs.

Before the experiment began, the tappers were asked how often they believed that the listeners would name the songs correctly. On average, tappers expected listeners to get it right about half the time. In the end, however, listeners guessed only 3 of 120 songs tapped out, or 2.5 percent.

Posted by James Zellmer at 5:30 PM

December 19, 2007

Workshop of the World - Fine Arts Division

James Fallows:

Which brings us to the Dafen "art factory village" outside Shenzhen, in southern China. I had heard a lot about Dafen, including in a very good story by Evan Osnos of the Chicago Tribune early this year. (The story seems no longer to be on the Tribune's site. For reference, it was published on February 13, 2007.) But only this weekend did I see it, guided by Liam Casey, the Irish "Mr. China" I described a few months ago in an article about Shenzhen's more conventional factories. Now that I've seen it -- my lord!

Posted by James Zellmer at 10:20 AM

November 11, 2007

Putting the Past to Work

Jack Falvey:

IN AN AGE OF INFORMATION OVERLOAD, identifying the most useful information in a timely fashion isn't easy -- and it may be some comfort to know it never was. Yet by studying the adaptive skills of earlier captains of commerce, entrepreneurs in even the most cutthroat businesses can learn how to smack down the competition.

The key: Embrace invention -- even that of your competitors -- and use it better and faster than they do.

In the 1870s, John D. Rockefeller had a telegraph line run to his Euclid Avenue home in Cleveland. When he came home for lunch, he could stay in touch with his Oil City, Pa., contacts for updates on gushers and dry holes. He could then telegraph his brother in New York to adjust the price of kerosene for the European market, and his brother could pass the price on to Europe by trans-Atlantic cable.

Although Standard Oil employed telegraphers, John D. Rockefeller sent and received his own "e-mails." Sending and receiving Morse code at commercial speeds were not easy skills to master, but Rockefeller was "computer-literate." He had to be skilled in the current technology to have the best information and act on it.

The oil business of that day was not a fuel business. Standard Oil sold illumination. Tallow and whale-oil concerns were its competitors. Kerosene lamps, especially with mantles that burned white-hot, were a great advance in technology. Standard Oil produced a lamp-fuel kerosene of such purity that explosions were greatly reduced. Its five-gallon branded blue tins became known around the world. (Meanwhile, the byproduct of kerosene distillation, gasoline, was discarded as a nuisance.)

Posted by James Zellmer at 12:00 AM

October 18, 2007

The Subprime Collapse Didn't Start Bothering the Bush Administration until Wall Street Bankers Started Whimpering

Daniel Gross:

When individual borrowers began to suffer, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson didn't seem overly concerned. The market would clear out the problem through the foreclosure process. Loans would get written off; properties would change hands and be resold. When upstart subprime mortgage lenders ran into trouble, Bernanke and Paulson shrugged again. The market would clear out the problem through the bankruptcy process. Subprime companies like New Century Financial filed for Chapter 11, others liquidated or restructured, and loans made to the lenders were written down. Meanwhile, Paulson and Bernanke assured us that the subprime mess was contained.

But as the summer turned to fall, and the next several shoes dropped, their attitude changed. And that is because the next group of unfortunates to fall victim to subprime woes were massive banks. In recent years, banks in New York, London, and other financial capitals set up off-balance-sheet funding vehicles called SIVs, or conduits. The entities borrow money at low interest rates for short periods, say 30 to 90 days, and use the funds to buy longer-term debt that pays higher interest rates. To stay in business, the conduits must continually roll over the short-term debt. But as they searched for higher yields, some conduits stuffed themselves with subprime-mortgage-backed securities. And when lenders became alarmed at the declining value of those holdings, they were reluctant to roll over the debt. Banks thus faced a choice. They could either raise cash by dumping the already-depressed subprime junk onto the market, or bring the conduits onto their balance sheets and assure short-term lenders they'd get paid back.

Related: Credit Risk is Rising Again.

Posted by James Zellmer at 8:17 AM

October 5, 2007

Has Managerial Capitalism Peaked?

Jim Heskett:

There is a growing call for a redress of the imbalance between what John Bogle terms managerial capitalism and owners' capitalism. Bogle describes owners' capitalism in his book, The Battle for the Soul of Capitalism, as "an enormous transfer of wealth from public investors to the hands of business leaders, corporate insiders, and financial intermediaries."

Headlines remind us of very large payouts to CEOs, regardless of their performance. (In fact, it could be argued that in many cases, payouts are inverse to success, since many have been occasioned by the firing of the recipients.) Some critics contend that managers have received a disproportionate share of the fruits of corporate success, leaving too little for workers or owners. Even hedge funds have been derided as better management compensation devices than investment vehicles.

What's the reason for these phenomena? According to one report, Michael Jensen and Kevin Murphy, in a book to be published in the next several months, C.E.O. Pay and What to Do About It, lay much of the blame at the feet of boards of directors. They claim that CEOs in public companies should be answerable to directors for poor performance but in fact are not. Directors, representing an indirect form of governance, are poor representatives of owners. They are far too lax in influencing employment contracts and management incentives. The options they grant are too generous and fail to take into account the cost of capital employed during the term of the option. The severance payment arrangements to which they agree are too lavish, regardless of the reasons for severance.

Posted by James Zellmer at 12:00 AM

September 15, 2007

A conversation with Ed Iacobucci about the reinvention of air travel

Jon Udell:

In Free Flight, the seminal book on the forthcoming reinvention of air travel, James Fallows tells a story about Bruce Holmes, who was then the manager of NASA’s general aviation program office. For years Holmes clocked his door-to-door travel times for commercial flights, and he found that for trips shorter than 500 miles, flying was no faster than driving. The hub-and-spoke air travel system is the root of the problem, and there’s no incremental fix. The solution is to augment it with a radically new system that works more like a peer-to-peer network.

Today Bruce Holmes works for DayJet, one of the companies at the forefront of a movement to invent and deliver that radically new system. Ed Iacobucci is DayJet’s co-founder, president, and CEO, and I’m delighted to have him join me for this week’s episode of Interviews with Innovators.

I first met Ed way back in 1991 when he came to BYTE to show us the first version of Citrix, which was the product he left IBM and founded his first company to create. As we discuss in this interview, the trip he made then — from Boca Raton, Florida to Peterborough, New Hampshire — was a typically grueling experience, and it would be no different today. A long car trip to a hub airport, a multi-hop flight, another long car trip from hub airport to destination.

Posted by James Zellmer at 7:03 PM

August 30, 2007

Who's afraid of Google?

The Economist:

RARELY if ever has a company risen so fast in so many ways as Google, the world's most popular search engine. This is true by just about any measure: the growth in its market value and revenues; the number of people clicking in search of news, the nearest pizza parlour or a satellite image of their neighbour's garden; the volume of its advertisers; or the number of its lawyers and lobbyists.

Such an ascent is enough to evoke concerns—both paranoid and justified. The list of constituencies that hate or fear Google grows by the week. Television networks, book publishers and newspaper owners feel that Google has grown by using their content without paying for it. Telecoms firms such as America's AT&T and Verizon are miffed that Google prospers, in their eyes, by free-riding on the bandwidth that they provide; and it is about to bid against them in a forthcoming auction for radio spectrum. Many small firms hate Google because they relied on exploiting its search formulas to win prime positions in its rankings, but dropped to the internet's equivalent of Hades after Google tweaked these algorithms.

And now come the politicians. Libertarians dislike Google's deal with China's censors. Conservatives moan about its uncensored videos. But the big new fear is to do with the privacy of its users. Google's business model (see article) assumes that people will entrust it with ever more information about their lives, to be stored in the company's “cloud” of remote computers. These data begin with the logs of a user's searches (in effect, a record of his interests) and his responses to advertisements. Often they extend to the user's e-mail, calendar, contacts, documents, spreadsheets, photos and videos. They could soon include even the user's medical records and precise location (determined from his mobile phone).

Posted by James Zellmer at 11:48 AM

August 18, 2007

The Quants Explain Disaster

Joe Nocera (Subscription):
Back in 1998, that now infamous quant fund really did melt down, not only liquidating, but shaking the entire global financial system. Long-Term used complex computer models that failed to anticipate some severe once-in-a-lifetime market events, and it was shockingly leveraged — it was using $100 of borrowed money for every dollar of its own capital — which magnified its losses. It was also run by some of the smartest people on Wall Street. “When Geniuses Fail” was the apt title to Roger Lowenstein’s fine book about that fiasco.

Ever since, whenever quant funds stumble, it’s “When Geniuses Fail Redux.” Wall Street wags begin to wonder if those losses will lead to something truly cataclysmic, while newspaper reporters take a certain undisguised glee in reporting on really smart people losing money. Even now, there’s enough Luddite schadenfreude in the air that rumors continue to circulate that AQR is continuing to absorb substantial losses — which is the exact opposite of the truth, Mr. Asness says.
Ritholtz has more here and here.
Posted by James Zellmer at 5:31 AM

July 19, 2007

AirTran's Presentation to the Midwest Airlines Board of Directors

Presentation via extensive discussion.

The demise of Midwest into AirTran will be a dark day for travelers....

Posted by James Zellmer at 10:18 AM

July 14, 2007

China's Online Population Explosion

Deborah Fallows:

There are now an estimated 137 million internet users in China, second in number only to the United States, where estimates of the current internet population range from 165 million to 210 million. The growth rate of China's internet user population has been outpacing that of the U.S., and China is projected to overtake the U.S. in the total number of users within a few years.

The influx of tens of millions of new online participants each year can be expected to have far-reaching consequences for the Chinese population, for China itself and for the larger world. At the very least, the internet will offer ever greater numbers of Chinese a much more sophisticated information and communications world than the one they currently inhabit. And because the Chinese share a single written language, despite the multiplicity of spoken tongues, it could have a unifying effect on the country's widely dispersed citizenry. An expanding internet population might also increase domestic tensions that could spill over into China's relations with the U.S. and other countries while the difference between Chinese and Western approaches to the internet could create additional sore points over human rights and problems with restrictions on non-Chinese companies.

Posted by James Zellmer at 10:40 PM

June 25, 2007

Eliminate Agriculture Subsidies?

Andrew Martin:

Mr. Kind, a six-term congressman, has introduced legislation that would drastically reduce farm subsidies while pouring more money into land conservation programs and rural development. He gathered 200 votes for a similar bill in 2002 and says he believes he has additional momentum this time around.

“There are so many reasons to do it,” Mr. Kind said, ticking off high crop prices and increasing pressure from foreign trading partners as two reasons to curb subsidies. “Now we are going to see if this Congress has the stomach for meaningful reform.”

To no one’s surprise, Mr. Kind’s crusade has raised the hackles of the powerful farm lobby and its supporters in Congress, who describe his proposal as naïve, ill conceived and even dangerous.

Posted by James Zellmer at 8:50 PM

June 23, 2007

Interesting Look at Sam Zell's Tax Advantaged Structure of the Chicago Tribune Acquisition

Joe Nocera:

As Zell deals go, this hardly ranks among his biggest; he’s putting up a “mere” $250 million to gain control of a company with $5.5 billion in revenue last year. But what it lacks in economic heft, it more than makes up for in complexity. When the deal closes, probably at the end of the year, the Tribune Company will go from being a public company to a private S corporation, meaning it will pay no corporate taxes. Its sole owner will be an employee stock ownership plan, which is essentially a fund, owned by employees, which owns the company’s stock. ESOPs also pay no taxes, meaning that both the company and its owner will no longer be taxpayers. Mr. Zell, who will become chairman of the company, will immediately recoup his $250 million and then reinvest an additional $315 million (don’t ask). He’ll have an option to buy 40% of the company for another $500 million to $600 million. (If he does so, he will become the one taxpayer in the deal.)

The Tribune Company will be laden with debt, $13 billion in all, which it plans to pay down in part with the extra cash flow that is generated from not having to pay taxes. If the company does well — or even just decently — everyone will make out, starting with the employees whose stock in the ESOP will be worth a lot more than $28 a share, the discounted price the ESOP paid for it. But if it continues to sink — and just this week, the Tribune Company announced that May revenue fell 11.1% — then the company could wind up in default, which would hurt everyone, starting, again, with the employees, who would lose the value of their ESOP shares. ...

What most seemed to excite him was the ESOP itself. And why not? As the Lehman Brothers tax expert Robert Willens said, “He is using it in a way that no one has ever done before.” Mostly, ESOPs are set up when family owners want to cash out of privately held companies and turn them over to their employees. Mr. Zell, by contrast, is using it to buy out the shareholders of a large public corporation —and turn it into a tax-free private company.

Posted by James Zellmer at 9:37 PM

June 20, 2007

Roche Buys Madison's NimbleGen Systems for $272.5M

Jeff Richgels summarizes the deal:

NimbleGen's revenues have been growing strongly, from $4.5 million in 2004, to $9.5 million in 2005 and $13.5 million in 2006, but it has accumulated a total loss of $44.5 million as of the end of 2006, including losses of $8.3 million in 2004, $5.2 million in 2005 and $6.8 million in 2006, according to its IPO filing.

The company had raised $70 million in private funding and had $19 million in cash and cash equivalents as of Dec. 31, 2006.

A few interesting data points: $272.5M Sale price, $70M capitalization, 140 employees (850K to $1M monthly staff burn rate, maybe much more) and $19M cash and equivalents at the end of 2006. These numbers nicely illustrate the risks and potential upside of technology plays. While $272.5M is not a home run by VC standards (10X+), it's a nice out for many, perhaps most (all?) investors. It would be interesting to find out if some of the capitalization included participating preferences.

The good news for Dane County? Some of that money will probably finds its way back into new startups.

Kathleen Gallagher has more.

Posted by James Zellmer at 11:07 AM

June 17, 2007

The "Cashectomy" of AT&T

Cringely makes some useful points regarding the business relationship between Apple and AT&T:
What could AT&T be praying for? Plenty of things, but the most obvious theme I see is how to compete with Verizon, Comcast, and all the national cell phone providers. With Verizon, AT&T has to defend its decision to stick with a copper broadband infrastructure instead of the more expensive optical fiber Verizon has picked. With Comcast, AT&T has to defend its copper plant against Comcast's copper plant, which is about to gain a LOT more bandwidth thanks to new modems using more advanced modulation techniques. And against the other mobile operators, AT&T has to defend its decision not to go full 3G with the iPhone.

Are you noticing a trend here? AT&T is facing a potential bandwidth crisis when it comes to customer perception and it is logical to assume that Apple helped create that crisis. After all, the iPhone could easily have been made to work with 3G. Since AT&T HAS a 3G network, the decision not to use it was probably complicated and some of that complication may have come from Steve Jobs saying, "We don't need it. The iPhone will be insanely great with G2.5, thanks."
AT&T clearly prefers to spend money on lobbying and advertising, rather than substance (fiber to the home).
Posted by James Zellmer at 10:26 PM

June 5, 2007

The Profit Calculator

Michael Idov:

You can’t live in New York—arguably, you can’t spend an hour in New York—and remain oblivious to the machinery of profit pumping away under every surface. This city makes money, loses money, houses money; lately, with luxe condos stacking up like casino chips along the waterfront, the city looks like money. What’s amazing, then, is how little we truly know about the inner workings of this beast we feed, and milk, daily: How does New York make its money?

Every company setting up in the city finds itself plugged into its myriad historical, cultural, and regulatory quirks. The biggest one, of course, concerns our island’s most precious commodity and its most enduring obsession: real estate. New York businesses live and die by the rent; if you’re a retailer leasing here, “making the rent” becomes the yardstick of solvency. The unofficial golden rule of restaurants dictates that the rent be made in a week and take up no more than a quarter of revenue. The bar version of the rule is even simpler: The rent should equal your Friday-night take. With each year, another company succumbs to the strange realization that where it sits may be more valuable than what it does. Even Macy’s, that icon of consumerism, may be worth more as a building than as a store. We’ve picked a disparate cross section of New York institutions and examined their inner workings. Some are nonprofits (a soup kitchen, a private school), some are not profitable (a fledgling yoga studio, the Yankees—at least on an annual basis), and at least one, Goldman Sachs, is stratospherically lucrative (though a lazy meth dealer ekes out a higher margin). A note: Where companies wouldn’t provide figures, our estimates are based on analyst reports, tax filings, and interviews with former and current employees.

We also asked Edward Glaeser, a pioneering urban economist at Harvard, to analyze the New Yorkonomics of the businesses we profile. His insights are in italic. Glaeser is an expert in how New York’s great density makes our lives—and livelihoods—hugely dependent on one another. We’re all plugged, at different entry points, into the same awesome web. A failing restaurant keeps a printer in the black with its incessant flyering. The sex-toy market rises and falls with the consumer-confidence index. An eight o’clock Nobu reservation provides a cabdriver with his golden hour. And everyone—everyone—is cursing the rent. Except the landlords.


Posted by James Zellmer at 9:17 AM

April 30, 2007

Shattering the Bell Cure: The Power Law Rules

David Shaywitz:
Life isn't fair. Many of the most coveted spoils--wealth, fame, links on the Web--are concentrated among the few. If such a distribution doesn't sound like the familiar bell-shaped curve, you're right.

Along the hilly slopes of the bell curve, most values--the data points that track whatever is being measured--are clustered around the middle. The average value is also the most common value. The points along the far extremes of the curve contribute very little statistically. If 100 random people gather in a room and the world's tallest man walks in, the average height doesn't change much. But if Bill Gates walks in, the average net worth rises dramatically. Height follows the bell curve in its distribution. Wealth does not: It follows an asymmetric, L-shaped pattern known as a "power law," where most values are below average and a few far above. In the realm of the power law, rare and extreme events dominate the action.

For Nassim Taleb, irrepressible quant-jock and the author of "Fooled by Randomness" (2001), the contrast between the two distributions is not an amusing statistical exercise but something more profound: It highlights the fundamental difference between life as we imagine it and life as it really is. In "The Black Swan"--a kind of cri de coeur--Mr. Taleb struggles to free us from our misguided allegiance to the bell-curve mindset and awaken us to the dominance of the power law.
Posted by James Zellmer at 5:06 PM

April 20, 2007

"Save the Cookie"

Midwest Airline's website dedicated to remaining independent. An Airtran takeover would be a disaster...
Posted by James Zellmer at 5:32 PM

April 18, 2007

Used Cars Rule

Steven Lang:
Every year over ten million vehicles pass through U.S. auto dealer auctions. This decades old free market has always been dependent on you, the consumer. Dealers will bid up those models that are popular with buyers, while those with a limited audience are stuck in what’s commonly called ‘wholesale heaven’. This is a place where thousands of unappreciated and unloved models go until the market dictates otherwise. Over the course of time, consumers dictates the winners… and the losers.

Over the last few years, The Big 2.5 have been downsizing their domestic production capacity to match falling demand, and compensate for their decision to wean themselves from low-profit fleet sales. Enormous assembly plants that once produced hundreds of thousands of new vehicles are now shuttered. The theory: as production sinks, new car prices will eventually hold firm and profits will follow. Unfortunately, the latest patchwork of new product has already come apart, and th
Posted by James Zellmer at 9:19 PM

April 4, 2007

State ready for energy research lab

This column by Tom Stills, president of the Wisconsin Technology Council, ran in the Stevens Point Journal:

A joint proposal was filed Feb. 1 by the UW System, UW-Madison and Michigan State University to open a federal energy research lab in Madison. Molly Jahn, dean of the UW-Madison College of Agriculture and Life Sciences, has described the proposal as a strong fit with faculty, staff and student projects related to bio-energy. Those projects are taking place in disciplines that encompass biology, agriculture, engineering, natural resources and the social sciences. . . .

It will be months before the next phase of the federal selection process begins, but the collaborative effort should merit a hard look in Washington. If Wisconsin is successful, it could mean several hundred jobs and tens of millions of dollars within five years.

Posted by Ed Blume at 12:03 PM

March 18, 2007

Airlines Learn to Fly on a Wing and an Apology

Jeff Bailey:
Airlines are getting serious about saying they’re sorry.

After a spate of nightmarish service disruptions, American Airlines, JetBlue Airways and others are sending out more apologies, hoping to head off customer complaints and quell talk of new consumer-protection regulations from Congress.

But no airline accepts blame quite like Southwest Airlines, which employs Fred Taylor Jr. in a job that could be called chief apology officer.

His formal title is senior manager of proactive customer communications. But Mr. Taylor — 37, rail thin and mildly compulsive, by his own admission — spends his 12-hour work days finding out how Southwest disappointed its customers and then firing off homespun letters of apology.
Fascinating look at Southwest Airlines' culture. I hope they fly into Madison soon.
Posted by James Zellmer at 9:28 PM

March 10, 2007

Wake-up Call

Niall Ferguson:
AT AGE 42, NIALL FERGUSON HAS BECOME one of the world's most famous and provocative historians, with high-profile posts ranging from Harvard to Oxford to Stanford University's Hoover Institution. Born in Scotland and educated at Oxford, he is not only a prolific author of books, including Colossus (2004), an examination of American empire, and The War of the World (2006), a study of World War II, but a media star with a weekly newspaper column and numerous television projects. Ferguson also has developed a growing fan club on Wall Street and in British financial circles, where he has stressed in speeches that investors are too complacent about geopolitical risk, notably growing instability in Iraq and elsewhere in the Middle East.

Geopolitical issues and economic history are Ferguson's specialty, and he approaches both with uncommon intelligence, style and vigor. His rightward-leaning views have been embraced by those who believe that the American empire can and should be a force for good in the world. Some on the left have attacked him, perhaps unfairly, as an apologist for imperialism -- Britain's in days of old, and the American strain that critics charge has mired the U.S. in Iraq. In a recent column, reprinted in the Chicago Tribune, Ferguson berated Democratic presidential hopeful Barack Obama, "with his melting-pot roots and his molten-hot rhetoric," for calling for a withdrawal of U.S. forces from Iraq by March 2008, in the misguided notion it would hasten a peaceful solution to that nation's "internecine conflict."

Amplifying this theme, Ferguson told Barron's that America's speedy departure likely would transform Iraq into "as violent and unstable a place as Central Africa was in the 1990s." An ardent supporter of Britain's former prime minister Margaret Thatcher, he is about to be named an adviser to Republican presidential candidate John McCain.

FERGUSON IS FASCINATED by what he calls the "paradox of diminishing risk in an apparently dangerous world." By that, he means ebullient global stock markets and record-tight yield spreads between risk-free U.S. Treasuries and junk bonds and emerging-market debt. He also cites declining volatility in stock, bond and foreign-exchange markets, and an abiding faith in the ability of the Federal Reserve and other central banks to rescue the investment community from any potential financial crisis. Although the global stock-market selloff two weeks ago wasn't spurred by geopolitical events, it validated his concern that investors have willingly downplayed risk.
Posted by James Zellmer at 7:48 AM

March 7, 2007

Founders Words

Guy Kawasaki rounds up some useful quotes from tech founders.
Posted by James Zellmer at 10:02 PM

March 1, 2007

2006 Letter to Shareholders

Warren Buffett [pdf]:
Our gain in net worth during 2006 was $16.9 billion, which increased the per-share book value of both our Class A and Class B stock by 18.4%. Over the last 42 years (that is, since present management took over) book value has grown from $19 to $70,281, a rate of 21.4% compounded annually.*

We believe that $16.9 billion is a record for a one-year gain in net worth – more than has ever been booked by any American business, leaving aside boosts that have occurred because of mergers (e.g., AOL’s purchase of Time Warner). Of course, Exxon Mobil and other companies earn far more than Berkshire, but their earnings largely go to dividends and/or repurchases, rather than to building net worth.

All that said, a confession about our 2006 gain is in order. Our most important business, insurance, benefited from a large dose of luck: Mother Nature, bless her heart, went on vacation. After hammering us with hurricanes in 2004 and 2005 – storms that caused us to lose a bundle on super-cat insurance – she just vanished. Last year, the red ink from this activity turned black – very black.

In addition, the great majority of our 73 businesses did outstandingly well in 2006. Let me focus for a moment on one of our largest operations, GEICO. What management accomplished there was simply extraordinary.
Posted by James Zellmer at 5:30 PM

February 27, 2007

Some Good Reasons for Governments NOT to invest Taxpayer Money in Schemes

Richard Aboulafia:
Finding Two. If a state plays this game it quickly reaches an absurd level. Just after the LoPresti micro-triumph New Mexico announced a $100 million investment to build…a spaceport (I really wish I was making this up). This will service Richard Branson’s Virgin Galactic and is obviously a necessary subsidy, because Branson, for some reason, has no cash. (See the December 2005 press release at Title: Richardson Announces $100 Million Commitment to Build World’s First Spaceport. Implicit subtitles: “Private Sector Baulks At Risky Project; We’re enlisting New Mexico Taxpayers To Provide Generous Help” and “Hooray! We’re Morons!”). Today, Kansas and Florida. Tomorrow, Low Earth Orbit. Who can stop New Mexico from operating like an aerospace banana republic? In search of good government I asked my friend Jeff Schwartz what could be done. Jeff is one of the smartest government guys I know, and he works for the Appalachian Regional Commission, which funds development work in states in their jurisdiction. “We’re on it,” he reassured me, referring me to their code ( The ARC prohibits its money from going to “(A) Any form of assistance to relocating industries; (B) recruitment activities that place a state in competition with another state or states; and (C) projects that promote unfair competition between businesses within the same immediate service area.”
Brenda Konkel recently wondered about the City of Madison's $700K loan to Tomo Therapy. Generally, I think governments should stay out of this. We're all better off if they spend time simplifying processes, taxes and paperwork.
Posted by James Zellmer at 4:54 PM

February 23, 2007

Zatar Restaurant

"Eclectic Mediterranean Cuisine".

Well worth stopping. Reminds me, in some ways of Madison's excellent Himul Chuli, with a Berkeley twist or two. Zatar's website. KQED has a review [video]. Click for larger photos. Kelly's salad was superb.
Posted by James Zellmer at 4:58 PM

February 20, 2007

Fear and Loathing the Cable Company

Jeff Jarvis:
But then, that’s not news. I’ve been trying to get Joost working at home and was cursing it, but I was cursing the wrong party. Joost works fine at work. I can’t wait until Verizon finishes laying fibre on my street so I can get FIOS. Except Verizon hired the worst contractor imaginable to get the job done. They have been at it for more than two months on a street with fewer than 20 homes; they’ve managed to cut our cable and gas line and a neighbor’s electric line and they’re not nearly done. I’m about to go out with a shovel myself just so I can get rid of Cablevision sooner.
At least Jarvis can look forward to fiber to the home, via Verizon. Locally, AT&T is content to spend money on advertising and resell us the copper lines we've paid for over and over and over.
Posted by James Zellmer at 11:16 AM

February 19, 2007

Competition is the Mother of Innovation

Virginia Postrel:
The LAT's David Colker tells the story of how the last soap factory in town has managed to survive despite low-cost competition from China. It's clear that soap-making doesn't have a big future in Los Angeles, but the story also a tribute to the ingenuity that has allowed the company to find new markets and new operating methods.

Hoping to trim one of his biggest remaining expenses, electricity, he contacted the Department of Water and Power. "They told me if I could shut down by 1 p.m., they could give me a much better rate," Shugar said. He moved the plant's starting time back to 5 a.m. to meet the cutoff time, resulting in 40% savings.

One of his most valuable assets was his mechanical engineer, Cheng Lim, who came to Shugar from Jergens when that company closed its Burbank plant in 1992. Lim could have stayed with the giant company, based in Cincinnati, but "my wife did not want to go," he said. "Too cold there."

Lim adapted the Shugar production line for use by fewer employees.
Posted by James Zellmer at 5:01 PM

February 18, 2007

From 0 to 60 to World Domination

Jon Gertner:
When he started, the Big Three completely controlled car sales in the United States. The only foreign company of any prominence was Volkswagen, and as Press recalled, Toyota’s modest sales were lumped with various tiny carmakers as “Other.” Still, soon after he arrived, Press realized he liked the company’s intimacy: he could meet face to face with top managers and exert some influence over marketing decisions. And he liked Toyota’s obsession with customer satisfaction. When he told me about his first trip to Japan, he seemed to be recounting a religious experience. “As a young person, you are searching for this level of comfort, you don’t know what it is, but you’re sort of uncomfortable,” he said. In Japan, as he put it, he found a home, a place where everything from the politeness of the people to the organization of the factories made sense. On that first trip, at a restaurant one evening, he tried a rich corn soup and asked the waitress for the recipe. She checked with the chef, who explained that there was no recipe; it had been handed down from his mother. The next morning, the waitress came to Press’s hotel room: she had found a cookbook with a recipe for the soup. Press, apparently, was still her customer. “That blew me away,” he said.

It can be simplistic, and often a distortion, to accept a corporate executive as the personification of a corporation, especially one as large and varied as Toyota. Yet Press serves as an apt representative, and not merely because his career arc mirrors the company’s ascendancy. Like Toyota, he expresses himself in private with modesty and care, yet in public his speeches are bold, declarative and effervescent. In his office, he has an informal, relaxed presence and exhibits just a hint of an avuncular stoop; yet he loves to race cars and sometimes swims 5,000 meters a day. Press also has a fluency in the company’s arcane systems and history. Toyota is as much a philosophy as a business, a patchwork of traditions, apothegms and precepts that don’t translate easily into the American vernacular. Some have proved incisive (“Build quality into processes”) and some opaque (“Open the window. It’s a big world out there!”). Toyota’s overarching principle, Press told me, is “to enrich society through the building of cars and trucks.” This phrase should be cause for skepticism, especially coming from a company so adept at marketing and public relations. I lost count of how many times Toyota executives, during the course of my reporting, repeated it and how often I had to keep from recoiling at its hollow peculiarity. And yet, the catch phrase — to enrich and serve society — was not intended, at least originally, to function as a P.R. motto. Historically the idea has meant offering car customers reliability and mobility while investing profits in new plants, technologies and employees. It has also captured an obsessive obligation to build better cars, which reflects the Toyota belief in kaizen, or continuous improvement. Finally, the phrase carries with it the responsibility to plan for the long term — financially, technically, imaginatively. “The company thinks in years and decades,” Michael Robinet, a vice president at CSM Worldwide, a consulting firm that focuses on the global auto industry, told me. “They don’t think in months or quarters.”
Fascinating and timely.
Posted by James Zellmer at 9:56 PM

February 17, 2007

The DNA of Wal-Mart

John Moore:
I’ve already gushed about Bill Marquard’s business strategy book, WAL-SMART. In the book, this former Wal-Mart executive explains because of Wal-Mart’s unbridled success, this mega-retailer has forever changed the game of business from sourcing to distribution to pricing to inventory methods to merchandising. It’s now up to companies today (and tomorrow) to deal with doing business in the world that Wal-Mart has created and redefined.

Since Marquard spent time at Wal-Mart in the late 90s responsible for developing the company’s strategic planning processes, he has a very unique understanding of the company’s DNA. In the book, Marquard shares five key cultural underpinnings that make Wal-Mart the company it is. (Good stuff!)
Posted by James Zellmer at 9:59 PM

Declining Demand for Luxury Sports Suites?

Russell Adams:
It was like watching an era of sports history being erased. In early December, construction workers sawed through the multiple layers of drywall and metal studs separating a row of skyboxes at the Seattle Mariners' Safeco Field. They tore up the suites' beech-hardwood floors and carted away their oriental rugs and leather furniture. By the end of the week, the eight skyboxes were gone.

In a reversal that strikes at a cornerstone of pro-sports finances -- and of the way corporate America entertains -- teams around the country are ripping out luxury suites. These perches have been used to justify billions of dollars in stadium construction over the past two decades. But in many cities, they are losing luster with surprising speed, partly the result of factors that couldn't have predicted five or 10 years ago, from changes in tax laws to scandal-driven reforms on corporate entertaining.

"At GM, you can't even buy them a cup of coffee anymore," says Lin Cummins, the marketing chief at automotive supplier Arvin Meritor in Troy, Mich, which has let the leases expire for its suites in four different sports.
Posted by James Zellmer at 8:37 AM

February 16, 2007

Iowa's AllFreeCalls Shut Down

Michael Arrington:
In a blog post today founder Pat Phelan says “Our allfreecalls provider in Iowa today took flight due to increasing pressure from a large USA based carrier. We are working on getting a new number up. We expect to be back in business on Monday afternoon.”
Posted by James Zellmer at 9:42 PM

February 14, 2007

2006 Local Real Estate Review

Dave Stark [450K PDF]:
Regular readers of this newsletter will know that 2006 was, to put it mildly, a strange year in real estate. Despite continued record low interest rates and a relatively strong economic and employment picture, it’s well known that housing sales in South Central Wisconsin took a breather in the second half of the year.

What was particularly startling was how sudden and pronounced the change was from the first half of the year to the second. The good news is that, at least as of this writing, it appears that the recovery could be equally as sudden, and perhaps as dramatic.

For the year, sales of single family homes and condos were down roughly 8% in the area covered by the full South Central Multiple Listing Service. However, for the first 6 months of the year, sales were basically flat, down about 1%. For the second 6 months, sales were down 14.5%. In Dane County, the slowdown was even more dramatic; sales were down 4.7% in the first half of the year, but down 19.2% in the second half. For the year, Dane County was off roughly 12%. In Sauk and Columbia Counties, sales were actually up almost 4% in the first half of the year, but down almost 10% in the second half, and off about 3% for the year overall.

The question this all begs is: Why did this happen? And, perhaps more important: When will things turn back up?
Dave Stark is a friend and long time customer.
Posted by James Zellmer at 2:41 PM

February 13, 2007

Startups & VC Investment Risk

Mike Arrington:
When I added FilmLoop to the TechCrunch DeadPool last month based on rumors of mass layoffs, it was clear there was more to the story. The thirty person company had raised $11.5 million in capital and by any calculation should have still had at least $3 - $5 million left in the bank. They were trailing Slide, RockYou and Photobucket in their market, but had just launched a completely new platform that was getting good reviews. FilmLoop wasn’t dominating the market, but they were not on the ropes, either.
Posted by James Zellmer at 9:02 AM

February 12, 2007

Toyota Memogate?

Frank Williams:
These issues pale in comparison to one problem that could make or break Toyota’s North American operations: their relationship with their hourly workers. In a confidential memo that accidentally ended up in workers’ hands, Seiichi Sudo, president of Engineering and Manufacturing in North America, discussed the cost of American labor and the steps they need to take to control those costs.

The memo, which was inadvertently stored on a shared computer drive, states the US auto industry pays some of the highest manufacturing wages in the world. It compares American wages to those in France and Japan (50 percent higher) and Mexico (500 percent higher). They project their American labor costs will increase by $900m over the next four years.
Ed Wallace on the upcoming truck wars.
Posted by James Zellmer at 10:03 PM

February 11, 2007

Google's Arrogance in North Carolina: Learning from AT&T?

Ed Cone:
But it turns out that there was a lot more to the story. Google leaned hard on North Carolina lawmakers and officials, not just to get the fattest deal possible but to choke off the flow of information along the way.

According to documents obtained by The News & Observer of Raleigh, the company went beyond reasonable expectations of confidentiality to demand absolute secrecy while negotiations were under way, even asking participants to sign nondisclosure agreements; some legislators and local officials did so, but Department of Commerce officials did not. Google executive Rhett Weiss badgered Commerce Secretary Jim Fain about the state's adherence to process, complaining, for example, when lawmakers wanted an estimate of the cost to North Carolina in lost tax revenue, and threatening to kill the whole thing if Google didn't get its way.

Businesses need some measure of confidentiality when putting together this kind of transaction. Fair enough. But this is the people's business, and Google's high-handedness is an affront to the people of this state.

And then there's that whole "Don't be evil" thing. Google spokesman Barry Schnitt told me that the company's negotiations with the state were "very standard." If that's the case, and this is standard operating procedure for the company, then something has gone wrong in Silicon Valley.
Barry Orton keeps up with AT&T's Wisconsin Lobbying.

Yet another reason to use the excellent Clusty search engine.
Posted by James Zellmer at 10:56 AM

February 4, 2007

Kirkwood Jumps the Shark?

Kathryn Reed:
Those who skied Kirkwood 20 or more years ago found a typical day lodge with a cafeteria and slow lifts. It was the mountain people came for. They still come for it, only now they don't have to make the 40-mile trek into South Lake Tahoe to spend the night.

Off Highway 88 where Alpine, Amador and El Dorado counties meet, the Kirkwood Valley is growing up. Whether it grows with grace will be decided in the next few years.

Even with all the hammering and sawing, Kirkwood remains laid-back -- and growth has come relatively slowly. Ten years ago, the first phase of the village opened with 19 condominiums. The resort installed its first high-speed quad chairlift in 2001, with its second in operation last ski season. Dining choices are still sparse, but more diverse. Pretentiousness is unheard of. The 2000 Census tallies Kirkwood's population at 96 and Tim Cohee, president of Kirkwood Mountain Realty, says full-time residents still number fewer than 100.
I was one of those people who skied Kirkwood years ago. A Squaw Valley ski visit always included Jaguars and Mercedes-Benz (Oh Lord, Won't you buy me a Mercedes-Benz), while a fun outing to Kirkwood found the Jeep / 4-Runner crowd enjoying the mountain. It is nice to stay on the mountain, but miles of condos in the valley certainly changes the alpine views.
Posted by James Zellmer at 5:11 PM

February 1, 2007

Gasoline and the American People

Cambridge Energy Research Associates:
America's "love affair with the automobile" is being transformed -- but not broken up -- by forces that are redrawing the global gasoline and oil market, including higher gasoline prices, tightening environmental requirements, changing demographics, growing world oil demand and expanding fuel options, according to the new 2007 edition of Gasoline and the American People, by Cambridge Energy Research Associates (CERA).

Americans have been driving further -- 40% more than 25 years ago -- and using more gasoline in bigger, more powerful cars and other light duty vehicles. But higher gasoline prices have had a significant impact. The rate of growth in gasoline demand slowed sharply from its 1.6% per year pace (1990-2004) to 0.3% in 2005, and continued to grow slowly in 2006, at 1.0%. And for the first time in 25 years, motorists' average mileage went down. Overall, though, according to the CERA report, improved automotive efficiencies and one of the lowest fuel tax rates among Western countries have kept gasoline and oil's share of average U.S. household budgets at 3.8% in 2006, slightly above the 1960s' 3.4% to 3.6% level despite rising world oil prices.
Media coverage.

