Saturday, November 24, 2007

Non-Smoker Cigarettes

John,

I'm negotiating with a Chinese manufacturer to distribute his product
here in the U.S. It's a smoking deterrent "cigarette", an aid to quit
smoking. You "puff" on this non-smoker cigarette for 10 or 15 minutes
(it doesn't require lighting) in lieu of firing up a regular
cigarette—over a months use, your craving for nicotine diminishes
somewhat.
This eight pack of non-smokers is essentially ginseng—wrapped as a
cigarette—and qualifies as an herbal supplement or homeopathic remedy.
It is not a pharmaceutical grade substance, and simply carries the
FDA disclaimer, like all herbal remedies and supplements. I planned
to place it initially in health stores, whole food stores etc.

I asked the company to add caffeine, as that would be a selling point.
They agreed to add caffeine to the ciggy. I redesigned the package
for sale over hear —they (the Chinese) liked the design and agreed to
package the product in my Americanized wrap.

But they want $5 a pack for up to 10,000 packs. Of course, the
manufacturer isn't divulging his costs but really, what can a pack of
eight (8) rolled ginseng smokes cost when you consider that a pack of
twenty (20) tobacco cigarettes here would sell for $2.50 and still see
a profit (barring excise taxes.) I don't feel this product can
sustain a markup from me, then one from the retailer—and sell at $15.


John, I quote you: "There is always someone willing to pay outrageous
prices for something-anything." But even considering that these
"non-smokers" have been sleekly re-packaged to strengthen perceived
value, this product is pretty much defined by its presented form—as a
pack of cigarettes (albeit "quit smoking" ones.) Is not the price
already established by the price of cigarettes? A pack of cigarettes
is around $5.

The manufacturer is saying "No, price them the same as smoking
deterrents; price them the same as the withdrawal products on the
market." I quote the manufacturer:

"Wren, I understand what you mean, the price of the common
cigarette(20) is much more lower than our No-smoking Cigarette(8)in
our country, too. But the effect is completely different, the common
cigarette(20) is bad for their health while they will benefit from the
No-smoking Cigarette. No-smoking Cigarette is a health care product
although its package and some presentation like any other kind of
cigarette.
Now you are worried because you haven't operate the marketing and know
the product completely. Our products are not only well sold
throughout the big cities in China but also received by vast customers
all over the world; well sold in the international market."

If I pay this manufacturer $5, add my cost, then sell them to the
retailer for $10 (hopefully); the retailer would have to sell them for
$15—a non medicinal cigarette, not endorsed by a doctor's
prescription, not pills or capsules—like most smoking deterrents.
I don't feel that people will pay $15 for a pack of eight (8) (though
one can be "puffed" on for up to 45 minutes.)

Before quitting negotiations, I wanted your input.

Wren


Subsidies

Folks,

In all the talk of unfair trade due to subsidies, I note there is no mention of the fundamental subsidies such companies as Boeing get.

http://news.bbc.co.uk/2/hi/business/7014370.stm

Aluminum is made from bauxite which is strip-mined, about the worse kind of mining. To get aluminum from bauxite, tremendous amounts of electricity is required. Thus, the rivers are dammed at taxpayers expense, and electricity is subsidized to make aluminum.

Boeing has paid no net taxes in decades, and gets county services like fire suppression at taxpayers expense.

If what Boeing costs taxpayers was actually charged off to customers, then Boeing jets would
cost more than Airbus. If Airbus also charged what they cost, air travel might be too
expensive, certainly more expensive. Could we live without air travel? Or would we work out
an alternative? Or, free of subsidies, would investment distribute in ways that the airline
industries would exist, but just on alternative, self-supporting industrial model?

Certainly in the unsubsidized category of private jets, the price has fallen dramatically as they
now make the fuselages without aluminum.

I read somewhere the Toyota Pius hybrid car costs something like $250,000 each, at present
amortization of the investments, although they sell for something like $20,000. The
difference is subsidized by taxpayers.

