All Hail Matthew Burnett & Makersrow.com!

Anthony bird-dogged a report on a fellow who had trouble sourcing in China, Matthew Burnett.  Now no surprise there, he had not taken my seminar so these things happen.  After hav ing problems in China, what he decided is to have his garments made in USA.  The next problem was to find USA suppliers of garments.  Hard to do.

So, in his suffering (passion) he found joy in solving the problem.  He organized a website that showcases garment related manufacturers in USA.  This is what the internet is good at, widening the access and lowering the cost of research and communication.  (I wonder if he checked out Thomasnet.com for say "denim jeans" and if so, why that did not do the trick?)

Anyway,  from the article...

Nicole Levy is one manufacturer who likes the new website. Her small factory, Baikal, makes fashionable handbags in Manhattan. She got a lot of calls from designers who saw her video online. She even had to hire more workers to keep up with demand.

I would test the reaction she gets from Thomasnet.com vs. makersrow.com for both number and quality of inquiries.

"It could revolutionize the industry domestically because it could create a lot of labor for domestic factories and keep them around," Levy says.

Maybe, on the other hand, it may just reiterate the reason people go overseas, which is the crazy make-work regs, the absurd minimum wage laws, employer-mandate and confiscatory tax regime in USA that drives creative people to seek management of production overseas.

Also, a "Made in the USA" label could be a good selling point for American consumers who want to avoid ethical questions about overseas manufacturing.

The way to avoid ethical questions is to decline to act unethically.  If one acts unethically, then it does not matter where you produce.  Where you produce does not determine ethicality.  

Some new designers don't quite understand how domestic manufacturing works. Their rookie mistakes and naïve questions can be irritating to an old-timer like Terry Schwartz. His company,Sherry Accessories, has been in New York's Garment District for decades.

"The ones I can't handle are the ones who are making a product, who want to know why I can't make it for the same price as the Dominican Republic," Schwartz says.

Mr. Schwartz need to dummy up that MOQ order offer page to repel the unserious and attract the serious.

"I do have some things that are very unique," Schwartz says. "I honestly never saw things like this before, and I'm trying to create these for these people, to make them work."

And here is where the rubber will meet the road.  Mr. Schwartz is not competing on labor rates, he is competing on the cost of managing the design and production process of the items in question.  Can Mr. Schwartz out-hustle the Chinese factories in China and the Chinese factories in the Dominican Republic?    Will the Chinese managers require less compensation for the same level of expertise of result?  

The answer to that question will determine if garment making comes back to USA, if the investors in makersrow.com ever see a profit from their investment in the website.

But Matthew Burnett has had the "experience."  He found out joy is not something you can get directly, but it is a by-product of passion (suffering.)  He found joy in working on a problem.  

There is no stopping him now.

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Avoid Getting Burned Exporting

The big order seems to be the idea of international trade, to everyone except those who actually thrive in the business.  Schools teach all about economies of scale, comparative advantage, currency arbitraging, which I suppose helps fill otherwise empty space in lecture time, but are not a part of real world international trade.  A researcher checked in with me on an apparent anomaly:

I ran a model that said holding everything else fixed (industry, age of business, size of business, year started, etc.), a new exporter's life expectancy is negatively correlated with the value of sales in it's first year exporting.  That is, the more you sell your first year, the shorter the time you continue to export.  What do you think?  Do you have any intuition for why that would be?

I know from personal experience that large orders to start mean one is likely being ripped off.  I say so in my book. 

Plenty of companies who get big first orders experience one problem or another (including plain fraud), and the cost of the mistake on a big shipment overwhelms the company.  When exporting, selling to buyers overseas, the buyers are testing as much as we are.  They find the rules and regs as contradictory and whimsical as the seller.  They want small shipments to test out the processes.

  No legitimate buyer risks big money on new product.  They desperately need new, but "new" necessarily means "untested."  So legitimate buyers are testing ... Measure twice, cut once vs burned once twice shy.

Exporting is notoriously easy to get burned, for a couple of reasons.  First and foremost, our strengths are our weaknesses.  The UCC gives us all recourse if someone rips us off.    Therefore, we are innocents abroad.  We just assume we can take malefactors to court, like usa.  Not so...

Next,  banks sell letters of credit as security.  Brenda McKelvy is the only banker I ever met who said no, not true (I already knew in practice they are not, but it was good to meet a banker who said so.)  I read a long book on LsC by a lawyer who said they were not security, and his recommendation was a international law enforcement agency blah blah blah...  he had a good line.. "the law is supposed to bring order, but LsC bring chaos." (Also cited in my book.)  Well, right.  The only thing that matters in int'l trade is relationship.

