LETTERS FROM THE GLOBAL PROVINCE

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Letters from the Global Province 2002 - Email us

GP13Aug03: Rounding the World Then and Now

Breaking Away.  At the start of Moby Dick, Ishmael frets that it’s time to be getting to sea again when.  As he is walking down the street, he feels like plunging a knife into the back of the fellow just ahead of him.  He must get away from his home and the crush of society to rid himself of impulses that issue from some dark part of the soul.

In the 19th century, you would take a trip around the globe to escape the company of over-civilized men and to feel that you were doing something quite different, as you took in exotic places that bore no connection to where you’d been before.  A classic in this regard is Captain Joshua Slocum’s Sailing Alone Around the World, where he achieves solitude, danger, and a special look at the world that was even more out of the ordinary than that enjoyed by the many explorers of his age.

The Two Jims. Today you probably can’t get away from it all.  A whole new  travel literature of round-the-world trips has come to the fore recently in which we find that cars, neuroses, soldiers, menus, and bureaucracy in Timbuktu bear a striking resemblance to those we can find much closer to home.  We have just been through Jim Rogers’ Adventure Capitalist and James Prosek’s Fly-Fishing the 41st:  Around the World, in which we discover that these two world travelers simply do more of what they had already been doing before.  Rogers, onetime associate of George Soros, who retired early from the Wall Street fray after he had made his pile, is a curious bystander who restlessly absorbs experience after experience, data point after data point, always quickly moving onto the next thing.  And James Prosek, an abundantly talented young man who pens books about trout fishing that he himself illustrates, trots along the 41st parallel from his home in Connecticut to France, Turkey, Mongolia, and other points along the 41st in order to fish for trout around the world. 

Challenges Overcome.  Jim Rogers here has sandwiched together at least two books and probably several more in this one volume.  Sure there is a travel book here, but also a dissertation on the state of the world and of each country visited, larded with occasional investment insights.  We probably liked best the first chapter called “A Yellow Mercedes.”  There we learn of his complex preparations for getting underway:  He persuaded Gerhard Steinle, a former Mercedes-Benz executive, to put together a couple of specially built Mercedes for the trip.  The cars, no surprise to us, gave him a fair amount of grief along the way, for he was forever having work done on the underpinnings.  In the same chapter, he and his then-fiancé-now-wife Paige Parker almost come a cropper in Iceland, the trip hardly having begun.  “Not even at our most pessimistic had we thought we might die on our third day out.”  So much for the best laid plans.  There’s a lot of planning along the way, and a host of difficulties that are only surmounted by bribes, clever ruses, and improvisation.  The Rogers book is a TV generation expedition, full of complication and equipment.  Amusingly, it pretty much lets us know why he was successful on the Street:  He never lets up on the task at hand, but is always tirelessly moving on to the next, and the next, making up his mind as he goes what spin he will put on what has transpired.

Gone Fishing.  Prosek just gets on a boat and goes.  He will sleep along the way in the office of a close friend in the fraternity of fisherman.  His knee gets badly infected in middle Europe, but he mainly cares for it by waiting for it to cure itself.  In Asia he travels in a car of patched tires that are always blowing out, yet he finally gets to his destination, maybe a little more slowly than Mr. Rogers would.  His account is not about endless experiences:  He sticks to fishing folk and trout fishing, both of which he can find across the globe along the 41st.  We visit a few places in depth.  He is able to linger awhile.  Particularly the tale is about his rambles with older trout fanatics who serve almost as mentors and become close friends.  The best of this book is the end of the journey, in Colorado, where he visits with Robert Benke, a retired professor of fisheries and wildlife biology at the University of Colorado, Fort Collins who fishes well, cooks superbly, and still imbibes new scientific information about trout with the same avidity that he displayed at the start of his career.  It’s clear that Prosek would not mind being something like Benke when it comes time for his own retirement.

People Aplenty.  These are not lonely explorers of the 19th century.  There are plenty of people, and Prosek’s book is probably about friendship in the trout fraternity as much as anything.  Increasingly, all these people everywhere are linked together by digital communications.  Rogers notes:  “Ulan Bator, the capital of Mongolia, is perhaps the most technologically up-to-date city in the world, totally digital.”  Wired people increasingly share the same information, so you are close to home whether you are in Ulan Bator or Africa’s Gold Coast.  Solitude has become a rare commodity. 

Easy access to money is another sign that every place has become like every other, each increasingly part of one world city.  Rogers does not have to carry a lot of currency  because “Visa, Master Card, Diners Club, and American Express were accepted everywhere … we could just march off to the nearest ATM and take out whatever cash we needed….”

Global Convergence.  We had a chat recently with Gail Fosler, the noted economist at the Conference Board in New York City, who has often topped her fellow dismal scientists in her forecasts of where the economy is headed.  She gave us her usual upbeat predictions about things ahead.  But what was most interesting is that she said Europe’s economy is waking up just as ours is on the mend.  People used to think that different areas of the world would always find themselves in different stages of the business cycle, with one part up when another was down.  This state of affairs was thought, as if by magic, to promote economic recovery in those countries where commerce was down in the dumps.  At least in the case of the U.S. and Europe, this yin and yang concurrence no longer seems to obtain.

Because of digital technology and other forces, the world, increasingly, is so knit together that economic cycles and other currents have begun to run in tandem.  Likewise, there is a great deal of convergence in particular industries.  What happens in one part of financial services, say insurance, spills over quickly into another part, say commercial banking.  Media, broadly defined, are more knotted together—not just cable and TV, but magazines and newspapers, the Internet and advertising and education, movies and art.  Boundaries are being eroded at every turn.

The Days the World Turned Upside Down.  In our Annual Report on Annual Reports 2003, which we have just published, we have said that companies and institutions are now branching out into strategies that are a complete break with their past, all born in a far different strategic environment.  Global convergence, which began to be most evident a decade ago in financial markets, is now occurring in market after market, all about the globe.  All this seems to have come to a head as we moved into the 21st century, although we do not hear the thinks tanks and futurists talking about it.  Convergence, we think, is turning business upside down.

Getting It Wrong.  One of our favorite publications, the Economist, recently (June 28, 2003) published an essay on what the world needs now.  The article is by Bill Emmott, its very bright editor who is just out with his own new book this year.  The piece is “a polemical essay in favour of liberalism but also against the abuse of capitalism and of democracy….”   In other words, the magazine is positing that the world just needs a further dose of liberal democratic capitalism with some tweaking to avoid occasional corruption, fudging of accounts, and other rough edges. 

We think not.  Global convergence, we would say, is stressing out the laissez-faire system that has served us so well but that has now run its course.  If economies and industries are so closely linked, and a little event in the U.S. or China can be a tipping point leading to unintended economic consequences around the globe, then the game has to change.  The prior system was based on a world that was not so tightly synchronized. 

The practical consequences of the Economist view of things are not at all academic.  If we are merely to patch up the existing system, then companies, institutions, and governments had better muddle along as they are, trying on some future clothing but not giving up on the past.  It’s this stumble-along attitude that largely informs an article on corporate strategy that appeared in a recent issue (July 12, 2003, pp. 61-63).  It gives mixed messages about how companies should proceed, since it and the management consultants who provided some of the thinking behind it do not have a clear view about the economic environment in which we now reside. But if the world economy is really light-years different from what we have experienced before, then companies and governments must adopt a whole new way of wrestling with markets so that they do not  get flattened by this Age of Instantaneous Information. 

View from the Bicycle.  If you look closely at everything, nothing seems quite the same this year, because, as the comedian Red Buttons put it several years ago, “Strange things are happening.”  Recently during the Luz Ardiden segment of the Tour de France, Lance Armstrong took a spill but recovered enough to widen his lead quite a bit over the contender Jan Ullrich of Germany.  At the same time Ben Curtis, a complete dark horse, overwhelmed all the standard golfing champions in the British Open at Royal St. George’s.  All about us, the unexpected is happening as if some deus ex machina is having a little joke on everybody.

After the race, Armstrong said:  “This has been a crisis-filled Tour.  There have been a lot of strange things happening, things I haven’t talked about.  This is a Tour of too many problems—close calls, near misses.  I wish it would stop.  I wish I could have some uneventful days.” (See New York Times, July 22, 2003, p. C16). 

We submit that in a world that is too tightly knit together by less than rugged technology, lots of strange things are happening.  Very vulnerable systems break down, and then have a negative domino effect on people across the country or around the globe.

Obsolescence Is Rife.  Global linkage would argue that the Clinton-Bush foreign policy has taken us to the edge of a cliff.  Further, it commands even the smallest of businesses to think about their every move in global terms.  One of the more innovative, small mortgage businesses we know, for instance, has made a calculated effort to sell off U.S. mortgages in India and Malta, having taken the view that true liquidity in this business must be achieved on a global basis.  The old ways are simply outmoded.

Looking ahead, we recommend an old article just reprinted in the Harvard Business Review entitled “The End of Corporate Imperialism” by C.K. Prahalad and Kenneth Lieberthal (see August, 2003, pp. 109-207).  It tells multinationals to stop hawking first-world wares in the third world.  Instead they must devise third-world products and distributions systems if they are not to miss out on some burgeoning markets.  We would now also advise the authors that global linkage should compel such companies to overhaul their manufacturing and distribution for all markets, not just for Asia’s billions of underserved people.

P.S.  The Rogers family, by the way, had a most productive trip.  Hilton Augusta Parker Rogers was born 30 May 2003, and we are told she already has her passport.

GP23Jul03: How to Beat Walmart, Home Depot, and Other Powerhouses; Heard It on the Grapevine

The Answer Is Leonard Lee.  Leonard Lee is an agnostic, but oddly enough, he wants to turn us into believers.  He hopes we’ll become passionate about Ottawa’s Lee Valley  (www.leevalley.com),  a supplier of woodworking tools, garden equipment, etc, which he founded.  And now that he’s moved on to his third career as a maker of medical instruments, he’d also welcome some admiration for Canica Design Inc. (www.canica.com), his new enterprise. 

Oddly enough, we’re already converts, and we’ve not tried his products or services.  He’s persuasive.  And we’ve clearly been waiting for something better to come along.  Home Depot, Walmart, and the like don’t stock the items we need, charge too much for their plants these days, offer seeders for rent that have slits in the body, and sell soaker hoses that break down all too easily.  For 2 months, we’ve not been able to get our very fine Felco #2 shears repaired, because the dealer cannot get the spare part needed.  Desperate, we believe in Leonard even before trying his wares.  On the rebound, we’re after salvation, having walked through the valley of despair.  Like many who have had trouble with their supplier, their government, or their church, we are ready to make a leap of faith, hungry for something that works.   

By Recommendation.  That set us to listening to the grapevine.  We came on Lee Valley because one of our Global Province readers said, “Here’s a company you just have to put on Best of Class.”  To prove the point, he cited a story about a gift he wanted to take to his sister in Florida two Christmases ago.  He was after a micro-plane wood rasp, a very handy shredding tool for the kitchen, which was out of stock at his local Lee Valley.  Even though he was leaving on Friday, the store folks promised delivery on time.  “Thursday morning a courier delivered the tool to my door.  There was no delivery charge.  This is typical of the commitment to customer satisfaction that Lee Valley always exhibits.” 

Getting Started.  Leonard Lee started Lee Valley at age 39, partially to escape a government job he had come to detest, and secondly, as a woodworking enthusiast, because he could tell the world needed some better tools.  Today its Veritas unit manufactures about 1/3 of its tool offerings, which makes the whole  enterprise more of a tool maker than a conventional retailer.  It does about 1/2 its sales in eleven Canadian stores.  The other half is mail order, with half of that volume coming from its 300,000 U.S. customers.  It has now swollen to about 700 employees, and, as we remember, it records something north of $100 million in sales. 

The Product Is First.  You’ll remember we talked about the world of Unbranding in our Global Province letter of July 9.  That’s where you take dollars out your hype budget and put them into product quality.  Lee Valley spends less than one-tenth of one percent of sales on advertising, but lays out a whole lot of money, time, and energy getting the product right.  It designs and produces a lot of its products.  And its design and manufacturing knowledge makes it a very picky buyer, indeed, of the other products that make it into the stores and catalogs.  It spends its dough on the product and the customer experience.  As Lee said to me, you (i.e we) are distinguished by “the products that don’t make it into the catalog.” 

The Customer Experience.  We can only half tell the story of what Lee Valley does for its customers.  Let’s discuss some of the things it does that turns customers into proselytizers for the company: 

1. Any purchase can be returned for 90 days, no questions asked.

2. Any product with a defect can be returned any time.

3. Should Lee Valley reduce the price of anything you’ve bought by more than $5.00, it will send off a check in the mail to you to make up the difference.

4. If it discovers a product defect, it will send you the parts to make a repair.  If the product is simply too defective to remedy, it will give it to you and refund your total expenditure.  That means shipping charges, too.  Its ambition is to reach you before you even know you have a problem.  

5. It will charge you the same price for a product whether you buy one, 100, or 1,000 units.  Only a few manufacturers get volume discounts.  Otherwise, everybody pays the same price.

6. It does not use automated phone systems. You will get through to a real person, and he or she has both the authority and responsibility to deal with your request on the spot.

As Lee said to me, “With our customers, we’d like to create a state of awe, though we never want to shock them.”   That’s a better way of expressing an idea about quality used in business 20 years ago:  “We don’t want to satisfy customers:  We want to delight them.” 

Helping Out.  In our Annual Report on Annual Reports 2003, we have implied that 21^st century corporations have to do more than create shareholder value.  They must and will broadly create value for the society of which they are a part. (By the way, we’ll be announcing the highlights of this report to the press this week, and it will be posted on the website by July 31).   

Lee Valley does this in several ways, but let’s cite a simple one.  If you recruit a new customer for the company, it will donate $5.00 to the Nature Conservancy or United Way.  It has recently geographically segmented its catalog customers so that they can see the local Nature Conservancy projects in their catalogs that they will be helping if they’re good recruiters.  Lee, incidentally, is a Board member for the Nature Conservancy of Canada, so this program has become a handy way for him to put his money where his mouth is.  

It’s About Product.  We’ve said that Lee Valley answers the question:  How do you beat Walmart, Home Depot, and the other Behemoths who offer average merchandise that wears out, at medium, but not sharply discounted prices, based on squeezing their suppliers too hard?  The answer:  Offer a great product, don’t waste bucks on frivolous marketing, and back the product to the hilt.  Then the grapevine will bring customers to your door. 

A Loose Screw.  Now we’re waiting to see if Lee Valley is all it’s cracked up to be, having sung its praises based on copious hearsay.  We’ll find out if the free, small screw Mr. Lee offered us for our errant Felco #2 does arrive.  We’ll be watching the mailbox, because the acid test of any business is how well it does the small things.  A few minor things done well at the beginning win customers for life. 

The opposite tack will gain you some devout enemies.  Years back we called a credit card unit of one of the world’s largest banks.  Phoney charges, maybe to the tune of $10.00, had appeared on a couple of our bills.  By the way, the bank’s consumer activities are immensely profitable.  When we talked to a manager, he recoiled, told us not to bother him with such small matters, and advised us to call the disreputable merchants who were palming off these charges.  As a result, we have cut every business relationship with that bank, and we go out of our way to advise some of its major customers about its arrogance.  Ethical lapses by this bank regularly appear in the news. 

We don’t think the people in Lee Valley will ever kiss off business so cavalierly.  That’s how you beat the big guys: don’t be like them. 

GP16Jul03: Kicking the Tires

How to Get the Global Province Letter.   Things come in bunches.  For two weeks now, we’ve been hounded by readers complaining that they can’t find out how to sign up their friends for the letter.  We’ve not heard from our old school chum and frequent, trenchant correspondent Les Epstein, who is too busy basking in the success of his bemusing novel San Remo Drive:  A Novel from Memory (a fine summer read by the way), but others have been more vocal. We’re obviously a bit too discreet, some would say opaque, about the workings of our website.

Rest assured, you can find a sign-up link on top of our homepage at www.globalprovince.com.  And at the very bottom of the Global Province letter you now will find directions for subscribing.  But you can also simply go to our subscription page.  Generally speaking, Mike, our webmaestro, promises to be a bit more obvious about how to get around the Province.  This will become even more important as we add new, specialized newsletters that some of you will want to receive, such as the global cooking missive we are now concocting.  Despite our lack of subscription commercials, we still added a plasma physicist, a computer professor, a few lawyers from Washington, and a neurosurgeon to our readers last week.  Obviously it takes a Ph.D. to make one’s way through our Global Maze. 
 