What if we had no subsidies for toyota? Would our investment allocation result in better
transportation? Would we have mag lev? Or somethign else? In seattle they have just finished
laying in light rail, 1880's technology, costing deca-millions. China is laying in mag lev at
1/3 the per mile cost.

What if we did not subsidizes education and medicine. Would we get more better cheaper
faster? We have every other time we've withdrawn subsidies.

John


Exporting Inflation

Folks,

Below is a cut and paste from part of an article of which I lost the original source, but little
matter... it is a good explanation of how USA can "export inflation" or expressed otherwise,
from Hong Kong's point of view, "import inflation."

Hong Kong is China, so this is a fascinating "alternative case" playing out simultaneously.

What the bad guys among our politicians want China to do, that is for the Chinese to revalue
the currency to harm their economy and help some in USA, Hong Kong does quite regularly.

Hong Kong is finding this more and more difficult to do, so Hong Kong may have to follow
the Chinese method of managing US dollar flows through hong kong in a different manner.

In any case, when the bad policy people tell you all will be wonderful if the Chinese revalue
the Yuan, we can see if they are right (and how they are wrong) by watching Hong Kong.

John


With the $ waning fast and currency pressures across the globe, never has there been a time
when
investors have needed safe-havens for their wealth. At the front of these sits gold and later
silver.
Many feel that the pressure may be short-term, but we believe it is systemic and growing
worse by
the day. As the hemorrhaging of U.S. $ across the world continues, smaller Central Banks
are
fighting to stop their currencies from rising so as to protect the competitiveness of their own
currencies. If the pressure persists these banks will be forced to take more regulatory
measures
such as imposing controls on inflows. The latest reported incident of these is in Hog Kong.



Hong Kong's de-facto central bank stepped in four times last week to defend the Hong Kong
dollar's peg to the U.S. dollar, injecting about $800 million worth of local currency into the
red-
hot market. The Hong Kong Monetary Authority injected a total 6.2 billion Hong Kong dollars
($800 million) into the market. As the U.S. $ weakens so this intervention will continue.
Under
Hong Kong's currency board system, the Hong Kong $ is pegged at 7.80 to the U.S. $ but is
allowed to trade between 7.75 and 7.85. When the Hong Kong dollar reaches the limits of its
trading band, the monetary authority can be expected to intervene. With the cut in U.S.
interest
rates this week more upward pressure will come onto the HK$. By intervening, Honk Kong
releases
more local currency, so importing inflation and allowing more ‘hot’ money into their system.
Such
investments can leave as quickly as they arrive contracting money supply when they leave,
bringing instability and eventual loss of control over the money supply should such actions
reach
extremes. Inflow Capital Controls are another way of coping with this problem or a strong
revaluation of the currency and a departure from the $ peg.

The Hong Kong $ has been rising against the U.S. $ as investors pour money into the soaring
Hong Kong stock market. The Hong Kong $ hovered near 7.75 to the U.S. $ all morning last
Wednesday before the Hong Kong Monetary Authority began buying greenbacks to keep the
local
currency within the trading range. This week’s moves follow two interventions by the HKMA
last
week, which were its first such actions in more than two years, causing speculation that
Hong
Kong might widen the peg, or drop it all together. The Hong Kong government is "totally
committed" to the linked exchange rate mechanism. This is usually a prelude to actions to
fully
control the situation along the line we mention here.


Update Videocam Cops

Folks,

Judge Andrew Napolitano, a New Jersey Superior court judge (a real judge) is now a Fox TV
personality and rather hard-core libertarian, at least for Fox.

He has a new book out, A Nation of Sheep, from which this quote is taken...

"Why should government agents spy on us? They work for us. How about we spy on them?
On cops when they arrest and interrogate people or contemplate suspending freedom; on
prosecutors when they decide who to prosecute and what evidence to use; on judges when
they rationalize away our guaranteed rights; and on members of Congress whenever they
meet with a lobbyist, mark up a piece of legislation, or conspire to assault our liberties or our
pocketbooks."

