How Do We Manage the Future of Capitalism- Shrug?

How Do We Manage the Future of Capitalism- Shrug?

“‘Mr. Rearden,’ said Francisco, his voice solemnly calm, ‘if you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders- what would you tell him to do?’

‘I…don’t know. What…could he do? What would you tell him?’

‘To shrug’”

“Atlas Shrugged,” Ayn Rand, 1957

Lately, there has been a lot written about the future of capitalism.

The current situation, accelerated and highlighted by COVID-19, has yielded increasing income inequality, bankruptcies, unemployment and Bernie Sanders-who tried to secure political capital by proposing a move to whatever he called his political system, where everyone gets something whether they earned it or not.

The inequality is striking: 

• In 2019, The Guardian reported that World's 26 richest people own as much as poorest 50%, according to Oxfam (link)
•     In 2020, Oxfam reported that “The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population” (link)
•     Bernie Sanders reported on the wealth of the world’s richest as described above, and his solution was? take it away and distribute it to those who have no clue as to how to make money. What does this solve except as a disincentive to people who have built great companies that changed our world and most of our lives except for redistributing their wealth? Then what? Is Bernie going to deliver your Amazon packages?

We have a system-capitalism- that was built on the freedom for everyone to capture their dream without the interference (not regulation) or participation of government. It has been copied, cared for, and mutated around the world. Most important, is not to confuse Capitalism with a political system. Vietnam and China are one-party, “Communist” governments that have risen to the top of the economic ladder by conducting themselves how? Not what Bernie would have them do- giving the freedom and reward to individuals to be successful based on their own efforts; the dramatic effect of their success is Capitalist- that they provide jobs, community growth and income for those who could not do it on their own, but who can serve and follow. 

So, to me, Capitalism is not an economic system, it is an economic process whereby people, with the permission and sometimes assistance of governments, can realize their own vision and make it real. 

Any political system that discourages or punishes individual effort at the expense of the entrepreneurs by mandating that individual effort must be diluted by taking away what is rightfully earned from those who earned it, to those who did not or could not. And it has an unbroken record of failure, according to world history.

So any political system can allow Capitalism to exist and encourage it for the welfare of its citizens. 

Mao tried to equalize the playing field in China, but now, China is as financially unequal as the “Capitalist” countries, if not more. George Orwell predicted that fatal flaw in Communism with his novel “Animal Farm,” which saw a group of pigs come to the conclusion that, “All Animals Are Created Equal, But Some Are More Equal Than Others.”

Is this ok? Shall we thank our benefactors who provide us jobs and let this inequality continue as they get richer and richer to an obscene level (nothing wrong with RICH- it is a matter of degrees), and be thankful for what we get?

Or should we look for a way to temper the situation without resorting to a Bernie world or having wealth handed to people who don’t work for it? 

Here’s my basic proposition: We need to improve the middle class standard of living, as we saw at the end of WWII- everyone with a house, car, two kids and a dog; If we do, it will benefit the rich in the long run as people are better off and can buy more; if not, the super rich will see an erosion of their wealth as economies stagnate and everyone’s wealth withers.

So, finding a solution to improving Capitalism so more people can share in the benefits of production and marketing is in everybody’s interest.

So what does that mean? It certainly doesn’t mean overturn the whole system, or grab what someone else earned, because you want to make a political point or you have not thought through what to do about it. It means to adjust- or SHRUG.

Our Atlas is straining, whether we see it or not- and we have the power to support him.

So what do we have to do? This requires collaboration by the great economic and political minds of our time (we have lots of them) AND telling the politicians (non Partisan- All of them) to stand back while We, The People, work out a viable solution. 

Let’s look at some contemporary opinion and current events as a starting point.