Wind in our Sails.  We’re sorry if we have been difficult.  Hopefully we have done a better job of sticking to our mission.  We cover everything under the sun in our letter, but our main goal is to connect you up to the future, for fun and profit.  As one consulting group says, we provide “Real leading edge thoughts on business and the world.”  So we were talking about wind power well before GE bought into the business.  That, incidentally, is what we do for our clients, be they business executives or investors:  Get them onto the next plateau. 

Annual Reports 2003 Coming Up.  You’ll find plenty of investment insights in our Annual Report on Annual Reports 2003, which will be posted on the Global Province in the next couple of weeks.

The 2002 batch of reports are riddled with paradox.  For a variety of reasons, their quality has gone downhill and so they are less read than ever.  And yet this year they signal dramatic, once-in-a-generation changes to those who give them a close reading, as the smartest investors and most thoughtful businesspeople always do.  New disclosure demands have been imposed upon them, and yet they are far less revealing about what counts, since the vitriolic regulatory atmosphere has caused business leaders to listen to their lawyers and clam up about most anything important.  Nonetheless, taken as a whole, the reports still tell investment firms and businesses where to put their dollars.  We find that if you look at enough documents (we always cover 500 reports or so), in any field of endeavor, even if they seem impenetrable, they will eventually give up their clues about the future.

The best reports, by the way, are now done outside the United States, where one still has the freedom to use some imagination.  We like particularly Vorwerk (www.vorwerk.de) in Germany; this company has been an annual report innovator for years.  It started down the right path due to a chap named Manfred Piwinger (if we remember his name correctly) who understood that the report is an international calling card that can help a growth company do business around the globe.  This year, in timely fashion, it chooses to discuss truth and lies even as it details its own rather satisfactory year.  Ambitious companies in the U.S. should also be using reports to open doors abroad. 

Kicking the Tires.  The Global Province Letter and our Annual Report on Annual Reports constantly seem to reveal that the world is not what the experts say it is.  Their preconceptions and methodology (epistemology if you a philosopher) always seem to confirm old truths and prejudices that they swear by, rather than the new realities that none of us have thought about.  The gap between the world as our renowned oracles see it and the world as it is has never appeared wider.

In this vein, we are about to add a new element to our Investor’s Digest section called “Kicking the Tires.”  We and friends will report there little observations about companies because we have gone out and looked around their stores, tried their products, talked to their employees, and gotten behind their screen doors.  To get a real sense of what is happening in the here and now, one has to walk around and get the lay of the land.

We will try the new, hot car ourselves to see if it runs.  And then we will pay attention to our mechanic who swears that the only car that is easy to repair is a Toyota, even though he favors American cars.  If we go out and find that the stores are empty and that everything is discounted, we will claim deflation is here even though the economists can prove otherwise from their aggregate numbers.  If a venerated electric utility keeps having breakdowns in the same spot several times a year, every year, we will tell Fortune it is not this planet’s best power company.  And if we see fish returning to San Francisco Bay and the Hudson River, we will surely declare that the world is not yet at an end and that environmental progress may accelerate.  In our Annual Report on Annual Reports 2003, tire-kicking leads us to praise Walmart—with several caveats.

We just got our AAA card in the mail, and the cost accountants have taken it down to a sliver of its former self.  It’s becoming less than a slice of onion.  Years ago we counseled chief executives not to use thin, gritty paper in their annual reports.  My partner said, “Flabby paper is worse than a limp handshake,” because it sends that subliminal message you don’t want to send.  For many of us the membership card is the most tangible thing we receive from AAA every year.  Does it make sense to disappear it?  Is AAA evaporating?  Those are the kind of questions you ask when you kick the tires.

GP9Jul03: Unbranding Next?  The Rise of the Unlikely

Our Fourth of July Surprise.  To get America ready for the Fourth, Ms. Julia Reed, journalist of diverse interests and a soon-to-be-bride, did an ice cream essay for The New York Times Magazine (June 29, 2003, pp. 53-54) where she featured homemade peach ice cream.  Our family put her recipe to the test just before the holiday and found it not to be wanting.  Somehow it reminded us of another Fourth decades ago in the Garden State, when we went out and picked quarts of fresh strawberries in the hot Jersey sun and then, rock salt and all, stirred them into a cold confection that was 90% berries and 10% cream.  Delicious.  Our only quibble with Miss Reed—minor, indeed—is that our hand-cranked ice cream was even better than that she has turned out in today’s automated Williams and Sonoma whoop-de-do ice cream maker.  That said, hers is still very much an “A.” 

The Taste That Got Away.  You can’t buy a decent commercial ice cream these days, so it has become ever more urgent, virtually a patriotic act, to make your own so you and the grandkids can remember the bundle of flavors that course through the real McCoy.  Nestle and Unilever, Europe’s giants of tastelessness, have gobbled up huge chunks of the American ice cream market, locking up a bunch of supermarket brands.  Like all consolidators, they are taking big lumps of cost out of the product, turning ice cream into chilled insipid, furthering the degradation that occurred under previous owners.  Politically correct Europeans are all aflutter over genetically modified crops:  instead, they probably should bestir themselves about companies further down the food chain who take some of the essence out of our foodstuffs.  The two conglomerates are creating an opening in the market for boutique companies who can offer the real goods. 

The Real Thing.  Increasingly, the real thing ain’t.  Coca Cola seems ever more watery.  Some say it went into painful decline when it started filling the bottle with corn syrup.  We were recently reminded that there was once a real Coke when a friend, just returned from Europe, told us about having cokes with zing in Russia, Finland, and Denmark.  Ironically, the beverage moguls in Atlanta seem to have made it imperative to go aboard to get a decent bottle of pop.  But the upside, of course, is that we are better without it, and our pocketbooks are healthier, too, since management is currently trying to get its prices per unit up. 

Put a Cork in It.  This week a report in the Times (Saturday, July 5, 2003, pp. B1, 4)  details the stout resistance the Portuguese wine makers are offering to the urgings of wine manufacturers elsewhere to install screwtops or plastic corks on our bottles.  Naturally the Swiss (there go those Nestle folks again), not knowing the difference, now cork half their bottles with substitutes.  We have noted on the Global Province (See Global Wit 252) that the wine writer at the Times, after first coming out for the plastic, has changed his tune and become a screwtop fan.  The Portuguese account for one-half of the $2 billion in real corks sold annually, so they’re passionate, even self righteous about this issue.  We ourselves have long noticed that plastic and metal impart strange and offputting tastes to all kinds of beverages.  Only the tasteless,  the same people who  tolerate commercial ice creams, can  celebrate the unsavory plastic corks or the cheap, rather ugly screwtops.  

Value Subtraction.  In wine or ice cream or soda pop or refrigerators or a 1,000 other products, there’s been a relentless drive to build bigger and bigger, market-dominant global companies that can gain massive advantages of scale.  Invariably that has meant taking value out of the actual product (be it peaches in your ice cream or chip capacity in your cell phone), while investing ever more heavily and continuously in marketing and advertising to saturate customers the world over with messages.  It is fair to say that marketing expenditures have gotten out of hand, just like campaign finance, and that they are doing a disservice to the economy.  In many instances, companies no longer really prize their products, but worship, instead, their brands.  There is often an inverse correlation between marketing expenditures (as a percentage of sales) and product quality, the same kind of correlation that exists between campaign costs and the quality of our politicians.  Somebody has to pay for all that TV advertising, couponing, and store detailing.  The bucks come out of the product, and, it can be said, the product is being hollowed out. 

Unbranding.  On the Global Province, we have talked about the growth of non-marketing, a countervailing tendency (see Agile Companies 186 and Letters from the Global Province, 25 June 2003), and unbranding.  We have become rabid fans, as have many others, of the understated, much talked about ads put out by Honda in the United Kingdom.  We know of boutique craft companies in several fields who ultra-control their marketing expenditures in order to use finer materials and better assembly techniques.   

In other, words, there is a grand assembly of people out there besides Ms. Reed who know they’re not getting peaches in their ice cream and are on the look out for something better.  Through word of mouth, through niche magazines, through the Internet, they’re discovering value-added products.  Their new spending habits are exposing the vulnerabilities of purveyors whose offerings are all brand and no substance.  For instance, very demanding consumers bonded together by their common interest, rather than marketing dollars, are beginning to drive the specialty coffee market, the caffeine segment that is showing real growth.   This gradual drift to quality portends some momentous changes for advertising agencies, magazines plus other media, and retail outlets of all sorts.  Many in these traditional marketing channels complain that they have not seen such economic pain since the 1930s, experiencing flat or declining revenues, part of which stems from some fundamental changes in the marketplace.  

P.S.  Our Annual Report on Annual Reports 2003, called The Shock of Recognition, will be published in the next few weeks.  We discover there that tough and rather unprecedented economic events have compelled companies to adopt dramatic new strategies, although this transformation is masked in the reports by miniscule disclosure concerns and corporate governance showboating occasioned by new legislation and a punitive legal atmosphere.  It is this new economic marketplace that is giving birth to “unbranding” and other unlikely trends.  We will be posting this new report in the Annual Reports section of the Global Province.

GP25Jun03:  Bloom—In Praise of Divorce

The Spread of Genius.  The late Leonard Krieger, author of The German Idea of Freedom and intellectual historian of the first order, never tired of describing how big ideas traveled from the minds of original men, out into the popular marketplace, and then radiated to the corners of the globe.  This is the most exalted form of marketing.  A classic study in this regard is Bruno Latour’s The Pasteurization of France which shows the complex of circumstances that put Pasteur across the map of France.  (See the Science and Technology branch of our Infinite Bookstore, on the Global Province for more on his books.)  We have long wondered how good ideas best get a grip on the whole of a people, for this is literally the only way to drive out bad ideas.   In Krieger’s view, universities and professors earn their keep by distributing seminal ideas originated elsewhere by geniuses: they’re simply radio transmitters for the intellectual giants who live apart from the academic ratpack. 

What Now?  But universities are probably breaking down, and education is sometimes no longer their main agenda.  When we chatted for a few moments with Professor Harold Bloom in mid-June, he allowed that Harvard, Princeton, and a raft of other brandname institutions had fallen into disrepair, beset by ideological nonsense and other confusions that kept them from focusing on and teaching the subject at hand.  In his view, Yale, where he mostly abides, does somewhat better, having resisted some of the distractions and currents that draw one away from the raison d’etre of the university.  Probably, nonetheless, universities are no longer the forum where good thinking struts its stuff and then makes its way out to visit with the citizenry. 

Divorce.  We had called to ask him how he had burst beyond the boundaries of the university to get his teachings into the hands of readers of literature throughout this land and beyond.  He kindly fitted us in during the quiet time, after tea and just before supper, that late afternoon hour where Proust achieved dramatic clarity.  It’s a good time for a summing up—perhaps of the day, even of a lifetime. 

“Simple,” he replied to our query.  “It all began with my divorce from the English Department at Yale in 1976.  Then I became a Yale professor of absolutely nothing.”  If we remember rightly, he was subsequently called something like Professor of Humanities.  By a curious accident, he found himself separated, just like that, from the small skirmishes that now eternally plague all academic departments.  As importantly, thereafter, he began to reach out to a wider audience. 

He taught at more places, including New York University, where he still holds a second chair.  He figures, if we got it right, that he’s reached some 30,000 students over all in his long career. That is probably equal to an Army division that’s a little under strength.  One never quite knows where he will pop up next—on C-Span some days, in The Wall Street JournaI on another, railing about Harry Potter on still others.  He is guilty of innumerable acts of random teaching. 

His books, meanwhile, have carried him well beyond these shores, particularly in the Latin countries of Europe.  He is compulsively copious, having produced an incredible stream of volumes  and articles.  Apparently, now, he’s been published in Indonesia.  That so many devout readers have flocked to him has been “incredibly moving” to him.  He is reviewed and re-reviewed almost constantly.  This is doubly wonderful, because he is not an extremely accessible author, but complex in the tradition of William Wimsatt, a teacher of his who was also a brilliant academic critic in the generation before him.  To get a little feeling for the breadth of his work and of his following, take a peek at the following New York Times and Stanford websites:  www.nytimes.com/books/98/11/01/specials/bloom.html and http://prelectur.stanford.edu/lecturers/bloom/interviews.html.  

The lesson in all of this is that anyone who wants to get beyond a small place must leave it, at least in part.  Any institution ties an Atlas-intellect down, causing one to look inward, equipping one’s tongue with a limited vernacular that does not ever reach a global audience.  All of us owe it to ourselves to achieve a certain detachment from the place where we work, especially if the whole structure is in decay anyway. 

Irony.  We might even call this ironic detachment, and we think “irony” is Professor Bloom’s stock in trade.  A compelling conversationalist, Mr. Bloom is a torrent of words where one does not exchange ideas, but drinks his in.  Fortunately the rush of thoughts is witty, and the wit is ironic.  Did he not say to us (well, approximately), “If  I don’t speak ill of the dead, who will?”  Or something like that. 

In one of his lesser works, How to Read and Why, we read about the importance he attaches to irony: 

“Irony is only a metaphor, and the irony of one literary age can rarely be the irony of another, yet without the renaissance of an ironic sense more than what we once called imaginative literature will be lost.”

In 2003, we would say, irony frees us to get beyond truisms to something that resembles the truth. 

At this moment in history, there’s a massive cleavage between the world as we perceive it and the world as it really is, in all fields of endeavor.  Words put to paper do not quite mean what they seem to say.  With such cosmic delusion firmly in the saddle, irony is in total command of the stage.  Bloom is awesomely relevant.     

Creative Critic.  For 30 years now, academic critics of all sorts have consigned Bloom to the dustbin of history, particularly those who want to interpret literature as a piece of history, an underpinning for racism or sexism, as something other than literature.  But his audience, as we have said, grows.  So much for his critics. 

His power we think lies in the fact that he gives a close, close reading of the text and, whether it is Shakespeare or Wallace Stevens, uses his imagination to elicit meanings that might otherwise elude us.  In his hand, criticism is not analysis but a creative act that looks for truths that will evade a dissecting eye.  This view of things has drawn readers the world over to him, as they find his passion and ideas to be authentic.  Ultimately his power with the populace has not come about because he has flogged his works the world over through book tours and the like, but simply because the words have rung true.  What he has to say about a writer, even if it has flights of fancy, comes to grips with what the writer has said in his creative work, excluding the considerable intellectual baggage many critics bring to their task.   

Pabst Blue Ribbon.   In this week’s New York Times Magazine  (“The Marketing of No Marketing,” June 22, 2003, pp. 42-45), you can read how Pabst Blue Ribbon, once of Milwaukee but now of San Antonio, has amazingly staged a comeback, rising perhaps to 1% of all U.S. beer sales.  In some locales, such as Oregon, it has even done better.  This is only interesting because it did the trick with virtually no marketing:  it really doesn’t  have the dollars to support advertising and the other tactics that national consumer brands use to buy shelf space.     

In a way, we could care less.  All the U.S. national beer brands, including Pabst, taste like water and froth, hardly deserving a place in anybody’s refrigerator. They are shoddy products.  Yet it’s interesting that little subgroups, people who have opted out of the mainstream, have taken up the beverage and had Pabst sponsor their occasional meetings, but without any sign of Pabst or its people at those meetings.  Pabst sells through silence, by being invisible.  The Orwellian subclasses have opted for Pabst because it has no message at all, about as truthful as you can get about a tasteless commodity which does not particularly have anything to recommend it.  The message, or the lack of it, fits the product and has made it grow. 

End of Marketing.  Obviously the Professor and PBR have absolutely nothing in common, except that they have attracted people in unusual ways.  Bloom gains an avid audience by an ironic reading of first-rate authors.  Pabst moves its tepid brew off the shelf by saying nothing at all.  There is a yearning for authentic messages that accurately convey the essence of the speaker and that are, at the same time, emotionally closer to the real mood of our era than the utterings of pundits, endorsers, and organization men of any stripe.     

This is not the way universities or companies have sold their wares in the past.  With them, packaging has become all important, and their product has often become hollow.  Perhaps marketing as we know it is set to take a tumble, since it often aims to put a face on things that does not square with reality.  Already we see a different style in some of the more interesting Internet communication and some other marketing avenues.  We  have urged new substantive approaches on our own clientele. 

Authenticity.  We are reminded of the advertising man who said, “Truth is in—for advertising.  Now, if we can only learn to package truth.”  But you can’t.  You can mostly strip away the packaging.  That’s a different business altogether.

