Seven Untrue MBA Lessons

Here are a half dozen or so lessons taught in business schools and MBA programs that simply are not true.  I suppose it does not matter if you are going to work for a company that will be bailed out anyway, but I encounter people starting businesses who have these ideas inculcated, to their detriment.  So let’s sort them out.

1. Money is green pieces of paper with dead presidents.  No, that is just a tally, and probably debt.  Money is a commodity used as a medium of exchange, while retaining its property as a store of value.  Today it is gold and silver. Everything else is some version of a tally, as part of some cosmic balance sheet.  It matters if at any point you need money and all you have is tallies. When the state seized citizens gold in 1933 and forbid its ownership, an exception was made for international traders, since that was still money, as it is today.

2. The only basis upon which one can compete is price.  Not true.  There is also design as a competitive basis.  Monopoly is by definition not a competition.

3.  Service is a competitive advantage. We can sell products and services, but “service” as in “service level”, the other sense as an attribute a company may hold as an organization, is never a competitive advantage.  All industries have a service level.  Walmart has a service level, similar to ToysRUs.  Saks has a service level similar to Needless Markups.  Service is a standard item on offer, not a competitive item.  Your job is to match exactly the service level of everyone in your industry.

4. The same with quality.  Quality is an atribute in relation to the good or service you sell.  Quality is never a competitive item. All industries have a quality level.  Walmart has a quality level, similar to ToysRUs.  Saks has a quality level similar to Needless Markups.  Quality is a standard item on offer, not a competitive item.  Your job is to match exactly the quality level of everyone in your industry.

5. Free trade agreements help.  Talk about oxymoron!  No one has to “agree” to free trade.  Free trade is voluntary and unilateral.  The moment one says “agreement” it is no longer free trade.  “Free trade agreements” are where the violence of the state is ordered to the end of making life easier for crybaby billionaires who do not want to have to compete.

We have free trade between Oregon and California.  It takes a whole paragraph to explain it in the US Constitution.    Nafta started out at 14,000 pages, and an army of eunuchs add to it constantly.

Free trade is always voluntary and unilateral.  And it always makes a country stronger.  But no state entity uses the term honestly.

6. Cheap labor is a factor in international trade.  No it is not.  There is no evidence of that, nor could it be in fact or theory.  The idea of cheap labor is entirely a matter of social conditioning, a false dilemma to keep USA labor on the ropes.  The lie hides the real reason for most international trade, which is tax avoidance and money laundering.

7. Comparative advantage is the theory that some countries naturally have an advantage over others in some particular area of production.  The upshot is you can use this knowledge as you reckon market possibilities.  The fact is in reality comparative advantage is unworkable as an idea, since state intervention ruins any natural advantages a country may have.  As long as there is a state to intervene in a market, comparative advantage will never obtain.


Tell me what you learned in business school that turned out to be not true in the real world.


john@johnspiers.com

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Europe Movement to End "Intellectual Property"

A movement is gaining steam in Europe to get rid of intellectual "property rights."  As regimes fall, it is a good time to get rid of bad ideas.  Good for Germany and Sweden!

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Understanding Property vs Intellectual Property

Property is something we find in natural law, the result of mixing your labor with natural resources.  Intellectual property cannot be found in natural law, it is a construct in prescriptive law.

Intellectual property is grounded in the theory if you mix your ideas with others, you own the entire idea. Set aside the problems of "owning" idea, and look at just mixing your labor with others' ideas.  The labor in this case is thinking.  We all get paid to think, to some degree.  So thinking can be an example of productive labor.

One way, of the countless ways, Intellectual Property Rights theory goes wrong is it assumes, once thought, always owned (or for some length of time set by statute).  Where as property is valuable only to the extent it can be worked, Intellectual Property can be valuable to the extent that anyone works it.

