Category Archives: Economics

Free is Fashionable, But Still, Beware of Free Lunches

Current Affairs, Economics, Marketing, ,

I’ve been thinking about this Free business a lot. There’s Chris Anderson’s book Free, and the debate around it. There’s free content everywhere. I find great free photos on Flickr. And I read free blogs every day.

It’s not like free is all that new. I grew up with free radio and television, funded by advertising. And the free prize in the Cracker Jack package. And free weekends for people naive enough to think they weren’t just an opportunity for sales pitching the condos. Free drinks, free lunches, and free seminars were never really free.

I compete against free. Since 1995 I’ve made my living with software that’s for sale, not free. It gets pirated a lot. And it competes with a lot of free stuff.

And I market with free. My company’s business plan resource site  Bplans.com is free. My last book, which sells in bookstores and Amazon.com as a book, is also free for reading from start to finish at PlanAsYouGo.com. I’ve done about 2,000 blog posts since 2007, all for free.

Still, today, in this new world, you have to be able to distinguish real free, like a great photo on Flickr, from fake free, like a free seminar that’s a veiled sales pitch.

  1. Some kinds of self expression, like writing, photography, art, music, and performance, will always compete against free. The greats, I hope, will continue to make money because they’ll stand out enough to generate some economics; but the almost-greats, and the greats-but-undiscovered, will do it for free. I’ve seen great writing and great photography for free on the Web. People do this; they create because they want to create, and they often do it for free. Sure, we all hope to be the commercial successes with our self expressions, but few of us are.
  2. Some professions are diluted by free contributions. This isn’t new either. I was a professional journalist, full time, as my means of making a living, for almost 10 years. One thing I didn’t like about it was that it was so much fun, and so basically interesting, that there was always somebody new willing to do it for less. That was in the 1970s. Earlier this month I read this Los Angeles Times piece about the difficult plight of freelancers, which is really the same thing as in the 1970s. There’s more of it, but it’s the same thing.
  3. You’re in a tough spot if you’re competing against something a lot of people will do, and reasonably well, for free. Like writing articles, for example, in my previous point. People will do it for free because they want to. I think that’s why there are so many fabulous musicians playing for tips or nothing at all, actors acting for free in local theaters, and photographers offering freebies on Flickr.
  4. As a consumer of free stuff, such as free content, you have to look for the business model. One thing I really like about advertising is that it explains free content. One thing I like about Web advertising is it doesn’t (usually) interrupt either. You don’t have to click. Where there isn’t advertising, you have to look behind the curtain for a driver. Sometimes it’s pride, sometimes establishing credibility, sometimes just honest free expression; but there’s also a ton of modern-day equivalent of the cynical seminar as sales pitch. Don’t be naive about it. Free is a legitimate marketing strategy, but don’t confuse free as a marketing strategy with free as free.

So sure, there’s occasionally a free lunch for a good reason. Free samples make for future customers. But don’t take it at face value. Figure out why it’s free.

(Image: Sergey Peterman/Shutterstock)

A New Dimension of Haves and Have-Nots

Current Affairs, Economics, ,

Wow. Talk about misreading data. They found clusters of autism and looked for pollution or some such problem as a cause, but found something entirely different, and probably just as significant. You have to read this, on NPR: Autism ‘Clusters’ Linked To Parents’ Education. It turns out that…

Clusters of children diagnosed with autism tend to occur in places where parents are older, more educated, and white, according to a study by researchers at the University of California, Davis.

The study found no link to local pollution or chemical exposures — which some consumer groups have cited as possible causes of autism clusters.

The results suggest that areas in California with apparently high rates of autism spectrum disorders are probably just places where parents are more likely to obtain a diagnosis for their child, the researchers say.”

I grew up with a sense, inherited from my mother, of the danger of dividing the world into haves and have-nots. It’s not just a matter of fairness. Even the haves are worse off when surrounded by large numbers of have-nots. Nobody wins. This was just a bad vision when I was growing up, but it’s an undeniable reality now.

And now it’s affecting things like drugs to increase focus and intellectual achievement?

Shades of The Child Buyer, a strange novel from 1960, by John Hershey. Large corporations were buying children to convert them into something like biological computers.

I picked this up from Steve King of Small Business Labs, who posted on it here yesterday. He takes it a logical step forward, noting that drugs like Ritalin, supposedly for helping ADD, are now widely used by students looking for an edge. He wrote:

This is an early sign of the coming human enhancement divide.  Simply put, rich people are going to have better access to technologies and drugs that improve cognitive ability and other forms of human enhancement than poor people.  The same will be true for rich countries versus poor countries.

He says this scares him. Me too.

On Cities, Food, History, and Future

Current Affairs, Economics, ,

In honor of Blog Action Day, the video here is a 15-minute TED talk by Carolyn Steel, author and architect. Among the startling things she says here:

  • We lose about 47 million acres of rainforest every year. And at the same time, we lose about 50 million acres of farm land to salinization and erosion.
  • Half the food produced in the USA is thrown away.
  • A billion of us are obese while another billion starve.
  • 80% of global trade in food is controlled by five corporations.