Ray Dalio, the CEO of Bridgewater Associates, one of the world’s largest hedge funds, (and also a member of that Rich Guys fraternity) has made a thoughtful analysis of the situation and future of capitalism; in a recent article published in CNN Business entitled, “Ray Dalio: We must reform capitalism, not abandon it,” he analyzes the situation:

• The economic world order is changing whether we like it or not. You can see it happening as people and companies around the world are losing income and savings, and central banks and governments are providing them money to try to compensate for those losses. And you can see it as the free market is no longer determining the allocation of capital — governments are.
• Given this situation, Dalio predicts, Chances are that the new system we end up with will be significantly different from the capitalist system that we've gotten used to.
• But then he reminds us, As the current crisis unfolds, we should remember that throughout history, capitalism has proven to be the best system, though it can sometimes be highly flawed. It is typically best when it comes to allocating resources and raising a society's productivity and living standards because of how profit-making works.
• He analyzes the biggest flaw of Capitalism this way: While this profit-making capitalism has worked well in this way, it has also been intolerably imperfect in providing equal opportunity. It has failed to deliver people equal opportunities to be productive if they can be and to take care of the basic needs of people who can't be. It also doesn't create limits on how bad people's living conditions can be or on how decadent spending can be. To me, most tragically, it allows vast numbers of children to grow up in environments of violent squalor, which is both economically and socially bad. It is economically bad because the costs of having large numbers of unproductive people are enormous compared to the benefits of having productive people. And it is socially bad because a system that doesn't provide equal opportunity can't be considered fair — and unfair systems eventually lead to disruptive social conflicts.
• Then, in a way of saying even he doesn’t have the answer, he says: Can't we all — capitalists, socialists, Republicans and Democrats — agree on that? Can't we all agree that whatever system we have, it must do a great job of both increasing the size of the pie and dividing it well?

Agree on what? How we fix a good and proven system so that more people can benefit from it without disincentivizing those who can create the wealth?

In “Atlas Shrugged,” Ayn Rand imagines a world where those who create wealth are stripped of their companies and wealth by a government who takes away because it can. And a world where people with money and power are told that they must share with those who can’t or won’t or are just too lazy? Back to Animal Farm…this doesn’t work- it will just evolve back to the inequality that Orwell predicts and that Mao hoped to eliminate but didn’t. If the power to create wealth is taken away from those who can, what will be left is  only those who can’t (Read on in Atlas Shrugged and you will see Ayn Rand’s scary vision of this scenario).

So how to solve this problem?

Here’s a start, as I see it: Create a society that does not allow greedy accumulation by the few where it will negatively affect the lives of many. Here’s an example: 

JC Penney, which has just filed for bankruptcy and has been declining for years, at the expense of the loyal employees who have served it for years, will give out $10 million in executive bonuses, including $4.5 million to CEO Jill Soltau.

The excuse is that the bonuses are given to “retain and continue to motivate its key executives.” Huh? This group is  responsible for the current irrelevance of an  iconic institution and failure, what else do they have to claim? When I was in companies large enough to confer a bonus, I remember years when I didn’t get anything because the company had not met its goals (regardless of whether I had met mine or not). What changed? Why do executives who presided at the death of a company deserve to be rewarded for it? What could that $10million add to the lives of the innocent, hardworking employees whose employment was terminated through no fault of their own?

Mariana Mazzucato, in her groundbreaking book “The Value of Everything,” begins to give us a clue to start a solution by her main thesis of distinguishing between the “makers” and the “takers.” This book is the beginning of a road map to MODIFY, not ELIMINATE, Capitalism as our core economic system. Her basic thesis is: Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all.

How exactly to do this without making radical, destructive and socially stupid changes a la Bernie is at the beginning of its conversation and learning curve. Everyone should participate in this conversation; the one no-no is don’t leave it to the politicians- politics never solved anything for anyone except them.

I want to be part of this process- we all should be and we all have equal right to cast our opinion and thoughts. As should you.

What I believe to be true, as Ayn Rand said, is that we don’t want to let or cause Atlas to fall and drop the world; we don’t need revolution, war, or other catastrophic events to solve the problem. Most of all, we don’t need POLITICS. Tell the politicians to go fly a kite (ALL of them) and let’s put our heads together to solve this.

What we need is a “Shrug,” not a crisis.

"China" Did What?

"Ask China"

“China” Did What?

Every day in the news today we see rhetoric, led by our President, that associates the Coronavirus with “China:”

• “The Plague From China”
• “China sent the virus here”
• “Ask China”

I need to know exactly who “China” is. China is a country; it can’t do anything. Do we mean that the 1.3 billion citizens of China got together and all agreed to send the virus? So do we mean “Chinese?”

And, do we mean the millions of Chinese and Chinese-Americans that live here, and are equally affected by the virus as non-Chinese? That EXACTLY is how people who are prone to prejudice and looking for someone to blame are taking it. 