My Fair Lady (Pygmalion), the George Bernard Shaw play that promotes the idea of scientific racist eugenics (the scientist ultimately rejects his "do little" untermenschen) can be put on by others if they pay for the "property. "  But wait! To mount a play, any play, people who must apply the labor of their minds to organizing and producing a play along with the countless details to attend to in order to make the play happen, including invest considerable amounts of money.   Why should they have to pay Shaw, or Shaw's estate anything at all, since Shaw is not offering any thinking power to the present effort?

You'll say "but Shaw thought up the play."  Nonsense, Shaw stole the idea from Ovid.  Shaw married the ancient plot with modern scientific racism,  thought up some clever dialogue and sold it in 1916 to a widespread audience eager to be socially conditioned to scientific racism.  Most of Shakespeare's plays can be traced back to earlier plays. Both sellable parts of the play are ideas Shaw "stole" from others, in the case of My Fair Lady, Ovid and scientific racists.  Shaw got paid for his work in 1916, and for decades thereafter, as people consulted him on subsequent productions and movies.  The play made Shaw rich because Shaw kept producing in relation to the play.  Making people feel warm and fuzzy about scientific racism takes talent.

Shaw no longer is breathing, let alone thinking and working.  Why should anyone pay anyone else for an effort to mount a play that in no way takes anything away form anyone else?  If I light your candle with my candle, do you owe me money for the flame on your candle?  How come?  I might agree to pay, but if you are not around and I light my candle, do I owe you?

I write books, and print them and make money from them.  Selling books is how I get paid for my time spent thinking.  Don't I want my kids to have the "royalties" from my books after I an dead?  I am an anarchist, and I do not like kings (an + archy = no  king) or their royalties.  If my kids want to make money off my books let them print them up and sell them, like anyone else.  If they want to make money off ideas, let them produce a version of the ideas they can sell.  A theatre and a production of a play, and a book, are property.  We do not need "intellectual property rights" and laws to make money from our ideas and thinking.  We do need property rights, something we find in natural law.

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Corporate Personhood & Employee Transformation

A new hot-button topic, corporate personhood, has the Left aflutter and the Right taking to the trenches.  Neither knows much about the history of the US corporation, or understands it.  It is an evil construct, and the fine Marxist Harvard professor Morton Horwitz took it apart, among other things, in his book The Transformation of American Law - 1790 to 1860.    If you want to understand reality read a Marxist, not these lightweight progressives and their silly self-referential panics.



Unless you understand what you are talking about, you will not make much progress.  As a Marxist, Horwitz gets his facts straight, as Marxists usually do.  It is their prescriptions that fall short.  Read Marxists, skip the last paragraph.

Corporations and big govt working together, by definition fascism, has ruined the American economy.  Society has rotted in the wake of the economic ruin.  The ruined America is what both the left and right want to preserve.  Both the left and right want to continue the wars, spying, bailouts, death squads, drug control, prison planet, pollution, etc.  They just argue over who gets to be in charge of it all.

What to do about it?  The fascists ruined the USA economy with their central planning.  The only path to recovery is a renaissance in self-employment.   Self-employment is the bane of every central planner.

 You already know your pension is forfeit, your property will be taxed into worthlessness and your paycheck is being inflated away.  Come government healthcare, your life will be forfeit too, as a pensioner you become cheaper to kill than to keep.  You think that is extreme? Let's hear from a leading playwrite and thinker of the side that won WWII.

Being self-employed, and independently productive, will keep you happy, healthy and off the lists of the "non-productive."   You'll pay cash for your health needs, and be self-supporting.  But for right now, you have a job, and for whatever reason cannot make a transition.  Well, you can, by transforming to "self-employed in place."

Right now you think of your employer as the source of your paycheck, healthcare, etc.  Change your mind.  See your employer as a customer of yours, not your employer.  See yourself as a supplier to your employer, not an employee.  Behave as if your employer were a customer.

Just how much value can you give your customers?  What can you do for them that helps them succeed more than they would without you?  How can they get as much value from you for as little money as possible?  This is how the self-employed see themselves in relation to their customers.  Start thinking that way now.

