The Management Mythbuster

Economic schizophrenia? Or am I just paranoid?

Are you confused yet?  The stock market seems to be saying that things are getting better - do you feel it?  I know unemployment is supposed to be a lagging indicator but the numbers are still bleak.  There will be some growth from stimulus spending (by the way when is the real spending going to start? Only $150bn of the $787bn has been spent so far) never mind most of the jobs are not sustainable anyway, the consumer is not spending - after all 10 percent don't have jobs, cars are not moving off the lots without clash for clunkers and corporate profits have only grown through cost cuts - not much top line growth, and there are lots of "For Sale" signs here in Ohio and not many "Sold" signs.

Maybe Wall Street bankers will single-handedly jump start a consumer spending revival with their record bonuses? And then this morning the ultimate mixed signal, on page A3 of the Wall Street Journal is a story headlined "Hunger Threatens More Households." On the same page are four adverts, one for Tiffany offering a diamond pendant for $10,825, one for fractional jet ownership - I guess its cheaper than buying the whole jet, one for Versace, and one for a Jaguar you can lease for just $599 a month!

Go figure...

Bud Light - pure marketing genius

The scene; a conference room in St. Louis

Big Cheese: "Well team, the football season is almost here, the perfect reason to drink gallons of Bud Light.  How do we capture that thirst? I don't want to wait for the Superbowl this year - after all the season is over by then."

Red Hot Marketing Whiz: "I think the NFL is the wrong wagon to hitch the Clydesdale to, we should go after the college game.  After all a lot of NFL games are played in frigid weather in godawful places like Buffalo, Cleveland and Green Bay - who wants acold beer when its -20 outside?. We should make Bud Light cans in the colors of top college teams.  After all who wouldn't want to sup a cold one while tailgating before a Texas, USC or Florida State game, never mind the millions who will happily chug a team brew sheaved in the college colors in front of the big screen with their frat brothers."

Big Cheese: "Sounds like a great idea but aren't most college students under 21?"

The Whiz (after loud guffaws): "Sure but we will make sure the promotion is targeted at the over 21's - no ads on Nick or Disney, just ESPN."

Big Cheese: "OK I like it. Do you think we can get in by the new bosses in Belgium?"

The Whiz: "Sure, the drinking age there is like, 12, isn't it?"

Big Cheese: "OK -  go for it."

And so another stroke of pure marketing genius is born...

Healthcare - answering the wrong questions - a personal perspective

It does not matter which side of the health care debate you are on, truth has long been subjugated by politics and posturing.  It seems that the latest scare tactics for those opposed to any change is to darkly warn that the U.S. will become like the U.K. That intellectual giant, Sarah Palin, went so far as describe the U.K. National Health Service as "evil" evoking Darth Vadar like images of anyone over 55 being left to rot rather than waste valuable resources. I cannot compete in the supposed facts being thrown about but what I can offer is some personal experience having lived for 30 years under the evil system and that past 18 years in the land of the free but chronically under-insured.

- Both my parents lived (and died) under the British system and I cannot fault the system for the care they received.  Yes the waiting lists were long for knee and hip replacements (much shorter now) but the quality of care was perfectly acceptable and the medical staff the equal (from my dumb consumer perspective) to that found in the U.S.

-Basic medical care through the General Practitioner channel was much more effective in the U.K. Doctors will still visit homes and access was easy.  In the U.S. everything seems to require a referral to a specialist. Notwithstanding I have generally received great health care in the U.S. and it used to offer value for money - not anymore.

- The U.S. system seems test and drug happy - no one feels like they have received effective treatment unless at least one MRI is ordered and two prescriptions written.  Tests are much less frequent in the U.K. Of course this is not always a good thing but the again you don't get a $3,000 MRI bill confirming what the cheap X-ray already showed.

- From a personal perspective I pay around four times more in the U.S. for family health care than the equivalent tax burden would be in the U.K.  When I moved to the U.S. in 1991 it was around twice as much but the lower U.S. tax rates more than made up for the difference.  However, my total tax burden in the U.S. is now close to what it would be in the U.K. (even with the Bush tax cuts) so the extra U.S. cost is a reduction in income and hence spending power.  No doubt this is going to get worse as I pay for my share of Chevrolet, AIG, and a few thousand Las Vegas condos further hampering any consumer-led economic recovery.

- The one fact that seems tough to avoid is that the U.S. spends almost double the amount of GDP (17%) on health care than the U.K. but fails to cover 47 million people.

To my simple mind there are only two things I care about:

1. The U.S. needs to offer universal health care to its people in the same way everyone has the right to education and national defense.