How did we get here, and what are we going to do about it? It’s a short talk, but she tries to answer the first question and ask the second. It’s fascinating.

http://video.ted.com/assets/player/swf/EmbedPlayer.swf

If you can’t see the video here, you can click here to go to the original on TED.com

Top 10 Unconventional Recession Indicators

Economics, , , , , , , , , , ,

I found this on the Huffington Post over the weekend: Top Ten Unconventional Indicators Of The Recession. It’s a slide show, more fun there than here, but in case you’re interested:

  1. Home movie rentals: up during recession. Netflix, Redbox and others are way up over last year. From The Atlantic.

    Flickr by Jeff Gunn
    Flickr by Jeff Gunn
  2. Urban farming: More people grow their own food during recession. “The National Gardening Association has found that 19 percent more people will grow their own fruit, berries, vegetables and herbs this year than last, and 54 percent say they are motivated by the prospect of saving money on groceries.” From Kiplingers.
  3. McDonald’s sales: apparently cheap meals do better during recession. McDonald’s same-store sales are up 7.1%. From the Washington Post.

    Flickr by pointnshoot
    Flickr by pointnshoot
  4. Going to the movies: normally up during recession. Up 9% for the first quarter of this year, compared to 2008. Kiplinger.
  5. The underwear index: sales of men’s underwear go down during recession. Economizing? They’re down 2.3% for 2009. Huffington Post, quoting Alan Greenspan.
  6. Dating increases during a recession: Match.com is way up. Kiplinger.
  7. The necktie index: sales go up during recession. Job interviews? They’re up 50% this year. From The Telegraph.
  8. (Ugh, I don’t like this one) New York Magazine proposed the hot waitress index: “the worse the economy, the hotter the waitresses.” That’s dumb. It shouldn’t have been included.
  9. Lipstick index: supposedly lipstick sales go up in recession. Affordable luxury? But they’re down this year. The Economist.
  10. The Bed Bath and Beyond Barometer. Proposed by Time Magazine. The explanation is that consumers who can’t go out or away upgrade their home. Ho-hum.

Business Boost: Business Planning for Oregon

Business Planning, Current Affairs, Economics, Self Promotion, , ,

I hope it doesn’t seem like total self promotion — I’ve tried to avoid that as much as possible on this blog — but hey, tomorrow Palo Alto Software is going to give away thousands of copies of Business Plan Pro (and not a light version, the upscale, premier version) for free to Oregonians who want it. I would like to think that’s newsworthy, even if it’s my company.

The video here is my talking for slightly less than three minutes, my summary of what happens tomorrow. And if you can’t see it for any reason, then please click here to go to the Youtube source.

And for more information, here’s the link to the page at Palo Alto Software that explains what we’re doing, and provides a map of the 85 locations (mostly town halls and chambers of commerce, no commercial locations (it really is a free giveaway)) where people can go tomorrow to get the software.

It’s just for the one day, tomorrow, July 1. For any Oregonian 18 years or older who goes to one of those locations to collect a download card.

Congratulations. Now Duck!

Current Affairs, Economics, ,

Graduating from college and looking for a job, this year of all years, is something like entering a busy freeway going the wrong way.

Consider the plight of the kids born mostly in 1988. Struggle through high school, struggle through college, working on the American dream. They were discovering computers during the Internet boom of the 1990s. They did high school in the aftermath of the dot-com bust, and the recession of 2001. Then they went through college in the heyday of the so-called Generation Y boom, helicopter parents, and a rep for being more demanding than any other generation.

There was a hint of special in the way they valued entrepreneurship more than previous generations, or so it seemed. More than before, they started their own businesses. They got a reputation for not liking to do the grunt work, or making compromises.

Then “boom,” as John Madden would put it, as they start their senior years in college, the economy plummets downward.

The job search is harder than it has been in any year since World War II. I’ve been following along with my youngest daughter (previous post here), plus students in my starting a business class. It’s really tough out there. The National Association of Colleges and Employers (NACE) released a survey taken earlier this year showing that less than 20 percent of 2009 grads who applied for a job between February and April actually found one. That compares to 26 percent in 2008, and 73 percent in 2007.

Don’t be confused by the added detail that fewer grads are looking for jobs. The NACE summary points this out:

Surprisingly, despite current economic uncertainties, survey results also show that fewer 2009 graduates have sought out jobs than their predecessors. In fact, just 59 percent of this year’s class has started the job search. Approximately 64 percent of the Class of 2007 and two-thirds of the Class of 2008 had started looking for a job by this time.

I’ve seen what’s going on through the eyes of my youngest daughter, who’s graduating from Stanford this month. She’s got a group of friends who’ve opted to stay on for master’s degrees, not because they wanted to, or at least not that much, but more because they can see what’s going on in the job market and they’d rather wait a year before braving the storm. I know a man, now in his thirties, who complained to his father about the drudgery of the 40-hour work week when he got his first grown-up summer job, after his first year in college. “Don’t worry,” his father said, “it’s only for the next 40 or so years.” But at least he got a job.

