Month: May 2004

Bitter Lemonade

I’d like to tell you about a very unusual company today. Their prospects are looking up. Granted, they had some troubles after 9/11 — they did lose people and facilities — but their finances are in good order. Core management has been reduced by about half since then, and the remaining middle managers have successfully implemented a decentralized management plan, allowing them to quickly move on a regional or local basis without having to get the CEO to sign off on every small detail. They have 18,000 employees and contractors, and recruiting for open positions is going exceptionally well.

Unfortunately, this “company” is Al Qaeda.

Let’s face it, pictures like this are not helping the War on Terror™, and they are not helping America. The idea that the commander who allowed this to occur is shocked, just shocked I tell you that she is being sent elsewhere is, well, just shocking. Alright, I grant you that she should not have found out on the evening news.

But back to the topic of Al Qaeda. We invaded Afghanistan to get them, if you will recall. Then we left the job half finished. Then we got distracted by Iraq, and managed to mess up everything we could think of to mess up in the process. Even our plan for returning Iraqis to self-rule is flawed.

And that brings us to this week’s missive, brought to us jointly from the Department of Homeland Security and the Department of Justice: Look Out. Al Qaeda might be planning to attack. They won’t tell us what they plan to do, they won’t tell us where, they won’t tell us when except to say “summer,” but they will at least tell us who might be involved. Maybe they can get these guys to help out. Oh yeah, it’s credible or they wouldn’t bother to mention it. But it isn’t a big enough deal to be worth raising the alert level. If you are skeptical of the whole deal, you aren’t alone.

The War On Terror™ was supposed to make us safer. Instead, it has made the terrorists stronger.

Haitus, the Sequel!

I do not anticipate being able to post again before next week.

Special thanks to Dean Paxton, Jerry Kindall (check out the awesome photos!), Arcanis (whose LiveJournal I will politely not flood with strangers), KWCom (who actually puts me on the same page as InstaPundit!), Elisa Camahort, GroundMeat, LeaderLog, and all the other referrers.

Oh, and if you are really desperate for my so-called wisdom, you might look at this idea, which frankly makes more sense than ever in a world of absurd gas prices.

Son of Webvan

I’ve been quoted before as saying that if there were money to be made delivering groceries, Hooper’s Store would still do it. But, believe it or not there’s a second wave of online grocers. And there is actually a chance they are not all doomed.

From the ashes of the Webvan bankruptcy rises several breeds of internet based food delivery systems. On one hand, you have online divisions of the grocery stores you may already shop at: Albertson’s; Safeway. They have the distinct advantage of not needing big warehouses with lots of employees: regular employees can just take product off the shelves and put it on a truck. Then you have companies like Peapod, who in addition to their own internet grocery business do product distribution for several traditional grocers. Finally, you have the specialists. Companies like FreshDirect appear to be the boutique shopping option for groceries.

So, what do these companies have to do to avoid Webvan’s ignoble fate?

Do it right from day one. Too obvious, huh? If you let the customer’s first experience be a bad one, you can just forget ever serving them again. So find out what the customers are going to want first and determine whether you can — literally — deliver.

Make lots of information available online. There are lots of people who read labels before they buy things. If you want to make them internet shoppers, you have to get them that label information, whether it’s in the form of a big database or links to manufacturers. Likewise, alert customers to things like label changes and availability of seasonal produce. While you are at it, take a cue from Home Depot’s “don’t forget to buy this for your project” lists. If your system can see that a customer has all but one ingredient for a common recipe, suggest it. Or use an Amazonian model of “people who bought these products also selected these items.”

Advertise, but don’t over-do it. I still have a collection of assorted Webvan magnets. I have no idea how many postcards they sent me that I threw away. By contrast, I occasionally hear an ad for Albertson’s online service, and I see the truck sitting out front. I know they are there if I need them. Really.