Worse than the finger pointing, are we proud to live in a country that calls the Pandemic “Kung-Flu?” And someone who says the virus is “Chinese Communist Propaganda?”

Chinese built the infrastructure of California during the 1800’s. Americans who happen to be ethnic Chinese (or any other ethnic group) are just as American as anyone. 

Chinese in America are already being confronted by random prejudice, and, if it is not stopped by we, Americans, it will only get worse, and maybe even tragic. 

Isn’t this “a nation of immigrants?” Is this “The Land of the Free and the Home of the Brave?” Who is that lady standing in the Hudson River? Mr. Trump, do you want to tear down that statue?

So even if the virus did originate in China (there is significant evidence that there was an origin in Europe and even here), it is not proven at all that it came from a Chinese lab in Wuhan (we have those labs too), and even less proven that it was let out purposely. 

Damn, there goes another American principle: Innocent until proven guilty.

China started its quarantine on January 24th. As I heard Governor Cuomo ask, “where were the authority figures then?” The PAUSE In New York didn’t start until March 16th. 

History shows us that any time a group, without regard for its membership, behavior, or participation, is singled out, history is stained with heinous acts and attitudes. As a reminder, German Jews were citizens of Germany.

Is that the road we want to go down as a nation? Anybody who says or thinks yes is a travesty to our heritage. Myself and my father served in the US Military to PROTECT our freedoms against those who would do harm based on mass prejudice; It would be a crime against humanity if those freedoms were damaged because of this inane and senseless rhetoric. As such, I am beyond embarrassed about what is going on.

We can’t do anything about our leadership until November; I can personally tell you that, even if I was inclined to NOT vote, I would get my ass out to vote AGAINST anyone, local or national, who promoted attitudes and rhetoric like that.

Finally, it is really bad statesmanship and bad for our country to espouse, as Trump is doing, an antagonistic relationship with a country whose citizens had nothing to do with the Coronavirus, and whose people consume our goods, work to keep our Walmarts going, and who send their children here for education because of the example we set for the world.

I would hope that you speak out against this blatant prejudice; only that can change the direction, since politicians generally have no principles except what gets them elected. We, the People, do. 

That’s how I see it. You?

"Who's Minding the Store" (Now)?

“Who’s Minding the Store” (Now)?

Of course, the above is the title of a 1974 book by the late Stanley Marcus in which he shows us how a real merchant is created and operates. At that time, Neiman Marcus was unique. While consciously relevant to a certain niche of customers, he had the admiration of those who couldn’t afford the luxuries as well.

I remember reading the book as a buyer for the late A&S of the late Federated Department stores, and being thoroughly inspired and awestruck. This was a merchant prince whose shoes I could dream about, but never really hope to fill.

This week, we were informed of Neiman Marcus Chapter 11 filing. For anyone like me, who had not been following the daily story, you had to wonder, “what happened to the magic?” Clearly, there had not been an overnight meteor strike; clearly, as with others, this decline had happened over a number of years.

In filing, NM joined a list of other well-known names such as J. Crew, Sears, JC Penney in the same financial boat. But why? The headline in a recent article in CNN Business online read, “Four Famous Stores That Might Not Survive Because of Coronavirus.” 

Wait- Because of Coronavirus? The way I see it, this headline implies that, had not the Covid-19 Pandemic occurred, that they would or even might have survived. I believe that, in the case of at least Penney’s, Sears and J. Crew this is not the case. (Whether Neiman Marcus would have survived depends on who you listen to, but the symptoms are totally similar to the other three.) The Coronavirus might be the kill shot, and it hastened a death that was already well on its way- not caused it.

Mark Cohen, Director of Retail Studies at Columbia Business School, who worked at A&S back in the day, was quoted in the article: "The retailers who were wandering around aimlessly pre-pandemic are going to be substantially less likely to muddle through than they were before”. I think that is a great and appropriate choice of words- wandering around aimlessly implies a loss of direction or orientation- there’s the rub.

So what will be our cause of death for these stores? Let’s start with what we can rule out: Coronavirus. If a patient is ill with cancer and dies from pneumonia, we can call pneumonia the direct cause of death, but the real culprit is the cancer, right?

