When Does Marketing Trump Products?

As usual, I stepped into a discussion about the “importance” of marketing when I should have just ignored it all and let people believe the whackadoodle crap they want to believe, uninterrupted by reality. As usual, the marketing dweebs out-jabbered me and I’m happy to let them wander off into the woods as they usually do. At this point in my life, it no longer matters to me what happens to anyone’s business and I’m less inclined to be interested in anyone’s mission than at any other time in my life.

However, I get to have the last word (if I want to) on my own blog and here it comes.

The question from marketing is always, “How do people hear about the product you are selling if not marketing?" The answer is simple and complicated. The simple part is that word-of-mouth spreads far faster and more effectively than any advertising campaign. The complicated part is that word-of-mouth spreads bad news far faster and more effectively than any advertising campaign can ever hope to repair. From my years in quality management training, I remember a restaurant rule that went something like “It will take $50 in advertising to convince a customer to try your business, 5 seconds of lousy service to drive that customer out the door, and $5,000 in more advertising to get them to try you again.” Something like that.

My favorite example of how effectively word-of-mouth works is In-N-Out Burger vs. McDonalds and Burger King.  When my family lived in California in the 80’s, there were probably a dozen fairly substantial fast food chains. Fast food was nothing more than a commodity to 90% of those businesses. None of them did anything particularly well, so the best marketing program probably “won.” Creative accounting probably helped those chains help convince suckers to both invest in their franchise and to buy their engineered addictive “fat, salt, and sugar” concoctions. You couldn’t drive a block on any busy street without seeing an ad for McDonalds, Burger King, Burger Chef, Wendy’s, Hardies, Carl’s Jr., and/or any of those commodity food producers.

The burger joint of choice for Californians remained In-N-Out Burger and before the internet the best way to find one was to ask for directions from someone wearing one of their t-shirts. There were two In-N-Out Burger stands in Huntington Beach and Costa Mesa and neither of them bothered to do much more than keep their signs lit, marketing-wise, and their lines flowing through their drive-thrus were always long. Like Aldi’s, those lines moved fast, so it was always worth the wait to get a hamburger made from actual beef, fresh tomatoes, onions, and lettuce and fries made from actual potatoes. When an In-N-Out Burger appeared near my daughter’s home in Plano, Texas, her junk-food addicted husband immediately changed his food allegiance to actual food. No advertising required.

Likewise, the pro audio company I worked for in California couldn’t afford an actual marketing department for the first 6 years I worked for the company. When the company started out, in 1973, the founder spent all of his inheritance and some of his siblings and parents’ money promoting a company that had yet to figure out product development and manufacturing. After a brief flash-in-the-pan period of media presence, the company downsized to a half-dozen employees in a cheap business district in Costa Mesa. For the next ten years, the founder worked at learning his engineering craft, the original employees learned how to manage money, purchase parts, and develop a sales rep network. By the time I started work there, “marketing” consisted of very information-strong ads in industry magazines and a couple of sales meetings each year.

That same year, the company released its first professional quality power amplifiers and by the end of 1983 our problems became “how can we make more of these products, service our customers, and maintain our product quality?” For the next six years, we doubled our gross sales every year, maintained a 24-26% profit margin, and led our industry in customer service and product quality.

The company’s CEO idolized Hartley Peavey and Steve Jobs and had a minor hard-on for Donald Trump. He saw himself as a similar marketing “genius” and desperately wanted to reform the company as an “ideas business” instead of a manufacturing and engineering company. In the next few years, manufacturing moved to China, product development became diffused and only somewhat focused on customer needs, marketing became a more powerful force and a larger empire in the company, and it took another decade for the gross sales to double between 1992 and 2002. It’s a privately-held company, so it’s hard to guess what the profit margins are now, but based on the gross sales, the size of the administrative staff (especially in marketing and sales), and the luxury of the new facilities and number of executive officers, I’d guess 5-8% max.

There was an upside for me. Having spent 8 years in an executive position near someone who saw himself as a marketing genius, I developed pretty thick charisma armor. When Donald Trump went public for his one-and-only time with the Trump Hotels and Casino Resorts (DJT) IPO, I remembered the giant space between reality and our CEO’s self-image and, for the first and only time in my investment career, I shorted about 1,000 shares of DJT. I know, not an impressive bet in the scale of things, but it was a big deal for me at the time. My incredibly clever and sophisticated investment philosophy was “anything that the CEO I knew so well believes is a ‘good idea’ is going to be a guaranteed disaster.” I missed the IPO peak by a few weeks, but I still got in when the stock was valued at about $29. I sold off half of my shorted option in 1998 and the rest in 2001 when DJT was pretty much a penny stock.

I have never had that much confidence in a stock’s value collapsing since. I was close with Apple in 1997, but Bill Gates stepped in to save Apple with a $150M investment and a dumbed-down version of Office for dumbed-down Mac users. Peavey is still a privately held company, so there has never been an “investment opportunity” for me to bet against that company. I would if I could, though.

