JACK MIXNER STRATEGY

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Just about the time you begin to wonder if VCs are making any investments at all comes word that VCs want to invest in the obesity space (Glasner):  Thythm Pharmaceuticals go $21 million; GI Gynamics go $15 million; Satiety got $25 million; Elixir Pharmaceuticals got $12 million; ValenTX got $22 million. All these investments have to do with treatments for obesity. Rush out to develop a new treatment yourself? It is probably too late, unless you really do have a disruptive methodology.

Reference

Glasner, Joanna. Rise in obesity makes VCs hungry for startups. Reuters. 25 Mar 2010. http://www.reuters.com/article/idUSTRE62O3SO20100325?type=smallBusinessNews

Posted by jackmixner at 10:37 AM | Permalink

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It is tricky to say who defined terms first in the busines press. Value chains have been around for a while. Porter talked about them. So does Moore. Moore also shows why Christensen should have talked more about value chains in his work on disruptive strategy. Let's see if we can reconcile all this into a workable strategy.

Porter's model worked like this (Porter, 60): Inbound Logistics flows into Operations flows into Outbound Logistics flows into Marketing & Sales flows into Service. There are overlays of Firm Infrastructure, Human Resource Management, Technology Development and Procurement. It is handy to remember, as well, that Porter (Porter, 12) compared Competitive Scope with poles of Narrow Target and Broad Target, to Competitive Advantage with its poles of Lower Cost and Differentiation, to yield his Three Generic Strategies of Cost Leadership, Differentiation and Cost Focus/Differentiation Focus. I suggested recently that the Orange County Business Council use the Porter Value Chain model for research they are performing for the Workforce Investment Board because the methodology has been around a while and is seemingly bullet proof for workforce projections. Customers and competitors are crucial to the model, as a firm is always bench-marking performance against the norms.

Moore (Chasm, 12) talked about a bell curve comparing five sequential consumer populations: Innovators, Early Adopters, Early Majority, Late Majority and Laggards. The crucial section (Chasm, 17) described the near certainty that, while Innovators and Early Adopters might like your new product, if you ever want to make money, you'd better figure out a way to "leap the chasm" of failure for most companies and figure out how to sell to the Early Majority, as their buying habits were vastly different from the Early Adopters in crucial ways. In Darwin Moore applies the value chain concept to innovation (Darwin, 38) while enhancing his discussion of the chasm by describing its effects on complex sales and volume sales.

Christensen explores the evolution of the disk drive market (Christensen, 16), pointing to the inevitability that disruptive products (from new, smaller, more innovative companies) are nearly certain to replace sustainably improved products (from main-stream companies). His team at Innosight follows with a methodology (Anthony) to keep your main-stream, not very innovative, company disruptive.

The Boston Consulting Group compared relative market share with growth rate in its Growth Share Matrix (Boston). Question mark divisions become stars or dogs according to the their relative growth rate compared to the competition and the growth of the market. Hopefully, stars become long-term cash cows, not dogs. The message from this is that divisions migrate from section to section according to market conditions.

Moore very usefully attempts a mash-up of all this disparate information. He amplfies Porter's value chain with overlays for complex systems requiring consultative sales processes and for volume operations where the sales process focuses on a closed-end transaction (Darwin, 38). Then, he applies four innovation zones (Product Leadership, Customer Intimacy, Operational Excellence, and finally, Category Renewal) to the Chasm bell curve. For instance, he defines four different innovation technologies that apply to growth markets (Darwin, 73) in the Product Leadership zone of his Chasm bell curve and ranging up to mature markets: Disruptive Innovation, Product Innovation, Platform Innovation and Application Innovation. You have a choice in your company. If you are rapidly growing, focusing on just a few strategies in this range makes sense. If yours is a mature company or - horrors - a declining company, returning to the growth market strategies also makes sense.

Specific strategies are strengthed when you consider the stage of your technology - and your firm.

References

Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield and Elizabeth J. Altman. The Innovator's guide to Growth. Putting Disruptive Innovation to Work. Harvard Business Press. 2008. 

