The Tedium of Knowledge

We've observed what amounts to a mess; an incredible collection of weeds, confusion, misunderstandings and delusions. The task then is to sort through it and discover what's really going on. If we want to "know" and have a chance to change anything (intentional change - not just an accidental consequence), we observe, measure, document, study, debate, experiment, and repeat.

It's really quite tedious. Isn't it?

Relative Scarcity

When something (Let's say... a house) is for sale at a certain price and there are no buyers, the seller may choose to keep the house or lower the price. Eventually, the bid meets the ask and then there is a transaction.

Right now (in many markets) there are few bids and lots of asks. If the asks were lower, there would be bids - oh yes indeed. Houses are plentiful, but for the right price - I'll take'm all.

Because the process is drawn out over time, it takes on other qualities. If it were compressed like the stock market, the dynamics would be easier to work with. However, it isn't compressed. This gives everyone enough time to sulk.

The housing supply (and subsequently the price) moving up or down and eventually (years) falling neatly along the previously established regression, is not the end of the world. When the general consensus is one of impending doom, we can look for the balancing influence to hop in. Then we can start over. Maybe next time, some lessons will have been learned about stretch-financing, sub-prime etc. - probably not.

Hmmm... relative scarcity.

Credit, Subprime and the Auto Biz

The collapse of the subprime home mortgage market is infecting the U.S. auto industry. Car and truck buyers, especially those with lower credit scores, often are finding it harder to get financing.

Vehicle-loan delinquencies are rising among higher-risk customers. And as budget-squeezed consumers put off vehicle purchases, industry forecasters are cutting their sales predictions for 2007.

The mortgage mess and falling home values are weakening consumer confidence in a way that threatens other big-ticket purchases, industry executives say."Outside of a home, a car is one of the biggest things we purchase," Ford Motor Co. CEO Alan Mulally said last week. "When you look at all of the things that are happening right now in the United States, it's a watch item. It's something we really have to pay attention to.

"Last week, the National Automobile Dealers Association scaled back its 2007 sales forecast, in part because of the battered mortgage market. In February, NADA chief economist Paul Taylor predicted that U.S. sales of new cars and light trucks this year would roughly equal the 2006 mark of 16.5 million. Now Taylor predicts 2007 sales could dip as low as 16.1 million units.Dennis Graham, an analyst with the Plante and Moran consulting firm, says U.S. sales could fall below 16 million vehicles this year. That would make 2007 the worst year since 1998, when the industry sold 15.6 million cars and trucks in the United States.

At the same time, some lenders have raised interest rates on vehicle loans to subprime buyers. That can add up: A four-year, $20,000 loan at 7 percent costs the buyer about $880 more than the same loan at 5 percent."Customers who come in with their own financing, it used to be 4.9, 5.9 percent," says Matt Thompson, general sales manager of Watertown Ford in Watertown, Mass. "Now it's 'Can you beat 7 percent?' "

Lenders and dealers say the subprime crunch has had little effect on the cost and availability of inventory financing for dealerships."It's a different business," says David Cosper, vice chairman of Sonic Automotive Inc. and a former executive with Ford Motor Credit Co.

Disaster at retail
Dealers in markets where subprime mortgage problems are most acute report slumping sales at their stores.Many consumers, the dealers say, are delaying vehicle purchases. Other customers are buying lower priced cars and trucks with fewer options and aftermarket products to pare their monthly payments.

Patrick Strickland, sales manager of Brandon Ford in Tampa, Fla., says the number of his customers who finance vehicles with home equity lines of credit has dropped by two-thirds in recent months. More customers have missed mortgage payments, Brandon says, making them harder to finance.

Thompson of Watertown Ford also cites greater difficulty getting customers financed over the past two months."My finance manager came to me and said, 'I don't know what the hell is going on here -- everybody we've been working with is having problems'," Thompson says.

Mike Jackson, CEO of AutoNation Inc., says the mortgage industry's troubles have created "a disaster at retail." AutoNation, the nation's largest dealership group, has a concentration of stores in California and Florida."To say there is no spillover from housing into automotive is ludicrous," Jackson says. "Retail sales are down 7 to 8 percent. That's almost a million units a year."Jackson says "things could get ugly" if the Federal Reserve Board does not do more to reduce interest rates. This month, the Fed cut the discount rate by half a percentage point, to 5.75 percent. The discount rate is the rate at which the Fed makes short-term loans to banks.

