Great Contraction

A very very scary story on this All Halos Eve from Consumerindex.com which has a great piece about this recession,

Contrary to the timeline suggested by the NBER, our data strongly suggests that the consumer portion of this recession did not start out to be about housing or damaged consumer balance sheets. But it is now. It has clearly evolved, and the average consumer's version of a recession diary might look something like this:

    -- December, 2007: Spending slightly more than last year, sub-prime mess is somebody else's problem

    -- May, 2008: Gas prices way up, banking crisis in the news -- maybe we need to be little cautious

    -- August, 2008: Democratic National Convention says things really are getting different this time, maybe more caution is warranted

    -- November, 2008: Good, the election's over, and gas prices are down -- things are getting normal again

    -- March, 2009: The 401K may be hurting, but at least we have the house to retire on

    -- June, 2009: Unemployment numbers don't look good, but those usually start back down  

- August, 2009: A lot of vacant houses in the neighborhood, let's rethink retirement funding

     -- January, 2010: Unemployment is getting worse, let's pay down our credit cards

     -- May, 2010: There may be a recovery going on somewhere else, but it certainly ain't here

     -- August, 2010: Politics are getting ugly again, things aren't about to improve anytime soon

    There probably hasn't been two separate recessions in three years, simply one that has evolved in significant ways. But if this really is a "double dip" recession, then our data indicates that the "Great Recession" of 2008 was merely the precursor, and not the main event. It is this current dip that we should be really concerned about; the current contraction in consumer demand is about
     structural changes in consumer behavior, whereas the "first dip" was about short term loss of consumer confidence.

    This recession has been complex and constantly evolving in ways that policy makers have not been able to understand through their low resolution lenses. As a consequence their policy responses have been misguided, ineffective and wasteful. The Federal Reserve may be able to save the banking system by being the "lender of last resort", but it is powerless to change perhaps the one thing that John Maynard Keynes got right -- and what he mischaracterized as a "Paradox
     of Thrift" -- as over 100 million U.S. households become economic "loose cannons", acting exclusively in their own best interests in 100 million different ways.

Bias clouds all of our decisions

 Victoria Pynchon explains how our bias clouds how we react to perceived slights.

let me first say that we are all blinded to the part we play in disputes by cognitive biases.  Those biases include:

• fundamental attribution error (over-attributing intention and under-attributing circumstance to another’s harm-causing behavior while over-attributing circumstance and under-attributing intention to our own harm-causing behavior /1;
• clustering illusion (seeing patterns where none exist); and,
  
• confirmation bias (selecting from a vast amount of data only that which confirms our pre-existing opinions)

Mistakes about the intentions and motivations of our fellows, as well as the constraints under which they are working, are so common in the litigated disputes I mediate that I’ve been forced to acknowledge just how much of other people’s behavior is colored by my untested assumptions.  It naturally follows that my part in disputes has loomed much larger in their resolution than they ever did before.

Not Today

Karl Smith explains the Karmic lie

[N]othing ends well. In the end, the universe, like the house, always wins. Yet, we do not have to tolerate agony and pain all the way up until our inevitable demise. We live. We love. We laugh in defiance of that inevitability. If we have our heads on straight we’ll do it right up until the cold, bitter, utterly unjust and utterly unavoidable end. We are mortals — those who die. That fact should infuse our every value and animate our every action.

When my loved ones take ill they sometimes ask me — with hope in their eyes — “Am I going to die?” Yes, I answer, I cannot change that. But not today.

Not today.

Can you identify your top twenty customers and their challenges?

Chris Brogan asks that very question,

Can you name your top 5 customers? (Your top 20?) Can you explain the challenges those top 20 people face? Can you talk about what else is on their plate besides potentially buying more of what you sell? Do you know how they talk about you to their bosses, their peers, or others? 

It’s interesting, to me, which metrics we track and what we do with them. The distance between metrics and analytics is the difference between statistics and intent. Meaning, we might know several things about how many products we sell, where we sell them, at which time of day, and all kinds of other things, but what we’re really trying to figure out is the secrets of our relationship with our customer. That’s where we have to invest our efforts.

Barter is back in a big way

John Gerzema shares the rise of Spendshift

In the post-financial crisis age, mindless consumption is out, and mindful consumption is in. Eighty-one percent of Americans according to my firm's research say the recent economic crisis has had a long-term effect on the way they spend their time and money. One example of this shift is the phenomenon of cooperative consumerism, in which social business models help American households avoid parting with their hard earned dollars.

...

In the emerging barter nation, households are shifting from consumption to production. They’re sharing skills and resources and demanding more from your business. We’ve just scratched the surface of this movement. Whose to say they can't scale to the power of, say, Walmart?

Street smart v book smart

Scoot Shane shares this little ditty,

As you might expect, more intelligent entrepreneurs do better at running their own businesses than less intelligent ones. In a different article, published a year after the one mentioned above, de Wit and Winden found that the self-employed with higher IQs tended to earn more money than those with lower IQs. And the recent working paper by Djankov, Qian, Roland and Zhuravskaya found that “failed entrepreneurs are less smart” than successful ones.