Boston Consulting Group. Growth Share Matrix. http://en.wikipedia.org/wiki/Growth-share_matrix

Christensen. Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997. 

Moore, Geoffrey A. Crossing the Chasm. Marketing and Selling High-Tech Products to Mainstream Customers. HarperBusiness 1991.  

Moore, Geoffrey. A. Dealing With Darwin. How Great Companies Innovate at Every Phase of Their Evolution. Portfolio. 2005.

Porter, Michael E. Competitive Advantage. Creating and Sustaining Superior Performance. Free Press. 1985.

Posted by jackmixner at 05:10 AM | Permalink

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When you facilitate the strategic planning process, you focus on six basic objectives for the corporation (Birnbaum, 128):

1. Financial
2. Marketing/sales
3. Product/services
4. Operations
5. Human resources
6. Community.

It's a good list as it includes all the obvious objectives you might want to form. Consider making a couple objectives under each major category and you're done. That's simple. Sometimes things are forgotten. Marketing always seems to come first as it drives the top line. Operations is melded into human resources in today's environment as your objective many times is to reduce the head count to increase efficiency. That head-count reduction might have worked over the last eighteen months, but by now it is wearing thin, as are your worn out employees. You could lean on your suppliers to reduce costs, or convert to a quality system of some sort that focuses, for instance, on continuous improvement. I'm thinking those are nice strategies, but didn't we take care of them in the eighties? What do we do now in operations?

There's a picture of an Chrysler automobile manufacturing line that says it all (Simpson, 280). It shows three seemingly different models of Chryslers (two Grand Cherokees, a Chrysler 300C, and a Chrysler Voyager) all going down the same production line. Chrysler, although late to the flexible manufacturing game, is following a platform strategy, that of focusing on the commonalities in a group of products in order to cross-pollinate each of the products with like parts and processes. They do it to save costs and therefore increase profitability.

So, where does platform strategy fit into your strategic plan? Under marketing and product objectives, you might consider what products you are going to manufacture. You make sure that you have the technology strengths to manufacture the products you are targeting, and then firm up your product line strategy by segmenting all the different products in different lines. Right here you have an option to add a platform strategy to what you are doing. If you can figure out a way to provide like parts to many of your different products and product lines, you are on the way to a platform strategy. When the New Beetle came out, for instance, it really wasn't so new (Marion, 84). It fit into a product platform inside the world-wide Volkswagen scheme composed of VWs, Skodas, Seats and Audis. It's new design and all the hoopla related to it fostered growth across the platform as the New Beetle's use of platform parts reduced engineering costs and production costs as the volume of parts used across the platform increased with the bump in sales of New Beetles.

Now, there are impacts as a result of this decision. You have to consider product architecture, design, manufacturing and sourcing, and, finally, customer service. If you do it correctly, however, the platform strategy allows you to reduce costs significantly while at the same time increasing the diversity of your product line and its utility to consumers.

Reference

Birnbaum, William S. If Your Strategy Is So Terrific, How Come It Doesn't Work? AMACOM. 1990.

Bowman, Daniel. Effective Product Platform Planning in the Front End. In Simpson. 19.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

Simpson, Timothy W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

Posted by jackmixner at 09:09 AM | Permalink

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My laptop blew out its screen recently and it looked like I was going to have to buy a new one. Since I wanted more portability, I looked at the netbooks. Since I had reported here about the one computer per child movement, I knew about Asus computers and their EeePC. I was focusing on the one with the new Intel chip, the 450N, because it seems that it had the longest battery life. All good. What was also good was that I was able to fix my old laptop and move on without buying another box. All this forced me to understand what the Taiwanese and other Asian businesses are discovering: Silicon Valley is a good place to do research and buy early stage companies. Why let the Silicon Valley VCs have all the fun? They can do it themselves.