Now, I am not working on a "cop-cam" product, but if anyone was, this would be the time to
jump on Napolitano and get a "license" for napolitan to endorse or "design" the product. Call
it the Napolitano-cam, freedom-cam. or whatever someone truly passionate about this would
come up with, and then pay napolitano a royalty on each unit sold. (The napolitanater?)

Opportunities like this jump up for any and eery project, but you have to be doing a project
to see the opportunity.

Also, see how there are plenty of people thinking the same thing all over? Any idea you have
is alredy being thought of elsewhere too... the difference with you is you are actually doing
something about it. And it also means there is a built in market...

John


Economist Cover Story

Folks,

The Economist magazine (which calls itself a newspaper for better postage rates) has a cover
story on the New Wars of Religion.

http://tinyurl.com/ypwfgx

Of course, this is about east vs west, etc... Moslem vs Christian... a perennial argument.

Which makes me think... is there a pattern to observe and learn from?

Although these wars are billed as terrorist (bad means) vs the free (good ideals), certainly a
religious foundation is attached to the terrorist side, and certainly by those who use the term
"islamofascits." (Do you suppose Arabic Blogs speak of "evangelofascists?") Bad means vs
good ideals is critical, because if we consider the Moslem ideals, they look pretty much like
ours. If we consider our means, they look pretty much like the terrorists.

I think the real division is between the peace-loving and the war-loving. On both sides, the
vast majority of people are peace loving, and on both sides the leaders are somehow war-
loving. I think I can go further and say the masses better represent their respective religions.
But then they would, wouldn't they?

How we got to our leaders being war-lovers, contrary to the religion of their masses, I'll leave
to others to explain.

The more interesting question is how magazines like the Economist can imply that Osama bin
Laden is a religious leader or George Bush for that matter. Nobody around these people are
religiously qualified as ministers, let alone motivated by such sentiments.

There single largest religious institution, the Catholic Church, has consistently condemned
the USA attacks in the middle east, as do countless smaller denominations. (And plenty of
Islamic religious groups have condemned the terrorism on the other side too). In fact the
Vatican will no longer receive Bush administration officials, refusing to meet with Condi Rice
most recently, but is happy to meet with the Saudi King this week.

The idea that there is some religious basis to these conflicts is absurd. What is plain is both
sides try to put a halo on bombing their way to government takeover. The USA elite wants to
rule the middle east, extend their own govt control over the territory, and the other side
wants to do so as well, except their own govt control. This conflict is bomb-throwers vs.
bomb throwers, in with the goal of political power. What's religion got to do with it?

Anyway, if plainly today religion has nothing to do with these wars, we can say "that is
nonsense!" Likewise, when we read of "wars of religion" in history, are they every bit as
bogus an appellation? At the same time, we can know that people who practice their religion
sincerely are no threat to us.

As a side issue, this "religion thing" is slightly impolite in western culture. We are supposed
to interact as though we have no religious perferences. I think this is wrong. There are
countless entrepreneurial opportunities in religion, to do good while doing well. We just
don't see that anywhere in the USA economy today. Perhaps we should expand our view to
include small business opportunities in religion.

John


Bernanke On Imports

Folks,

If the FED policy was a good thing, how come they say things that are simply not true?

Among other things, Bernanke said yesterday at the congressional hearing: "A lower dollar
only affects Americans inasmuch as they purchase imports."

This is 100% sheer nonsense, with history against it.

Any time the price of imports rise because of a declining dollar, American manufacturer/
competitors of the importers will raise their prices to match the newly higher priced imported
goods. This happens every time, every category.

As the dollar tanked in the late 70's Japanese cars got far more expensive for the US
consumer, but Detroit then jacked up their prices on USA made cars (instead of making better
cars) so all Americans experienced higher prices on all cars. We got lousy cars, the Japanese
got more money, big biz/gov rejoiced.