GP18Jun03: You Can Make Me Wobble, But You Can't Knock Me Down

Weeble Woman.  We always come upon Ms. Letitia Baldrige when she is just bouncing back from a bad patch that would have proven fatal to an ordinary mortal.  Some twenty years ago we lunched together, through the good offices of her brother Malcolm, at a pretty French restaurant in the East 20s and chatted about most everything under the sun.  Along the way, casually, she mentioned  that she had just beaten back the Big C—cancer. 

A month ago, motivated by some vague presentiment, we called to check on her at her office in Washington.  Lo and behold, she was just home from the hospital after a serious bout of surgery, bouncing back yet all over again.  And, sure enough, she was to be on the road a few days later to lecture some company’s employees in New Jersey on the importance and fundamentals of good etiquette. 

Her several “ups” and “downs” in life reminded her, she said, of a childhood toy she long cherished:  the weeble.  You could try to knock it over, but it was weighted in such a way that it would immediately right itself.  The slogan was:  “Weebles wobble, but they don’t fall down.”  

At that, we said to her “You make us recall John Wayne’s movie True Grit.”  We made an appointment to talk more with her about this “the show-must-go-on” spirit upon her return from the Garden State. 

Nobody Showed.  We’ve talked since.  She allows that her life has been fraught with crises, largely of her own making.  So she’s had no choice but to right herself when all seems lost.   

Once, for instance, she was set to re-launch the newly refurbished King Cole bar at the St. Regis Hotel, a stylish watering hole with a wonderful Maxwell Parrish mural.  The proprietors were converting it to a restaurant.  The invitations to the sendoff party were perfect, except that they did not clearly state the date of the affair.  What a surprise party! Quelle surprise!  Nobody showed.  She had to apologize profusely to the owners and to promise to make up for her faux pas.  And she did, turning a lemon into lemonade.  Her follow-on activities clearly rang the cash register for Sheraton’s management. 

High Priestess of Manners.  That she has survived and flourished stems from such true grit, her boundless good cheer, and her religious devotion to the cause of civility.  She has become, we think, the high priestess of  good manners, and her website (www.letitia.com) is populated with a string of books she has written about the “whys” and “wherefores” of gentility.  She believes, incidentally, that good manners are only communication devices by which kind people express their care for others.  She implies that kindness itself is the very glue that holds together civilized society.  For more about her several books, refer to Best of Class on the Global Province, Item 73.   

Barbarians at the Gates.  It is her relentlessness about manners, even more than her resilience amidst crisis, that really shows her true grit.  Even if civility is the lifeblood of diplomacy, of strategic alliances (which are the sine qua non of global business), and of marriage, rudeness has become the more common currency in modern life.  It’s not just that barbarians are pressing at our gates, but that nobody on the inside knows how to say , “Please, Thank you, Your welcome, May I help you, “ etc.  Bravely, she insists that minimum standards and a little kindness would make things a great deal easier for all of us, and she fights the good fight to get us to raise our sights. 

The Service Paradox.  Bad manners have produced gridlock in government and have fanned the countless, little wars that now dot the globe.  Neither the Clinton nor Bush Administrations have comported themselves in the modest and forthright ways that compel the admiration of reasonable people around the world.  For Americans, in addition, the consequences of crudeness have even dampened our ability to make a living. 

In one way or another, business chieftains discovered late in the 90s  that “services” are the difference between single and double-digit growth.  That is, if you just make a product, you will barely grow  these days.  So services have become hugely  more important to IBM than mainframe computers, because that’s where the money is. 

Civility is 70% of service.  But little of it is forthcoming.  Manners have most atrophied just as they have become most important.  If there were ever a strategic paradox, this is it.  Just when service has become the critical value-added in our economy, corporate technocrats have taken true service off the table.  In fact, it’s almost a shock now when someone at a major institution or company is truly polite.  Often enough, one never even speaks to a responsive human being during telephonic corporate transactions, and is shuttled instead into unwieldy interactive phone systems.  In some businesses, most notably investment banking, the too clever practitioners even brag  about their arrogance and unseemly behavior, some of which has been recounted in books dealing with the lows of high finance.  

From Don to Donnybrook.  Fifty years ago, in the morning, America listened to Don McNeil’s Breakfast Club on ABC radio, a talk and entertainment show beamed out of the old Allerton Hotel in Chicago.  It began:  “Good morning, Breakfast Clubbers.”  It ended:  “So long, and be good to yourself.”  This was happiness, cheer, and kindness. 

Today, post 2000, we turn on the TV and turn in desperation to Don Imus.  There is nothing, nothing good on the tube even with 40 or so channels, and the Imus offers the least worst of the worst.  Here labored discussions of uninteresting neurosis block out the charming playfulness that ran through the old-time early bird shows.  Occasionally the program is punctuated by interviews with people of significance and substance, but generally the fare is boring and boorish.  Even Mr. Imus, sometimes rising above the morass, seems a trifle embarrassed by the enervating triviality of it all.  Most of the palaver comes as if from fleas who have laid their eggs in our rice krispies.   

Such talk TV and talk radio are rather profitable, since they cost so little to produce. Likewise, Time Inc. manages to stay afloat because of People magazine, also a low-cost appeal to the mindless many.  But  broadcasters and publishers of this dark, gritty material have tarnished their reputation and brand, driving away large segments of their potential audience, slowly losing their bond with listener-land.  These are forums where all fall down and never get up.  They sap the public spirit and the nation’s sense of purpose.  When again, will they be good to us, trying to inspire us to be good to ourselves?   They need a few lessons from  Ms. Baldrige, or Don McNeil.   

P.S. Michael Bierut of Pentagram just sent us Toys:  Celebrating 100 Years of the Power of Play which he beautifully designed for the Toy Industry Association, Inc.  We were happy to find there Lionel Trains, the Frisbee, Twister, and Trivial Pursuit.  But we certainly hope the Weeble makes it into the next edition, and somehow Jacks did not survive the cut.  The book, incidentally, has generated a nickel or two for the association, one of the rare instances when one of these corporate histories has been more than a dust gatherer on file room shelves. 

P.P.S.  For good humor and politeness, pick up the phone sometime and dial the folks at Freeport Maine’s L.L. Bean.  We always find them helpful and welcoming, and we go out of our way to make purchases at this esteemed outfitter.

GP11Jun03:  Headhunting:  Searching for the Globally Homeless

From Nowhere.  Coming from the airport on the long ride into Indianapolis to see a couple of clients, we fell into conversation.  Our cab driver was a winning sort of fellow, able to ask and talk about most anything, sparking laughter between the two of us.  He challenged us to guess where he was from.  “Southern Ohio,” we shot back, guessing correctly from his accent, syntax, attitude, and directness.

Then he went after our origins, trying to connect us up with some part of America.  He drew a blank.  “You know, you have one of those radio announcer sort of voices.  From everywhere but nowhere in particular.”  His response did not surprise:  it had happened before.  The sociologists would call us marginal, since we lack clear identification with a tribe, a geography, a slice of society.  Nonetheless, the conversation put us in such good humor that we played hooky and went off to see the toy collection at a local museum.  We had a lot of taxi rides like that in the 1980s. 

Anywhere Man.  Robert Theleen, leader of ChinaVest, a venture capital firm founded in Hong Kong, but operating both in China and America, likes to tell us how he knows if he truly has a Chinese entrepreneur on his hands.  He’ll ask his visitor how things are at home.  After a pause of some moments, the true entrepreneur will reply, “Which home?”  The wandering conqueror has houses in Silicon Valley, Shanghai,  Frankfurt, and the British Virgins and is equally at home and equally alienated everywhere.  He knows no borders, only time zones.

The 21st Leap.  This multination man has become terribly relevant now at the start of the 21st century.  In our Annual Report on Annual Reports 2003, now underway, we will discuss the sudden rush of the world’s major companies to jump swiftly into radical new strategies which will demand leaders cut from entirely different pieces of cloth.  Even last year, companies were still changing out CEOs but asking the new hires to use the same tired old tactics companies have employed for the last 20 years:  insistent cost-cutting, often right into the bone; beefed up support for their major brands; irrational slashing of inventories; imprudent squeezing of suppliers, etc.  Now, finally, slash-and-burn is no longer working, and we’re at the opening page of an entirely new chapter in business.  New global strategies are on the way.  It’s a whole new ballgame.

The million-dollar question is who can implement them.  Yesterday’s fellows, whatever their B-school credentials, are really not up to the tasks.  They simply do not comprehend the new world we have entered.  Unless they are cosmopolitan, cross-border personalities, they don’t have an inkling, for instance, that the critical business knowledge on which they depend is very widely diffused throughout the world, no longer confined to 5 or 6 world hubs as in the 20th century.  Is this what computer jockeys mean by distributed intelligence?

The Answers Lie Elsewhere and Everywhere.  Even short-term fixes for business enterprises depend on global finesse.  We advise one mid-size manufacturing company whose turnaround chairman has served in over 41 countries during his long business career.  Thank goodness, because critical financings have come from Scotland, mainland China, and Australia.  Vital new customers have come from France, Japan, South Africa, and Germany.  New talent has come in from the 4 corners of the globe.  In other words, you have to have a global rolodex these days if you are going to deal with the shortfalls in this economy or that.

Likewise, it has taken a Carlos Ghosn of Middle Eastern derivation, brought up in Brazil, working for more than one French company, exposed to the ways of the U.S., to turn Titanic Nissan completely around and make it a high profit global automobile leader.  Ingrown Japan needed this commanding external catalyst to recast its fallen giant.  It could use some of the same sort of people in its government, which is floundering amidst gridlock. 

Geoffrey Bawa.  Even before some avant garde people began to understand that business needed an extremely cosmopolitan generation of leaders groomed in many nations, the arts and academia had learned that worldly imagination was needed to animate all the cultural trades.  Culture now is much more integrated than national boundaries and ethnic rivalries would suggest—politics and business still lag behind it.  Certainly Geoffrey Bawa illustrates just this point.

A Sri Lankan, he just passed away in May at 83 after a most fruitful career as an architect of some of Asia’s most splendid hotels.  Born in Ceylon in 1914, he came of German, Scot, and Sinhalese (New York Times spelling) stock.  Later he studied at Cambridge, and then took up law in London in 1944.  After returning home, he toured Asia, the U.S., and Europe, drawn to architecture during his travels in Italy.  In 1959, he founded an architectural partnership with a Dane.  See his obituary in the New York Times (May 31, 2003, B17).  His pre-eminence stemmed from his capacity to pull together cultural strands and diverse practices from so many nations, East and West.  He was of the stuff from which we will fashion  the world’s future leaders.

Big-Picture People.  We have argued here that leaders worth their salt will have to have the breadth to draw on resources from several nations.  They contribute value because they are not fastened on 4 or 5 boilerplate solutions to everything.  As importantly, we think, their global personalities can capture the big picture and focus on big problems.

In this vein, please look at Dunk’s Dictum 22, “Don’t Worry about the Copperheads; the Big Bear Will Get You First,” which you will find here on the Global Province.  Much of the time in business and government, we simply attend to the wrong things, looking for snakes in the grass, when it’s the bears we should be watching for.  Consultants refer to this as “getting caught in the weeds.”  At this point in history, you need to be global if you are not going to be chewed up by small matters.  You may draw on a 1,000 sources but you still must focus on one Big Idea that has a worldly look to it. 

Big Thinkers.  The Sunday New York Times Magazine (June 8, 2003, pp. 72-76) looked at New York University’s attempt to become a world-class institution under its new president, John Sexton.  It’s had this opportunity many times, but never seized the day.  Signally, he is trying to jumpstart the place by beefing up the economics department, having recently hired a West Coast star named Thomas Sargent.

On the one hand, Sargent does not really have the global credentials that would ordinarily  put us on his trail.  On the other, this prolific economist has his feet firmly planted in macroeconomics, and his new thinking is said to have made policy makers rethink which economic levers should be pulled in more than one economy around the world.  Broadly, at least, he is on the right problem (macro fishing), since economic policy is clearly out of whack in virtually all the developed nations as hackneyed clichés have overwhelmed good forward thinking. 

As far back as December 1989 in a publication called Region, from the Minneapolis Federal Reserve Bank, we learned of the clear split Sargent perceives between modern economic thinking (such as his own “rational expectations” theorizing) and the tired formulas in Washington.  “Most economic policy in Washington,” Sargent said then, “shows little acquaintance with macroeconomics in general.”

That, in a nutshell, is what we are most looking for in global leaders on a variety of fronts—a clear understanding that the old models about how things worked just don’t speak to the brand new world of the 21st.  We think that globally adept leaders clearly perceive the difference between the architecture of the world that was and the world that is becoming. 

P.S.  This week good Bill Hanley of the National Post in Canada wrote a Saturday column  “Why Dunk Slams the Status Quo.”  He, too, understands we’re living in the past and it no longer works.  Bill likes our choice of restaurants but wishes we were savvy enough to find a taxi in 4 p.m. New York.  Click here for a link to full article.  For more Hanley, see www.nationalpost.com/commentary/whanley.html.

GP28May03: Mob Wisdom: Managing the Moment in a World at Risk.

Our Neighborhood.  Forty years ago, in New York, an aspiring writer or graduate student might have taken an apartment in New York’s Little Italy.  Here the price was right, and the South of Houston enclave was immensely safer than other low-rent sections of the city.  The Mafia protected its own, running off lesser hoodlums and drug peddlers, quickly getting the lowdown on any interloper.  Even those who had not grown up there inadvertently fell under its protection and sway.  Today, with insecurity sweeping across the world, you hear of citizens in many nations who are looking for a local boss to shield them from predators of all sorts.   

It’s ironic enough that the mob in several haunts around the world is sometimes a local force for peace and stability.  Our Gang also renders lessons in kingship you really won’t pick up in vaunted leadership institutes across the developed world that would rather trade in platitudes than wrestle with grim reality.  There’s something to be said for street smarts, even the cunning of criminals.  Under the most adverse conditions, they act decisively and rapidly to protect and enlarge their dominion.   

Very Tight Alignment.  In 1976, on a visit to Japan, we stayed at the Hotel Pacific, a bit away from the central business district and its more regimented, monumental hotels.  For breakfast one morning we entertained an American publisher who knew the ins and outs of Tokyo.  “The Pacific,” he remarked, “A very nice hotel.  In fact, I’ve stopped here on several occasions.” 

After a night of tippling, he would often repair to the steam room at the Pacific on the way home in order to put his head to rights.  On one occasion he met there a group of men with ornate tattoos covering their bodies who were wrapped in a tight discussion.  He asked them what they were all about.  Very amused at the daring of the intrepid foreigner, they told him they were yakuza, or Japanese gangsters, there to review their sundry “business dealings.” 

They were astute enough to hold their meetings “outside of the office,” where they would surely have better perspective on their affairs.  Never, we think, should businesses carry on discussions of strategy at the office, because their conclusions will be warped by the matters of the moment. 

Like many tribes, they wore distinctive insignia, their special warpaint, that bound them together and made them feel part of something very important.  In business, we talk of the importance of alignment, but often lack the visual symbolism and other connective tissue that pulls together people for purposeful action.  Around the world, the mob knows how to deck itself out in a distinctive uniform.  Close-knit, it can deal with the sundry threats poised by outsiders. 

Dominate the Agenda.  In 1983 or so, we dined on  Bellinis and carpaccio at Harry’s in Venice.  (Ostensibly carpaccio was invented at Harry’s in 196l and named after a Renaissance painter famous for his glorious reds).  Stuffed to the gills, we strolled down the canal to work off our meal.  We decided on a late night drink at the pretty Hotel Danieli, the bar in the rear with its café society music offering a harmonious end to the evening.  A half hour into our beverage, the piano player finished and retired to the back.  We thought of getting the check.  

However, some Mafia bosses strolled in—one from Napoli, one from Venice, and a go-between from Marseilles who was trying to arrange some sort of deal.  Quickly enough, the fellow from Naples grew bored with the proceedings, and turned to us for conversation, much to the despair of the other two.  Sporting a wolfish grin, he asked us whether we liked Napoli music, or Venetian.  Of course, very quickly we said, “Napoli, Napoli!” 

“Oh, you like Napoli music.  You shall have it.”  He sidled off to the kitchen where the piano player was savoring his dinner.  In no more than 5 minutes, he dragged the piano player back by the ear and plopped him down on the piano stool.  We had an hour of conversation and endless rounds of Napoli music.   