Ed Wallace has more.
Posted by James Zellmer at 11:12 AM

January 30, 2007

NPR's Chadwick Interviews Bill Gates

Alex Chadwick:
Microsoft chairman Bill Gates joins Alex Chadwick to talk about Windows Vista, the company's new operating system. Gates also talks about his reaction to the Apple-Microsoft ads and the recent controversy surrounding the Bill and Melinda Gates Foundation and its investment policies.
via Tom Yager. Audio
Posted by James Zellmer at 10:45 PM

January 28, 2007

Give Away the Music and Sell the Show

Chris Anderson:
The major labels are freaked out: CD sales are continuing their inexorable decline and iTunes sales aren't making up the difference. Meanwhile, tens of thousands of artists are giving away their music for free on MySpace, their own websites and independent MP3 blogs. This puzzles the labels. Don't these bands want to make money from their art?

Many do, but they're just smarter than most music industry execs. They understand the difference between abundance and scarcity economics. Music as a digital product enjoys near-zero costs of production and distribution--classic abundance economics. When costs are near zero, you might as well make the price zero, too, something thousands of bands have figured out.
Posted by James Zellmer at 10:31 PM

Michael Lewis on the Hidden Economics of Baseball and Football

Russ Roberts:
Michael Lewis talks about the economics of sports--the financial and decision-making side of baseball and football--using the insights from his bestselling books on baseball and football: Moneyball and The Blind Side. Along the way he discusses the implications of Moneyball for the movie business and other industries, the peculiar ways that Moneyball influenced the strategies of baseball teams, the corruption of college football, and the challenge and tragedy of kids who live on the streets with little education or prospects for success.
Posted by James Zellmer at 2:23 PM

January 27, 2007

The Sarajevo Moment

The Economist:
A PROPOS the Sarajevo moment, which might bring to an end this latest of age of globalisation.

It wouldn't be a political killing, I imagine, since there is no one figure whose death at the hands of a deranged assassin would turn the great powers against one another. But a terrorist strike against a cluster of essential Saudi oil installations might have the necessary economic and geopolitical repercussions.

Whatever the Sarajevo moment might be, everyone seems to be talking about it. As if we know in our hearts that these asset prices are too good.
Posted by James Zellmer at 6:47 AM

January 25, 2007

Planes, Trains and Automobiles

Michelle Maynard speaks with new Ford CEO Alan Mulally. Interesting.
Posted by James Zellmer at 10:10 PM

January 22, 2007

Interesting Discussion on China

Janes Pethokoukis:
When will the Chinese middle class push for greater political freedom to match growing economic freedom?

The $64,000 question. The extent of the ideological bankruptcy of the Chinese Communist Party is not widely understood in the U.S. It claims single party rule because it is the trustee of the 1949 Communist revolution governing democratically for China's workers and peasants. Its problem is that communism is in reverse worldwide, and under the doctrine of the "Three Represents" invented by Jiang Zemin, the party now accepts that class war is over and that it must represent all Chinese society. In which case: Why no accountability? Change came in the Soviet Union with the fifth generation of leaders; the fifth generation of leaders succeeds Hu Jintao in 2012. I don't expect any change until after then, but my guess is that sometime in the mid-to-late 2010s, the growing Chinese middle class will want to hold the Chinese official and political class to account for how they spend their taxes and for their political choices.
The Wall Street Journal posted an email interview with Friedman which included a few words on China.
Posted by James Zellmer at 10:18 AM

January 15, 2007

Wisconsin's GDP = South Africa's

Interesting. A map that equates a US State with a similar Country's GDP.
Posted by James Zellmer at 4:54 PM

January 13, 2007

A Chronicle of Allen-Edmonds Sale

Avrum Lank:
Stollenwerk and some partners bought Allen-Edmonds in 1980 from descendents of the founders. Later on, Stollenwerk bought out his partners and built the brand into one recognized around the world.

Unlike his competitors in the footwear industry, Stollenwerk has kept production in the U.S. Allen-Edmonds employs about 550 people in Wisconsin and Maine and makes more than 500,000 pairs of men's shoes a year. Thanks to the introduction of lean manufacturing and cell concepts, the company can make a pair in seven hours. Shoes are made to order, with the inventory of finished products kept very low.

The shoes are handcrafted from imported leather and can sell for more than $300 a pair. During his tenure, Stollenwerk has seen a decline in the number of independent shoe stores interested in carrying the line, and his distribution channels have become limited. As a result, the company has opened a chain of retail stores that carry not only shoes but also upscale accessories. Sales are about $100 million annually.

As he reached his mid-60s, Stollenwerk knew the company would need to invest in even more stores - at about $1 million each - to continue to grow. That meant "I would have to go to a bank and borrow a considerable amount of money," he said.

He had done that in the past, and the idea of managing it in the future did not appeal to him. He has children, but none is interested in taking over the company, so his mind turned to other options.
Posted by James Zellmer at 7:58 PM

January 9, 2007

Energy Market Tea Leaves

Barry Ritholtz:
BP readers correctly pointed out to the change in the Goldman Sachs Commodity Index (GSCI) (Here, here and of course, here). Tim Iacono did a nice job on the details the following month.

That mid-year halving of the gasoline weighting caught quite a few people by surprise. The timing -- slashing energy futures weightings 2 months before the mid-term elections -- was stunning to say the least. The GSCI changes had wide ranging impacts, leading (indirectly at the very least) to: Amaranth's implosion, a drop in CPI / inflation rates, the market rally since the July lows, and of course, GS's record setting Q3/Q4 profits (Hey, its nice to be the House).
Posted by James Zellmer at 8:49 AM

January 3, 2007

A Semi Self Defense of Enron

Malcolm Gladwell:
I also have a minor challenge for aficionados of the Enron case.

Years ago, when I was at the Washington Post, one of my colleagues on the science desk—Bill Booth—called up a dozen or so Nobel Laureates in physics and asked them to explain, in plain language, the nature and significance of the Higgs Boson atomic particle. None of them could. This was at a time, mind you, when the physics community was arguing passionately for the construction of a multi-billion dollar particle accelerator to look for things like the Higgs Boson. So it wasn’t for lack of interest. They were gung-ho for nailing the Higgs Boson. They just couldn’t explain the Higgs Boson.

Can anyone explain—in plain language—what it is Jeff Skilling and Co. did wrong?
Posted by James Zellmer at 5:23 PM

December 30, 2006

The Creation of American Girl's 2007 Girl of the Year - Nikki

Christina Binkley visits Middleton's American Girl (a unit of Mattel):
A little more than a year ago, executives at the dollmaker American Girl sat down to undertake a high-stakes marketing mission: cramming everything the company deems uplifting and authentic about American girls into a single plastic and cloth figure. The goal: to create a character so compelling that parents will pay $86 for an 18-inch doll and a paperback book.

Working with a trove of customer feedback culled from its magazine, Web and book-publishing empire, the company determined that the typical girl these days is dependable, athletic and loves animals. She is also completely overscheduled and stressed out. She skis like a demon, rides horses, trains guide dogs, plans school parties, washes the dishes, battles popularity crises and helps her little brother with his math homework.

The improbable result is Nicki Fleming, the company's 2007 Girl of the Year -- an annual event in which the Mattel Inc. unit releases, on Jan. 1, a new doll meant to capture the current state of girlhood. Nicki's dog Sprocket, together with training treats, a collar and leash, sells for $24. Her horse Jackson with Western saddle costs $62; his tack box, curry brush and carrots are $34.
Mattel's (Jill Barrad was CEO at the time) acquisition of Pleasant Rowland's American Girl for some $700M lead the way to the creation of Madison's Overture Center. Former Oscar Meyer CEO Bob Eckert currently runs Mattel.
Posted by James Zellmer at 6:23 AM

December 28, 2006

The Future of the Equity Premium

Brad DeLong and Konstantin Magin:
Suppose that, at the start of some year since the beginning of the twentieth century, you had taken $1,000,000 that you had invested in bonds and believed you would not want to touch for twenty years, and invested it insteade in a diversified portfolio of equities. (Or suppose you had been able to borrow $1,000,000 at the long-term government bond rate). And suppose you had then let both legs of that investment ride for twenty years. What would have been the results in dollars (adjusted for inflation) twenty years later?
Posted by James Zellmer at 8:26 PM

Guns to Caviar Index

Daniel Gross:
Reading the news, it's easy to get the sense that the world is at war: strife in Afghanistan, chaos in Iraq, genocide in Darfur, upheaval in Lebanon, and a variety of insurgencies and border squabbles around the globe. Reading the news, it's also easy to get the sense that the world is in the midst of a golden age of peaceful prosperity. Each year, tens of millions of Indians and Chinese join the middle class. Latin America and South America, previously dominated by authoritarian regimes and civil wars, are now generally democratic and enjoying steady growth.

So, which is it? Is the world more peaceful or more warlike? Since Americans are doing the lion's share of the fighting and military policing, it's difficult for us to answer the question objectively. Fortunately, there is an unbiased global economic indicator that sheds some light on the question: the Guns-to-Caviar Index.
Posted by James Zellmer at 8:20 PM

December 23, 2006

A History of Information Processing

Jeremy Norman:

This timeline is revised and expanded from the timeline available in the printed edition of From Gutenberg to the Internet, and widened greatly in scope. It is a work in progress, continuing the research which I began in the printed book. This is one of an untold number of timelines on the web. Even so, the approach that I am taking in building this growing timeline is, as far as I know, unique, at least for now. Thus some explanation may be in order. These introductory remarks, which I began writing in December 2005, first concern From Gutenberg to the Internet and then address issues involved with studying the history of information recorded in physical form in relationship to the history of information in digital form. They are a result of my continuing studies since the book was published, and they are evolving into another book. Your comments would be appreciated.
Posted by James Zellmer at 3:30 PM

December 21, 2006

2007 Financial Market Forecasts

Business Week:
We polled 80 strategists for their 2007 predictions, and many think tech stocks will be on top. Call it a 7% year. That's the return the 80 strategists we polled expect in 2007 for the Dow Jones industrial average and the Standard & Poor's 500-stock index. Our prognosticators overwhelmingly think technology will be the best-performing sector next year, but still come up with a forecast of only a 9% gain in the tech-heavy NASDAQ Composite. They expect the Russell 2000, an index of small-cap stocks, to lag, with just a 6% return. Strategists are listed according to their yearend Dow forecasts, from the most bullish to the most bearish
Posted by James Zellmer at 9:14 AM

December 18, 2006

Details on AirTran's Midwest Desires

David Bond & James Ott:
A two-month exchange of letters between Leonard and Hoeksema, published in an AirTran filing with the Securities and Exchange Commission, reveals that Midwest rejected an initial AirTran proposal more than a year ago--for $4.25 per share, according to Skornicka--and that things got testy in mid-November after Hoeksema told Leonard he would present an assessment of the offer to Midwest's board at its regular meeting on Dec. 6.

Leonard replied Nov. 22 that it was "unacceptable" for Hoeksema to wait for the board's next regular meeting and suggested that Midwest's management wasn't carrying out its fiduciary duty to shareholders. He also hinted at a hostile-takeover attempt--"[O]ur passive response to your rejection of our original offer is not the pattern that you can continue to expect from us." Hoeksema reassured Leonard Nov. 27 that Midwest wasn't dragging its feet.

ALSO, LEONARD TOLD Hoeksema that the merged airline would "significantly increase jobs in a way that Midwest could never do under any possible scenario," and that it would "materially improve the scope and frequency of air service in Milwaukee and Kansas City . . . far beyond anything Midwest can offer as an independent company." Milwaukee and Kansas City are the origins or destinations of 83% and 13% of Midwest's service, respectively.
Nice bit of digging in AirTran's SEC filings. Nothing good will happen if the AirTran takeover occurs. Dennis McCann recently gave both a try.
Posted by James Zellmer at 9:24 AM

December 13, 2006

Nothing Good Will Come of a Midwest / Airtran Merger....

Jeff Bailey:
AirTran Holdings is roughly a tenth the size of its main competitor, Delta Air Lines. So AirTran executives would seem unlikely cheerleaders of a potential merger that would make Delta 60 percent larger.

But the recent $8.5 billion takeover offer for Delta by US Airways has found a fan in Joseph B. Leonard, chief executive at AirTran, which, like Delta, flies routes across the Southeast from its hub in Atlanta.

“I’m rooting for it,” Mr. Leonard said yesterday in an interview, after announcing his own proposed takeover of Midwest Air, an airline based in Oak Creek, Ill., for $290 million.

Mr. Leonard may relish his role as underdog but that is not why he hopes the carriers merge — he just wants to see fewer jets in the sky. After all, US Airways’ proposed takeover would reduce the two airlines’ combined jet fleet about 10 percent.
Posted by James Zellmer at 10:59 PM

December 12, 2006

Silicon Valley Math: Interesting Look at Yahoo's Potential Deal with Facebook

Michael Arrington:
Rumors about the possible acquisition of Facebook, usually with Yahoo as buyer, have been around for most of this year. Not that Yahoo or Facebook have asked for this attention, but the media is getting antsy. Robert Young put it best last week when he asked - Yahoo & Facebook: Deal or No Deal?. That is certainly the question of the fiscal quarter.

We know that Facebook has been pursued almost since the beginning of its existence. They narrowly avoided a $10 million acquisition by Friendster in mid 2004, just months before they took their first round of financing from Accel Partners. Former Friendster execs say that the deal was close to closing, but last minute negoations over control ultimately disrupted the deal. Since then, Facebook has certainly been approached by every major Internet company.
Posted by James Zellmer at 8:38 PM

December 9, 2006

Wal-Mart Culture/Marketing Clash

Two interesting articles on the identity conflict underway (perhaps being resolved?) at Wal-Mart:
  • Michael Barbaro & Stuart Elliott:
    Yesterday, in a surprising rebuke, Wal-Mart overturned Ms. Roehm’s choice to replace the company’s longtime advertising agencies — a decision that puts $580 million worth of marketing up for grabs again, two months after the original search process ended.

    Her departure has roiled Madison Avenue and sent several major agencies scrambling to dust off their marketing plans for the nation’s largest retailer.

    At the heart of the controversy, everyone agreed, is a culture clash. Ms. Roehm, a 35-year-old rising star who won acclaim in advertising circles for her work in the automobile industry, was never at home within the painstakingly modest by-the-books culture of Wal-Mart.
  • Michael Barbaro & Stuart Elliott:
    t was the kind of bold advertising campaign that Wal-Mart executives agreed was needed to attract style-hungry consumers: a series of commercials featuring two sisters — one a regular Wal-Mart shopper, the other not — trying to redecorate their homes.

    In commercials set to run throughout this holiday season, the sisters were to discover that Wal-Mart offers a lot more than low prices.

    But in July, as gasoline prices spiked, senior executives abruptly scrapped plans for the so-called sisters campaign, sending a marketing team led by Julie Roehm scrambling to create a replacement, according to people involved in the process. The reason was that the ads did not focus enough on low prices.
Posted by James Zellmer at 10:18 PM

December 6, 2006

Web Investment Bubble: 61 Video Hosting Companies

Phil Harvey:
I'm pleased to offer this latest revision of the Web Video Cheat Sheet, a quick and dirty guide to sharing videos online. I'm in the process of compiling another report that examines a specific facet of the video sharing experience (more on that later). Meanwhile, I couldn't wait to get this 61-site overview out there so folks can figure out the best place to host their most memorable (drunken) holiday moments.
Posted by James Zellmer at 5:16 PM

December 3, 2006

A New Goofy Short: "How to Install Your Home Theater"

Charles Solomon:
It is not surprising that Mr. Lasseter is using short films to train and test the artists: he and his fellow Pixar animators spent almost 10 years making shorts, learning how to use computer graphics effectively before they made “Toy Story” and the string of hits that followed. Pixar continues to produce a cartoon short every year, and has won Oscars for the shorts “Tin Toy,” “Geri’s Game” and “For the Birds.”

Four new shorts are in development at Disney: “The Ballad of Nessie,” a stylized account of the origin of the Loch Ness monster; “Golgo’s Guest,” about a meeting between a Russian frontier guard and an extraterrestrial; “Prep and Landing,” in which two inept elves ready a house for Santa’s visit; and “How to Install Your Home Theater,” the return of Goofy’s popular “How to” shorts of the ’40s and ’50s, in which a deadpan narrator explains how to play a sport or execute a task, while Goofy attempts to demonstrate — with disastrous results. The new Goofy short is slated to go into production early next year.
I've long enjoyed short films. Clusty has more.
Posted by James Zellmer at 10:35 PM

The Top 100 Red Wines of 2006

Linda Murphy & Lynne Char Bennett.
Posted by James Zellmer at 7:48 PM

Books and the Future of Publishing

Michael Maiello and Michael Noer:
Are books in danger?

The conventional wisdom would say yes. After all, more and more media--the Internet, cable television, satellite radio, videogames--compete for our time. And the Web in particular, with its emphasis on textual snippets, skimming and collaborative creation, seems ill-suited to nurture the sustained, authoritative transmission of complex ideas that has been the historical purview of the printed page.

But surprise--the conventional wisdom is wrong. Our special report on books and the future of publishing is brim-full of reasons to be optimistic. People are reading more, not less. The Internet is fueling literacy. Giving books away online increases off-line readership. New forms of expression--wikis, networked books--are blossoming in a digital hothouse.
Posted by James Zellmer at 7:22 PM

December 1, 2006

Air Travel Liberalization

Randy @ Boeing:
Earlier this year an important study came out, taking a look at the economic impact of liberalization. And I've been meaning to share it with you and talk a bit about what it means for our business.

Over the past 25 years, three main forces have radically changed the airline industry: the regulatory environment, airplane/aerospace capabilities, and airline strategies/business models.

First, changes to government regulations have been critical in shaping the airline industry. Since the deregulation of the U.S. market in 1978, we've seen a dramatic shift in domestic and international markets. And we've also seen increased liberalization - even "open skies" - in international markets. This freer market access has had the effect of intensifying airline competition and causing airlines to focus more on what passengers want.
Posted by James Zellmer at 5:07 PM

November 28, 2006

The End of Risk Pooling

John Robb:
Another sign that we are increasingly on our own. The insurance industry is rapidly (and inexorably) eliminating the idea of risk pooling:

As insurers use the new techniques to get ever-more-refined estimates of what individual policyholders are likely to cost in the future, they may be tempted to charge people closer and closer to full freight for treating an illness or rebuilding a fire-damaged home. Then even those who benefited from the end of cross-subsidies could see their rates go up as they effectively are asked to pay their own way, rather than share the cost by pooling with others.
The Economist has more.
Posted by James Zellmer at 8:50 AM

November 27, 2006

Tyson's Renewable Energy

Brad Feld:
"Tyson Foods, the world's largest chicken producer and meat processing company, blamed high corn prices last week for its third consecutive quarterly loss. It said that the recent excitement over corn-based ethanol fuel sent the price of that grain soaring, raising feed costs and compounding the effect of a meat glut that depressed prices. "This is either corn for feed for corn for fuel," Rich L. Bond, president and chief executive, lamented in a statement. Well, if fuels are where the money is, Tyson will be there too. As Mr. Bond was releasing the disappointing results, Jeff Webster of the corporate strategy department was announcing a brand new venture: Tyson Renewable Energy. Its first task? Turning some of what the company described as its "vast supply of animal fat" - 2.3 billion pounds a year, Mr. Webster reckons - into a diesel-like biofuel."
Posted by James Zellmer at 8:29 AM

November 25, 2006

Extraordinary Service in an Era of Low Expectations

My cell phone rang, displaying an unknown number while driving home from a Thanksgiving trip via the airport. Shannon from Milwaukee's fine airline - Midwest - called to say that one of her coworkers found homework in the seatback of the plane we just vacated. She thought it important and wanted to know if we had a FedEx number so she could send us the missing homework via an overnight package.

Let's just ponder this customer service outlier, or "black swan [more]" for a moment. We live in an era of low expectations:
  • Politics: Meet the New Boss, Same as the Old Boss:
    But Ms. Pelosi’s damage to herself was already done. The well-known shortcomings of Mr. Murtha were broadcast for all to see — from his quid-pro-quo addiction to moneyed lobbyists to the grainy government tape of his involvement in the Abscam scandal a generation ago. The resurrected tape — feasted upon by Pelosi enemies — shows how Mr. Murtha narrowly survived as an unindicted co-conspirator, admittedly tempted but finally rebuffing a bribe offer: “I’m not interested — at this point.
  • Black Friday retail tactics:
    In Lewis Center, Ohio, near Columbus, Cindy Milsap, 43, and her daughter, Ashley, 20, woke up before dawn to drive to the nearby Wal-Mart Supercenter, which advertised a 52-inch high-definition television for $474. “We don’t really need a new TV, Ms. Milsap said. “But at that price? C’mon.”

    But the bargain eluded them. The “limited quantity” in the ad, she said, was three TVs — all sold by the time the pair arrived.

    Those customers left in peace.
  • The oxymoron that is "airline service":
    With overcrowded airplanes, little civility in dress or demeanor of passengers, few meals, fewer amenities, industrywide salary cuts of epic proportions, and (the worst sin of all) airlines canceling pension plans because they've robbed the fund of hundreds of millions, far too many of America's airline employees are shell shocked, depressed, disillusioned and resentful. In effect, we're now an industry full of employees going through post-traumatic stress and wondering why we ever thought it was fun.

    And that, in a nutshell, equates to bad and inattentive service with a "who cares" attitude. Morale, in other words, is the key, and it's in precious short supply today.
  • 2006 Airline Quality Rating website.

I remain astonished that a Midwest employee cleaning the plane found said homework, took the time to give it to someone who could find the owner, lookup their contact information, make a call, obtain the shipping information, place the papers in a FedEx package and send it our way. Everyone involved must actually care about the customer. What a concept. I hope that these words, in some small way encourage others to fly Midwest. There is indeed, no better care in the air.
Posted by James Zellmer at 8:41 PM

November 21, 2006

Reduced Fed Transparency: Inflation on the Way?

Barry Ritholtz:
Last year, we lamented the passing of M3 reporting. This broadest of money supply measures had shown a discomforting increase in liquidity, far greater than what M2 was revealing.

At the time of the M3 announcement, we suspected the Fed was attempting to cover their tracks, disguising an ongoing increase in money supply and an unstated "easing" in Fed bias. Since that time, we have learned: the Treasury Department was also adding liquidity -- a duty they have assumed, in part, in addition to the same performed by the Fed. Indeed, based on the credit growth data Doug Noland published last month (October Credit Review), it appears that the Fed has - despite increasing interest rates - actually eased over the last two years.
Posted by James Zellmer at 7:22 PM

November 20, 2006

Becker & Posner on Milton Friedman

The Becker - Posner Blog:
Milton Friedman died this past week. He was the most influential economist of the 20th century when one combines his contributions to both economic science and to public policy. I knew him for many decades starting first when I was a graduate student at Chicago, and then as a colleague, mentor, and very close friend.

I will not dwell here on what a remarkable colleague he was. However, I do want to describe my first exposure to him as a teacher since he enormously changed my approach to economics, and to life itself. After my first class with him a half-century ago, I recognized that I was fortunate to have an extraordinary economist as a teacher. During that class he asked a question, and I shot up my hand and was called on to provide an answer. I still remember what he said, "That is no answer, for you are only restating the question in other words." I sat down humiliated, but I knew he was right. I decided on my way home after a very stimulating class that despite all the economics I had studied at Princeton, and the two economics articles I was in the process of publishing, I had to relearn economics from the ground up. I sat at Friedman's feet for the next six years-- three as an Assistant Professor at Chicago-- learning economics from a fresh perspective. It was the most exciting intellectual period of my life. Further reflections on Friedman as a teacher can be found in my essay on him in the collection edited by Edward Shils, Remembering the University of Chicago: Teachers, Scientists, and Scholars, 1991, University of Chicago Press.
Posted by James Zellmer at 8:59 AM

November 19, 2006

Yahoo's Peanut Butter Manifesto

Henry Blodget:
It will be interesting to see how Terry Semel reacts to Brad Garlinghouse's "peanut butter manifesto," which was essentially open letter accusing Terry of incompetence. Garlinghouse took pains to note that Yahoo's problems come "straight from the top." He also obviously either leaked the memo himself or knew that it would be leaked (little difference). Regardless of what happens, Yahoo shareholders should thank him.
Posted by James Zellmer at 12:19 PM

November 15, 2006

Wisconsin 27th in "Entrepreneur Friendliness"

Small Business & Entrepreneurship Council [PDF]:
The Small Business Survival Index ranks the 50 states and District of Columbia according to some of the major government-imposed or government-related costs affecting investment, entrepreneurship, and business.

This eleventh annual Small Business Survival Index ties together 29 major government-imposed or government-related costs impacting small businesses and entrepreneurs across a broad spectrum of industries and types of businesses:
  • Personal Income Tax. State personal income tax rates affect individual economic decision-making in important ways. A high personal income tax rate raises the costs of working, saving, investing, and risk taking. Personal income tax rates vary among states, therefore impacting crucial economic decisions and activities. In fact, the personal income tax impacts business far more than generally assumed because roughly 90 percent of businesses file taxes as individuals (e.g., sole proprietorship, partnerships and S-Corps.), and therefore pay personal income taxes rather than corporate income taxes. Measurement in the Small Business Survival Index: state’s top personal income tax rate.1
  • Capital Gains Tax. One of the biggest obstacles that start-ups or expanding businesses face is access to capital. State capital gains taxes, therefore, affect the economy by directly impacting the rate of return on investment and entrepreneurship. Indeed, capital gains taxes are direct levies on risk taking, or the sources of growth in the economy. High capital gains taxes restrict access to capital, and help to restrain or redirect risk taking. Measurement in the Small Business Survival Index: state’s top capital gains tax rate on individuals.2
Posted by James Zellmer at 7:03 AM

November 10, 2006

Third Quarter Real Estate Market Data

Dave Stark [PDF]:
We are currently witnessing a phenomenon that I have not seen in my nearly 30 years in real estate brokerage. For the first time in anyone’s memory, we are seeing a noticeable slowdown in sales despite continuing record low interest rates. I’ve experienced many soft markets before; most (1980 – 1982 particularly) were far more severe than this. But all of those were precipitated by rapidly rising interest rates. This one seems to be occurring even though rates have actually fallen (that’s right, fallen) over the past 60 to 90 days by nearly two thirds of a percentage point, remaining near all time lows. At this writing, 30 year rates are around 6.375%. What’s going on?

I’ve heard many explanations offered, and many have some validity. For starters, the Federal Reserve has raised short term interest rates steadily over the last two years. This has probably led many consumers to assume that mortgage rates were rising too. They did rise a little, but not much… they’re still within a percentage point or so of their lows. It’s also true, as you see below and on the following pages, that inventories have continued to rise, leading many to assume that the market is “slow,” since they see more for sale signs than they’re used to. Perhaps most importantly, the media has been relentlessly predicting a “bursting real estate bubble” for two years now, and they’ve seized on any evidence of a slowdown to fuel the gloomy predictions. While fears of a bursting bubble are utterly unfounded, especially here (see page 2), we’re hearing that many buyers are afraid to buy, thinking that real estate has become a bad investment on which they’ll lose money. A self fulfilling prophecy if ever there was one. Add in the fact that the fall is normally the slowest time of year anyway, and the market appears just plain tired after a sizzling 5 year run.
Posted by James Zellmer at 10:30 AM

November 5, 2006

A Chat with JetBlue's David Neelman

Judith Dobrzynski:
With Washington often, umm, unable to focus--"It took 10 years to get an energy bill passed that has had little effect," Mr. Neeleman interjects--he sought counsel on the capital's ways. As a result, he got professional help on the bill's language and learned about the legislative process. "The advice I got was to go get RAND and other thinkers to write about it--those are the guys that they listen to," Mr. Neeleman says. He has spoken with RAND about doing an economic impact study, but has not commissioned one. And, as he put it, "I got a couple professors"--names of people he might enlist in the cause. Who?--I ask. "From the American Enterprise Institute and Brookings Institution," is his reply.

Mr. Neeleman has also visited the White House seeking support. "They're looking at it," he says, but were noncommittal. He believes "it should sail through Congress," and would be happy to "testify for my country and for our industry." This earnestness, along with his resolve, is obvious throughout the interview. As I'm leaving, Mr. Neeleman stops me to point out--no, to declaim--a framed quote on the wall outside his office. It's from Teddy Roosevelt, and reads, in part: It is not the critic who counts, not the man who points out how the strong man stumbled or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena . . . who--at the worst--if he fails, at least fails while daring greatly.
Posted by James Zellmer at 9:50 AM

November 1, 2006

The Next Capitalism

Robert Samuelson:
When he died in 1848, John Jacob Astor was America's richest man, leaving a fortune of $20 million that had been earned mainly from real estate and fur trading. Despite his riches, Astor's business was mainly a one-man show. He employed only a handful of workers, most of them clerks. This was typical of his time, when the farmer, the craftsman, the small partnership and the independent merchant ruled the economy. Only 50 years later, almost everything had changed. Giant industrial enterprises -- making steel, producing oil, refining sugar and much more -- had come to dominate.

The rise of big business is one of the seminal events in American history, and if you want to think about it intelligently, you consult historian Alfred D. Chandler Jr., its pre-eminent chronicler. At 88, Chandler has retired from the Harvard Business School but is still churning out books and articles. It is an apt moment to revisit his ideas because the present upheavals in business are second only to those of a century ago.

Until Chandler, the emergence of big business was all about titans. The Rockefellers, Carnegies and Fords were either "robber barons'' whose greed and ruthlessness allowed them to smother competitors and establish monopolistic empires. Or they were "captains of industry'' whose genius and ambition laid the industrial foundations for modern prosperity. But when Chandler meticulously examined business records, he uncovered a more subtle story. New technologies (the railroad, telegraph and steam power) favored the creation of massive businesses that needed -- and, in turn, gave rise to -- superstructures of professional managers: engineers, accountants and supervisors.
Posted by James Zellmer at 8:22 PM

October 30, 2006

More on Yahoo's Cooperation with the Chinese Government

Tom Foremski:
hi Tao was sentenced to 10 years in prison after "illegally providing state secrets to foreign entities".

His crime was to have e-mailed details of the Chinese government's plans to handle news coverage of the 15th anniversary of the Tiananmen Square massacre in 2004. Yahoo! provided crucial information in the case, linking the message and e-mail account with Shi 's computer. Reporters Without Borders accused Yahoo! of acting as a "police informant".
Posted by James Zellmer at 1:26 PM

October 29, 2006

John Bogle's Recent San Francisco Talk

Kathleen Pender:
Bogle believes investors should simply buy the lowest-cost index funds available and hold them forever. His rule of thumb is to take your age minus 10 and hold that percentage of your assets in a total bond market index fund and the rest in a total stock market index fund. For example, a 30-year old would put 20 percent in bonds and 80 percent in stocks.

This strategy nearly eliminates "the two greatest enemies of equity investing -- expenses and emotions," Bogle said.

Bogle's attitudes have barely changed since he started the first index fund in August 1976.

That fund, now called Vanguard Index 500, has about $112 billion in retail assets and is the second-largest fund after American Funds' Growth Fund of America, according to Morningstar.
Bogle wrote the excellent "Battle for the Soul of Capitalism".
Posted by James Zellmer at 10:03 AM

October 25, 2006

The Next Capitalism

Robert Samuelson:
When he died in 1848, John Jacob Astor was America's richest man, leaving a fortune of $20 million that had been earned mainly from real estate and fur trading. Despite his riches, Astor's business was mainly a one-man show. He employed only a handful of workers, most of them clerks. This was typical of his time, when the farmer, the craftsman, the small partnership and the independent merchant ruled the economy. Only 50 years later, almost everything had changed. Giant industrial enterprises -- making steel, producing oil, refining sugar and much more -- had come to dominate.

The rise of big business is one of the seminal events in American history, and if you want to think about it intelligently, you consult historian Alfred D. Chandler Jr., its pre-eminent chronicler. At 88, Chandler has retired from the Harvard Business School but is still churning out books and articles. It is an apt moment to revisit his ideas because the present upheavals in business are second only to those of a century ago.

Until Chandler, the emergence of big business was all about titans. The Rockefellers, Carnegies and Fords were either "robber barons'' whose greed and ruthlessness allowed them to smother competitors and establish monopolistic empires. Or they were "captains of industry'' whose genius and ambition laid the industrial foundations for modern prosperity. But when Chandler meticulously examined business records, he uncovered a more subtle story. New technologies (the railroad, telegraph and steam power) favored the creation of massive businesses that needed -- and, in turn, gave rise to -- superstructures of professional managers: engineers, accountants and supervisors.
Posted by James Zellmer at 8:12 PM

October 24, 2006

Still Built on the Homefront

Timothy Aeppel:
While many U.S. manufacturers are decamping to greener, and cheaper, pastures overseas, Bobcat, a division of Ingersoll-Rand Co. Ltd., has found advantages sticking close to its North Dakota roots to build the little machines that, among other things, are used to clean barns, dig dirt and plow snow. Bobcat has exploited its location to keep a finger on the pulse of its core market of small landscaping and construction contractors, helping it quickly develop and ship products. Also, the company's rural setting, executives say, has bred the kind of culture where problems are solved with the can-do, make-do ethos of the farm.

"There are a lot of barriers any foreign producer has to overcome to give us a real challenge," says Richard F. Pedtke, the president of Ingersoll-Rand's compact vehicle division.

For example, the company usually can deliver any of the hundreds of attachments it sells for its machines to a customer within four days, a feat almost impossible and certainly costly for any company with long supply lines stretching overseas. And by keeping manufacturing, engineering, and marketing closely linked, with people in those roles sometimes living across the street from each other, the company is better able to anticipate how markets are shifting and find new applications for its machines, says Mr. Pedtke.
Posted by James Zellmer at 8:27 AM

October 18, 2006

A Lesson from Europe on Healthcare

David Leonhardt:
A few weeks ago, I wrote a column arguing that this country’s increased medical spending over the last half-century has, on the whole, been overwhelmingly worth it. Thanks to new treatments for everything from premature births to heart attacks, human life has continued to lengthen — defying expectations — even without major improvements in public health. Yet, strangely, we talk about medical spending as if it were nothing more than a drag on the economy, rather than an investment in the most important thing of all: our well-being.

I received about 500 e-mail responses from readers, and the most common reaction was a version of a simple question. “Why do Americans spend so much more than folks in most other developed countries while getting worse results?” as Sumati Eberstadt of East Greenwich, R.I., wrote.

In Greece, the government and individuals combine to spend about $2,300 per capita on health care each year, and the average life expectancy is 79 years. Canada, where the hospitals are probably cleaner, spends about $3,300, and people live to about 80. Here in the United States, we spend more than $6,000, yet life expectancy is just below 78.
Posted by James Zellmer at 9:52 AM

October 13, 2006

Philanthropy from the Heart of America

David Leonhardt:
In the last five years, though, something utterly unexpected has happened. The decline has stopped. More people are moving to Ord, the county seat, than leaving, and the county’s population is likely to show its first increase this decade since the 1920’s.

The economics of rural America have not really changed. If anything, the advantages that Chicago, Dallas, New York and other big cities have over Nebraska have only continued to grow. But Ord has finally figured out how to fight back.

It has hired a “business coach” to help teach local stores how to sell their goods over the Internet and to match up retiring shop owners with aspiring ones. Schoolchildren learn how to start their own little businesses — like the sixth-grade girl who made a video of the town’s history and sells it at school reunions — so they will not grow up to think the only job opportunities are at big companies in Omaha or St. Louis. Graduates of Ord High School who have moved elsewhere receive mailings telling them about job opportunities back in town.
Posted by James Zellmer at 9:56 AM

October 12, 2006

Markets in Everything: 7:11

Tyler Cowen:
the Chicago White Sox] have just announced that for the next three seasons, their evening home games will begin at 7:11 p.m. instead of the customary 7:05 p.m. or 7:35 p.m. Why? Because 7-Eleven, the convenience store chain, is paying them $500,000 to do so.
Posted by James Zellmer at 4:47 PM

October 5, 2006

Good News for Inexpensive Flights to Europe

In a move bound to drive British Airways and its Irish CEO nuts, Ryanair has launched a surprise takeover bid for Aer Lingus. The deal values Aer Lingus at 1.48bn euros (1.9bn dollars). Predictably, the spin started immediately. "This offer represents a unique opportunity to form one strong airline group for Ireland and for European consumers. We will expand, enhance and upgrade the Aer Lingus operations," said Ryanair Chief Executive Michael O'Leary in a statement. "This offer, if successful,means both companies will continue to operate separately and compete vigorously in the small number of routes on which we both operate, currently around 17 of the approximately 500 routes operated by the two airlines," he added.
Posted by James Zellmer at 7:57 AM

September 25, 2006

GM Janesville Plant History

GM's FYI Blog:
GM’s Janesville, Wisc., Assembly plant has produced more than half a million trucks capable of running on corn-based E-85 ethanol. But back in 1919, farmers counted on the Janesville plant for another reason: Samson Model M tractors.

The Model M cost $445 and used a four-cylinder Northway engine with a disc-type clutch. Moving parts were enclosed and self-oiling, making them low maintenance. The Model M was advertised to be so simple that the toolbox only contained three wrenches.
Posted by James Zellmer at 5:15 PM

September 20, 2006

Grove on the HP Morass

Tom Foremski:
"Every time I see that a company that has departed from the ... combined chairman-chief executive role go back" to combining the roles, Grove said, "I'm sorry to see that."

. . . HP had split the roles of chairwoman and chief executive in February 2005, when Carly Fiorina was ousted by the board.

. . . Grove was in New York to speak at the Grove School of Engineering at the City College of New York. The school was named after Grove, following his $26 million donation to the school last year, the largest ever to the school.
Posted by James Zellmer at 6:42 AM

August 30, 2006

Dependency Ratios

Malcolm Gladwell:
This relation between the number of people who aren’t of working age and the number of people who are is captured in the dependency ratio. In Ireland during the sixties, when contraception was illegal, there were ten people who were too old or too young to work for every fourteen people in a position to earn a paycheck. That meant that the country was spending a large percentage of its resources on caring for the young and the old. Last year, Ireland’s dependency ratio hit an all-time low: for every ten dependents, it had twenty-two people of working age. That change coincides precisely with the country’s extraordinary economic surge.
Posted by James Zellmer at 9:29 AM

Kraft Foods (Oscar Meyer Parent) Spinoff?