Bernanke is a scholar in economics. He knows all this. So do all of the business people out
there, and foreign investors, who take it to mean "out of control." The market continues
trending down, in its wild ride.

Money is another thing a free people ought never let the government control.

John


Walmart Ice Cream Scoop

Folks,

A wee story on how things work...

An acquaintance of mine recently retired after 30 years of building a housewares import biz,
and sold his company to some New York investors. He walked away with a tidy sum.

He had always sold to upscale stores, and therein the investors assumed an opportunity. He
had never sold to Walmart, so the NYC investors believed they would take his products and
manufacturing resources, and exploit the mass markets.

The best selling item for this company is an ice cream scoop, made of metal and plastic. The
new owners approach Walmart with the ice cream scoop, by way of introduction.

The Walmart buyers were very interested. “Tell us the composition of the metal part, the
precise metallurgy, and the exact process by which you achieve the end-product of the metal
part, and then do the same for the plastic part, and how they are connected together.”

“Why?” asked the NYC investors?

“Because we share the precise instructions of how to make anything we intend to buy with the
rest of the world, by live worldwide reverse-auction to assure we get the very lowest price
possible.” says Walmart.

“But what is someone ahs a lower price than us?” asked NYC investors?

“We buy from the lowest price source.” says Walmart.

“But we have the patent on this item, so you cannot buy it from anyone else but us!” says the
NYC investors.

“Then we will not buy it at all.” says Walmart.

“But ours is the best in the world...!” say NYC investors.

“No” says Walmart, “our is, the one we have on the shelf of our stores already, is the best in
the world. And we can prove it, because we sell millions more of ours than anyone sells of
theirs.”

The deal did not go through, and the investors are sorely disappointed in their investment.
Of course, Walmart defines best as “sells most due to lowest price.” This company never
competed on price before, and is in no position to do so.

The NYC investors certainly would not be in a position to be the least expensive, and their
patents did them no good. Simply irrelevent.

John


Whose side are you on?

Folks,

Dean, a few weeks ago, asked a very good question: “Whose side are you on?” regarding
videocamming oneself in an encounter with police for self-protection. The idea for a product one could buy that allowed one to videotape their encounters with police perhaps would make
a good item to develop and sell, perhaps worldwide.

Just so happens the following weekend I took a road trip to San Francisco with a retired police
detective, and with both of us gifted with ADD/ADHD we spoke constantly for 12 hours
straight driving time (each way) with neither getting a word in edgewise. We will call this
retired officer “B.”

AS to citizens with an attitude, B’s view was “how things go depends on how the officer
handles it.” It is always a small group of the same officers who get into the fights and
problems.

Fresh out of the academy, B’s first Field Training Officer (FTO) stopped on Alki (a popular
drive in Seattle) and showed him a brief case with marijuana, cocaine and heroin in it. “I plant
this on @$$#*)@&” the training officer said.

His second FTO parked outside a lesbian bar where patrons (matrons?) parked across
abandoned railroad tracks. Technically that is a parking violation, so the FTO wrote up all the
gals, just to make life a wee bit more miserable.

B had been in the Navy 8 years, some in Viet Nam, so he already knew there can be good
guys and bad guys in any service. He just resolved to be one of the good guys.

B started as a young cop in the late 60’s during the student riots and the black militancy
movement. For his part the riots were more shoving matches, so he never felt the need to
keep whacking when a student fell down. When he pulled over Aaron Dixon, the head of the
Black Panthers in Seattle, for illegal lane change, B got a full ration of attitude from several
Blacks in the car. His rule was “never escalate,” so he ignored their taunts, gave Aaron a
caution, as he would anyone else, and let him go.

One of the ongoing complaints Blacks had in the ‘60’s was cops would always handcuff
Blacks after an arrest, and rarely handcuff whites. It was up to the arresting officer whether
to handcuff or not. My friend spotted a Black with a felony warrant sitting in a jack-in-the-
box restaurant and went in and arrested him, in spite of the felon being surrounded by his
friends. The felon hesitated, stood, and presented his wrists for shackling. B said, “Sir, will
that be necessary?” The felon said “no!” and they walked out to the squad car and drove
down town for booking.

