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Thursday, Oct 15, 2009 - 22:10 SGT
Posted By: Gilbert

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Half Dozen Of One

"Never assume the obvious is true."
- William Safire, RIP 27 September 2009


Safire's nugget of wisdom was subtly stressed in several of the books I picked, from two brief stopovers at the regional library. Without further ado, and ignoring Safire's admonition to "Last, but not least, avoid cliches like the plague", let me not beat about the bush and cut to the chase. In alphabetical order, the books are:
The books together constitute well over a thousand pages, and even one percent of that probably wouldn't be welcome for a normal blog post, so I'll try some freestyle synthesis and present the gist of what I caught.

Among these, the Web 2.0 and Parker Brothers studies are slightly less congruent to the others, with the former fixated on the present and future - a nineteen year-old Harvard sophomore starting on the road to creating Facebook after getting dumped by a girl, for instance (around the same time I was in NS, come to think of it). It was too painful to read too many stories about what I might have at least attempted, and so I stopped reading it after a while.

On to the Parker Brothers and gaming then. Apparently, games in the nineteenth century were supposed to promote morality (e.g. The Mansion of Happiness), which must have worn thin after awhile. In came George Parker, who read the trends and came up with games on more unprincipled themes, such as Banking. Not that he was too averse to playing the morality card, as he did when he introduced Rook, which is essentially a normal deck of playing cards except that it was not descended from the Tarot and thus, you know, ungodly.

Parker Brothers is probably known today for evergreen hits like Monopoly (since 1935) and Risk (originally La Conquete Du Monde, introduced 1957), and less for oldies like tiddly winks (in the 1890s), or the card games Pit (1903, million-unit seller) and Flinch (1905, even more popular than Pit). Simplicity seems a top selling point, with Pillow-Dex (1896) simply indoor volleyball with a balloon, and later the Nerf ball (1970), which did not even bother to have any rules.

Pillow-Dex was in fact a precursor of Ping-Pong (1902), where Parker Brothers capitalized on the invention of celluloid (originally meant to replace billiard balls) and organized the American Ping-Pong Association and Parker Cup competition, but were unable to stop the generic table tennis from becoming widespread.

Another revelation was that Mahjong was once a big fad in America from 1922 to about 1929, with Parker Brothers' exports of Mah-Jongg sets from Shanghai making up the sixth highest-valued category of Chinese exports to the States then. A common complaint then was that everyone had their own way of playing the game (which Parker Brothers tried to standardize), a sentiment which I can share.

[Referrals to 4O Dice and FourOPoly]


On (human, not computer) networking next, author Ivan Misner, Ph.D. insists that no, it is not a fad (he's also the founder of Business Network International, a business referral organization, so...) There are dozens of subsidiary facts in the book, and I'll just draw attention to the most striking ones. Heading the list is that bad referrals are in practice far more common than good - a hundred happy customers may not so much as whisper about your excellent service, but that one demanding and totally unreasonable customer often finds the energy to fling a lot of crap.

Along the same line, people who like, care about, and/or respect a person, nevertheless almost never refer business to him - when was the last time you name-dropped for a relative or a friend? Indeed, it is later on stated that being plain nice and helping others out won't get referrals either, and that it is best not to expect reciprocal referrals, but to give them unconditionally. Of course, to help oneself, it is advised to "...choose your relationships wisely. Form relationships with people who are willing to practice the philosophy of giving unconditionally", so your goodwill won't disappear into an unending void, I figure.

Statements of this sort do make me a teeny bit uneasy, since it makes the act of forming and keeping friendships seem calculated, i.e. friends for benefits. Misner does at least warn against putting people down based on appearance, since "you don't know who they know", but this does seem to imply that if they really don't know anybody, it's alright to brush them off then. Well, this is life (and business) after all, and one can't meaningfully give attention to everybody.

A couple more tips: Ask direct questions such as "Do you know of any art teacher..." instead of "Do you know of anyone who might need art supplies...", since it is far easier for others to make simple connections, and try to practice the Platinum Rule instead of the Golden Rule: "Treat others the way they (and not you) would want to be treated." (there's often a difference)

Emotionomics follows up on Malcolm Gladwell's Blink, and declares that humans are primarily emotional (instead of rational) decision makers. The third page probably sums it up with a J.P. Morgan quote:

"A man makes a decision for two reasons - the good reason and the real reason."

While people often do not reveal their true feelings in speech, whether out of politeness or deceit, it appears far more difficult to hide their instinctive facial expressions, which seems inborn as even blind people exhibit the same responses. Ekman and Friesen's research on facial coding supports seven major emotions, namely surprise, fear, anger, sadness, disgust, contempt and happiness (which is the only truly positive emotion, and even then people often have to try and fake it with a "social" smile).

If facial coding is accurate, then the actual public sentiment towards issues may be pretty far removed from what is expressed during spoken or written polls, e.g. racism (5% spoken, 43% facial) and sexism (11% spoken, 40% facial). Huntington's opus The Clash of Civilizations and the Remaking of World Order was cited as defining certain values that companies aspiring to a global reach have to be careful about. One interesting example: White Democrats were rather more positive in their facial responses to assistance offered to a black family as compared to a white one, while it was the opposite for white Republicans.