And do it they are.  There's risk here, you say. Why would they want to take on this risk? And how can they compete with the VCs on the ground? Not possible. Possible! If you've dealt with Angels and VCs lately, you realize that they aren't investing like they used to, and, when they do invest, they are taking less risk. They feel more like bankers than VCs. What's an Asian tech company to do, especially when it wants access to new ideas and designs? Invest. And invest they are. That Asus computer I mentioned above used to be an unknown. They'd learned how to make the designs. All they had to do was make a complete box. They did it for others, now they are doing it for themselves. It all makes sense. Silicon Valley better get going. Now is the time.

Reference

Vance, Ashlee. Asian Computer Makers Move Into Riskier Ventures. New York Times. 15 March 2010. http://www.nytimes.com/2010/01/06/technology/personaltech/06valley.html?ref=global-home 

Posted by jackmixner at 12:57 PM | Permalink

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The dot-com frenzy was bad, no question. The NASDAQ fell, what, eighty percent? The Dow fell a lot too. Recovery took years. The frenzy was an investment bubble without much debt on the table. It was all equities. The initial public offering market hasn't really recovered yet. There was a recession yes, but not like this one.  

What makes this recession different (Lowenstein, 26)? House prices doubled, but that was nothing like the dot-com growth in stock values. However, and there is a big however, there was one big difference. The dot-com bust relied on the growth of stock values and their ultimate bust. The mortgage debacle was based upon risk alright, but not consumer risk. It was lender risk. Lenders figured out how to risk more and more money on loans that didn't ever pencil out. There's a ratio you want to watch, the ratio of capital a bank has to the amount of loans a bank has. Have to many loans with no capital and you are going to have a problem. Something like the Great Recession. Banks were allowed to carry too many loans without enough equity to balance them and the banks got caught. Now here is the good part: it will happen again, guaranteed, unless the regulators do something. All the derivatives allowed the banks to hide loans and make their ratios look far better than they were. So, regulators need to figure out how to measure debt ratios at banks and keep the banks from increasing their leverage too much ever again. That's the simple solution: reduce risk in lenders by making them play by more conservative rules. That's the solution. There's an ugly word here, however, and even moderate Libertarians will watch carefully. That word is regulation. Supposedly, capitalism is self-regulating. Well, this time around, we proved that capitalists make errors. Our job is to make sure they don't make the leverage mistake again.

Reference

Lowenstein, Roger. First, Slap Limits on Bank Leverage. The fight over a financial consumer protection agency misses the point. What fueled the crisis was bank debt. Bloomberg BusinessWeek. 22 and 29 March 2010. 26. http://www.businessweek.com/magazine/content/10_12/b4171026575784.htm

Posted by jackmixner at 12:35 PM | Permalink

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My friend Steve Maylish first referred me to an article (Marion) about the Chevrolet Corvair and platform strategy. I have to admit that early on, I was giving him a hard time because the Corvair, as we all know, has a storied past, what with Ralph Nadar and all. If you give the message a little time, it grows on you, however.

The Corvair was conceived in about 1955 as a Volkswagen killer. The Big Three in America realized that the foreign imports were doing something they hadn't even considered: selling small cars. General Motors decided to do something. The result was the Corvair. If you look a little more closely, you will notice that the Corvair isn't one car, but at least three or four depending on your definition of a car. There was a four door. There was a two door. There was a two door convertible. There was a van. There was a pick-up of sorts. Then, for most of the models, there was a souped-up version that was a lot of fun to drive. All new. All based on a new platform (when had we ever seen a rear engine car in America before, at least since the very, very short-lived Tucker?) with many shared parts across all the models. Now you have to squint a bit, but you will realize that the Camaro replaced parts of the offering, as did the Chevrolet Van. They were part of the platform, too.

Early on, the Corvair was disruptive in the industry. It was different, certainly. Cheaper, probably. It's smallness forced them to leave off some of the fins and chrome American autos were famous for at the time. It allowed General Motors to enter the compact market with a new design conceived from a blank piece of paper.

The platform part of the strategy allowed GM to use the engines and suspension parts across the whole product line, saving money and design time. Looked at another way, because they were focusing on fewer parts, they were able to invest more in each part.

Reference

Simpson, Timoth W., Zahed Siddique, and Jianxin Jiao, editors. Product Platform and Product Family Design. Springer Science+Business Media, Inc. 2006.