My takeaway from all of this is that marketing is what you do when you can’t do anything useful, original, necessary, and/or well. When what you have to sell is fluff or a me-too commodity or crap, you probably need marketing to convince customers to part with their money and waste their time. There is a price to be paid for shifting resources from manufacturing, design, research, and customer service, too. Regardless of the delusions and propaganda saying otherwise, everything is a zero-sum game: you can’t spend money in one area without taking those resources from other areas. Moving resources to an unexamined, usually poorly-managed area like marketing (especially if the marketing is an external “organization”) too often means that manufacturing (the hardest job in any product-based company) gets shipped off-shore and important, mission-critical skills are lost forever. (And the off-shore vendor gets to refine those skills on someone else’s money, eventually becoming a competitor.)

From the inside, I have since witnessed the farce of marketing-driven mismanagement several times and every one of those attempts at an illusionary business model resulted in spectacular crashes; just like DJT. I don’t really know if marketing actually ever works, but I do know that if you think your business desperately needs marketing assistance you have a lot to worry about.

Just Stop, Facebook, Please

A decade or so ago, John Stewart went on “Firing Line” with Tucker Carlson and some other Fox nitwit(s) and asked them to “just stop” everything they were doing. He told them they were “hurting America” and that they were making no useful contribution. And of course, they were and still are; hurting America, that is. Nobody on Fox makes a useful contribution as anything other than aural fertilizer. The same goes for Facebook and similar web ilk.

I recently met a reasonable educated person, a retired lawyer, who imagines himself to be scientifically literate because he follows “Facebook Science”; which assume is Facebook’s Skeptical Science clown car. From that ridiculous source he has learned a bunch of pseudo-technical words that he doesn’t understand, a ton of red herrings to use like lawyerese debate gibberish, and he decided that climate change is a farce because his Facebook “skeptical scientists” have told him that carbon is a reflector in the upper atmosphere that shields the planet from the sun’s heat; as opposed to being an element distributed throughout the atmosphere that absorbs heat and prevents it from escaping the atmosphere and disipating into space. The terms he’s memorized and random red herring collection of talking points allow him to believe he understands some of the science.

Not only is his “scientific knowledge” laughable, he is completely oblivious to the way Facebook works. He imagines that by years of “liking” various climate-change denier Facebook pages he has been exposed to a diverse set of opinions from scientific sources. He doesn’t realize that Facebook’s engineers and psychologists have designed a collection of tools to keep him coming back to the opinions that reaffirm his biases. There is no better reason to avoid “social media” than this dumbing-down echo chamber effect.

And there is no better reason to ask Facebook to “just stop” everything they are doing. If they won’t, the next best thing is to either require them to limit social media conversations to unimportant trivia; or we hunt the bastards down like rats in the corn crib or put them out of our misery. Ideally, every country would follow Germany’s lead and limit Facebook’s ability to track and manipulate consumers to the point that the company can’t make money. At the least, anytime some uses Facebook as a reference point for any adult conversation, you should laugh in their face until they leave. The best thing for everyone would be for Facebook, Twitter, and the rest of the social media crapbucket to die an unnatural and quick death. I don’t care how it happens, but it should happen quickly before we have no world left to fuck up.

Who Is Sustainable?

As I’m writing this I am doing one of the least sustainable activities human beings have ever invented: a vacation cruise to the Caribbean in late January. I’m on a floating city with about 3,000 other old farts, burning tons of oil resources every few hours, consuming more food than many cities ten or one hundred times the population of this boat, creating nothing of use for anyone else on the planet, and we’re all pretending that we “deserve” this luxury because we managed to be lucky enough to be some of the world’s most wealthy people. We just left two islands, Aruba and Cascaras that are barely more sustainable than this boat. One of those two islands produces nothing but tourist attractions and the other is equally dependent on tourism plus water resources for a brand of booze that is incredibly water-intensive on a desert island that tears through energy and water as if the world were endless.

I live in a small Minnesota town, Red Wing that is barely more sustainable than those islands and this boat. Like all of the previously mentioned places, Red Wing’s residents are mostly oblivious to their dependence and like most of rural America they are even arrogantly clueless about how dependent they are on the rest of the country and world for their lifestyle. “We grow our own food, unlike the people in the cities,” they often argue. Growing corn and soybeans is not “growing your own food.” Corn and soybeans are food for animals and a particularly inefficient energy boondoggle. Just like the rest of the country, if the shit hit the fan and our system of interdependent reliance collapsed, most of rural America would fail in quick and spectacular fashion.

