You know, at one time there must’ve been dozens of companies makin’ buggy whips. And I’ll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let’s have the intelligence, let’s have the decency to sign the death certificate, collect the insurance, and invest in something with a future.
(Lawrence Garfield — “Larry the Liquidator” – played by Danny DeVito, in the movie, Other People’s Money)
news item: Blockbuster finally files for Chapter 11
Born, 1985: (The first Blockbuster store opened in Dallas, Texas on October 26, 1985 at the corner of Skillman and Northwest Highway. By the way, I used to rent videos at that specific store. I had no idea that it was the first).
Died, September 23, 2010: (though some smaller version might last a little longer).
The lessons are many. Like:
#1 Customer loyalty is dead. Really dead.
#2 Someone intends to go right past you — you’d better beat them to the punch.
#3 If the product you are selling is no longer the product that works best, you have no future.
#4 If these three are true, then you will go under – it’s just a matter of when, not if.
These are the thoughts that I have as I reflect on Blockbuster going into bankruptcy. Netflix, and redbox, and youtube, and iTunes, all simply passed them by. And Blockbuster simply was not nimble enough, not quick enough, not able to react and change fast enough, and now they are on the verge of gone.
Lots of thoughts, from plenty of books, come to mind, like:
Verne Harnish, in Mastering the Rockefeller Habits, reminds us that all business starts with the functions of Making or Buying something. So, if people no longer want to buy what you offer, you’ve got real trouble…
In Get There Early: Sensing the Future to Compete in the Present (Using Foresight to Provoke Strategy and Innovation) by Bob Johansen (Institute for the Future), we learn about the VUCA world of (VUCA originated at the U. S. Army War College – the graduate school for Generals-to-be):
It’s the volatility that helped doom Blockbuster.
In The New Experts: Win Today’s Newly Empowered Customers At Their Decisive Moments by Robert (Bob) Bloom, Bob basically wrote Blockbuster’s obituary. Consider these quotes from his book:
Today’s buyers – empowered by the Internet, assured by the enormous choice in every segment of commerce, and capitalizing on the acute vulnerability of sellers struggling in this new selling climate – have taken control of the entire purchase progression.
Buyers no longer care who they buy from.
Today, buyers are in control.
This reversal of supremacy has placed every business around the globe in a perilous situation.
This confluence of technology and choice started customer loyalty down the slippery slope – ultimately, customer loyalty died.
It is a scary world out there. Somebody is out to beat you in tomorrow’s market.
I’ll end with a well-known quote from Gary Hamel (quoted by Tom Kelley in The Art of Innovation):
To those few companies sitting on the innovation fence, business writer Gary Hamel has a dire prediction: “Out there in some garage is an entrepreneur who’s forging a bullet with your company’s name on it. You’ve got one option now – to shoot first. You’ve got to out-innovate the innovators.”
The Robber Barons of old at least left something tangible in their wake — a coal mine, a railroad, banks. This man leaves nothing. He creates nothing. He builds nothing. He runs nothing. And in his wake lies nothing but a blizzard of paper to cover the pain. Oh, if he said, “I know how to run your business better than you,” that would be something worth talking about. But he’s not saying that. He’s saying, “I’m going to kill you because at this particular moment in time, you’re worth more dead than alive.”
God save us if we vote to take his paltry few dollars and run. God save this country if that is truly the wave of the future. We will then have become a nation that makes nothing but hamburgers, creates nothing but lawyers, and sells nothing but tax shelters.
• Andrew Jorgenson, played by Gregory Peck, Fictional CEO of New England Wire and Cable, Other People’s Money (read the full text and and listen to the speech at the terrific AmericanRhetoric.com site here. Watch the speech on youtube here).
I don’t make anything? I’m makin’ you money. And lest we forget, that’s the only reason any of you became stockholders in the first place. You wanna make money! You don’t care if they manufacture wire and cable, fried chicken, or grow tangerines! You wanna make money! I’m the only friend you’ve got. I’m makin’ you money.
• From the response by Lawrence Garfield, played by Danny DeVito, the fictional head of Garfield Investments, from the same movie. Full text of speech here. Watch the speech on youtube here).
Here’s the issue: “traders” (making money by trading things) vs. “builders” (real assets in the real economy).
In The Great Reset by Richard Florida, the list of thoughts to ponder is long. This is one that I can’t quite get out of my head. (by the way, I am sure many others have made this point – I just happened to have it jump out at me in Florida’s book).
For most of us, we tend to think of work as doing something tangible – almost physical. Although, admittedly I have not worked with my hands for a living since my short stints at a service station, and at a tennis center (in my junior high school days, when I checked the oil and put air in the tires, as I put in the gasoline, at Self Texaco in Harlingen, TX; and taught tennis one summer at a park/tennis center in Abilene, TX). Today, I get paid for speaking – actually for reading, pondering, preparing, and speaking. I suppose I am one of those “knowledge workers” that we all read so much about.
But Florida is talking about a more basic problem. He is talking about the outsized role of “finance” — finance disconnected from its earlier, far more constructive purpose. Here are a few paragraphs from the book:
The role of finance changed from being, in the words of William Black, a “servant” of the economy to a “predator.” Instead of supporting the real wealth producing parts of the economy, (the finance sector) has become a parasite on them.
We’re witnessing a replay of the age-old conflict between “traders” and “builders,” as Geoff Beattie, the head of Woodbridge, dubs it. Traders make money off, well, trading things. They create little or no real wealth, because they do not engage in productivity; they profit through trading. Builders, on the other hand, focus on investing in real assets in the real economy…
The landscape today is littered with instant tycoons who made their fortunes on tiny upticks in the stock market or by trading shares in other people’ debt.
For far too many of these traders, the only productivity was profit and their only customers were themselves.