One common theme running through all of these failures is debt. Which is understandable in a store whose sales are declining. The more they decline, the harder to suffer the debt burden. All of these cases also have in common their debt being the result of a leveraged or other type of buyout by some institution that buys companies not to run them, but to sell them at a profit. And, while they are waiting, the company has to pay them a huge sum of money so they don’t lose if they can’t sell. To be honest, I do understand desperation, believe me, but I don’t understand why companies would enter into such a deal given the track record. Oh, I understand that when you have a business that you want to survive you will do anything, even if it is totally stupid financially. 

So our first cause of death is debt aka greed. 

I know that, if the companies in question could bring their businesses alive, that the debt burden would now be so overwhelming. So what’s up with that? Well, that, in my view, is the second cause of death- irrelevance.

Since retail is not a zero-sum game, the implication is that, if these companies became irrelevant, that would be because their customers had other choices that were more relevant to their lives and or purchasing behavior.

So, looking at Sears, Penney’s and J. Crew, who were on the top of the retail world not so long ago, how could this happen? Oh, don’t let’s blame Amazon, that’s too easy an excuse. 

You would think that an iconic brand like the 3 above with a name that goes back as far as the 19th century would be able to parlay that name into the merchandise and the retail experience that people wanted. They could not have reinvented themselves? Sears, for example, has been declining since 2008. Here’s a look at the sad picture for both Sears and Penney’s:

So, we are talking in May 2020 about Chapter 11; and we are talking about Coronavirus as the cause. So my question is: What happened in the intervening 12 years where both have been in a precipitous decline? To use Mark Cohen’s well-chosen words again, have they been “wandering around aimlessly” for 12 years?

Once they saw that their Moat was being breached and that other retail entities were thriving at their expense (such as Walmart, Target, Costco, BJ’s, etc.), was there no course of action for them? Further, when the online world became more important and Amazon became the King Kong of it, could they have not attempted to reinvent themselves both physically and online? When Walmart became a grocery, couldn’t Sears or Penney’s have had a grocery? Or a warehouse store like Sam’s Club?

My take on this is that you don’t have to be a retailing genius to figure out that maybe there were some efforts missed or opportunities lost, or 

Greed?

Maybe the appropriate term is more than “wandering around aimlessly?” Can we add “living in a bubble of denial?”

My feeling is that at least some CEOs had a fear of radical change, because it would point the finger at them for the failure and thus endanger their jobs, shares, options etc. so they either were in denial of what they had to do or afraid to do so? 

Which brings us to my second cause of death: irrelevance. The failure to evolve and remain relevant to a changing world and changing customer, as well as protecting their Moat from others who were more interesting and attractive to their former customers is a direct cause of the slow death that has befallen these three and others such as Toys ‘R Us. 

IF they had recognized and attempted to deal with the causes of erosion when they first began, the degree and cost of reinventing or updating themselves would have been lower, and less difficult.

To this I would have to add a third possible cause of death: arrogance. Falsely comforting themselves with what they were, and are, may have prevented them from seeing clearly what they will be or should be. 

I wrote about a clear example of this attitude regarding L Brands Victoria’s Secret division, which at one point was on top of the Bra and Panty world, and now can’t find a buyer. The article, written in August of 2017, was called, “Bra or Bralette? Know Your Dinosaurs” in which I clearly predicted their demise based on that merchandising decision, but, more important, the attitude that caused them to walk away from the bralette business, thus spitting in the face of evolution and riding the road to irrelevance. 

But what about Neiman Marcus? Will they survive Chapter 11 or join the Former Great Retailers Graveyard? Depends on a. even with the debt they have escaped, will their cost of existence be untenable? and b. Are they willing to humbly reinvent themselves to be relevant to the current market? 

The way I see it, the fact that they seem to have committed themselves to Ecommerce is encouraging. If they follow that up with an interesting and engaging persona, which they certainly have the history for, not underfed models and folded shirts, they have a chance to parlay their great name into something attractive. Today’s customers want something that is sustainable and original. As a former department store merchant, I can feel the effort. Can be done.

I wonder what Stanley Marcus would do if he were alive today? I believe that he certainly would not be afraid to make any and all radical changes that are needed for his customers. As I teach my marketing classes, “Find products for your customers, not customers for your products.”

For me, the bottom line is that Coronavirus is neither a reason nor an excuse for the death of an institution which was already in serious decline.