Our Napoli chieftain had decided what would be talked about with his companions when.  And, since the conversation was going nowhere, he quickly changed the direction of everything.  We suspect that, after we left, he won everything he wanted in the negotiations because he had so dominated the intercourse with wit, force, and energy. 

Act the Part.  In 1987 or so, we were enjoying fabulous squid pasta at Siracusa, surely one of the four or five truly great Italian restaurants we’ve sampled in America.  We had been introduced to it by the late John Condon, sometime jazz club owner, smoker of the most aromatic cigars, long-time graphic artist, and always the knowing New Yorker.  The young Sicilian brothers who owned it made the pasta and the gelato from scratch, reaping a freshness and flavor not available elsewhere.  The twenty or so patrons that evening obviously felt as passionately about the fare as we did.  Sad to say, this restaurant has since disappeared. 

At first we did not focus on the four gentlemen from New York who took a table in the northeast corner of the room.  But almost instantly the crowd melted away, and we found ourselves alone with them.  It was then we noticed that the Don, the boss of all bosses, was amongst the quartet, his back to the wall.  Intrepid or foolish, we dawdled over our meal, particularly savoring the expresso gelato we had for dessert. 

The Don and his party spoke quietly and ate well.  We could contrast the Don’s behavior with the covey of young investment bankers of that period whom we would encounter at Lutece and other noted uptown eateries.  They were loud and garish with their clients, slushing the best of wines like mouthwash.  The Don was extremely understated.  The Don acted like a Don, a man of sophistication. 

Knowledge Management.  In Adventure Capitalist, Jim Rogers recounts his visit to Siberia.  In Chita, for a short while, he fell in with a local mafia boss who wondered how Rogers and Paige had avoided laying out bribes to assorted Russian officials.  “I know you haven’t paid anybody off, because I checked.” 

It’s safe to say that Alexi, the Boss, got the complete scoop on any foreigner who ambled into his domain.  He made it his business to get every last detail about anything he cared about.  His tentacles reached deep enough to give him the skinny.  His efficacy as a local ruler depended on his ability to trace how the levers were pulled throughout Russian officialdom. 

Surviving.  We wouldn’t want to exaggerate how much mob bosses can teach leaders of government or heads of conglomerates, nor to gloss over in any way their horrific activities.  

Yet it is mildly instructive to see the talent they display for surviving and functioning effectively in a dysfunctional world.  While paralysis afflicts most of the major developed nations of the world today as well as a host of multinational corporations, local mafias control their turf and reap a bounteous living from the cash flow (asset light) businesses they favor.  The Mafia Bosses are much like the old ward political bosses who also had a talent for getting things done.  They did so because they were so pervasive a force in the communities in which they dwelled.  Ordinary enterprises lack that deep connection to the locales where they are situated.  We must ask of any business, then, how well its owners know the local geography. 

P.S.  “Of course, government in general, any government anywhere, is a thing of exquisite comicality to a discerning mind.”—Joseph Conrad as quoted by John Mortimer.

GP21May03:  Good News for a Change

Dire Straits.  Dire Straits has long been one of our favorite pop musical groups.  Its name captures perfectly the present mood in our land.  Bad news about war, pestilence, floods, and economic hardship have shell-shocked Americans and brought insecurity into every home.  The New York Times Book Review of May 18 flags for us Our Final Hour, a book by British scientist Martin Rees that says, according to the Times, that “the world has a 50-50 chance of surviving the 21^st century.”  Denise Rich, who had an inglorious moment in the sun during the Clinton administration, reportedly feels compelled these days to take her yoga guru along on vacation in order to ward off the ills of the world.  And Andrew Weill, the healing doctor, prescribes newsless days to help you screen out negative thoughts.  During a vacation at one of the old Adirondack camps of yesteryear, we ourselves noticed that everyone in our party put aside TV and newspapers to shut out the pain of the world.

But this is only to say that good news has been elbowed aside by media that tends to thrive on negatives.  There are plenty of changes afoot that are quite promising.

Let The Good Times Roll.  The New York Times has been taking a lot of hits lately.  First off, a troubled junior reporter has proven to be excessively creative, dreaming up bits and pieces for his national news stories that were purely figments of his imagination or were purloined from other newspapers.  Second, the Times appears to have tilted its front page coverage of the Iraq war to jibe with the prejudices of some of its editors against our intervention.  When U.S. troops were bogged down in a short battle, the stories hinted we might be losing the war.  And finally, circulation has been eroding lately, a hint that not all was well on the business side.  This and other problems have led, according to the rumor mill, to an across-the-board pay cut plus a freeze on bonuses. 

The irony here is that under Howell Raines, passionate fisherman and the current executive editor, the paper has perked up considerably.  The old gray Times had become dull and listless.  He has been forcibly reworking it, and it is now less of a newspaper of record and more of a daily news magazine, often filled with features you will find nowhere else.  Probably it is getting better, even though it has always been an uneven operation, both editorially and particularly business-wise, where it needs both strategic and operational help.  Raines is much under attack inside and outside the paper, but we suspect he should be congratulated with a caveat or two.  His top-down style has been much criticized; yet the paper would have just plodded along in the same old way without a strong hand at the wheel.

The best day of the week for this wordy paper is Saturday, when the writing can be accused of being almost succinct.  (For more on this, see our Global Province newsletter for 16 October 2002).  All the good things slip into the paper Friday night, when nobody is looking.  One feature that has become a regular, The Saturday Profile, is a smashing success.  It recently featured a Russian intellectual who has taken to writing interesting crime novels.  The column dwells on truly multifaceted people in several societies around the world, people creating a lot of buzz in their communities.  We would never hear about them if the Times weren't looking for them.

Wind at our Backs.  Despite America’s passionate love affair with oil, we are beginning to do something about our national energy situation.  To wit, we are starting to breed hybrid cars, such as Toyota’s Prius, that use both rechargeable electricity cells and gas, resulting in much less oil consumption.  Iceland, of all places, is just beginning to put hydrogen pumps in place at service stations, and fairly soon buses will give up gas guzzling and become hydrogen-powered.  This is just another wonder from a country that generates so much geothermal power.

Even more dramatic is the great progress the world is making in using other alternate sources of energy.  We would particularly cite wind power.  For the longest while the equipment has been too expensive and too unreliable.  But the Europeans, as we have said in Big Ideas 58, have built more durable and economic equipment.  The Danes, in particular, reap meaningful amounts of energy from their windpower farms.  Now, as we will report further on the Global Province, America is making progress in wind generation and in the development of better equipment. 

An Unlikely Education.  Educational television is something that never really quite happened, even with early experiments such as Omnibus and the plethora of content generated by the Public Broadcasting Network. We do acknowledge that there is a host of TV and videoconferencing instruction around the nation, but this is not the kind of stuff that takes our citizenry to a new level of enlightenment or that can reckon with the puzzles presented by the 21^st century.  The need for new forms of education has never been so great, as our formal educational institutions get more deeply mired in bureaucracy, runaway costs, and political correctness.  We need educational alternatives that work.  Surely it was the search for something different that led scholar Harold Bloom to leave his 25,000-volume book collection to an unknown college in Vermont, where classical teaching still is the ideal, rather than to vaunted large institutions that seem to have lost their way.  (See Wit and Wisdom 249). 

And education is springing up in unlikely places.  C-Span, funded by the cable industry, features Booknotes on its C-Span 2 channel on weekends.  In fact, this is by far the most interesting thing that occurs on C-Span.  Brian Lamb and his colleagues interview significant authors in an objective manner and also go to literary presentations at bookshops, book fairs, etc.  In toto, a listener can learn all sorts of things about this world by tuning in.  The only flaw is that it handles only non-fiction, somewhat limiting its scope. (See Best of Class 21 for more on Booknotes.)  Other kinds of book programs are creeping onto the airwaves inside and outside the United States.  We hope Booknotes gets piped into more and more of our schools so that students see what is revealed from a close reading of books that count.

Away from the Madding Crowd.  If you can get away from the crowd, no matter what you do, you may discover some nice things are happening that are obscured by the calamities in the mainstream media:  a new national energy mix is on the way and real education is taking place in strange places.

Above the Fray.  It's always been a truism that the best investors never get too close to Wall Street, where their thinking would get polluted by the day traders' fumes.  They're out in Omaha or a thousand other places where the hot news of the moment does not obscure longer term trends.  Sir Isaac Newton did all his best work before he ever came to London;  there he became more of a fop and less of a genius, contaminated by the luxuriant currents swirling in the capital.  It's no wonder that Andrew Weill would have us get away from the newscasters to guard our health:  that also may be good medicine for our pocketbooks.  It may be hard to be a practical streetfighter if you are not caught up in the thick of things.  But it's just as hard to get to the essence and fathom the important when you are too close to the bright lights or too hemmed in by the Beltway.   To be on top of the world, you simply have to get above it.

GP14May03: Hockey from Canada; Winning with Wild Things

Au Canada.  People on both sides of the border never quite grasp the full importance of Canada and the U.S. to each other.  Canada is our largest trading partner, and that’s just a start.  While fractious types in both countries have recently stirred up divisive passions over trade, cultural, and diplomatic matters, at the end of the day we are very much part of one another, sharing more values than many care to admit.  That North America (and Australia if you like) is really the only peaceful continent on earth is due to the creative bonds between us and Canada and, more recently, between us and Mexico.  NAFTA is just the codification of the sinews binding norte americanos. 

Hockey, a Huge Export.  There’s some debate about the provenance of ice hockey.  Was it an English/Indian sport taken across Canada by the Brits in the mid-1800s?  Or, per the revisionists, is it a game out of Nova Scotia (and Ireland) spread by Scottish and Irish immigrants?  Well, never mind, it’s Canadian, and, despite the fact that it is Canada’s national passion, it has taken deep hold in the United States.  It’s another one of those ties between us.  History reminds us that most sweeping changes that occur in American life generally wash in from abroad, often transported on the backs of immigrants.  As we study its growth and its dynamics, we see that cross border, professional hockey  exemplifies much that is happening in business, politics, and even world affairs.  

Alternative  Sports.  Gradually our mainline sports—baseball, football, golf, and basketball—are getting in trouble, beset by monstrous payrolls and other exploding costs and exploited by a commercialism that takes away the gleam of heroism that gives sport its immortal quality.  To revive our national sports, we are beginning to take some of them global  to create new allure and capture new fans.  It’s not just that we are importing players from all over the world:  there are now rumblings, for instance, about major league baseball franchises further afield than Canada..  Attendance is declining in many locations, and all the main sports are losing their hold on America, except perhaps football.  Other games are taking up the slack with kids, such as soccer, lacrosse, cross country, and hockey.   

Hockey is a mixed bag.  It is gaining attention like all the alternative sports.  But several professional franchises, to include the top seeded Ottawa Senators, teeter on the edge of bankruptcy.  Several franchises in other professional sports also have deep money woes.   

Generally commentators have missed the fact that moral and economic bankruptcy are afflicting our mainstream sports, while the lesser seconds are gaining marketshare.  The TV networks have not missed this decline and are negotiating their way out of money-losing sports contracts. 

Knowledge Management of the Talent Pool.  In our Global Province letter of 2 April 2003, “Walmart  Investing…,” we comment that Billy Beane, General Manager of the Oakland Athletics, has been able to put together a pennant contender at a fraction of the payroll cost of the New York Yankees, by astutely calculating the economic worth of every player in the majors and even the minors, and only picking up players at the right price.  Pro sports have become so expensive that regionals and new teams have had to substitute smarts for money in order to become competitive.  Three of the final round contenders (Ottawa, Minnesota, and Anaheim) for this year’s Stanley Cup, the holy grail in hockey, have payrolls under $50 million, did not exist before the 1990s, and did not get this far in the playoffs until 2003.  In some pro sports, we are now proving what the gurus are wont to say—intellectual capital is becoming more important than bucks in the global economy. 

A Story Missed.  Nobody has particularly noticed that hockey has grabbed the popular imagination.  Certainly not The New York Times.  It generally has done a lackluster job on the hockey story in a sports section that has never achieved its potential, although it sits in one of the richest hockey markets in North America, with enough fans to support the Rangers, Devils, and Islanders.  That said, you should still take a look at Joe LaPointe’s “Mostly Unfamiliar Four Ready for Run at the Cup,” New York Times, May 10, 2003, p. B15.  It toasts the upstarts that have pushed aside the established teams this year. 

 Even USA Today, which is the dominant national newspaper for sports (the odd-man-out Wall Street Journal still does not  have a sports section), does a half-hearted job on hockey.  It has the scores in the morning, but its reporting lacks sizzle.  We reported last week on a couple of stories the media is missing:  hockey’s another. 

Best TV Sport.  It’s also the best sport on TV, with big multimedia possibilities that are not being exploited.  TV demands action, and hockey’s got it.  There are simply more moves per second here than in anything else you can imagine.  Football, baseball, tennis, etc.—they are all ponderous compared to hockey, and some of the captains of these sports are trying to speed them up in order to make music on TV.  In fact, the whirl is so fast, the pace so frenetic, that many fans new to the sport complain they cannot follow it on TV, which should eventually lead ESPN to explain things better.  

Wild Thing.  We’ve said that unknown teams in poor markets can rise to the top in sports now, whether it’s the California Angels in baseball or the Anaheim Mighty Ducks in hockey, if they’re smart and innovative enough.  This is a great time for off-the-wall players who can defy the oddsmakers. 

In other words, we’re looking for “wild thing” or wild cards.  Jimi Hendrix introduced his song “Wild Thing” at the Monterey Pop Festival (June 16-18, 1967), the seminal pop and rock event that installed music in the dreams of breakaway young Americans and made our youth-oriented music an unstoppable export around the world.  “Wild Thing” was also the name of the pitcher in the movie Major League (1989) who helped resurrect a hapless team from Cleveland that had turned losing into an art form.  Surely “Wild Thing” is a metaphor for any new, unfamiliar force that comes out of nowhere and seizes the day, sweeping all from its path.  

Minnesota Wild.  This aside on the honorable history of “Wild Thing” is necessary to set the stage for the most amazing team anywhere in pro sports this year—The Minnesota Wild.  A nowhere team, with the lowest payroll in the league at $20.7 million according to the Times, it has smashed through to the finals in its conference to a final joust with Anaheim.  In two rounds (against Colorado and Vancouver), it was behind 3 to 1, and then won against both 4 to 3.  This has never happened before.  The team-members of the  Minnesota Wild are making everyone else look pretty tame, and they’re so exciting it doesn’t even quite matter whether they take the Stanley Cup.  At the margins, they have exceeded all our expectations. 

Upset.  In sports, in business, in politics, in the competition between countries, this is the time when somebody with no money and no market presence can slay the big guys down the block.  The Goliaths—in so many fields of endeavor—have to contend with swollen payrolls; fat habits; Olympian hubris; terrible morale and corruption; overgrown, broken systems; and a host of other cracks in the facade.  Sports and everything else now are on a global playing field where knowledge and agility count for as much as money, where fast change is the only constant, and where a spirited contender with a sense of mission can topple the most powerful players on the turf by locating their Achilles’ heels. 

It’s a great time to be an entrepreneur as long as you know that you can’t raise money (the bankers and the venture capitalists and most of the rest have become ever more risk averse) and that you will have to get by on a hope and a prayer.  But smart upstarts are making it all over the place, while the big fellows (and not just the airlines) are crashing right and left.  It’s a time for Wild Things.  When investing, you have to decide whether to be on a Sure Thing or a Wild Thing.   

P.S.  Jim Rogers has just forwarded his Adventure Capitalist to us, and we are finding it to be an easy read.  So far the picture we like best is of his souped-up Nash Bridges yellow car he drove around the world.  Of course, his is a customized Mercedes,  while Nash drove a Cuda.  We’ll have a lot more to say about this book at a later date, but, for now, take to heart his caution to stay out of five-star restaurants.  Food poisoning struck 3 times in his trip around the world, always after a visit to a top restaurant.  This squares with our conversation with an engineer who had set up kitchens around the world.  As he remarked, “there are only handful of clean kitchens on the face of the planet.”

GP30Apr03: The Stories You're Not Seeing or Hearing

Monomania.  The Iraq Skirmish has vividly illustrated the fact that the media is not covering all the news that’s fit to print.  The TV networks and the cable channels reported endlessly on this boring set of mini-firefights in excruciating detail, with far too many reporters “embedded” in Dullsville looking for a war to gossip about that was not happening.  Much to the pleasure of the Bush administration, this Iraq-around-the-clock  has dragged the Fourth Estate away from domestic matters where rot and decay are the order of the day.