Melanie Warner:
Today’s meeting of Altria’s board may bring Kraft — which sells food carrying the Maxwell House, Nabisco and Oscar Mayer labels, among others — one step closer to its goal.

With the last major legal challenge over marketing practices by the tobacco industry having cleared two weeks ago, Altria’s 11-member board is likely to discuss the timing of a much-anticipated and imminent corporate overhaul. But Altria’s board is not expected to announce a Kraft spinoff after the meeting.

Wall Street analysts who follow Altria say they expect the company, which has been planning an overhaul since 2004, to take its time in making a final decision on the timing of what would be one of the largest tax-free corporate spinoffs.
Posted by James Zellmer at 8:57 AM

August 20, 2006

Target's "Popup" LA Store

Virginia Postrel:
Target is, of course, well known for persuading designers to turn their skills--and publicity-generating ability--to its mass market. The latest twist, as explained in this report is to open full-blown, but temporary, boutiques like this "pop up" Paul & Joe store on Melrose Place in L.A. My niece Rachel and I hit it on July 29, the day Moore's story ran, and it was packed with women eager to buy discount-priced clothes in a non-discount environment.
Posted by James Zellmer at 8:36 PM

August 19, 2006

Casting a Net for Better Airfares

Dave Demerjian:
You board your flight to Chicago, $600 ticket in hand, and do a quick survey of the people sitting around you. Turns out 13D paid only $300 for her flight, while 14E shelled out nearly $1,000 for his. It's a reality of air travel that infuriates passengers, but now several new travel websites are promising to demystify the seemingly nonsensical world of airline ticket pricing.

It was exasperation with existing online travel tools that led Robert Metcalf to develop flyspy, a site currently in alpha mode using fare data from Northwest Airlines.

"I once spent six hours combing through different websites," says Metcalf, who wanted to see how prices changed if he flew into a different airport or adjusted his travel dates and length of stay. "I ended up compiling all the data I gathered into an Excel spreadsheet, and started wondering why there wasn't a site that provides this kind of functionality."
Posted by James Zellmer at 6:17 AM

August 14, 2006

Midwest Airlines Expansion Plans

Steve Lott:
Midwest Airlines in the coming months will make several significant fleet decisions that will guide the carrier through a planned network and schedule expansion. This marks a significant turnaround for the airline, which barely averted bankruptcy three years ago.

Since its 1984 launch, Midwest was always known for its product and service, which was better than many of its larger competitors. The airline won praise from business travelers for its all-first-class seating and a full meal service, even on many of the shorter flights. Following the post-9/11 crisis, however, Midwest quickly realized that its product alone would no longer bring in the revenue premium it once received.

The carrier stumbled for several years but was able to win labor concessions and relief from aircraft lessors during the summer of 2003 that kept the carrier out of bankruptcy court. That same year, after facing a barrage of competition from low-cost carriers, Midwest diverged from its original strategy by adding seats to its MD-80 fleet and targeting leisure passengers with a new "saver service." The carrier kept its Boeing 717 fleet in the traditional all-first-class "signature service."
Posted by James Zellmer at 7:10 AM

July 24, 2006

Luck & Business Strategy

James Surowiecki:
Because we underestimate how much variation can be caused simply by luck, we see patterns where none exist. It’s no wonder that management theory is dominated by fads: every few years, new companies succeed, and they are scrutinized for the underlying truths that they might reveal. But often there is no underlying truth; the companies just happened to be in the right place at the right time. In 1999, after all, it was hard to find a business book that didn’t hold up Enron as the embodiment of one important principle or other. Of course, some strategies and structures work better than others, but real meaning emerges only over the long term.
Posted by James Zellmer at 8:23 AM

July 21, 2006

Judge Rules a Tax Shelter in KPMG Case Is Legitimate

Lynnley Browning:
The heart of Judge Ward’s ruling was that the I.R.S.’s retroactive use of tougher Treasury Department rules in 2003 on liabilities like those in Blips was “ineffective” and “not enforceable” because it was retroactive. The Internal Revenue Code generally prohibits retroactive regulations. The I.R.S. said in 2000 that it would formally challenge Blips deductions claimed by taxpayers.

Jerrold Cohen, a lawyer in Atlanta for Mr. Nix and Mr. Patterson, said yesterday that Judge Ward’s ruling showed that “the government isn’t allowed to change the rules just because it doesn’t like the result.”
Great example of the mess that is our tax system. The Opinion (PDF).
Posted by James Zellmer at 9:09 AM

July 20, 2006

Stressed Air Travel System?

Flying around recently, amid full planes, high fuel prices, employees who have endured some tough years and challenging weather, it seems to me that the airlines, while trying very hard to make money, are really stretching their employees and systems. Juggling planes and tickets amid cancellations and delays one night, I ended up on a 777. Passengers boarded the full flight, were instructed to close the overhead bins and buckle up. Minutes before departure, the steward announced that there were no pilots. They would be arriving in 45 minutes and we were free to get off the plane..... The steward, when asked, mentioned that they just found out about this (no pilots! - seems odd in 2006 that they were not aware that the pilots were not around, what with elaborate crew and equipment management software). I grabbed my bags and ran over to my prior, delayed flight, swapped tickets and was later on my way.

This, and other recent examples make me wonder how far the airlines can push their systems and people.... I also noticed a number of rather rude passengers along with some great, hard working airline employees.
Posted by James Zellmer at 9:06 PM

July 17, 2006

The Future of America Forecasts, Part 2

"Fabius Maximus":
orecast #3: the death of the US Constitution.

The Constitution was originally designed to specify the duties for each of America’s three branches and to limit their powers. Its ability to do the latter function has faded rapidly since the New Deal. Already most of the Bill of Rights remain de jure in force but are de facto void, as can be seen by a Lexis search of successful attempts to use them in litigation – you’ll find almost none.

At some point soon the Constitution will become a purely procedural document, much like that of the former Soviet Union, and equally effective at preserving our liberties. Our rights will exist only on the sufferance of our government and our ruling elites. This is already true in the UK, as the “unwritten constitution” protecting the “rights of Englishmen” has blown away like smoke in the wind.
Posted by James Zellmer at 10:20 PM

July 7, 2006

Ted Levitt

Laurel Delaney:
One of my favorite people (minds) on the planet and the person who coined the term "globalization" died at age 81: Theodore Levitt. The reason why Professor Levitt became such a force in my life was because in the '80s -- before any individual or company was thinking about going global -- he turned me on to the importance of looking at the world as your market. He also knew how to deconstruct and solve problems by asking the right questions. Something to this day I still find myself doing. Here are some things I will remember the most about Levitt:

• Harvard Business Review -- He holds the record with Peter Drucker for publishing the most articles in HBR.

• What turned me on to Levitt -- "The Globalization of Markets" and five other great articles authored by HBR talents.

Using the term "globalization" in a 1983 Harvard Business Review article about the emergence of standardized, low-priced consumer products. He defined that globalization as the changes in social behaviors and technology which allowed companies to sell the same products around the world.
Posted by James Zellmer at 5:28 PM

July 6, 2006

AOL: "Certain Death or Free Plus Ads"?

Henry Blodget:
The WSJ reports that AOL is considering making online access to its service--including, importantly, email--free. (AOL email users currently have to pay for one of the company's subscription plans, although much of the rest of the company's content is already free.) Per the WSJ, this move would vaporize about one-quarter of the company's revenue, or $2 billion. The company estimates that it would also result in the loss of 8 million paying subscribers.
Blodget also notes that Vonage's recent IPO continues to be black comedy (public at 17, now 8.25 after just a month....
Posted by James Zellmer at 10:47 AM

July 5, 2006

DeLorenzo and Wallace on Nissan / Renault / GM

Peter DeLorenzo:
Make no mistake - this isn't about creating a new global automotive powerhouse well-equipped to do battle deep into this century, one that will keep Toyota from taking over the world. And this certainly isn't about doing what's best for General Motors and the people who have so much invested in the fortunes of the company. And this in no way, shape or form has anything to do with solidifying America's manufacturing base or shoring up the economy.

No, this is about flat-out greed, pure and simple.
Ed Wallace:
This possibility is not a case of what would be best for General Motors; it’s driven by egotism and greed. Setting the stage for it were the peculiarities of the financial markets; GM, the world’s largest car company, recently had a market capitalization barely above $10 billion, while its closest competitor’s market cap was $169 billion. Analysts now forecast that Toyota, the world’s second largest car company, should be worth $236 billion within the year, but faltering GM will be worth no more than $15 billion.

It is that situation that allowed a notorious corporate raider, Kirk Kerkorian, to buy 9.9% of GM’s outstanding shares for little or nothing. And with that purchase he gained the leverage to push his personal consultant — whose pay is based not on GM’s improved financial performance but on Kerkorian’s take from his investment in the motor company — onto GM’s board of directors.
Posted by James Zellmer at 8:57 AM

July 1, 2006

On Lake Michigan, A Global Village

Steve Lohr:
As Racine has changed, so have its politics. Once, a ritual antagonism for business was a sure vote-getter among Democrats. But Mr. Becker was elected three years ago with a pro-development message, pledging to trim jobs from the public payroll to free resources to attract new residents and businesses.

Racine's future, Mr. Becker believes, lies in forging stronger links with the regional economy and global markets. Reinvention can be unnerving, he acknowledges, but he says it is his hometown's best shot at prosperity and progress. "In the past, Racine was a self-contained economy," he said. "But that is not an option anymore."

No local economy truly mirrors the nation. But for Racine and its surrounding suburbs, the last few years have been marked by gradually rising prosperity, in step with the national trend. And the recent history of Racine, like that of the nation as a whole, is also the story of how a community comes to grips with the larger forces of globalization and technological change.
Posted by James Zellmer at 6:41 PM

June 23, 2006


The Economist:
Happy 20th birthday to our Big Mac index.

WHEN our economics editor invented the Big Mac index in 1986 as a light-hearted introduction to exchange-rate theory, little did she think that 20 years later she would still be munching her way, a little less sylph-like, around the world. As burgernomics enters its third decade, the Big Mac index is widely used and abused around the globe. It is time to take stock of what burgers do and do not tell you about exchange rates.

The Economist's Big Mac index is based on one of the oldest concepts in international economics: the theory of purchasing-power parity (PPP), which argues that in the long run, exchange rates should move towards levels that would equalise the prices of an identical basket of goods and services in any two countries. Our “basket” is a McDonald's Big Mac, produced in around 120 countries. The Big Mac PPP is the exchange rate that would leave burgers costing the same in America as elsewhere. Thus a Big Mac in China costs 10.5 yuan, against an average price in four American cities of $3.10 (see the first column of the table). To make the two prices equal would require an exchange rate of 3.39 yuan to the dollar, compared with a market rate of 8.03. In other words, the yuan is 58% “undervalued” against the dollar. To put it another way, converted into dollars at market rates the Chinese burger is the cheapest in the table.
Posted by James Zellmer at 1:48 PM

June 20, 2006

Why Offer Employee Benefits?

McKinsey Quarterly:
The vast majority of US executives see employee benefits as important to their company's competitiveness, according to the latest McKinsey Quarterly survey.
Posted by James Zellmer at 8:21 PM

June 19, 2006

If It's Good for Philip Morris, Can It Also Be Good for Public Health?

Joe Nocera:
"We don't make widgets," Steve Parrish likes to say, and that acknowledgment strikes me as a good place to start this story. Parrish, whose title is senior vice president for corporate affairs, is a highly paid executive at Altria Group, a New York-based holding company that is the 10th-most-profitable corporation in America. If the name of the company doesn't strike you as terribly familiar, that's because a few years ago the company changed its name. It used to be called Philip Morris, a name that still attaches to two of its holdings, Philip Morris USA and Philip Morris International. (Altria also owns Kraft Foods.) So, yes, let's stipulate right up front: Steve Parrish represents the country's leading tobacco company, whose best-known brand, Marlboro, is so dominant it accounts for 4 out of every 10 cigarettes smoked in the United States. Last year, Philip Morris USA alone made $4.6 billion in profits. What was it that Warren Buffett once said? "You make a product for a penny, you sell it for a dollar and you sell it to addicts." They most certainly don't make widgets.
Kraft is parent of Madison based Oscar Meyer Foods.
Posted by James Zellmer at 9:34 AM

June 17, 2006


Local firm Fiskars runs a blog for its Fiskateers program; "amabassdors for crafting". Via John Moore.
Posted by James Zellmer at 6:24 AM

June 12, 2006

Inside Apple's iPod Factories

Apple's iPods are made by mainly female workers who earn as little as £27 per month, according to a report in the Mail on Sunday yesterday.

The report, 'iPod City', isn't available online. It offers photographs taken from inside the factories that make Apple music players, situated in China and owned by Foxconn.

The Mail visited some of these factories and spoke with staff there. It reports that Foxconn's Longhua plant houses 200,000 workers, remarking: "This iPod City has a population bigger than Newcastle's."
Posted by James Zellmer at 2:30 PM

UAW Chief Says Union Must Brace For Change as Big Three Struggle

The challenges we face aren't the kind that can be ridden out. They're structural challenges, and they require new and farsighted solutions," he said.

Among those challenges is that nonunion U.S.-based auto assembly plants made 1.1 million more vehicles in 2005 than they did in 2001, while production at unionized plants fell by 1.1 million, he said. Mr. Gettelfinger said U.S. labor laws heavily favor management and allow employers, such as Japanese auto makers that have opened plants in this country, to intimidate workers seeking to unionize.
Ron Gettelfinger's report is available here [25MB PDF]
Posted by James Zellmer at 12:40 PM

June 9, 2006

The Real Estate Market Source

Dave Stark, a friend and long time client has published the first of what will be a quarterly look at the Madison area real estate market [1.2MB PDF]:
There could be no better illustration of the confusing nature of today’s discussions about real estate than the market in South Central Wisconsin in 2006. quarter. Despite relentless stories about the “bursting real estate bubble,” and “rising rates taking the steam out of the real estate market,” our local market remained robust in the first quarter.

As you’ll see in the accompanying charts, the overall level of sales activity is similar to a year ago. What has changed, however, is the relationship between the number of sales and the level of active inventory for sale. The result is that, while the overall level of demand is much like it was one year ago, sellers have 50 to 100% more competition on the market for the same number of buyers. The result: it feels slower to many sellers, whose houses may be sitting on the market longer than in the past. However, it remains our experience that homes in good condition that are priced competitively will still sell quickly, sometimes in a matter of days.
Posted by James Zellmer at 10:27 AM

June 7, 2006

Google vs Microsoft

Barry Ritholtz:
I've heard all sorts of chatter about the Google foray into spreadsheets, and none of it resonates with me. Here are 3 key aspects of this worth thinking about:

1. Strategically, Google is shooting at half of the Microsoft franchise

Microsoft, despite alot of hoopla you have heard about all its other product offerings, makes the vast lion's share of its money via its Operating System and via Office. Nothing else it does is generates nearly the profitable cash flow as those two money printing presses do.

Think long term strategy: From a military perspective, Google is opening a second front in the war Microsoft launched against them. You want to come after our core busines? Allow us to return the favor.
Posted by James Zellmer at 9:40 AM

June 2, 2006

The Key Ingredients for a "Great City"

Paul Graham ruminates on the essence of a technology hub:
I think you only need two kinds of people to create a technology hub: rich people and nerds. They're the limiting reagents in the reaction that produces startups, because they're the only ones present when startups get started. Everyone else will move.

Do you really need the rich people? Wouldn't it work to have the government invest in the nerds? No, it would not. Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.

Bureaucrats by their nature are the exact opposite sort of people from startup investors. The idea of them making startup investments is comic. It would be like mathematicians running Vogue-- or perhaps more accurately, Vogue editors running a math journal.
Grahams words are a must read for local politicians. Madison's (Wisconsin) biggest challenge with respect to new business development is it's parochialism. Living in San Francisco years ago, I was impressed by the general willingness to try new things and take risks. We have a world class University, lots of bright citizens but not so many people willing to take financial and career risks.
Posted by James Zellmer at 8:35 AM

May 30, 2006

Emerging Airline Industry Trends 2006 - 2011

The Boyd Group [pdf]:
Airline Industry Trends Updat Presentation To Regional Airline Association May 24, 2006
Posted by James Zellmer at 10:59 AM

State Business Filing Data

Larry Ribstein has posted some fascinating state-by-state business filing data from the International Association of Commercial Administrators. Of the 35 states with filing data for the past four years, 32 reported increases in LLC filings and 21 reported decreases in corporation filings. In the six largest states. the growth in LLC filings from 2002 to 2005 ranged from 60.3% to 237.9%, while three of the states experienced declines in the number of corporate filings ranging from (11.4%) to (27.3%) and the three states with growth in the number of corporate filings ranged from 4.6% to 23.7%:
Wisconsin's data:
  • Business & Professional Corporations: 12/31/2004: 5,571 ($1,8M); 12/31/2005: 5,104
  • Nonprofits: 12/31/2004: 1,927 ($73K)
  • Limited Liability Copmanies (LLC): 12/31/2004: 25,268 ($3,484,515); 12/31/2005: 26,653
  • Limited Partnerships: 12/31/2004: 203 ($20K); 12/31/2005: 203
Minnesota had more than twice as many corporate filings and about 1/3 less LLC formations than Wisconsin. Illinois has a significantly larger annual number of corporate filings than Minnesota or Wisconsin.

It would be interesting to see what the numbers look like over time, attrition rates and the correlation to taxes and jobs.
Posted by James Zellmer at 10:54 AM

May 27, 2006

The First Action Hero

Bryan Myrkle:
I once read that a person with experience caring for horses knows more about what it meant to be a human in the last thousand years than anyone without. Similarly, anyone who’s driven a Model T knows more about what it felt like to be an American in the first half of the 20th Century than anyone who hasn’t. History records the Model T as a two-fold blessing: it created the American working class and it put them behind the wheel. Again, the map is not the territory. To fully appreciate the Model T’s impact on American psychology, you have to get behind the wheel.
Posted by James Zellmer at 8:27 AM

May 25, 2006

Intuit Chief Marketing Officer Speech in Madison

Ben McConnell:

The company's chief marketing officer, Mark Schar, told attendees today at the Brandworks University conference in Madison, Wisconsin, how Intuit recently recognized an employee with a "Swing for the Fence" award for a big idea, even though the idea didn't work out. The big idea? Partner with hip-hop mogul Russell Simmons, who would encourage 18-24-year-olds to file their tax returns early using TurboTax and win some prizes, like tickets to a show featuring rapper Jah Rule. Launched last year, the program flopped.

Posted by James Zellmer at 8:57 AM

May 22, 2006

2006 Political & Economic Risk Map

Political, economic and social environments can shift at a moment’s notice, disrupting business operations for anyone involved in international commerce. Companies can be subjected to discriminatory action – or inaction – of foreign governments and third parties, potentially leading to forced shutdowns, relocations and other unforeseen expenses.

The impact of these political and economic exposures is examined by Aon Trade Credit in its 2006 Political & Economic Risk Map, created in conjunction with Oxford Analytica, an international, independent consulting firm of more than 1,000 senior faculty members at Oxford and other major universities and research institutions around the world.
Posted by James Zellmer at 5:40 PM

May 19, 2006

$2,489 vs $971 Revenue Per Square Foot

photo by ifoapplestore.

Steve Lohr takes an interesting look at Apple's retail store initiatives (high end, expensive locations, large open spaces and lots of space to play with the goodies), their inspiration and performance:
"We had to design an experience that was as big as the space," said Mr. Johnson, 47, who is senior vice president in charge of the stores. "When your product line is the size of a conference table, that is a real risk."

Taking that risk has paid off handsomely so far. Since it opened its first two stores five years ago today, the Apple chain has become a retailing phenomenon. Necessity and inspiration led Apple to toss out the conventional textbook on computer stores and to ignore the rules of location, design, staffing and services provided.

Revenue for each square foot at Apple stores last year was $2,489, compared with $971 at Best Buy, the big computer and electronics retailer, according to Forrester Research, a market research firm.

This evening, Apple is opening a showcase store in Manhattan that will burnish the company's reputation for clever design. The entrance to the store, on Fifth Avenue between 58th and 59th Streets, is a glass cube, 32 feet on each side, with a suspended Apple logo inside. Customers walk down a circular staircase — or take a cylindrical glass elevator — to the 10,000-square-foot store below. The store will be open 24 hours a day, seven days a week — a first for Apple and an acknowledgment of New York's status as a round-the-clock city.
Posted by James Zellmer at 4:35 PM

May 14, 2006

Red Bank, NJ: More Telco Fun

Redbanktv Blog:
Verizon infamously hired an ‘astroturfing’ company to send faxes to the mayor of Red Bank proclaiming to be from local residents. Mayor McKenna sensing something afoot with these faxes did a little research and called Verizon out. Verizon wanted it to appear that there was a real grass roots effort in support of them being undertaken by the residents of our small town; but there wasn’t. It was all made up and it backfired miserably.
Posted by James Zellmer at 9:12 AM

May 12, 2006

Wal-Mart's Site Selection Process & Distribution Economics

Tyler Cowen:
The placement of Wal-Mart stores has followed a spatial diffusion model. K-Mart, in contrast, scattered its stores across the country. Here is more. Here is a video showing the spread of Wal-Mart, well worth watching and short. It is the best single lesson in economic geography you will receive. Thanks to for the pointer.
Posted by James Zellmer at 7:52 AM

May 11, 2006

On Flint

B. Myrkle discusses growing up in Flint and General Motors.
Posted by James Zellmer at 10:12 PM

May 9, 2006

The Patent Trolls

Judy Newman takes a very useful look at the numerous and growing problems with our patent system.
Posted by James Zellmer at 8:35 AM

May 7, 2006

Pull Over Harley, Looks like Honda's on Your Tail

Michael Taylor:
n fact, police in the United States have been using motorcycles since about 1912 when the nascent Harley-Davidson Co. started outfitting a few departments with them. The cycles turned out to be a godsend for traffic enforcement -- they could chase speeders through traffic, and they could get to the scene of an accident far faster than a patrol car. This basic principle still holds true.

For nearly 100 years, Harley has dominated the U.S. market -- the company said last year that its motorcycles "are presently in service with some 2,800 law enforcement agencies nationwide."

Now, however, Honda, the world's most successful maker of motorcycles, is testing the law enforcement waters here. Honda has the largest share of the U.S. civilian motorcycle market, with 26.9 percent of all new bikes sold in the United States, followed by Harley with 23.7 percent and then a handful of other manufacturers, according to figures for 2004 provided by the Motorcycle Industry Council.
Posted by James Zellmer at 4:05 PM

May 2, 2006

Modern Joint Operating Agreements

Dan Gillmor looks at Hearst's deal with MediaNews Group to acquire four newspapers. Madison has had one of these for years - a $120M annual arrangement that has kept the Cap Times going despite its very small circulation. Joint operating agreements were protected by congress years ago, as a way to "preserve daily newspapers". The time has long since arrived to eliminate this relic.

Dave Zweifel passes along his experience at the American Society of Newspaper Editors' convention recently.
Posted by James Zellmer at 7:00 AM

May 1, 2006

A Word for Governor Doyle on the Broadband Expansion Tax Credit

Gov. Jim Doyle plans to sign the broadband bill passed by both the state Senate and Assembly on Tuesday, a top aide said Wednesday afternoon.

“The governor supports it,” said spokesman Matthew Canter. “In fact, he helped lead the way for it. It’s part of his Grow Wisconsin plan.”

The legislation will give telecommunications companies tax exemptions if they provide high-speed Internet service to parts of Wisconsin that lack it or are underserved – mostly in the rural and northern areas of the state.
I hope that Governor Doyle will insert some language into this bill that requires the recipients of this subsidy - local Telco's - to provide symmetrical internet access, not the odd services they largely provide today where the downstream and upstream services run at different speeds. The internet is not TV. Our generally poor broadband service significantly limits the opportunities for emerging home based internet businesses and services. This is a trivial change and should be a no brainer for the Governor. Learn much more on these issues, including why the US is so far behind countries like Japan and Korea in true broadband (100mbps symmetrical speeds), here. Om Malik tells us why this is important.
Posted by James Zellmer at 12:57 PM

Organic Goes Mainstream

Carol Ness:
Thirteen-and-a-half million servings of organic romaine, radicchio and baby greens. That's how much Earthbound Farm, the biggest organic produce company in the country, sends across America from its gigantic San Juan Bautista processing plant every single week.

That's one big bowl of salad -- way bigger than when Myra and Drew Goodman started Earthbound Farm in their Carmel Valley living room in 1984. They now farm 26,000 organic acres.
Posted by James Zellmer at 9:19 AM

April 24, 2006

Microjets: Eclipse 500 Certification

Joseph Anselmo:
an a former copy machine repairman who happens to be friends with Bill Gates reinvigorate the general aviation industry by adopting the low-cost, mass production model used for personal computers? The world is about to find out.

Not long ago, it appeared the answer was a resounding "no." Eclipse Aviation founder Vern Raburn gathered his team on a dismal Saturday morning in November 2002 to figure out whether the company had a future. Raburn, a pioneer in the personal computer revolution, was aiming to develop a six-seat jet that would sell for less than $1 million, bringing jet ownership within reach of thousands of new customers. But his penchant for risk had put Eclipse in big trouble.

The Albuquerque company, with funding support from NASA, had bet big on the development of an advanced, radically cheaper turbine engine. The technology wasn't panning out in time, however, and there was no Plan B. Investors, lured by Raburn's earlier successes at Microsoft, Lotus and Symantec, were running out of patience. Eclipse had two options: stick with the balky engine and pray for a miracle, or delay launch of the aircraft by several years and try to hang on while it found a new engine.
Posted by James Zellmer at 10:21 AM

What if Media 2.0 is Less Profitable than Media 1.0?

Scott Karp:
But what if there’s a fatal flaw in this assumption? What if the transfer of marketing and advertising dollars online is not 1-to-1? What if the Internet has fundamentally lowered the marketing and advertising costs for big companies as it has for small companies? What if large companies can achieve the same sales objectives for a fraction of the cost of traditional mass media advertising?

All marketers know intuitively that mass media advertising is wildly inefficient — there’s the obsessively repeated Wanamaker quote about knowing that half of all advertising is wasted but not knowing which half. But the Internet may be doing more than make advertising more efficient and measureable, i.e. reducing wasted dollars — it may be fundamentally lowering its unit costs.
Posted by James Zellmer at 8:22 AM

April 21, 2006

How Successful People Remain Successful

Knowledge @ Wharton:
When James C. Collins and Jerry I. Porras wrote their hugely popular 1994 book, Built to Last: Successful Habits of Visionary Companies, they began by stating clearly that they did not mean to write about visionary leaders. Their goal was to find visionary companies -- the crown jewels of their industries -- and discover what made them extraordinary. Then questions arose about the extent to which the principles of Built to Last might apply to individuals. That sparked another investigation that has now led to a follow-up book, Success Built to Last, which will be published by Wharton School Publishing later this year.
Posted by James Zellmer at 11:58 AM

Earth Dinner

The Earth Dinner:
To the extent that's possible, try to find foods that are locally produced, seasonal, fresh and flavorful! If they are organically grown—that's even better! If it's not local, that's okay. It's a chance to celebrate the farmers from other regions or countries. If your having a potluck dinner, remember to ask your guests to do their best to find out about the origins of food they bring to share and how it was grown.
via Kristian Knutsen.
Posted by James Zellmer at 11:46 AM

April 19, 2006

Steal this Newspaper

David Carr:
ABOUT a month ago, The Star Tribune in Minneapolis let it be known that, as a cost-cutting effort, free copies of the newspaper would no longer be broadly available around the newsroom.

Instead, the staff was offered an electronic edition of the paper — "an exact digital reproduction of the printed version," no less — that they could access online. Those who insisted on seeing the fruits of the their labors in its physical form were told that they could purchase copies for 25 cents, half the retail cost, from boxes around the office. (This change in policy was first reported by City Pages in Minneapolis.)

So far, so weird. Journalism is not jammed with perks — well, not at most newspapers, anyway — but it was always assumed that you could grab a gratis sports section on the way to lunch.
Posted by James Zellmer at 7:29 AM

April 14, 2006

Quarterly Google Earnings - Blodget

Henry Blodget:
Okay, Google gamblers. This one's going to be interesting.

On the one hand, Google's modest deceleration last quarter suggests that the company is going to once again deliver (relatively) ho-hum results and disappoint investors conditioned to expect the astounding. It takes a long time for a supertanker to change speeds or course, and, last quarter, anyway, it did seem that the Google supertanker was finally beginning to slow down. This diagnosis seemed confirmed by possible canary-in-the-coalmine announcements from advertisers who were cutting back on search spending because prices had gotten out of hand. And then there was CFO George Reyes' lucid mid-quarter explanation of why growth had slowed in Q4--because previous growth had been accelerated by a monetization program that had now run its course. This convincing explanation kneecapped the stock for the eight hours it took for the company to issue a press release that said, effectively, George was wrong.
Posted by James Zellmer at 9:54 AM

April 13, 2006

Sears Chairman Works on Selling Skills

Michael Barbaro:
For 90 minutes on Wednesday, the investor, Edward S. Lampert, the normally reclusive chairman of Sears Holding, spoke expansively about the need to change attitudes and work habits at the merged company.

One effort is already under way: assembling the company's top 500 managers here for marathon training sessions, where a film clip from "Miracle on Ice," about the United States hockey team that won the gold medal at the 1980 Winter Olympics, is used to promote team work and improve customer service.

"In the past, we had a situation where people worked here but could not get results," Mr. Lampert said during the first shareholder meeting for the newly formed retailer. "We need to invest in those people."
Sears owns nearby Lands End
Posted by James Zellmer at 6:54 AM

April 11, 2006

More B-Schools Add Sales Courses

Ronald Alsop:
A company's sales force is its lifeblood. But you'd never know it by looking at the typical M.B.A. curriculum.

Because they're lighter on theory and research than other academic subjects, sales courses are surprisingly scarce in M.B.A. programs. "It's sad that something as important to the economy as sales shows up as a footnote in the principles of marketing course at most graduate business schools," says Andy Zoltners, a professor at Northwestern University's Kellogg School of Management, which has long offered a sales-force management class.

But the sales function seems to be slowly gaining more respect as a few other major schools, including Stanford University, the Massachusetts Institute of Technology and the University of North Carolina, create M.B.A.-level sales courses. Harvard Business School has taught sales management for many years, but lately it has been focusing more on the selling process itself, with lessons on making sales presentations to corporate customers, influencing people and closing the deal.

"Many people view selling as tactical and haven't taken the broader view that you will need sales skills even if you aren't managing a sales force," says David Godes, an associate professor at Harvard. "If you're going into banking or consulting, how do you get clients and how do you raise money?"
It's about time. Superior salespeople are always in short supply. They succeed based on solid, long term relationships.
Posted by James Zellmer at 10:19 AM

April 8, 2006

Godin on Financing Your Startup

Seth Godin:
I'm frequently asked (by friends, and sometimes, aggressive strangers) to help them find someone to fund their company. Often, but not always, these people are happy to hear the following answer.

1. If you fund your company, even a little, you've just sold it. Maybe not today, or tomorrow, but one day. That's because rational investors are funding your company in the expectation that you are going to sell it and make them a profit. (sure there are exceptions, but not many). So, if you don't expect that your company will be easy to sell for a big profit, or you don't ever want to sell your company, it's not a smart idea to raise money for it.
Posted by James Zellmer at 6:29 PM

April 5, 2006

Dealer Activism for GM's Embattled Chairman

Lee Hawkins, Jr., Monica Langley and Joe White:
Besides Mr. Fisher's statement, Mr. Wagoner recently has won the backing of two prominent GM dealers. John Bergstrom, chairman of Wisconsin-based GM dealership chain Bergstrom Automotive, sent a letter to the board late last week to "share with you my total support and respect for Rick Wagoner...who has earned the respect of all of us in the retail network."

Another dealer, Carl Sewell, who has 15 GM franchises in the Dallas area, recently began talking to other dealers to say, "We need to come to our company's and Rick's defense." GM is providing his dealerships with "the best product we've ever had," he said, adding that Mr. Wagoner is "a wonderful human being of intellect and integrity."
Posted by James Zellmer at 9:45 AM

April 4, 2006

Long Term Rates Creep Higher

Mark Whitehouse and Serena Ng:
After stubbornly resisting nearly two years of prodding by the Federal Reserve, long-term interest rates are on the rise, a trend that could eventually slow the nation's expansion.

Yesterday, the yield on the 10-year U.S. Treasury note -- the foundation for long-term interest rates -- rose as high as 4.905%, matching a two-year peak set in May 2004. Some analysts believe the yield is on a run that will take it above 5%.

The upturn, spurred by deepening economic growth in the U.S. and abroad, is pushing up the cost of a widening range of consumer and business loans -- including 30-year mortgages and corporate bonds -- from extraordinarily low levels.
Posted by James Zellmer at 8:07 AM

March 29, 2006

Google's $2Billion Stock Sale

It must want to buy something. No other conceivable explanation jumps to mind for why a cash-gushing monster with an $8 billion war chest would toss away another 5 million shares in tonight's shelf filing.

Scheduled 2006 big ticket items are $1 billion to AOL for the search deal, $1 billion (rumored) to Dell for the Google Pack deal, and $1-$2 billion for capex, all offset by an estimated $2-$3 billion of positive cash flow. Add that together and you get a net 2006 cash outflow of maybe $1 billion, leaving $7 billion on the balance sheet--more than enough to compete with anyone except...
Posted by James Zellmer at 10:57 PM

March 28, 2006

Making a Market in Talent

Lowell L. Bryan, Claudia I. Joyce, and Leigh M. Weiss:
Savvy companies understand the competitive value of talented people and spend considerable time identifying and recruiting high-caliber individuals wherever they can be found. The trouble is that too many companies pay too little attention to allocating their internal talent resources effectively. Few companies use talented people in a competitively advantageous way—by maximizing their visibility and mobility and creating work experiences that help them feed and develop their expertise. Many a frustrated manager has searched in vain for the right person for a particular job, knowing that he or she works somewhere in the company. And many talented people have had the experience of getting stuck in a dead-end corner of a company, never finding the right experiences and challenges to grow, and, finally, bailing out
Posted by James Zellmer at 12:48 PM

March 21, 2006

"Trusting the Marketplace"

Billmon takes on political/business hypocrisy.
Posted by James Zellmer at 10:18 PM

March 20, 2006

UW Grad Carol Bartz Offers Tech CEO Advice

Carol Hymowitz:
Carol Bartz has outlasted most CEOs of big companies. She has been chief executive of Autodesk for the past 14 years, when the median tenure is just five years. She led the Silicon Valley software company through economic ups and downs. In May, Ms. Bartz will relinquish her CEO post and become executive chairman. But her longevity as CEO gives her a rare perspective on what it takes to weather mistakes and business cycles and to be an agent of change.

Don't rest on your honeymoon-period laurels.

When she first became CEO, Ms. Bartz joked that her task was "playing Wendy to the Lost Boys of Autodesk." The company had one product, profits were sagging and employees, who brought their dogs and cats to the office, weren't used to answering to anyone. Even by Silicon Valley standards, the atmosphere was chaotic, choking creativity.
Posted by James Zellmer at 1:34 PM

What's the Biggest Change Facing Business in the Next 10 Years?

Fast Company:
In Fast Company's first decade, we introduced readers to a lot of amazingly smart people. To launch our second, we asked 10 of our favorite brains what's next--and how to get ready for it.
I think Malcolm Gladwell nails it, business will become much more active in political issues:
"Business has to find its national voice. It has to be engaged in the politics of this country in a way it's not accustomed to. Right now, executives are very good at saying, 'Cut our taxes, cut our regulations.' And they're really terrible at making far more important and substantive arguments about social policy. It's time they stopped banging this one-note drum and started saying that a lot of the things that have been relegated to ideology are, in fact, matters of fundamental international competitiveness for this country.

Take, for example, health care. We are ceding manufacturing jobs to the rest of the world because we can't get around to providing some kind of basic, uniform health insurance. Because of our strange ideological problem with nationalized health insurance, we're basically driving Detroit out of business--which strikes me as a very counterintuitive, nonsensical policy. The simple fact is that GM and Ford and Chrysler cannot compete in the world market if they're asked to bear the pension and health-care costs of their retirees. Can't be done. It's that simple.
Posted by James Zellmer at 12:57 PM

March 17, 2006

Why Don't More Businesses Use Prediction Markets?

Tyler Cowen:
Last week in The New York Times (TimesSelect), Joseph Nocera quoted Robin Hanson as saying private businesses had not made a breakthrough with the use of idea futures. It seems natural to let your employees bet on future business conditions, the success of product lines, or broader questions of corporate strategy. Microsoft and Google and a few other companies have played with the idea, but it does not (yet?) seem to be taking off. Why not?
  • Prediction markets threaten the hierarchical control of top managers. It would become too obvious that most managers are idiots, unable to predict the future.
  • Prediction markets make a big chunk of the bettors into "losers." Yet within a company morale is all-important. Businesses proceed by soliciting feedback, and by reshaping their plans to pretend that everyone is on board and has an ego stake in the final outcome. Prediction markets make this coordination more difficult. Once people make bets, they start rooting for their bet to win and for the other bet to lose. They move away from maximizing the value of the firm and develop an oppositional mentality vis-a-vis other employees. Furthermore it is disruptive to have a running tally on who are the winners and losers each day.
Posted by James Zellmer at 10:23 PM

Super Target Plans

Madison Alder Zach Brandon posts the latest development plans for Fitchburg's Super Target.
Posted by James Zellmer at 6:36 PM

March 8, 2006

GM's Slide: Bosses Misjudged New Urban Tastes

Lee Hawkins, Jr (a writer who used to work in Madison and Milwaukee):

In December, General Motors Corp. ran a series of ads across the U.S. showing Cadillacs being driven in snow. The decision to do so was made by the giant car maker's executives in Detroit, where on Christmas Day, temperatures hovered just above freezing.