Service, service, service. Toilet paper and boxes of cereal are one thing, but most people just aren’t sure they want fruits, vegetables, and meat picked out by a complete stranger. To counteract that, an online grocer must develop an absolutely impeccable reputation for quality and freshness. Oh, and now that it’s picked out, it needs to arrive on time, every time, when I need it. If that means delivery at 7 PM when everybody is home from work, so be it. If that means before 7 AM so things are there by breakfast time, so be it. If your customer had time to go to the grocery store during banker’s hours, they probably would.

Grow conservatively. It’s best to do one region well than 4 regions poorly. Attempted (and failed) hypergrowth is one of the reasons Webvan failed. For that matter, be willing to write off failures as soon as they are obviously failures. Food Lion wasn’t afraid to walk away from its failed stores in Texas.

Be realistic. Not everybody is willing to pay $10 to have groceries delivered. That’s just the way it is.

Oil’s Well That Ends Well

For the benefit of those of you who may indeed be reading this from under a rock, I will point out that the prices of both gasoline and oil are at highs, with more highs coming. I will not be shocked if Trilby Lundberg continues to announce record high gas prices at least once a month until Labor Day. On the West Coast and many other places, you can expect to pay at least $2 per gallon, even at Bad Neighborhood No Name Gas Co. Quickie Mart. Some analysts are predicting a full blown 70s style oil crisis. Any readers from elsewhere in the country who might be able to shed light on whether gas prices are really higher in Red States than Blue States, please feel free to comment.

Some of you are wondering when these kinds of things are going to have an impact on the economy at large. The answer is right about now. The world’s biggest retailer, WalMart, figures the current price of gas costs its customers an addditional $7 per week. This of course means about $45 less they can spend each month on other necessities, let alone desires. This is a big deal to the typical WalMart shopper. This is almost certain to effect all but the highest end retailers.

The fact that almost every product you can have in your home spent part of its supply chain in a truck means that rising gas prices very quickly translate into general inflation. It’s happening now. The Europeans are worried about us. Well, more precisely, they are worried that inflation will effect earnings, and they are worried about the standard prescription for inflation, interest rate hikes. Oh, make no mistake, they know it’s coming. They are concerned about the timing and dosage. After all, the Fed Funds rate has been sitting at 1% for a while. A modest sounding 25 basis point hike (0.25%) would be a rise of 25%! As if that isn’t enough, there is some evidence to suggest that spikes in oil prices come before recessions.

Want to know who else is worried about oil prices? The Airlines. All those planes use a lot of fuel. It should be no surprise that when you can’t control your costs, you can’t predict how much money you will have at the end of the quarter. Frankly, the airlines have enough to worry about. Consumers just don’t like what’s happened to traveling by air. Even the TSA realizes there is a problem.

Alas, it isn’t as simple as just pumping more oil. Here’s Paul Krugman’s take on the situation. In short, however much the Saudis would like to control crude oil prices, they can’t. The oil they are able to bring online in a timely fashion has too much sulphur in it. And OPEC is already pumping over its targets. Bringing new sources online is a long term answer to an emergency problem. In Alaska, they are not counting on these high prices lasting for long. Seriously, new sources of oil can take 5 to 10 years to yield marketable quantities. And that’s assuming there is oil to be found, that permits can be obtained, that the area is accessible, that the oil can be transported away….

Of course there are some winners in this oily mess. The Globe and Mail has a nice well thought out list, but really, the only one you need to know is this: Oil Companies.

Yeah, they are making millions on the additional $7 per week that WalMart estimates each customer is spending at the pump.

Sincerely, Insulted Female Voter

The following is the draft of a letter I will be sending to the editorial staff of Alternet.

To Whom It May Concern:

As a regular reader of Alternet, I find myself insulted by the blatant sexist subtext of Lakshmi Chaudhry’s essay, “What John Kerry Needs: The Estrogen Factor.” I am not sure what I find more outrageous: the insinuation that the woman who pasted her head over Mrs. Edward’s picture is in any way “typical” of female voters; the description of women as “those creatures with breasts”; or pointing out that “the fact that Edwards ‘looks seriously hot’ while he’s making his pitch doesn’t hurt either.” Even John Edwards should be insulted by this message of “He’s more than just a pretty face.”