More delinquents
About 30 percent of subprime auto borrowers own homes, says Jack Tracey, executive director of the National Automobile Finance Association. The trade group represents subprime lenders.Tracey says the subprime mortgage crunch and changes in federal law that make it harder for individuals to file for bankruptcy have caused delinquency rates on vehicle loans to spike.According to an association survey of subprime lenders, 11.6 percent of vehicle loans were delinquent last year, up from 6.5 percent in 2005. Tracey says delinquencies are up again this year, although he did not cite figures.

Tom Wolfe, president of Wachovia Dealer Services, says his company is seeing an increase in loan delinquencies "correlated to the areas of the housing market most impacted by the subprime market." But Wolfe insists those problems are not causing Wachovia to tighten floorplanning credit for its dealer customers."We have been in the auto finance business for over 60 years and are in it for the long haul," Wolfe says.

Toyota Financial Services also has seen an uptick in delinquencies, even though most of its borrowers have good credit, says CFO John Stillo. The captive finance company is seeing just "the beginning" of the subprime mortgage fallout, Stillo warns."The housing market is such an important part of how people feel about the economy," Stillo says. "It keeps the ball rolling from a credit perspective."

From - Automotive News, August 27, 2007

The Chinese symbol for "Ocean"

The Chinese symbol for "Ocean" is:

You never know when you might need this - so there you have it.

Gekko - Greed Speech (from "Wall Street")

"The point is, ladies and gentlemen, that greed—for lack of a better word—is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms—greed for life, for money, for love, knowledge—has marked the upward surge of mankind. And greed—you mark my words—will not only save Teldar Paper, but that other malfunctioning corporation called the USA".

Hmmm... Hey, it's a movie.

Bait & Switch, PETA, and the way it is...

A lot of people consider PETA protests against killing fish (because the fish feel pain) to be silly. It's not that there is a disagreement about whether fish feel pain, it's the fact that most people don't feel bad about it. I mean - we gotta eat. It's the way it is. So those who stand as advocates for the plight of fish are not taken seriously - especially by fisherman. It would be bad form on the part of fisherman or people who eat fish to publicly celebrate the pain they cause, so you don't see much of that.

In the retail auto business (also true for other products), there is no doubt that the most successful advertising tactic is "bait and switch". The dealer features a car at an extremely low price, often considerably less than the vehicle's wholesale cost. The number of vehicles available is much smaller (sometimes just one) than the demand. In addition, the "ad car" is handicapped in some other way - maybe it's a manual transmission (not disclosed), or maybe some other undesirable (also unexpected) quality. How about "you have to pay for it right now with a cashier's check - no financing and no deposits can be accepted." The most common theme is "the ad car is sold - sorry - but we have these others".

You get it... bait and switch. This is a nasty phrase because it suggests a deceitful practice. Consumer watchdogs, government agencies, advocates, and the consumers themselves (once they experience it - if they understand what has happened) consider this a no-no, and it is (if proven) against the law, but alas it's very difficult to prove. In the end the remedy (if pushed hard enough) is usually a settlement by the dealer. Dealers who are good at this will deny it. In some cases, they have actually convinced themselves that they are not deceiving the customers.

You go to buy the 42 inch plasma for $499 or the laptop for $299 - it's just not going to happen. You see; this is what is necessary to "drive traffic", the merchant will say. They know exactly what they're doing. It is the most successful tactic. Some of the most prolific producers in the country are adept practitioners. Yes - there are other strategies and some are effective, but clearly none as effective (with commitment) as this. Let me back up to PETA...

The merchants who apply these strategies see the argument against them in a similar way to how most people see the PETA protests. "I mean - we gotta eat. We have to drive traffic. It's the way it is. Nobody ends up getting less than they pay for. We don't force anyone to do anything. " So those who stand as advocates for the plight of consumers in this situation are not taken seriously by merchants. It's just the way it is out on the open sea.