While there's a lot after this, it mostly seems to come down to emotions and the subconscious being the first barrier anybody seeking to influence has to get through (Kahneman and Smith won the 2002 Nobel in Economics for more or less emphasizing that). The beginning of the book gives as an example people being most accepting of a mid-priced product ($6 compared to $5 and $7) at least emotionally, probably because it wouldn't make them feel as if they were being ripped off, but also that they weren't cheap.

But the last two books to be covered - Cheap and The Bully of Bentonville - suggest that cheap is winning by a landslide. The first book is a more generic view of the phenomenon, while the second focuses on the Champion of Cheap, Wal-Mart, but both extensively cover that kingdom built on "Everyday Low Prices"; and they don't come much bigger than that. Tech companies like Apple, Google, Microsoft and IBM may be more glamorous, but Wal-mart dwarfs them in most measures (e.g. revenue, asset worth, employee count).

More statistics to rub it in - If Wal-Mart were a country, it would be the 21st largest in the world by GDP, and China's eighth largest trading partner. Even by data capacity, it has 460 terabytes in its data warehouse, compared to Amazon.com's mere 13 terabytes, and which could store half the Internet (figures for 2004 - the Internet's size is estimated to be closer to 5 million terabytes now).

Cheap covers the rise of "value" and the loss of craftsmanship from the replaceable parts innovation in firearms way back in the eighteenth century, and lists the psychological tricks employed by large discount retailers (synonymous with cheap) throughout. [See the Dilbert take on processes]

We all know (and still get taken in by) the artificial marking-up of prices before they are heavily discounted, of course. What may be less well-known is the degree to which this can be orchestrated, an example being rotating discount offers through different brands of the same class of product. As Emotionomics also stresses, establishing product quality (branding) is very helpful, since then a reduction on price is attractive to customers, whereas low prices on products of doubtful pedigree is often seen as a reflection of low quality. One possible signal mentioned was situating oneself in a place linked to premium brands to enjoy class by association.

Another of the more amusing Jedi mind-games was utilized by a company that had a poor response to the now-ubiquitous shopping carts, as men thought that they were effeminate, and women thought that they were insulting (shrug). Solution: hire burly men and attractive women to pose as customers using the carts. This sort of peer influence works more often than it should, with the White Castle burger chain once hiring guys to dress up as doctors and eat their burgers to successfully lend the impression that they were healthy.

This aside, the books agree that the ability to be cheap to consumers is built upon one necessary constant - the ability to be cheap to employees. Frank Woolworth, a pioneer of cheap retail, recognized it early: "We must have cheap labor or we cannot sell cheap goods. When a clerk gets so good she can earn better wages elsewhere, let her go." Ordinary employees can get rich - but they had to be with the company from its founding days. (Note that this is not always true, and the Web 2.0 book gives instances where recapitalization of a startup led to original investors being left with next to nothing)

It was also asserted that in the case of Wal-Mart, other than being lowly paid (which to be fair is par for the industry), workers get poor medical benefits, do unpaid overtime (which in the case of salaried and not hourly-rated employees is legal), work through breaks, have personal relationships scrutinized, and still have to do a Wal-Mart cheer each morning. Employee turnover is naturally high, with nearly half of the hourly-rated employees leaving annually.

Keeping in mind that this is a negative portrayal, the authors list out their grievances against Wal-Mart (and by association, other companies of the ilk): Their supersized stores squeeze traditional independent mom-and-pop stores out of existence, but are still able to force communities to offer concessions and incentives to host them, since the consequences of losing out to a neighbouring town are even worse.

On the supply side, the concentrated power of such a huge retailer can extract extremely favourable terms from manufacturers. One case study is Vlasic Foods, whose quality pickles Wal-Mart flogged at a minute profit margin, which contributed to the company eventually filing for bankruptcy protection. Yes, Vlasic might have refused to do business with Wal-Mart - but how then could it sell its product?

Ditto for Huffy Corp, a bicycle manufacturer that once owned the biggest bicycle factory in the world in Ohio. Wal-Mart could order nearly a million bicycles at a go, but on the condition of - what else - drastically reduced prices. Huffy couldn't make the numbers add up, saw no option but to outsource to China, but still went under and got acquired by the Shenzhen Bo-An Bike Company.

To further put Wal-Mart's dominance into context, consider Proctor & Gamble, a behemoth in its own right and almost certainly within the top dozen largest corporations in the world. Yet, P&G's products only account for 2% of Wal-Mart's sales, while Wal-Mart accounts for 18% of P&G's revenues. In short, Wal-Mart can hurt even one of the biggest manufacturers, far more than they can possibly hurt Wal-Mart back. What hope then for smaller producers?

Not that many consumers might care. They want low prices, and Wal-Mart delivers (on easily compared signpost items, at least). Manufacturers and labour unions (which Wal-Mart takes great pains to eradicate from its operations) can go cry in a bucket. There's always some honest, hardworking chap in China or India who'll take their jobs for half their wages, or in other words, at the China price.

The other side of the story is then, what's wrong with the China price? Yes, their benefits and working conditions are bad, and the product not particularly fine, but isn't that what capitalism is all about, with consumers voting with their wallets? A cheap Billy bookcase that sags when loaded is disparaged, and a durable (and expensive) one lauded, but can they be compared? As Jonze says in his Ikea ad: "Why do you feel bad for this lamp? That is because you are crazy! It has no feelings, and the new one is much better!"



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