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GP 4 April 2007: Fly in the Ointment

The Merry Widow.  Back in the 1960s, down on the Peninsula, safely insulated from the Fillmore East in San Francisco and Mario Savio of Free Speech fame in Berkeley, lived Kathy the Widow, who was much fun and who provided ample decoration for the endless string of suburban cocktail parties that began just as the afternoon fog was curling in across the hills, well away from the Bay and near to the Pacific.  She always seemed without regrets, and no party was very live without her.

She not only was fun.  She had a stock portfolio that was the envy of the neighborhood.  Her investment philosophy was simple.  If she stumbled on a household product she liked—a new toothpaste, a better perfumed cleanser, a different kind of vacuum cleaner—she bought the stock.  And her net worth went up and up and up.

Often it’s simple commonsense and sly insight that tells you whether you are dealing with a lemon or lemonade.  One electrical equipment analyst of the same era only put out buys on stocks when the companies involved were running a lot of help-wanted ads in the papers.  Simple, simple things tell you when things are going good—or going south.  The Widow and this canny analyst both relied on close, personal observation to pick winners.

Stupid as It Looks.  In “Up Against the Wall,” we attributed part of Wal-Mart’s current malaise to its ability to mess up the simplest things.  For weeks, for months, it has been selling cherry tomatoes in plastic containers that fly open if you jostle them.  These insidious little flaws color the enterprise and eat away at its performance.

But, in fairness, let’s admit that there is a whole lot of really dumb packaging around—thought up by the best and brightest at a host of corporations.  In fact, there’s a gaggle of plastic packages that are hard as Hades to open.  “Nobody likes these incredibly hard-to-open, clear plastic packages that hang from retail pegboards, trapping your new purchase inside, clearly visible but seemingly unattainable without a long struggle, a sharp implement and possibly an injury” (New York Times Magazine, April 1, 2007, p. 24).  “In fact, in a recent roundup of the worst packaging, Consumer Reports notes that a ‘cottage industry has developed among manufacturers looking to cash in on packaging angst.’”

OpenX, Pyranna, and iSlice have come up with antidotes to deal with the blister-pack clamshell.  OpenX has a couple of blades designed to safely cut through and around the clamshell.  Small entrepreneurs, such as Tom Perlmutter of OpenX, are making little fortunes these days by providing simple cures for the incredibly dumb mistakes companies make.  The thousands of errors would be amusing, if they did not create so much pain.

American Airlines.  Two days before a recent trip to Paris, a traveler received a call from American Airlines saying the flight out of New York had been rescheduled and so the vacationer would have to take an earlier feeder flight into the city.  A new flight to Kennedy was agreed upon.  But, on arriving at the airport, the intrepid globetrotter found herself scheduled to get aboard an American flight into LaGuardia.  American had fouled up.  The counter clerk refused to do anything about it.  Only after gnashing and shrieking did the querulous agent put the traveler on the previously agreed-upon flight into Kennedy.  Oh, and the Kennedy flight was only half full anyway, but the clerk had clearly hoped to wrest more money out of the traveler.  American has long been in decline, its slide predating 9/11, the oil crisis, and everything else.  With the accession of the abrasive Robert Crandall to CEO in 1985, who took tremendous pride in taking one olive out of his customers’ martinis, it started to come unglued.  It lost its pride with the retirement of Al Casey and resorted, instead, to arrogance.

Nissan Mug.  The almost best car mug for your coffee is Thermos Nissan Original Traveler Tumbler Mug, but for one thing.  Its seal is reasonably tight, it looks stylish, it is comfortable enough to hold.  But, apparently, it is not designed for dishwashing, though the unwary purchaser won’t readily discover that fact.  The black rubber banding around the side becomes too loose with repeated washings, and you have to send off to Thermos for replacements.  The customer service person will lecture you on how you have misused the cup, not on how Thermos has mis-designed it.  Thermos, incidentally, seems to be owned by Nippon Sanso, and we don’t know where it manufactures anything anymore.

Brooks Brothers.  Back when we were all in school, Brooks was where you wanted to buy your garments, if you could pony up the money.  It’s had successive changes in ownership.  One and all knew it was falling apart when it installed an escalator in the Madison Avenue store.  Today it’s unlikely that the semi-custom department will get samples to you, even when you go to the store and pick out the swatches.  Lately a New Yorker wanted to send a gift certificate to a customer living in the boondocks, with the thought that he would make a purchase next time in New York City (Brooks branches around the country are rather hopeless).  But Brooks wanted to tack on a surcharge because the transaction was being done over the phone.  The irate New Yorker sent a check instead, and Brooks lost $1,000 worth of business and the float on the gift certificate.  We suspect that this idiocy stems from the fact that Brooks farmed out its financial operations to somebody in the far Midwest years ago.

As with Thermos, Brooks has gone through too many ownership changes, each new owner having taken another piece out of its hide.  Beware of fine businesses that have been shopped around too much. They lose it.

