It’s been far too long since I’ve posted anything on my blog. Making the move to NYC has been fun and work has been a huge time commitment, but I’m loving it. I get to do what I love, live in the city of my dreams, and in the end that makes the crazy hours and high stress lifestyle more than worth it. But more on that in the next few weeks.
One of my favorite activities to do in the city is walk. I put in my headphones, put on some music, and just walk. Lately I’ve been taking Friday afternoon and walking from my office on 51st and Broadway down to the tip of Manhattan and the Financial District. It’s a rather long walk, but it’s more than worth it. For someone who spent a large portion of his college summers traveling, it’s a reminder that living in NYC is like living in hundred different places while never moving more than 10 miles. Three blocks and you can move from a Asian metropolis to a Russian enclave. It’s seriously that diverse.
Last week before our quick snow, I was walking down the Hudson River Park on the west side of Manhattan. Near the end of my walk, I was lucky to be in the right place at the right time to capture this spectacular winter sunset over New Jersey. I keep forgetting my trusty Nikon D300, but luckily the iPhone 4 has a pretty amazing camera built into it… Like the adage says, it’s not the camera, it’s the photographer and the moment.
So yes, it is official. I accepted a job offer and now live/work in the Big Apple. So as a way to celebrate, I decided to take advantage of the amazing weather and walk from Central Park to Brooklyn via the Brooklyn Bridge. I was even asked to take a couple’s picture as they started on the bridge. Turns out 5 minutes later at the top, they got engaged. I don’t have access to my iMac and Photoshop yet, so these are extremely raw. Still, they came out excellent. Enjoy. Click on the photo below for the set.
It’s been almost 7 years since I planned and built my Eagle Scout Project while a member of Troop 45 in Chapel Hill. I thought I would go visit it earlier today (and finally take a few good pictures) and see how it is doing. Just for a little background info, the project is located in Camp Chestnut Ridge and was completed in 2004. If you are interested in the write up, it’s here and in PDF. The base plans (we modified them somewhat for the project) can be found here.
I am in a love affair with Adobe Creative Suite. It’s true and I’m not even going to try and deny it. The software is just so useful! But it’s also so powerful and comprehensive that learning how to use it to its full potential is nearly impossible. That being said, I’m starting to get decent at it. At least I can make mock ups for graphic designers to work off of.
But I can honestly say I’ve got Flash Catalyst pretty much down! In fact, I just built my first real site for a few friends of mine attempting to start their own Non-Profit Organization, Educators For Change. The site is early in development and we need to pump it full of content, but I’m feeling good about it’s look.
Of course the project has a long ways to go with my next goal being a custom blog template for the project. I’m 90% done with the Adobe Illustrator mock up. Now just to learn PHP… Anyone want to help out?
In the Indiana Jones films, there is one scene that to me, sums up the greatest lesson any entrepreneur and business developer can master; building a successful product is very different from running a successful business. They may sound like the same thing, but in reality, they are very different.
The scene itself is the one where Indiana escapes with his father from a Zeppelin Air Ship via the escape plane. Like any good entrepreneur, Indiana, an intrepid and resourceful problem solver, sees the opportunity in front of him and dives headfirst into taking advantage of the opportunity. After all, having a first mover advantage is a major asset when trying to turn an idea/opportunity into a realization. It’s especially true when the opportunity is the chance to escape capture and not die. As expected, Indiana takes the plane, but when confronted by his surprised (and impressed) father about his piloting skills, Indiana quickly admits that he can, “Fly yes… Land no.”
Although starting a company and flying/landing a plane are very different skills, Indy’s famous words resonate all too well for many successful entrepreneurs: they can develop an idea, but they have great trouble managing the company after takeoff. It’s a situation all too familiar with a lot of great innovators.
Netflix, a product that I personally love has recently made itself a very public example of why entrepreneurs often make terrible business leaders. Yes the founders are a very smart group of innovators who obviously know how to start a business, but the fact is they are still entrepreneurs who live by the mantra, “fail often, fail soon.”