If your point is that Senator Edwards is able to effectively deliver a message of importance to female voters, please make that point and move on. Frankly, this article smacks of “Oh yes! Kerry should run with Edwards because he’s so dreeeeeamy!”

Don’t get me wrong, being charismatic is a huge asset to someone running for office. Dennis Kucinich can attest to this. He has great ideas but, well, looks so unpresidential. Senator Kerry would be wise to get some of Kucinich’s ideas on board, and perhaps even get the man himself on board helping make policy. However, if the Presidential race comes down to looks and charisma, perhaps we should completely sell out and consider Brad Pitt. Or maybe Harrison Ford — he has at least played the President in a movie. Don’t you think that would spice up the Vice-Presidential debates this fall?

If Senator Kerry wants women’s votes this fall, the key is not his Vice-Presidential candidate, but the issues. Talk to us about things that matter to us. Strangely enough, most of the things the female half of our population cares about effect the rest of the country too.

For example, everybody needs healthcare. And at this point, I think we can all agree it is expensive. Furthermore, I think anybody who has honestly looked at the issues understands that nothing President Bush has done has improved things.

How about food safety? We all eat food, don’t we? And choosy moms would like to know they aren’t feeding their kids mad-cow burgers, or otherwise dangerous food.

Don’t forget education. Education is a critical issue not only to moms, but to anybody who has employees, and anybody who wants to make sure America has a stable, productive economy in the future.

Oh, and don’t forget the price of oil and gas. Frankly, it is vitally important to everyone. It’s important to everyone who uses a vehicle to get to work or school. It’s important to small businesses. It’s important to big businesses. It’s important to the economy. It’s important to global security.

This is to say nothing of civil liberties (which we all have), the environment (which we all live in), inflation (it’s back!), and even the 40 hour work week (which still might be in danger).

John Edwards may well be the right man to be John Kerry’s running mate. However, it that is the case it is because of his stance on the issues, not “The Estrogen Factor.”

Happy Mother’s Day! Look what I made you!

The teenager who apparently wrote the Sasser and Netsky worms may have been trying to help drum up business for his mom’s computer repair shop. Sven J. has been arrested, but not before he unleashed what was supposed to have been some kind of damage limiting version of the worm. Indeed, according to the young hacker, Netsky was originally intended as an anti-viral virus to combat MyDoom and Bagle. Oh yeah, except for that whole attacking the local educational server thing. He may, however, avoid jail-time because he just turned 18.

Another worm was apparently written and released by an acquaintance of Sven J. The second young man was also arrested last week. Phatbot is the latest in a line of viruses begun in 2002. It is a spambot, and if you think you have gotten more than your fair share of spam in the last week or so, Phatbot might have something to do with it.

No idea what I’m talking about? How Stuff Works has a good explanation. Go ahead, there’s no harm in admitting you don’t know stuff.

Victims of Sasser, which has only been in circulation since April 30, include Westpac Bank, the Northern Territory Government, British Airways, Delta Airlines and the UK Maritime and Coastguard Agency. These are not home users with neither firewall nor clue; they are large organizations with large Information Technology departments. These are people who have the expertise to make networks secure, even when the official solution is the problem. It costs businesses a lot of money to keep up with this stuff, and even more to combat actual outbreaks. And guess what? Those businesses turn around and pass the costs on to their customers. You.

And that is to say nothing of the time and money you may spend should you be the victim of such a virus.

Microsoft is going to need to do more than give out bounties to stop the virus problem. The idea that a high school student — who his computer teacher described as “not show[ing] early signs of genius in the technological world” — and his college aged buddy could write viruses that can infiltrate a variety of allegedly secure networks is absurd. The fact that one young man has been writing related malicious code that exploits one, single Windows vulnerability for 2 years is absolutely outrageous.