I raise this to make this point: builders need to take their preeminent position back from the traders for the economy of the future to flourish.
I think Mr. Florida is correct. When more people work in the “real economy,” and when more people invest in investments in the “real economy,” the economy will be healthier than when people work in, and invest in, only the “fantasy economy.”
“Fantasy” – that’s what much of the finance sector sold and practiced in recent years. And this “fantasy economy” created the bubbles that crashed. And we now know how that turned out.
God save this country if that is truly the wave of the future. We will then have become a nation that makes nothing but hamburgers, creates nothing but lawyers, and sells nothing but tax shelters.
Andrew Jorgenson, fictional CEO of New England Wire and Cable, in the movie Other People’s Money (played by Gregory Peck) (a transcript of Jorgenson’s speech is here).
What do we make? This is not a small question. Our country has continued to move away from growing stuff, to making stuff, to now primarily trafficking in ideas. This is the premise of the new column by David Brooks, The Protocol Society.
In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass.
Economic change is fomenting intellectual change. When the economy was about stuff, economics resembled physics. When it’s about ideas, economics comes to resemble psychology.
Brooks stated that these ideas were prompted by a new book entitled From Poverty to Prosperity, by Arnold Kling and Nick Schulz. This is just a short post to raise this question: what are the key ideas that drive your thoughts, your hours, and your economic engine?
Last night, I watched the HBO Documentary Schmatta: Rags to Riches to Rags. (Schmatta is a Yiddish word for rag). It was about the garment district in New York City. It told the story of the vibrant role played by the garment industry in New York City for so much of the last century, and included the good, the tough, the unbelievably ugly. (Read a review here).
For example, the Triangle Shirtwaist Factory Fire of 1911 killed 148 of the sweatshop workers, many of whom jumped to their death because the exit doors were locked to keep the workers in,and thus spurred the growth of the International Ladies’ Garment Workers’ Union. I think I might have joined a union for better working conditions after that.
Sadly, that tragedy was practically duplicated in Bangladesh in 2000, where young girls were working in sweatshop conditions, and were also looked in, and died in a fire. (Death toll – 48). And, yes, they were making clothing for consumers in the United States.
But the documentary was primarily about the loss of jobs in the garment district. Here are the astonishing statistics:
In 1965, 95% of the clothing Americans wore was made in this country.
In 1975, it went down to 80%.
It was just 70%, in 1985,
50% in 1995,
and currently only 5% of our clothing is manufactured in this country.
And the documentary clearly argues that the loss of jobs in the garment industry is the “canary in the coal mine,” representing the loss of so many other manufacturing jobs in this country.
I, and many others, have wondered, just what jobs will be available in this country, especially for the non-college-educated among us. (Of which there are so very many).
The documentary reminded me of the premise in the 1991 movie Other People’s Money. Andrew Jorgenson (Gregory Peck) gives a speech in a losing effort to save his company. Here’s an excerpt:
God save us if we vote to take his paltry few dollars and run. God save this country if that is truly the wave of the future. We will then have become a nation that makes nothing but hamburgers, creates nothing but lawyers, and sells nothing but tax shelters. And if we are at that point in this country, where we kill something because at the moment it’s worth more dead than alive — well, take a look around. Look at your neighbor. Look at your neighbor. You won’t kill him, will you? No. It’s called murder and it’s illegal.
Well, this too is murder — on a mass scale. Only on Wall Street, they call it “maximizing share-holder value” and they call it “legal.” And they substitute dollar bills where a conscience should be. Dammit! A business is worth more than the price of its stock. It’s the place where we earn our living, where we meet our friends, dream our dreams. It is, in every sense, the very fabric that binds our society together.
I’ve watched that movie, paid careful attention to those speeches, and have to admit – I would vote to close the company. But in doing so, would I participate in the destruction of American industry, and would thus be a participant in a long, long painful reality of unintended consequences? That is the question raised not just in the fictional company of Other People’s Money, but in the very real world of actual workers in the garment district.
I think this is a really, really big question in and for this country. I encourage you to find a way to watch the documentary Schmatta: Rags to Riches to Rags. It will make you think. Will it help us act – and, how do we so act?
Here’s a brief clip:
Seth Godin wrote this in his book Tribes: We Need You to Lead Us: Tribes make our lives better. And leading a tribe is the best life of all.
Godin is really onto something. He is at the front edge of something new – identifying it with an old yet now new word, “tribe,” used to describe a new reality. The reality is this: everyone is looking to find his/her own tribe.
Here is what prompted this post: I was reading about the new Drew Barrymore movie Whip It, (her directorial debut) starring Ellen Page, best known from Juno. The Huffington Post put up the trailer – and right in the middle, in big bold text, it says: “Find Your Tribe.” (Watch the trailer here).
We can all reflect on the power of this concept. A tribe provides a place to belong, with tasks to perform — a sense of connection and purpose. Years ago, I heard this simple description of how to keep people involved in church: make sure each person has someone to know and something to do. The principle is universal, and reflects a deep human need. We need to be connected, and we need purposeful work to fill our days.
Business can provide such a place to be part of a tribe. In the movie Other People’s Money, Andrew Jorgenson (played by Gregory Peck) addressed the stock holders and included these lines:
A business is worth more than the price of its stock. It’s the place where we earn our living, where we meet our friends, dream our dreams. It is, in every sense, the very fabric that binds our society together.
Jorgenson lost the vote, but spoke truth about what we all long for in the business we engage in. He was describing a tribe. (You can listen to the speech at Americanrhetoric.com).
I think we are finding a tribe among book lovers at the First Friday Book Synopsis. Seth Godin reminds us that we can be part of multiple tribes. But the call is clear: Find Your Tribe!