So what do these studies tell us? Maybe they are little more than a statistical curiosity or maybe they hint at a pattern.

Subject to the caveat that we have only handful of studies and all of them are based on correlations, here’s the pattern suggested by the data: The average person who works for herself is more intelligent than the average person who works for others, but (as my earlier column pointed out) she doesn’t do as well in school.

Dictating credit card choices to the customers.

Jay Goltz offers a personal experience about how a customers needs to pay

“No, we want you to use a different card”? It depends on how many of your customers care. I can assure you that some will, but they won’t necessarily tell you. How many repeat customers would you have to lose to eat up the $100 you saved in lower fees? If your business is working on a 50 percent gross profit margin, you would have to lose $200 of business, or about two customers out of 100. That is 2 percent. Might you only lose 1 percent? Maybe, but I doubt it. Could you lose 10 percent? Perhaps. And keep in mind, you may also lose the referrals and the repeat business of people who are with the person whose card you reject. It seems to me you have far more to lose than to gain.

Here’s my confession: For a long time, mine was one of those companies that did not want to pay the higher fees. I changed my mind after I went into a store that wouldn’t accept my American Express card. It didn’t make me happy, and I didn’t go back. And after that, I started to accept all cards at my business. I actually had one customer with an American Express card say to me, “I’ve only been bringing my personal business here. Now I can bring my business framing, too, because that’s the only company card I have.”

The point is, saving money can be perilous. With the economy soft, we’re all trying to cut costs, but there are all sorts of ways to save money without really saving money: not fixing a store sign, not updating a computer, not sending people for training. Sometimes a penny saved is not a penny earned — it’s two cents lost.

more trends for 2011

Andrew Freeman offers this

Pies

Single purpose restaurants (peanut butter)

grilled vegetables

Hummus

Pretzels

Coconut Water

hat tip Megan Conniff

trends for 2011 are in the air

Joseph Baum and Michael Whitman share this

Meatballs In

Gourmet Hamburgers out,

Food trucks in,

Profitable customers in,

Unprofitable customers way out,

the rise of collaborative customers using their smartphones,

What if six friends made their own reservation and demanded a group discount like your giving Groupon? Not that out of the question.

The continual rise of cities

Jeffery Phillips offers this,

Brown and Hagel suggest two reasons:

1. The value of "rich exchanges" and tacit knowledge is higher
2. The potential of serendipitous interactions increases

...

but as people work with information and knowledge, they become exposed to a wider world of change and options.  Rural areas tend to be more conservative in nature, slower to change and with less dynamic interactions.  As people are exposed to information and change, many of them want more of that, not less.  They increasingly crave interaction with other people who have these experiences, and they want new experiences as well.

expect more movement of educated, younger people to the urban areas, especially those with universities or high concentrations of knowledge workers

break rules but not rules that matter?

VC view of how to judge a possible investment, does the entreprenuer have at imagnitive bent


Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not goody-two-shoes good. Morally they care about getting the big questions right but not about observing proprieties. That's why I'd use the word "naughty" rather than evil. They delight in breaking rules--but not rules that matter. This quality may be redundant, though; it may be implied by imagination.
Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage--hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.

Case study in operations during a massive recession

Ken Bruno interviews Ron Shaich

  Pick up an article and all anybody was writing about was how they [eateries] were going to pull costs out of the menu. And our view was when you pull costs out at a rate faster than sales fall off [that] you’re basically taxing the consumer. In times of great change, which is what this recession represented, it was an opportunity to create significantly greater competitive differentiation, competitive advantage. So when everybody pulled back, we actually invested. And we invested in the customer experience, in product development, we invested in marketing in a very serious way, we invested in operations and we invested in category management. And we said now is the time to stay the course, to continue our game and to continue doing this strategy that served us so well over the prior decade.

Fire up your muchness

The Great Reset has certainly strained resources, both fiscal and emotional. Entrepreneurs as a group have more enthusiasm than the general population, however of late they are showing the weariness of this seemly unending battle that this recession has wrought.

Dave Logan has a great article on "muchness"

First, recognize that it’s your job to create muchness around you. Unlike raw goods and money (unless you own an illegal printing press), there’s no limit to how much muchness you and your company can create. How do you do this? By emphasizing untapped opportunities in the economy, including incredible talent looking for a place to call home.

Second, if muchness is lacking, create it in pockets. People are tribal by nature, and one tribe can enjoy muchness while the next tribe over is in despair. While it’s too simplistic to just tell your tribes to opt out of the bad economy, you can say you’re going to do things differently and choose not take part in the collective melancholy. It’s critical to avoid the common stupid business ideas that steal muchness from companies and individuals.

Third, see muchness as a cause, and not an effect. It wasn’t morning in America until Reagan said it was. When people believed him, the economic sun started to rise. Muchness comes before a great P&L.

Mobile Aps for restaurants

The smartphone is the future. If your restaurant has not joined yet, you will soon.

GrubHub

Urbanspoon

Beer and wine daypart

Bruce Horovitz explains Starbucks foray into the nightlife daypart.

A very different kind of Starbucks is on tap. It will serve regional wine and beer. It offers an expansive plate of locally made cheeses — served on china. The barista bar is rebuilt to seat customers up close to the coffee.