The problem is you might get a raise and promotion which may get you to stick around.  Maybe, and that would be a tragedy.  Nothing could be worse than success in corporate america. More likely, you will think up a business for you to start sooner, better, and leave faster.  Self-employment is personal transformation, and you can start right now, in spite of being a wage-slave.  It is in your head.

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A Worldwide China Brand

A remarkable phenomena is in spite of China being 1/4 of the world's population and likely the oldest civilization, it does not have a sigle brand known worldwide.  No home grown Coca Cola, Nike, Tiffany, IBM, etc.  Here is an article that says that is about to change.

The article does claim that Lenovo and Haier are world wide known Chinese brands.  I don't think they count.  I recall the sale of IBM computer biz to Lenovo which was advertised as a mere name change, so it is not quite the same thing as a organic China home grown company known worldwide, and although I know Haier well, I doubt most Americans would recognize the name or know what they make (refrigerators).  And I believe they bought their way into the market by buying maytag.  Neither of these is an example of a domestic business in china that gre worldwide form their products, like say IBM or coca cola or tiffany.

What is more interesting is Huawei, and organic home grown brand, making a bid to be a worldwide brand.  They very well may be the first, and if so, of a very long line.  Critical to this will be the security in the China market of their brand.  I have no doubt China will do it, by means of the "clean business" campaign.  Anyone who is working with China right now should be well versed in this "clean business"  or "social credit" campaign.

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And Next: EXIMBank $3B for LNG

After MY being outed as a GOP extremist, GOP extremists announce the taxpayers are on the hook for $3 billion in loans to support an AUSTRALIAN project that will sell LNG to Japan and China!

Wait, what?  China needs USA financing?  China is sitting on a trillion dollars of our money and we have to finance a deal for them?

Ex-Im's financing is expected to support an estimated 11,000 American jobs. Principal U.S. exporters are ConocoPhillips Co. and Bechtel International, both of Houston, Texas.

Read more here: http://www.sacbee.com/2012/05/08/4475060/ex-im-bank-approves-nearly-3-billion.html#storylink=cpy

Expected?  How about those companies CEOs go to jail if not?   They never do generate the jobs.

"Our authorization paves the way for U.S. companies to export equipment and services to this major LNG project and, in so doing, to maintain thousands of American jobs across the country," said Ex-Im Bank Chairman and President Fred P. Hochberg

Read more here: http://www.sacbee.com/2012/05/08/4475060/ex-im-bank-approves-nearly-3-billion.html#storylink=cpy

Well, he would say that, wouldn't he?  What it means is those companies are so overbloated and uncompetitve that the only way that Australia, China and Japan will let those companies play is if Conoco Becthel get USA taxpayers to pay Conoco Bechtel.  This is like Detroit paying you $50,000 to buy a $50,000 car.  OK.

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Nigeria Reforms ExImBank

Good news from Nigeria!  They are plans afoot to reform their ExImbank! (Every 3rd world country has one). Read how they have no intention of letting it become a mayor in the trashbin of government bureaucracy!  I could not have said it better myself!

Nigeria is an example of too much state interference in life.  Nigeria is the future of USA, if not already.  We have to get rid of at lest one 3rd world agency, why nor ExImBank?

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I Am Outed As A GOP Extremist!

This comment was left by a ExImBank defender:

JBurke has left a new comment on your post "Obama Bailouts Continue Thru ExIM to NAV": 

Based on your same logic Chrysler should never have been bailed out way back, after its share price nose-dived and they had their rating cut. When share price goes down, the money is not actually taken "out of the company", but instead comes out of the market as a vote of lower confidence. Guys like Icahn and others have made zillions buying on bad news and market softness. To say that $130k in campaign contributions drives $360M in loan guarantees is fantasy and whild accusation. These guarantees are for financing through Navistar to 1,000+ smaller supplier firms, not money that is going to Navistar, it is cash flow to Suppliers (small businesses) in better payment terms while protecting the working capital of Navistar. Are you sure you know how this works? Doesn't sound like it. In fact, this whole blog sounds like a political rant instead of financial logic. You've been OUTED, you GOP extremist! 