The ads also ran in Miami, a vibrant car market where GM has bombed for the past 15 years. As Christmas dawned, temperatures there started climbing into the high 70s.

GM is struggling under a financial burden created by monumental pension and health-care obligations. But it's also having a hard time persuading Americans to buy its cars. One reason: GM's cumbersome and unresponsive bureaucracy, the one that ran the snow ads in Miami, has for years failed to connect with the tastes and expectations of consumers outside the company's Midwestern base.

Hawkins does a nice job digging into this issue with examples from mid level GM employees. GM has a large assembly facility in nearby Janesville.

Posted by James Zellmer at 9:33 AM

March 7, 2006

How Wisconsin Lost Its Big Advantage in the Ginseng Game

Jane Zhang:
In a cramped shop filled with stale aromas of Chinese herbs, Keary Drath, a stout Wisconsin farmer and self-appointed ginseng sleuth, picked up a dry, wrinkly ginseng root, broke it in half and chewed it.

Clerks and customers of Ginseng City Trading Inc., stopped haggling in their rapid-fire Mandarin and stared. "From China," he declared. "Not Wisconsin."

"What's the difference?" asked a shocked customer, Max Chen, who has used ginseng for 20 years. "They all say it is Wisconsin ginseng. I know Wisconsin's is superior."

Mr. Drath, 42 years old, wishes he had an easy way for Mr. Chen and millions of other ginseng buyers in Asia and in Chinatowns all over the world to make the distinction. The future of Wisconsin's century-old ginseng farming business, now under attack by global rivals, depends on it.

The root has been worshiped as an energy-balancing folk medicine for 5,000 years. Ginseng -- or Ren Shen, meaning "Man Root," in Chinese -- has two types. American ginseng (Panax quinquefolius) has a cooling effect. Asian ginseng (Panax ginseng) provides a hot rush of energy.

With its rich loam, sunlight and cool summers, Wisconsin -- especially Marathon County in the central part of the state -- produces premium American ginseng. It is more potent and more bitter than American ginseng grown elsewhere.

To an untrained eye, dried Wisconsin roots look the same as those produced in great quantity in Canada and China. Mislabeling and product mixing abound.

And that is threatening the livelihood of Wisconsin's ginseng farmers, whose roots trace back to the early 1900s when the four Fromm brothers began cultivating ginseng in Marathon County. Ginseng isn't easy to cultivate: It takes four to five years to grow ginseng under wood or fabric canopies.

"Kids are easier to raise than ginseng," says Stephen Kaiser, 59, of Rozellville, Wis., who has been grown ginseng since 1977. "Kids only get colds, flu or pneumonia, but ginseng, it tends to die very easily."
Posted by James Zellmer at 10:47 PM

February 25, 2006

The Birth of the Toyota Prius

Alex Taylor III:

New York (FORTUNE Magazine) � In late 1995, six months after Toyota decided to move forward with its revolutionary hybrid, the Prius, and two years before the car was supposed to go into production in Japan, the engineers working on the project had a problem. A big problem.

The first prototypes wouldn't start. "On the computer the hybrid power system worked very well," says Satoshi Ogiso, the team's chief power train engineer. "But simulation is different from seeing if the actual part can work." It took Ogiso and his team more than a month to fix the software and electrical problems that kept the Prius stationary. Then, when they finally got it started, the car motored only a few hundred yards down the test track before coming to a stop.

It's hard to imagine Toyota (Research), with its aura of invincibility, running into such trouble. But the story of how it brought the Prius to market -- a tale of technological potholes, impossible demands, and multiple miscalculations -- reveals how a great company can overcome huge obstacles to make the improbable seem inevitable. The gas-electric auto represents only a tiny fraction of the nine million cars and trucks the Japanese company will produce this year. But it is the first vehicle to provide a serious alternative to the internal combustion engine since the Stanley Steamer ran out of steam in 1924. It has become an automotive landmark: a car for the future, designed for a world of scarce oil and surplus greenhouse gases.

Posted by James Zellmer at 11:44 AM

February 24, 2006

Plus Shipping and Handling......, Making Money on eBay

Alex Tabarrok:

Would you rather pay $10 and have free shipping or pay $5 and pay $6 for shipping?  Answer: you prefer the latter.  Well, at least if you are like most bidders on eBay. 

Morgan and co-author Tanjim Hossain, an assistant professor at Hong Kong University of Science and Technology, held 80 auctions of new music CDs and Xbox video games to test how consumers respond to different price schemes. In the eBay study, they varied the opening bid price and shipping charges on identical CDs, ranging from Britney Spears to Nirvana, and video games, including Halo and NBA 2K2.

...A perfectly informed and fully rational consumer will merely add together the two parts of a price to obtain the total out-of-pocket price for an item and then decide whether to buy and how much to bid based on this total price.

But that’s not what happened in their eBay auctions. Instead, they found that lowering the opening bid price while raising shipping charges attracts earlier and more bidders and ultimately leads to higher revenues compared with doing the reverse. Those findings suggest consumers pay less attention or even completely overlook shipping costs when making bids...

The quote is from a writeup, the full paper is ...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay (subs required).

Also check out the interesting data on online pricing at

Posted by James Zellmer at 8:42 AM

February 23, 2006

More on General Motors

Robert Farago takes a look at GM's supplier situation in his latest "Deathwatch" editorial:
A couple of days ago, I was talking to an auto industry analyst about the world’s largest automaker. We were discussing the cracks in GM’s hull, trying to figure out which of The General's compartments were already breached, which are filling with water and which remain viable. A wistful tone in the analyst’s voice indicated head-shaking dismay. “I’m no longer hearing anything positive about GM,” he revealed. “The conversations range from how bad it is, to how bad it’s going to get.” I didn’t want to sound like a paranoid fantasist to a new source, so I tried not to out-pessimist the doomsayers. But it wasn’t easy.
GM operates a large SUV assembly plant in nearby Janesville, WI
Posted by James Zellmer at 10:10 PM

February 20, 2006

Wisconsin VC Investment

Wisconsin's Venture Capital investments increased from $38M in 2003 to 68M in 2005, roughly 1/4 that of Minnesota and Illinois.
Posted by James Zellmer at 9:41 PM

February 18, 2006

The Energy Outlook Changes

Ed Wallace:
Posted by James Zellmer at 3:28 PM

February 17, 2006

Surviving Globalism - Caterpillar

Joann Muller:
Caterpillar confronted the same labor costs and Asian competition that the auto companies did. But Cat is doing just fine. Why?

A Midwest manufacturing company, fat and lazy, heavily unionized, suddenly faces foreign competition. You know the ending: massive layoffs, closed factories, consolidation, rumblings of bankruptcy. That's the familiar story of General Motors, Ford and lots of other big manufacturers over the last 20 or 30 years.
Great article, particularly in contrast to GM's challenges.
Posted by James Zellmer at 10:08 AM

Congressman Quizzes Net Companies on Shame

Declan McCullagh:
Rep. Tom Lantos: Can you say in English that you're ashamed of what your company and what the other companies have done?

Google: Congressman, I actually can't, I don't think it's fair for us to say that we're ashamed.

Lantos: You have nothing to be ashamed of?

Google: I am not ashamed of it, and I am not proud of it...We have taken a path, we have begun on a path, we have done a path that...will ultimately benefit all the users in China. If we determined, congressman, as a result of changing circumstances or as a result of the implementation of the program that we are not achieving those results then we will assess our performance, our ability to achieve those goals, and whether to remain in the market.
Posted by James Zellmer at 9:52 AM

February 16, 2006

GM Deathwatch: 07 Tahoe Sales

Robert Farago:
This is a tale of two Tahoes. The first is a wildly successful SUV that’s flying off the lots at full price: a Hail Mary pass that will put General Motors back in the end zone, saving them from the unthinkable humiliation of bankruptcy, with only moments to spare. The second is a gas-guzzling truck that’s being swept out to sea by the vast receding tide of SUV buyers: a four-wheeled indictment of GM's inability to build what America wants to drive at a price that makes the company enough money to stay in business. For the time being, which vehicle you see depends entirely on which one you want to see.
The Chevy Tahoe is built in Janesville.
Posted by James Zellmer at 9:02 PM

Blodget on Amazon's Music Strategy

Henry Blodget:
The WSJ reported Amazon's plans to offer an Amazon-branded iPod competitor and digital music download store. I haven't done much work in this area yet, so please weigh in, but this strikes me as a startlingly bad move.

First, Amazon's entry into this business is shockingly and annoyingly late. As with the Netflix DVD business, Amazon could have owned this category, but in the name of moving deliberately (or of trying to become all things to all people), it allowed other competitors to build a dominant market position. No matter what the company says, winning significant market share in digital music is going to be much harder now than it would have been three years ago.
Posted by James Zellmer at 11:09 AM

February 14, 2006

A Chat with Mattel's Bob Eckhert

The toy industry's big trade show gets down to business in New York this weekend. Meanwhile, in our new series "Conversations from the Corner Office," Kai talks with Mattel's CEO Bob Eckert about the perks and responsibilities of running the world's biggest toymaker.
Eckert is a former Oscar Meyer CEO.
Posted by James Zellmer at 8:58 PM

February 13, 2006

Seven Sins of Fund Management

Barry Ritholtz:

There is a terrific PDF (warning -- its 105 pages) on the Seven Sins of Fund Management. It is a behavioural critique by James Montier, the Global Equity Strategist of Dresdner Kleinwort Wasserstein, and its full of all sorts of smart observations, backed up with data and charts.

I haven't read prior work of Mr. Montier -- but this PDF made me interested in his book, "Behavioural Finance: A User's Guide."

I may be  referencing parts of the PDF in the future, but if you want an overview, here are the 7 Deadly Sins

Sin 1 Forecasting
The folly of forecasting: Ignore all economists, strategists & analysts
Do analysts understand value: who is the greater fool?

Posted by James Zellmer at 9:01 AM

February 8, 2006

Consumer Debt Growth

Barry Ritholtz:
The facts are indisputable - the consumer has grown increasingly levered just when interest rates are rising and the large amount of mortgages based on teaser rates are about to be reset.

The facts speak for themselves:
  • Non-discretionary consumer spending (for items like food, energy, medical expenses and interest payments) which vacillated in the 44% to 47% range until 2000 has now risen to 54%.
  • Household debt/household assets is at an all-time record high (up from 14% six years ago to nearly 19% today).
Posted by James Zellmer at 9:27 AM

February 7, 2006

Death of Blockbuster, Part IV

Chris Anderson pens and charts his way to the conclusion that:
Bottom line: even in Hollywood, the home of the blockbuster, hits are losing their power. It's not nearly as dire as in music, but it's trending in the same direction. Does this mean the end of movies? Not at all--there have never been more films made, just as there has never been more music available than today, despite the fact that the bestsellers sell less.

It's not that people aren't watching films and listening to music, it's that they're watching different films and different music--we're just not following the herd to the same hits the way we used to. I'd guess that most of the decline in box office is due to the rise of the DVD, not a loss of interest in movies.
Posted by James Zellmer at 2:35 PM

February 6, 2006

The Gladwell Effect

Rachel Donadio:
"PEOPLE are experience rich and theory poor," the writer Malcolm Gladwell said recently. "People who are busy doing things — as opposed to people who are busy sitting around, like me, reading and having coffee in coffee shops — don't have opportunities to kind of collect and organize their experiences and make sense of them."
[mp3 audio]
Posted by James Zellmer at 10:58 AM

February 2, 2006

Small Dairyman Shakes Up Milk Industry

Ilan Brat:
The milk fight, which is being watched in the industry from coast to coast, started because Mr. Hettinga runs a rare hybrid operation. Most dairy businesses either only produce milk, or only process it. He does both. As a result, he falls into a protected class that isn't bound by an arcane system of Depression-era federal rules. Under it, milk processors selling into specific geographical areas, which cover most of the country, must all pay into that area's pool for subsidizing milk prices. But so-called producer-distributors have always been exempt.
Posted by James Zellmer at 10:18 PM

February 1, 2006

Interview with Southwest Airlines CEO Gary Kelly

In the first installment of our new segment "Conversations from the Corner Office," Kai talks with Southwest Airlines CEO Gary Kelly about building a corporate culture, and why the customer isn't necessarily always right.
Southwest continues to have a market cap greater than all of the other airlines, combined. Perhaps, one day, they will serve Madison.
Posted by James Zellmer at 1:36 PM

January 31, 2006

Shopping in 1975

Alex Tabarrok via a Sears Catalog:
Sears’ lowest-priced 10-inch table saw: 52.35 hours of work required in 1975; 7.34 hours of work required in 2006.

Sears’ lowest-priced gasoline-powered lawn mower: 13.14 hours of work required in 1975 (to buy a lawn-mower that cuts a 20-inch swathe); 8.56 hours of work required in 2006 (to buy a lawn-mower that cuts a 22-inch swathe. Sears no longer sells a power mower that cuts a swathe smaller than 22 inches.)
Posted by James Zellmer at 9:40 AM

January 26, 2006

Man Behind the 747 Tells His Story

James Wallace:
Sutter, white-haired and soon to be 85 but still razor-sharp, has finally told his life's story, and that of the 747, in a book with aviation writer Jay Spenser.

"747: Creating the World's First Jumbo Jet and Other Adventures from a Life in Aviation," won't hit book stores until May. But last week I received an advance copy from the publisher, Smithsonian Books.
via enplaned.
Posted by James Zellmer at 9:06 AM

January 25, 2006

Google in China

Rebecca MacKinnon:

So it has happened. Google has caved in. It has agreed to actively censor a new Chinese-language search service that will be housed on computer servers inside the PRC.

Obviously this contradicts its stated desire to make information freely available to everybody on the planet, and it contradicts its mission statement: "don't be evil."  As Mike Langberg at the San Jose Mercury News puts it: their revised motto should now read "don't be evil more than necessary."

Posted by James Zellmer at 3:19 PM

Ford's New Way

Peter DeLorenzo:
I sat there listening to the Ford Motor Company press conference Monday morning - as first Bill Ford, Jim Padilla and then Mark Fields outlined the "Way Forward," confirming the elimination of up to 30,000 jobs and the closings of 14 manufacturing facilities over the next several years, while basically admitting that the company was culturally bankrupt, bureaucratically paralyzed, and woefully and relentlessly clueless about how to function in the modern automotive world - and the first thought that came to my mind is that it's a flat-out miracle this iconic American company has managed to survive this long.

Monday morning's presentation, designed to take us under the tent with Ford executives thinking and talking out loud for the assembled media, financial analysts and a worldwide Ford company audience, was a lurid combination of multiple mea culpas and a blatant pep rally - and the net-net of it was that it exposed Ford to be a company so far out of touch and so far removed from being a competitive force in the U.S. market that I was literally stunned at what I was hearing.
I have to agree with Peter. Reading the blowback from Ford's Monday announcements, I, too wondered where the company is heading, and, if indeed it has been so rudderless, how has it survived?
Posted by James Zellmer at 12:33 PM

January 21, 2006

General Motors Death Watch

Robert Farago:
It’s increasingly obvious that this necessary (not to say inevitable) “restructuring” will have to wait until GM goes under. The General’s generals made that clear when they reacted to Turnaround King Jerry York’s suggestion that GM should deep-six or sell their Saab and Hummer brands. GM execs dismissed the idea with the PR equivalent of a derisive snort. Marketing Maven Monster Mark LaNeve, a man whose comments about GM’s pricing strategy sound a lot like a snake-handler speaking in tongues, assured the press that “all GM’s brands will eventually be profitable.” Bet your bottom dollar? Done. GM has mortgaged its future on baseless brand optimism.
Harsh. We'll see how it plays out.
Posted by James Zellmer at 5:09 PM

January 17, 2006

Archives Help Businesses Learn From Past Mistakes

The documents, products and records a company keeps in its archive help it to create institutional memories -- good and bad. Nike turns to shoes in its archives to be reminded of past successes and failures.
Posted by James Zellmer at 10:09 AM

January 14, 2006

Blodget: The Bear Case for Google

Henry Blodget:
No one else is writing this piece, so it will have to be me. I should say upfront that I'm not predicting that this will happen (yet), and I'm certainly not making a recommendation. I'm just laying out a scenario that could kneecap Google and take its stock back to, say, $100 a share.

Google's major weakness is that it is almost entirely dependent on one, high-margin revenue stream. The company has dozens of cool products, but with the exception of AdWords, none of them generate meaningful revenue. From an intermediate-term financial perspective, therefore, they are irrelevant.

So, the question is, what could happen to AdWords, and what will happen to the company (and stock) if it does?
Rather ironic - and refreshing, coming from Blodget.
Posted by James Zellmer at 6:44 AM

January 12, 2006

It's Not The Technology That Raises Productivity, But How it's Used

Hal R. Varian:
Just dropping a bunch of new personal computers on workers' desks is unlikely to contribute to productivity. A company has to rethink how business processes are handled to get significant cost savings.

As the Stanford economic historian Paul A. David has pointed out, the productivity effects from the electric motor did not really show up until Henry Ford and other industrialists figured out how to use it effectively to create the assembly line. The same is true for computers: just as the early industrialists had to learn how to use manufacturing technology to optimize the flow of materials on the factory floor, companies today must learn how to use information technology to optimize the flow of information in their organizations.
Posted by James Zellmer at 8:22 PM

January 11, 2006

Makers Mark Marketing

Ben McConnell:
For our latest podcast, we spent some time with Maker's Mark CEO Bill Samuels Jr., who described how one rather influential person helped launched the bourbon manufacturer into the stratosphere of recognition.

He also discusses the rationale and practice of "marketing without fingerprints" and the rapid growth of its ambassador community.
Posted by James Zellmer at 10:37 PM

January 8, 2006

Genetic Testing for the Rest of Us - over the Internet

Katherine Seligman:
DNA Direct offers genetics tests that can reveal a predisposition to a half dozen diseases or conditions, among them breast and ovarian cancer, cystic fibrosis, clotting disorders and infertility. Phelan obtained her chromosomal analysis the same way any client could. She spoke with the company's genetic counselor and then went for a blood test. The counselor reviewed the findings to help her interpret what they meant. In Phelan's case, the results provided a surprise -- what looked like partial Turner's syndrome. It was a possible clue to her past struggle with infertility, although she's never had any other symptoms.

"When I realized this I was thrilled," she said. "There may have been an underlying genetic factor. ... I thought, wow, women could go through this and have this help. It can work backward and help diagnose the past."
Posted by James Zellmer at 10:35 AM

January 6, 2006

What Worries Bill Gross

PIMCO's Bill Gross:
This recovery is different because it was spawned and subsequently nurtured on the back of asset appreciation alone. Greenspan and company have high hopes that investment and then employment will ultimately kick in and work their self-sustaining magic one more time, but jobs and investment these days go to Asia at the margin, and domestic animal spirits have been squelched by the looming inevitability of reduced returns on risk capital in a low interest rate world. I’ll leave the Asian story for another day or let you turn on CNN at 11:00pm EST to get your fill of Lou Dobbs - the Dobbsian spectre of foreign competition on the march is undeniably real. My point in this Outlook will be an extension of the thoughts expressed over the past few months that this recovery is on fragile legs because it is asset-appreciation-based and that future asset appreciation is vulnerable based on the weakening stimulative power of interest rates. Therein lies the potential for a white hot speculative blaze turning into a destructive recessionary fire. Such an analogy inevitably suggests that in future years, Rome, Georgia, may not be on fire, but burning.
Posted by James Zellmer at 5:39 PM

January 5, 2006

Northwest's Pilot Scope Clause Contract Negotiations

Sort of an abstract issue, but relevant for Madison, particularly with the growth of 50 to 100 seat aircraft in and out of Madison


Interesting look at labor issues for Madison's #1 air carrier:

Northwest's scope clause is, in fact, particularly onerous relative to scope clauses at other major airlines. United, Delta, American & US Airways can outsource (to regional airlines) aircraft up to at least 70 seats (US Airways can even outsource some aircraft of 86 seats). Continental's limit is 59 seats, but can do a virtually unlimited number of those.

The issue at Northwest is particularly acute because Northwest flies smaller mainline aircraft than any other major airline. Northwest itself flies over 100 DC-9s (photo above). These geriatric aircraft (many of them over 30 years old or more) have just over 100 seats. Click here for further DC-9 data.

Posted by James Zellmer at 9:30 AM

January 4, 2006

Boyd's 2006 Aviation Forecast

Mike Boyd posts some useful reading for any serious air traveller.
Posted by James Zellmer at 8:39 PM

December 29, 2005

Bogle's "The Battle for the Soul of Capitalism"

Vanguard Founder and former CEO John Bogle has written a timely and useful book: The Battle for the Soul of Capitalism. Daniel Berninger posts a nice summary:
"The Battle for the Soul of Capitalism" argues most of the forces that produced the scandals among Enron, Worldcom, et al remain in place.

This means investors should expect another wave of scandals even as the bad actors of the first wave go to trial.

The people running investment funds and corporations increasingly put their short term interests ahead of the long term interests of the investing public. The status quo has corporate CEO's reaping a disproportionate share of returns by finding ways to align the interests of the intermediaries with their own. The link between executive compensation and stock options produces more activities that boost short term stock price even as they jeopardize long term prospects. Bogle makes the point "the more the managers take, the less investors make." By his calculations, investing owners take 100% of the risk while CEO's, intermediary investment bankers, and portfolio managers get 70% of the compounded return. The currently passive nature of stock ownership follows the decline of direct ownership of stocks from 92% in 1950 to 32% today. Portfolio managers do not hold corporate CEO's accountable because the average stock stays in a portfolio for less than a year versus 15 years when Bogle got into the business in the 1960's.
Well worth reading.
Posted by James Zellmer at 10:49 AM

December 23, 2005

Rules for Forecasting - Paul Saffo

Jim McGee:
"Never mistake a clear view for a short distance" - Paul Saffo
  • Know when not to make a forecast.
  • Overnight successes come out of twenty years of failure.
  • Look back twice as far as forward.
  • Be indifferent
  • Tell a story or, better, draw a map.
  • Prove yourself wrong
Posted by James Zellmer at 9:36 AM

December 20, 2005

Word of Mouth Study - Every Day

Walter Carl:

What percentage of all our conversations include talk about an organization, brand, product, or service?

Based on my research with college students (18-29 years of age) the answer is about 17.5%, on average. This is a little higher than the 13.5% I found in an earlier study (see "March 2005" results in the chart and below for details).

Via Ben McConnell

Posted by James Zellmer at 7:19 AM

Southwest CEO Gary Kelly on Competition

Susan Warren:

But the 35-year-old airline is feeling its age, with labor costs rising along with expenses related to maintaining a fleet of more than 400 planes. As its fuel-hedging benefits begin to erode, Mr. Kelly must continue to tighten spending while maintaining the famous warm-and-fuzzy Southwest culture that has generated some of the most loyal employees in the industry. His ability to do that will be severely tested next year when Southwest must negotiate a new labor contract with its pilots union. The airline's financial strength and its long, unbroken string of quarterly profits could make it harder to keep a lid on salaries and benefits.

Posted by James Zellmer at 4:15 AM

December 18, 2005

The State of IT Outsourcing to India

The Economist:

The biggest problem seems to be that the talent pool of skilled workers will not able to keep up. Currently there are about 700,000 people working in IT and outsourcing, which is likely to grow up to 2.3 million by 2010, but only 1.05 million new graduates will qualify from local colleges in the next 5 years leading to a shortfall of 500,000 workers! All this despite the fact that almost 2.5 million students graduate in India each year." From the article: "In IT the growth in Indian exports is expected to come both from the software market, and from 'traditional IT outsourcing'--such as the remote management of whole systems, a market now dominated by the big global IT consultancies. This is expected to rise from 8% of Indian sales now to about 30% in 2010, while software-development's share will fall from 55% to 39%. In business-process-offshoring, the big industries will remain banking and insurance. But rapid expansion is also expected in other areas, like legal services."
Slashdot. discussion.

Posted by James Zellmer at 8:00 AM

December 13, 2005

What employees think about consumer-directed health plans

Vishal Agrawal, Paul D. Mango, and Kimberly O. Packard:
Eager to curb the rising cost of health care, many US insurers and employers are considering consumer-directed health plans (CDHPs), which are designed to lower costs by giving consumers more responsibility for managing their own health care spending.1 Indeed, a survey indicates that this interest is more than justified. We found that the plans encourage value-conscious behavior, increase the consumers' level of engagement with their well-being, and may even promote behavior that leads to better long-term health.

In March 2005 we surveyed 2,500 consumers, 1,000 of whom had been enrolled in a CDHP for at least one year.2 We also conducted extensive interviews with 25 of these CDHP consumers and with seven benefits managers who administer the plans.3 Our goal was to learn how consumers' behavior changes when they become responsible for a greater share of their health care costs.
Posted by James Zellmer at 11:41 AM

December 12, 2005

VC's Survey Opportunities

Julie Hanna:
What about future trends, asked Sahlman. Many venture capitalists made money in enterprise software, until the space was saturated. Will venture capitalists have an impact in fields relating to healthcare, education, and the environment—all areas that show a great demand for new solutions?

"Clean energy is big on the West Coast," said Reiss. "Venture capitalists haven't traditionally invested in those areas that you mentioned . . . but given the amount of money that's in the business, somebody is going to try, and somebody will be right."
Posted by James Zellmer at 8:43 AM

December 8, 2005

Signs of A Bubble?

Tristan Louis:
As we near the end of the year, I realized that it's been about half a decade since the bubble burst on the dotcom world. At the same time, it seems that a number of similar bubble signs may be showing up again. Based on my personal experience, I'd like to present what I consider the top five signs of a bubble being in place. Some may overlap but I've tried to define some generic rules that can be applied to all bubbles, not just the ones in technology
Posted by James Zellmer at 8:09 AM

December 5, 2005

GM's New Janesville Assembled SUV's

Thomas Content:
There's a lot riding on those SUVs, including the jobs of nearly 4,000 workers who assemble Suburbans, Tahoes and Yukons at General Motors' Janesville factory.

The plant was spared from GM's massive restructuring last month, when the company announced it would shutter five factories and scale back a host of others - moves designed to cut 30,000 manufacturing jobs.

The Janesville factory still faces a risk, particularly if oil and gasoline prices spike again, industry observers say.
Posted by James Zellmer at 8:18 AM

November 30, 2005

GM, Janesville and Where do We Go From here?

Tom Still offers commentary on why Janesville survived GM's recent cutbacks. Unfortunately, as he notes in closing, the auto industry will continue to shed jobs. Peter DeLorenzo summarizes Detroit's challenges here.
Posted by James Zellmer at 8:47 AM

November 28, 2005

One in Six Web Users Sell Online - Pew Internet


One in six U.S. Internet users have sold goods and services online and 2 percent do so on a given day, a new study found.

Sales are typically done through such online classifed ads sites as Craigslist or through an auction like eBay, the Pew Internet and American Life Project said Sunday.

Those who use the Internet more frequently, have high-speed broadband connections or have been online longer are more likely to be an online seller, the study found.

Online selling is also higher among men, the more affluent and the better educated.

Posted by James Zellmer at 12:01 AM

November 26, 2005

WSJ on GM Janesville

Wisconsin State Journal Editorial pens a useful, cautious note:
There are no guarantees that GM will succeed with its turnaround plant. That means there are no long-term guarantees for the Janesville plant.

But in today's rapidly changing economy, there are few guarantees for anyone.

The lesson for Wisconsin is that knowledge is vital. The knowledge-based economy is transforming all industries, from auto makers to software developers to genetic engineers. The state should invest in its knowledge assets its schools, colleges and universities. They will not only produce the educated work force we will depend upon but also the research that will generate many new businesses.

Families should also invest in knowledge the education and re-education that will be required to prepare for the changing job market.
Posted by James Zellmer at 6:57 AM

November 23, 2005

Bill Ford Seeks Federal Help

Sholnn Freeman:

Ford Motor Co. Chairman William C. Ford Jr. urged the government yesterday to help struggling U.S. automakers by expanding subsidies for companies that make components for hybrids and other fuel-efficient vehicles, as U.S. automakers race to close a widening technology gap with the Japanese.

In a speech at the National Press Club, Ford asked for more incentives, such as tax credits, to prod consumers to buy hybrids and other vehicles with fuel-saving technology. He also asked Congress for money to retrain workers, and to consider tax incentives to help manufacturers outfit old plants with new equipment. In the speech, Ford said a national strategy is needed to respond to the pressures of globalization, which he called the "economic challenge of our time."

Fascinating. Ford, along with GM and to a lesser extent, the others, gorged on highly profitable SUV sales for years. That strategy does not have legs any longer...

Posted by James Zellmer at 12:01 AM

November 21, 2005

GM's Plant Closings

General Motors Corp. will eliminate 30,000 jobs and close nine North American assembly, stamping and powertrain plants by 2008 as part of an effort to get production in line with demand and position the world's biggest automaker to start making money again after absorbing nearly $4 billion in losses so far this year
Mark Tapscott has more.
Posted by James Zellmer at 9:47 AM

November 19, 2005

Housing Price Insurance

Fascinating, Tyler Cowen:

Just in time for the apparent top of the housing market, the Chicago Mercantile Exchange is introducing futures and options on housing prices in 10 cities for the second quarter of 2006. (Here's an overview of the products, and CME's White Paper on the topic.)

Here is the Slate article.

Addendum: Here is further analysis, from a new blog on risk markets.

Posted by James Zellmer at 12:01 AM

November 16, 2005

Drucker's Intellectual Compass

Carole Matthews:

Drucker had an amazing ability to predict what was coming next, and distilled management into actionable terms for entrepreneurs, eschewing fads of the day. As George Gendron, Inc.'s founding editor-in-chief, once said in a 1996 article, "Both the man and his work have been my intellectual compass for the past two decades." Gendron wasn't alone, and Drucker's works are sure to continue to guide businesses for years to come.
Drucker's four entrepreneurial pitfalls:
  1. The entrepreneur doesn't realize that a new product or service is not successful where he or she thought it would be but it is instead successful in a totally different market. (This, Drucker says, is much more common than you might imagine.)
  2. Entrepreneurs believe that profit is what matters most in a new enterprise. Cash flow matters most.
  3. As a business grows, the person who founded it becomes incredibly busy. Rapid growth puts an incredible strain on a business. You outgrow your production facilities. You outgrow your management capabilities.
  4. When the business is a success, the entrepreneur (who is perhaps bored) begins to put himself and his needs before the business.
  5. For a fuller explanation, check out the complete text of the article here.

Posted by James Zellmer at 12:01 AM

November 15, 2005

The Evangelist of Entrepreneurship

The Economist:
“FORGET space aliens and race cars—here's a game that gives kids skills they can use for the rest of their lives.” So says the blurb for Hot Shot Business, an online game ( played each year by millions of “budding entrepreneurs” who get the chance to open their own pet spa, skateboard factory, landscape-gardening business or comic shop in Opportunity City. Players start marketing campaigns; change products, services and prices; and respond to demanding customers and big news events. And, “as a self-funded entrepreneur, you'll keep all the profits. But if anything goes wrong, well, you're on your own.”
Posted by James Zellmer at 12:54 PM

November 11, 2005

Three "D's" of Customer Experience

Harvard Business School:
Eighty percent of companies believe they deliver a superior customer experience, but only 8 percent of their customers agree, says Bain & Company. Here's how to repair the disconnect.
Posted by James Zellmer at 7:43 AM

Best of What's New in 2005

Popular Science.
Posted by James Zellmer at 7:30 AM

November 9, 2005

Microsoft's Memos

Via Dave Winer. Microsoft discusses fundamentally altering their business to compete in the internet era. Microsoft has for years been fighting the net. They killed Netscape and let their browser die (Internet Explorer has not been updated for years. It will be in 2007 largely due to the rise of the superior, free, open source mozilla firefox browser). Cringely has more.
Posted by James Zellmer at 6:51 AM

November 7, 2005

Microsoft's Irish Tax Shelter

Glenn Simpson:
The citizens of other nations where Microsoft sells its products are less fortunate. Round Island One provides a structure for Microsoft to radically reduce its corporate taxes in much of Europe, and similarly shields billions of dollars from U.S. taxation.

Giant U.S. companies whose products are heavily based on their innovations, such as technology and pharmaceutical firms, increasingly are setting up units in Ireland that route intellectual property and its financial fruits to the low-tax haven -- at the expense of the U.S. Treasury.

Much of Round Island's income is licensing fees from copyrighted software code that originates in the U.S. Some of the rights to these lucrative assets end up in Ireland via complex accounting rules on intellectual property that the Treasury is now seeking to overhaul. The Internal Revenue Service said it is also looking closely at how companies account for such transactions.

In a statement, Microsoft said its European units "report and pay significant amounts of taxes" and that Microsoft "is fully compliant with the tax laws of the United States and all other countries."

Through a key holding, dubbed Flat Island Co., Round Island licenses rights to Microsoft software throughout Europe, the Middle East and Africa. Thus, Microsoft routes the license sales through Ireland and Round Island pays a total of just under $17 million in taxes to about 20 other governments that represent more than 300 million people.
Microosft is not unique. Many firms route their IP through tax havens such as Ireland, Puerto Rico, Cyprus and others.

This tax saving process occurs in everyday products (for some) as well, such as Pepsi & Coke. Both beverage giants locate their flavor facilities in tax havens.
Posted by James Zellmer at 6:41 AM

November 6, 2005

Fascinating: What are Frequent Flyer Points Really Worth?

Gary posts an interesting summary of how frequent flyer programs have propped up several bankrupt airlines.

Posted by James Zellmer at 4:33 PM

October 23, 2005

Silicon Valley, Where Brains Meet Bucks

A recent visit and discussions with a mentor friend of mine reinforce Alan T. Saracevic's article: Silicon Valley, Where Brains Meet Bucks. My friend mentioned two ventures where he stuck with ideas through two bankruptcies until they were successful. That type of risk taking and stick to it attitude is generally not seen (there are exceptions) here.
What do you get when you mix two parts money, a healthy dose of brains and another three parts money? Why, Silicon Valley, of course. The most opportunistic place in the world.
The Madison area has plenty of cash. We simply must be willing to use it. Judy Newman notes that Wisconsin lags in high-tech jobs.
Posted by James Zellmer at 9:54 AM

October 17, 2005

Part-Time Entrepreneurs:

Stephen Grocer:
Carolina Braunschweig, 28, worked as a reporter covering the venture-capital industry for Thomson Corp. in San Francisco. During that period, she also began contemplating the direction of her career and considering ways to supplement her modest reporter salary.

Ms. Braunschweig launched cmbsweets in June 2004, selling jams over the Internet at Today her product line, which includes strawberry, boysenberry and olallieberry jams and apple-honey butter, is also sold in stores in New York, Chicago and the San Francisco Bay Area.
Posted by James Zellmer at 7:22 AM

October 13, 2005


Bob Garfield:
Why? Because the information society is reversing flow. What began as an experiment among a few software nerds has, thanks to the Internet, expanded into other disciplines, notably media and law. But it won’t stop there. Advertising. Branding. Distribution. Consumer research. Product development. Manufacturing. They will all be turned upside down as the despotism of the executive suite gives way to the will, and wisdom, of the masses in a new commercial and cultural epoch, namely: The Open Source Revolution.

“We’re tired of the 20th-century model of being passive consumers of mass content,” says J.D. Lasica, author of Darknet: Hollywood’s War Against the Digital Generation. “We’re transitioning to a new kind of culture. More participatory, more open, more interactive where the locus of control passes.”

Lasica, who believes for example that by now Mickey Mouse should be in the public domain, doesn’t think he’s demanding anything outlandish.
Posted by James Zellmer at 8:22 AM

Sun Prairie, China and the Yuan

Luis Uchitelle:

Richard T. Wilkey (owner of Fisher-Barton), who runs a small Wisconsin company that makes cutting blades for lawn mowers and harvesting equipment, worries that he will soon be vulnerable to competition from China. But he is afraid that by the time he gets help from Washignton, it ma be too late.

Posted by James Zellmer at 12:01 AM

October 12, 2005

Delphi's Bankruptcy

Peter DeLorenzo points out the stakes in play with Delphi's bankruptcy:

The Delphi bankruptcy is the latest major crack in the pressure cooker that the U.S. auto industry has become over the last two decades - only this one is definitely the tipping point into a dimension that industry insiders have been dreading. Lower cost competition from around the world has changed the auto manufacturing landscape completely - and Detroit has been operating under a model that has been obsolete for years. Strapped with a crushing wage and benefits structure negotiated in an environment fueled by an optimism that in retrospect had absolutely no right to exist, the American car companies and the United Auto Workers union are now facing a future that revolves around a harsh reality that comes down to this one simple but all-encompassing statement: change or die.

Posted by James Zellmer at 12:01 AM

October 8, 2005

Bogle's New Book: The Battle for the Soul of Capitalism

The Motley Fool:

Time magazine called him one of the world's 100 most powerful and influential people. Now John Bogle weighs in on the current direction of America with his new book, The Battle for The Soul of Capitalism.

Bogle, who founded the Vanguard Group of mutual funds in 1974, was the company's chairman until 2000. Vanguard, one of the largest fund groups in the world, holds accounts totaling more than $800 billion.

Posted by James Zellmer at 12:01 AM

September 29, 2005

GE Buys Epic Systems Competitor IDX

Ross Sneyd:
GE said the IDX acquisition would significantly its health care offerings and aid in its drive to accelerate the transition to electronic health records. IDX's administrative, clinical and imaging products will complement GE's Centricity-brand applications, the company said.