You deserve a virus free computer. Really.

If you only have time to read two important things today, they should be these. First, check out what Security Guru Bruce Schneier has to say about surveillance and search warrants. Then try this piece about hiring trends, inflation, and balancing the economy.

Respect

We interrupt this post to point out the obvious. Torturing, humiliating, and murdering prisoners is a bad thing. Even the President of the United States says so. It isn’t even acceptable when it happens in American prisons. Don’t dare excuse it by saying these were all “bad” people. The bottom line is they are all people. Maybe they don’t deserve deluxe accommodations and gourmet meals, but they surely don’t deserve what has happened either. Enough said.

We now return you to your previously scheduled commentary.

When I took English 1302 in college, they took great pains to remind us that when writing an essay, we must consider our audience: who will be reading it; what will they be expecting to see; what do we want to say to them. There was the tacit understanding that through most of our collegiate career, our primary audience would be our professors, who would among other things expect to see good grammar and spelling, and an adequate understanding of the things you were supposed to have learned in class. Depending on the professor — and this was something you might hear in passing or something you might experience first hand — you might be expected to adhere to a certain party line, and at least pretend to espouse liberalism, conservatism, feminism, chauvanism, capitalism, socialism, Protestantism, Darwinism, or the theory of the day. Failure to adhere to this unwritten rule is failure to consider and cater to your audience.

This principle can be applied to business too. In fact, I like to summarize it as follows: Do not annoy your customers. This includes both people who use your product/service, and those who might do so someday. This may come as a shock, but people don’t like to do business with companies that annoy them. There are some exceptions to this rule of thumb, for example if you are fortunate enough to have a monopoly (telephone, cable, computer operating system). Or perhaps if you are in a situation where the people who pay the bills are different from the people who actually use your services (any business that depends on insurance companies for reimbursement).

The bottom line is that I will avoid giving you money if you annoy me. That being the case, don’t stuff flyers under my windshield wiper. Don’t stick them in my front door. Don’t send me spam, don’t call me, don’t send me junk faxes (who the heck are these people buying OTC penny stocks on the basis of a fax tip anyway? And when I want a new mortgage, I’ll call a mortgage broker rather than check my fax machine). Think about it for a minute: do you do business with companies that advertise this way? No? Then why on earth would you waste time and money doing it? I don’t really mind junk mail, because most of it recycles. Besides which, every once in a while I actually find a company to do business with from junk mail. Just the same, how many AOL CDs do I really need?

Make it easy to get ahold of you. I shouldn’t have to play tag just to find a valid phone number for you. When I do call, I do not want to navigate an arcane voice-mail system, I want to talk to you and arrange service or solve a problem. And if you have a web site, it should be simple, fast loading, and easy to navigate. Oh, and it should definitely include a way to reach you someplace.

I’m already your customer? Then return my phone calls promptly. Show up when you say you will, and have all the equipment you need to do the job. Do what I need done, and do it right the first time. I will not be happy if you have to come back to my property to fix things you messed up, missed, or just plain didn’t do correctly. Be responsible. Don’t tell me how reliable and professional you are, show me. Gee, another business rule you could have learned in English class.

Don’t talk down to me, don’t try to sell me goods and services I don’t need, and for goodness sake don’t you dare call me “dear” or “honey.” You can darn well call your customers by their title and last name: Mr. Jones, Miss Smith, Dr. Stewart; your customer is not your buddy. If you have a customer who feels this is too formal, he or she will correct you. Smile and comply with his or her wishes. The “topic sentence” of this paragraph — and this essay — is treat people with respect.

Wanted: Truth in Headlines

According to the Chicago Tribune, Poor Kids Thrive in Charter School. (Here’s a no registration required version, and a related story). This brings to mind a thesis that all we need to do to improve schools in poor neighborhoods is turn them over to private management and let them be charter schools. Free them of government oversight and teachers unions; let the miracle of free markets do the rest. Unfortunately their anecdote does not prove the headline.