Yes, Chrysler should not have been bailed out way back when.  It had to be bailed out again.  If Chrysler had folded, a few hundred thousand people would have been out of work for a short while, most of which would have been picked up by better-run companies, companies whose business would have increased sales due to poorly run Chrysler folding.  Further, a few dozen of those people would have started auto companies, young fresh smart, and we would have seen in autos what we saw in computers.  Prices falling fast, and cars more better cheaper faster (more efficient).    What we get with bailouts is, well, what we have today, GM = government motors.

Ah! When a company is being run into the ground by poor management, insiders bailing out and stiffing the pension plan investors is just being smart like Icahn.  To choose "pay to play" over sound management is just being smart? Putting taxpayers at risk and keeping alive a zombie company, state directed malinvestment is good policy?  There is a difference between crony capitalism and economics.

To say the $130k in campaign contributions drive $360M in loan guarantees is to demonstrate Navistar must pay exorbitant contributions, when so many other companies get far more for far less.  Are you sure you know how this works?

Are you sure you addressed the facts and logic of the original post?

Do you realize how delusional you sound "outing me as a GOP extremist"?  You need to get out more, and see that the world is bigger than the democrat/republican false dilemma.

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A Tax On Religious Freedom

If you make a loan to someone, and do not charge (usury) interest, the IRS will impute an interest rate, and charge you tax on that income.  For both Christians and Moslems, charging (usury) interest is a crime, a sin, because it does damage.    (For Jews too, but they have an exception which allows them to charge non-Jews).

Certainly you are free in USA to not charge interest, but if your religion forbids you to do so, there is a tax upon you for exercising your religion.  Say you loan $100,000 to someone, with no interest, as your religion requires.  If the imputed interest is 5%, then your imputed income is $5000 per year.  If your tax bracket is 30%, then you owe the Fed govt (not to mention the state) 30% of $5000 or $1500 each year, for making the loan.

In essence, in USA, you are taxed for following your religion.

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Advertising

David Ogilvy was the enfant terrible of advertising in the 1960's and wrote a few books, in particular OGILVY ON ADVERTISING I have long recommended. He appears to have had the gift of ADD/ADHD, if his CV is any indication. He was an innovator and a truth-teller.

Ogilvy points out most advertising is a waste of money, largely an ego-investment in the form of a valentine to the CEO and crew that run the company. Think of Jack Welch and GE, and all of the money spent to tell us they "Bring Good Things to Life" in spite of the fact they at the time were pursuing business and allying with government programs that much harmed our economy.

The book made one point I found astonishing when I first read it. Ogilvy said never run an ad without a coupon. Now, Ogilvy represented Rolls Royce and Sears. Sears, I can see a coupon. But Rolls Royce? Yes, a coupon for a brochure that advanced the sales job on a Rolls Royce, but far more importantly, showed Rolls Royce exactly the response rate to the ads placed. Ogilvy taught every ad should be keyed ( indentified in some trackable way) and as dollars are spent on ads, you know exactly what you are getting for your money.

As a small business grows, small amounts of experience inform the entrepreneur as to what precipitates a customers buy. the unique offer of the entrepreneur, in the process of designing and redesigning based on market feedback, also shapes any advertising message, at its most effective, within the enterprise and as the ever better designs are being developed. It is a pas de deux between design and advertising message, the one working with the other.

in big biz, since the taxpayers ultimately support the corporations whether they fail or thrive, especially if they fail, advertising is just spending money to aggrandize oneself and support the regime. When Union 76 advertises how the oil company is advancing green initiatives, it is simply coordinating its activities with the state, and charging the cost to the taxpayers, not the customers. The rank and file celebrate bringing Union 76 into the fold of the green movement, when in fact it is a defeat.