The Way I See It: Force Majeure Is Not An Excuse For Refusing Orders

The Bottom Line: Many Retailers around the Globe have hidden behind the Force Majeure clause for refusing orders that were finished or in process, and for cancelling orders already placed.

Let’s get the legal stuff out of the way first, then we should discuss how the situation might be handled in a better way.

Force Majeure (French for Superior Force) is a clause that may be inserted into a contract “which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as war, strike, riot, crime, act of God (e.g., flooding, earthquake, volcano), prevents one or both parties from fulfilling their obligations under the contract. However, "force majeure" is not intended to excuse negligence or other malfeasance of a party, as where non-performance is caused by the usual and natural consequences of external forces (e.g., predicted rain stops an outdoor event), or where the intervening circumstances are specifically contemplated.” (Wikipedia)

Force Majeure has been used as a legal reason for cancelling events due to COVID-19. In those cases, the argument is that either legal or medical or both reasons prevented the event from taking place. People could be seriously affected if the event were allowed to go on. So in this case, the event cannot take place, or is prevented from doing so.

So, the way I see it, the difference between an event cancellation due to Force Majeure clause and the refusal or cancellation of orders is that, while the Pandemic was not foreseen, nothing except the bottom line of bad business and overstocks prevented those buyers from taking the orders. They still had the power to take the goods and the shipment did not present a clear and present danger of medical endangerment.

So, in my opinion, Force Majeure is not a legal excuse for refusing or cancelling orders. 

Maybe it is a stretch, but, according to the above definition, you could say that bad business due to Coronavirus is “usual and natural consequences of external forces (e.g., predicted rain stops an outdoor event), or where the intervening circumstances are specifically contemplated.” The usual and natural consequences of a store closing (which, I agree, could not have been prevented) will be a glut of inventory. But, is cutting off your supply chain at the throat citing Force Majeure a legal excuse?

As with any legal point, there can be many sides to this story and many opinions on my question above.

Now let’s get to the Reality of the situation. Force Majeure clauses may or may not be a reason buyers COULD have cancelled or refused orders. Let’s talk for a minute about whether they SHOULD have.

Coronavirus sucks for retailers (to whatever degree they depend on Brick & Mortar for sales- it does NOT affect online sales). Having to close stores for an indefinite period is a serious, and we can see in some cases tragic or fatal, blow.

But let’s take a minute and explore the Ecommerce angle. While people who are losing their jobs are more reluctant to spend, people still are shopping online- Amazon proves that- as are the stocks of businesses that can supply goods online- such as Pizza Hut and Instacart. So what prevented retailers like Macy’s from offering huge discounts on goods online and letting people know that? Maybe I missed something, but I have a Macy’s card and have not received any offers, either in mail or online. Just saying…

Given that this Pandemic sucks for retailers, it sucks more for those factories who have had to eat orders they already paid for, or whose production flow gets cut off at the knees. What is worse, those workers who depend on these jobs for their daily bread are affected almost as badly as if they caught the disease. Starvation and malnutrition is also a cause of sickness and death.

So what might have and could have been done? Here’s how I see it: An order that has been fully or partially made becomes the full responsibility of the buyer; even if they have to reduce or eliminate executive pay or other perks, cut expenses so it does not effect their employees (such as negotiating rent abatements), they should meet their obligations, and Force Majeure is not a legal excuse to avoid them.

What is more, their supply chain partners are just that, partners. That is not how you treat partners. When businesses opens again, what do you say to your partner? Sorry? Never mind? IF your pocketbook is your overriding concern with little or no regard for the welfare of the supply chain that kept you in business before and you hope will do so after the Pandemic has subsided, shouldn’t your suppliers think the same and all raise their prices? Shouldn’t they demand payment in advance? If you were them, wouldn’t you do that?

Surely the suppliers understand the pickle that retailers are in. I believe most of them would not insist that it is business as usual. But, besides abating the greed that motivates them to summarily cancel and refuse orders, buyers should pay for all they are obligated to pay for, and try to work out some agreements for the future, as to when they will start up orders, or what parts of orders can be started in the interim (if you are making white shirts, you will need them sooner or later, so I guess there are ways to work out the problem).

After working in the global sourcing business for many decades, I have made many great business and personal friends. In a pinch such as this, I would treat them as friends, not as an anonymous factory with anonymous people who go to anonymous families with money to buy them food (maybe).