Marion, Tucker J. and Timothy W. Simpson. Platform Leveraging Strategies and Market Segmentation. In Simpson. 73.

Posted by jackmixner at 11:02 AM | Permalink

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Buried in a book (Micklethwait, 144-146) on the history of the corporation is a very good description of what makes Silicon Valley - and now the world tech community - so strong and resilient. Micklethwait identified four key points:

Silicon Valley products were miniaturized with ever more computing power. The introduction of the Internet reduced transaction costs across the economy.

Silicon Valley corporations relied on creative destruction. Some failed, but out of them came new companies. Shockley begot Fairchild begot Intel. Those new company's leaped into profitability: they were gazelles. The American mores of failure toleration, treachery acceptance and attitude were clear. They dumped ties and suits - and last names - even back in the fifties.

The Silicon Valley model has spurred looser hierarchies all over the world. More and more economies rely on gazelle firms. Alliances, partnerships, joint ventures, and franchises are universal.

Finally, all efforts to create state companies are failing. States are concentrating on fostering entrepreneural clusters with their fierce competitors.

Reference

Micklethwait, John and Adrian Wooldridge. The Company. A Short History of a Revolutionary Idea. A Modern Library Chronicles Book. The Modern Library. 2003.

Posted by jackmixner at 02:23 PM | Permalink

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Let's say the business press has been speculating about which firm in your industry will make a particular technological advance in an existing product line. The press is looking to identify the winner, as they speculate that the winner's stock value will go up when it announces this new incremental improvement. If you read between the lines - and you're the CEO - you might make the decision to invest heavily in the incremental improvement in order to take advantage of this hit to stock price. In strategic terms, we're talking about a sustainable improvement, one of many that have been made over the years in your product line. The question we're talking about still is "Does it make sense to invest heavily in this sustainable improvement in an existing product line, or is it OK to follow along as other industry participants make the incremental improvement first?"

Let's contrast this sustainable improvement with a disruptive improvement, an improvement made to a product in a small, emerging market. Let's underline the contrast again. Does it make more sense to invest in a sustainable improvement to a current product line, or does it make more sense to invest in a disruptive innovation in a product line that, while new, could grow rapidly?

Christensen tells us the answer (Christensen, 132). Invest heavily in the disruptive innovation to the new product line. The pay-off is twenty times as lucrative as the investment in the sustainably innovated product line.

In financial terms, we're talking about two types of risk, market risk and competitive risk (Christensen, 132). If you are going to invest for the biggest bang for your buck, invest in markets, especially emerging markets and products as opposed to investments in competitive situations where market leadership doesn't matter so much (Christensen, 132).

Reference

Christensen, Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press. 1997.

Posted by jackmixner at 12:06 PM | Permalink

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The New York Times just announced that the administration has the votes to pass the healthcare bill. Since I have just finished a book that includes whole sections on another chapter of the healthcare business history I couldn't help but look for commonalities.

Jim Clark helped found Silicon Systems back when. For his efforts (and after he was forced out) he made tens of millions of dollars. To prove he could do it again, Clark made hundreds of millions on the first Internet stock, the one that started everything, Netscape. Of course, as we all know, Microsoft slowly ate Netscape's lunch. So Clark had to do it all over again, with what they started to call Healthscape (later changed to Healtheon because some smart kid already owned Healthscape.com). Now, Healtheon was posed to really shake things up.

Jim Clark had drawn a picture that you can mimic easily on a napkin if you decide to (Lewis, 99). He put four dots on the paper. One was labeled Payers, another Providers, the third Consumers, and the final one Doctors. Pretty simple. You have to remember this was during the Internet boom. You didn't need anything but four dots to go public. So where was Healtheon in those four dots? Right in the middle, taking a portion of the flow of monies for every transaction flowing between the four dots. This was simple to do as this was the Internet. Everything would be automatic. 

Healtheon almost made it big, except for one problem: the Russians defaulted on some bonds, sending the whole market into turmoil and sinking many offerings, most forever. Healtheon ultimately sank too.