(The imbeciles who write police procedures rules decided instread of handcuffing fewer
Blacks, the solution would be to handcuff everyone, behind the back, on every arrest. Now
they handcuff old ladies, suspects dying from gunshot wounds, and even handcuff people
who are NOT under arrest!)

Another time some fellow in a martial arts outfit had several cops at bay with some fearsome
looking moves. The cops were ready to assault him when B approached, bowed deeply martial
arts style, and repectfully requested the ninja nutjob to accompany him downtown. The
fellow complied when shown a little respect.

Once when responding to a call in a flophouse a tenant drew a 357 magnum revolver from
under his blankets and pointed it in B’s face, as B’s partner dropped back to draw his weapon
and fire... B had already grabbed the gun by the cylinder, so the nut could not fire the
uncocked gun. Turns out the fellow had stomach cancer and wanted to commit “suicide by
cop,” but B would not oblige.

Most cops are like this: calm, level-headed, competent without an axe to grind, wanting to
see things turn out OK for everyone involved.

That’s not to say he never had to get physical. He recounted one time he and his partner had
to drag a very thoroughly beaten prisoner out of the back of the squadcar when a uniformed
lieutenant happened by, looking over the scene with a scowl. Without any question the
lieutenant said “Good work, men...” and walked on. That was rare. But it did teach him that a
cop with a beaten prisoner is given unquestioned credibility.

On the other hand, one of the best friends he made on the force (opposites attract), a famous
officer, was notorious for aggressiveness. They met and became fast friends during riot-
control baton training during which the fellow severed his baby finger clean off, and kept on training.
This officer was regularly in the papers for his over-the-top incidents. He was taken off street
patrol and put on Harbor Patrol after he brought in a hitchhiker beaten to a pulp. “Hitchhiker
resisted a ticket...”

B’s motivation for being a cop is probably fairly typical: to serve and protect. He enjoyed
stepping in and defending the defenseless and hustling the dangerous off the streets.

There had always been fairly light anti-drug abuse laws, but with Nixon there came the “war
on drugs.” B volunteered. To make a long story short, over time, you name wrong cops can
do, B got around to it, short of murder.

In fact, it was an offer to B for a contract killing that caused him to finally retire. Seattle cops
as murderers is not unheard of, about 1972 one had murdered a snitch in an alley off Pine
Street unaware the snitch had wired himself. Somehow News5 got the tape and led the 11
oclock news with it.

Some say it is just a matter of firing bad apples. Short of murder, no cops gets fired, unless
unloved by the brass. Officers who step out of line get an “attaboy” and nobody has to say
anything directly to get “the job done.” When some prominent citizen has been raided twice
and no drugs show up, the judge says “last time” to a warrant, the brass says “last time” to
the cops, and the cops understand, “this time find drugs.” And they do. As the officers
invade, one anonymous officer throws a felonious amount of dope in a closet and moves on.
Another officer discovers it, the arrest is made. The defense lawyers polygraph the officer
who discovered the dope, and the officer truly swears he did not plant the dope. Conviction
guaranteed.

Problem was, after years in undercover narcotics and intelligence, B found himself tempted
by an offer for a contract killing, and decided enough was enough. He was offered Harbor
Patrol too, but he was afraid the first time he came across a yacht with coke, he’d be back in
trouble.

The people who manage police forces have all studied Max Weber, and all accept the
definition of government an entity within a certain geographic boundary with a monopoly on
violence. The bottom line is violence, the last resort is violence, and the police wield it. B
just did not want to cross that line so far as murder.

There are alternatives to Weberian ethics, such as the last resort being a jury, or other
premises, but let’s deal with what we have.

We have a system of good cops, yet it generates bad cops, and a system that has a hard time
recruiting good cops. The powers that be like having bad cops on the force, for special jobs.
The bad cops distort the whole profession.