Is It Just Me, Or Are Things Are Picking Up?

Current Affairs, Economics, Reflections, Starting a Business

Seems to me like the recession has hit bottom and the economy is starting back up.

It’s not just sales at our company which are picking up. It’s also people I know and talk to, like the other 24 investors in my angel investor group which met last week; most of them are business owners. And people at the local Chamber of Commerce and Small Business Development Center.

Yesterday I did the business plan section at a quarterly day-long SCORE workshop on starting or running a business. We had twice as many people yesterday as three months ago and six months ago.

I’m sure it’s going to be a long, hard, climb back up. We can’t get around the economic impact of so many people out of work, so many home loans in trouble, and so many people’s paper wealth worth a lot less now than a year ago.

Still, at least I think we’re starting to go up instead of down.

10 Ways to Avoid Falling Skies Next Time

Books, Business Stories, Economics,

I’ve posted before on this blog about The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb’s powerful book, written before the big downturn, which some say (he wouldn’t) predicted it. 

With a beautifully written mix of history, stories, studies, and logic, Taleb shows how the big events are completely unpredictable. And that we kid ourselves, afterwards, trying to rationalize that they would have been, if we’d only figured out the signs. We want things to be logical, and, therefore, we could have predicted them. But we couldn’t have. That’s his point.

We define swans as white. Then we see a black swan. It cracks our world view.

In the book, Taleb talks about turkey logic. For 999 days of its life the turkey sees overwhelming evidence that the farmer is its best friend. Farmer feeds it, cares for it. And then, on the thousandth day, the axe. We’re like that.

So I was interested when I saw Taleb’s byline on this story in the Financial Times: Ten principles for a Black Swan-proof world. The title itself is ironic. There is no such thing as a black swan-proof world. Still, here’s his list (although just the list, with explanations cut to shreds; you should read the source): 

  1. What is fragile should break early while it is still small.
  2. No socialization of losses nor privatization of gains.
  3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
  4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks .
  5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.
  6. Do not give children sticks of dynamite, even if they come with a warning.
  7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.
  8. Do not give an addict more drugs if he has withdrawal pains.
  9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.
  10. Make an omelette with the broken eggs. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buy-outs, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Again, that’s at: Ten principles for a Black Swan-proof world.

Pendulum Swings Against Business. And Banks. And Bonuses

Current Affairs, Economics, , , , , , ,

Two Very Important Sentences:

Fred Wilson of AVC posted my favorite line from the president’s press conference yesterday; and the whole post — brilliant blogging, in my opinion — was this simple quote:

At the same time, the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.

Good point. Thanks Fred, and thanks Mr. President. Somebody should say it.

A Catch 22 on Banks

Talk about on again — off again — on again:

  1. They wrote all those banking laws back in the first great depression when banks were caught speculating with depositors’ money. So banks weren’t allowed to invest in, say, a good business plan. Instead, they had to have collateral. The world wanted banks to play it safe.
  2. Then in the great boom days of the last 10-15 years, banks were set free and they started using “yoopeee” as their philosophy of loan management. And we loved it. We said “Yoopee” too. That is, until they crashed and burned. And got bailed out with our money.
  3. Now there’s a credit crunch and we want the banks to lend again. So do I. But do we want them to make bad loans, or risky loans? Isn’t that what got us into this mess.

And How Did Bonus Become a Bad Word?

OK I know the answer; anybody who hasn’t been living in a cave knows how bonuses got a bad name: excess and greed in large business. Bailouts and bankruptcies and lavish bonuses don’t go together. Thank you, big business, thank you, big banks, and, specifically, AIG; but they’re not alone.

But what about the rest of us, in small business, where a bonus is a reward for a job well done? Where people get an extra month or two of salary if — and only if — the company makes a profit? Bonus isn’t a bad word, or shouldn’t be. No profits, then no bonus.

This isn’t lavish excess. This is sharing profits, working and thinking as a team. And it’s a good thing, not a bad thing.

The Future in 5 Minutes

Current Affairs, Economics, Entrepreneurship, Technology, Web/Tech

Consider these predictions. They’re all based on identifiable trends. Ask yourself how this affects you, your business, and your business future:

  • In 10 years, the number one English-speaking country in the world will be China.
  • By 2011, 90% of all the engineers in the world will live in Asia.
  • In 20 years, two thirds of the world’s middle class will live in India and China. That will be 1.15 billion people, an increase from 430 million in 2000.
  • The Chinese instant messenger system QQ has more than 342 million users.

This five-minute video puts a quiet, almost peaceful, musical background behind a series of startling Futures Group predictions of drastic change coming soon to a world near you.

If for any reason you can’t see the video here on the blog, just click here for the source video on YouTube.

My thanks to Kare Anderson of MovingFromMetoWe.com for posting to this. The title, The Rise of the Rest comes from the title of a recent book by Fareed Zakaria (Newsweek International Editor).