"GE and IDX have a shared vision on how to accelerate the adoption of electronic health records across the globe," Joe Hogan, president and CEO of GE Healthcare, said in a statement.
Posted by James Zellmer at 6:52 PM

September 18, 2005

WSJ Reader Comments: Customer Service & Sears

Hampton P. Wansley writing in the Wall Street Journal, relates his recent experience shopping at Sears.
I visited a Sears store last week for a washer, dryer and microwave. The salesman couldn't give details about specifications on the machines. A microwave was priced at $119; the salesman said that was wrong price and that it should be $148. I had a terrible conversation with the credit people from the home office. They tried to sell me disability insurance. I said I didn't need it as I hadn't purchased anything. Finally, I ended up buying a Sears long-distance phone card and paid cash. After ringing up the sale, they said card wasn't good until 24 hours had transpired. What a horrible shopping experience. It took over two hours. Sears lost $960 in sales. I went to Home Depot the same day and bought a washer, dryer and microwave for the new home. The transaction took 35 minutes and all the goods were delivered the next day. Mr. Lampert: you've got a very serious problem.
Posted by James Zellmer at 3:43 PM

September 6, 2005

Menu Costs

Tyler Cowen:
"Occasionally menu costs kick in...Dylan Alexander sends me the following: Gas at the pump in downtown Birmingham: $3.99/g. Gas from Hertz when you return it: $3.05/g.
Posted by James Zellmer at 8:42 AM

September 4, 2005

S & P 500 Following Gasoline Price Surges

Barry Ritholtz:

Chart of the Day looks at how the stock market has responded to significant increases in gasoline prices over the past 25 years.

Posted by James Zellmer at 12:01 AM

August 28, 2005

Small Town USA may be an alternative to Offshore Outsourcing

ABC News:
The rural town of Sebeka, population 710, is not exactly Silicon Valley. It's hardly the place computer programmer Dave La Reau expected to find employment.

La Reau, who had been job hunting for years, answered a help wanted ad from CrossUSA — one of a half dozen companies actively recruiting workers to small towns in at least eight states.

He traded his suburban home for a 7-acre farm at a fraction of the price. But La Reau is making half of what he earned in Chicago — before outsourcing put his small company out of business.
"I'm hooked up to the computer in Baltimore," La Reau said while working. "I've got the same screen they have."
All the more reason for Madison to get serious about true broadband service. We're behind the curve... Slashdot discussion.
Posted by James Zellmer at 12:17 PM

August 24, 2005

Costco Selling Health Insurance in California

Wendy Kaufman:
Costco, the members-only discount retailer, is testing sales of individual health insurance policies. The pilot program launched last month in California. It targets mom-and-pop business owners, and those without a job or without job-provided health insurance.
Posted by James Zellmer at 12:01 PM

Talking Straight on Wisconsin Economic Development

I like Mike Ivey's take on Wisconsin's economic development efforts:

If holding conferences and talking about high-tech were the sole gauges of economic development success, Wisconsin would be booming these days like Dublin, Ireland.

Unfortunately, every other state from Alabama to Oregon is trying to market itself as the next Silicon Valley or Research Triangle.

And Wisconsin is having a particularly hard time shifting gears from its traditional old economy of manufacturing and agriculture into a new economy world where brains count more than brawn.

This type of distasteful cheerleading does no one any good. I've worked for entrepreneurs on the west coast and started a business here some years ago. I think our problem is an aversion to risk taking, which manifests itself in our schools and government. These entities typically discuss a "same service' approach year after year after year, which makes no sense.

There are exceptions to the rule, of course, but we need many more people to take a few risks. We also need a simplified business tax and regulatory scheme. The paperwork is simply out of control.

Posted by James Zellmer at 12:03 AM

August 22, 2005

Northwest Machinist Strike: Well Laid Plans Kept Their Planes Flying

Micheline Maynard:
Over the last 18 months, the airline analyzed every job represented by the mechanics' union at every airport and calculated the skills required to fix each of its planes. It then decided how many of those workers it actually needed and what kind of replacements it would require in the event of a strike.

Some differences between the airline's old and new approaches began to appear.

Before the strike, union rules specified that only members of the mechanics' union, known as AMFA, could deliver planes to airport gates. But on Saturday, the pilot of a Northwest 757 in Detroit, upon discovering his plane was not ready, hopped into a pickup truck and went to the hangar to fetch his plane, rather than keep crew and passengers waiting, airline officials said.

Meanwhile, members of the machinists' union, which usually handles tasks like baggage handling and customer service, took on the task of cleaning Northwest's cabins between flights at its hubs here and in Minneapolis, a job that was previously done by the mechanics' union.
Northwest is the Dane County Regional Airport's (Still without WiFi!) largest airline. More.
Posted by James Zellmer at 10:40 PM

August 17, 2005

Dell Customer Support Hassles

Jeff Jarvis relates his Dell customer service hassles. I've had some too - with a just purchased dead printer at home.
Posted by James Zellmer at 8:47 AM

August 14, 2005

Businesses Fight Wisconsin's "Unlimited" Jury Awards

JR Ross:
Businesses are preparing to launch a $2 million campaign to fight a series of state Supreme Court rulings they fear are making Wisconsin an easier place to sue doctors and manufacturers.

They want lawmakers to counter some of the rulings with legislation, and, they say, they want to educate voters on what they calls one justice's "votes in support of frivolous lawsuits."

Wisconsin implemented several laws in the mid-1990s in an attempt to limit jury awards for such non-economic damages as pain and suffering in malpractice and liability cases.

But last month, the state Supreme Court threw out the limits on medical malpractice awards. The next day, it cleared the way for a Milwaukee teen to sue several makers of a lead paint pigment his attorneys claim made him mentally retarded - even though they can't prove the manufactures had any ties to the paint that may have sickened him.
Posted by James Zellmer at 5:53 PM

August 11, 2005

Northwest Goes after the Small Airlines with Non-Stops to Las Vegas

Northwest Airlines, Madison's largest air carrier, announced new non-stop service to Las Vegas yesterday. This service competes with an existing non-stop route flown by Allegiant Airlines. The major airlines have often used this tactic to drive low fare competitors from the market. Northwest flies several non-stop routes from Milwaukee that compete with local favorite Midwest Airlines. These flights are unusual in that they do not require connections on NW's Minneapolis, Detroit or Memphis fortress hubs.
Posted by James Zellmer at 12:04 PM

August 10, 2005

Stock Options: Do They Make Bosses Cheat?

My sister, Mary forwarded this interesting, brief summary of research (PDF) on the shareholder effects of large option grants to the chief executive.
QUESTION for shareholders: If the company's directors give lots of options to the chief executive, should you be happy or nervous?

The traditional answer from academia was that big options grants were good. They aligned the interests of executives with shareholders, and they helped to offset the tendency of executives to avoid risky but potentially profitable investments.

But it turns out that the conclusions were based more on optimistic theories than data. Now, with option grants having become the largest portion of chief executive compensation - worth more than either salary or bonus for the average boss - analysis of data on corporate performance provides some disturbing results.

It appears that really big options grants make it more likely that companies will fudge their numbers and that companies with such grants are more likely to go broke.
Posted by James Zellmer at 8:37 AM

Netscape IPO +10 Years

Kevin Kelly looks at what Netscape's IPO has wrought:

Before the Netscape browser illuminated the Web, the Internet did not exist for most people. If it was acknowledged at all, it was mischaracterized as either corporate email (as exciting as a necktie) or a clubhouse for adolescent males (read: pimply nerds). It was hard to use. On the Internet, even dogs had to type. Who wanted to waste time on something so boring?

The memories of an early enthusiast like myself can be unreliable, so I recently spent a few weeks reading stacks of old magazines and newspapers. Any promising new invention will have its naysayers, and the bigger the promises, the louder the nays. It's not hard to find smart people saying stupid things about the Internet on the morning of its birth. In late 1994, Time magazine explained why the Internet would never go mainstream: "It was not designed for doing commerce, and it does not gracefully accommodate new arrivals." Newsweek put the doubts more bluntly in a February 1995 headline: "THE INTERNET? BAH!" The article was written by astrophysicist and Net maven Cliff Stoll, who captured the prevailing skepticism of virtual communities and online shopping with one word: "baloney."

Posted by James Zellmer at 12:00 AM

August 9, 2005

Thinking Different: GM $5,000 Chinese Minivan

Keith Bradsher, former NY Times Detroit bureau chief and author of the SUV craze critique: High and Mighty writes about the maverick executive behind GM's successful $5,000 Chinese minivan. The executive, Philip F. Murtaugh, is of course, no longer with GM.
Their development was led by an American, Philip F. Murtaugh, a native of Ohio and a maverick executive who was willing to zig while the rest of G.M. was zagging. Mr. Murtaugh was able to create in China the kind of innovative environment that G.M. has struggled for decades to achieve in its American operations. But whether G.M. can duplicate elsewhere its achievements in China or even keep its pace here is unclear.

In what may be a telling sign of the corporate culture at G.M., Mr. Murtaugh's success in China led not to promotion but to his departure from the company. G.M. declined to discuss personnel matters, but both it and Mr. Murtaugh said he resigned and was not dismissed.

A soft-spoken man in a company known for autocratic leaders, Mr. Murtaugh ran the China operations for more than nine years from his base in Shanghai, repeatedly making some of the best calls in the industry. Now he finds himself unemployed and living in a small community in rural Kentucky.
Bradsher's tenure covering the auto industry was rather controversial. More on Bradsher.
Posted by James Zellmer at 7:45 AM

August 5, 2005

Land's End President Out

Mike Ivey:

The turmoil continues at Lands' End with the firing of president and CEO Mindy Meads after just 18 months at the helm of the clothing retailer.

Meads had been promoted to Lands' End CEO in February 2004.

Replacing Meads as interim president is David McCreight, executive vice president of merchandising for Lands' End.

Posted by Erika Frederick at 11:15 AM

Green Bay's Schneider National: HBR on their Operational Innovation

Great example of a traditional company that continues to improve. I remember using Schneider years ago, on the west coast and being astonished at their unique GPS shipment tracking system. This was in the late 1980's.... Michael Hammer takes a look:

That's the bad news. The good news is that Schneider's leaders did not give up, but restarted the effort in a different way. This time around the company was astoundingly successful. The time to respond to a customer's RFP, which had been in the range of 30–45 days, plummeted to 1–2 days. These results started to appear within nine months of the project getting underway and were fully realized in less than two years. By getting back to customers so much faster than its competitors, Schneider was able to shape the terms of competition. The result was a rise of some 70 percent in the percentage of bids that Schneider won, which translated into sales increases of hundreds of millions of dollars annually. Ironically, many of the ideas that had been developed in the original project resurfaced in the new system for responding to RFPs.

So what changed between the first and second efforts that made the difference between failure and success? There were six key factors:

Posted by James Zellmer at 12:01 AM

August 3, 2005

Peter Drucker

On Point:

5-year-old Peter Drucker is one of the world's most respected thinkers. For six decades, he's helped shape many of today's great corporations and made the study of management theory a respected discipline. As a journalist, teacher, consultant, and author of more than 35 books, Drucker's expertise reaches far beyond the confines of the Fortune 500.

Posted by James Zellmer at 12:05 AM

August 2, 2005

A New Kind of Middleman

Roark Johnson:
But Noone’s outlook couldn’t be more global. He spends a typical weekend watching Chinese-language movies and listening to Chinese-language tapes. At least once a week he makes sure to eat with chopsticks. “You’ve got to show people you’re interested in their culture,” he says.

Noone is interested, all right. The 54-year-old entrepreneur is founder and CEO of Capacitor Industries, which imports low-cost electronic components from China and sells them to motor makers and other manufacturers in the U.S. and, increasingly, abroad. His stock-in-trade is capacitors: tiny devices that store charges, maintain electrical currents, keep motors running, and protect computers and communications equipment from surges. Every motor manufacturer needs a steady supply of them, which has helped send Noone’s annual sales to $5 million.
Posted by James Zellmer at 6:47 AM

July 30, 2005

Life is Customer Service

Jeff Jarvis continues his ongoing "Dell Hell" saga with links to Craig Newmark's customer service philosophy, which is right on:

In Technology Review, Craig Newmark writes about his list and his view of customer service. As I think I’ve said here before, I’ve heard Craig introduce himself at more than one event as the guy who does customer service and that always gets a laugh but it is no joke. Customer service is the highest ethic of his venture. It is the highest ethic of open source. It is the highest ethic of a true community. If newspapers… and Dell… and AOL… and government remembered that customer service is their job, they’d be a lot more successful than they are.
I, too, have had problems with a recent Dell purchase. I now have an unusable Dell laser printer, thanks to a failed firmware upgrade. On hold to Dell support in India for 90+ minutes (pleasant person, but what a waste of time), I was advised to try it again, which I knew would not work as the printer is evidently in an infinite loop. After several go rounds, I called Dell and asked them to take it back. Unfortunately, my request was 29 days after the purchase date and Dell evidently only accepts returns 21 days after the purchase date. I've turned it over to my credit card company....

My Father emphasized great customer service throughout his career. Dell is simply being cheap and it will cost them.

Posted by James Zellmer at 12:04 AM

July 27, 2005

The Personal 40 MBA

Josh Kaufman:

My goal was to reduce the PMBA list to no more than 40 titles. Here are my editing criteria:

  • Valuable Content - each book has to contain a lot of useful, practical information on how business works, how you can add value, and must explain why the material in the book is important to know. As a whole, the list must cover as much ground as possible, while providing a mix of both complimentary and conflicting viewpoints.

  • Acceptable Time Commitment - no 1,000 page books here, although there are a few (good) textbooks in the mix for the more technical topics (accounting, finance, real estate). You should be able to get the key points of each book in a few hours, or by reading the chapter introductions and summaries of the textbooks.

  • Reference Value - is the book going to be one you pick back up when you need information? How does the book re-read? Is this a book that is worth keeping for many years?

Posted by James Zellmer at 12:03 AM

July 25, 2005

Process Improvement - American Airlines

Alexandra Marks:
Two American Airlines mechanics didn't like having to toss out $200 drill bits once they got dull. So they rigged up some old machine parts - a vacuum-cleaner belt and a motor from a science project - and built "Thumping Ralph." It's essentially a drill-bit sharpener that allows them to get more use out of each bit. The savings, according to the company: as much as $300,000 a year.

And it was a group of pilots who realized that they could taxi just as safely with one engine as with two. That was instituted as policy has helped cut American's fuel consumption even as prices have continued to rise to record levels.

From the maintenance floor to the cockpit, American Airlines is daily scouring operations to increase efficiency and find even the smallest cost savings. It's paid off: Last week, the company announced its first profit in almost five years.
Via John Robb
Posted by James Zellmer at 8:07 AM

July 24, 2005

Racine's Artist Colony

Robert Sharoff:
IF Racine, Wis., is not yet the Hamptons of the Midwest, it's not for lack of effort.

This formerly gritty industrial city roughly 70 miles north of Chicago and 30 miles south of Milwaukee on the shores of Lake Michigan has been trying for much of the last decade to reinvent itself as an artist's colony and tourist destination.

The efforts have included the opening of the $11 million Racine Art Museum on Main Street in 2003 and the creation of a gallery district centering on nearby Sixth Street, currently home to about a dozen galleries.
Racine Map. Madison based Gorman & Company, developer of the Mitchell Wagon Factory Lofts is mentioned in Sharoff's article.

Racine is considering county-wide WiFi. Perhaps they'll have it in place before we Madisonians do?
Posted by James Zellmer at 11:12 AM

Small Town vs. Wal-Mart: Jefferson Opposition Alderman Faces Recall

Reid Epstein:
The company left in its wake a recall effort against one alderman, a local newspaper smarting from the loss of a major advertising client and hurt feelings from people on both sides of the debate.

David Olsen, the targeted alderman, said the schism has divided the city of about 7,500 more than an 11-month strike at the local Tyson Foods plant in 2003.
Posted by James Zellmer at 8:48 AM

July 23, 2005

Entrepreneurs: Competing with the Big Firms

Tom Peters offers up several useful tips on competing with big organizations:
Can the small player compete in a world of Citigroups and Bank of Americas? I said it was a lark. And I more or less meant it. That is, among other things, giants— "new tech," CRM, etc notwithstanding— will always be clumsy and impersonal relative to an "intimate local" who is really out to make a dramatic difference.
Posted by James Zellmer at 6:28 PM

Customer Service - 2005

Joanne Jacobs tells a useful story about trying to get money back from a credit card company - with a classic ending.

Posted by James Zellmer at 6:39 AM

July 22, 2005

Open Source Medical Records System

Gina Kolata:
Now, however, Medicare, which says the lack of electronic records is one of the biggest impediments to improving health care, has decided to step in. In an unprecedented move, it said it planned to announce that it would give doctors - free of charge - software to computerize their medical practices. An office with five doctors could save more than $100,000 by choosing the Medicare software rather than buying software from a private company, officials say.
Verona based Epic Systems creates and supports a medical records product along with many other health care tools. Slashdot discussion. Worldvista site.
Posted by James Zellmer at 12:19 PM

Kimberly-Clark Plans Job Cuts/Plant Closings
Kimberly-Clark Corp., which has plants in Neenah and Marinette, said Friday that it will cut about 6,000 jobs and sell or close up to 20 manufacturing plants as it increases spending on certain core products and emerging markets over the next three years.

The company, based in Irving, Texas, makes such products as Kleenex tissues and Huggies diapers. Kimberly-Clark disclosed its plans as it reported that its second-quarter earnings fell to $421.8 million, or 88 cents per share, from $454.3 million, or 90 cents per share, in the comparable period last year.
K-C moved it's headquarters from the Fox Valley to Dallas years ago. They still have a large presence in Wisconsin.
Posted by James Zellmer at 12:15 PM

Trade & Interest Rates: China sort of Floats the Yuan

The Wall Street Journal's Econoblog provides a useful look at China's decision Thursday to slightly float the Yuan (this will likely drive interest rates here higher, unless we actually start to significantly reduce our deficits):

This would imply an unraveling of the Bretton Woods 2 regime and will force the U.S. to make significant and painful adjustments to its private and public savings droughts, droughts that much more than a global savings glut explain why the U.S. external balance has been worsening over time. Then, U.S. private spending, both consumption and investment, may have to fall sharply -- driven by higher U.S. interest rates and a bursting of the housing bubble -- relative to U.S. output to make room for an improvement of U.S. net exports.

And how much U.S. private spending may be squeezed will depend on whether there is a meaningful structural reduction in the U.S. fiscal imbalance. Less foreign financing of the U.S. external deficits would, for unchanged fiscal balance, tend to crowd out private consumption and private investment via higher interest rates. This U.S. adjustment could be painful.

Reminds of a tale that goes something like this (paraphrasing): a butterfly flaps its wings and this ends up being a hurricane halfway around the world.

Posted by James Zellmer at 12:02 AM

July 21, 2005

Nominee Represented CUNA in Supreme Court Case

WASHINGTON--John G. Roberts, President George W. Bush's nominee to the U.S. Supreme Court, has a history with credit unions: He argued the AT&T Family FCU case before the U.S. Supreme Court on Oct. 6, 1997.

At the time, Roberts was a 42-year-old partner in the law firm of Hogan & Hartson. He argued the case for the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions, which intervened on behalf of the National Credit Union Administration (NCUA).

The Supreme Court eventually ruled against credit unions in the case, based on a suit brought by bankers in 1990 against NCUA over the field-of-membership expansion the agency granted AT&T Family FCU, Winston-Salem, N.C. The events culminated into the push for the Credit Union Membership Access Act (H.R. 1151), which President Clinton signed into law in August of 1998.

In 1997, after arguing the case, Roberts told CUNA News Now, "It's always a mistake to try to predict the outcome of a case from the justices' questions."

He explained that there was nothing credit unions and members could do to influence the court's decision. "The court isn't like Congress and third parties we've lobbied. The court is looking at the law," said Roberts.

CUNA General Counsel Eric Richard worked with Roberts during the AT&T case. He said the nominee is "enormously talented with an exceedingly bright legal mind."

"CUNA and the credit union movement were privileged to have been represented by him," said Richard. "We wish Judge Roberts all the best."

Posted by Erika Frederick at 3:43 PM

July 15, 2005

Great Management: Southwest Grows Airline Profits

Southwest Airlines continues to make it happen in what is obviously a very difficult market - the airline business.
But Wall Street's focus remains on Southwest's ability to fight off the crippling effects of high oil prices with financial contracts that have essentially locked in lower fuel prices for the airline while its competitors groan under heavier costs. Though oil prices topped $60 a barrel in the quarter, Southwest has secured financial hedges that limit 85% of its fuel costs during the year to an equivalent average oil price of $26 a barrel.

The hedging strategy saved Southwest $196 million in fuel costs during the quarter, reducing the increase in Southwest's per-gallon jet fuel expenses to 25%, compared to twice that for its competitors. Through other cost cuts and productivity improvements, Southwest said it was able to drive down its overall unit costs in the quarter by 3.5%, to 7.81 cents per available seat-mile flown from 8.09 cents a year earlier.

"Considering soaring oil prices and the enormous operational challenges our company and industry have faced over the past four years, our operating cost performance was exceptional and better than we expected," said Mr. Kelly. Excluding fuel, expenses per seat-mile flown fell 7.7% to 6.27 cents.
If only they flew to Madison...
Posted by James Zellmer at 8:35 AM

July 10, 2005

Biotech Continues to Grow in San Francisco

Steve Bergsman:
EARLIER THIS YEAR, SIRNA THERAPEUTICS ANNOUNCED it was moving its corporate headquarters from Boulder, Colo., to San Francisco -- one more in the long line of biotechnology firms to put down roots in the region. From a real-estate perspective, homegrown and transplanted companies together have transformed the fabled Bay area into the largest biotech community in the country, occupying 16 million square feet. And demand for laboratory space, from San Francisco to Palo Alto, shows no sign of slowing, as the proximity of Genentech and first-rate universities beckons other research firms.
Posted by James Zellmer at 4:31 PM

July 4, 2005

Wisconsin Low in Job Quality

Joel Dresang:

Wisconsin's overall job quality ranked 39th out of the 50 states and the District of Columbia in 2003, based on the research released Thursday. The study used government data to define job quality by the average wages paid per industry and occupation.

Compared with the national mix of industries, Wisconsin had smaller shares of workers in fields such as information; finance and insurance; and professional, scientific and technical services, all of which pay higher-than-average wages nationwide, said Tom Rex, associate director of the research center at Arizona State's W.P. Carey School of Business.

Posted by James Zellmer at 12:01 AM

June 18, 2005

Globalization, It's Not Just the Wages

Louis Uchitelle pens an interesting article on Whirlpool's worldwide production system for washing machines. Quite interesting, particularily their comments on the very small labor cost component in the final product.

Posted by James Zellmer at 12:00 AM

June 15, 2005

Northwest Airlines' Fortress Midwest Strategy

Susan Carey writes about Northwests' "catering to travelers between small and midsize cities in the Upper Midwest. This "heartland" gambit aims to keep fares higher and discourage discounters from flying there. .... Going one big step further, Northwest also has been expanding aggressively with nonstop flights between nonhub cities, so that more passengers don't have to make connections through one of its hubs when flying to some domestic cities."

This strategy has manifested itself with 50 seat jet non-stop flights between Madison and Washington's Reagan National Airport (though at inconvenient middle of the day times) and a variety of non-stops from cities like Milwaukee and Indianapolis to New York, Washington and other east coast destinations. This is also an attempt - futile, I think to kill Midwest Airlines.

Northwest is largely betting that flyers will put up with the small, uncomfortable jets in an effort to grow frequent flyer miles (the hidden secret here is that frequent flyer miles are growing more difficult to use by the day, unless you use a lot of them.....)

On a related note, the Boyd Group has written about the declining utility and economics of 50 seat jets for some time. They recently mentioned growing demand for 100 seat planes. I think, unfortunately, it will be difficult for Madison to grow service with 100 seat aircraft - I hope I'm wrong on this. Microjets will likely be one popular alternative in places like Madison.
Posted by James Zellmer at 7:37 AM

June 12, 2005

More on GM Janesville

Brian Bull on GM Janesville's prospects in light of recent statements by CEO Rick Wagner that additional plants would be closed.

Posted by James Zellmer at 12:01 AM

June 7, 2005

GM Janesville?

GM Chairman Rick Wagner mentioned additional plant closings & layoffs during today's shareholder's meeting in Wilmington, DE:
Going forward, in order to achieve full capacity utilization based on conservative volume planning scenarios, we expect to close additional assembly and component plants over the next few years, and to reduce our manufacturing employment levels in the U.S. by 25,000 or more people in the 2005 to 2008 period. We project that these capacity and employment actions will generate annual savings of approximately $2.5 billion.
Posted by James Zellmer at 12:11 PM

10 Big Thinkers for Big Business


They work in vastly different fields, but the leaders profiled in the following pages are much alike—they have new takes on old business models, a knack for seeing around corners and an appetite for big risk. A case study of New Thinkers.

Posted by James Zellmer at 12:00 AM

June 2, 2005

AJR on Lee Enterprises, Parent of the Wisconsin State Journal

Lori Robertson:
At the Wisconsin State Journal in Madison, Bill Wineke, the books editor and a columnist, recalls a time in the early 1970s--he's been there since '63--when he wrote a column that was distributed to about 15 Lee papers.

After a number of weeks, the State Journal decided to syndicate the column and asked the papers to pay 50 cents each, for postage. Every one of them dropped it.


Ron Seely, science and environment reporter at the Wisconsin State Journal, said in late April that his paper was leaving two key jobs unfilled: a regional reporter position and an assistant city editor job. "That makes it harder on our already small staff," he said. "That's frustrating."
Jason Shephard take a look at the local daily newspaper business in the June 2, 2005 Isthmus - available now. Shephard mentions Lee's 20% profit margins along with a few local reporter's comments.
Posted by James Zellmer at 2:39 PM

June 1, 2005

Is Wharton Ruining American Business?

Mauren Tkacick:

That is, anyway, the assertion of an increasingly influential batch of business-school professors, including noted iconoclasts like McGill University management guru Henry Mintzberg and Yale economist Robert Schiller (who wrote that MBA curriculums are "so devoid of moral content that the discussions of ethics must seem like a side order of some overcooked vegetable"). More reasoned types like the late Sumantra Ghoshal of the London Business School, whose posthumously published Bad Management Theories Are Destroying Good Management Practices has roiled the business education world, agree. "Business schools do not need to do a great deal more to help prevent future Enrons," Ghoshal wrote. "They need only to stop doing a lot they currently do."

Posted by James Zellmer at 12:00 AM

May 28, 2005

The Pleasures of Local Businesses

I've had several recent great experiences with local small businesses that are worth sharing:
  • Harmony Valley Farm (Saturday morning Farmer's Market) offers a 1LB bag of triple washed greens for $7.00. Great stuff and lasts a week.
  • Ideal Body Shop performed some minor body work on an older car last summer. Unfortunately, paint on the repaired area recently began to chip. I drove the car back to Ideal and they replaced the part at no extra cost - no questions asked!
  • I stopped at Sentry Hilldale to pickup some fruit recently. While looking over the strawberries, an employee stopped to make sure I chose those that did not have any mold. Refreshing!
  • Flying recently, I've been very pleased with Midwest Airlines. Sign up for their periodic email promotions. I've flown to several east coast cities for $180 to $210 round trip (keep looking - Flying from Milwaukee rather than Madison saves you some money) on their "Signature Service" - the traditional Midwest configuration with comfortable domestic business class seating.
Shop local, it's good for all of us.
Posted by James Zellmer at 4:24 PM

May 27, 2005

Giving Electronic Books Away Increases Paper Book Sales

Gray was asked to study the publishing strategy of the Human Sciences Research Council (HSRC) in South Africa. This research institution had a traditional strategy of publishing lots of research books, and selling them. Gray convinced them to change their strategy -- to give away all their research books for free online, and offer a high quality print-on-demand service for anyone who wants the paper version. The result: "the sales turnover of the publishing department has risen by 300%." As she concluded her presentation, "giving away books and lead to an increase in our book sales." There's much much more in her interesting analysis.
Download the pdf.
Posted by James Zellmer at 8:00 AM

May 24, 2005

Selling to the Department of Homeland Security

Brian Clark takes a look at the opportunities for small businesses in the Department of Homeland Security's massive $40B budget. I hope some Wisconsin firms are feeding at the trough.

Posted by James Zellmer at 12:00 AM

May 21, 2005

Pepsi's Interesting Mea Culpa

The company that Don Kendall built and Roger Enrico grew has an interesting PR problem.
Pepsico President Indra Nooyi delivered a controversial commencement speech at Columbia Business School. Pepsi has been backtracking ever since on their corporate website.

I wonder what would have happened to a local truck driver who might have given a similar speech to a High School's graduating class, or perhaps a mid level manager speaking at a regional business conference? Somehow, I think they would be looking for something else to do. Background on her speech via google. BusinessWeek posted Nooyi's remarks. Diane Brady refers to Nooyi's inept analogy.

Sugar Water....
Posted by James Zellmer at 8:25 AM

May 20, 2005

10 Wisconsin Small Businesses & Investor Tax Credits


"I championed legislation to spur more venture capital investment, as it is essential to the state's economic growth," Governor Doyle said. "By encouraging investors through tax credits to make these crucial investments - we are helping to turn these great ideas into viable, job-creating businesses."

The Angel Investor and Venture Fund Tax Credit Programs offer Wisconsin income tax credits to angel investors and investors in seed-stage venture capital funds. These programs are designed to increase the supply of both qualified angel investors and investors in qualified venture capital funds. The tax credits are available only for investments made in technology businesses qualified by Commerce. As Commerce qualifies businesses for investment, it will list them on the Commerce website.

Posted by James Zellmer at 12:01 AM

May 18, 2005

More Wal-Mart Supercenters?

The Daily Union Editorial Page:
That said, we can’t help but notice that the Daily Union staffers have been receiving more than their fair share of “thank-yous” of late, and particularly since May 3. That was the day we reported that the Jefferson Common Council decided 5-3 to ignore high circulation figures and drop the Daily Union after nearly two decades as the city’s official newspaper. Apparently a lot of our Jefferson readers now want us to know that they, at least, appreciate our efforts. Their pats on the back have felt nice. Conversely, the stabs from five aldermen who perceive our coverage of municipal meetings as biased and erroneous have not. They’ve pointed, in particular, to one discussion on Wal-Mart in which proponents claim we slanted our front-page story against a SuperCenter being built in Jefferson. We’ve also misinterpreted quotes recorded on tape, they say.
While it is no secret that the Daily Union thinks Wal-Mart has gotten too big for its britches and doesn’t need another SuperCenter so close to the one in Watertown, we’ve kept that opinion on the editorial page … that same page we’ve opened for all views, both pro and con. As to being able to read the minds of city officials whose words don’t always coincide with their intended meaning, we can’t. Despite what some might think, we’re not omnipotent. And regarding editing stories so they’re biased toward our own viewpoints, we don’t. We don’t have the time, the ego or, most importantly, the desire to slant the news in any direction other than down the center. No, we’re just sitting here doing our job … thanks or no thanks, official city paper or not. And rest assured, Jefferson, we’ll be doing that for many, many years to come.
Posted by James Zellmer at 3:05 PM

The Amazing Rise of the Do it Yourself Economy

Daniel Roth:
It used to be that a tinkerer like Misterovich could, at best, hope to sell his idea to a big company. More likely, he’d entertain friends with his Pez-sized visions. But a number of factors are coming together to empower amateurs in a way never before possible, blurring the lines between those who make and those who take. Unlike the dot-com fortune hunters of the late 1990s, these do-it-yourselfers aren’t deluding themselves with oversized visions of what they might achieve. Instead, they’re simply finding a way—in this mass-produced, Wal-Mart world—to take power back, prove that they can make the products that they want to consume, have fun doing so, and, just maybe, make a few dollars. "What’s happened is a tremendous change in awareness," says Eric von Hippel, a professor at the MIT Sloan School of Management and author of the recent Democratizing Innovation. "Conventional wisdom is so strong [in business] about find-a-need-and-fill-it: ‘We’re the manufacturers; we design products; we ask users what they need; we do it.’ That has begun to crack."
Posted by James Zellmer at 9:23 AM

May 17, 2005

Baker on a Big Three Rebirth?

Mark Baker:
Today's Wall Street Journal article provides an overview of today's Auto industry. It answers the question I've been thinking of for a long time -- "what is an American Car". Fully 1/3 of the cars built in North America are Non-Big Three. I'm sure that if they went further and looked at "investment" in new facilities over the past 20 years, it would be even further skewed.
Posted by James Zellmer at 7:52 PM

May 16, 2005

Wisconsin Utility CEO Compensation

Thomas Content takes a look at Wisconsin regulated utility CEO compensation.

Posted by James Zellmer at 12:01 AM

May 15, 2005

Local Tech Firm Sonic Foundry's Annual Meeting

Andrew Wallmeyer summarizes Sonic Foundry's current state of affairs and provides a useful bit of history in terms of their stock mania and subsequent losses. The tech business can be brutal. We'll see how SF navigates these waters.
"When you look at the number of tech companies that didn't make it when the bubble burst, it's truly amazing that this company was able to get it under control and survive that period," he said. "The carnage was so absolute."

If some of this smacks of boosterism, that's because it is. Aside from their personal financial interest, many of the stockholders at the meeting said they root for Sonic Foundry because they want to see a local company succeed.

"I've been up and I've been down with the company," said Hughes, who once watched his Sonic Foundry holdings fall from $100,000 to $1,000. "But it's nice to be in a Madison company, being from Madison."
Posted by James Zellmer at 9:05 AM

Income Movements Out of Southeastern Wisconsin

Paul Gores takes an interesting look at income flows from Southeast Wisconsin - via a new Public Policy Forum report. Essentially people who leave make more than people moving in. In addition: "Every county is southeastern Wisconsin loses more income to Madison's Dane County than it gains from Dane County".

Posted by James Zellmer at 12:04 AM

GM's Troubles Ripple Locally: Tower Automotive

Thomas Content discusses Milwaukee auto parts supplier Tower Automotive's ongoing layoffs. Tower will have less than 200 employeees next week. Tower supplies steel car and truck frames to the domestic auto manufacturers. Content's article arrives the same week as GM's announcement that they were talking with Toyota about hybrid components. Sadly, these increasingly popular parts will likely come from Toyota's network, rather than domestic sources...

Posted by James Zellmer at 12:00 AM

May 10, 2005

What Westerner's Don't Know About Keiretsu

Jeffrey K. Liker and Thomas Y. Choi discuss Toyota & Honda's vaunted supplier system.

Posted by James Zellmer at 12:01 AM

May 5, 2005

Whither GM Janesville?

Business Week disects GM's travails, and includes a "rumor" that one of their full size SUV plants will close (one of those is Janesville).

Posted by James Zellmer at 12:02 AM

May 2, 2005

Business Process Innovation at Ariens

Long time Wisconsin manufacturer Ariens has embraced "lean manufacturing" - made famous by the Toyota Production System. Interesting and powerful stuff. Read on.

BTW - I like their website. Straightforward, easy to read, prices upfront.

Posted by James Zellmer at 12:01 AM

April 30, 2005

Lutz on the World's Largest Car Market - China

Interesting reading, Bob Lutz talks about his recent visit to China and their growth prospects.

Posted by James Zellmer at 12:00 AM

April 29, 2005

Flight of Fancy - Dayjet

Robert X Cringely:
The idea behind DayJet is a lot simpler than the technology it takes to make it happen. Many regional travelers are spending whole days going to airports, sitting in airports, flying to hubs, changing planes, and sitting in more airports that they could almost drive faster to their final destination. By going point-to-point when the passenger wants to fly, DayJet replicates that driving experience, but with a chauffer and at over 400 mph.

The difference between DayJet and a traditional aircraft charter is that all you'll be chartering is the seat you are sitting in. That means if you take a friend it costs twice as much, but it doesn't mean that you are paying for seats you don't use. And unlike a charter, DayJet won't charge for sending the plane to pick you up -- only for when you are actually in that seat.

Only time will tell if this concept is successful. I'm for it. Imagine skipping security lines and regional hubs and going right where you want to go.
Posted by James Zellmer at 9:28 AM

WaterPark Over Supply?

At some point, there will be too many (I'm not all that much of a fan). Ryan Masse dives in:

Noah’s Ark water park in Wisconsin Dells currently lies in a state of hibernation, a fact of life for any outdoor attraction residing in the upper Midwest.

When the park reopens next month, it will be greeted by new competition — although not in the Dells. Instead, the challenge will come from Six Flags Inc., which will unveil its brand new Hurricane Harbor water park on the grounds of its Great America Theme Park in Gurnee, Ill.

Posted by James Zellmer at 12:00 AM

April 26, 2005

Microsoft's Next Windows, Longhorn....

This Bill Gates quote: "Gates did promise that Microsoft's biggest-ever marketing campaign would accompany Longhorn's release. Microsoft recently announced plans for a precursor to that campaign, a "Start Something" blitz that will tout the abilities of current versions of Windows." reminds me of SUN Microsystem Founder Bill Joy's great quote: "The quality of a company's software has an inverse relationship to the amount of money spent on marketing". I've found this to be uniformly true.
Posted by James Zellmer at 8:26 AM

Rutherford County, TN: Fastest growth in jobs

Kasey Wehrum:
The Bureau of Labor Statistics released its figures for the fastest-growing large counties in terms of job growth last week, and Rutherford County, Tennessee came in on top at 9.2 percent.

Small businesses' hiring habits played no small role in the number of jobs created and lost, according to Brian Headd, economist at the Small Business Administration.

“"hen a large company lays off thousands of employees it is national news, but in fact, the rise and fall of small businesses has a much greater effect on job growth than most people realize," said Headd.
Posted by James Zellmer at 7:41 AM

April 24, 2005

More than 90% of Corporate Spreadsheets Have Material Errors in Them

Philip Howard:
At the highest level (at least), spreadsheets should be treated as a corporate resource. For example, if you use spreadsheets for planning then you need to do everything you can to eliminate the possibility of error. And what do you do with corporate resources? You give them to the IT department which can implement proper testing and control procedures.

The real problem, of course, is that business managers don't know that there is a problem (actually, lots of problems) with spreadsheets, while IT regards spreadsheets as falling outside its jurisdiction. So spreadsheet management falls down a hole in the middle.
Posted by James Zellmer at 7:03 PM

Alliant Energy's Erroll Davis on Humility in the NYT

as told to Eve Tahmincioglu:
Enron made me very angry. We are all paying a tremendous price for the screw-up.