I was consulting circa 1995 with a MetLife Ag investment of 1000 acres of apples and pears.  First day the boss tells me he is stealing thunder from a MetLife peer who has a 1000 acres of oranges who thinks he will be the first MetLife Ag manager to export to China.  Secret deal.  hahaha...  Full container load to China, and I ask how he is getting paid.  "no problem..letter of credit."  He shows me the document.   Yikes...  It is a Bank of China LC application form, duly filled out.  I tell him it is an application form, not an LC (not that an LC would be any security).  He calls in a banker who says "it is an application form, not an LC."

It is a problem that everyone is conditioned to think that the MOQ must be at least a 20', and since a 20' is 80% the cost of a 40", reason dictates the MOQ is a 40'.  I've seen plenty of scamming in int'l trade in my time.  The full container load premise invites disaster.

There are far more potential customers at a $2000 MOQ than a $100,000 MOQ, potential customers who can test markets and find something no one foresaw.

The trick to avoid getting burned in exporting is to offer the FOB your currency prepaid low MOQ export offer.  You ship to everyone who prepays, and then you let them reorder slowly over time.  Upon reorders, you can study that company, and find their creditworthiness.  

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Get Big or Get Out

There was a time maybe 100 years ago when progressives though big government/big business was the way to go.  At that time the term commonly used for the federal government was the general government.    Top offices were called the attorney general, inspector general, solicitor general, etc.  To this day legislative committees use the term general to refer to the federal government.  Big government/ big business united is the definition of fascism.

When this idea was gaining popularity, people formed companies with a view to becoming one with the "general'" (federal) government.  Businesses were incorporated with the names General Motors, General Foods, General Mills, General Electric, General Dynamics, General Insurance, General Tire and so on down to companies that were never quite able to ascend to the heights of fascism.  GNC is General Nutrition Company, started in the 1930s.  Government and business as one was the future.

The goal has been largely achieved, to the point where in 1970s Sec of Ag Earl Butz could say the ag policy of USA is "get big or get out."  That is proving a bit of a problem, when quality and safety issues plague Big Ag.  Big Ag cannot be reduced as quickly as it was built up.  There is the problem of orderly rebalancing.  And jealousy of one's privileges.

But the work is going on with a renaissance of good eating in USA.  The good food costs more per pound than the frankenfoods, but it is exponentially more healthy.  So you eat less, and stress your body less.

Also, world hunger would probably disappear if Americans were to just chew their food.  We have so much and it is so cheap that we gulp massive amounts down.  This is poorly processed and leads to obesity and disease.  We were designed to chew food to liquefaction and then swallow.  What is swallowed is processed.

So it is with the body politic.  It gulps too much without using in and has gotten obese and diseased.  The Soviets called it collectivization.  The problem was no one could tell what prices were, and the system failed.  We are that much in the dark ourselves.

An act of revolution: buy good food and chew it well.

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California Wine Sales In China

The wine export market to China has been a rare opportunity to test so many premises and theories.  The Brits had formed a relatively free market economy in the colony for everything except for gambling and spirits.  Portuguese Macau has benefitted from Hong Kong's restriction on gambling (not to mention the preservation of morals in Hong Kong) and nobody was benefitting on the restriction on spirits.  China gave the newly recovered colony even more freedom as it elected to eliminate the tariffs and restrictions on booze.

Now neither Hong Kong nor China was much of a wine drinker in 2008.  With the change in the laws, there was a global shift in sales and storage of wine from Europe to Hong Kong.  For several reasons I have laid out before here, Hong Kong started towards #1 in wine sales world wide, especially the auctions.  I've also noted why USA had a bad reputation for wine in Hong Kong.

One reason, among many, USA wines have such tough competition is the tax laws in USA encourage rich people to open wineries.  This results in misallocation of resources and malinvestment, to what degree, who knows.  The market will sort it out at some point, in the meantime competition is tough.  It is possible to have lots of money and bad wine, no money and good wine, and lots of money and good wine.  (And I suppose, no money and bad wine, but then, we call that vinegar.)

Heading in and out of Hong Kong anyway, I did some research on the market for some associates, and got the lay of the land. But recalling from my youth when there was maybe 30 wine labels for sale in Washington state, and then by 1988, 18,000, I recollected that wine sales depended on education about wine.  That began immediately in Hong Kong.

Educators began working the field, and the Hong Kong Wine Expo and competition even has a booth category of "wine appreciation/education."