As a result of living by such a mantra, entrepreneurs tend to make radical changes in their products. In fact, it’s an understood part of a company’s lifecycle. Fledgling companies almost always go through huge changes as their core idea moves from “some crazy idea” to a validated and marketable product. In other words, the best entrepreneurs have the ability to not grow overly attached to any one idea, but rather, they can see opportunity in failure and change. What may seem like a phenomenal idea on paper often fails, but as a consequence of failing, that idea sparks a secondary idea that ends up changes the world. It’s called the Teflon Syndrom. That’s a hard concept for most people to comprehend, but that’s how many revolutionary innovations come to life.
Unfortunately, that “fail often, fail quickly” mantra is also a dangerous characteristic in regards to running an established business. What may have worked for an unknown company trying to make it doesn’t always translate well for established players. It’s like completely changing a TV show years after it’s become a classic. Think of I love Lucy turning into a drama. For all we know, it could have been a great TV drama (great actors, a good story line, etc), but the fact is, consumers would never accept it. People hate dramatic change. They especially dislike it when they feel the change comes out of greed.
And that’s where Netflix is today. They are run like a start-up, but they are anything but a start-up. Why do I say this? If you look at the numbers and think about what they are doing in a very business-model-entrepreneurial mindset, Netflix is doing something a lot of small companies end up doing. They are still finding out who they are. And for that reason, I don’t believe that Netflix has nailed its own coffin.
By splitting their streaming and mail delivery options (and potentially doubling the subscription price per user) they have only lost 1 million of their 25 million subscribers. That’s not a killer loss. As a strictly business issue, they could very well end up increasing their overall profitability. Their move is what entrepreneurs like to call a pain-threshold test; they are re-evaluating and validating their products and subscription prices.
It’s all basic economics. When your product is inexpensive, a lot of people will pay for it. The more expensive it is, the fewer people will pay for it. It’s really a simple supply and demand problem. At some point in between the extremes, a maximum profit point exist. Where that point is located exactly, that’s always ends up being an educated guess based on market research, testing, etc. Like I mentioned earlier, they are doing what all start-ups do; they are figuring out how much people will pay for their products. Unfortunately for them, their approach sucks and they will pay for it.
But that leaves another big question: why would they do something like this now? They have had years to play around with price testing. My guess is something major has changed within their revenue model; expenses. With the quick transition that television and film has seen from DVDs to streaming, everyone wants a bigger piece of the pie. And in that sense, Netflix is learning another lesson entrepreneurs often have to face, “Pioneers get slaughtered, Settlers prosper.” It’s especially true in the tech world where no one knows what’s going to be big, how much people will pay, etc.
Back when Netflix was getting started, media producers and distributors viewed streaming media as an afterthought, a secondary way to gain a little profit with little extra cost on their end. That being said, they didn’t make a huge deal out of making money off streaming media. Now that it’s clearly become a major means of media distribution, there is a lot of pressure to milk it for all its worth.
But that change is exactly why I’m not ready to call Netflix done. The fact is Netflix is better than the rest of its competitors. Furthermore, the changes in cost structure are not isolated to Netflix, they are industry wide. Unless media producers decide to pursue their own streaming solutions (can you imagine a world where you would have to use a different streaming service to watch shows for different networks?), every platform is going to face the issues Netflix is experiencing. In other words, don’t count Netflix as dead. Count them as overvalued because in my mind they still have the advantage over competitors. And that’s big.
Money doesn’t grow on trees. It’s something we all know. But it doesn’t mean that trees are a bad investment idea. In fact, the opposite is true. And in my experience wacky investment ideas are always worth a look.
A few days ago I was having a discussion about Japanese Maples. Why? I have no clue, but what started out as a conversation about trees quickly transitioned into a conversation about wacky retirement savings plans. Once again the question of why… I have no clue. Really. No clue. I honestly stopped asking that question a long time ago.