I promised commonalities between the Obama plan and Healtheon. I guess I won't be wrong if I say they are both big. Healtheon thought they had a simple solution that would work. The Administration may not be convinced that they have a simple solution, but they do clearly believe that they have a solution that will work. I am going to stop right there. All I will say is that something needs fixing in the healthcare mess and that, hopefully, the solution they are about to vote on will start the process of fixing some of the weaknesses. I suspect this will be even harder than we envision (someone told me the bill was more than two thousand pages long - amazing!), but the first step is always the hardest. Good luck to us all.

Reference

Lewis, Michael. The New New Thing. A Silicon Valley Story. W. W. Norton & Company. 2000.

Posted by jackmixner at 02:50 PM | Permalink

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Mike Bloomberg joined Salomon Brothers in 1966, fresh out of the Harvard MBA program. He counted securities for a while before he moved upstairs to the stock-trading department, working for Jay Perry, with whom he worked until Perry moved on the Dallas, allowing Bloomberg to take his job as head of Salomon's equities desk (Purnick, 26-32). Exile to the "information services" department in 1979 came as the result of serious in-fighting with the same man who was instrumental in exiling Perry to Dallas earlier (Purnick, 33).

Exile could have been the end of the story except for Bloomberg's interest in things any trader in his right mind in the seventies wasn't even considering: how to instantaneously use information to make more money. Manual was the norm. You made decisions based on gut feel and old data. No one was taking advantage of real time information very well. No one was making use of historical information at all. Enter Mike Bloomberg.

While still a trader, he started to figure out how to program the Quotron machines that Salomon had early on invested in. Ultimately, you could ask the machine "what if" questions, something no one had ever considered doing before (Purnick, 34). So Bloomberg's exile became a learning opportunity. The Quotron turned into desk top, personal computers for every analyst, something the rest of the firm still thought a foolish waste. Main frames staffed by staff in a back room were the norm. Bloomberg pushed and pushed and pushed for more personal computers. That pushing had an effect, just not the effect Bloomberg had expected. He still had enemies (remember the guy who exiled him to IT in the first place?) who, in a reorganization of the firm, finally pushed him out the door (Purnick, 36-37) for good in 1981. A nice thing was buried in the distaste of the firing: they handed him cash and securities worth $10 million and sent him on his merry (not too happy, probably) way (Purnick, 37). Bloomberg took two other Salomon values along with him: he didn't cheat, and he "wouldn't tolerate dishonesty" (Purnick, 37).

Drum-roll please! Enter opportunity.

Basically, we all know the story from there: Bloomberg and a small team sold their services to Merrill Lynch to program some computers. Merrill kept buying and investing in Bloomberg's firm long enough for him to reach the critical mass needed by an entrepreneur to succeed. Let's just remember that by the time he closed his first deals, Bloomberg had been working diligently not for a couple years, but for almost two decades. This was no over-night success.

Reference

Purnick, Joyce. Mike Bloomberg. Money, Power, Politics. PublicAffairs. 2009.

Posted by jackmixner at 11:35 AM | Permalink

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We all know that Quickbooks has sold so many copies because it does accounting differently. No double entries. Simple reports. Those are features. The benefit of Quickbooks is that you can do cash flow for your business - fast. Load up Quickbooks with regular data, push the button and out comes a cash flow projection. Any owner of a small business - a middle market owner, as well - will tell you that, come Friday night, when things are winding down for the weekend, she or he wants to know one number: How much money is in the bank, and how much money will be in the bank next Friday evening? Simple number that could be labelled "Survival" - or "Canary".

So, what are your canaries? Inventory used to be a bigger problem than it is today. We all cut inventory and saved some money. Cash flow will never go away as a canary. What about payables, receivables, booked sales, pipeline, sales calls completed, sales calls leading to closes? There are lots of possibilities for your business.

Strategically, there are some interesting ones. Size of innovation team. Productivity of innovation team. Productivity in whatever form. Innovation plan. How about strategic plan? How about strategic plan actually implemented? Employee turnover. Number of employees. Outsourcing plan. Outsourcing productivity. Insourcing plan (there's a new word, I guess).