One effort at market entry/wine appreciation which overcomes the problem of the bad reputation USA earned in wine exports,  and to build market,  is particularly good.  A group of some 30 california wineries has opened a restaurant in Hong Kong that sells near 90 bottles of wine by the glass.  But here is the clever part, they have reversed the traditional restaurant order of matching wine to food, and in this restaurant they match the food to the wine.  You order a glass of wine you'd like to learn about, say a Riesling, and then the waiter will recommend what is on the menu you should eat with that.  Brilliant exercise of ADD!  They are opening a second restaurant.

Here is a video with comments below...



So this restaurant is both a platform to showcase wines and an educational venue.  Brilliant.

Picky points form the video...  I disagree about NY, it is over, like Venice once faded from glory.  Try to open a wine bar in NYC... fogeddaboutit....  Hong Kong, as you see, no problem...  When it is as easy to open a wine bar in NYC as Hong Kong then that will signal NYC is coming back.  Don't hold your breath.

Of course he means artisanal wines not artesian wines.  At first I though he meant artesian since water quality is an issue in winemaking, and that would be extra special.  I replayed and he means artisanal, not artesian.

Competition is tough and great in Hong Kong.  But competition means to strive with.  Combat means to fight with.  You cannot have excellence without competition.  These guys have excelled by their competitiveness.  Learning from their success, what is the next height to reach?

***John Spiers will be offering an all-day seminar on small business international trade start up at Orange Coast College, Los Angeles Area, June 29, 2013.  Full info here...***

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$239 million a mile.

The Seattle Times is reporting that a new extension of light rail is being installed for $383 million dollars for 1.6 miles of rail.  That has to be some kind of record.  That is some $239 million dollars a mile for 1880s technology.  It is not about mass transportation, it is about lining pockets.

There is no possible way that a 1/3rd billion can be recovered from the revenues.  Who cares, it is the thought that counts.

China gets mag lev for about $63 million a mile.   We cannot have modern technology in a kleptocracy.

Update: It gets worse...

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Feedback Matrix

You make a request and there are perhaps four responses from the other party...

1. Yes, I will, and then do

2.  Yes, I will, and then do not.

3. No I won't, and then do.

4. No I won't, and then do not.

1, 3 and 4 are all acceptable and workable..  2 is the one that is most valuable.  How come yes, then no?  Really no way of knowing. No possible way of working it.

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Wait a Minute...

If quantative easing is printing up currency, and that is a good thing, how come enemies do it to us to destroy our country?

During the revolutionary war, when the UK printed up currency we considered it an act of war.  We executed people for it.

Now that Iran desires to throw off the yoke of USA tyranny, USA is doing to Iran what the UK did to revolutionary USA.

It's not like we do not know how this works, the Richmond Fed has done some good reporting on this, how printing currency with abandon is common to destroy the economies of enemies.

So it is bad when people do it to us, good when we do it to enemies, and good when we do it to ourselves.

It sounds crazy to me.

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Stay Away From Exclusives

So as mentioned below, when exporting, create a universal, one size fits all FOB MOQ US$ (or the currency of your country) offer on your products.  This no-strings low dollar value order allows the greatest number of people to test your product in their market with the least amount of difficulty.  since, sadly, the rules cannot be known in advance (there is always something wrong in int'l trade) the buyers also test the system as well as the product.

To try to cover any bases in advance, let alone all bases, requires such overwhelming effort that many just quit.  The logistics, labelling, payment terms.

The idea that your customer overseas is somehow ready, willing and able to take your product to immediate success is delusional.  There is the problem of introduction, testing, modifying and so on, at least a year's worth of work based on small orders just to discover if there is any market.  that you would have the time to pay attention to this overseas work, or the knowledge to contribute to the efforts is also delusional.

At best, you can, upon a re-order, inquire as to what the buyer overseas has found, and solicit ways that you might support their efforts.  But any more than that, regarding what is going on overseas, is literally none of your business.

An exclusive assumes you do care, that you are intimately involved in the market overseas.  It is delusional again that

a. you would have any insights to offer an overseas marketer

b. if you were to develop internally the capacity to contribute to marketing overseas it would be cost effective

c. your customer is the only or best marketer of your products in that market.

By having no exclusives, any and all potential customers in a market can and will test your ideas.  Let a thousand flowers bloom, let the best take over by performance.

And once you begin to sell to a given importer overseas, their competitors see your product on their shelves and contact you.  Sell to them too.  And then watch.

Of course some will plead for exclusives.  You job will be to say no.  People who want exclusives are either malicious or delusional, they are either intending to tie you down by an exclusive, or not strong enough to compete without an exclusive.  And ultimately, exclusives cannot be maintained in int'l trade.   At the small business level,  no American can enforce business agreements overseas.  And the reverse is true.