The networks, surprise, surprise, lost market share to cable.  Shortsighted economics and bad news judgment have dragged network and even print news top and middle management totally onto the war story, to the exclusion of all other, as news executives try to imitate cable’s low-cost, Johnny-one-note chatter.  This is suicide for these media  businesses.  The networks and the national newspapers derive their strength from breadth and depth, not faddish coverage of the Saddam of the moment.

We’re going to bring more attention here to the stuff that’s not getting reported, war or no war.  Even with First Amendment protection, media is not getting to the meat of the matter.  We must ask how to get journalists asking 21st century questions that ensure we focus on tomorrow rather than yesterday.  The weakness of our newspapers and TV networks is a grievous concern  for the Republic.  Years ago, when we talked with labor lawyer Theodore Kheel about the media and the New York Times, he said publishers loved the First Amendment because, with that protection, the newspapers could use cheap, irresponsible reporters to get the irreverent questions asked, with no fear of lawsuits if some of the facts were unfounded.  But now, the inexperienced cub reporters are no even longer getting to the right questions.  Mencken and A.J. Leibling must be turning over in their graves.  How do we get the original, out-of-the-box questions and concepts aired?  Here are just 3 stories that never get done: 

Our Biggest Cancer.  When you talk to effective men and women in the healthcare world about skyrocketing costs and abysmal care, they mostly admit they don’t know what to do about it.  Healthcare is the nation’s biggest cancer, now spreading at the rate of 15% a year in an economy that is basically not growing.  Left to its own devices, it will chew up all our national income in another decade or two.  Incidentally, the major networks and the significant national media have all told us that they have postponed the healthcare story until the war is over, but they all intend to get on it soon.  So you can expect to hear about healthcare in spades over the next few months, and we hope the journalists will get it right.

Healthcare is a multi-headed hydra, so it’s hard to talk about all the things that are wrong.  But probably its biggest ills can be summed up in two ways.  First of all, in the developed world, we’re growing old at a mad rate.  Policy-wise that means we will have to raise the retirement age, because there are too few workers supporting too many  people who have hung up their spurs.  But secondly, many old people are continuously sick, fat, and depressed.  We have to get them off their backsides, motivating them to work and to take care of themselves.  That means continuous care outside of hospitals with much less surgery.  Right now we’re trying to fill too many unnecessary beds and are carving up people at an obscene rate.

What media has not honed in on is how we deal with old people.  Or about the huge cost of healthcare that serves absolutely no purpose other than keeping the docs busy—somewhere well north of $225 billion, according to analysts of clinical medicine.  We intend to post comments exploring Medicare treatment by papers that underline such wastefulness.  Oddly enough, there’s fragmentary evidence that suggests that spending miniscule sums in the right way will begin to vastly improve the nation’s health.  In a better world we will not be doing superfluous bypasses:  we’ll be exercising more, eating more vegetables, and bringing more purpose into our lives.  SARS and AIDS aside, we need more preventive medicine that teaches everyday habits that will keep continuing ailments from boiling over into crises.

Cannons for Mosquitoes.  We were shocked when the Administration sort of told us that Iraq would cost us $100 billion.  Obviously the nation no longer registers pain at such announcements.  Let us be clear:  we cannot afford these $100-billion expenditures for minor conflicts.  These costs are insane and illustrate the failure of our defense establishment to get real bang for their bucks. 

What we’re witnessing, of course, are generals and admirals who’ve never seen a weapons system they didn’t like.  The smart bombs used in Iraq are just an example of a Pentagon that does not know how to fight cheap.  In Iraq, we have used super-cannons to silence the buzz of mosquitoes.

Donald Rumsfeld has been celebrated for wanting to upgrade the military and to fight quick with very agile forces.  In truth, he’s gotten little of this done.  Even worse, the changes he envisions are not dramatic enough.  As usual, our forces are still fighting the last war over again with shopworn doctrine.  The only encouraging note in Iraq is the quiet part of the war waged by our special forces where we apparently had some wins that did not cost us an arm and a leg.  Mr. Rumsfeld is not pressing for the kind of military we need to fight a stateless enemy who can use one man and a razor blade to take down the World Trade Center. 

The media story here is that we have to learn how to fight $100-million not $100-billion wars.  On Global Province, we’ve talked about next generation warfare, which leads to the kind of thinking we need if we are to organize around the right threats (see Agile Companies, item 132).  The wars of the future are wars of attrition where you must have cheap pesticides that deal with cockroaches and termites that can crawl under rocks if you are using big smart bombs against them.  War is all about lasting longer than the other guy, spending less than he does, not depending on overwhelming initial force. Rumsfeld’s $100 billion victories have to be regarded as defeats.

Bankruptcy.  Sadly enough, the biggest investment opportunities of the moment are junk bonds and other investments that are sorely undervalued in a fear-wracked business environment.  A skillion things are going south, and bankruptcy has never been so good.  All the investment action lies in sorting through companies in trouble or healed companies that have emerged from trouble.  To turn a phrase, most of us “have never had it so bad,” and both the problems and opportunities in a lousy world economy amidst domestic inertia need much more exploration.

We’ve been debating what the key story is for the media here.  Is it the whole of the Clinton 90s, which recklessly extended credit across the whole world and created a global credit bubble?  Is it that our major industries (e.g. steel, telecoms, airlines, major league sports, etc.) are all going bust? 

We suspect it’s “none of the above.”  In 1990 or so, a Fortune writer showed up at our office to ask about the state of the economy, but he already had his conclusion in hand.  That is, he said, American business had completed a vast restructuring and was in very good shape, indeed.  We told him that the restructuring had barely begun and would go on 'til about 2015, and none of us knew how it would turn out.  But he was not in the mood to listen

Well, the restructuring is still going on, and there are bankruptcies aplenty to come.  We have barely begun to deal with state governments and the federal establishment, both of which are bust, for example.  We are counseling all our clients—Fortune CEOs, money managers, Chinese midcaps—that there are at least 5 more years of bankruptcy before us.  So don’t get starry-eyed about our economic prospects anytime soon.  That’s only for CNBC, MSNBC, CNN and all the one-dimensional news channels.  The story here is that restructuring, bankruptcy, volatility, and economic disallocation are absolutely thriving. If you want to get into the bankruptcy subject, the publications from the folks at New Generation are a must, providing data on companies in trouble, companies that have filed for bankruptcy, and companies that have come off the bottom.  To find out more about them, look at item 49 at Best of Class on the Global Province.

More to Come.  Healthcare is not providing healthcare.  Defense is fighting yesterday’s enemy.  Bankruptcy is a staple of our life.  But this is just the beginning.  We’ll give you more stories that are not being told in weeks to come.  Oh, and they will include many notes of cheer as well, because there are plenty of good things newsmakers are not noticing.  Cheerio.

GP23Apr: Richmond, Washington, and Warm Rooms

Tired Richmond.  Like Philadelphia, Richmond has the air of a city that missed its moment.  Still the capital of the Confederacy, it made several fortunes in the tobacco trade, but today consists of memories and empty streets because it could not reinvent itself.  For the tourist the obvious temptation is to visit the ring of Civil War battlefields, but these, too, are still and vacant.  Only a video at the Chimborazo Medical Museum or the audio re-enactment of carnage at Cold Harbor remind you that the city once was the crossroads of the South, the center of all its dreams, and the ultimate fortress in the Civil War.

Hail, Jefferson.  The real treat in town is the Jefferson, an 1895 hotel to the west of the business district and the capitol.  The enterprising Lewis Ginter, emigrant from New York who arrived in 1842, set to work on the hotel with his third fortune from tobacco (already having lost two), a majestic, graceful establishment designed by New York’s premier Beaux Arts architectural firm Carrere and Hastings.  He named it, of course, after his hero, the Revolution’s Thomas Jefferson, who, along with several other Virginian founding fathers, is the example of Virginia at its best.  It had to be revived from the dead at least 3 times, surviving a 1901 fire, a 1944 fire, and economic depredations that temporarily closed it in 1980.  Its public spaces make every other Richmond hotel seem paltry and wrap you in an enchanted cocoon that takes  you away from the desolation outside.  No wonder Louis Malle chose to film his My Dinner with Andre in its ballroom, the right tableau for a long, ironic, low-key conversation.

The Road to Washington.  The minute you hit I-95 North into Washington, you are gripped by traffic that only thickens as you draw closer to Washington.  Washington, we learn, has the second worst traffic congestion in the country, only surpassed by Los Angeles.  The traffic jams, the beleaguered schools, and the parlous state of local government suggest that the Feds, stumbling in their own backyard, should stay out of transportation, education, and a host of other matters. 

City without Joy.  Richmond has been defeated for 135 years, and has lingered in its past.  But Washington itself does not have the smell of victory.  It’s not just the traffic that drives you for cover.  The commercial areas are almost universally tatty, and the service is at best slapdash.  Besieged, Washingtonians fear another 9/11 attack, and they have piled in gas masks, water supplies, and the like in preparation for the worst.  Iraq may be won, but songs of victory are not heard in the cafes, even if the Defense Department is chortling a bit.  Richmond is tired, and Washington is anxious.

Sanctuary.  As in Richmond, you look for a place where you may retreat.  Perhaps a restaurant in Georgetown with little signage and a very discreet street front which is housed in a pleasant enough basement known to the local classes and not the masses.

FDR Memorial.  Perhaps, too, the strain will lead you to hunt out different monuments than you did of old.  Away from the Lincoln and Washington is the more elegant, less monumental Jefferson Memorial, John Russell Pope’s soothing Pantheon-style 1930’s construct, which is much less favored by the crowds.  Better yet, the FDR Memorial, completed in 1997, a secluded grove designed by Laurance Halprin, with works by several artists including Leonard Baskin.  It is the non-monument monument, consisting of 4 outdoor rooms, each dedicated to one term of  Roosevelt’s presidency.  The human scale speaks less of glory and more of concern and closeness to troubled people.  Like the Jefferson Hotel in Richmond, it is a place for consolation amidst the assaults of the times.

Traffic Redux.  This is all to say that we may be looking for ways to make our cities much less imposing. There’s a need for modesty and constraint.   Last week we posted a note on the Global Province about Red Ken Livingston’s victory over traffic in center London.  This has been further commemorated in “The Day the Traffic Disappeared,” New York Times Magazine, April 20, 2003, pp.42ff.  What he did was to impose a handsome daily surcharge on those wanting to drive into the heart of town, and so far the cars are staying away in droves and gridlock is in the descent. Less is decidedly more. 

Less of Everything.  Big cities it seems are in need of very small, humble ideas.  And fortunately they seem to spring up.  A tax against too many cars.  Monuments that are cut down to size.  Hidden places—an old hotel here, an FDR memorial there—that allow citizens to beat a strategic retreat.  The big ideas aren’t working out too well, based as they are on the world as it was 50, 100, or 150 years ago.

Come to think of it, it’s the small ideas that are now helping business as well.  Ford has decided not to be a transportation colossus and is back to being a car company.  IBM, which was more of a marketing company than a technology company at the start, has bet its future on services rather than hardware.  McDonald’s is trying to be a hamburger company again.  In other words, they’re being cut down to size and adopting a less amorphous shape.  Business after business is beating a strategic retreat.

GP16Apr03: Keeping Up with Friends in April

Why.  We started the Global Province to stay in touch with old friends.  Moreover, we wanted to relentlessly push quality in a world that is worshipping quantity.  You’ll have to tell us how we are doing on quality, but we’re having lots of luck on the people front.  New ballistic flurries from a bevy of friends rain on us weekly, all aptly designed to cut us down to size.  Probably the best at this is Les of Boston, a novelist and an academic who wants to remind us that our middle-of-the-road politics are decidedly right of the truth.  Undaunted, we drink our Malbec and look for other insights that will please nobody.   

An Apology.  Some of you have written to ask us whether we have bitten the dust.  Many have not been receiving our weekly letters.  That’s due to a local Internet firm that suddenly could not handle 10,000-plus newsletters going out to the whole of the globe.  Our webmaestro Mike has solved this by moving to another supplier as well as adding several other improvements to our site.  Mike promises to make us better than we’d be if left to our own devices.  Incidentally, you can view any letters you missed on our site at the section entitled Letters from the Global Province.  

Notice:  Nota Bene.  We’ve changed the homepage.  In addition to discovering what’s new, you can  see the full contents just below in a hurry.  Investor’s Digest now has some investor tips in addition to featuring companies that Wall Street cannot bother with.  Take a look at Best of Class.  We’ve carved out some categories there—Best Spices, Best Hotels, Best Restaurants, etc.—that are proving very popular with our friends around the globe.  Many of these bests show up in the world press, since more than 200 journalists now read our newsletter and our website.  And there are all sorts of other changes, with more to come:  we will in time be offering a newsletter dealing with some aspects of cuisine.   

Sighting Other Friends.  Mike Hicks, a brilliant Austin designer, has made us laugh for years.  If you’ll look at Scenes from the Global Province, you will find some of his domestic caviar, a repast worth your while.  Regularly, Charles Wheat, speechwriter extraordinaire, and Gary Gladstone, renowned New York photographer and recent author of a book on America’s strangely named places, provide us with jokes aplenty, some of which find their way into our Global Wit section. 

New Friends.  Maybe the real purpose of the Internet is to meet good new minds.  The map antiquarian in England.  The  electrical engineer at Yale who has shed light on our lightening problems.  The public health guru from the Veterans Administration who is honest enough to say he doesn’t know what will solve health in America.  The armchair historian in Kansas who organizes historical discourse across the globe.  The astute New York money manager who stridently warns us away from the still too pricey big capitalization stocks.   

Just this week we heard from Ron Kessler at Harvard who has focused on the grievous losses American business suffers because American workers aren’t as healthy as they might be.  Sometime we mean to tell you more about Dr. Kessler, because he’s been unduly prolific, producing papers, thoughts, and sermons galore about the condition of the mind and spirit of modern America. 

April Is the Cruelest Month.  That’s what Tom Eliot said.  With taxes and war on our doorstep, maybe we should admit he’s right.  That’s why this letter is all about friendship, which is surely the ultimate antidote for cruelty.  In our view, even the computer,  which has brought so much alienation to society, can be turned into a magnet that draws together people at the ends of the earth.  And, by the way, we are off to Washington this week to confront April’s blossoms and a few policymakers, but mostly just to see friends. 

Can We Talk?  That’s what Joan Rivers says, or said anyway.  If you have something to say, send us a note.  Please look for the best you’ve got and share it with us.  Make us better. 

The Best.  Our business here is to bring you the best—the best people, ideas, goods, health thoughts, etc.  We will be expanding on this simple idea, hoping to provide discriminating people with easy access to things that matter.  That’s the essence of our consulting practice as well:  to help good people reach for the very best.

GP2Apr03:  Wal-Mart Investing; Shopping Elsewhere

Junkyard Dogs.  The New York Times kicked off the baseball season last Sunday, running an article on the money mechanics, which are now at the heart of pro ball.    Michael Lewis, who knows too much about Wall Street, titles his vivid account of Billy Beane, the General Manager of the Oakland Athletics, scrounging for players, The Trading Desk, an apt pun since trading activities now dominate investment bankers such as Goldman Sachs as well as every other aspect of our economy, including professional sports.  (See New York Times Magazine, March 30, 2003, pp. 34ff.)  Beane and his sidekicks have put a value on every player who counts in the major and even minor leagues and have calculated the value of various trading strategies.  That has allowed them to put together a serious pennant contender with a very low payroll (less than 1/3 of the Yankees $133.4 million tab), although it can’t quite grab them a pennant or World Series.  They have achieved success of a sort by understanding the value of the walking wounded, picking up players in their 30s on a downhill slope, who still have a few serious innings left in them.  They recycle the scraps in the junkyard, always buying cheap.  The article is adapted from Lewis’s forthcoming book Moneyball:  The Art of Winning an Unfair Game.  Needless to say, Billy Beane is a far cry from Connie Mack and the glorious days of the Philadelphia Athletics. 