The school in question is the Preuss School, run by the University of California at San Diego. Here, 750 specially chosen students from around the area attend a $14 Million facility one more month a year, one more hour a day, and have double-length classes that meet every other day. Parental participation and volunteerism is expected. Evidence of their success is high attendance, high college admissions rates, and high rates of actually taking the SAT. A better title for this essay might be “Select Group of Poor Kids Thrive in One Particular Charter School.”

What they have proven is that the sort of student who will enroll in such a school, and whose parents will support such a decision, are achievers.

Companies that run private and charter schools — companies like Edison and Nobel — do not have $14 Million facilities. Nor can any school district afford to turn every campus into such a facility. Few organizations have the ability to make teachers work more hours. Neither private companies nor average school districts have the backing of major universities and the bottomless pool of Education Majors those universities are training. This model is replicable, but absolutely cannot be made universal.

Speaking of what is best for the children, what was the American Academy of Pediatrics thinking when they published a report suggesting a wait and see attitude for kids’ ear infections? Waiting a week might be reasonable, but “For children who are not at risk for speech, language or learning problems, ‘watchful waiting’ for at least three months is recommended instead of treatment.”

Just what every parent wants to do, spend 3 months watching and waiting with a kid whose ears hurt. Besides which, almost by definition a kid who has an earache for 3 months is at risk for speech, language, or learning problems. The strange thing is that the members of the AAP will wonder why parents find this advice unacceptable.

Going Up?

It isn’t your imagination. Prices are going up. Food is costing more. Gas is costing more. Anything imported from China is costing more. It doesn’t take Warren Buffett to tell you that inflation is here and “that the companies that will be best suited for this environment will be ones that either have unique products and services or aren’t as dependent on purchasing inflation sensitive goods.”

The bottom line is that the FOMC will be raising interest rates — probably not at their Tuesday meeting, but at their June 29 meeting. So say the experts, and frankly the FOMC does not like to move unless the experts know it’s coming. But since Reuters and the Associated Press both see it coming, a hike in interest rates shouldn’t surprise anybody who keeps track of these things. Lock in those Adjustable Rate Mortgages now, alright? And don’t say I didn’t warn you.

One of the more important things about the currently beginning round of inflation is that the items in question are not things we can do without. Everybody eats food. Of course, shoppers are doing everything they can think of to pay less for food. Who can blame them? Maybe that’s why grocery chain Winn-Dixie is planning on selling or closing 156 stores. Insert obligatory comment of what you think of Winn-Dixie, but the fact is they can’t compete on price, and they’ve never been known for competing on quality.

As for gasoline, even if you don’t own a car you probably depend on the stuff. Indeed, if you are reading this site on a computer, that computer had to be transported to where it sits from the factory. Chances are it rode in a truck for at least part of that journey. At least be cheered by the fact that truckers aren’t happy about rising fuel prices either. The bottom line is that gas prices are continuing to go up, that Trilby Lundberg will continue to announce record high gas prices as needed through the summer, and that Big Oil will make a lot of money.

Oh yes. And then there’s China. Part of our inflation problem is that China is experiencing inflation, and their currency is linked to ours. This of course means anything they export to the United States has to cost more to cover the increased costs of manufacture. This is a big problem. Just look at some random country of manufacture tags around your home and in stores. A lot of goods come from China. And why does China have an inflation problem? Because of the Weak Dollar. Frequent readers know that the Weak Dollar policy is allowed by the current administration for several reasons, including a misguided belief that it will improve the trade deficit. But this policy had another consequence: oil is pretty much bought and sold in American dollars around the world; the Weak Dollar means OPEC feels they can’t afford to keep oil prices low.

The high price of gas and the rising price of Chinese goods are inextricably linked by the Weak Dollar. This leads to higher prices for everything, including food. The cycle feeds itself.

The good news is that Wall Street has another word for inflation: “Pricing Power.”