2. Current health care costs are so far out of whack that radical redesign of the process is needed.  How can the U.S. spend more of GDP and cover less of its people than any other developed nation in the world?  An effective system should cover everyone at a total cost of around 10-11% of GDP (40 percent less than today).  This is the challenge American ingenuity and entrepreneurship should be tackling. Unfortunately it seems that our politicians are the ones tasked with doing it and they do not exhibit these character traits in abundance.   So put the right people on the job and give them a share of the benefits. 

Forget raising taxes - pay for healthcare by cutting out waste

Today I went and had my stitches removed after last week's knee operation.  The nurse performing this delicate procedure assembled his tools -  a nice clean pair of metal scissors fresh from a sealed packet and an equally nice pair of metal tweezers also clean from the packet.  Two snips and the stitches were out.  He then proceeded to toss the scissors and tweezers in the waste. 

"Why are you throwing them away?" I asked. 

"Oh we have switched over to disposable instruments as sterilization now costs too much."

So here we have a perfectly good pair of scissors (used for only two clips!) and tweezers made of metal tossed in the rubbish.  What's wrong with this picture? Health care costs are being controlled (not cut I hasten to add) by switching from reusable instruments to disposable ones. No doubt this will help fund the vaunted cost controls that will pay for universal care.

How can anyone support a tax increase to pay for universal coverage until every scrap of waste is eliminated from the system. But of course raising taxes is much easier than improving efficiency.

Not allowed in Vegas, but Phuket's O.K.

Great story juxtaposition in the Wall Street Journal on Wednesday.  On one page there was a long article on how some government departments have black-listed cities such as Las Vegas, Reno, and Orlando as sites for meetings and conferences. (Dare to enjoy oneself) The fear is that this may give the appearance that someone may actually have some fun while attending such events. Apparently, Chicago, Denver and Portland are better bets.  Not only is this stupid (aren't people in Vegas and Orlando allowed to have jobs anymore?) it is also hypocritical - you can have lots of inappropriate expense account fun in Chicago, Denver and Portland.  If they were really serious the list of acceptable places would include Akron, Gary, and Buffalo.

On the very nexty page of the Journal was a piece on Clinton's Asian tour. (Hillary in Phuket) She is now in Thailand attending an Asean summit in Phuket -- which is the utlimate boondoggle playground in the region!  Some one will need to audit her expenses very carefully.

Balkan balls-up

Winston Churchill once said that, "The Balkans produce more history than anyone can consume." Even forty-four years after his death it remains true. While in Croatia, one of about seven countries that emerged when Yugoslavia imploded I was amused by the inter-regional bickering that still goes on. Here are just some of the news items I saw  during my sojourn in the Balkans:

- Croatia and Slovenia agree to stop arguing over their border if both agree not to prejudge any settlement
- Croatia and Montenegro meet to discuss combating organized crime (sounds like the Obama/Calderon talks doesn't it?)
- Serbia and Croatia to meet to discuss dropping mutual lawsuits regarding genocide
- Slovenia fires its foreign minister
- Macedonia seeks to improve relations with Greece (US and Cuba?)
- Maldives bribed to recognize Kosovo
- Croatia wants to help Serbia in European integration
- Montenegrin government gives massive construction contract to Croatian consortium.

And we wonder while the assassination of a dodgy Austrian Archduke caused WWI?

A massive step back for women?

Yesterday I experienced the mayhem that is Terminal 5 at Heathrow. Actually is wasn;t that bad just very busy. I barely had time to pick up a Sunday Times during my two hour layover en route from Chicago to Moscow during my hike from T3 to T5. 

It was good to read a proper paper for a change, the 12 page Akron Beacon Journal with two pages of news doesn't really qualify.  The Sunday Times is a good inch think and carries more content and less ads than its American brethren.  One article caught my attention.  Apparently, former British Prime Minister, Tony Blair is the world's highest paid speaker having recently earned $600,000 for two half hour speeches.  Blair has surpassed former champion, Bill Clinton, who scaled back last year as Hil' ran for the presidency.  During the article the very British named, Sylvia Tidy-Harris, was quoted as being surprised that Tony could out earn Bill commenting that,  “I can understood Bill Clinton’s appeal – every man wants to pat him on the back and every woman wants to be the next Monica Lewinsky,” she said. “But Tony Blair . . . he just doesn’t have that charisma.”

What got me was the slam on the fairer sex.  Do they really want to be in Monica's role.  From my recollection she was more the giver than the receiver in the relationship and without being too crude - does every woman really want to be on her knees in front of the pudgy former President?  I think Ms. Tidy-Harris needs to rethink her soundbites!

What did he say?

I've said a lot of stupid things in my time and no doubt will add to my oeuvre in the years to come.  The good news is I am not alone. Many people who are supposedly smarter than me and certainly richer than me have successfully managed to insert their foot in their mouth to great effect. 