The Wal-Mart Ethic.  What we probably see here is another example of the Wal-Mart ethic.  Wal-Mart now is probably the most influential force in business worldwide, a thought that was imparted to us by a former textile chief  executive who has bumped up against the Wall more than once.  Wal-Mart has mastered supply chain economics, which means it relentlessly beats on its suppliers for lower and lower prices, and then goes offshore for yet lower prices.  The consumer gets pedestrian quality for prices that look cheap but often are a tad high for what’s delivered.  The Company has become a large enough market force that it has created imitators in a host of industries.  In business this has led to win-lose negotiations rather than win-win.  Again and again, we are witness to dealings that threaten the very existence of manufacturers and other providers.  As the former chief executive points out, it is not surprising that ethical lapses poison the whole  marketplace, since this purchasing approach does not encourage trust and respect between buyer and seller.  A side effect is that transaction costs, involving the use of lawyers, accountants, and other middlemen, have increased, cumulatively draining the economy.    

Junk Investing.  As well, professional investors have had to become junkyard dogs.  Just a few years ago Warren Buffett had convinced himself to buy brand name companies like Coca Cola and Gillette.   In his current annual report, he complains that stocks—generically—are still quite overpriced, even if some have fallen 70%, so he has gone to the sidelines.  He is buying instead a few junk bonds where he can envision more attractive returns, even if he expects some of the bonds to go sour. 

Like Wal-Mart and Buffett, substantial individual investors, too, must look for deep, deep, deep value in a market that will probably slide some more.  However, they cannot and should not follow the tactics of the junkyard boys.  We have said elsewhere that one should not try to emulate Wal-Mart’s business strategy, because it’s a slugging match that one cannot win.  For many this is the time to go upmarket, not downmarket, offering high end products and somewhat stiffer prices. 

Nor should individuals and smaller money managers try to invest in the same things that the billion dollar players do.  Unlike Buffett and large financial institutions, they can buy niches and small companies since they don’t have to deploy so much capital.  There are a number of companies that fly beneath Wall Street’s radar with reasonable earnings and respectable balance sheets that are too small for Buffett and too small for the investment banking houses.  The nice thing about small companies and small niches ignored by the big fellows is that some of them don’t sink with the economy.  The multinational giants like GE always turn down sooner or later when the economy is going through a bad patch.     

In other words, big investors now have to be junkyard dogs.  But smaller money managers and individuals can look at the companies that are ignored and find their way safely through volatile markets..   

Global Bets.  In America one has to look for deep value.  Abroad one should look for ways to invest in economies that seem to be performing respectably.  Maybe Australia.  Possibly China if you or the company in which you invest has figured out how to get its money out of there.  Or you can look harder for other small countries at the margin that are not quite as affected by the global slowdown.  As we have said elsewhere, smaller nations count a great deal more since the end of the Cold War.  They have more power on the world stage, and a few offer investments that promise stable returns.  Once again, the rule is to look in the places the world is ignoring that just happen to have okay economies. 

Alternate Investments.  There’s a great deal of talk now about how overpriced equities and real estate are and how you have to migrate to alternate investments.  This is a tricky business since the markets of gold, and commodities, and currencies operate by strange rules and can sink a novice.  But with your savings account at the bank paying 2% or less, you have to take a look.   

Probably this means picking one type of  investment so you can get to know it.  Go kick some tires.  Perhaps you will find a way to buy a piece of the specialty tea business which is ostensibly growing 15% a year.  But only after you have done a lot of looking around talking to retailers to see if the stuff is really flying off the shelves, reading tea-specific publications to see if the growth is due to a demographic trend or just a temporary fad, and tasting a lot of product to see if you are convinced it can become a way of life.  You must read the tea leaves before you buy.  Finally, you have to convince yourself that specialty tea (or whatever you pick) is still ignored by mainstream investors, so that you still have a chance to buy while the price is right.   

With alternate investments, incidentally, you want to find a way to buy the best, not the cheapest.  This has always been true of the art markets.  We know of one Chicago investor who has done well in fine art because he never touches second tier merchandise, no matter how tempting.  So this is a bit different from junkyard investing.  

Investment Aids.  Our thesis here is that safety and performance for investors putting out less than $100 million lies in acting like a small guy.  We can  prosper by looking at some companies, small countries, and small niche investments where we discover a little quality and consistency.   We have recently added a section to the Investor’s Digest area of Global Province called Investment Aids and Investment Outlook.  We hope they help you march to your own drummer, helping you evaluate investments that are not the talk of the town today that will earn you a penny tomorrow. See www.globalprovince.com/investordigest.htm.  

Working with Winners.  In his 2002 letter to the shareholders of Berkshire Hathaway, Buffett says his “managerial model” was Eddie Bennett, major league batboy circa 1919 and into the 1920s.  He moved from the Chicago White Sox to the Brooklyn Dodgers and then to the fearsome Yankees, making a heap more money than your average batboy because he was working for the right team.  “It’s simple,” says Buffett, “To be a winner—work with winners.” 

That’s the lesson for small investors who may feel like batboys.  Rather than trying to buy flawed merchandise on the cheap, look for winners—companies, countries, niche investments—that have not yet caught the eye of the behemoths.  It’s a safer way to go.

GP26Mar03:  Citizens on the Edge of a Nervous Breakdown

About Iraq.  Last week we had several calls from reporters asking how companies were dealing with the war in Iraq.  “They aren’t,” we said.  “They’re mainly struggling with a deflated economy.”  A few announced further cost reductions.  USAir said it would chip away at salaries as permitted by its bankruptcy covenants.  A few talked about renewed inflation, all based on the prospective size of government deficits.  But generally things have been all quiet on the Western Front and in the halls of capitalism.   

Well Then, What?  What then should they be doing was the next question from the journalists.  “First,” we said, “They have to stick to their gameplans.  They must plunge ahead.”  Right after 9/11, economist William J. Baumol (see Big Ideas on Global Province, entry 122) thought we might experience an orgy of risk avoidance that would drag down the economy, a notion that has turned out to be prescient.  The Iraq situation could further compound the worry and lead to even more  tepid results as entrepreneurs fail to be entrepreneurs.  Specifically, companies must hunt for new markets and products 24 hours a day, because they continue to see a decline in their traditional sources of revenue.  This means risk-taking instead of risk avoidance.  It’s all too easy for companies under the gun to fritter away their time on distractions.    

Secondly, companies need back up communication plans for their businesses and for every employee.  Many lost contact for hours on end during 9/11.  While they cannot plan for every contingency that conspiratorial malefactors may bring our way, they can work at length to make sure people have 2, 3, and 4 ways of getting in touch with each other.  Then they can quickly pull together in the aftermath. 

Panic Button.  If we had doubted that our several states of emergency have let loose panic throughout the nation, we only had to visit our health club last Friday evening to see citizens on the edge of a nervous breakdown.   

The receptionist at the desk found us too casual showing our I.D.  She had been put on “high alert,” she said, and she absolutely had to make sure we were whom we claimed we were.  Clearly Saddam planned to lob a Scud onto our treadmill. 

Depression Begets Depression.  The mini-depression from which our economy is suffering, the tape duct alerts stoked by terrorists, and this Mouse That Roared War in Iraq have induced growing depression in the population at large.  The stress is palpable, and smart companies will have to deal with it.  Some calculate that the cost of depression and mental illness will soar to the head of the healthcare list soon, outranking all the other afflictions (cancer, heart disease, diabetes) that command the bulk of our attention now. We will be talking about how a few companies are dealing with stress on the Global Province in weeks to come.  But the diseases of a stressed population—depression and obesity—have become epidemic and constitute threats companies must get their arms around.  Is it possible, too, that stress, not only in America but around the world, has something to do with the clear growth of religious fervor in both the developed and developing countries about the globe? 

The Costs of Health.  In fact, we don’t know how much poor health is costing employers or the country.  But we do know that employee health benefit costs are now rising 14% a year and that healthcare, now truly our leading industry, is consuming an ever increasing share of the GNP.  Ron Kessler at Harvard and others estimate that the real costs of bad health (i.e. absenteeism, lost productivity, etc.) are double or triple the direct benefit costs employers pay out for health.  We will have more to say about Dr. Kessler in future weeks.  As the late Senator Dirksen of Illinois would surely say about healthcare, “Ten billion here, and ten billion there.  Sooner or later you’re talking about real money.”   

Health Number One.  Right now at one of the major TV networks, every journalist with free time is working on the Iraq War.  But, come peace, we hear from our sources  it plans to throw its staff onto health, because it regards healthcare as the number one domestic news issue for America.   

Smart companies, it would seem, will look past Iraq and terrorism and start assiduously dealing with stress and health, the kind of issues that won’t go away.  We would guess that the nation is spending $50 billion a year on inappropriate care that does not create a healthier nation.  Focused, outpatient ministration  will have to supplant excessive hospitalization, doctoring, and pill consumption if we’re to get well.  The problem now is to give the right kind of care and get the costs of healthcare run amuck under control.

GP19Mar03:  CubaLibre? 

Apres Castro.  With the de facto loosening of trade and tourist regulations, one step at a time more Americans and more American goods are drifting down to Cuba.  We are  beginning to export something other than family cash remittances and the fusillade of barbed messages over Radio Marti to this mythic island.  Our renewed contact with the Stalinist sunshine paradise, along with the musings of policy wonks in Washington, have led to renewed speculation about what happens when Castro dies.  Of course, people have been wondering since at least the 90s and he’s still there, immortal as ever.  He’s had a 1,000 laughs at his enemies, so many of whom are long gone.  Surprisingly, we think Cuba will have even more impact on events in this hemisphere than it does today, but more on that later.   

A Half Century Behind.  Pico Iyer, our favorite travel writer, goes back to Cuba frequently.  In his writings, we can get a  good idea of where the country’s at and what’s not going to happen next.  “The other great achievement of the Castro government, of course, is that its overnight arrest of history has left the island furnished with all the musty relics of the time when it was America’s dream playground, and many parts of Cuba still look and feel like museum pieces of the American empire….  The most aromatic of the culture’s features are, in many respects, the backward-looking ones:  the savor of rum in bars that Hemingway once haunted…..”  (See Iyer, Falling off the Map, “An Elegiac Carnival,” p. 58)  Our own suspicion, however, is that Cuba’s museum quality is inherent in the blood of the place, a clinging to the past that’s bigger than Castro.  As in so much Latin American poetry and painting, where you hear and see motifs popular in America 50 or even 100 years ago, Cuba has a purchase on the past.  But for the vast improvements in both health and education, and the suicidal murder of its economy, the core of Cuba holds to the ways of yore. 

Roving Reporter.  Alston Beinhorn of Toronto, escaping an unusually brutal Artic winter in Canada, just took a gander at Havana and its precincts.  He shares his observations with us: 

“The Cuban economy has run on a dual US Dollar/peso system since the 90s, precipitated by the abrupt end of the Soviet sugar subsidies.  But only those few in the tourist trade, or those with remittances from relatives in the U.S., have dollars.  Without dollars, you don’t have a full belly.  The rest are provided about half their required food from the government,  and they spend an inordinate amount of time finding the other half each month.  Ninety-nine( 99.44)% of all Cubans are quite skinny.  The government provides the following staples per month via a ration book at local stations:  3 kg. rice/beans; 1/4 liter cooking oil; 6 lbs. sugar; l bar soap every 3 months; 1 liter detergent every 3 months; 4 ounces coffee; l tube toothpaste for 4 persons for month; 1/4 chicken up to 13 years old; 8 liters of yoghurt.  Milk is $1.60 per liter and only available in dollars.” 

“There are 57 universities, 69,000 doctors, and 32 mango varieties in Cuba, whose population is 11,000,000.  Education and medical care are free to all.  All medical prescriptions, however, are priced in dollars and available only to those with dollars.  The best hospitals are for foreigners only.  Foreign tourist hotels, managed and minority owned by European and Canadian companies, are off limits for all Cubans.  It is Cuban apartheid by the government, as described by one Cuban.” 

“The most highly sought after job in Cuba at the moment is bell hop at any of the foreign hotels.  As well, taxi drivers, tour guides, and chamber maids live relatively well on U.S. dollar tips.  Doctors and other educated professionals are better off than farmers.” 

“Foreign investment in Cuba is at the direction of the government, which offers only selected strategic ventures.  The Cuban government has majority ownership, while 100% of the equity capital is foreign.  The government has full control of  planning, budgets, hiring and firing employees, etc.  The word is that foreigners regularly get stiffed by the government, which rides its small bills.  The foreign investment pace has slowed.  Yet a recent U.S. food product sales program by U.S. producers insisted and obtained dollar cash payments in advance for several million dollars.” 

“Cuba is expensive, the cost for foreigners pegged at 130% of Washington D.C. prices according to the U.S. Interests Section.  We agreed.  Food, hotels, taxis, and liquor are all tres cher.  This will have to change when Cuba starts to really compete with the likes of Cancun for American tourist dollars.  For now, the government is raking in all the dollars it can get just to make ends meet.” 

“Cuban cuisine must have suffered terribly since the revolution, when just finding sufficient nourishment has been the sole object.  Since 1994, the government has allowed home owners to open small restaurants in their homes, called paladares, which are open at dinner only to 12 tourists at a time….  The local beer, a lager called Crystal, and Old Havana rum, are excellent.  Hemingway’s daiquiri, at an unchanged El Floridita, is truly superb.  The mohitos, though, are only average, except at one paladar with stunning Cuban food, called La Casa de Adelaida, which uses only family recipes supposedly over 100 years old.” 

“Old Havana, declared a UNESCO World Heritage site in 1984, is fortunately being saved.  It is a truly booming 20 block grid, with boutique hotels, restaurants, museums, and cathedrals, all housed in the exquisite original colonial buildings.  No Louis Vuittons yet, but such fashion stores seem close to happening.” 

“The rest of Havana  is  crumbling down, wonderful buildings unpainted and unmaintained.  Streets teem with people … at all hours of the day.  The Malecon, the perfectly arched seawall running from Old Havana about 10 kilometers down past Miramar, the former upscale residential district, is truly grand.”    

The Buena Vista Social Club.  Just a few years back, Wim Wenders made a movie called the Buena Vista Social Club which celebrates the Cuba that never dies.  Available as a video or a sound recording, it captures those wonderful musicians whose lyricism results in an uneasy marriage of Marx and music on the island.  One suspects that the music, even more than the ever-strong Catholicism, is the key element in the national character that will abide when Che and Fidel have become no more than memories.  “Cuban music and dancing” reports Beinhorn, “are what keeps Cubans loving life.” 

Sine Fidel.  Without Fidel.  There’s no telling what the government will look like after Fidel.  No likely successors are being groomed; no plethora of talent is sitting just offstage.  But what happens inside Cuba is not the interesting question. 

As we have said before, it is the countries at the margin that, for good and bad, are  making history happen these days, as the major powers, such as the U.S., France, Britain, Germany,  Japan, and Russia stumble over themselves.  The end of the Cold War has diminished the power of the big guys.  Cuba has long stirred the imagination of all Latin America, and we do not know what will be unleashed when it is no longer there in its present incarnation.  What will happen throughout Latin America when Cuba is transformed by Fidel’s passing?  We suspect quite a lot.    

Play Resumes.  In a full length book on Cuba , Cuba and the Night, Iyer remarks that it is a videotape that simply never advances:  “It’s like history’s on the pause button here.  Everywhere else in the world, everything’s either on fast-forward or rewind.  This is the only place I know where everything’s moving and nothing ever changes.  It’s like instant replay around the clock.”  Another kind of Cuba that is no longer on pause would surely become a catalyst for all sorts of things throughout Central and South America, finding its real place in the sun.  We are on the verge here of something equivalent to the flowering of the bureaucratic European union in the Old World or the Western-financed advent of capitalism in agrarian China.  A new Latin American  alliance is in the making, with swirls of Cuban cigar smoke in the background, and it will not find its direction in the North. 

Best of the Week.  Old friend Tom Canning passed away last week.  He was our Global Laureate (see 16, 20, 22, 30, and 32 under “Business and Poetry”), faithful host of an annual Boxing Day party, a sometimes colleague in a host of adventures, a wonderful father of 5 equally eloquent children, and—to boot—the right guy with whom to enjoy steak and martinis for lunch, preferably a long lunch.  Oh, and he could sing on endlessly in his cups.  He exited quickly and gracefully, and we know he is now recumbent with other immortals on some high Grecian peak composing witty couplets to amuse the gods.

GP5Mar03:  My Favorite Year

Best of Week.  Every so often, against our better judgment, we sample modern technology.  Backing into the future, we purchased a DVD player, which is the only thing that’s worse than a VCR to operate.  The poor design of these machines is only exceeded by the dismal, confused writing in their operating manuals, which we think are all composed by an engineer in Katmandu under the influence of exotic opiates.  These babble-books violate all the rules of good expository prose.   