But regardless of the why, the conversation left a big question in my mind: could someone invest in Japanese Maples and beat the best of the best in the equity market? It’s an odd question to ask, but I like trees and anything I can do to make a tree look good… I’m going to do it.
So, without further interruptions… Introducing…
Brian’s Japanese Maple Retirement Plan
So let’s first look at the equity numbers. For a benchmark, I’ve researched two data sets. The first is the Dow annual return rate from 1968 to 2007. The second is the annual return rate of Warren Buffet’s Berkshire Hathaway Class A stock from the same period. Either way, the numbers are impressive. If you invested $2023 in the Dow in 1968 and pulled it out in 2007, you would theoretically have $109,431. That’s a 5,410% return. Sounds impressive, but compared to Buffet, it’s chunk change. For an investor that purchased $36 worth of Berkshire Hathaway stock in 1968, that share would be worth $141,600 in 2007. As for the total return, that’s 393,333% return. Impressive isn’t quite the word.
Now for the trees. Let’s assume we will be starting with seeds at a cost of 20 seeds for $4 dollars. Yes you can purchase seedlings for roughly $4-$5 per seedling, but like the equities, I’m looking at this as a full life cycle. That being said, let’s say that after planting supplies, each plant cost $5 per plant. No exactly a huge difference in cost.
This is where the plant investment really takes off. After just one year a seedling can be sold for $25! Give them two years and the price goes to $40 or at 4 years, the price climbs to $120 per plant. If we assume each plant cost $5 per year to grow (water, plant food, etc), that’s a $100 profit for each plant. In other words, if you have a spare acre of land (4000 square meters), the right climate, and the desire to grow trees, you can theoretically gross $400,000 in four years. That’s of course not including the cost of your time or the cost of selling them. For argument’s sake, let’s assume the grower sales their plants to a distributor for $20,000.
So a grower repeats this cycle 10 times over the same period of the equity investment. That leaves the grower a final gross revenue of $2,400,000 (4000 plants, $60 price, 10 sales cycles) and a total cost of $780,000 (4000 plants, $5/year/plant, 40 years). Do a little math and that’s a $1,620,000 profit or a 207% return.
If you are paying attention to the news, it’s pretty clear that the world’s economy is overall not looking so hot. Government debts have grown out of control, traditional industries are in chaos, and unemployment is high. In the United States, which in the past has weathered recent economic storms fairly well, it seems that everyone has their own solution to improving the economy. Not to be left out, I’ve got my own ideas. But before I introduce my idealistic solution, let me go through some basic facts about the current US Economy:
1) The Economy of past generations is no more. Yes we still live in a capitalistic-ish based economy, but unlike the economy of the WWII Generation or even the economy of the Baby-Boomers, we aren’t a manufacturing based economy anymore. The United States is now what economist call a service based economy. Think I’m off my rocker? In 1953, 23% of our economy was based on manufacturing. Today it’s roughly 12%. More important than the actual numbers is what the numbers represent: we aren’t numero uno in manufacturing anymore. Unlike the WWII generation, the world isn’t a mess of post World War I/II European economies nor is the Far East a economic afterthought. Instead, Europe and Asia are now economic juggernauts. In other words, the global economic landscape is not a one horse race anymore… it’s very much a multi-horse derby and the US Economy is not Secretariat.
2) Big Business does not equal jobs. In fact the opposite is true. In this year’s INC. Magazine’s 500, they open their article with a very sobering fact: From 2007 to 2010 (the worst period of the Great Recession), 488 of the top 500 honorees added 35,823 jobs. In contrast, the companies in the Fortune 500 deleted just over 820,000 jobs in spite of being profitable. What does that say? After hitting a certain point in company growth (the critical point), the limiting factor for further growth transitions from being human capital to being other capital investment (technology for instance). As these companies ultimately report to their stockholders, they basically perpetuate a top-heavy income growth trend. In other words, the rich get richer and everyone else get’s poorer. So get ready to party like it’s 1997! And no, it’s not because 1997 was way better; it’s because that’s where the median income has fallen.
