Sir on the equities - Over-sized Gains in the Past

About the nice market pop in 2009 and prospects for 2010 - Sir said, "The over-sized gains of '09 are now in the past".

Too bad. That was fun.

That's all I have for now. Will 2010 still manage to give us a little? Don't know. Maybe it's a picker's year.

It's not the rats

It's not the rats you need to worry about

If you want to know if a ship is going to sink, watch what the richest passengers do.

iTunes and file sharing killed Tower Records. The key symptom: the best customers switched. Of course people who were buying 200 records a year would switch. They had the most incentive. The alternatives were cheaper and faster mostly for the heavy users.

Amazon and the Kindle have killed the bookstore. Why? Because people who buy 100 or 300 books a year are gone forever. The typical American buys just one book a year for pleasure. Those people are meaningless to a bookstore. It's the heavy users that matter, and now officially, as 2009 ends, they have abandoned the bookstore. It's over.

When law firms started switching to fax machines, Fedex realized that the cash cow part of their business (100 or 1000 or more envelopes per firm per day) was over and switched fast to packages. Good for them.

If your ship is sinking, get out now. By the time the rats start packing, it's way too late.

27 days at sea - no ports, just sailing and sailing and sailing

Jaimie touches land for the first time in 27 days:

Woody

I ran into Isosceles. He had a great idea for a new triangle!

Cuppla Quotes from some guy I know

"Luck plays a big part in business. Not having a good business is bad luck."

"Don't kid yourself. There will be pain. Isn't that encouraging?"

I see a little silhouetto of a clam...

Can you say too much? I think you can.

"He only shuts his mouth long enough to change feet."

Story Story Story

Did we forget how good it is?

Vee Dubbya Spot - The Fun Theory

Mighty Sam McLain

Health care math

If total US health care cost are 2.2 trillion (2,200,000,000,000) and there are 308 million (308,000,000) people in the US; that is $7,143 / person per year - or $595 / month / person.

If elective procedures account for 26% ($1,857), then non-elective costs become $5,286 / year - or $440 / month / person.

Keep in mind that the numbers include profit margins for health services, doctors, pharma etc. While it is a gross over-simplification, we might say that $440 / month would cover everyone for everything that is not elective. You'd have to pay for your own facelift.

Okay - now say we toss in a deductible of 15% transferring $66/ month to the actual consumers of health care. The "EE" (everyone for everything) cost goes down to $374 / month / person.

USA Today reports that the average health insurance policy (varying coverages and deductibles) is $402 / person / month.

Now, we start shifting the cost around based on risk factors and we get a range between $125 and $675 / person / month.

There you have it.

Some days are better than others

Nice stuff Louis

Nice stuff Louis C. K.

Take off

Soaring is good.
Swooping is good.
Finding a landing spot is good.

Taking off could be the best part.

Leaping priorities - the hierarchy

It looks like this:

1. Attitude
2. Approach
3. Goals
4. Strategy
5. Tactics
6. Execution

We spend all our time on execution. Use this word instead of that one. This web host. That color. This material or that frequency of mailing.

Big news: No one ever succeeded because of execution tactics learned from a Dummies book.

Tactics tell you what to execute. They're important, but dwarfed by strategy. Strategy determines which tactics might work.

But what's the point of a strategy if your goals aren't clear, or contradict?

Which leads the first two, the two we almost never hear about.

Approach determines how you look at the project (or your career). Do you read a lot of books? Ask a lot of questions? Use science and testing or go with your hunches? Are you imperious? A lifehacker? When was the last time you admitted an error and made a dramatic course correction? Most everyone has a style, and if you pick the wrong one, then all the strategy, tactics and execution in the world won't work nearly as well.

As far as I'm concerned, the most important of all, the top of the hierarchy is attitude. Why are you doing this at all? What's your bias in dealing with people and problems?

Some more questions:

• How do you deal with failure?
• When will you quit?
• How do you treat competitors?
• What personality are you looking for in the people you hire?
• What's it like to work for you? Why? Is that a deliberate choice?
• What sort of decisions do you you make when no one is looking?

Sure, you can start at the bottom by focusing on execution and credentials. Reading a typical blog (or going to a typical school for 16 years), it seems like that's what you're supposed to do. What a waste.

Isn't it odd that these six questions are so important and yet we almost never talk or write about them?

If the top of the hierarchy is messed up, no amount of brilliant tactics or execution is going to help you at all

Godin writes

More leaping strategy

I never enjoyed listening to people who bounce along on "attitude" intentionally blind to real things. You can't just imagine your way around obstacles. If you don't have the skills, can't acquire them or don't think there will be ugly patches and times that require tough decision making (at least good guesses and the willingness to push), then your attitude is just an annoying deception.

However, when you accept that risk is a necessary part of reward and you decide that now is the time to take a leap, mustering up the confidence and determination has to include commitment. You can't be blind and stupid, but the right approach does have to come with attitude.

Even if you quake with fear, keep it to yourself. Your effectiveness as a leader (winner of others confidence and effectiveness) depends on it.

This comment from Godin is spot-on. He writes:

All the evidence I've seen shows that positive thinking and confidence improves performance. In anything.

Give someone an easy math problem, watch them get it right and then they'll do better on the ensuing standardized test than someone who just failed a difficult practice test.

No, positive thinking doesn't allow you to do anything, but it's been shown over and over again that it improves performance over negative thinking.