Some people see a cop tasering someone and say...”I’ll never be a cop..that is sadistic...” Of
course some people see a cop tasering someone and says...”I wanna do that!” It is a
downward spiral.

Cops are of course used as political pawns, enforcing whatever campaign du jour the political
class cooks up. At the same time while enforcing laws cops are short-manned as politicians
feather-bed with yet another gardener in the parks departments but leaving police staffing
undermanned. If something bad happens and people demand “more police!” then they can
raise more new taxes for those, too.

The police officer was invented bout 150 years ago, spread to USA about 100 years ago, and
undergoes “reform” about every 20 years, because it just does not work out. Most law
enforcement, property protection and peacekeeping in USA is in private hands anyway, to
mover to 100% private would cause no disruption.

Back to the question "Whose side am I on?" I am the side of the police who are put in an impossible bind, and
consumers who do not get their money’s worth. Police are in a system that suffers from an
internal contradiction: taxpayers are obliged to pay, but the police are not obliged to serve.
The Supreme Court has ruled so.

There is a useful detour in this argument: while our discussion was flowing on this topic a
few weeks ago, and in regards to other discussions of private vs. govt provision of goods and
services, people have emailed me to encourage me to promote Congressman Ron Paul for
President, for surely he is a good man who will make a difference. I agree, his philosophy is
Jeffersonian free market/small government, and no doubt with him as president we’d see
good government trickle down to local police departments who would fire any and all bad
apples, sound money so police pensions were secure, less government campaigns distorting
the economic landscape and we’d have bad cops fired, and better and more good cops
working.

But this misses the point. Ron Paul is a politician. He believes some government is
good. The undeniable fact is every good and service government might provide is better
provided by private business. Private business is superior to even good government. So to
settle for “good government” is to settle for less tham optimum distribution of material
goods and services among humankind. My argument is we can do better than the “good
enough” of good government.

So the question is “whose side am I on?” My friend who committed crimes as a police officer,
a system that led a good cop into perdition? The government that deployed and destroyed
him pursuing political ends? A police sargeant who threatens a kid with false arrest because
the cop does not have the maturity to ignore some snotty teen, and thus makes good cops
look bad? The good, straight cops whose pensions are empty? Cops who are at risk
because their back-up is a sub-par hire, or worse yet, there is no back-up because there is
money for a gardener but not for a cop? Their problems all go back to the same source:
government interference in what ought to be privately contracted.

When I say “let’s turn all police work over to private enterprise” I am coming up with a
solution to the problem, a solution that would bring us more better cheaper faster in
protection of persons and property. Soon enough the material benefit of security in persons
and property would be available to then poorest among us, as surely as everyone has a cell
phone today. It is not an alternative universe to the one we have, because most of our
security is now in private hands, and we can resume having it all there again. Dealing with
security would be like dealing with Home Depot or Saks 5th Avenue, not the government.
(Indeed, a most excellent San Francisco cop I know quit and moved up to Head of Security for the entire
Home Depot Corp.) The best people working as police now would be working in these
private biz as police. People in security business would be properly deployed and
compensated if they were in the free market, not in the obviously failed experiment of having
some police work handled by government. Isn’t the one who wants to get rid of the job of
“police officer’ the one on the side of the cops?

John


China Trade

Folks,

Recently the news came out that Germany is now #1 exporter in the world, but that is slightly misleading, since it is for one month I believe, and it since everything is changing, who knows how things will level off in time. It is significant though, in the larger issue of changing trqade patterns.

When reading trade related news reports, think in terms of "video" vs. "snapshot". The video supports my
argument since it covers trends in time, a snapshot from any given time frame is very
misleading.

Look at China and Germany... China is now Germany's #4 supplier, (if cheap labor
mattered, why not #1?) At the same time, if China is so poor, how come China is Germany's #10
customer, ahead of Russia, a neighbor, and Japan, a rich country?