3) We’re great at ignoring the truth. Take that however you like, but it’s true. We’re great at ignoring some very basic truths about economics. The primary truth we ignore? There is no such thing as a free lunch. We love free lunches such as having good schools, great healthcare, and huge militaries. But we don’t like to pay for it. To Americans, having a high standard of living has become a birthright, not a result of working hard and paying taxes. Once again, if you think I’m out of mind…
But don’t get overly concerned with the debt. I’m with Warren Buffet: I think the debt issue is important, but let’s face it, you have to spend money to make money. Anyway, the whole debt crisis a few months ago; you would have to be very gullible to believe that the US Government was not going to pass some sort of resolution.
What’s more important to me is how we spend money. I’m all for education, but from what I’ve seen from a lot of colleges, they are essentially pumping out “cheap” degrees. Notice how I did not say inexpensive degrees. I personally like the German System where education is based on teaching students concrete skills, not on making sure everyone has an undergraduate degree. From my personal experience, I know many people who would be much better off having never started/finished their “undergraduate” degree. Instead they should have attended a solid community college or other trade school.
So now that I’ve explained a few basic facts about the economy, what’s my solution? Well, it’s not concrete, but it is simple: justify government spending, stop cuddling the super rich/big business, and reward/fund small business. But most importantly, push overly dogmatic politics aside for the moment. If there has ever been a time in recent American history where our politicians need to leave their petty differences outside and work together on the big issues, this is it.
Business and society are funny things. We talk about the rapid pace of technological progress and how technology ultimately improves our lives (and businesses), but rarely do step away from our infatuation with technology and talk about what we lose as we continue to do things quicker, faster, and “better.” And that’s something we should do more often. Stepping away from technology for a few hours not only allows us to reflect on what we have achieved, but in my experience, it allows us to learn how to use technology better.
I was recently reminded of this while reading a blog post from Paul Gumbinner, a NYC based Executive Recruiter who often writes about advertising jobs, interviewing, and his experiences in the Madison Avenue Advertising World. I’ve sourced Paul a time or two for my post on Beyond Madison Avenueand I highly recommend reading his blog. It’s good stuff.
As a whole, we are technically more connected with each other today than in any period in history. But at the same time, I continuously find that we are much less personally connected. In fact, I often feel like we are quickly becoming almost impassive. Yes we email each other in what seems like a near constant stream of messages, participate in involved Twitter based conversations, and interact via social media, but less and less do we communicate via real personal interaction.
This is especially true in the business world where anonymous job posts are becoming what seems like the standard. As a result, we have become a society that seems to feel contacting potential employers via a phone call is rude. Furthermore when we do initiate a connection, interview with a potential employer, or even ask for advice from someone, it seems like it’s become a rare thing to write a real thank you note. And that is rude.
In the “old days” (the days before email, Twitter, Facebook, etc), we relied on three major forms of communication: personal interaction, snail mail, and the telephone. And although snail mail and the telephone seem impersonal compared to a personal meeting with someone, sending a letter to someone or making a phone call can in fact be a very personal way to communicate. Think about all the letters soldiers sent to their friends and family during the American Civil War.
Although business letters are not exactly in the same league as Civil War letters, both types of letters share many common threads; most of which stem from the effort involved in writing and sending a real letter. Compared to email, which seems to have been reduced to quick informal messages, writing a true letter takes time no matter if the letter is three pages long or three sentences long. And that effort shows; especially when it’s a thank you note to a business contact. Add in the fact that the business world is increasingly tough and guess what, that extra thirty minutes may in fact lead to great opportunities.
That being said, call me old-fashioned, but I still write snail mailed thank you notes. Yes they take time, but in my experience, they make a real impression on people.
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