So the real problem here is more than Force Majeure; it is the self-reference criterion, to an ethnocentric degree, of buyers. The factories and the people that depend on them for a living are inferior, and not deserving of the same consideration as your colleagues and friends at home. 

One time a company President spoke to me and said, “every once in a while we can throw the factories a bone.” This chilled me to my bones and is something I will never forget.

CEOs, take some money out of your pockets and pay the factories; next, work out the future with them as EQUALS.

I know there are companies that are doing the right thing with the right attitude. They are the examples we should follow.

That’s my take on the situation.

The Undeniable Reality About Global Sourcing (and Food)

The Undeniable Reality About Global Sourcing

(And Food)

(Author’s note: The following is an excerpt from my upcoming book, “Travels with Mikey- The Global Life of a Business Foodie.” Please watch this blog and LinkedIn for updates on publication)

Chapter: China Wanderer 2012-2017

When returning to China in 2012, after decades focused on the fashion industry, I found myself with no opportunities for sourcing product in that industry. But, the Middle East was thriving, so I focused on the region rather than the product.

That being said, I learned a lot during these years- about myself, and about business as well. Before this time, my entire career had been focused on apparel- Could I function as well in other industries that I knew nothing about? This was a case of fake it until you make it?

During that time, I got involved in, and got orders on some, but learned about all, like 20 different industries. After decades in apparel, I found myself learning about, sourcing product for, and visiting factories in industries like:

• Construction equipment
• Fertilizer
• Chemicals
• Candle Wax
• Bottling
• Pet Products
• Wood products such as doors and panels for furniture and construction
• Bioplastic and plastic utensils
• Tents for refugees and military.

It was for such diverse products and more that I ended up-alone-in some, well, less urbane parts of China. My roles were: 

• manage the entire sourcing process for items where we did get orders;
• Check factories for feasibility of the buyers sourcing items which I was not to be involved in.
• Inspect finished goods for quality and confirm shipments
• Combination of the above.

So how did I get paid for these tasks? That is where I got to doing something I would not have approved if I was on the other side- double dipping- building in a commission from the factories in addition to what buyers were paying (if anything). Survival made me smarter, and a lot less smug.

Specifically, some of the products I touched during that time were:

A Crusher plant for Saudi Arabia which was to crush rocks for railway and dam construction;

Stuffed Pet toys, pet beds, rugs, chews etc. for Brazil;

Wax for candles to be made in Syria;

Wood doors, wall panels and furniture panels for Lebanon.

What did I learn from all of this? Other than a lot about a bunch of different industries that I never dreamed I would be involved in, I learned the most valuable sourcing lesson that anybody could learn:

The product itself is not the primary challenge- the mechanics and specific product details of any industry can be learned (in fact, I learned that every other industry was easier to learn than apparel- usually less moving parts and a lot simpler process); what are the most important elements of Global Sourcing?

1. The Process is basically the same for any product:
1. Find a good and trustworthy factory that can produce a quality product in a timely manner;
2. Be anal about the product details and expectations;
3. Build relationships with not only the customers, but, more important, with the factories;
4. Follow up assiduously;
5. Eat the food.

So here I am, flying all over China by myself with only a minimal command of the language, tasked with acquiring knowledge, placing product, and following up to a successful conclusion on shit I mostly knew nothing about.

I didn’t make much money doing that, but I acquired a wealth of knowledge of my profession that I never could have acquired doing the same shmates again and again as I had done for decades.

Another lesson that I believe was reinforced in me is that people in China, US, anywhere are basically all the same: They have a goal or dream, they have families to support, they like to like and be liked in business, and mostly they love to eat.

I, as always, ate what I was given, but, on the road (home later in this chapter), I did eat some interesting things, such as deep fried insects, to include giant bees and scorpions; donkey pie; Jinhua ham, China’s answer to Pata Negra (damn good stuff on its own), but most important I learned so much about the cultural association with food. So food is not just for eating, it is for sharing and bonding.

From the late, great Anthony Bourdain:

Food is everything we are. It's an extension of nationalist feeling, ethnic feeling, your personal history, your province, your region, your tribe, your grandma. It's inseparable from those from the get-go. 