These are powerful positions we executives hold. I have $8 billion at my disposal. We don't have that many checks and balances on us. You can lose perspective and start to think you're royalty. I think of these guys with their $10,000 shower curtains and I say to myself: "I could understand how they could do that." But I also understand why you shouldn't.

If you lose track of where you came from - and surprisingly, a lot of these people came from humble beginnings - you lose track of your moral compass, what work means to the average employee.
Davis's Wisconsin based Alliant Energy has been in some hot water over investments in Brazil and a Mexican resort. Interesting to see this in the NY Times. I wonder if this piece was "placed" by a pr firm?
Posted by James Zellmer at 12:51 PM

April 23, 2005

The Death of a Salesman

Frank Hayes offers some useful comments on the perils of CEM (Customer Elimination Management using CRM - Customer Relationship Management Software):

Siebel was built, inside and out, on CRM. Siebel was all about automating CRM as a business process.

Trouble is, customer relationship management isn't primarily a business process that can be automated. Real management of customer relationships is a culture, a strategy, a way of doing business.

And too many organizations use CRM in a way that marketing guru Herschell Gordon Lewis has dubbed CEM -- customer elimination management.

They don't use CRM software to help good salesmen do a great job. Instead, they feed customers into the CRM sausage machine, a mechanical data-grinder that combines a phony familiarity -- strangers in a call center who know everything about the customer -- with a relentless, robotized drive to sell, sell, sell.

Posted by James Zellmer at 12:00 AM

April 22, 2005

Why Google is Like Wal-Mart

Adam L. Penenberg comments on the two firms similarities.

Posted by James Zellmer at 12:00 AM

April 20, 2005

Minneapolis named top "Technopolis"

Some interesting tidbits on Minneapolis in the latest eprairie newsletter, including Popular Science's proclamation as the top "Technopolis".

UW-Whitewater's Literate Cities Study ranked Minneapolis #1... (Madison was #4). Take a look at their data sources, here. (I wonder what the yellow pages tells them, exactly. I never use it, frankly. The web is much faster).

I also have my doubts on the value of newspaper circulation data, now.
Posted by James Zellmer at 10:22 AM

April 11, 2005

Gladwell: The Ketchup Conundrum

Malcolm Gladwell:
Many years ago, one mustard dominated the supermarket shelves: French's. It came in a plastic bottle. People used it on hot dogs and bologna. It was a yellow mustard, made from ground white mustard seed with turmeric and vinegar, which gave it a mild, slightly metallic taste. If you looked hard in the grocery store, you might find something in the specialty-foods section called Grey Poupon, which was Dijon mustard, made from the more pungent brown mustard seed. In the early seventies, Grey Poupon was no more than a hundred-thousand-dollar-a-year business. Few people knew what it was or how it tasted, or had any particular desire for an alternative to French's or the runner-up, Gulden's. Then one day the Heublein Company, which owned Grey Poupon, discovered something remarkable: if you gave people a mustard taste test, a significant number had only to try Grey Poupon once to switch from yellow mustard. In the food world that almost never happens; even among the most successful food brands, only about one in a hundred have that kind of conversion rate. Grey Poupon was magic.
Posted by James Zellmer at 7:56 AM

April 10, 2005

Where the Innovators Are

Laura Rich:

As James Surowiecki writes in the April 11, 2005 issue of The New Yorker, innovation has fallen almost entirely upon the shoulders of small businesses; big companies can't manage it anymore. They're still spending money on research and development, but those budgets have shrunk dramatically in most cases, and many are outsourcing R&D or forming R&D alliances with other big companies.

Surowiecki focuses on the decline of an innovation culture at Sony, which hasn't really been able to corner any market since the Walkman. While some may bemoan the disintegration of innovation out of such giants, it's really not so sad. New ideas that come from smaller businesses are often more exciting and groundbreaking (just look at many of the ideas that come from the Inc. 500), and, as small businesses make up three-quarters of all businesses, perhaps even more essential to the health of the economy.

Yet another reason why our politicians need to pull their head out and make true high speed networks a reality in Wisconsin...

Posted by James Zellmer at 12:03 AM

April 4, 2005

United Replaces Some Air Wisconsin Routes

PR Newswire:
These 30 aircraft will fly on some routes previously operated for United by Air Wisconsin Airlines. As the company indicated in an announcement to employees late last month, United also is considering reductions in the United Express fleet to further reduce spending on U.S. domestic capacity, given high fuel prices and the current fare levels.
Air Wisconsin is based in Appleton and recently invested in US Airways as part of a deal to redeploy aircraft.
Posted by James Zellmer at 8:00 AM

April 1, 2005

Midwest Airlines & Northwest Battle it out in Milwaukee

Midwest, in a somewhat bold move, is expanding Milwaukee service to Northwest's fortress hub in Minneapolis. (Northwest has been expanding nonstop flights from Midwest's Milwaukee hub to several cities in an obvious effort to kill their much smaller competitor).
Posted by James Zellmer at 1:24 PM

March 23, 2005

Doing Business with the Bottom of the Period

The Long tail:

The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, like the Long Tail, is about finding ways to efficiently address sub-economic markets. In this case, Prahalad is talking about how to sell goods and services to the world's 4 billion poor, for mutual benefit.

Posted by James Zellmer at 12:00 AM

March 19, 2005

Employees Who Smoke Face Health Care Surcharge

Paul Gores:
That's why she is troubled by a rule that will go into effect at her company next January. Trapp-Dietz and other smokers who work at Northwestern Mutual - regardless of whether they light up at home or outside the building at work - will pay an extra $25 a month for health insurance coverage.

Trapp-Dietz said considers the fee an invasion of her private life.

"I know I have to quit, and I really want to. But I don't like being told to by my employer," she said.
These type of disincentives are already in play if one purchases other benefit type products such as life insurance.
Posted by James Zellmer at 6:20 AM

March 17, 2005

Venture Capital & How to Start a Startup

Paul Graham offers up two very useful articles:
  • How to Start a Startup:
    You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.
  • A Unified Theory of VC Suckage:
    But lately I've been learning more about how the VC world works, and a few days ago it hit me that there's a reason VCs are the way they are. It's not so much that the business attracts jerks, or even that the power they wield corrupts them. The real problem is the way they're paid.

    The problem with VC funds is that they're funds. Like the managers of mutual funds or hedge funds, VCs get paid a percentage of the money they manage. Usually about 2% a year. So they want the fund to be huge: hundreds of millions of dollars, if possible. But that means each partner ends up being responsible for investing a lot of money. And since one person can only manage so many deals, each deal has to be for multiple millions of dollars.
Posted by James Zellmer at 2:41 PM

March 15, 2005

Fighting Rivals with Efficiency

Rick Barrett:

"Right now, the Midwest is awash with old, decrepit manufacturing plants," Mautner said in an interview. "Some of these are factories with century-old equipment, and theyve seen few improvements over the years. At the same time, China is building all new facilities, with all new equipment, and theyre consuming about half of the worlds oil, and half of the worlds steel and concrete."

U.S. companies cant stop Chinas industrial revolution, but they can shield themselves from it a little, Mautner said.

Posted by James Zellmer at 12:03 AM

March 13, 2005

Tim Draper on Skype, Telco's and the VC Business

Draper is acknowledged as the inspiration behind the term "viral marketing" via his hotmail investment. Interesting interview.
We often list all the problems in society, and the politicians would make you believe that they're going to solve all those problems.

Generally, I'd say it goes the other way. Businesses solve a lot of the world's problems. The next big energy breakthrough will happen through a business.

The next big environmental breakthrough similarly could happen through a business. Medicine has been advanced through business. It turns out that it's the businesspeople that tend to be the ones who solve all this stuff.
Posted by James Zellmer at 7:56 AM

March 11, 2005

More on the changing advertising landscape

Several recent articles on the changing advertising landscape (struggling to keep up with our changing habits):
Posted by James Zellmer at 9:51 AM

Malcolm Gladwell at the UW on Blink

New Yorker writer Malcolm Gladwell, author of The Tipping Point and more recently, Blink, spoke a the UW Wednesday evening. Here's an excerpt of his talk [Quicktime video | mp3] This was an interesting evening.

Posted by James Zellmer at 12:01 AM

March 8, 2005

Health Exchange

Victoria Colliver:
One of the main stumbling blocks in the American health care system, many experts say, is the inefficient use of computer technology to manage medical records.

Now, in Santa Barbara County, a network of hospitals, laboratories, pharmacies and doctors is pioneering new technology that will allow medical professionals with different computer systems to share clinical information. The initiative may well be a first step toward the creation of a national patient-care data bank.
Posted by James Zellmer at 11:26 AM

March 7, 2005

Buffett Bets on A Weak Dollar

Warren Buffett has 21.4 billion in forward foreign exchange contracts.

UPDATE: Buffett's recent letter to his shareholders.

Posted by James Zellmer at 12:02 AM

March 5, 2005

Retail: Penney's goes for the "Missing Middle"

Interesting look at JC Penney's new marketing strategy.

Posted by James Zellmer at 12:02 AM

March 3, 2005

How Marketing Drives Pharmaceutical Sales

I've always wondered about the utility of drug advertising. Every now and then, I'll drive by a billboard that says "Ask your doctor about Bextra". Having no idea what Bextra (insert name of drug here) is, I'm amazed that these efforts pay off at all. Bernadette Tansey digs into the drug industry's marketing practices. Jim
Posted by James Zellmer at 8:51 AM

March 2, 2005

Charter Cable: Loses 83,000 Subscribers & 340M

Paul Allen's Charter Communications released their most recent quarterly results today.

Posted by James Zellmer at 12:00 AM

March 1, 2005

Ben Mcconnell & The Apple Experience

Ben Mcconnell buys a Powerbook on Michigan Avenue and blogs about the "experiential" marketing...

Posted by James Zellmer at 12:02 AM

February 27, 2005

Delight Your Customer - Steve's Liquor (Wine Market)

Several weeks ago, I tried a bottle of Domaine Sauvete's Touraine, a $9.99 "Poor Man's Sancerre" at Steve's Wine Market.

The results were pleasant.

I made a return trip this weekend, hoping to buy a case (1 bottle free). Unfortunately, Steve's had just 3 bottle's left. Knowing how to delight a customer, they provided me with a 10% discount anyway.
Posted by James Zellmer at 10:00 AM

February 26, 2005

Strategic Failure: HP & AT&T

It is interesting to note that groups of technologists within AT&T were accurately forecasting the future. A few groups formed to deal with new developments and even attempted to influence the decision makers. Probably the most interesting was ODD *- I wasn't directly associated with it, but know most of its former members.

A friend who happens to be one of the ODDsters, Amy Muller, co-authored a brief history on the group and AT&T's strategic failure. (pdf) read it
Interesting Reading... Via Lessig
Posted by James Zellmer at 12:03 AM

February 25, 2005

KCRW (Public Radio) starts Podcasting

Setting a great example for all other public radio stations, Santa Monica College's KCRW will launch Podcasts of their programs (mp3 files easily passed around, linked to and played back by the millions of mp3/iPod type players in use today). KCRW is an excellent source for interesting music and programs, via mp3 internet streams.

I've seen no change in Wisconsin Public Radio's audio content. They would be much better off, as would the listeners and contributors if they provided all local content in easy to use mp3 files (they currently have real audio streams which require the listener to be connected to the internet while listening).

Rebecca Ryan is speaking Tuesday night (3/1) at the Overture Center on whether Madison has what it takes to play in the New Economy (Two bad signs: no public radio podcasts and no wi-fi at the airport, actually, there's a 3rd, we continue to let Kenton Peters inflict his metal buildings on us....). While these two issues require attention, the larger problem we have is a low business risk culture. Sort of strange, given that the Wisconsin economy was grown by many, many entrepreneurs who built agricultural and manufacturing businesses 50, 70 and 100 years ago.

What are podcasts? Click here to find out.

Posted by James Zellmer at 12:02 AM

February 24, 2005

MBA's Bad for Business?

The Economist:

But just as the market value of an MBA is reviving, its academic credibility is being attacked. In a forthcoming article to be published posthumously in Academy of Management Learning & Education, Sumantra Ghoshal argues that many of the worst excesses of recent management practices have their roots in a set of ideas that have emerged from business-school academics over the last 30 years.

Posted by James Zellmer at 12:01 AM

A Conversation with Warren Buffet

Darren Johnson shares a rather interesting chat with Warren Buffett.

Posted by James Zellmer at 12:00 AM

February 22, 2005

Classic Product Line Extensions: Diet Coke & Tide

Bruce Mohl on the ongoing effort to trade on well known brand names:
Two huge consumer brands have been busy cloning themselves.

Procter & Gamble Co. rolled out a cold-water version of its blockbuster Tide laundry detergent earlier this month. Coca-Cola Co., meanwhile, unveiled plans to start selling a seventh version of Diet Coke, this time sweetened with Splenda instead of aspartame
Posted by James Zellmer at 7:35 AM

February 20, 2005

City Dwellers Plow Money into Farmland

Stephanie Simon takes a look at the city "slickers"/dwellers who are buying up farmland as an investment and renting it back to traditional farmers:
Seeking steady, secure investments to round out their portfolios, big-city investors are increasingly buying Midwest farmland, spending $100,000 to $500,000 per field.

Many hire professional farm managers to maximize their profits. The managers, in turn, hire farmers like Wyant — sometimes offering them a stake in the crop but often paying them by the hour (or the acre), like a hired hand.
Posted by James Zellmer at 12:55 PM

More on Monopoly Utilities

Some Californians are trying to "unplug" from the state's major utility, PG & E. Lower costs (though there's some dispute about that) are the motivator according to David Baker.
Posted by James Zellmer at 6:55 AM

February 19, 2005

Fascinating Game of Poker: Air Wisconsin Invests in US Airways

Appleton based regional carrier Air Wisconsin (which operates much of United Express's routes) has participated in a $125M investment round with US Airways. Fascinating game of poker as Air Wisconsin renegotiates it's deal with United and a rather interesting gamble. I wish them luck! Keep in mind that Air Wisconsin currently has one (!) customer - United Airlines. United is shopping around for a better deal on regional flights (in effect, squeezing Air Wisconsin). Air Wisconsin does not, or did not have much leverage, other than price. This deal creates a different playing field for Air Wisconsin and United...
Posted by James Zellmer at 12:00 AM

February 16, 2005

Horace & Selling Out

Dave published an essay today, let's call it an essay "mini" in keeping with the times, on product development & selling out. Well worth reading.

Dave's words remind me of past experiences in the large, corporate world. Product A is created or acquired. Over time, the things that made Product A useful, interesting and marketable are slowly taken away (juice content (Pepsi Slice), flavors, quantity) while prices go up. We might refer to this as an MBA approach to product development, though that is too harsh. Perhaps it is more of a corporate vs entrepreneur approach.

In any event, it happens all too often.
Posted by James Zellmer at 10:20 AM

February 14, 2005

Amazon Prime

Jeremy Zawodny discusses Amazon's Prime Program (essentially an affinity model for $79/year) (I'm not a fan of Amazon generally - due to their one-click patent silliness)
Posted by James Zellmer at 9:20 AM

Money for Nothin': Media Consultants & the value proposition

Darren Dahl talks with Martin Kihn about his new book: House of Lies: How Management Consultants Steal Your Watch and Then Tell You the Time Interesting Reading.
Posted by James Zellmer at 9:15 AM

February 9, 2005

UW Team Revives dying neurons Related to Alzheimer's & Parkinson's

Ryan Joerres:
The new findings could eventually help halt the progression of such diseases by averting the deterioration of the neurons involved in such diseases. UW professor of pharmacology Jeff Johnson, the lead researcher of the group, has been recognized across the nation for his recent findings concerning Alzheimer’s disease and the natural defense mechanisms involved in similar neurodegenerative diseases.
Posted by James Zellmer at 8:45 AM

February 8, 2005

Changing Planes at O'Hare: God Smiles on Me!

I've now experienced this sort of a very pleasant, unexpected airline experience twice.... in 15 years. Changing planes recently at O'hare, I literally jogged from one end of Terminal B to the far end of terminal F in 9 minutes, trying to catch an early flight to Madison. I arrived at the gate with 6 minutes to spare.

The gate attendant waved me through and I walked outside, toward the 50 seat jet. A member of the ground crew then told me that because the Canadair jet's doors had just closed, I had to return to the terminal. During this discussion, the Air Wisconsin (United Express) Pilot sent another ground crew member toward me to walk me to the plane. They opened the aircraft and I walked on board.....

Flying through O'Hare several times the past few months, I noticed that flights are far more reliable and predictable than one year ago. I emailed Kevin LaWare, Air Wisconsin's Vice President of Operations to thank him for this vast improvement in service.

LaWare is in a tough spot, working with a bankrupt major carrier (United Airlines). United is evidently shopping their regional services again (squeezing prices) - putting some more pressure on Appleton based regional carrier Air Wisconsin.

I'm impressed with their service and hope they continue to improve.

UPDATE: The Boyd Group takes apart a recent Wharton Study on the airline industry's problems.

Hot Flash - January 31, 2005

Misinformation. Bad Conclusions. Outright Errors & Idiotic Opinions.
More Reasons To Home-School Kids
Beyond The 12th Grade

Anybody catch the missive put out on the airline industry last week from the Wharton School of Business?

It got great press circulation, which is quite unfortunate for Wharton. If the date was April 1st, we might have an explanation as to why the document was issued. But short of that, all we can say is that higher education in America apparently isn't what it used to be.

The Article, "Why Most Airlines Are Caught In A Tailspin" should have been titled, "Why Are People Paying To Get An Education From This Place?" (If you have the stomach, a link to the article is provided below.)

For those into wild conspiracy theories, it could be a terrorist plot. There's evidence that dozens of university professors have been abducted and forced to live trapped inside the hallowed walls of universities for so long that they've plumb lost all contact with the outside world, not to mention reality. The sinister result is that thousands of American students may be graduating each year without enough real-world skills to properly boil an egg, let alone enter the business environment.

Whatever the reason, it appears that in the rarified intellectual atmosphere of these supposed towers of higher learning, some professors are denied any real counter-input to some of the crackpot ideas they come up with. In their world, they have no competition - they print and say what they will, and if a student disagrees, it's F-city for the kid. This system has produced a whole genre of academics that are so far from reality that they'll need a visa to get back. And, referring to the terrorist plot concept, a lot of what they're teaching our young what can only be described as intellectual el toro doo-doo.

wharton1.JPG (57823 bytes)But, because of the "prestige" of the university, much of this sheer nonsense gets printed as fact. Not just funny opinions, but information that is so inaccurate as to cast doubt on whether some of these institutions aren't really just joking. This past week we were regaled by just such an article.

Again, this is from the Wharton Business School, no less. Not East Upchuck Community College. It's from the school that's just sooo highly rated in cranking out MBA grads in full metal jacket mode to save American business.

Rule One: Get The Grade. Don't Argue With The Prof. In the article, three learned Wharton faculty opined on what's wrong with airlines today, and what must be done to fix them. What they missed is that before one can promulgate solutions, it's always nice to get a grasp of the problem first. One can only hope that their students don't buy into this stuff.

All We Need Is Three. The professors have determined that since there are only three automakers left in America, well, then that's about the right number of airlines we should have, too. "This industry, like others, is an oligopoly," one professor noted. "How many domestic automakers do we have? Three. The airline industry should be like that."

Just three airlines is all we need. And, according to the profs, Southwest is the model. No discussion of the fundamental economic and structural differences between airline systems. No investigation of the reasons that Southwest was profitable last quarter. No, the sages have spoken - just three airlines is all we need. Just like the automobile industry. Come to think of it, when the conclusions from these guys are fully considered, maybe that rule should be applied to B-schools, too.

Don't Argue The Theory: Airline Bankruptcies Definitely Cause Other Bankruptcies. Forget readin' writin' & 'rithmatic, these guys are buried in the wonderful world of theory, often insulated from any taint of reality. In that regard, the Wharton Brain Trust concluded that if one airline goes bankrupt, it will "cut prices" thereby causing non-bankrupt carriers to do so, with the result being that all carriers will be tossed into the murky depths of bankruptcy, too.

Wow, what a revelation. What great theory. What great textbook babble.

And in the real world, as proven over the past two years, it's a giant 55-gallon drum of hogwash.

Gee, it seems that these professors missed the story about United being in bankruptcy for over two years, and somehow their grand domino theory hasn't played out. To start with, they've missed the fact that United has not had any real control over industry pricing. That's because airline pricing involves a whole lot more than just costs at one airline, bankrupt or not. Too bad they don't know this. But the statement, "The government allows a carrier to dramatically cut costs in bankruptcy and then push others into the financial abyss"  has a nice, front-of-the-classroom ring to it. Even if it is total garbage.

Go ahead, students, be sure to remember this idiotic ooze during finals. Get the grade. Tell the prof what he or she wants to hear. Then after you graduate, ignore it, because it's nonsense.

Mired over their heads in academic quicksand, these professors are oblivious to the fact that bankruptcy isn't the only way that airline costs can be pared, union work rules changed, and operational systems made more effective. Too much involved in trying to prove theories instead of learning about the industry, they failed to note that while United wallowed in bankruptcy, other carriers, such as American, Continental, and Northwest, proceeded to get commensurate cost savings without filing Chapter 11. They latter two did so before going to their unions for concessions. If fuel had not jumped 40% in 2004, they likely would not have done so at all.

There goes the sacred textbook theory. It's a shame these guys haven't noticed what's gone on in the last three years. But, they're on a roll...

Chapter 11 As A Blood Sport. Then the Wharton trio danced into glittering generalities. "It's ludicrous to allow a company to go bankrupt repeatedly," one of these academic luminaries declared, implying that the number one O&D market for legacy carriers is to the local bankruptcy court. Here's a fact that their students likely know, but won't say for fear of getting an "F" in the course. Of major airlines, there have been very few "repeated bankruptcies" - Continental being the most obvious before the recent double-header at US Airways - and that was ten years ago.

Somebody Call AA's CEO - Quick. He's Been In Chapter 11 - And Didn't Know It. But having a working knowledge of the airline industry may not be a prerequisite for professorship at Wharton. One noted, "Continental and American, both of which restructured in bankruptcy, should be able to keep flying." Hello, Ivory Tower. Continental came out of bankruptcy a decade ago, which makes the challenges it faces now a non sequitur regarding how it restructured back then.

And American has never "restructured in bankruptcy" as these professors so confidently declared. Real world to the Wharton Brain Trust: You don't know that? Y'all should be pretty embarrassed spouting out stuff that proves you don't know what's going on in the industry. Do you really teach students this inaccurate drivel?

More Trendy Panaceas. The professors in the article worship Southwest, which is okay. But they kept implying that every airline should be like Southwest. "For instance, Southwest pioneered the concept of standardizing its fleet - using only Boeing 737s and thus saving on training and maintenance costs..."   It would be nice if they had any idea what a "737" is.  Or more correctly, what 737s are.The fact is that Southwest, until it retired its last 737-200 last week, actually had three types of aircraft. The -200s, the -300/500s, and the 737-700s. They look a lot alike, but there are fundamental differences in these three types.

What these guys - who, shockingly, are actually teaching our children - don't understand is that a "standardized" fleet has mission limitations. The 737 low-cost model can't deliver system passengers and revenue from Bangor or Beijing. If all airlines were like Southwest, or just two out of the three these clowns think are all that's necessary, over half of all US communities that now have scheduled air service would find themselves singing the blues.

News Flash, Professors. There's Something Called Alliances. These professors just kept on coming with statements that proved beyond doubt that maybe MBA degrees aren't all they're cracked up to be. Get this gem of wisdom: "I'm sure a foreign carrier would buy US Airways because it would like access to the US Airways network," one stated.

What we're sure of, professor, is that you need to get up to speed on what's going on in the airline industry. Hello, up there. US Airways is having trouble accessing the traffic on its own network. Oh, and by the way, have you ever heard of the Star Alliance? Well, we'll go slow so you can keep up. The Star Alliance is a system that already allows foreign carriers, like Lufthansa, to get access to the US Airways network. They don't need to buy US Airways to get access to that lucrative Elmira-Athens traffic. If you had a clue about the subject matter, you'd never have made such a moronic statement.

And, It's Those Union Rules, Too. No academic paper from the intellectual stratosphere is complete without a perfunctory attack on those nasty, bat-wielding labor unions. "For instance, legacy carriers are saddled with union rules that boosted salaries..."  Heck, let's not pop their bubble. We won't suggest that these guys take the elevator down to where 2+2 really equals four. They don't need to identify those "union rules" and whether they even exist in many cases after three years of concessionary contracts at carriers like American, United and others. Or how Continental and Northwest had success in paring operational costs before the recent spike in fuel costs, and how they did it before asking for any labor concessions.

We won't suggest they take a gander at the current maintenance contracts at Southwest and at, say, American. Or, the fact that some of Southwest's contracts could be a real challenge for the carrier going forward. No, we won't rain on their parade. Facts need to be set aside and made secondary to sacred theory. This is academia, right?

If you're interested in visiting intellectual fantasy land, click here to view the entire article.

Posted by James Zellmer at 12:02 AM

February 7, 2005

Drexel Burnham Lambert Alumni Article: Brewer's Mark Attanasio

New Brewer CEO Mark Attanasio gets a few mentions in Jenny Anderson's article on the Drexel Diaspora:

Several other former Drexel employees are managing billions for pension funds, endowments, wealthy people and one another - often using junk bonds. Mark L. Attanasio, a senior vice president at Drexel when it collapsed, is a managing partner at Trust Company of the West, a $109.7 billion money management firm. Last month, he bought the Milwaukee Brewers for more than $220 million.

Interviews with more than two dozen former employees showed that, far from being embarrassed by their connection to Drexel, most retain an almost cultlike devotion to the firm and much of what it stood for. Few of them were crucial players in building Drexel's core franchise, junk bonds. And few of them were especially close to Mr. Milken, who has since survived cancer, established two major foundations devoted to cancer research and become a major investor in an education initiative, Knowledge Universe Inc.

Attanasio also worked at Global Crossing with another ex-Drexel player - Gary Winnick.

Posted by James Zellmer at 12:00 AM

February 6, 2005

Oscar Mayer Sale: Done Deal?

Looking through my logs recently, I noticed this google search, which originated at a Phillip Morris (Kraft's parent; Kraft currently owns Oscar Mayer) IP Address: (UU-63-80-251).More discussion on a possible sale. Log screen shot.
Posted by James Zellmer at 2:20 PM

Madison Small Business Series: Mike McMahon & Pinnacle Health & Fitness

Mike McMahon
CEO, Pinnacle Health & Fitness
On starting and growing a business

I visited with Mike recently and talked about:
  • The experience necessary to successfully start a business, and avoid losing your relatives money.
  • Hiring the right people
  • Customer Service
  • Competition
  • Career Advice
Check out this 7 minute mp3 audio file or a 7 minute Quicktime Video.
Posted by James Zellmer at 8:14 AM

February 3, 2005

Miracle-Gro's Horace Hagedon Obituary

Douglas Martin:

Miracle-Gro, which produced the world's biggest cabbage, cantaloupe and dahlia, soon became as familiar a sight in the American backyard as the station wagon in the carport. The gardening business is now estimated to exceed $35 billion in annual sales, and Miracle-Gro's share of the home fertilizer market is estimated to be about 85 percent.

Mr. Hagedorn orchestrated the growth of his product like the marketing genius he was. He hired a Norman Rockwell colleague to paint homey advertisements, and the actor James Whitmore, whose gnarled face suggested a trustworthy farmer, for television commercials. The $100,000 prize he offered for a tomato of world record size was conditional on the use of a certain plant food.

Posted by James Zellmer at 12:01 AM

February 1, 2005

Ivey takes a look at Madison (Verona's) Epic Systems

Mike Ivey takes a useful look at Madison's quiet technology giant (I don't think there's really any competition in the local tech sector), Epic Systems:
The company remains privately held by its employees - shares are repurchased when anyone leaves - and maintains it has no intention of ever making a public stock offering. The share price has gone from $14 in 1996 to over $100 today, making Faulkner one of the most successful, if not wealthiest, businesswomen in the state.

Still, Faulkner rarely grants interviews, doesn't schmooze with the local tech crowd and has no intention of changing her approach. Faulkner has said the focus should always remain on the company and its mission to serve patients.

Software is a difficult business. Judy Faulkner and everyone at Epic deserve a great deal of credit for their success. Having said that, this next step is a big one, filled with sharks. I wish them well!
Posted by James Zellmer at 4:20 PM

January 31, 2005

Mining Music Industrials from the 50's & 60's

A humorous way to start the week: John Kalish on industrials, those broadway tunes that promoted shop grease, tractors and other industrial products:
From the 1950s through the 1970s, large companies regularly commissioned original musicals for their annual conventions and sales meetings. Some employed reknowned Broadway composers for these shows.
Posted by James Zellmer at 8:11 AM

January 29, 2005

Toyota: The Car Company in Front

The Economist on Toyota's automotive juggernaut:
THERE is the world car industry, and then there is Toyota. Since 2000 the output of the global industry has risen by about 3m vehicles to some 60m: of that increase, half came from Toyota alone. While most attention over the past four years has focused on a spectacular turnaround at Nissan, Toyota has undergone a dramatic growth spurt all round the world. Japan's industry leader will soon be making more cars abroad than at home. It has overtaken Ford in global production terms and is set to pass Chrysler in sales to become one of America's Big Three. In an industry strewn with basket cases, where hardly any volume producer makes a real return on its capital, Toyota is exceptional in that it consistently makes good returns (see chart 1).
Posted by James Zellmer at 12:00 AM

January 27, 2005

"Category Killers"

Brand Autopsy has an interesting discussion on category killers:
Costco has a very loyal clientele (who pay a membership fee). Costco understands the taste level of this group and caters to their wants and needs--for wine, apparel, technology, jewelry, etc. Costco communicates with those customers through an excellent monthly magazine, the Costco Connection. Because many of Costco's customers are small business owners, the magazine (and, of course, the stores) cater to their needs and interests.

Now, Costco's customers are also attracted by the deals. There is an implicit understanding that Costco is offering the best possible price on that particular product on that particular day. The product may not be offered tomorrow. So, if you want it, you better buy it today.
Posted by James Zellmer at 12:00 AM

January 24, 2005

Government Weather Data: Must We Pay Twice?

James Fallows takes a look at the intersection of public (taxpayer funded) and private (business) interests, specifically, weather data that we've already paid for. Some businesses, who have made a living recycling that data, would like to continue their gatekeeper role. [We have examples of this in Madison. Access Dane offers "subscription" access to data that we've already paid for]. Here's a clip from Fallows article. Read it all.
some of the most significant innovations have been made where public and private efforts touch. In its first term, the Bush team made a few important pro-technology choices. Over the next year it will signal whether it intends to stand by them. There is a long historical background to the administration's choices, plus a variety of recent shifts and circumstances. The history stretches to the early days of the republic, and the idea that government-sponsored research in science and technology could bolster private business growth. Progress in farming, led by the land-grant universities, demonstrated this concept in the 19th century. Sputnik-era science, culminating in the work that led to the Internet, did the same in the 20th century.
Open source weather is available here. Create your own weather site using the NOAA's xml web service.
Posted by James Zellmer at 12:01 AM

January 23, 2005

Does Not Compute: Technology Implementations....

Nicholas G. Carr continues his analysis of failed software projects. Carr wonders if we should scale back our technology expectations:
Equally important, they stopped trying to be creative. Rather than try to customize their software, they began looking for cheaper, off-the-shelf programs that would get the job done with a minimum of fuss. When necessary, they changed their own procedures to fit the available software. Old, generic technology may not be glamorous, but it has an important advantage: it works. It may well turn out that the F.B.I.'s biggest problem was its desire to be innovative - to build a new wheel rather than use an old one within easy reach. When it comes to developing software today, innovation should be a last resort, not a first instinct.
Carr is mistaken in telling technology drivers to slow down with respect to innovation. The real question is whether or not top management has made the commitment to align their business processes with the technology (and provide leadership when tough decisions must be made). Carr, of course does not mention the many successful technology innovations we take for granted today, such as
  • Cell Phones
  • The Internet
  • Fast payment processing (credit cards)
  • Travel reservation systems
We take these innovations for granted, but each one required risk, leadership, mistakes and a willingness to make it work. There are no shortcuts. More on Nicholas G. Carr.

AT&T's CTO recognizes what is required to succeed:
"The biggest challenge is not the technology," he said, "but being able to change the culture."
Posted by James Zellmer at 12:00 AM

January 20, 2005

Sales Skills 101

Surviving a meeting today, I recalled the essential skill that makes a great salesperson: the ability to listen, sometimes for extensive periods of time. I'm always amazed when a person selling something can't be bothered to actually listen to what the buyer has to say (another way one might put this, when the cluetrain made a stop, they failed to board).

It can be difficult, for sure. I remember one meeting, where there was 3 or 4 minutes of silence. Anyone involved in sales and marketing should become familiar with the term markets are conversations. Learn more at the cluetrain.

Posted by James Zellmer at 6:45 PM

What Makes a Good Opportunity?

Jay Ebbens:

So what makes a good opportunity? A colleague of mine at the University of St. Thomas, Dr. Alec Johnson, has come up with what I think is a simple yet effective framework for analyzing opportunities. It is based on what he terms the "Three M's": Me, Market, and Money. All three are related, and if any of them are missing, it's likely the concept is not worth developing.

Posted by James Zellmer at 7:39 AM

January 19, 2005

Charter Cable's CEO resigns

Local Cable Monopoly Charter Communication's CEO Carl Vogel resigned yesterday amid a decline in subscribers and an accounting probe. Charter's stock closed yesterday at $1.92/share, a 52 week low. I think the cable folks have pushed the envelope with respect to pricing and "product". I can't imagine much growth is left in that business. The action is certainly shifting to the internet. Former Microsoft exec Paul Allen is Chairman of Charter. Allen went on a cable acquisition spree years ago, which loaded up charter with $19billion in debt (quite a bit, even for a billionaire).
Posted by James Zellmer at 8:46 AM

January 17, 2005

Zuboff on Business Ethics

Shoshana Zuboff makes a few useful points on business ethics:
When I wondered last month how the insurance industry carries on when so many customers have lost faith in it, I had no idea my worst fears would be confirmed so soon. The short answer is that some of them cheat. That's how companies can remain profitable while being despised and mistrusted by so many customers. This was captured piquantly by Vinay Saqi, a Morgan Stanley insurance analyst, who noted insurance companies have had "a difficult time making money when the game is rigged in their favor. We're concerned they won't fare well in a truly competitive environment."

Among the wealth of wrongdoing in this still unfolding story, one fact looms over the rest: Thousands, perhaps tens of thousands, of grown-ups knew about an array of fraudulent practices and failed to shout, "Wrong!" Instead, many regulators, independent watchdogs, brokers, executives in both the retail and commercial sectors, benefits consultants, and investment advisers joined together in a parallel moral universe. Collusion and conformity -- "it's not wrong because everyone is doing it" -- is accepted. Obedience -- "it's not wrong because they told me to do it" -- is okay. Opportunism -- "it's only wrong if I get caught" -- is encouraged. And, of course, narcissism -- "it's not wrong if it's good for us" -- is celebrated.
Posted by James Zellmer at 5:19 PM

January 16, 2005

Buy Local & Live Free: Tired Tomatoes

Our wonderful farmer's market supports Robin Good's statement that we should "Buy local and Live Free". Good provides a useful illustration:

Its gotten to the point where much of our nourishment depends on a handful of giants.

And theyre shipping foods an average of 1500 miles to reach your plate, a practice that strains anyones notion of fresh.

But a quiet revolution is in the air, and we the eaters hold the power for change.

The typical Tom (tomato) is exhausted by the time he gets to market.

1500 miles from field to fork thats the trek made by the average fruit or vegetable these days. Because of the need to hold up over distances, our foods are bred, not for taste but for transport their ability to handle the long haul. And what do we eaters get? Tired tomatoes

Yesterday's winter farmer's market included a big stack of tomatoes, potatoes, cheeses, honey, spinach, apples, eggs, pork and beef.

Posted by James Zellmer at 9:26 AM

January 13, 2005

Fortune's Best Companies to Work For Rankings

Fortune's annual list of the 100 best companies to work for is out. Family run grocery store Wegmans is #1. Deanna Garcia takes a closer look at Wegmans. audio

Posted by James Zellmer at 8:30 AM

January 12, 2005

Lessons on Innovation from Microsoft

Carleen Hawn makes some interesting points on why Microsoft's record of innovation is so "lackluster":

Not to mince words, Bill Gates's researchers have placed a bunch of expensive bets on technologies that haven't panned out. But the company's failure also points to three much bigger lessons about innovation.

Defense is easier. And for now, it's more profitable. Harvard Business School's Clayton Christensen coined the expression the "innovator's dilemma" to describe what happens when entrenched companies confront new technologies. Good managers instinctively direct people and investment toward "sustaining innovations" that protect established businesses -- and away from new ideas that threaten current profitability. That's why Microsoft spends a lot on Office and Windows.

We have some local examples of protecting established businesses: Newspapers. Despite general circulation declines, both Madison Newspapers (Capital) and the Journal Company continue to invest in niche print publications that keep the printing presses going.

Posted by James Zellmer at 12:00 AM

January 11, 2005

Weak on Entrepreneurial Energy

Starting a Business is Not a Top Down Process

Rick Romell's summary of CFED's Development Report Cards for the States does not shed a whole lot of new thinking on Wisconsin's entrepreneurial dilemna:

  • Wisconsin placed 47th in the number of new companies formed per 1,000 workers in the state

  • Venture Capital is a problem here

  • Wisconsin's Brain Drain - new grads often leave the Badger State.

Yet, Wisconsin continues to try government driven, top down programs, such as the Wisconsin Angel Network, among others.

Candinas Chocolatier is the type of business we should seek to emulate. Markus started the company in 1994, after completing an apprenticeship in Switzerland. Today, over 10 years later, he is still in business and clearly enjoys what he's doing. The attention to detail illustrated in the product photos above demonstrates the devotion required to succeed. Let's call it passion. Another interesting local firm, Planet Propaganda created his packaging.