Maybe you feel like this technique is "just wrong". Maybe you think you would be offended if you were massaged into a transaction by this approach. The fact remains, it is highly effective and will likely remain so. Some manufacturers (Honda for example) have taken steps to prevent it. Honda prohibits advertising of prices below invoice. On the surface, this seems like a noble effort, but in fact (unfortunately) the policy was poorly constructed and in many cases is viewed as PETA-like by the big retailers. Some of those who became wildly successful by using this tactic have gone as far as eating the financial and other penalties dolled out by the manufacturer for violating the policy. That's how important it is to drive traffic. No - it's not the only play, but it's a good one.

Does that make these aggressive, committed to the strategy, no-guilt feeling dealers bad people. I say it does not.

"If it's hanging there and it looks like a very tasty meal and in fact it looks much tastier than any others I've seen, and even though I know it seems too good to be true, and even though I vow to spit it out if it turns out to have a hook in it - I'll bite".

We can't blame the fisherman, can we?

Edmunds article

Review: The Nine Ways

Let's review:

The Nine Ways of Strategy - Musashi - 1643
From~ The Book of Five Rings

1. Do not think dishonestly
2. The way is in training
3. Become acquainted with the arts
4. Know the ways of all professions
5. Distinguish between true gain and loss
6. Develop intuitive judgement
7. Perceive things not seen
8. Pay attention - even to trifles
9. Do nothing which is of no use

There you have it...

Game Changing

~
Creating, or disrupting informational asymmetry (one party knows something important that the other does not) in the marketplace is a game changing strategy. Pick one.

Creating:
Some businesses withhold the details on purpose. A good example of an important detail "the price". They force the customer to take the next step which usually means establishing a more isolated exchange; away from immediate comparison or the opportunity for competitive rebuttal. This is clearly an advantage for the seller. Without any interference, this works quite nicely.

Disrupting:
When the standard strategy for any business / industry is based on the seller's withholding of details, finding a way to provide the details can undo the sellers advantage. If the change in the process and the easy access to information matters (to the customer) enough, the game changes. The Internet looms large here.

Maybe it's good

Maybe it's good that your new approach will make some people uncomfortable, threaten the status quo (one in which much money has been made by many), and require broad cultural change in the workforce.

Naaaaa...

Bonds

I bought the book "Game of Shadows" a couple of weeks ago and decided that I would read it when Barry Bonds hit number 756.

Wow! Barry... this is bad news Barry. You are not a nice fellow. Some people are just nasty. That's the way they are. They can't change, They won't change. I think that's Bonds. He has always had amazing talent. If he was a good guy and didn't do the drugs, he would have been awesome, but he has turned himself into a clown. Too bad.

Enough pain to go around

Alrighty then... Let's just say that easy credit terms and conditions turn out to be not such a good thing for the lenders. They were happy when they booked all that "on-the-way-here" income, but now...not so good. As lenders pinch their puckery standards tighter and tighter, the sellers of real estate, cars, and even replacement windows - are going to feel real pain. When these businesses feel pain, they may find it difficult to stay in the game. If they depart, they'll probably not pay all the bills. The creditors feel pain. Yes indeed... there could be enough pain so that we all get a taste. Nice huh?

Lucidity and the facts in the way

We'll search for, find (whenever possible) and use the impressions, emotions or facts in our experience that serve us best or support our current view of "reality". We'll also shape that reality - without even knowing - to be as kind as possible. As it turns out, we humans are naturally quite good at kidding ourselves. This applies to our view of the past, present and future. In particular, our ability to see (predict) the future and make choices about the future, are completely affected by this condition. In other words, we consistently mispredict. It’s really quite amazing how well and how consistently we do this.

We'll find a logical basis for dismissing objects that don't fit. This is an extremely important thing to realize. Accepting this condition and using it to help prevent us from acting on a distorted (bordering on delusional) reality, and knowing that others do, represents a competitive edge.

More later...

That's good

Sure, fine, okay, alright, yes, pick it up, no sweat, please, oh how nice indeed, thanks, really special... really.

Storing Experiences

Our brains store our experiences. If we were to record and retain complete detail of every event (the whole movie), all that information - including color, sound, time sequence and dialogue - would occupy a lot of storage space. Instead, we store key objects, emotions and enough detail so that we can recall the set and piece together our recollection of the experience as if it were complete.

Can we manage to plant, generate or influence the key objects stored by customers and in so doing, program a memory?

Take a Left

We navigate with great intensity toward a location that is uncertain at best and at worst - unknown.

What?