(Lots more about the food in the book)

Value Is Everything

(Note to readers: This article was originally published on this blog May 6, 2017. It applies as much today as at that time- This time let's add Personal Value, the Value of People. I was reminded of this article when reading the groundbreaking book "The Value of Everything" by Mariana Mazzucato- Highly Recommended reading for you if you want to think seriously about the future of our economy and capitalism)

Value Is Everything

Value- It is a word we have used hundreds of times. The definition of value (there are several) as it relates to economics:  “a measure of the benefit that may be gained from goods or service” or for marketing: “the difference between a customer’s evaluation of benefits and costs.”

It is significant that both definitions imply some finite mathematical calculation- “difference.” Or “measure.” In some cases this may be immediately quantifiable, in other cases true value can only be known after benefits are given or revealed.

Neither of these finite measurable is the case in the apparel world. Other than the difference of the same item from one store to the next (or one web site to the next), most of value perception in apparel purchase decisions is subjective.  There are a lot of abstract comparisons to be made:

1.     Price of not same but similar item in same shop- 2 pair of jeans, for example. Same content, different price. Based on what do you make purchase decision?

a.     Brand perception

b.     Price

c.      Aesthetics- hand feel, colour, FIT.

d.     Whether this is a need purchase or impulse. If value comparison not clear in your mind, you can choose to do nothing.

2.     Price of similar items in different shops-All of the above, plus the “believability” factor- Do you believe the sale is real, and will the price be reduced 5 minutes after you walk out the door?

3.     Magnitude of discount or comparative price value- IF you felt the original price was a good value, a smaller discount will get your attention. IF you felt the original discount was too high or just a template for further discounts, you will need a higher discount to overcome your price objection.

4.     Function/urgency for the purchase- Interview suit vs. sweatpants. Again, price will be a consideration, but there is much, much more in the decision based solely on PERCEPTION- of the brand, the item itself and how you perceive it makes you look, etc.

So yes, you can calculate the price difference in price between item a and b that you are considering to purchase, but is that the major factor in purchase decisions? It is not. I believe;

1.     The final decision is based on VALUE, not PRICE. Price may figure in the decision, but in almost every case it is not the deal maker or breaker.

2.     There is a complex set of PERCEPTIONS combined with calculations which tips the scale toward purchase. Most especially this is the case because pure mathematics cannot provide the answer. These perceptions are as strongly related to the seller as they are to the item itself.

Value is critical in another area: human resources. If you pay $100,000 per year to an individual that can run an entire business for you (virtually mistake-free), versus paying $50,000 to 3 individuals who do the same job (at that level, expect mistakes and omissions), you are not paying too much- you are creating VALUE.  Now let’s say you populated an entire office with this type of individual, you have the perfect scenario: a. your business is run smoothly and efficiently b. your expense is minimized and c. your fixed cost is insulated for business downturns OR may not need to be increased when business grows.

Not everything takes a village, and, if you operate under the principle of Think Big but Be Small, you have every chance to have a low-cost, sustainable business and a damn good staff (whom, if you keep paying well and empowering to operate as they are capable of, will probably stick around)

All over the world today, companies are guilty of hiring lower-paid staff (maybe due to inexperience rather than incompetence) rather than spend more on someone who can do the job with maturity as well as anticipate or handle problems, thus reducing cost and risk. The consequences are far-reaching, and we see companies get into trouble and even disappear, but nobody changes the way things are done. Why?

The fish stinks from the head. Management is responsible and guilty. What is the main reason for this? As always, fear. Fear of change, fear of risk, fear of changing the way things have been done since forever. Clearly, this fear is brought on by the prospect of holding the bag if change doesn’t work. But, with all due respect, that makes no sense. Why? Because if you do nothing, you are holding a worse-smelling bag than if you tried and it didn’t work out as planned. That being said, if you think it through and hire the right people, simplify and streamline your procedures, there is no reason it shouldn’t work. I have done it repeatedly and it has never failed.

I always love the idea of Creative Destruction, which finds its roots in the Hindu Trinity: For something to be born, something must die (Hindu: typically Brahma the creator, Vishnu the preserver, and Shiva the destroyer/regenerator- see https://en.wikipedia.org/wiki/Trimurti ) What that means for us, for it is eternally true and we see it in our world and markets in vivid color, anybody or any business that fails to change with the markets or the world cannot be regenerated, thus dies (see: Sears). So the choice is simple: change or die. That is a no brainer for me-you?

Another relevant cliché: lead, follow, or get out of the way.