Oddly, the most sustainable community I have visited in recent years has been Detroit. Through corruption, incompetence, indifference, and lethargy, Detroit’s infrastructure and community completely collapsed in the wake of NAFTA, the Bush Recession, and the socio-economic upheavals of the last 25 years that is causing the auto industry to either reform or die (the outcomes, the winners and losers are yet to be determined). After neighborhoods collapsed and were abandoned, ransacked, and, eventually, knocked down and hauled away, urban farms sprouted up everywhere and became far more efficient, independent food sources than anything rural America has seen since the 1800’s. There are neighborhoods in Detroit that not only are capable of feeding themselves, but they produce enough food to export to the rich folks for a premium and profit.

Nobody ever said, “If you can make it in Red Wing you can make it anywhere.” One of the problems rural Americans haven’t had to face (yet) is the fact that talent, skills, and intelligence have been evacuating the countryside since the beginning of the Industrial Age. The smart kids leave and the dumb ones stay and reproduce, creating a growing dumbed-down rural population that becomes more dependent every generation. Every economic study I know of demonstrates that urban America economically props up rural America for diminishing returns and vanishing reasons. There will be an obvious outcome, eventually.

One of the lessons I learned from my manufacturing career was that engineers apply the Paretto Effect, sometimes unintentionally, to occupations. We first automate the jobs that are typically filled by assholes, eliminating the assholes and the places were their “participation” jams up production. For example, you might have thought that production line technicians would have been the last place for automation to appear, but it was among the first. Equipment and fixtures to perform final test procedures on assemblies and finished products were some of the first jobs to be automated because the people who gravitated to those jobs over-estimated both their skill levels and their necessity. Likewise, farming is experiencing the beginning of that effect as GPS, satellite weather monitoring, drone and robotic ground conditions observation, and robotic planting and harvesting equipment take over farming and farm jobs. In the very foreseeable future, the only commercial farm jobs will be high-tech equipment repair and “farming” will be managed from even greater distances; most likely from urban offices. At that point, rural dependence on urban support will be unsustainable and we’ll see even more rural communities dry up and blow away than in 1929.

The best possible scenario I can imagine will be that some rural areas will become like those Caribbean islands; tourist destinations that either learn to be incredibly tolerant and friendly or die. I got the feeling that Aruba was like one giant service business depending on positive Yelp reviews for its existence. It is scary-easy to imagine my current hometown, Red Wing, becoming one cruise ship-like entity living or dying by a few thousand tourist reviews.

What’s with All the Hate?

I just got off of a two week cruise and, if you’ve never done that, a cruise ship is a floating retirement village for old white people of a particular income class. Our cruise departed from Ft. Lauderdale, so it was mostly white Americans (including Canadians). The last day of the cruise was the day after Trump’s “State of the Union” chin-dribble. Mostly, what I heard from people was “Trump’s an idiot, but I really don’t like Nancy Pelosi.” Mostly, I heard that from old white women. One thing old white women do not like is other old white women. They may not be consistent in any other thing they say or believe, but they hang pretty tightly on that subject. Old white women with power and/or accomplishments are just one more thing to stack on to the “reasons I don’t like her” pile.

I wish I could tell you why that is, but I can’t. Most of the women from whom I heard this refrain were of a type I would generally describe as “angry old white women.” Politically-incorrect or not, I know you know the type. These women are fixed with a permanent scowl that has created scowl lines that make anything resembling a smile look painfully out-of-place. The odds are good that they don’t “like” anyone much.

As much as all that is true, the job of Speaker of the House is not about being “liked.” Leadership, in general, is about making decisions; often hard decisions. The job is about as much fun, and as necessary, as being a dentist. Here are a few of Pelosi’s accomplishments as Speaker of the House:

• The Affordable Care Act with the public option (the option was eventually taken out for the Republican compromise of the Heritage Foundation mandate)
• Dodd-Frank
• Lilly Ledbetter Fair Pay
• Economic Stimulus Act of 2008
• The repeal of Don’t Ask, Don’t Tell
• The Credit Card Holders Bill of Rights issued new regulations on card companies, demanding that they increase transparency
• The Student Aid and Fiscal Responsibility Act increased the amount of Pell Grants for college students.
• The Family Smoking Prevention and Tobacco Control Act gave the Food and Drug Administration the power to regulate the tobacco industry.
• The Food Safety Modernization Act giving the Food and Drug Administration more power over food producers (passed by Senate, not yet signed into law).
• Raised the minimum wage
• Hate Crimes Prevention Act
• Established the Office of Congressional Ethics (the one Republicans are trying to eliminate for obvious reasons)

It’s hard to find fault with that list of accomplishments, but because she is all of the things old white women (and too many white men of all ages) hate, accomplished and powerful, she gets hatred instead of appreciation. Honestly, I suspect a lot of the hatred is based on her appearance. She looks too much like what they see in the mirror and they do not like mirrors. While she looks like them, she is a lot smarter than them and that pisses them off too. I can see that.