Candinas' products are certainly not inexpensive, nor are they run of the mill. Rather, Markus has taken a quality position in the market and continued to improve his chocolates. This is a very long term approach to business. I need say no more on this subject as Consumer Reports discovered:

The best chocolates came from lesser-known makers, the magazine pronounced in its February issue. Lesser-known as in Candinas Chocolates, of Verona, Wisconsin ( Candinas was one of only three chocolate makers nationwide to achieve the rating of excellent, ranking behind Martines Chocolates and La Maison du Chocolat in that category.

The winning assortment was the Candinas 36-piece box (price: $41). Ultra-smooth dark and milk chocolates with especially good hazelnut, caramel, and liqueur-flavored centers, praises the magazine, accentuating the fresh cream and butter notes.

Fine chocolates from Wisconsin may boggle the mind, but consider: chocolatier Markus Candinas, 32, has Swiss parents and trained as a confectioner in their homeland.

Great chocolate makes perfect sense - we have fantastic dairy products. Perhaps we'd be better off further leveraging our dairy business (designer milks and more cheese varieties?).

Entrepreneurs are born, not trained. We simply, as Romell's article notes, need to find more people willing to give it a try.

A useful book, sort of related is Mintzburg's Managers Not MBA's.

Posted by James Zellmer at 12:01 AM

January 10, 2005

SBA: New Small Business Government Contract Rules

Darren Dahl:

The SBA's Office of Advocacy announced recently that roughly $2 billion in federal contracting money that was believed to have gone to small businesses actually went to large companies in fiscal year 2002. The reason: Larger companies like Titan, Raytheon, General Dynamics and Hewlett-Packard bought the small businesses that originally received the contracts.

Since the government strives to award 23% of all prime-contract dollars to small businesses, the SBA has implemented a new monitoring system that will force companies to recertify their small business status if they take part in an acquisition

Posted by James Zellmer at 12:00 AM

January 8, 2005

Creating and Managing Change - The Car Business

Queuing up at the local car wash recently, I was behind a guy in his 60's who had a nearly new Cadillac CTS. While waiting for our cars to make the short wash trip, I asked him how he liked the car (the CTS has received many favorable reviews, as has the new STS - including the STS-V).

He has owned Cadillacs for 25 years and this one (CTS) does not ride nearly as well as his previous cars (big sigh). The older Cadillacs were known for essentially riding like a sofa. Personally, I like the direction they've gone with Cadillac (performance, efficiency, improved handling and interesting transmissions), though I'm not a big fan of the designs.

Cadillac is attempting to resurrect its product line and change the public perception (see their Led Zeppelin advertisements), something that is very difficult in any business, particularily with strong competitors such as Acura, Audi, BMW, Lexus, Mercedes and Volvo, among others.

In a related note, famed car guy Bob Lutz, #2 at GM and a former exec with BMW, Ford and Chrysler is now evidently blogging here [RSS Feed]. Interesting reading, particularily the opportunity he now has to interact with buyers, sellers and everyone in the GM supply chain. I applaud the effort and hope the result is better, more attractive and economical cars from the firm that used to have 50% of the US market.

Background Fat Link: Bob Lutz

Posted by James Zellmer at 12:05 AM

January 6, 2005

The Power of Words - Launching a Revolution

Linus Torvalds launched his Linux revolution with these words, over 13 years ago. Today, the linux operating system powers a growing number of internet servers.
Posted by James Zellmer at 12:01 AM

January 5, 2005

Place Based Foods: Maytag Farms

Greg Allen takes a look at Newton, Iowa's Maytag Farms. They make a million pounds of blue cheese each year, and they do it the same way as when the plant opened: almost entirely by hand.Listen to this story here.
Posted by James Zellmer at 12:00 AM

January 3, 2005

Rayovac Acquires ST. Louis based United Industries

Atlanta (ouch!) based Rayovac is expected to announce a $476M acquisition of closely held United Industries, a consumer-products maker of such brands as Cutter insect repellant, Sta-Green fertilizer, and Eight in One Pet supplies, according to Dennis Berman

The move is the latest in Rayovac's plan to transform itself from a seller of low-cost batteries, which has been its focus for nearly 100 years, into a diversified purveyor of consumer products. In acquiring United, which operates under the Spectrum Brands name in the U.S., Rayovac expects its battery sales to account for just 40% of overall revenue, down from 67%.

The deal will pay St. Louis-based United a total of $406 million in Rayovac shares, which closed trading Monday on the New York Stock Exchange at $29.56. Rayovac will also pay $70 million in cash to United's shareholders, while redeeming or replacing $900 million of United's outstanding debt. The companies are targeting cost savings of about $70 million to $75 million, company executives said. They said the deal will be immediately accretive to Rayovac's earnings.

Seems rather strange that a battery company would acquire a fertilizer and insect repellant firm, until I read that "both have long been under the wing of private-equity firm Thomas H. Lee Partners". Ah, sounds like packaging for a bigger deal. Madison has growing risk here with respect to Rayovac's ongoing employment.

Rayovac's move comes amid tight competition from leading battery brands Duracell and Eveready. Atlanta-based Rayovac has aggressively moved into new product categories, last year buying the Remington Products electric-shaver business. Last year, overall Rayovac sales hit $1.4 billion, while United registered sales of $950 million. Rayovac has said previously that it hopes sales will grow to more than $3 billion over the next few years. The company's shares have climbed 42% in the last year after positive quarterly earnings results.

The United transaction, however, underscores how powerful a few large retailers have become to the success of midsize companies such as Rayovac. In buying United, said Rayovac Chairman and Chief Executive David A. Jones, the company can better use its relationships, distribution and marketing at such retailers as Wal-Mart Stores Inc. and Home Depot Inc. "Retailers are looking for sophisticated suppliers," Mr. Jones said. In branching out, "We become more important and vital to them."

The transaction weds two companies that have long been under the wing of private-equity firm Thomas H. Lee Partners. The firm owns 87% of United, and held significant stakes in Rayovac until September 2002. Following the deal's closing, which is expected in about six weeks, Thomas H. Lee Partners will own about 25% of Rayovac.

Merrill Lynch and Investment Banking Group advised Rayovac, while Citigroup advised the company's independent committee of its board of directors. Goldman Sachs & Co. advised United Industries.

Posted by James Zellmer at 4:30 PM

A new challenge for Wisconsin Manufacturers: Chinese Car Imports

Malcolm Bricklin, who imported the Yugo and Subaru brands to the US, announced a deal with China's Chery Automobile Corporation to import up to 250,000 cars per year by 2007.

Posted by James Zellmer at 12:00 AM

A new challenge for Wisconsin Manufacturers: Chinese Car Imports

Malcolm Bricklin, who imported the Yugo and Subaru brands to the US, announced a deal with China's Chery Automobile Corporation to import up to 250,000 cars per year by 2007.

Posted by James Zellmer at 12:00 AM

January 1, 2005

Iowa's state government funds a local Venture Capital Deal

Sort of a deja vu vis a vis SWIB's initiatives:

The money for the Acuity Ventures agreement will come from the Grow Iowa Values Fund, the economic development program that's limping along with about $16 million of $100 million still available.

Lawmakers are expected to consider early next year finding a permanent source for the $503 million premier economic development program.

I generally think the state should just get out of the way and focus on reducing costs and paperwork. In other words, spend time on things that make it easier to create business and hire people in Wisconsin.

Posted by James Zellmer at 12:10 PM

December 29, 2004

Judy Faulkner on Epic Systems Culture

Mike Klein wrote this now two year old article on a talk Epic Systems CEO Judy Faulkner gave at an Accelerate Madison meeting. This article provides a rather useful look at Epic's culture.

Posted by James Zellmer at 12:00 AM

December 27, 2004

Madison's Third Wave Technologies Apparently Bounces Back

Kathleen Gallagher visit's Madison's Third Wave Technologies:

Since arriving at Third Wave, he has helped guide the closing of two of the companys three production facilities and the departure of more than 200 employees, stanch the cash drain and transform its product line to emphasize higher-margin offerings.

He realized as a numbers person that getting profitable was the key to the success of the company, said Daniel Kane, an analyst at the State of Wisconsin Investment Board. The pension plan manager is the biggest shareholder of Third Wave, holding 13% of its stock as of Sept. 30. What theyve been able to do in terms of developing more products and becoming more customer-focused, thats something John has understood all along.

At least initially, Puisis didnt ask for the job. In October 2001, Third Wave chairman and founder Lance Fors hired Puisis, then an executive recruiter at Egon Zehnder International, to conduct a search for a new chief financial officer - a position the company had not filled even as it went through its IPO.

Posted by James Zellmer at 12:01 AM

December 26, 2004

An Identity Crisis at Lands End?

Aaron Nathans:

"Lands' End was one of the most brilliant brands of the 20th century, and under Sears, one of the most irrelevant brands of the 21st century," said Burt Flickinger III, managing partner at the Strategic Resource Group, a retail consultant in New York. "Lands' End in the Sears stores is poorly positioned in between men's suits, snow blowers, tools, denim and work clothes."

As for bringing Lands' End products into the Kmart stores, Mr. Flickinger said: "J. Crew, Eddie Bauer and Abercrombie & Fitch would never stand to have their brand image eroded by going down-market to Kmart. Kmart is associated more with a rough-and-tumble blue-collar consumer."

It seems obvious that Lands End will be spun off or sold at some point.

Posted by James Zellmer at 12:00 AM

December 24, 2004

E-tailing continues to grow

Gallup found that more and more consumers under the age of 65 are using the internet for shopping. The average online transaction grew 10% to $140.00.

Posted by James Zellmer at 12:01 AM

December 22, 2004

The Business Sales Cycle: A Great Example from Jonathan Schwartz

Sun Microsystems Executive Jonathan Schwartz writes a blog (which is a rather big deal). His most recent post summarizes the sales challenges when competitors are writing Sun's obituary. Schwartz's story is quite useful and interesting:

The customer started by telling us what our competitors had been saying about Sun, our platforms, and our future over the past two years. HP told him Sun was going out of business. IBM told him the future was all about linux, and that Sun was all about lock-in. Both competitors expressed a sympathetic concern that we weren't "going to make it." How charitable. The CIO wanted to know why they were wrong. This was going to be one of those "what doesn't kill me makes me stronger" sessions. And we got right into it.

He told me consolidation was his number one priority. That's why they were standardizing on HP. I asked "Which systems?" He responded "their enterprise systems." I asked, "Itanium?" Wondering why they'd introduce a fork (new apps, new OS, new skills, and the expense of porting) if they were trying to consolidate platforms. He said they weren't interested in Itanium. "No way, we're going with PA-RISC." I asked, "But isn't that an end of life'd platform?" Silence. "Well, yes, I guess it would be." How times change. Maybe HP had a specialty service for dead platform consolidation.

Posted by James Zellmer at 12:01 AM

December 20, 2004

Lands End Spinoff from Sears/K-Mart?

I'm rather certain that many Lands End folks would be happy (and relieved) if the Sears/K-Mart folks spun them off..... Doris Hajewski reviews analysts views on this matter.

Posted by James Zellmer at 8:24 PM

December 12, 2004

Dunkin Donuts vs. Starbucks: Will Speed Win?

John Moore summarizes Dunkin Donuts' strategy to take on starbucks: sell latte's faster (time from order to delivery) and cheaper than Starbucks.

Posted by James Zellmer at 11:36 AM

Wisconsin Agri-Business: South American Competition

Larry Rohter takes us to Brazil where he explores the world's new breadbasket.

Sometime over the next decade or so, Brazil, which Secretary of State Colin L. Powell described as "an agricultural superpower" during a visit in October, hopes to pass the United States as the world's largest agricultural producer. But the trend is far broader and can be felt also in parts of Argentina, Bolivia, Paraguay and Uruguay, with a deep impact on the region's economy and environment. And it has spurred a debate that has mainly focused on expansion into areas where the Amazon rainforest is thought to be jeopardized.

"There has been a silent revolution in the countryside" since the 1990's, Brazil's minister of agriculture, Roberto Rodrigues, said in an interview in the capital, Braslia. The past four or five years in particular, he said, have been "characterized by spectacular growth and a huge increase in demand" abroad for foodstuffs, which has given Brazil "the capacity to compete with anyone."

Related Links: Alltheweb Clusty Google Teoma Yahoo

Posted by James Zellmer at 11:02 AM

December 8, 2004

Marketing & Technology

Sun Microsystems co-founder Bill Joy is noted for his viewpoints on a variety of topics. One of my favorites is this: "The quality of a Company's software has an inverse relationship to the amount of money spent on marketing."

I often use this quote when speaking about our products and services as we try to be a function over form type of company. There are others like this, including Sybase. Sybase is not a household name vis a vis it's database competitors such as Oracle, IBM and Microsoft. However, it's software runs some of the largest financial institutions along with our products.

Interestingly, Microsoft's very popular SQL server was originally based on Sybase's database (MS did a licensing deal with Sybase in the 1990's. I wonder if Sybase would do that again today?)

Sybase is taking a bit more of an aggressive posture with small business opportunities. They now have a free linux version available. There are some limitations on this product (memory and database size), but for many projects, it's potentially great place to start.

Free doesn't pay the bills, so they do need to have a realistic glide path from "free" for a low end implementation to a pricing model that small businesses can actually afford. These are interesting times for many tech firms.

Posted by James Zellmer at 7:36 AM

December 7, 2004

Norm Brodsky on Employee Retention

Norm Brodsky offers up some useful tips on employee retention in his article: "Pennies from Heaven".

Posted by James Zellmer at 8:24 PM

December 6, 2004

More on Oscar Meyer for Sale?

Michael Arndt wrote about Kraft's possible sale of Oscar Meyer several weeks ago. Avrum Lank keeps the thread going this morning.

Posted by James Zellmer at 7:47 AM

December 5, 2004

Schools, Quality of Life, Jobs, Economic Growth and Globalization

Yesterday's property tax bill (including not small increases in local and school taxes) along with recent articles on the China Price and Milwaukee's loss of unskilled labor jobs serve to remind Wisconsin residents of the real issues facing our state:

  • Encouraging the formation of more new businesses. I don't believe the formation of yet another quasi-government organization is the answer. Rather, let's simplify (and reduce) the paperwork that any organization must support to operate in Wisconsin.

  • Broadband: Wisconsin is stuck with SBC, a telco that has done nothing to offer true, 2 way broadband (100X the speed of today's rather slow DSL/cable services) to Wisconsin residents. I have not seen any indication that our state's political leadership has boarded the cluetrain on this one.

  • Biotech certainly has great promise for Wisconsin, however, historically the benefits have generally gone to out of state firms. Perhaps this will change somewhat over time.
Without a strong, growing tax base, we'll continue to see substantial increases in local property taxes. I don't believe this is a sustainable strategy.

Posted by James Zellmer at 8:15 AM

December 2, 2004

Wisconsin Banks & Tax Shelters

The Wisconsin Department of Revenue continues to pursue local banks that have setup subsidiaries in Nevada to avoid Wisconsin's 7.9% state corporate tax rate. More power to the DOR, but the $26M in settlements seems rather small. I wonder if this is done for effect? Paul Gores has more.

Posted by James Zellmer at 12:00 AM

November 30, 2004

Entrepreneur: What not to do

Mark Henricks interviews John Osher who discusses the 17 most common mistakes startups make, along with 5 must dos to win:

Mistake 1: Failing to spend enough time researching the business idea to see if it's viable. "This is really the most important mistake of all. They say 9 [out] of 10 entrepreneurs fail because they're undercapitalized or have the wrong people. I say 9 [out] of 10 people fail because their original concept is not viable. They want to be in business so much that they often don't do the work they need to do ahead of time, so everything they do is doomed. They can be very talented, do everything else right, and fail because they have ideas that are flawed."

Posted by James Zellmer at 12:14 AM

November 29, 2004

Wal Mart Blog

Interesting look at Wal-Mart from Glenn Reynolds notes that he's never really liked shopping there. I have to agree. they do have great prices on some products, but you must be willing to put up with shopping their way (crowds and little in the way of aesthetics (which target has taken advantage of).

Posted by James Zellmer at 12:04 AM

November 28, 2004

More on Microjets

Sara Kehaulani Goo on Microjets or Very Light Jets (VLJ's) and the emerging air taxi system ($6/mile):

The fledgling industry is "going to be looked upon like the Wright brothers in 1903," said Ken Hespe, a spokesman for the National Consortium for Aviation Mobility, a nonprofit group that has been studying and developing new uses for the nation's tiniest airports and for small jets with NASA, which estimates a market for 8,300 microjets by 2010. "It's going to be a revolution in the transportation industry," Hespe said.

Analysts say microjets will appeal to a cross-section of customers including corporations, which might add planes to their fleets, and wealthy travelers who are looking for a less-expensive alternative to owning a jet. Since 2001, companies such as NetJets have grown by providing access to planes around the world for members who pay for fractional ownership of aircraft. Aviation experts say air taxis with all-microjet fleets could serve as an even more affordable version of the fractional ownership aircraft model.

Posted by James Zellmer at 12:00 AM

VC Don Valentine Looks Ahead

Alorie Gilbert interviews "legendary" venture capitalist Don Valentine (Founder of Silicon Valley's Sequoia Capital):

I really think it's sort of embarrassing for South Korea to have an intrinsically greater disposition in broadband than California........

I got to Silicon Valley in 1959. Nothing is revolutionary; it's evolutionary. Look the sequence of Intel microprocessors. It's all predictable. The nature of silicon and software and storage go hand in hand. In the case of software, you just have to be more clever about the nature of the application. So all these things kind of tick along, feeding off each other

Posted by James Zellmer at 12:00 AM

November 25, 2004

Elephants in the Living Room

Kuro5hin's Coryoth writes an op-ed piece on the possibility of a severe economic correction:

The first elephant is debt. There are 3 kinds of debt that are of concern: Household debt, the budget deficit, and the current account or trade deficit. Of those three, it is only the budget deficit that gets any real attention, and even then it is often brushed aside......

The second elephant is the US Dollar. At the time of writing, the US Dollar is running at about 0.77 Euros to the Dollar. One could claim that this is simply due to a strong Euro, but in reality most world currencies, including the Japanese yen and the Great British pound are trading strongly against the US Dollar......

The third elephant is the rise of India and China. Both the Indian and Chinese economies are growing very rapidly. These are the two most populous nations on earth, so they should not be taken lightly.

Posted by James Zellmer at 12:00 AM

November 23, 2004

Oscar Mayer For Sale?

Michael Arndt writes about Oscar Mayer parent Kraft Foods (itself part of Altria Group) rationalization plans (which include asset sales):

Now Deromedi is evaluating which brands to auction off next. As with the sale of Altoids and Life Savers to Wrigley, he'll look at secondary brands or those where Kraft lacks the clout with retailers to turn things around. Analysts and consultants figure Oscar Mayer is most likely. Despite being the leader in bacon, hot dogs, and luncheon meats in the U.S., with $2.1 billion in annual sales, it has been losing out to cheaper store brands and has little brand recognition overseas. Kraft's $1.2 billion-a-year Post cereals division, a distant No. 3 that also is ceding market share, could also be on the block. Michael A. Crowe, a senior managing director of Mesirow Financial, which owns 200,000 Kraft shares, hopes the sales come soon. "It's not long overdue," he says. "But it is overdue."
This could be a rather big deal for Madison.

Posted by James Zellmer at 12:03 AM

The New Age of Advertising

Tom Moon (audio):

To announce its latest release How to Dismantle an Atomic Bomb, U2 has partnered with Apple Computer for a series of now-ubiquitous television advertisements.

Posted by James Zellmer at 12:01 AM

November 21, 2004

Shoppers get Savvy: 40% of consumers shop Online

Doris Hajewski:

They do plenty of buying in stores, but before they go, they check the family's Christmas Web site, log in with a password and look at wish lists from their far-flung relatives.

When the Wildermans are ready to buy, they'll be able to use retail Web sites and shopping portals such as or to check prices. And they might look to their own in-box to find special offers from e-commerce sites where they've shopped in the past.

"I think the person who is into online shopping is addicted now," said Lauren Freedman, president of the E-tailing Group consulting firm in Chicago. "The customer has become savvier."

Begs the question: 40% (and growing) shop online, why do retailers spend so little on internet advertising (compared to legacy ad spending)?

Posted by James Zellmer at 12:01 AM

November 19, 2004

Tom Peters on K-Mart & Sears

"Thud or maybe no one cares" - Tom Peters on news of the K-Mart/Sears deal.

Posted by James Zellmer at 12:01 AM

10 Reasons to Shy Away From Venture Capital

Peter Ireland on antiventurecapital:

The decision to chase venture capital is often a tempting distraction from the much more complex and important entrepreneurial tasks of creating something to sell and persuading someone to buy it. The pursuit of venture capital is sometimes a means by which to postpone the day of reckoning when the marketplace finally decides if the idea will fly.

Posted by James Zellmer at 12:00 AM

November 18, 2004

The End for Sears & Lands End?

Doris Hajewski writes that K-Mart's takeover of Sears likely means a sale of Lands End.

Posted by James Zellmer at 6:57 AM

November 13, 2004

Verizon's Fiber to the Home - Yesterday's Architecture

While SBC raises rates in Wisconsin for a long since paid for copper network, Verizon pushes forward with fiber to the home. David Isenberg notes that they are installing broadband fiber with speeds up to 60Mbps; that's over 60X the speed of my DSL line. Isenberg also notes that Verizon may have chosen a difficult to scale architecture (that 60Mbps may be set for decades...)

Wisconsin politicians evidently continue to drink SBC's Kool-Aid, as there's no evidence of progress here.

Posted by James Zellmer at 12:00 AM

November 6, 2004

Lands End Parent Sears Stock Jumps on Vornado's Ownership Disclosure

Dodgeville based Lands End parent Sears' stock rose 23% today based on news that Vornado Realty Trust has acquired a 4.3% in the retailer, in an apparent real estate play, according to Constance L. Hays:

In July, Vornado began buying Sears stock as well as derivatives held by a bank. Its move seemed to suggest that Sears might be worth more as a collection of real estate holdings than as a purveyor of clothing, housewares and other goods. Sears owns about 60 percent of its 870 Sears stores, a spokesman said, and leases the rest. There are also 1,100 independently owned and operated outlets for appliances and tools.

Posted by James Zellmer at 12:34 AM

November 5, 2004

SBIR - A Source of Funds for Small Businesses

Elizabeth Olson summarizes the federal government's SBIR programs:

But for high-technology entrepreneurs, there is another source of financing that can be as generous as it is little known: grants from the federal government's Small Business Innovative Research Program.

The biggest fund, by far, is run by the Defense Department, which parcels out some $1 billion a year to independent companies with fewer than 500 employees. The goal is to stimulate research into novel technologies that can benefit military operations, but with a twist. The department is not paying for exclusivity for the ideas it finances; rather, it wants those ideas to go commercial as quickly as possible to assure a stream of reliable and cost-effective suppliers.

Martin Klein is one of its emerging success stories - at least that is what he hopes. A chemical engineer by training, Mr. Klein has spent 40 years in the battery and fuel-cell business. In 1970, he founded the Energy Research Corporation, since renamed Fuel Cell Energy Inc., and later sold his stake in it. Today, it employs 500 people.

Then, in 1992, he founded Electro Energy Inc. to develop batteries for the military, and that same year submitted a proposal for a grant for research into what he calls a rechargeable bipolar nickel-metal-hydride battery. What sets it apart from traditional batteries, Mr. Klein says, is its design, which stacks thin flat wafer cells atop one another to improve the flow of current while taking up less space. His eventual aim, he says, is to produce a battery that is 30 percent smaller and cheaper than conventional batteries yet provides 50 percent more power.

The Defense Department, which is always on the prowl for better batteries, particularly for its communications equipment and aircraft, liked his idea. It awarded him $50,000.

Posted by James Zellmer at 12:00 AM

October 29, 2004

The Great Circle: Wisconsin Manufacturing Jobs, Leadership (or not) and Competition

Yesterday's news that GM would temporarily idle five SUV and pickup plants in early 2005, including Janesville amplifies the importance of:

  • People that run large organizations thinking and planning ahead. The era of large pickup truck based SUV sales & profits is apparently drawing to a close (not a big surprise with high gas prices and a recent change in the absurd large vehicle tax deduction).
  • The Japanese have a years ahead leadership position in the emerging hybrid vehicle market (gas/electric powered vehicles such as the Prius, Accord and the Toyota based Ford Escape (!) Hybrid components will likely not be coming from Wisconsin companies....
  • Peter DeLorenzo reports that Porsche has approached Toyota to purchase/license hybrid components for their 5,000lb SUV.
    From the "Hell Freezes Over" File, Automotive News Europe reported that Porsche is considering building a hybrid version of the Cayenne - using a Toyota powertrain. Readers of this site know exactly what we think about the Cayenne, but it's clear that this is a new low in Porsche history. The company that was founded on building lithe little sports cars that bristled with innovation and the visionary thinking of its founder has now openly admitted that they have given up on the innovation game altogether.
  • Wisconsin subsidizing some of these large businesses may not pay off at all.... Jim Doyle supported $5M in state training dollars for GM Janesville recently.
Once again, the big three are behind the curve, with broad implications for Wisconsin jobs..... (it should be noted that the big three have all invested in hydrogen power, which still seems to be a long way away).

Posted by James Zellmer at 7:29 AM

October 26, 2004

The Milwaukee Job Scene

Bob Davis & Jon E Hilsenrath:

Milwaukee workers like Mr. Konieczny -- with newfound opportunities and profound ambivalence about them -- say a lot about the state of the economy and the presidential campaign. After considerable hesitation, the economy began to produce more jobs about a year ago, as President Bush points out at every opportunity. But many of those jobs don't pay as much or offer as much security as the manufacturing jobs on which Milwaukee once depended, a point Democratic challenger John Kerry makes just as often.

The economy is behaving differently than in the past, and government snapshots give each candidate facts by the dozen to support his case. Mr. Bush likes a survey of households that shows more jobs now than the day he took office; Mr. Kerry likes a survey of employers that shows fewer. Mr. Bush says the new jobs are good ones; Mr. Kerry says they're not. The murkiness of the statistics and politicians' propensity to stretch the facts create a confusing picture as the election nears. But the outcome depends less on the dueling statistics than on what voters in battleground states experience and think about the economy.

Posted by James Zellmer at 12:00 AM

October 23, 2004

Milken Biopharma Economic Growth Study

Darren Dahl:

The study found that many state economies are already highly dependent on the biopharmaceutical industry, including New Jersey, Massachusetts, Connecticut, California, New York, Pennsylvania, Rhode Island, North Carolina, Washington and Utah.

The state economies in Nevada, Vermont, Alabama, New Hampshire, Florida and West Virginia also show great potential for capitalizing on biopharmaceutical development in the next 10 years.

The Milken Institute's report. State by state biopharma economic contributions.

Posted by James Zellmer at 6:57 AM

October 19, 2004

Small Business and the Presidential Election

Rhonda Abrams takes a look at small business issues and the upcoming Presidential election.

Posted by James Zellmer at 12:14 AM

October 17, 2004

Famed Aerospace Designer Burt Rutan on the Government's Role in Technology Development

Leonard David:

And were sitting there amazed throughout the 1960s. We were amazed because our country was going from Walt Disney and von Braun talking about itall the way to a plan to land a man on the MoonWow!

The right to dream

But as a kid back then, Rutan continued, the right to dream of going to the Moon or into space was reserved for only professional astronauts an enormously dangerous and expensive undertaking.

Over the decades, Rutan said, despite the promise of the Space Shuttle to lower costs of getting to space, a kids hope of personal access to space in their lifetime remained in limbo.

Look at the progress in 25 years of trying to replace the mistake of the shuttle. Its more expensivenot lessa horrible mistake, Rutan said. They knew it right away. And theyve spent billionsarguably nearly $100 billion over all these years trying to sort out how to correct that mistaketrying to solve the problem of access to space. The problem isits the government trying to do it.

I believe Rutan is correct. Government should generally provide incentives for private industry to address problems that we as a society believe need attention. Examples include: broadband (true 2 way), education, energy and space exploration.

Posted by James Zellmer at 12:03 AM

October 11, 2004

Revolution at the Water Cooler: Corinne Maier

Sebastian Rotella:

Maier herself has withstood her share of boring meetings. But she did something about it. She wrote a 112-page manifesto titled "Hello, Laziness: Of the Art and Necessity of Doing the Least Possible in Business."

And France reeled.

Maier's satiric book, which denounces corporate culture as rigid, empty-headed, avaricious and ruthless, has zoomed to the top of the bestseller lists here, selling more than 120,000 copies at last count. In urging office workers to smile and look busy while sabotaging the system from within, she has ignited a national debate about the French work ethic or lack thereof.

"What you do ultimately means nothing and you could be replaced tomorrow by the first passing cretin," Maier writes. "So work as little as possible, and spend some time (but not too much) on 'marketing yourself' and 'building yourself a network' so you will have support and be untouchable (and untouched) in case of a restructuring."

Maier is a part time employee with EDF: Electricite de France.

Posted by James Zellmer at 12:01 AM

October 10, 2004

A Pravda View of

Jason Stein points to Madison's as an example of how "critical that [venture capital] funding can be":

In the late 1990s, Sikes dreamed of turning her Madison art catalog and publishing business into an Internet site that could sell pieces of art directly to the public. With millions in venture money to strengthen it, survived the bust and now has 35 employees.

"Venture capital helped build this company to what it is today," Sikes said. "The reason most start-up businesses fail is because they're undercapitalized. There is an enormous need in Wisconsin for more venture capital."

Fred Schwarzer, managing director of Charter Life Sciences in Palo Alto, Calif., said most venture capitalists stay relatively close to their East and West Coast offices and don't get a chance to discover Madison companies like

Rather than drinking the kool aid and simply printing Guild CEO Toni Sike's statements, Stein should have dug in a bit and run a quick Google search and found that:
  • Local investors lost millions during Guild's chase for west coast VC money

  • Guild was bought back from Ashford for less than pennies on the dollar
Holding up as a local vc success story would be like the folks in Silicon Valley point to their substantial VC investments in massive failure webvan as an example of why they need more venture funding. Local NBC affiliate channel 15 (now a friend of Capital Newspapers site (!)) ran a brief story on Guild a few years ago. No mention was made of their financial history. I phoned the reporter after the segment aired and asked why this was omitted. She said: "well, the local investors got to keep their [worthless] stock".

I'm not sure we can point to any successful VC backed firm here. Rather, we can look to those firms that have built businesses brick by brick, such as Epic systems. This lack of big numbers points to the real problem, too few folks are willing to take risks.... (Sikes took some, for sure, but let's tell the whole story).

Unfortunately, this type of hype is quickly dismissed by anyone doing their homework, which the serious VC's will do.

Posted by James Zellmer at 8:38 AM

October 5, 2004

Decline of the US Creative Class?

Richard Florida discusses [$6.00 PDF] America's looming creativity crisis. Timely article, given WTN's recent report.

The strength of the American economy does not rest on its manufacturing prowess, its natural resources, or the size of its market. It turns on one factor--the country's openness to new ideas, which has allowed it to attract the brightest minds from around the world and harness their creative energies. But the United States is on the verge of losing that competitive edge. As the nation tightens its borders to students and scientists and subjects federal research funding to ideological and religious litmus tests, many other countries are stepping in to lure that creative capital away. Ireland, Canada, Australia, New Zealand, Denmark, and others are spending more on research and development and shoring up their universities in an effort to attract the world's best--including Americans.
Richard Florida Links: All The Web | Clusty | Google | Teoma | Yahoo

Posted by James Zellmer at 12:02 AM

October 4, 2004

Why Spend taxpayer $'s when we don't Capitalize on what we have now?

WTN's recently released report [5.6MB PDF]includes these highlights:

  • Academic research and development activities in Wisconsin total about $883 million in the latest year. That includes the UW System, the Medical College of Wisconsin, other private colleges and universities, the Marshfield Clinics research arm and the research programs of the Veterans Administration hospitals.
  • Academic R&D is responsible for more than 31,000 jobs, directly and indirectly, in Wisconsin. That is according to an economic multiplier used by the U.S. Department of Commerce Bureau of Economic Analysis and the Association of American Universities.
  • Academic R&D represents an area where Wisconsin performs well versus other states in attracting federal dollars. Wisconsin is 15th nationally, even without the inclusion of the Marshfield Clinic and the Veterans Hospitals.
  • Academic R&D in Wisconsin has continued to grow, even as the economy retrenched in 2000-2003. In the last year alone, for example, R&D conducted in the UW System grew by $47.5 million.
  • Academic R&D in Wisconsin could be at risk unless state support for the infrastructure supporting such research is maintained. Other states are investing in their infrastructure because they believe it makes sound economic sense.

The report contains these recommendations:

  • The governor and Legislature should continue to invest in capital improvement programs such as BioStar and HealthStar, which leverage the assets of the UW-Madison and help to create spinout companies and jobs.
  • The governor and Legislature should begin, in the 2005-2007 state budget, the process of restoring state support for UW System operations. Although many states have experienced similar budget difficulties, the erosion in the UW budget has been relatively steady for years and cannot continue if the state wants to protect its investment.
  • The governor and Legislature should create a Wisconsin Innovation and Research Fund to help secure federal and corporate grants by providing small matching grants to UW System and private college faculty who collaborate with business on R&D.
  • The UW-Madison, the Medical College of Wisconsin and the Marshfield Clinic should re-examine already strong collaborative research relationships to look for more opportunities to joint attract research funding and conduct science. Incentives to conduct inter-institution and interdisciplinary research should be established. This is similar to an approach being followed in Minnesota, where the University of Minnesota and the Mayo Clinic have recently announced joint initiatives.
  • The governor and the Legislature should establish a commission, similar to the Michigan Commission on Higher Education and Economic Growth, to explore other options and to more deliberately track best practices in other states.

Judy Newman interviewed local scientists, along with other interested parties.

I continue to believe the primary issue for us is not money, rather risk taking. We've certainly spent a great deal of academic research, only to see WARF license the technology to firms such as California based Geron, among other non Wisconsin entities.

These licensing activities beg the usual question: why should the taxpayers continue to pay when the fruits go elsewhere, similar to the long time discussion of our brain drain (two of my four UW roommates are in Colorado and California....)?

My View: Why spend more taxpayer money when we don't capitalize on what we have now! I can't imagine yet another government level technology council....

UPDATE: Tom Still (Report Editor and President of the WTN) sent me a followup email:

Jim -- Thank you! It's good to get the information out and let people debate how to set priorities. I appreciate your thoughtful approach.

-- Tom
Send him yours: tstill at

Posted by James Zellmer at 7:50 AM

September 15, 2004

"Creative Destruction"

A term coined in 1942 by Joseph Schumpeter in his work, Capitalism, Socialism and Democracy, to denote a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

I thought of this concept (which I learned in High School many years ago) and refined at the UW recently while visiting with a local small business owner. This guy's firm formerly sold voice mail systems. That business has changed quite a bit therefore, he is now selling services and IT solutions including replication, archive and "secure" email products.

I told him that I was impressed by his ability to zig and zag as the market changed. It's clear that every worker today, at any level must be ready for new challenges and opportunities, as this article on the NY Times outsourcing plans illustrates.

Posted by James Zellmer at 1:12 AM

September 10, 2004

Nicole Miller's unplanned business success story

I remember buying a number of Nicole Miller ties in the early 1990's...

he first Nicole Miller boutique opened on New York's Madison Avenue in 1986. The store did well, but Miller's first big break came by accident.

Miller had made a series of silk dresses with a print made out of a design of theater tickets. Bud Konheim, her business partner of 22 years, remembers the dresses were "awful." Konheim and Miller discussed using the silk to make women's scarves but settled on men's ties instead. A security guard at the Madison Avenue boutique also happened to work nights at the Metropolitan Opera. He borrowed one of the ties and showed it to a buyer of the Met's gift shop.

Elizabeth Blair

Posted by James Zellmer at 12:50 AM

August 15, 2004

Wisconsin Economic Priorities

The Wisconsin State Journal Editorial page has a useful summary of pressing economic priorities:

  • Overburdened Highways
  • Inadequate telecommunications
  • Aged Electrical System
I generally agree with these issues, however, the #1 issue must be true, economical, 2-way broadband for all.

Posted by James Zellmer at 10:49 PM

August 5, 2004

Epic/Health Care Technology in the News

Jeff Richgels nicely summarizes a recently announced federal electronic medical records initiative and long time, successful Madison Tech (soon to be Verona) firm Epic Systems.

The downside of these sort of deals is that success requires lobbying and dealmaking with many interested (and moneyed) players.

Posted by James Zellmer at 10:54 PM

August 1, 2004

Dark Age Ahead?

Jane Jacobs has published Dark Age Ahead (Random House, 2004), in which she targets "five crucial weaknnesses in the foundation of contemporary life in the West" -- one of which is "dumbed down taxes."

Author, activitist, social theorist and renowned urban planner, Jane Jacobs defined an increasingly influential way of looking at cities by opposing "slum" clearance and "suburban sprawl," and advocating the "restoration" of urban centers. Still in print 40-plus years after publication, her classic The Death and Life of Great American Cities (1961) revolutionized urban planning.

Jacob's later works explored her fundament ideas for different perspectives: urban economics in The Economy of Cities (1969) and Cities and the Wealth of Nations (1984), and political philosophy in Systems of Survival (1992). More recently Ms. Jacobs argued that economic life obeys the same rules as those governing the systems in nature in The Nature of Economies (2000).

About her latest work, Publisher's Weekly wrote "Witty, beautifully written--the culmination of Jacobs' previous thinking, and a step forward that deftly invokes a broader philosophical, even metaphysical, context." Via Taxprof.

Posted by James Zellmer at 9:10 AM

July 30, 2004

Grand Haven, Michigan offers Full-City WiFi!

Grand Haven, Mich., makes a splash with full-city Wi-Fi coverage: This seems like yet another city announcement, but it might be the first city with this scale of access that 100-percent live and commercially available

Posted by James Zellmer at 2:49 AM

July 25, 2004

Biotech, Community Colleges & Jobs

Jason Gertzen on Wisconsin's fledgling Biotech industry, including the growing demand for community college grads.

Posted by James Zellmer at 11:11 PM

July 22, 2004

Wisconsin State Priorities?