The good part was the rental DVD we plucked off the metallic shelves of the video store, a discovery that took a lot of looking.  We found My Favorite Year, a film roughly based on Sid Caesar’s wonderful Your Show of Shows, and parodying  Errol Flynn, the Hollywood swordsman who had paid a visit as a guest star, probably far into his cups.  Flynn, the swashbuckler from Tasmania, sybarite, womanizer, possible traitor, provided ample fodder for comic imaginations.  The movie, needless to say, is a belly laugh from end to end. 

Somewhere in it, somebody remarks, “Death is easy; comedy is hard.”  While comedy seems to come easily here, the philosophy may be right.  It’s often a task to keep spirits high and the body in motion.  Banality triumphs over originality when you are just coasting.   

At any rate, 1982, when My Favorite Year came out, probably was a pretty good year.  The Reagan Revolution, with its several pluses and considerable minuses, was just beginning to get some traction, making Hollywood figures into political icons and rewriting international and domestic politics.  Many of us shucked old careers and old lives and got on to new adventures.  A good year is when you launch something new and send history in another direction.   

Your Shows of Shows.  My Favorite Year was an antic success, not because it sprang full blown from the head of a goddess, but because it drew on 30 years of post-World War II entertainment.  Your Show of Shows, on which it was based, was outrageously funny.  Running from 1950 to 1954 on NBC, it overflowed with talent.  Produced by Max Liebman, it starred Sid Caesar, Imogene Coca, and Carl Reiner.  The string of writers included Mel Brooks (whose company produced My Favorite Year), Woody Allen, Neil Simon, and Larry Gelbart (the man behind M*A*S*H).   Some say Saturday Night Live is its descendant, yet Your Show of Shows is simultaneously less labored and more hilariously explosive. 

Peter O’Toole.  The movie is much more than a remembrance of Show of Shows.  Without the star Peter O’Toole, it would have been nothing.  In it he plays a washed up, drunken movie star (i.e. Errol Flynn), and many think he played himself, since he has a taste for drink and manic adventure.  But O’Toole, whatever his abusive habits, whatever the ravages of time, never is through, and always has another movie or play in him.  He is one of those transplant Irishmen (there are several) who always bring a dash of life to phlegmatic English society.  We recommend to you a chapter about him in Gay Talese’s book Fame and Obscurity as well as in an article about him in Entertainment Weekly.  (See http://realitymouse.com/otoole/articles/ewinterview01.html  and                             http://www.realitymouse.com/otoole/articles/talese.html.)  For certain, a smart independent producer will do a movie about O’Toole one of these days, his life and comrades at least as interesting as several of the real and fictional characters he has played. 

The Story Behind the Story.  What all this proves is that behind every good story is a truly great story.  My Favorite Year is a fine bottle of 82, because Your Shows of Shows and Peter O’Toole already had set the stage and prepared the ground.  Good vintages beget good vintages.   

We were reminded of this recently when we read a fine article in the Wall Street Journal (which we’ll cite on Global Province later this month) about the startling success the Finns have had in controlling hard disease, due to the public health efforts of Dr. Pekka Puska.  But this was only half the story.  We have since learned of the Seven Countries Study.  Ancel Keys, a brilliant researcher at the University of Minnesota, had put before the global cardiology community in the 1950s his belief that diet and environmental factors had much to do with the epidemic rise in heart disease.  Stung by their scornful  reaction, he pulled together a study that included seven nations that surveyed men from 40 to 59 between 1958 and 1970 and that rather conclusively sustained his suspicions.  That study lies behind Finland’s success, Puska’s brilliant and still unfolding career, and the current realization throughout the developed world that altered habits can do more to curb heart disease than all the drugs and stents we insert into tired hearts these days.  The study, it seems, has been on the shelf:  with the exception of the Finns, we have just not paid enough attention to it.  This is immensely relevant in the present time where we are learning that appropriate care outside the hospital is the key to saving the health and preserving the pocketbook of our society.  We just need to pay attention to Keys and the public health pioneers who have said it all before.     

The Purpose of History.  You have heard that a lot of academics at MIT and elsewhere, sundry consulting firms, and a clutch of corporations have put together knowledge management systems to ensure that they can pick the correct needle out of the haystack when they need it in order to better run companies, governments, systems, etc.  As it turns out, the arts of history and of storytelling are simpler and more effective in transmitting knowledge to where it is needed most.  History is the greatest knowledge-management system ever built:  it is the best medium for disseminating accumulated knowledge.  Diligent historians of all sorts can find out why a movie is great or heart disease is plummeting in Finland.  All we have to do is look for the story behind the story. 

No History. This  suggests that great enterprises, happenings, institutions, etc. invariably have an interesting history behind them.  That’s how they make use of what has come before.  And the inverse is just as true.  If you look around the United States at regions that have never lived up to their promise, you may find that history runs thin there and that there’s not that much of a past to talk about.  All their capital, financial and intellectual, is imported and is too quickly dissipated. 

This was equally true of all the dotcom companies that evaporated.  They had no history and they had no future.  Or of many large companies that are failing now because they have turned away from their history.  Don’t try a revolution unless you are astute enough to draw on the past.  It’s fair to say that companies that have come from nowhere probably are headed that way.

GP19Feb03:  The Australian Attraction

Tugs of the Heart.  We keep meaning to make it out to Australia, but always get diverted by distractions along the way, such as  Japan and China.  Someday we will, for we are already under its sway.  We’ll get to this land that’s still becoming. 

Its magnetism has long tugged at us.  For years we had an eloquent Australian pen pal who had picked our name out of the phone book and wrote us about  everything from vegemite to the power of the surf.  Countless friends send us notes from Dunk Island, instructing us to go there and become honorary consuls.  A while back the Aussies cheered on a crack golfer named Bill Dunk:  surely, some thought, we must be related in some way.  Then too, our beer of the moment is Foster’s Bitter, for us Australia’s premier export, the taste of which vaguely reminds us of real ale in English pubs. 

More American Than Most.  Far away Australia does seem more like the United States than several countries closer at hand.  A recent batch of Australian exchange students on our doorstep provided a million laughs and gallons of optimism; they liked their visit here so much that they long overstayed their departure date.  Their capacity to fit right in reminded us of parties in the old days at the UN, where the Australian fellows seemed like rowdy Texans and provided vital extra bounce for what would have otherwise been languid affairs.  These nations of the New World and the even Newer World share some common wavelength. 

Is it any accident that the Australian movie industry (since its revival in the 1970s)  captures bravery and bravado and humor that has so much resonance in the United States?  My Brilliant Career, Gallipoli, and Breaker Morant never would have been made in Hollywood, but they easily could have been produced by independent directors around this country.  Mel Gibson and Paul Hogan, bankable stars, are such fixtures on American screens that it is hard to remember they are Australian. 

That Rupert Murdoch—Australian press lord and now American citizen—has cut such a broad swathe in all our media businesses speaks volumes.  Who would have imagined that network and cable news shows would have taken to copying his Fox network?  He has not added much quality to our life, but he has shown that he has his finger on our pulse. 

In Vino Veritas.  The closeness in spirit between the two lands is terribly apparent in the wine industry.  Reading Robert Parker, the wine impresario, you will find that the two    countries share a passion for postmodern winemaking technologies, sometimes at grave peril to the product.  This may involve early harvesting, zealous filtration, or the addition of acidity to the bottle.  Meanwhile, mega-mergers have sprouted up between spirits producers on both shores, leading to at least one Austral-American  powerhouse, Hardy-Constellation, with more heft than Gallo.  By the way, you should read about Yellow Tail from Australia in the Agile Companies section of Global Province.  It has brilliantly marketed itself in the United States, a quick branding job that would have taken our wine purveyors years to accomplish. 

The Australian art and cultural critic Robert Hughes, who now makes his home in America, has tried to define the difference between the two countries:  “I think the biggest single difference between Australians and Americans is that you  were founded as a religious experiment, and we were founded as a jail.”   

Well, if that’s so, the two have grown very much closer together.  We’ve become a land full of jails.  And the outpourings of religious sentiment from Australia over the Internet suggest more spiritual leanings down under than Mr. Hughes may care to acknowledge. The Emperor of Shopping Malls, Australia’s Frank Lowy of Westfield Holdings, has been able to pave over both countries as the shopping center has become the social thread running through Australia and the United States, one more emblem of the bond between them.  He is now making a run at Alfred Taubman’s properties here.  

Space Mastery.  Being continents away from everything, the Australians, more than most, have mastered space.  Their own inhospitable interior they ignore, clustering in cities along the coast. 

But if you want to find out what’s happening in outer space, tune in on Australia.  Despite the decades of exceptional space reporting by our friend John Wilford at the New York Times, we find it best to keep up with things in orbit on www.spacedaily.com, put out by the indefatigable Simon Mansfield in Sydney, Australia since 1996.  Importantly, he’s not only plugged into U.S. space doings but he also tracks astro-efforts around the world. 

It may seem ironic to go to Australia to find out about our space program.  But often the only way to get a reading on these United States is to go abroad for a comprehensive  account about what’s happening here.  World art news is best out of London.  And good detectives know that the way to find out about all aspects of the narcotics trade is to go to Thailand. 

At the Margin.  We have argued elsewhere that the countries worth paying attention to since the end of the Cold War are at the edges of our charts, perhaps a bit disconnected from the Global System.  Maybe far-away Australia, left to its own devices, has something special going on.  Unlike still medieval Europe, it appears to have planted its foot in the future.   

Its economy, for instance, turned in a very  good record during the 1990s, even registering a 2.4% growth rate as late as 2001, putting it 10th amongst the OCED countries.  All this stemmed from a very healthy stream of economic reforms, something most of the major economies were unable to accomplish. 

Part of its success stems from its hardy extractive industries, which have been doing reasonably well lately.  But, more important has been its openness to the world, a strong suit despite occasional bursts of nativism.  As of 2000, its percentage of foreign-born ranked third in the OCED, at 23.6% of the population:  this has been a sparkplug for innovation.  For instance, you will now see an Asian motif in many of the swank homes and in the newest restaurant cuisine, as the country develops its own AustralAsian style. 

Along with people, it is busily importing all sorts of ideas.  Much like the United States, it is working to discover how to benefit from genetically created foods, instead of hoping they will go away.  It’s home to CAMBIA, or the Center for Application of Molecular Biology to International Agriculture.  (See www.cambia.org.au).  Eyes forward,  Australians intend to survive the future by mastering it. 

Terra Australis.  For us, perhaps, Australia is as much a direction as a place.  As near as we can discover, it got its name from the explorer Matthew Flinders who penned in Terra Australis (“Southland”) on a map he created in the early 1800s.  Well away from Europe, it forces us to point our compass towards the down under and look for a fresh outlook. 

Today it’s an English speaking country that is putting on Asian clothing.  It has a resonant national character that allows it to have outsized influence on these United States.  With us, it is trying to get a grip on such modern developments as engineered foods or RFID chips.  (The University of Adelaide, MIT, and Cambridge University are all  working on this replacement for bar codes.  Look for more about this on the Global Province in future weeks).  Australia is there to get us to think a few different thoughts, since it has shown a capacity to turn itself upside down.

GP5Feb03:  Coach

The Harder They Fall.  Who would have thought it? In country after country, we find the world's largest organizations are coming seriously unglued. The bigger they are, the faster and harder they're falling. AOL Time Warner, to survive, will probably have to shut down or sell half its business. It's the biggest victim of the never-ending dotcom crisis, with the AOL digital New Economy part weighing heavily on the healthy Old Economy publishing, cable, and entertainment assets. It has just reported a $99 billion-plus loss, and its leaders are even more stunned by its $28 billion in long-term debt, the central legacy of Steve Case and Gerald Levin.

United Airlines, the nation's biggest airline, is now bankrupt. High wages and a terribly flawed trunk route strategy, employed by all the majors who universally adopted the same lemming-like hub scheme, put it in the tank. The electrical equipment colossus ABB Group, cobbled together by the once celebrated Percy Barnevik, has been chewed up by asbestos suits and paralyzing recrimination: it will be a vestige of itself in short order. All these huge, eroding enterprises, and hundreds others like them, are not unlike the horrendous State-Owned-Enterprises in China, which need to disappear if that country is not to lose the momentum responsible for its acclaimed 7-8% growth rate. All had agendas that had little to do with business common sense, and the ills of all were exacerbated by the worldwide credit bubble, fueled by the stock market capitalism that drove the financial system in the 1990s.

CEO Coaches.  Is it any wonder, then, that chief executives, more and more, are turning to coaches to help them through this maelstrom? Take a peek at "CEO Coaches," Business Week, November 11, 2002, pp.98-104. As Michelle Conlin correctly perceives in the article, the CEO job has become too big for one person even in the best of times, and a coach can help plug some of the holes. Smarter companies tend to have co-chief executives anyway, whatever their titles. Capital Cities Broadcasting, no longer around, was brilliantly run for this reason: it had two chiefs who made music together. It's an open secret that President Bush and Vice President Cheney are really sharing the hot seat, and that's why the administration's engine usually purrs.

Ms. Conlin suggests that chief executives mainly value their coaches because they get brutally honest feedback from them. That's actually only half true. They only need or want just so much laceration. Having advised senior executives for more than a quarter century, we think there's a deeper need that "coaches," or "advisors" as we prefer to call them, fulfill, in order to add something much more constructive to the executive brew. If you will refer to our Annual Report on Annual Reports 2001, you will uncover quite a paradox. Major corporations have been turning over chief executives at a mad rate, but the new fellows in the corner suites are still working on the same tired 20th-century agenda that tripped up their predecessors. For some reason their eyes are fastened on the rearview mirror. They all desperately need to update their bag of tricks.

Creativity.  The best thing harried executives get out of these coaching conversations is new thinking. To get rid of old baggage, the brighter chieftains use sounding-board coaches to genuinely rethink where they are heading and how to get there. The intuitions that arise in close dialogue inspire them to look forward rather than backwards. As well they should, because it ain't going to be that way (the old way) anymore.

Health Coaches.  Clearly all coaches are not equal. Some harangue you and remind you of all your sins. A few others may be creative and take you to a new place. Nowhere is this more evident than in health coaching, which is now blossoming throughout America. Health plans and other organizations now employ coaching companies to reach members afflicted with diseases to prompt them to take care of themselves in a more rational way. This may include dieting, or exercise, or taking cholesterol drugs, or a battery of other things depending on the problem. Average coaching may reduce health costs by 5 or 10%. But companies such as Health Dialog that correctly implement the principles of Shared-Decision Making trim the dollars by as much as 20% with commensurate improvements in health for the patients. Likewise, in Denmark, intensive health counseling has markedly improved the lives of diabetics, while Finland has worked wonders with people in coronary risk categories. Not all coaches are created equal, nor is all coaching, and you have to seek out the winners who just will not accept average outcomes.

Sales Coaches.  In no aspect of corporate life are we in more need of coaches than in sales. Garden variety consultants have spent the last 30 years helping us take costs out of our companies, but they are hopeless when it comes to helping us rack up revenue gains in dying markets. And most markets are dying these days.

A few brave souls are hard at it, however. Old friend John Tyson, a veteran Silicon Valley CEO, now is teaching Fortune 500 companies how to make a sale. Sales ability atrophied during boom times. What he has discovered again and again at his new berth is that corporate departments all put out conflicting sales messages that will help them get bigger budgets from top management but which rarely have anything to do with what real customers want to hear about. Recently, he sat down in China with all the key players of a Western telecommunications equipment company competing for major orders, and he hammered out a sales message that would light up Chinese officials. Lo and behold, the company got the contract. For sales to happen, a big part of the coaching chore is to get people to focus on the real world. Here, as in much coaching, the trick is to align people around the demands of the marketplace.

Bad and Good Coaching.  Often enough, coaching is a negative experience which produces short-term gain and long-term burnout. In My Losing Season, the coach hopes to win by cursing and belittling his players, trying to fire them up by angering and embarrassing them. This abuse has little to do with the normal discipline and direction a coach must impose. The author, Pat Conroy, who recounts his basketball experience at the Citadel, comes alive, however, only when he begins to ignore the coach. He shines, more than other more talented players, because he isolates himself from the barbs of a coach who was schooled to rule by fear.

Negative vibrations have so crept into big-time, big-money athletics that the fans of baseball, football, and several other professional sports are no longer showing up, put off by a world where everything has gone a bit sour. Several teams with huge payrolls are showing meager results. Attendance is declining in sports, just as audiences are melting away from the major TV networks. The sharper executives at the networks, in turn, are now unwilling to pay huge prices for broadcasting rights, as mainstream pro sports become a losing proposition. The foul atmosphere is producing poor teams, unsportsmanlike behavior, and shrinking audiences.