Here is something key: in outsourcing, USA jobs are never sent overseas. What happens is, a
company is about to build a new factory with new processes and machinery, much more
advanced than the status quo in the now obsolete USA factory. The new factory has jobs no one
has ever done before, so any employee needs to be trained from scratch.

Next it takes 15 years to recover the investment cost of a factory, so the question is, where on
earth will a factory built today be worth the most in 15 years? Right or wrong, people are
deciding the answer is "China". So factories never seen before and jobs never performed before
sprout up in China (where of course the workers, the one variable in this scenario, agitate for
ever-better welfare).

Now, not only is USA biz going to China, but so it every other country in the world. China is
#10 supplier to Germany because German companies have outsourced German goods to China,
and then buy those goods from the Chinese. China moves up in ranking as a supplier to
Germany as the Chinese make German products for the Germans.

USA was buying those same products from the Germans, but now USA is buying those products
labelled say "Siemens" from China with some profits going to Germany.

(Although all of this massive distortion and malinvestment is the result of USA monetary policy,
with a view to cheating China by encouraging them to make things and take worthless pieces of
paper as payment, the Chinese have "judo-flipped" us into a position where the worthless paper
hurts us, and the Chinese now have the technology to be a #1 source worldwide for products.
The trade patterns worldwide prove the Chinese efforts are succeeding.)

When Germans buy Mattel toys from Mattel USA, the toys once made in USA are made in China.
The Mattel factories are state of the art, Swiss Pharmaceutical grade factories putting out first
rate products, managed by world class managers, who happen to be born and raised in China,
and likely holding a Harvard MBA. (As I predicted, the recent multi-million unit toy recall ended
up a Mattel design-flaw issue, not a Chinese QC issue).

To attribute China's success to "cheap labor" or 'exploited labor" is to miss what is going on, and
how to play it. For the USA policymakers, that most Americans have become convinced that
cheap labor is THE factor in international trade (when it is not even A factor), they can write
policy that puts a halo on stupidity. USA policies harm the USA consumer and ever enrich the
Chinese, Perhaps this is why the Communist Party of China funnels so much money into the
democrat and republican presidential front runners, and why they must visit Beijing before they
can be considered "presidential."

Efforts that result in a thriving small business necessarily upset the bad guys who populate the
top tiers of government worldwide. Although individually we matter not one bit, collectively we
unbalance the status quo for all bad guys worldwide, because we do well while doing good. This
runs contrary to the official, stated government USA policy which all government workers and
policy makers organize around: "Get big or get out!"

John


****
Below is a list of Germany's top 15 export customers, based on WTO statistics for 2005. Total
German exports for 2005 amounted to US$971 billion. These 15 countries account for some
three-quarters of total German exports.

Top 15 Countries for German Exports in 2005

France ... US$99 billion (10.2% of total German exports)
U.S. ... $85.5 billion (8.8%)
U.K. ... $76.7 billion (7.9%)
Italy ... $67 billion (6.9%)
Netherlands ... $59.2 billion (6.1%)
Belgium ... $54.4 billion (5.6%)
Austria ... $52.4 billion (5.4%)
Spain ... $49.5 billion (5.1%)
Switzerland ... $36.9 billion (3.8%)
China ... $31.1 billion (3.2%)
Poland ... $25.3 billion (2.6%)
Czech Republic ... $23.3 billion (2.4%)
Sweden ... $21.4 billion (2.2%)
Russia ... $19.4 billion (2.0%)
Japan ... $16.5 billion (1.7%)

Germany imported $774 billion worth of goods from its trading partners in 2005. The 15
countries listed below were responsible for over 70% of goods imported into Germany.