The State Journal editorial page takes Wisconsin Attorney General Peg Lautenschlager to task for joining with six other states and New York City to sue five of the country's largest power producers to force them to cut carbon dioxide emissions. This is the same organization that, under Democrat Jim Doyle signed us up for the Matrix personal data mining project - then later withdrew.

Keeping the environment clean is certainly important, but the WSJ raises some useful issues on this topic. I believe that our state leadership is ignorning (for political reasons) the most important economic issues of our time, such as the construction of true high speed networks.

High speed data networks are the rails and roads of the future. Yet, today, we are saddled with slow services supported by local telco monopoly SBC.

Verizon just announced that fiber to the premises ("fttp" or to the home) will be available in Keller, Texas, parts of Southern California and Florida. Prices will range start at $40/month for 2 to 5mbps service; with optional speeds up to 30mbps. (Currently, many state residents can choose from 384kbps to 1.5mbps DSL or cable service - 1/10th the speed, or less of the fibre based products).

These speeds make high quality personal video conferencing a reality (family & friends), new small businesses from the home possible and most importantly, will reduce the cost of true high speed access for all residents.

Nice to see our politicians are paying attention.

David Isenberg has some useful examples of "value-subtracted" telco business models. Isenberg also discusses a May, 2004 study that shows a dramatic reduction in telco operating expenses after they switch from a copper wire based network to a fibre system.

Posted by James Zellmer at 8:49 AM

July 10, 2004

Maytag Skybox Blog

Maytag recently introduced a "personal beverage vendor"! Thinking ahead, they have a business blog devoted to the product. (the product is not for me, and has been slammed as a "product for people who can't get off their ______ and get a cold drink in the kitchen".

This is another example of the changing advertising and customer relationship game.

Posted by James Zellmer at 6:23 AM

July 9, 2004

Monopolies, Microsoft & Newspapers

Barry Ritholtz nicely summarizes the monopolist's modus operandi:

Microsoft has a monopoly on the desktop -- and because of that, there are certain behaviors they are legally restricted from engaging in (at least, in legal theory). Microsoft should not be able to disadvantage competitors by leveraging that monopoly in a way that restricts competition.

Search is a perfect example: By setting the default to MSN search, and making it extremely awkward to change it, they automatically become one of the top 3 players in that space. What would take any other company billions of dollars to do, they get for, oh, about nothing.

Clearly, in the case of newspapers, protected by the Newspaper Preservation Act of 1970, it's rather simple to create additional print publications, that for others would be expensive. Similarily, they can use this monopoly postion to give away advertising products & content, if necessary, to kill competition (just like Microsoft gave away Internet Explorer, to "cut off Netscape's air supply").

Posted by James Zellmer at 11:00 AM

July 8, 2004

Microsoft Monopoly Tactics in the Newspaper Business ("Old Media"?)

Local print media monopoly, Capital Newspapers (prints and generates advertising for the Wisconsin State Journal and the Capital Times) has announced a new weekly publication that targets long time, successful weekly Isthmus. Capital Newspapers, protected by a federally sanctioned joint operating agreement (Newspaper Preservation Act of 1970: the JOA allows two newspapers to "share" advertising, overhead and printing costs) is using those monopoly derived funds to compete with a traditional, non protected business - Isthmus publishing.

This is similar to a tactic that Microsoft used, illegally, to squish Netscape. See Lee Enterprise's (owns 50% of Capital Newspaper) 2003 10-K (286K PDF) for a look at the Capital Newspapers (formerly known as Madison Newspapers Inc) local revenues (112M!) and net income of $16M (14%!).

Perhaps this is simply a negotiating/acquisition tactic? Capital Newspapers would likely enjoy acquiring Isthmus Publishing and thereby solidify control of the local print advertising business. This tactic has been used before, with a local business weekly and a children's (Dane County Kids) publication.

What to do? Vince and Linda and the Isthmus have done a superb job for the community. Send a note to our representatives (Representative Tammy Baldwin | Senator Russ Feingold | Senator Herb Kohl) telling them that the time is long past to repeal the Joint Operating Agreement Statute. And cancel your subscription (if you have one) to the State Journal or Cap Times.

UPDATE - the act is certainly not helping quality, as Glenn Reynolds points out.

UPDATE2 - Perhaps this is the natural manifestation of the Clear Channel effect in Radio - played out in the newsprint business. Madison is fortunate to have two dailies - BUT - they should compete like anyone else, which would change things, significantly.

Posted by James Zellmer at 6:55 AM

June 14, 2004

The Cost of Executive Perks

Perk Hoggs on the cost of executive perks.

The problem is not the cost of the perks themselves; at a ten-billion-dollar corporation, theyre hardly even a rounding error. Its what they are symptomatic of. Perks and rigid management hierarchies tend to go together; perks are designed in part to reinforce status divisions, and rigid hierarchies do not lend themselves to intelligent decision-making, since they isolate executives from the rest of the company. Also, C.E.O.s who indulge in perks are likely to be profligate in general with shareholder money.
There are problems in both the private and public sector. Our senators have incredible health care AND average much better investment returns than us poor taxpayers. There are plenty of examples of corporate excess. Hoggs makes some useful points. Via John Robb.

Posted by James Zellmer at 9:58 PM

Journalism vs Advertising at the LA Times

Tribune owned LA Times recently announced layoffs, just after winning a couple of Pulitzer prizes according to this story by Jacques Steinberg.

"Look at USA Today; how many Pulitzers have they won?" Mr. Janedis added, singling out the flagship of the Gannett chain, which has yet to win one. "But they sell a lot of advertising and get good rate increases."
The article also compares major publisher cashflow margins (from Banc of America Investment Securities): Lee publishes the local Wisconsin State Journal and co-owns the federally sanctioned monopoly (newspaper joint operating agreement: whereby overhead and advertising are shared among two or more "competitors"): Capitol Newspapers.

Posted by James Zellmer at 9:46 PM

June 12, 2004

Vacation in Orbit?

Guy Gugliotta on the X-Prize:

The idea is to create a new tourist industry: "For the last 30 years, people have thought that space flight is only for a select number of government employees," said Peter H. Diamandis, chairman and president of the X Prize Foundation, the competition's organizer. "We want to change that mind-set."

Posted by James Zellmer at 2:06 AM

June 10, 2004

The MBA Menace....

Yuko Shimizu on Harvey Mintzburg's new book: Managers not MBA's

Congratulations! You have a sparkling new degree, highly prized in this world. You have learned a great many things about business. You have invested two years of your life, not to mention lost wages and a small fortune in tuition, in this impressive undertaking. As a result, you are fully qualified to go out and become a menace to society.

Granted, this isn't fully the fault of your school. Nothing personal, but full-time MBA programs by their nature attract many of the wrong people--too impatient and analytical, with little experience in management itself. These may be fine traits for students, but they can be tragically ill-suited for managers.

Conventional MBA programs then compound the error by giving the wrong impression of management: that managers are important people disconnected from the daily work of making products and producing services; that managing is largely about decision making through analysis; that managers pronounce deliberate strategies for everyone else to implement; and worst of all, that by sitting still in a classroom for a couple of years, you are now ready to manage anything.

Posted by James Zellmer at 2:11 AM

June 8, 2004

Sweat Equity is the Best Equity

Mark Cuban has been writing a series of essays on building a business. Today, he talks about sweat equity, and building a business the old fashioned way.

The reality is that for most businesses, they dont need more cash, they need more brains.
So true....

Posted by James Zellmer at 10:29 PM

June 6, 2004

Bio 2004

Bio 2004 is underway in San Francisco. Wisconsin, like many other states/government bodies, has a pavilion.

The exhibitor list is here. This list, with numerous government bodies illustrates the great temptation that states provide narrowly focused tax incentives, as discussed here recently.

In the end, these conferences can suffer from "increasing returns", because the Kansas Biosciences Association, among many others are exhibiting (in the Kansas Pavilion), so too must the Illinois Farm Bureau, and many, many others.

Posted by James Zellmer at 7:45 AM

May 30, 2004

Madison Airport "Leaking Passengers"

I've written a bit about Madison's air service. Marv Balousek writes today about Madison "leaking" passengers to Milwaukee and Chicago. Leaking means passengers driving to other airports in an effort to obain lower fares. Airport Director Brad Livingston cited one example, Orlando:

115,142 people flew to Orlando, Fla., last year from the Dane County Airport's market area, just 59,024 or 51.3 percent flew from the Madison airport. Orlando was the airport's most popular destination.

This is not a big surprise. Visit to and search a number of city pairs from Madison to Orlando, Austin, San Francisco, Boise, Denver and other major markets.

In some cases, fares are attractive from Madison, others they are not. (Madison to Minneapolis is a great example): on June 2, 2004 a typical business roundtrip (fly up at 7:00a.m. and return around 6:00p.m.> Northwest has a nonstop fare of $403 plus taxes and fees. Interestingly, on the same day, Southwest flies from Dallas to Houston (a similar distance) for a roundtrip fare of $197.20 (planning ahead will save money).

There are a couple of reasons for this discrepency: Northwest has no competition on Madison-Minneapolis flights; while Southwest does from Dallas to Houston. There's also a philosophical difference between Northwest's business approach (charge the highest prices possible) and Southwest's (let's grow traffic by charging low, friendly fares).

Finally, the only time major airlines reduce fares and increase frequency is when they are faced with low fare competition.

Southwest is the only game changer for Madison...

Posted by James Zellmer at 8:37 AM

May 28, 2004

Allen-Edmonds Stays in America

Aaron Nathans writes about Port Washington's Allen Edmonds Shoe Company, and their ongoing efforts to continue making shoes, competitively, in Wisconsin (rather than China):

The rumble, hum and clack of the Allen-Edmonds shoe factory went quiet in late December. Many of the machines that helped workers pack insoles, trim the leather and buff the finished men's dress shoes were gone by New Year's Day.

But John Stollenwerk, the president of the company, was not preparing to send his operations overseas. Instead, Mr. Stollenwerk gambled on staying put and reconfiguring his factory floor, which reopened on Jan. 5, with a new manufacturing method that could increase production and cut down on mistakes. The moves required an investment of $1 million, or 1.1 percent of the company's 2003 sales.

Mr. Stollenwerk is resisting a tide that has decimated the American shoe manufacturing industry: About 98.5 percent of shoes sold in the United States are now made abroad, according to the American Apparel and Footwear Association, which is based in Arlington, Va.

Posted by James Zellmer at 10:02 PM

May 27, 2004

Wired 40

From Wired: They are masters of innovation, technology, and strategic vision: 40 companies driving the global economy.

Old-school business types found some solace in the bust - at least the upstarts got their comeuppance. Hardly! With the economy finally perking up, newcomers are running the show: Three of the top five companies in this year's Wired 40, our annual list of enterprises leading the charge toward a connected global economy, were founded in the past decade. One-third are less than 20 years old.

This year's list reflects the churn we've come to expect in the tech economy. Only nine selections appeared on the original list back in 1998. Still, the criteria for inclusion remain unchanged. These 40 leaders have demonstrated an uncommon mastery of technology, innovation, globalism, networked communication, and strategic vision - skills essential to thriving in the information age.

Posted by James Zellmer at 10:17 AM

Futurist Doug Randall on Abrupt Climate Change

Randall, co-auther (along with Peter Schwartz) of Abrupt Climate Change [PDF] is interviewed by World Changing Blog:

Their scenaric findings -- that the gradual global warming we're experiencing could plausibly trigger an abrupt climate snap, and that its effects would be massive, perhaps catastrophic, and of direct relevance to the national security of the United States -- we're picked up by media around the world, gathering a snowball of controversy and hype along the way. Their scenarios, freely available on the Web, were termed a "secret Pentagon report," and their descriptions of possible climate catastrophe taken as bald prediction.

But underneath the hype was a reasoned attempt to judge the seriousness of the threat posed by climate instability. That's something all of us hoping to change the world have to take into account. So we asked Doug about the implications of that report (now that the dust has settled), the movie The Day After Tomorrow, and how to think about the future of climate change.

Posted by James Zellmer at 10:13 AM

May 24, 2004

May 21, 2004

More on Corporate Culture and Leadership: Herb Kelleher

Herb Kelleher on the survival of an airline; a recent talk to Southwest's Senior Leaders:

In a wide ranging discourse on the current state of affairs in the airline industry, Herbs talk was packed with historical truths and current observations based on over 35 years of industry experience. Here is a synopsis of his remarks.
  • As an airline executive, his prime goal and proudest accomplishment has been job security for the People of Southwest.
  • Nothing is as injurious to ones quality of life as a layoff or furlough.
  • In spite of being in one of the worst businesses in the history of business, Southwest has prospered because of its People.

Posted by James Zellmer at 10:31 AM

May 20, 2004

Corporate Culture & Travel

I've written before about Madison's air travel challenges and opportunities.

I continue to believe that only the arrival of Southwest will truly change Madison's air transportation opportunities. The "Southwest Effect" is just what Madison needs: the average fare decreases and the number of passengers dramatically increases when Southwest enters a market.

I recently phoned Gary Kelly, Southwest's CFO to encourage them to fly to Madison. Southwest gets major points for having a real person answering the phone and playing good music while the call is being routed around the company.

Posted by James Zellmer at 5:40 PM

Tax Avoidance & Intellectual Property

Dave writes about Amazon's controversial one-click purchase patent (many business process patents, are I believe an abuse of the patent process). Evidently, Amazon assigned their patent(s) to Deutsche Bank as part of a credit agreement between 1995 and 1997.

I wonder if there might be a tax shelter angle to this (amazon was generating huge losses at the time, and other firms might wish to do a deal for the tax benefits of those losses)? Years ago, I worked for a major international beverage firm. One of their (this firm was not unique) tax reduction/avoidance strategies was to create the flavors in tax havens (Puerto Rico, Cyprus, Ireland among other places) and sell that essential component back to US entities at high prices (this is of course a rather simplistic analysis). The US entities then generated small margins or losses while the offshore unit generated the large margins. This tax strategy, among many others is discussed in the very enlightening book by NY Times reporter David Cay Johnston: Perfectly Legal.

Deutsche Bank, like many others, has been part of a number of tax shelter strategies.

This abusive patent process is the major reason I do not link to amazon (barnes & noble online is a fine alternative).

Posted by James Zellmer at 7:53 AM

May 14, 2004

Methane Digester: generating electricity from cows

One would think that this type of thing should happen here first....
Maria Alicia Gaura writes:

After 25 years of persistent work, Marin County rancher Albert Straus has figured out a way to run his dairy farm, organic creamery and electric car from the manure generated by his herd of 270 cows.

Cheered on by a small gathering of engineers, environmentalists and fellow farmers, Straus stepped into a utility shed Thursday, switched on a 75- kilowatt generator, then stepped outside to snip the ribbon spanning a spanking-new electrical panel.

Posted by James Zellmer at 5:17 PM

First to Worst?

Thomas Content writes that "Wisconsin residents are paying more for electricity than consumers in seven other Midwestern states, a reversal from several years ago when power customers here paid the lowest rates, a study found."

Posted by James Zellmer at 6:48 AM

May 11, 2004

Madison is #1?

Forbes Mark Tatge writes about our "Miracle in the Midwest":

David C. Schwartz is right at home in the dark. That's where his fluorescent microscopes can do their work, scanning thousands of samples of DNA that make a slow crawl across computer screens and methodically map the human genome. All this activity is packed into a cramped room inside a lab at the University of Wisconsin at Madison. "Most people think I came here because I hated New York," he says with a boyish smile and a twitch of the mustache that curls over his lip. "I came here to start a company
Interesting sidebar:
Out-of-state venture capitalists complain that most of these hatchlings need better management. G. Steven Burrill, who runs the San Francisco merchant bank Burrill & Co. and has invested $15 million to $20 million in young Wisconsin companies, bemoans the failure to capitalize on opportunities. "We see 100 deals a month in life sciences," he explains. "But I don't see even one a month from Madison
Burrill is correct - while there are many opportunities here, it is not generally a risk taking culture.... unfortunately.

Posted by James Zellmer at 11:06 PM

April 22, 2004

Losing our Edge?

Tom Friedman writes about a recent trip to Silicon Valley:

Still others pointed out that the percentage of Americans graduating with bachelor's degrees in science and engineering is less than half of the comparable percentage in China and Japan, and that U.S. government investments are flagging in basic research in physics, chemistry and engineering. Anyone who thinks that all the Indian and Chinese techies are doing is answering call-center phones or solving tech problems for Dell customers is sadly mistaken. U.S. firms are moving serious research and development to India and China.

The bottom line: we are actually in the middle of two struggles right now. One is against the Islamist terrorists in Iraq and elsewhere, and the other is a competitiveness-and-innovation struggle against India, China, Japan and their neighbors. And while we are all fixated on the former (I've been no exception), we are completely ignoring the latter. We have got to get our focus back in balance, not to mention our budget. We can't wage war on income taxes and terrorism and a war for innovation at the same time.

Curriculum was and is a hot topic in the Madison School District.

Further, the tech industry has been playing footsie with Hollywood (ironic, given the size of the tech industry vs Hollywood) regarding our fair use rights. Dan Gillmor has recently published a draft version of his upcoming book: Making the News. Chapter 11 includes some very troubling quotes:

  • Jack Valenti, head of the MPAA (Motion Picture Association of America): "And he was adamant that technology in the future -- including personal computers -- will have to be modified to prevent people from making unauthorized copies.. The result: "Give the copyright holders the ability to "fix" all of its perceived infringement problems, and you give copyright holders unprecedented control over tomorrow's information, over culture itself. Here's an example: It is currently illegal to copy a snippet of video directly from a DVD to use as part of another work. But you can do this with a piece of text, though the e-book industry is working to prevent even a small cut and paste. If we need permission, or have to pay, simply to quote from other works, scholarship will be only one casualty."
  • No technology company has done more to curry favor with the copyright cartel than Microsoft, a company that repeatedly ignored copyright law in building its own powerful business. Here's how Cory Doctorow put it:
    When Microsoft shipped its first search-engine (which makes a copy of every page it searches), it violated the letter of copyright law. When Microsoft made its first proxy server (which makes a copy of every page it caches), it broke copyright law. When Microsoft shipped its first CD-ripping technology, it broke copyright law.

    It broke copyright law because copyright law was broken. Copyright law changes all the time to reflect the new tools that companies like Microsoft invent. If Microsoft wants to deliver a compelling service to its customers, let it make general-purpose tools that have the side-effect of breaking Sony and Apple's DRM, giving its customers more choice in the players they use. Microsoft has shown its willingness to go head-to-head with antitrust people to defend its bottom line: next to them, the copyright courts and lawmakers are pantywaists, Microsoft could eat those guys for lunch, exactly the way Sony kicked their asses in 1984 when they defended their right to build and sell VCRs, even though some people might do bad things with them. Just like the early MP3 player makers did when they ate Sony's lunch by shipping product when Sony wouldn't.
    Unfortunately, Microsoft's answer has been to build Digital Rights Management -- the more appropriate term is "Digital Restrictions Management" -- into just about everything it makes.

  • Microsoft, Intel and several other major technology companies are now working on a "Trusted Computing" initiative, putatively designed to prevent viruses and worms from taking hold of people's PCs and to keep documents secure from prying eyes. Sounds good, but the effect may be devastating to information freedom. The premise of these systems is not trust; it's mistrust. In effect, says security expert Ross Anderson, trusted computing "will transfer the ultimate control of your PC from you to whoever wrote the software it happens to be running." He goes on:

    [Trusted Computing] provides a computing platform on which you can't tamper with the application software, and where these applications can communicate securely with their authors and with each other. The original motivation was digital rights management (DRM): Disney will be able to sell you DVDs that will decrypt and run on a TC platform, but which you won't be able to copy. The music industry will be able to sell you music downloads that you won't be able to swap. They will be able to sell you CDs that you'll only be able to play three times, or only on your birthday. All sorts of new marketing possibilities will open up.
    But now consider the ways it could be used, beyond simple tracking by copyright holders of what they sell. Anderson writes:
    The potential for abuse extends far beyond commercial bullying and economic warfare into political censorship. I expect that it will proceed a step at a time. First, some well-intentioned police force will get an order against a pornographic picture of a child, or a manual on how to sabotage railroad signals. All TC-compliant PCs will delete, or perhaps report, these bad documents. Then a litigant in a libel or copyright case will get a civil court order against an offending document; perhaps the Scientologists will seek to blacklist the famous Fishman Affidavit. A dictator's secret police could punish the author of a dissident leaflet by deleting everything she ever created using that system - her new book, her tax return, even her kids' birthday cards - wherever it had ended up. In the West, a court might use a confiscation doctrine to `blackhole' a machine that had been used to make a pornographic picture of a child. Once lawyers, policemen and judges realise the potential, the trickle will become a flood.
    The Trusted Computing moves bring to mind a conversation in early 2000 with Andy Grove, longtime chief executive at Intel and one of the real pioneers in the tech industry. He was talking about how easy it would soon be to send videos back and forth with his grandchildren. If trends continued, I suggested, he'd someday need Hollywood's permission. The man who wrote the best-seller, "Only the Paranoid Survive," then called me paranoid. Several years later, amid the copyright industry's increasing clampdown and Intel's unfortunate leadership in helping the copyright holders lock everything down, I asked him if I'd really been all that paranoid. He avoided a direct reply.

I've often wondered if our tech industry & hollywood's attempts to impose their fair use & big brother controls on PC's will destroy their export business (and our jobs). China and intel recently battled over a wireless security spec.

Posted by James Zellmer at 8:33 AM

April 17, 2004

Knob Gallery - Successful Milwaukee Web/Physical Business

Joan Shelley translated a "knack for knobs" into a fast-growing $1.4m business, according to Doris Hajewski:

Knobs are an unusual foundation for a business, especially for a triage nurse.

The mother of eight children, Shelley turned a flair for decorating cakes into a home business. In rapid succession in the 1990s, that led to assisting with commercial kitchen design and then teaming up as a designer with Amish craftsmen from southern Illinois. They made cabinets, and every one of those cabinets needed a knob or handle.

"Customers, especially the high-end ones, wanted something special in hardware," Shelley said.

She acquired lots of catalogs, but she wished there was an easier way to find what the customers wanted.

Enter Kristina Shelley, the self-described computer geek of the Shelley brood. At age 16, in the late 1990s, she had mastered the Web design classes at Oconomowoc High School. She started taking college classes and working part-time at Apex, a now-defunct Web development business in Milwaukee.

Posted by James Zellmer at 9:54 PM

Wal-Mart - a nation unto itself?

Steve Greenhouse writes a useful article on the economic & cultural implications of the Wal-Mart system:

We already know that Wal-Mart is the biggest retailer. (If it were an independent nation, it would be China's eighth-largest trading partner.) We also know that it is maniacal about low prices. (Some economists say it has single-handedly cut inflation by 1 percent in recent years, saving consumers billions of dollars annually.) We know that its labor practices have come under attack. (It charges its workers so much for health insurance that about one-third of them do not have it.)

Posted by James Zellmer at 9:40 PM

April 12, 2004

Saving money on your phone bill: VOIP

David Pogue reviews the latest VOIP (Voice over Internet Protocol) services, which allow you to call anywhere in the United States for as little as $20.55/month (plus your broadband internet connection):.

This development is annoyingly called voice-over-Internet protocol, or VoIP, which means "calls that use the Internet's wiring instead of the phone company's." When you sign up, you get a little box that goes between your existing telephone and your broadband modem (that is, your cable modem or D.S.L. box, a requirement for most of these services).

At that point you can make unlimited local, regional and long-distance calls anywhere in the United States for a fixed fee of $20 to $40 a month (plus the cost of your broadband Internet service, of course). Overseas calls cost about 3 cents a minute. These figures aren't subject to inflation by a motley assortment of tacked-on fees, either; voice-over-Internet service is exempt from F.C.C. line charges, state 911 surcharges, number-portability service charges and so on.

Save money, switch! I've been using for some time.

Two alternatives beyond the phone interface: ichat | skype

Posted by James Zellmer at 7:40 PM

April 10, 2004

Madison Property Taxes: "Everybody's Richer"

According to city assessor Ray Fisher Friday when 2004 property assessments were released. "My house went up 10 percent this year. I look at it as money in my pocket." - Beth Williams writes. Interesting perspective.... Can't say that I agree with Ray on that one. Bill Novak writes:

"Last year, assessments went up 8.6 percent and the local real estate tax was up 7.1 percent, according to the Assessor's Office. In 2002, assessments were up 8.1 percent and taxes went up 3.2 percent. In 1997 and 1999, assessments went up and taxes went down." What about 1998, 2000 and 2001?

There has been talk in the state legislature of completely shifting school taxes from the property tax to other sources, such as the sales tax. Wayne Wood, a retiring representative from Janesville and Rep Mickey Lehman (R-Hartford) developed a proposal that would have used a sales tax increase to reduce property taxes for schools.

Michigan dramatically changed their school finance system a few years ago, substantially reducing property taxes, in return for an increase in sales taxes.

My view is that the time is long past to remove school spending from Wisconsin's high property taxes. Every Wisconsin property owner should reasonably expect:

  • Actual property taxes (not mill rate or assessed value) should increase at a rate not to exceed the past 12 month's Consumer Price Index (CPI)
  • Increases beyond the CPI would only occur if one or more of the following occur
    • Property is sold
    • Building Permit is issued, increasing the value of the home

How should we replace some of the property tax revenues?

  • Sales Tax
  • Gas Tax
  • Vehicle License Fees (tied to value as well as fuel economy - am I dreaming?)

Political paralysis on this issue can only lead to drastic measures in the not too distant future.

Related Links: Assessor's office | Wis Taxpayer's Alliance (lots of useful information)

Posted by James Zellmer at 8:56 PM

April 8, 2004

Learning to Expect the Unexpected

Former Wall Street bond trader and author of the quite useful book Fooled by Randomness pens an op-ed piece in today's New York Times where he describes black swans (an outlier, an event that lies beyond the realm of normal expectations) with respect to 9/11 and the current investigation:

Most people expect all swans to be white because that's what their experience tells them; a black swan is by definition a surprise. Nevertheless, people tend to concoct explanations for them after the fact, which makes them appear more predictable, and less random, than they are. Our minds are designed to retain, for efficient storage, past information that fits into a compressed narrative. This distortion, called the hindsight bias, prevents us from adequately learning from the past.

Black swans can have extreme effects: just a few explain almost everything, from the success of some ideas and religions to events in our personal lives. Moreover, their influence seems to have grown in the 20th century, while ordinary events the ones we study and discuss and learn about in history or from the news are becoming increasingly inconsequential.

Consider: How would an understanding of the world on June 27, 1914, have helped anyone guess what was to happen next? The rise of Hitler, the demise of the Soviet bloc, the spread of Islamic fundamentalism, the Internet bubble: not only were these events unpredictable, but anyone who correctly forecast any of them would have been deemed a lunatic (indeed, some were). This accusation of lunacy would have also applied to a correct prediction of the events of 9/11 a black swan of the vicious variety.

Posted by James Zellmer at 8:38 AM

April 7, 2004

The IBM System/360 Revolution

Speaking of Entrepreneurs, IBM launched System/360 on April 7, 1964. Many consider it the biggest business gamble of all time. At the height of IBM's success, Thomas J. Watson, Jr. bet the company's future on a new compatible family of computer systems that would help revolutionize modern organizations. Get a behind-the-scenes view of the tough decisions made by some of the people who made them, and learn how the System/360 helped transform the government, science and commercial landscape.

Posted by James Zellmer at 11:16 AM

Where are the Entrepreneurs?

John Byrnes has written one of the better articles [164K pdf] I've read on the topic of Wisconsin's generally poor entrepreneurial track record. He correctly points out that:

  • Most attendees at recent VC & Economic Conferences were from government agencies, community development organizations, schools and universities (why? most real entrepreneurs don't have time to sit around and talk, they'd rather make things happen)
  • Byrnes further muses that perhaps our culture is to blame: "We may be dealing with the long-term effects of an overprotective social climate that discourages risk taking."
  • Too much overhead: Byrnes cites a recent study by the California-based Milken Institute which shows that Wisconsin has more economic development offices and business incubators per capita that almost every other state, including California! Byrnes calcuates that the ratio of business support people to entrepreneurs is 100 to 1; if you add educators, the ratio is 1000 to 1!

Byrnes is right on. We don't need more state sponsored programs (that generally only benefit the largest firms). We in fact, need less paperwork (I can't imagine how a small business keeps up with it all....), more risk taking and a more entrepreneurial financial environment (California has this in droves).

Byrnes article appeared in the April, 2004 issue of Corporate Report Wisconsin.

Posted by James Zellmer at 9:28 AM

New Madison Air Service: Liberal Air!

David Brooks pens a too funny look at the proposed Liberal Air and it's counterpart Right Wing Express. The faculty seating arrangements are too funny....

On a more serious note, I recently received an email from County Executive Kathleen Falk regarding non stop air service to and from our local airport. She also attached a note from Brad Livingston, our airport director regarding their current initiatives (non-stop service to and from Atlanta along with potential incentives to increase service).

Posted by James Zellmer at 9:17 AM

March 24, 2004

Madison firm wins Shanghai traffic monitoring deal

John Schmid writes about Trafficcast's agreement to create a traffic monitoring system in Shanghai:

"This is a great example of a Wisconsin-developed technology and a Wisconsin-developed business that has found a significant market in China," Doyle said in an interview in Shanghai.

Much of the hiring will take place in China. In Shanghai, there will be more than 100 employees eventually, adding to the 35 in the United States, Li said. Without giving the company's annual revenue, she predicts China will catch up to U.S. sales within two to three years.

It's always great to read about Madison firms in the Milwaukee paper first....

Posted by James Zellmer at 7:19 AM

March 23, 2004

Andreessen on America's Strengths

Optimism is everything

Amidst much discussion on outsourcing, Wisconsin native (and Netscape co-founder) Marc Andreessen writes about America's economic & cultural strengths:

  • Higher education: -- we're the best in the world; students come from every other country on the planet to study in our colleges and universities.
  • Entrepreneurialism throughout the system -- we continue to be the most entrepreneurial economy on the planet (more than China, more than India, certainly more than Japan, ... and way more than Europe).
  • Risk-friendly culture (this is hugely important) - this is not true across all states - Wisconsin needs to encourage more risk taking - state subsidies are not the answer
  • Culture that loves new things -- American obsession with the latest and greatest -- often made fun of but hugely valuable.
more via John Robb....

Posted by James Zellmer at 7:43 AM

March 21, 2004

Biotech, Wisconsin's Economic Savior? - an update

Judy Newman has a timely article on the state of Madison's biotech industry:

The biotech hub took a big hit last week with the news that PowderJect Vaccines in Middleton will close, wiping out the jobs of 88 employees, many of them highly educated, specialized scientists and technologists. And it's not the only local biotech that has pared its staff or even disappeared in recent years. <

There are several issues here:

  • The biggest issue: Risk taking, attitude (compare to California, Colorado, Oregon & Washington)

  • Money (California's biotech money is a completely different world)

  • Again, we need more people that are willing to take a risk (and fail in some cases)

  • I doubt that additional state backed funding schemes will make any difference at all...

Posted by James Zellmer at 7:28 PM

March 20, 2004

Don't do survey's just read your email....

Doc Searls provides some useful advice to anyone running web surveys....

Big company Web site user surveys invariably suck. They tend to be too long, to ask the wrong questions, and to be done by outside companies that don't have relationships with users. So I usually don't take them.

Bottom line: keep it simple and listen to your clients....

Posted by James Zellmer at 8:31 PM

March 16, 2004

Retail Ideas: Guerilla Marketing is the wave of the future


Interesting look at unconventional marketing (from book of joe)

The Comme des Garcons Guerilla Store flouts conventional wisdom in almost every way. Said Nancy Koehn, a professor at Harvard Business School, "Guerilla marketing is the wave of the future. Red Bull and Trader Joe's have built their followings by word of mouth."

from doc searls....

Posted by James Zellmer at 7:01 PM

March 6, 2004

Warren Buffett's Annual Shareholder Letter

NEW YORK, March 6 (Reuters) - Warren Buffett, the world's second-richest person, wants to pay more taxes. And he wants the rest of corporate America to pay more too.

In his annual letter [196K PDF] to shareholders of his Berkshire Hathaway Inc. (nyse: BRKa - news - people) holding company, released on Saturday, the 73-year-old Buffett said Berkshire's taxes rose more than eleven-fold to $3.3 billion from 1995 to 2003, as profits rose ten-fold to $8.15 billion.

During the same period, federal income taxes paid by all U.S. companies fell by 16 percent, to $132 billion.

"We hope our taxes continue to rise in the future -- it will mean we are prospering -- but we also hope that the rest of corporate America antes up along with us," said Buffett, who has previously criticized Bush administration tax policy.

Visit Berkshire Hathaway's site to view Buffett's annual letters, from 1977 to 2003.....

Posted by James Zellmer at 1:48 PM

March 5, 2004

Misadventure Capitalism

Doc Searls has some useful commentary on a recent PBS Cringely column (The Curse of the Hundred Bagger) regarding the stagnant economy.

Searls references Peter Drucker's Post Capitalist Society with respect to the declining utility of large corporations (he's right on).

Posted by James Zellmer at 4:21 PM

March 3, 2004

Calatrava does residential

Architect Santiago Calatrava (Milwaukee's Art Museum) is set to make his mark on New York City's skyline with a new residential tower.

Posted by James Zellmer at 10:05 PM

February 28, 2004

Customer Service/Appreciation @ 35,000 ft.

A first:

I (along with others) received this very nice thank you note from the captain of a UA 737 yesterday.

Posted by James Zellmer at 5:15 PM

February 24, 2004

Tom Peters on Outsourcing

Tom Peters posts 16 points on outsourcing/offshoring. Points 6 and 7 are interesting.

6. Americans' "unearned wage advantage" could be erased permanently. ("There is no job which is America's God-given right anymore." -- Carly Fiorina, Hewlett-Packard)

7. The wholesale, upscale entry of 2.5 billion people (China, India) into the global economy at an accelerating rate is almost unfathomable.

His conclusion: we need to train many, many more creative, risk-taking entrepreneurs. That will require a massive shift in how we educate our youth. The only reliable indicator of whether you will be an entrepreneur: you are the son or daughter of an entrepreneur. If that skillset can't be transferred more generally, most people will be left behind.

Thanks to John Robb.

I've lived in the west, and there's no question, that residents in Wisconsin and the Midwest in general need to start to take some business risks, and grow more entrepreneurs (It is truly genetic, I believe).

Posted by James Zellmer at 4:58 PM

February 20, 2004

The Politics of Tax Policy

David Cay Johnston writes today in the New York Times that a federal grand jury in Manhattan is investigating the sale of tax shelters by KPMG, the big accounting firm, to corporations and wealthy individuals who used them to escape at least $1.4 billion in federal taxes.

I sent this email to today:

Good Morning:

I am writing in response to your periodic coverage of "abusive" tax shelters.

I believe articles such as this would better serve your readers if they included references to the mess that is the US Tax Code (David Cay Johnston's book includes many useful references). The code is ripe for all sorts of strategies and tactics, many that I'm sure remain to be discovered and exploited.

One of the worst examples, I believe, is the deductibility of vehicles over 6000lbs - which has lead many independent and small business owners who formerly drove sedans to purchase very large, gas guzzling vehicles, simply for tax reasons. What has this policy cost the treasury?

This Edmunds article mentions $17billion over 10 years.

How about ethanol?

Yet another example:
Prior to a 1986 Tax Law change, real estate partnerships (among other examples) were created for the purpose of generating tax losses. Partnerships were created for the sole purpose of selling tax losses.

I find the political grandstanding on this issue absurd. Does Senator Levin disapprove of the massive SUV tax subsidies?

Why has this issue been attractive to some politicians, vs other tax matters? Is there another agenda? Who benefits if the accounting firms are largely taken out of the tax shelter game? Do law firms and investment banks continue to do their deals?

Best wishes -

Jim Zellmer

You can watch, and view transcripts of the Senate Committee on Governmental Affairs November, 2003 hearings on this matter here [Day 1 | Day 2]

Posted by James Zellmer at 8:36 AM

February 19, 2004

Rowe Pottery Works - Closing?

Venerable Cambridge based Rowe Pottery works is operating under a court-appointed receiver and is scheduled to close by May 1, founder Jim Rowe said Thursday.

Posted by James Zellmer at 10:35 PM

February 15, 2004

Madison High Tech "still catching up"

Mike Ivey summarizes Ross DeVol's (director of regional economics at the Milken Institute) presentation at the MGE innovation center.

DeVol recounted the list of negatives facing Wisconsin as it tries to move from a traditional agriculture and manufacturing economy into a more knowledge-based economy. The negatives include a lack of venture capital, the loss of top talent to other states and the failure to lure any big name "anchor" technology companies.

Presentations and meetings are nice, but I think we have too much of that and not enough risk taking (there's plenty of money here).

Posted by James Zellmer at 10:40 PM

February 13, 2004

Tupperware on PBS

Fascinating WGBH special on Tupperware.

Here's a site that sells retro tupperware.

Posted by James Zellmer at 2:27 PM

February 7, 2004

90,000 Cow Dairy Herd?

A pair of Californian entrepreneurs want to turn an empty lake bed just east of town into a non-polluting dairy farm for 90,000 cows, and to convert the cows' prodigious produce of manure and flatulence into a renewable form of energy. This cowtown, which will cover 1,900 acres, is the brainchild of William Buck Johns and Henry Orlosky.

See also the Harper Lake Energy Project.

Posted by James Zellmer at 9:02 AM

February 3, 2004

Organic Valley

LaFarge based Organic Valley is a $184 million company with dairy, meat and egg producers in 16 states and one Canadian province. It's the third largest brand name in the entire organic foods industry, according to the latest Mike Ivey Column.

Posted by James Zellmer at 10:12 PM

February 2, 2004

Fifth Avenue American Girl Store

Doris Hajewski updates us on Mattel's American Girl Company (formerly the Pleasant Company), including their new Fifth Avenue store. American Girl, based in Middleton, was sold to Mattel by Pleasant Rowland for $700M in 1998.

$100M of the proceeds is funding Madison's Overture Center for the Arts.
Posted by James Zellmer at 9:34 PM