But back to efficacious advertising. The idea that advertising will necessarily grow a business of course is nonsense. The ads must be effective, Ogilvy's small point that efficacy could be tracked caused a furor when he mentioned it, but in fact it did little damage, since, as I said, most advertising is pointless and paid for by taxpayers, not consumers, anyway.

One aspect of the damage done by government intervention in the market is since the big bucks in advertising is misallocated in the area of promoting the regime and the big biz/big govt axis of evil, what advertising skill set that is out there is malinvested in inefficacious means. Little if any work is done in the area of solid art and science of advertising.

Ogilvy's point is critical for we who actually provide a value in the marketplace. We can know if advertising is efficacious as it runs. I lay out in my book some ways of using the principle of subsidiarity to get the most effective advertising, but it should be read in the context of Ogilvy's work.

Until the time comes when advertisers have a model that guarantees a return on your investment (Google is moving in this direction) you are on your own, but can be well guided by Ogilvy, and the tried and true practices of small businesses.

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Business Cloning & Free Markets

Hi Tech entrepreneurs whose MO is to steal others people's ideas and capitalize on them have gotten together to complain about people who steal other peoples ideas and capitalize on them.

"One media executive recounted learning about the launch of photo-sharing app Color just before boarding a flight to Shanghai, where he was to meet with Chinese entrepreneurs. The following morning, the second entrepreneur who pitched him presented a complete Color clone."

This is nothing new.  People did this when I sold baskets made in China.   And this practice started long before there was a China.  Only people in the Silicon Valley believe the history of the world started the day they wee born.

Ideas are always the result of a dialectic in which there is a thesis, antithesis and a synthesis.  Various actors feed off themselves.  Countless people were addressing the idea of microcomputers and stealing each others idea.  the one who marketed best won, and that is Apple.

In USA, a state that has an organizing principle grounded in violence, to stop this non-event from happening we have something called "intellectual property rights" (IPR)  that requires 4th and 5th parties to pay 3rd parties to involve themselves in marketing challenges between 1st and 2nd parties.

The 4th and 5th parties are you and I, the 3rd parties are the govt and their minions in the legal profession, the 2nd party is the "copycat" and the first party is the "originator."

If the search engine was patented, we'd be stuck with yahoo.  Google outclassed Yahoo, with an idea first thought up by the fellow that went on to start Baidu in China.  What if he had patented his idea, and stopped us from having google, and forcing upon us the Chinese version of google?  (I understand google's competitive edge is its secret logarithms, and not IPR, but my point stands.)

It is not just a matter of design, marketing, customers matter too.  Clearly Apple has superior design, but that is because they care about customers, something Microsoft, whose business tracks govt growth, never had to care about.  IPR allows the people the market does not care for to force the market to buy from them.  IPR is essentially a govt granted monopoly.  And if you resist, the govt applies pressure, up to and including violence against resistors.

In a free market people do copy others, but those who best serve the customers wins.  This is good.  This is the is idea that so many people whose lives are oriented around money, who we call capitalists, are so concerned with... they fear the part where they may have to serve the customers.  They would rather you and I pay the government to destroy anyone who would better serve their customers.  Why should we pay money to keep ourselves from access to more better cheaper faster? I would like to hear and answer to that question.

If we want the best on offer to the most, we must get rid of IPR.  Copycats already exist, so we'd have nothing new.  What we would see, in in the hidebound industries like medicine and law and banking and education remarkable improvement.

So what if someone cloned Color?  Anyone can clone anything.  The next step is to try to get customers.  Good luck with a "me too" offer.

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Eat Well and You Need No Vaccine

The food supply is heavily regulated, controlled, subsidized, distorted. We have a pension crisis, elders are beneficiaries of pensions, the government needs a solution.  Elders are advised, urged, offered for free, vaccines with four times the dosage.  Although there is no scientific evidence of efficacy.  Yes, lots of risks.  hmmmmm....

No one went to jail for the Tuskegee experiments.  Quite the contrary, if you wee active in those efforts, your career was set.

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