Is there any one predictor that you can use for your canary? You probably know what it is. That's good. Does your team know what it is? Why not?

Reference

Heath, Dan and Chip Heath. Business Advice From Van Halen. Fast Company. 1 March 2010. http://www.fastcompany.com/magazine/143/made-to-stick-the-telltale-brown-mampm.html

Posted by jackmixner at 09:23 AM | Permalink

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We've been talking for some time now about the advent of a computer for third world kids. Slowly, the talk is turning into a reality. Negroponte reports (Negroponte, 81) that "1.4 million children in 35 countries" speaking "25 languages" are using the original $100 computer (which actually cost $175), the XO from One Laptop per Child. That circuit board had lots of pieces, maybe 900 or so. The goal? A circuit board with "only one chip" (Negroponte, 81). That's all. One chip. And, oh, the computer actually costs $100 this time around, hopefully.

Who cares? First generation XO's go home with their owners. Kids sleep with their computers. They're learning like never before. All 1.4 million of them. Think about that number. 1.4 million is a lot. And yet it is nothing when you consider how many kids there are in Africa. Or South America. Or Santa Ana. We have a way to go yet.

But that's the good thing. There are opportunities here. The XO sparked all sorts of things, from cheap screens to cheap electronics to small computers to wider band width to more kids sleeping with their computers. This next chapter will do the same thing. The next version XO won't be a laptop, it'll be a tablet (Negroponte, 81). You're thinking, "Apple already did that, so what?" Think again. A one chip tablet isn't going to be given to 1.4 million kids. I'll bet 140 million get one. Think about that. Negroponte got beat up last time around because the price wouldn't go down fast enough, because Intel jumped in and created a cheap chip of their own (the Atom, in all those netbooks out there), and because Asus said, "We'll move from chips to computers" and started to make a good competitor to the XO. Big deal. Yes, big deal. Negroponte pointed out a need, started down the production path, got beat up, sparked a new industry, kept going, and still has a vision for more change. He's one guy.

How come your design team isn't acting like that? "Oh, they're too busy," you say. Really? Have another look.

Reference

Negroponte, Nicholas. The Next $100 Laptop. Wired. April 2010. 81.

Posted by jackmixner at 08:14 AM | Permalink

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Right now it is easy to take shots at Toyota. GM and Ford are taking pains not to, as they know what it feels like to be in the spotlight. But that doesn't mean that we can't have a look at what went wrong at Toyota. Now, we can point, look at the facts, and, realize that we aren't getting the whole story. Here's the story we're getting from BusinessWeek: Jim Press warned the Toyota brass in Japan in 2006 that there were quality issues with Toyota autos (Ohnsman, 34). Earlier, the company president "boasted of saving $10 billion in the previous six years by reducing operating costs (Ohnsman, 34)." Now, so you know, we have a Toyota. We like it for all sorts of reasons. And, so you know, I have stood back and tried to decide if I would recommend that we buy another Toyota. If you listen to the ads of satisfied new customers, Toyota is hoping that my decision - and lots of other folks' decision - will be to buy another Toyota. I guess the way I'll look at it is to try to figure, with all the problems we're hearing about, the Toyota I might want to buy someday is as good as or better than other autos on the market. That's how I'll make up my mind.

There are issues that apply to a well-run company that we all have to recognize. Continual focus on the bottom-line can ultimately have serious implications. Continuous improvement has to focus on improvement, not continuous cost-cutting. There is a difference. Sometimes it is hard to ascertain. The step that is missing is to realize the difference and act upon it. Just following along and removing every iota of quality to save money isn't what continuous improvement is all about. Reducing production time saves money. Reducing the number of parts in an auto, done correctly, can save money. Saving money is good. Ultimately, folks will notice if the quality isn't there. Toyota has gotten caught in a spiral. With effort they'll do fine. The real benefit is to notice what happened and make sure it doesn't happen to your company.