Most conspicuously, the place looks less like a Starbucks and more like a cafe that's been part of the neighborhood for years — yet that's "green" in design and decor. This is the calling card of independent java joints that have been eating and sipping away at Starbucks' evening business for decades. U.S. Starbucks stores get 70% of business before 2 p.m.

...

The wake-up-in-the-morning company that invented the $4 cup of coffee is trying to reinvent itself as the hang-out-in-the-evening company, too, with mood lighting, heritage furnishings and wine at up to $9 a glass.

Key leadership skills

Tony Schwartz clarifies the basic leadership skills,

1. Great leaders recognize strengths in us that we don't always yet fully see in ourselves.

2. Rather than simply trying to get more out of us, great leaders seek to understand and meet our needs, above all a compelling mission beyond our immediate self-interest, or theirs.

3. Great leaders take the time to clearly define what success looks like, and then empower and trust us to figure out the best way to achieve it.

4. The best of all leaders--a tiny fraction--have the capacity to embrace their own opposites, most notably vulnerability alongside strength, and confidence balanced by humility.

All four capacities are grounded in one overarching insight. Great leaders recognize that the best way to get the highest value is to give the highest value.

Happy Garbanzo Bean Day

QSR reports that,

October 21 is Garbanzo Bean Day, and Garbanzo Mediterranean Grill is honoring this occasion by celebrating the garbanzo bean and its many achievements. Some of these include providing outstanding health benefits, being part of a popular and healthy food movement—the Mediterranean diet—and acquiring a following of loyal Garbanzo Very Important Bean (VIB) members.

Recent studies have linked garbanzo beans and a Mediterranean diet with numerous health benefits, such as improved heart health, reduced risk of diabetes and dementia, decreased risk for stomach cancer, and even a lessened appearance of wrinkles.

How does geolocation work again?

Kermit Pattison helps explains the geolocation process.

CLAIM YOUR SITE
SET CLEAR GOALS
OFFER SPECIALS
REWARD CUSTOMERS
CHECK YOUR DATA

Use the Foursquare analytic dashboard to glean valuable data about bar customers, like how they break down by gender, when they check in and with whom they check in. By doing so, he can discern patterns of how business ebbs and flows throughout a week.

Recently, the bar’s managers noticed that check-ins declined after 2 a.m. on Saturdays. In response, the Destination Bar started holding a late-night happy hour — spreading the word through social media. A rise in check-ins and sales followed. “I look at the Foursquare check-ins as a representation, like the Nielsen ratings,” Mr. Maccarone said. “You can tell a lot about your audience based on the breakdown of the people who are checking in because they are a good sample set of your regular customer base.”

How much of the pie are you chasing?

What is the best way to negotiate?

Steve Tobak outlines negotiation

5 Ways to Win in Any Business Situation:

1. Internal relationship between coworkers. Win-win, collaborate, all the way. Anything else is dysfunctional. Sure, the dysfunctional stuff - back stabbing, taking credit for someone else’s work, sugar-coating BS, CYA - all exists, but don’t fall into that trap. You either have to play it smarter or find a company that doesn’t accept that kind of crap.
   Goal: Win-win
2. Boss-employee relationship. Again, Win-win, collaborate, all the way, same as with coworkers. Companies don’t exist for you, your boss, or your employees. They exist for two reasons: to provide a product or service to customers, and to provide value to shareholders. All employees at every level should be aligned to do that, simple as that.
   Goal: Win-win
3. Competitors in the marketplace. I win - you lose. Period. Market competition is a zero-sum game, simple as that. To suggest otherwise is idiotic. And yes, you should befriend your competitors, call them frienemies, hang out and party with them, anything you like. Just listen more than you talk. Keep your friends close and your enemies closer, right?
   Goal: I win - you lose
4. Customer-vendor relationship. Customer-vendor relationships should always yield the perception of a win-win, especially if you want an ongoing relationship. That said, when you approach negotiations, your goal is to get the better deal while the other guy thinks he did okay too. I think of that as “I win - you don’t lose.” Camp provides a pretty good approach for doing that. It’s not easy at first, but you do get better at it with experience.
   Goal: I win - you don’t lose
5. Job or consulting opportunity. It’s important to note that, in this situation, you all have to live with each other after the fact. So, whichever side of the equation you’re on, don’t overpromise and risk underdelivering or underplay your hand and risk losing the gig. Best to be genuine. That said, when it comes to negotiating dollars and cents, it’s the same as customer-vendor.
   Goal: I win - you don’t lose

How are well thought out logical decisons working for you?

In the vein that not knowing is knowing Sean highlights a study

The work looks at the results of the Peter Principle, which predicts that people are promoted to the level of their incompetence. Their skill gets them a series of job advances until they are ultimately promoted one level higher than abilities warrant. This results in an organization promoting itself into declining performance.

The Italian researchers ran computational models and concluded that ”counterintuitively, that in order to avoid such an (Peter Principle) effect the best ways for improving the efficiency of a given organization are either to promote each time an agent at random or to promote randomly the best and the worst members in terms of competence.”

Is your dart board in top working order?