The anti-exclusive points to remember...

1. why tie yourself down?

2. can't be enforced.

3. anyone can get around them.

I go into detail on this in my book, How Small Business Trades Worldwide, from both points of view.  I might just reiterate a putative exclusive holder will also charge a super-premium price in his market, thus provoking competitors to bring economic justice to the market by getting around the exclusive.

If you have an exclusive in place right now, still put your universal MOQ online, and take orders from the country with which you have exclusives.  (Since the MOQ offer is universal, the exclusive-holder will assume you'll honor your agreement and turn down any orders from that country.  Let them think that.)

Should you get orders from the country with which you have an exclusive, fulfill the order in violation of the exlusive.  Then watch what happens.  Here are some scenarios:

1.  You sell into that country for seven years before the exclusive holder finally notices.  that rather demonstrates the "exclusive holder" is hardly penetrating the market.

2. Within 15 minutes of the goods landing in the country of exclusivity, your exclusive holder calls you outraged that the exclusive has been broken.  Demure.  Remember this is a tiny test order. Suggest they watch the shipment and see what they learn.  Agree to give up any profits from the sale of the goods into the now salubrious situation.  Then watch.

If the exclusive holder is not obliged to cut his orders to you, given that now there is more of your product coming in, then it rather proves there is more room in the market than the exclusive holder is serving.  Affect indignation.  Remonstrate. Regain the moral high ground.

The best way to get out of exclusives is to never get in to begin with.

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No Secrets In Business - All Hail Transparency

As I write in my book, every industry is a village and no one has any secrets.  The internet brought a lowering of cost and widening of access to only two areas:

1. Communication.

2. Research.

I detail in my book how we were all on the mailing lists of our competitors for their catalogs, not so we could steal their ideas, but to make sure were were not doing the same thing, and they were not yet stealing ours.  If and when we ever saw the same thing somewhere else, then we would withdraw and work on other products, since, obviously someone else was working on that given idea.  Intellectual property rights or lawsuits or whatever was never in it.  There never were secrets in business, and that is a good thing.

As we sink into corporate fascism, there are people who are showing the free market still works.  One of the areas we most badly need deregulation is medicine.  Comes now a doctor who is reducing the price of surgery, by posting surgery prices online.  And guess what, when there is transparency, there are profits to be made charging 1/10th the price the "not for profit" hospitals charge:


\

now everyone knows..

There is simply no reason for the state involved in medicine.  We need no Romney/Obamacare, in a free market medicine would be cheap and plentiful.

I might add this private surgery center is a return to the days when there were doctors with offices on many street corners, with their own "surgery" on premises.  That is now in effect a crime.  What I did not know that now in most states, to offer medical services, say to open a  new hospital, you need a "Certificate of Need."

What is that?  Well, there is a person who pulls down $250,000 a year working for the state leading a committee who decides if it is in the public interest to have more medical care available.  This is curious, rationing when there is no shortage.  Raw evil.

The good doctor calls it crony capitalism.  Washington State requires this, and once the Catholic hospitals, which owned their buildings and were truly non-profit, with the highly trained, highly motivated nuns who ran the joint being paid literally nothing, gave up their hospitals to HMO managers, etc, the Catholics were out of the hospital game.  And now because of CON, the cannot get back in.  Once you accept the state can say something, it can then say anything.

How do you feel about a state employee decided how much medical service there should be?  Why is medical service different from say,  education?

One more advantage of decentralized medicine... MRSA and other superbugs are easier to control in decentralized surgery centers.  It's a big secret about that latent killer in the collective hospitals. and there is a solution.  The free market.

The chief reason the state makes medical records secret is to protect the state and its genocidal scientific racism being carried out in Obama/Romneycare.  No one can spot what is going on.  An excellent business opportunity would be a website where people posted all of their medical care to a database, and therein at once stored their medical records and made them public to the world.

With that database researchers could study patterns and pick out right from wrong in medicine, and catch crimes being committed.   Such a website could has an app attached so all medical care is instantly updated as you received it.

Lawyers could find the oppty to sue malicious pharmaceutical companies, people could see what medicine actually works, and give early warning when,as often is the case, the cure is worse than the disease.

If we wanted an economic recovery beyond what we had with the dotcom and internet build-out, we just need to deregulate medicine.

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The Gift of ADD

This just in...

 i just came back from dancing tango for 6 hours straight, with just a break for a cantonese lesson over tea. Paris is kindof amazing sometimes..

OK... I get the tango part... I get the Paris part.., but Cantonese, in Paris?

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