Key question then: why do smart people engage in negative thinking? Are they actually stupid?

The reason, I think, is that negative thinking feels good. In its own way, we believe that negative thinking works. Negative thinking feels realistic, or soothes our pain, or eases our embarrassment. Negative thinking protects us and lowers expectations.

In many ways, negative thinking is a lot more fun than positive thinking. So we do it.

If positive thinking was easy, we'd do it all the time. Compounding this difficulty is our belief that the easy thing (negative thinking) is actually appropriate, it actually works for us. The data is irrelevant. We're the exception, so we say.

Positive thinking is hard. Worth it, though.

Customer Service Expectations - The "Whatever it takes / Spare No Expense" option

The problem with customer service is not a new one. It's about balancing between serving a lot of people a little, or dropping everything to serve a few people a lot.

Getting a lot of benefit for a lot of people for not so much money isn't particularly difficult. In the chart on the left, for example, (a) represents the cost of good signage at the airport, or clearly written directions on the prescription bottle or a bit of training for your staff. It pays off. Pay a little bit and you help a lot of people to avoid hassles. The utility per person isn't huge, but you can help a lot of people at once.

(b) is the higher cost of a bit of direct intervention. This is the cost of a call center or a toll free number or an information desk. You're paying more, you're helping fewer people, but you're helping them a lot.

(c) is where it gets nuts. (c) is where we are expected to spare no expense, where the CEO has to get involved because it's a journalist who's upset, or where we're busy airlifting a new unit out to a super angry customer. The cost is very high, the systems fall apart and only one person benefits.

Of course, if you're that one person, you think it's not only fair, but appropriate and right.

This "spare no expense" mantra is extremely difficult to avoid, because in any given situation, when the resources are available, your inclination is to say, "make the problem go away, spend the money!"

It's certainly possible to build a brand without going to (c) (witness the way Google almost never gets embroiled in special cases or even answers the phone--I know that they're certainly not eager to fix my imap problems), but once you've trained your customers that (c) is an option, it's awfully hard to scale back.

The reason we get trapped by (c) is that, "I'm doing the best I can" is always much easier than, "we need to be disciplined and help more people, even if that means that some special cases will fall through the cracks. The internet makes this even more difficult because people who fall through the cracks are able to amplify their complaints ever louder.

The way around it, I think, is to set expectations early and often. If you're going to give me your phone number, you better answer it. If you're going to offer a warranty, you better honor it. If you position yourself as a company with real people eager to make every single person happy--you better deliver.

No matter what, you should decide. In advance. How much do you want to spend on ad hoc emergencies, how much do you want to reserve on design and helping the masses improve their experience?

Link

Used / Pre-owned / Experienced Automobiles?

So - the used car business looks appealing. There seems to be so many ways to be "better" than the next guy. Your instincts for retailing are good. You can sell. You know how to manage the environment. Stop!

You've got half the picture in view - perhaps less than half. The most difficult part of this business is buying inventory. Oh yea - it is. Don't kid yourself. This is not for the amateur. You'll be eaten and swallowed quickly. If you're an independent (no franchise) and even if your new car franchise does light volume, you really can't trade your way to good inventory. You have to find it to buy it. You have to compete with others.

The talent for selling is important but buying is where you make money. Buying is at least half the battle. The strategies, the skills, the rigor and talent needed to be a pro are rarer and more valuable than you might think. Some may argue that this isn't the case but they would be wrong.

So - if you want to "do used", be or get a professional buyer.

Ya - scalable thoughts perhaps? Think about it

Lessons from very tiny businesses

1. Go where your customers are.

Jacquelyne runs a tiny juice company called Chakwave. I met her in Los Angeles, standing next to an organic lunch truck. Like the little birds that clean the teeth of the hippo, there's synergy here. The kind of person that visits the truck for lunch is the sort of person that would happily pay for something as wonderfully weird as her juice. And the truck owners benefit from the rolling festival farmer's market feel that comes from having a synergistic partner set up on a bridge table right next door.

2. Be micro-focused and the search engines will find you.

My friend Patti Jo is an extraordinary teacher and tutor. Her new business, The Scarsdale Tutor doesn't need many clients in order to be successful. This permits her to focus obsessively and that gets rewarded with front page results on Google. Not because she's tried to manipulate the seo (she hasn't) but because this is exactly the page you'd hope to find if you typed "scarsdale tutor" into a search engine. Could she do this nationwide? Of course not. But she doesn't want to or need to. Living on the long tail can be profitable.

3. Outlast the competition.

I was amazed at all the empty storefronts I saw in LA on my last visit. On one particular block, three or four of the ten lunch places were shut down. And the others? Doing great. That's because the remaining office workers who used to eat lunch at the shuttered places had to eat somewhere, and so the survivors watched their business grow. A war of attrition is never pretty, but if you're smart about overhead and scale, you'll win it.

4. Leverage.

Rick Toone runs a tiny guitar-making operation. His lack of scale makes it easy for him to share. When others start using his designs, he doesn't suffer (he can't make any more guitars than he already is) he benefits, because as the originator of the design, his originals become more coveted, not less valuable. He leverages his insight and shares it as a free marketing device.

5. Respond.

This is the single biggest advantage you have over the big guys. Not only are you in charge, you also answer the phone and read your email and man the desk and set the prices.