Reference

Ohnsman, Alan, Jeff Green and Kae Inoue. The Humbling of Toyota. Bloomberg Businessweek. 22 & 29 March 2010. 33. http://www.businessweek.com/magazine/content/10_12/b4171032583967.htm

Posted by jackmixner at 02:48 PM | Permalink

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Occasionally, my pragmatic spirit gets in the way. In a quick stand-up planning session after another meeting recently, I changed my direction two or three times in seconds based on new information from others in the meeting. One of the women in the meeting said, "I'm never marrying you. You change your mind too much." That certainly caused this happily married man to pause and go "What?" And of course, from her point of view, my friend was correct. I do change my mind too easily, or so it seems. In my defense, I realize I am pragmatic - do what it takes, and all that - not hopelessly unable to make up my mind.

That "What?" allowed me to actually read Fish's comments about pragmatism, and caused me to ask my friendly research librarian to order Margolis' new book on pragmatism. The librarian was able to show that only six copies of the book existed, and that, really, did I want to order the book? Closer reading of the OpEd said, "No, don't read the book. You'll go nuts."

Pragmatism "is among the 'very small number of Western philosophical movements ... that ... never exceed the natural competence and limitation of mere human being (Fish quoting Margolis).'" That says there is a philosophy called pragmatism. We make pragmatic decisions all the time. We overlay other codes of conduct on our decisions, but, given a bit of flexibility, those codes don't have to be inflexible. Strategically, when you are working with a team, go with the flow. Have some plans that don't change - grow xxx per cent this year - but be willing to change, sometimes on the fly, what you are doing day to day. That's my read on the situation, anyway. But, and here is my personal caveat from experience with my friend, sometimes it pays not to change your mind too often.

References

Fish, Stanley. Pragmatism's Gift. New York Times. Opinionator. 15 March 2010. http://opinionator.blogs.nytimes.com/2010/03/15/pragmatisms-gift/?ref=global-home

Margolis, Joseph. Pragmatism's Advantage. American and European Philosophy at the End of the Twentieth Century. 2010.

Posted by jackmixner at 12:57 PM | Permalink

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First, he sold bonds on Wall Street back in the late eighties. Then he wrote about the experience in Liars' Poker. Now he is back with a book about the recent debacle entitled The Big Short. Already targeted for production as a movie (Osinski, 96), Michael Lewis' latest plays up the few players in the recent market who really made money, the ones who figured out that there was something wrong with all those mortgages out there, and figured out how to short the mortgage market, all to derision, first, and for great wealth, later. Osinski does a little digging and quotes an optimistic Lewis the day before the bond market broke in January 2007 and compares the quote with Lewis' final realization that, whoops, was he wrong. Rubbing it in when someone takes a bad stand is always fun for Monday morning quarterbacks, as it were.

Lewis got it wrong way back when. Luckily, the star of his book didn't. Michael Burry, a resident neurosurgeon, typed his predictions of doom into the ethers of the web as it existed in the late 1990's (Osinski, 95). People noticed, and sent him money to invest. He continued researching, hitting ultimately on the realization that mortgages "would start to blow up...when the original teaser rates expired" (Osinski, 96). Burry figured out how to invest his point of view and made a fortune.

Contrarians are always interesting to review in hind sight especially if they made money. There are always grey clouds over booming markets. The trick is to know when the rain is going to start. Modern strategy says have a plan and invest heavily in it. It is sensible to realize that everything good ultimately goes bad. Having a plan - having alternative investments already cooking - makes sense in any market. Right now, that means, yes, continue to improve the products and services your current customers happily buy. However, realize that it makes sense to invest in simpler, cheaper combinations for markets you might not normally address. Left a market behind in the last decade? It might make sense to look back to those customers to see if they might be interested in what you are making today, but at a cheaper price/feature point. If they're interested, maybe you have a way to grow, even in a slow growth market.

References

Lewis, Michael. The Big Short: Inside the Doomsday Machine. W. W. Norton. 2010.

Osinski, Michael. The Subprime of Their Lives. Bloomberg Businessweek. 22&29 March 2010. 94. http://www.businessweek.com/magazine/content/10_12/b4171094664065.htm

Posted by jackmixner at 11:51 AM | Permalink