Top 15 Countries German Imports From in 2005

France ... US$67.3 billion (8.7% of total German imports)
Netherlands ... $65.8 billion (8.5%)
U.S. ... $51.1 billion (6.6%)
China ... $49.5 billion (6.4%)
U.K. ... $48.8 billion (6.3%)
Italy ... $44.1 billion (5.7%)
Belgium ... $38.7 billion (5%)
Austria ... $31 billion (4%)
Spain ... $28.6 billion (3.7%)
Switzerland ... $27.9 billion (3.6%)
Japan ... $23.2 billion (3%)
Czech Republic ... $22.5 billion (2.9%)
Russia ... $21.7 billion (2.8%)
Poland ... $20.9 billion (2.7%)
Ireland ... $20.1 billion (2.6%)

Germany enjoys trade surpluses with most of its trade partners, with only 4 deficit trade
scenarios in the above lists. In 2005, Germany had trade deficits with China ($18.5 billion), Japan
($6.7 billion), Netherlands ($6.6 billion) and Russia ($2.3 billion).


Economist Article

Carlo,

I read that economist article, and it was very good.

http://tinyurl.com/22ph8j

Now you will notice that these companies
get into trouble when they mix up the roles as I lay out in my book: conservator adn
innovator.

The end of the article mentions Peter Drucker, from whom I took the idea of innovator vs.
conservator (he gave me the book himself)... Drucker argues big biz sdhould innovate, and
that struck me as wrong... and one reason I wrote the book you have is to lay out the
disagreement... (not that drucker or anyone could care less what i have to say...)

But it is intersting if they viewed their problems through the lens I lay out, then they would
sort out the problems.

The first problem is what they measure is the result of hawthorne effect, not Six Sigma or
TQM. They should read FOOLED BY RANDOMNESS by Nassim Nicholas Taleb.

Next, yes, innovation costs too much if done by huge-overhead companies... they ought
leave it to tiny overhead innovators... althugh Google may not be clear as to the "how" of
their innovation, it is clear to me: they focus on the customer ( user experience )...

"Fast failing" is what innovators do, pressing the customer directly and running the rabbit
into the ground, or designing what would sell...

Those companies that experience turf battles could sort it all out by simply demanding the
factions "prove it with customers..." But again, i disagree with conservators innovating at all,
their role is to lower the cost and widen the access of the innovative item...

The Siren song section of the article is best, becasue the confusion is most knotted there...

Yes, pleasing only your best customers causes the problem of the narrow basis of
comparison... you need to please most customers...

Yes cost of innovation is high for conservators, but not innovators...

It is innovators who should be coming up with new for those cream customers and charging a
premium price, not conservators coming up with the new for cream customers and charging
cheap price... there is the rub we at small business know about, and they have not figured out
completely yet... they keep buying innovators or stealing their ideas, which is the proper way
they should acquire items upon which to lower the cost and widen the access...

I love Christensen's comment that this error (he and I agree it is an error, I see a different
solution) on the part of big biz "allows upstarts to enter the market and offer inferior,
although perfectly adequate. technologies and products at much lower prices, and push
incumbents into ever small niches..."

Well yes and no, again. Innvators " enter the market and offer inferior, although perfectly
adequate. technologies and products" but not at lower prices. They do so at higher prices.
the key that is missing for Christensen is in retrospect those products are inferior, but in
1980 a cellphone was highly desirable and plenty of people, paid the super premium prices
to people like Seattle boy Craig McCaw for cell phones and service that was few choices,
lousy product, expensive and slow to get. today cell phones are more better cheaper faster
becasue the conservators are heavily into it... McCaw Cellular sold out to AT&T, making
McCaw a billionaire, and AT&T made every american feel like a million bucks with their cheap
phones and connections to the cell phone network....

Christensen is clear on the new if not so good (again compared to what evolves and
eventually gets to the mass consumer)... he mentions transistor radios which where rather
bad in the early 1960's. comparatively speaking, with their tinny sound.

Barry Gordy, head of Motown music, used to have his artists songs arranged for teh best
sound that could come out of transistor radios and car radios... what instruments best sound
on those devices... talk about passion for your product! (Also, hence why all the "digitally
remastered albums from original tapes, etc...)

So thanks for the article and let me know when you finish the book.

John