Cingular.  A few years back Cingular, the mobile phone company, enticed a customer into its national service plan and assured him that it would work nicely in the precincts of Boston.  Of course, it would not and did not.  One needed a better phone, even though the slippery service people at Cingular blamed the spotty service on software and 13 other things.  The phone supplied was simply inadequate for use around the Cingular network.  Since Cingular would not act, the customer went and bought a phone that would work at a Cingular store.  Cingular would not make amends.  Cingular has since lost 20 customers as a result.  Verizon, the other big mobile provider in the U.S., is similarly defective; for instance, it does not offer full details of its charges on its printed bills unless one pays a surcharge.  Some businessmen would say that both companies are ethically challenged.

Rather unregulated, the wireless industry is providing flawed service at absurdly high prices, its large telecommunication parents not having learned to act responsibly without strong federal and state controls.  We are incurring extra costs in our infrastructure sectors, such as wireless, probably because we have done away with regulation—but have not torn apart the telephone monopolies.  Ironically, Cingular and Verizon now offer virtually identical rates.  In fact, the industry has been permitted to re-concentrate. Hence, competitive telephone markets are a myth still waiting to happen.

Volvo.  Volvo, now part of Ford, puts out less of a car today than when it was a Swedish company.  But it has not given up Volvo’s ancient flaws.  Volvo has always billed itself as the safety conscious company, and it embodies many lifesaving characteristics.  But its mirrors, ill-placed and too small, have several blind spots that guarantee that drivers will not spot many vehicles behind them.  The problem, in fact, has gotten worse, one longtime Volvo driver now unable to spot certain vehicles coming up on the right and the left.  We’re surprised that the old Volvo regime never twigged on to this.  The new boys at the helm simply don’t care.  New ownership has not done away with old engineering mistakes, but has simply stirred in some new errors to the old mix.

Microsoft Works.  Still, to this day, our favorite oxymoron is “Microsoft Works.”  It doesn’t work and Linux intends to prove it.  The fact is that large organizations, virtually without exception, have hilarious glitches, broken circuits, systemic breakdowns which don’t take long for an outsider with a little commonsense to spot.  These errors, totally baked into the clay of organizations, expose their Achilles heels.  From such failures opportunity springs for smart fellows who can seize on such weakness.  Meanwhile, buyers, caveat emptor.  If you can buy the service or product from a small guy, do.

P.S.  Packaging Redux.  San Francisco is doing away with the plastic shopping bag.  “Outlawing plastic bags in San Francisco alone will reduce oil consumption by nearly 800,000 gallons a year, the city reckons.  Less than 5% of the 100 billion bags thrown away by American each year are recycled (Economist, March 31, 2007, p. 38).  Instead, bags will come from recycled paper or from compostable bags made from corn or potato starch.  Santa Monica, Oakland, and Berkeley are thinking of imitating this move, already in force in a number of areas outside the United States.

P.P.S.  Some years ago we sat beside a renowned software guru on late day flight to the Coast.  He said, “Do you notice more breakdowns on airplanes—and everything else.”  With the onset of so-called Sigma Six quality control programs and rampant cost cutting in the 1990s, redundancy became a no-no.  There were less spare parts; airplanes were not held in reserve to replace wounded craft; it became a sin to have extra skilled personnel standing by to handle emergency situations.  Across America we have had more unexplained breakdowns because we have eliminated redundancy from the system, not understanding where redundancy is part of our safety net.

P.P.S.  Do you know where Volvo of Sweden is now headquartered?  London and California, though the action seems to be in Irvine.  Do you know who owns Brooks Brothers now?  Retail Brand Alliance, which has owned a slapdash collection of middlebrow retailers.  It was spun out of Luxottica, a big eyewear maker.  Cingular, based in Atlanta, is now owned by AT&T, based in San Antonio.  Service is spotty there, often forcing callers out on to the sidewalk in order to find a decent signal.  CEO Stanley Sigman got his start with the company in Hereford, Texas.

P.P.P.S.  In addition to all its other difficulties, the New York Times seems to be experiencing trans-gender confusion.  On March 23, p. B26, it shows us “The Rice Portrait of Jane Austen,” a painting by Ozias Humphrey to be auctioned of at Christie’s.  Scholars cannot agree whether it is Jane.  On the same day, but a few pages later, the Times shows us the same portrait, but claims it is an 1889 self-portrait by Van Gogh.  On April 1, it adds more mystery to the tangle, announcing in “Pretty Words, Jane; Would That You Were Too,” that nobody quite knows what Jane looked like, but all the world is fairly certain that she wasn’t much to look at.  Several renditions of Jane appear in the article to include the so-called Rice Portrait.  It’s not hard to discern that all may not be right in The Kingdom and the Power.  Let us assure you that Kathy the Merry Widow was much prettier than Jane, whatever Jane looked like.

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