Coaching at its best probably dates back to the Greek philosophers. It's about wisdom, not browbeating. When you read Socratic dialogues, you realize that the teacher (coach) and the pupil both gain from their conversations. Coaching is a collaborative effort where everybody grows. Nobody has a monopoly on wisdom; nobody prevails at the expense of the other; everybody is richer for the experience. Rather than turning a glaring spotlight on somebody's faults, the Platonic philosopher has his eye on mutual illumination. The right coaching makes talented people wiser and, by the way, creates enduring economic value.

Best of the Week.  We've just been to the National Arboretum in Washington, and we'll sing its praises on the Global Province in future weeks. But, for now, let's just say it is a marvelous place to get away from it all.

And that's yet another aspect of the best coaching. When we advise executives, we work very hard to get them out of their offices. It's the only way to escape humdrum thinking and rat-caught-in-a-maze behavior. The creativity will not soar when executives are bottled up in their warrens. Aristotle and the Greek Peripatetics knew this, often doing their thinking and talking while walking around Athens. Suffice to say, the National Arboretum is a righteous place to do the creative exploration that leads to new places, away from old behaviors.

GP29Jan03:  How to Stay Up When Everybody's Down

Red Badge of Courage.  Sir John Templeton is right:  we seem to be caught in a 9-year Bear Market.  Everything else is in flagrant disarray as well.  The real economy, with occasional blips upwards, is in a stall, and thousands of workers will most likely get laid off from big enterprises once again in 2003.  We’re still fighting terrorism with 20^th-century tactics, while AIDS in Africa is getting so bad that smart companies like Heineken are offering almost free drug care to their employees in order to preserve their very precious workforce.  We could regale you with lots of other bad news, but we won’t. 

With such terrible  weather all around you, how do you keep your head up in the storm, forge ahead, and look for the bright golden sky Rogers and Hammerstein told us was  in the offing?   It seems you will have to look inside yourself.  In Stephen Crane’s Red Badge of Courage, the protagonist at first catches the terror of war and flees in panic.  But later he is illuminated by an inner existential gleam of light and intelligence, making his way forward amidst carnage and the panic of his fellow soldiers.  In other words, there is a way out inside yourself.  That Crane, who as a journalist in Cuba drank his way through the Spanish American War and cowered in its midst, could author such a tale is heartening.  What then will release the pent-up reserves we never knew we had? 

In Broome Time.  This week in The New York Times (January 22, 2003, p. A4), Raymond Bonner amuses us with an account of Broome, Australia where people have opted out of the globe, ambition, and that collection of activities we call “the rat race.”  “To describe Broome as laid back would suggest a level of energy greater than appears to exist in this remote town, once the bustling center of the world’s pearl trade, which laid the foundation for a cultural diversity that is visible today in faces, physique, and skin colors.”  Broome is how places likes Santa Fe, Vieques, and Glacier Bay are meant to be, but they’re all part of the ceaseless hubbub now. 

Happiness is to be had by getting off the Titanic now, instead of waiting for it to crash.  It’s not carrying a notebook computer or a Blackberry.  Turning off your cell phone.  Making sure the kids pull out of some drone activities at school and know enough not to take their homework too seriously, since the academy now worships quantity and hyper-activity instead of quality and useful leisure.  Taking the train instead of the plane, even if the Government over-subsidizes airlines and starves ground mass transportation.  If you’re “in Broome time” surely you have detached yourself from as many unworkable systems as you can.  You’re looking for the exits out of life’s chaotic crowded movie theater.   

Guerilla Tribes.  If you’re opting out, what are you opting into?  You’re looking for guerillas who are having fun and determined to slay giants.  In practical terms, you are probably discovering that most large organizations, no matter their sector, are slowly bleeding to death these days, desperately trimming staff to preserve the illusion of solvency, hoping they can wait out the downturn.  Even GE, currently the world’s most admired corporation, has hit several very bad speed bumps.  These corporations,  foundations, and governments do not know that their very hearts are in trouble, and they’re not undertaking the total remake that might give them an afterlife. 

But there are small companies that are staring death in the face every day and still come out slugging.  They have the guerilla instinct.  We advise one tiny financial services company with a big, big idea that can’t get financing from risk-adverse banks and venture capitalists:  it is digging up prospective investors in Canada, around the Mediterranean, atop the Emerald Isle, and near a Southern backwater.  Then there’s the small healthcare company we counsel that has the effrontery to say it can take 20% of the costs out of the national healthcare system and has a 50% growth rate to show for it.  JetBlue is raging ahead (see Agile Companies #158 on the Global Province) at New York’s Kennedy Airport, because its gang of believers thinks it has the right bag of tricks to run circles around the majors.  Oddly enough, for all of them, the threat of going out of business every day is the tonic that inspires fast action and rampant innovation.  Hard times makes them run, not run in place.   

Big, Unpopular Ideas.  What we’ve said here is that the way to keep your spirits up in hard times when everybody else is taking Prozac is to swim upstream, while others let the current carry them down into the abyss.  Ultimately, this may lead you to propagate a big, unpopular idea on which the powers that be heap a load of scorn.  In one of his plays, probably Enemy of the People, Ibsen talked of the importance of the compact minority, knowing full well that received opinion is often very, very wrong.  We’re at a transition point now where unpopular ideas are very important.  Some of these are found on our website under “Big Ideas.” 

Bjorn Lomborg, professor of statistics at the University of Aarhus in Denmark, has been reviled the world over by scientists in ad hominem attacks for his book The Skeptical Environmentalist, which contends that the environment is not half as bad off as the high priests of science would have us believe (See “Bjorn the Pincushion,” Big Ideas #103).  Luca Turin, now chief scientist at a Virginia company called Flexitral (www.flexitral.com), has come up with a unified theory of smell that threatens to turn the perfume and flavoring industries on their ears.  His struggles to put his ideas across are chronicled in a new book called The Emperor of Scent.  Dr. Atkins, author of the diet that businessmen most like, has been steadily attacked by the heart and nutritionist establishment for his diet theories, yet he is now coming into the mainstream as we learn that bread and carbohydrates have a lot more to do with our obesity epidemic that we previously understood (see  Letters from the Global Province, 8 July 2002, “Red-Blooded Americans Again?” ).  Pushing unpopular theories gives their proponents a sense of divine purpose, and it is, by the way, the only way we can get rid of the intellectual baggage of the past that is now weighing us down.  

If you want to be up, when others are down, you had better pull away from them.  Go to a better place.  Get with people who have a clear purpose.  Find an idea that’s worth shouting about.  

Using Your Noggin.  The board game Cranium is like a piece of software, allowing the players to partake of some 14 activities (including drawing, spelling, etc) and providing all sorts of “functionality.”  This is no surprise, since company founders Richard Tait and Whit Alexander were émigrés from the operating-system colossus Microsoft.  Once of the New Economy, they had chosen to enter a dying industry.  When they came out with Cranium in the late 1990s, the industry had not had a blockbuster for 15 years.  Even in success, they kept to the guerilla formula, numbering only 14 employees at the end of 2001, all motivated by the mantra CHIFF:  “clever, high quality, innovative, friendly, and fun.”  (For more, see Julie Bick’s story on Cranium in INC., January 1, 2002).  Indeed, we need more such migrant workers from the knowledge economy with the capacity to transform America’s dying industries, operating as guerillas, and, most importantly, animated by a distinctive set of values.  Put some smart people together with real values and something good is bound to happen.  That’s how to stay up. 

Best of the Week.  To make the best of very cold weather, we had some steam lemon pudding on Sunday, fashioned from the recipe of an innovative Southern cook.  It was critical, of course, that we used extraordinarily fresh fruit just off our own Meyers Lemon Tree.  A merely great recipe was then transformed into something exceptional.  And that’s another way to stay up.  

P.S.  If you are suffering in the stock market now (and in bonds and real estate), you may want to take a look at other asset classes.  Some people are still making a nickel by straying away from conventional investments.

GP22Jan03:  Once Again, Less Is More: Tylenol

Snake in the Grass.  Salem’s most distinguished citizen, Nathaniel Hawthorne, penned a fine story, “Rappaccini’s Daughter,” which perfectly captures the ambivalence with which the 19^th century greeted emerging technology.  The story introduces us to a beautiful garden and a devastatingly beautiful daughter, both of  such allure that passersby are attracted like bees drawn to the nectar of flowers.  There’s a fly in the ointment:  both are wondrous to behold but deadly poisonous to the touch.  Rappaccini, the scientist, had brought this about through his experiments—his great achievement a prelude to catastrophe. 

Pharmacopia.  Is this story not a metaphor for our chock-full medicine cabinet?  Every drug, no matter how useful, has lots of “contra-indications.”  Each is marvelous but with a hitch.  Mother Nature did not intend for us to put chemicals, the stuff of drugs, in our bodies, when she created the human design.  This paradox is endlessly replicated in our lives—in government, in business, in the sum of human activities.  We keep discovering that our cures are much worse than the problems they’re solving. 

Just Tylenol.  We’re not just talking about complex drugs such as statins for your heart or fast-selling Celexa for your mood.  Tylenol, the everyday pill that made Johnson & Johnson huge, has had a problematic history.  Certainly J & J is a fine company, and Tylenol is a worthy product.  But we learn in literature dating back at least to 1985 that over-use or wrongful use (with alcohol, for instance) of Tylenol can lead to pernicious liver and kidney damage. Annually, more than 100 deaths and 13,000 emergency room visits stem from problems with acetaminophen, the base ingredient in Tylenol. 

Somewhat Addictive.  The New York Times Sunday Magazine (January 12, 2003, pp. 40-42) suggests that Tylenol can be  a bit addictive, especially for headache sufferers.  While it is used as a cure for headaches, it can, if over-used, actually cause them, as the body’s own pain control mechanism goes dormant.  As the Times says, “Over-the-counter analgesics taken even five times a week can transform an episodic headache into a chronic one.”  Once again, the cure suddenly becomes worse than the malady it is to remedy.  Several articles do a good job of detailing Tylenol’s problems:  one may be found at www.lef.org. 

Less is More.  In the 21^st century, our challenge increasingly will be to use less, not only to save resources, but to save ourselves from the pain of excess.  Less drugs and hospitalization.  Fewer dollars on advertising and mass marketing (and more dollars on product).  Much less complicated weapons systems to better deal with the suicide warfare of nameless cults.  Small companies that can more smoothly create and deliver very large volumes of better goods and services.  What we need is to bring Toyota’s lean manufacturing system into more and more aspects of our lives.  In fact, using less is the economic imperative for most of the developed countries of the world. 

The Game’s Up.  That means knowing when a product is ready for the junk heap.  For prescient companies strategic insight consists of knowing when the game’s up, when yesterday’s miracle product has peaked out and when it’s time to find a new blockbuster.  GE’s jet engine unit, for instance, has designed the right engine for small regional jets, since it understands we will be pulling traffic away from mega-hubs in the future, wheeling passengers through under-utilized secondary airports in efficient small craft.  Land’s End, as we have said, has achieved significant Internet volume in semi-custom clothing.  This Christmas the Internet showed good sales growth even though overall volume at the nation’s retailers was flat.  To get renewed growth, Fidelity is moving decisively beyond its mutual fund franchise into the employee benefits business.  The Veterans Administration has peeled back the number of under-used hospital beds it offers while beefing up critical outpatient services.  The goal, simply, is to do more of the things we need, not to stuff marketing channels with a surfeit of yesterday’s products. 

Herbs and Spices.  There’s not been a deep market for spice and herbal remedies, which often can be safer than FDA approved drugs, even if they  are not without problems, too.  The fact is that it is hard to make a big enough bucks from them if you are a drug company, particularly if the product is freely available in nature, so we lack the clinical trials that would better determine their efficacy.  Saw palmetto, clearly effective for some enlarged prostrate sufferers, never quite makes it into the doctor’s tool kit.  There are a plentitude of things we know are useful, yet they don’t pass muster with doctors and the FDA. The science behind alternative remedies is still shaky, but smart pharmaceuticals will probably begin to pay more attention to them.    

There’s one scientist who has labored in the herbal vineyards all his life.  He’s a delightful fellow named James Duke who worked at the Department of Agriculture for years and who is about as expert as you can get about the medicinal use of plants.  His database lives on there, even though he’s in hyperactive retirement.  You can read a bit about him at Stitch in Time on the Global Province (www.globalprovince.com/stitchintime.htm).  

Adverse Drug Reactions.  He’s just out with two definitive books—Handbook of Medicinal Herbs and the CRC Handbook of Medicinal Spices—published by CRC Press in Boca Raton, Florida.  We will have a lot more to say about the spice book on Global Province since we are delving into spices in our Best of Class section.  In his acknowledgements, he provides a whopper of a reason to include medicinal plants in your bag of tricks:  “And to you, the reader, and your health, may the spices of life prolong and enhance the quality of your lives, saving you from what is believed to be America’s biggest killer, Adverse Drug Reactions (ADR’s), according to the Journal of the American Medical Association, May 1, 2002.”  And, oh, by the way, garlic is apparently the number one spice medicine, according to Duke.   

Best of the Week.  We finally learned that Viagra is good for something.  According to the Von Hipple brothers, seal demand has slackened as old timers around the world resort to Viagra, instead of seal appendages, to put a bounce in their steps and in their love lives.  Seals, it seems, had formerly played a big role in the galaxy of cure-alls for impotence.  You can read about this on Global Province under Wit and Wisdom, “Saving the Seals.”

GP8Jan2002: CHIFF

The Critic's Paradox.  Parker's Wine Buyer's Guide (sixth edition) is just over 1600 pages, but it is the 40-page introduction that we find most compelling.  There you can learn that Australian and California vintners pump a lot of extra acidity into their concoctions.  And a careful reading suggests that just as wine criticism is reaching new heights (due to stalwarts such as Hugh Johnson, Robert Parker, and Jancis Robinson), wine itself may be on a downward course.  This is frequently the plight of the critic:  we remember New York theater of the 1960s onward where some of the critics were at their brightest, but they had to make a lot out of nothing, because theatrical fare was in rapid decline.

Factory Wine.  In his introduction, Parker bemoans the practices of several high-volume producers.  Over-fertilizing, they are going for excessive crop yields while harvesting too early:  their grapes lack taste.  Then centrifuging, fining, and filtration produce stable, standard, very average wines that Parker characterizes as lifeless.  Mass manufacturing and mass marketing are putting increasing amounts of expensive wines on the shelf that are much less than they should be.  Parker, whose massive influence was celebrated in "The Million-Dollar Nose," an article very much worth reading that appeared in the December 2000 Atlantic Monthly, seems to know he cannot staunch the flood of quantity (annual wine production exceeds demand by some 25%, according to the article) that is sweeping away quality.

Fitting Jeans.  We have said in several of our letters (see "Going Upmarket in Stormy Weather," 18 September 2002 ) that the right strategy in tough markets may be to go upmarket, offering much better quality at a price.  Indeed, this may be, longer term, the right strategy for a post-industrial world where commodity, mass market products, even those draped in lots of marketing, may be less and less viable.  The wine titans who are squeezing out more and more "C" wines could have it all wrong.  The goal may not be too use technology to grind out too much mediocre product dressed in old-style marketing, but to produce the special and the particular, using cheaper yet more innovative marketing to connect to the discriminating consumer.

In coming days, you will learn on the Global Province how Land's End produces semi-custom jeans for you at a premium by letting you send in your measurements and a few other particulars over the Internet.  Three weeks later you've got the goods, straight from Central America.  Old Brooks Brothers has restored some of its made-to-order capabilities by putting some scanning machines in its store which, once again, net the customer a better if not quite custom look.  In other words, technology can lead to choice, quality, and individual distinction rather than a bottle of wine with no je ne sais quoi.  Using technology to go upmarket is, in fact, permitting new competitors to steal market share from the mass market leader in industry after industry.

Best of the Week.  We reread last week a great article that appeared on Forbes.com in November titled  "Inside the Smartest Little Company in America."  It's Cranium, the board game company.  We'll have more to say about the article and Cranium on the Global Province.  We liked best the company's celebration of CHIFF by which it guides all its actions.  CHIFF stands for "clever, high quality, innovative, friendly, and fun" which about sums up where we think business has to go in the post-industrial age.  And, by the way, next week we will have a note about Sid Sackson, who invented some 500 board games and who could have given Cranium a run for its money.

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