A few years ago Michael Eisner, the former CEO of Walt Disney described the first few weeks after the opening of the EuroDisney theme park in 1992, thus: "We've already had a million German and a million British visitors, and to have those numbers in France without a war going on is really something."  Very eloquent don't you think. 

More recently there have been some great quotes regarding the financial crisis. Last September, Hank Greenberg, former CEO of AIG in September 2008 commented on the company: "It's a healthy company financially except for liquidity." Well that's o.k. then; I'm glad they didn't have any other problems or else it may have cost us more than the $150 billion committed to the company's bailout so far.

And then last week there were two really good ones...

John Chambers, CEO of Cisco, while announcing his company's results on 4th February 2009 shocked the world with his observation: "It is now clear that we are in a global economic slowdown." As my kids would say "Well Duh!"   Where has this guy been for the last few months that only now is he beginning to realize the economy is in the crapper?

And finally our new President is not immune. As nominee after nominee went down to tax-related scandals he commented:  "it's important for this administration to send a message that there aren't two sets of rules."  I agree Mr. President, but what about Mr. Geithner? There are already two sets of rules they just apply to different people in different ways.  This is also a great argument for flat tax don't you think?

Back in the USSR

Next month I will visit Moscow for the first time in 32 years! Believe it or not, I was in Moscow when I found out that Elvis had died! I can't wait to see what's changed and perhaps more interestingly what's stayed the same.

 As someone who grew up in the shadow of the Iron Curtain I was well accustomed to deriding the Soviet economic system.  In 1977, as a fifteen-year old high schooler, I got to experience Soviet Russia first hand.  During a ten-day stay in Moscow and St. Petersburg (then still called Leningrad), I witnessed the sparse selection of goods on offer in the massive GUM department store in Red Square, traded ballpoint pens for rubles with which I couldn’t find anything to buy, and listened to lecturers proudly proclaim the Soviet economic miracle.  I well remember one chart that showed the rate of inflation in the USSR since the end of the Second World War.  The graph showed a straight horizontal line at the zero percent level on the y-axis.  It defied all logic and thirteen years later it all came tumbling down – literally in the case of the Berlin Wall.

All these experiences armed me with considerable biases that I had to suppress while reading the text of Russian prime-minster, Vladimir Putin’s speech to the World Economic Forum in Davos, Switzerland last week.  Surely a Russian (and a former Communist) could not offer anything of value on the subject of managing in a world of turbulence?  But some of Putin’s words made perfect sense.  First he nailed the economic downturn of 2008 by describing it as: “The world is now facing the first truly global economic crisis, which is continuing to develop at an unprecedented pace.”

Putin went on to liken the events of 2008 to a perfect storm and offered sage advice to managers trying to cope in such an environment: “Responsible and knowledgeable people must prepare for it.” He went to outline some of the failings that resulted in a singular lack of preparation: weak regulation; greed; and a failure to acknowledge risk. However, to a Cold War baby like me, his most startling statement of all was that: “Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.”

Wow! We’ve certainly come a long way in the last twenty years when a Russian warns America against excessive government intervention!!!

Is It Real Or Just A Movie?

So history has been made and now comes the easy part - reviving the economy and saving the world!  Amidst all the coverage of the inauguration the snippet that got my attention was a listing of the top grossing films in the US when each President was elected.

Starting with Carter, the box office champ was Rocky. Very appropriate as the Georgia peanut farmer came from nowhere to the White House much like Sly.  Unfortunately the ending got screwed up.  In the film, Rocky of course overcomes all the odds to be the champion;  Jimmy lost to Reagen and even his potential crowning glory, the release of the Iranian hostages failed to make it, occurring as the credits on his presidency were rolling.  Another difference is that Carter's sequels were probably better than the initial release which certainly can't be said of Rocky!

Reagen, the actor, entered as Darth Vader ruled the screen in the Empire Strikes Back.  Clearly this is perfect symmetry.  The Death Star is the Soviet Union and Reagen is Luke! Remember his words in 1987:

"General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!" Perfect don't you think? Better than a light sabre.

Bush the Elder entered on the back of Rain Man and his utterance "Read my lips, no new taxes" illustrated some of the challenges he faced in relating to the real world; although Dustin Hoffman's Raymond had the edge in intellectual capacity compared to most of Bush's cabinet.

What about Bill C? Well it had to be Aladdin didn't it? I will leave it to your imagination to work out what Bill used as his "magic lamp."

For Dubya, I kid you not when I tell you that the top film was ... wait for it...The Grinch Who Stole Christmas.  You can't make this stuff up.  But wait it gets better. Barack rode to power on the back of The Dark Knight!

Let's hope is he is equally able to vanquish evil.

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