Saturday, June 8, 2013

What Is Drudge Up To?

Like clockwork, an American President in getting embroiled in a scandal, so there is a school shooting somewhere.  This time the shooting is at a college three miles from where the President is staying. Three or Five or Seven dead, who knows?  The media just puts a by-line and whatever the police tweet them.  Drudge had a below-the-fold report on it Friday night, but it is gone now, the next day.

Drudge stayed with the scandal headlines, he did not switch to the schools shooting headlines. Saturday, one day after the Santa Monica murders, Drudge has no mention.  And actually, why should we bother reading about the shooting.  We already know the story, the guy was trained to kill by the military or some such, and the guy was on medication to get him to do things people do not normally do.  He was under medical supervision, but to protect the government medical records are kept secret. He shot up a school because they are gun free zones, and the police formed a perimeter so at no point was any officer in any danger.  Ho hum, same thing over and over.

What is different is Drudge is not distracted.  He is sticking on the scandal, not the diversion.  I wonder if he has permission to do this, and if so, who gave it.  A fascinating moment in USA history.

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Monsanto Law Backfires

The USA Supreme Court wrote a private law for Monsanto that is already backfiring.    Some farmer cannot sell his crop because GMO frankengrain showed up in it.

In a very weird result, Monsanto is calling their product showing up in a crop an act of sabotage.  Now pause for a minute, "sabotage?"  When is grain growing like sabotage?  Let 's get visual.

Sabotage:


                                                                                             
Grain Growing.

lightomega.org

How are the two alike?  What kind of company issues a press release that claims their product doing what it does is an act of sabotage?  Is there any point at which people will say, "no more of this nonsense."?

Now perhaps Monsanto is merely admitting what very many assume: and that is the structure of the frankenfood itself is a clear and present danger.    Monsanto and the US Supreme Court admitted as much when they ruled 9-0 that Monsanto needs an exception to the normal market processes.  Surely 9-0 recognizes that something is wrong with Monsanto.

Now, I for one have no idea if frankenfoods are dangerous.  They scare me, and I even feel bad when I get near them.  There are very many anecdotal stories about their degenerate effects.  But science, I believe, is lacking.  It is clear science is being suppressed on Frankenfoods, as it was on tobacco for so long, which heightens my alarm, but the science is not convincing yet.  But that is not the point.  Whether or not the science is pro or con, the fact that a company gets massive subsidies and is preferred in many ways by state regulation and Monsanto's ownership of regulators and the Supreme Court, crushes competition and puts way too much power over something far too critical in too few hands.  The few people to whom the Supreme Court granted special economic rights simply do not have the capacity to manage the crisis that will inevitably follow this concentration of power.  We will all suffer.

We truly do need to eliminate the US Supreme Court as a feature of our government.  It may have been a good idea in theory, but it has failed us consistently over the last 250 years, each time it matters.
There is this idea that if we give people lifetime appointments they will do the right thing.  Why would we think that?  God gave us lifetime appointments to our lives and we are all wicked.  Does being appointed to the Supreme Court make you automatically good?  You get appointed to the Supreme Court if you spend 25 years in the law putting out for BigBiz/BigGovt.  When you will clearly stick with the plan, then you can be trusted with the plan.  Rush Limbaugh once said "nobody tells me what to say on the air."  Well, no one has to.  Everyone knows exactly what he will say.  When it was revealed Gloria Steinem was a CIA asset, she insisted no one ever asked her to inform on progressives.  Well, no one had to ask her.  Once people get the program, you can leave them be.  We have nine on the Supreme Court because who knows, someday one might go crazy and actually rule consistent with the constitution.

  We need something else.  There are so many better proven options. But that is for another day.  For now we must learn from Daniel: stick to your religion, feed the dragon hairball and eat the Judean's lunch.

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DMCA & GMO & Democracy


There is a pattern that has occurred to me, reading Patry on copyrights.  Patry tells how the DMCA extends copyright holders power over the freedom of machinery makers to design products for consumers.  It is a very Rothbardian argument,  For example...

The DMCA gives copyright holders (actually the record companies) a control over the copyrighted item and the ability to reproduce it. If your machine can reproduce copyrighted item, I have control over your machine.  I have have a copyright on a song and you are Sony, I have say so in what you can design a machine to do.  I have say so in how your customers can use the machine they bought from you.*  Even if neither Sony nor its customer  ever approaches anything I have copyrighted.  Does this sound familiar?

Music copyrightholders control music and the right and means to reproduce them.  This extends to the personal property of others.

Seed companies patentholders control GMO seeds and the right to reproduce them.  This extends to the real property of others.

Just as the Congress gave music copyright holders control over what Apple and Sony can make in the way of machines, so the Supreme Court, following whatever political winds might be passing through at any given moment, gave Monsanto's patents the right to control what farmers grow.

Copyrights are a trojan horse in which record companies, putative representatives of the music or seed business, take over property.  It is brilliant, in an evil genius sort of way.

Where else do we see this?  Well, USA owns the idea of democracy, and if you want it for your self, you are obliged to allow USA troops into your country, whether you want them or not.  American Exceptionalism has the rights to democracy so USA controls democracy and the right to reproduce it. This extends to the countries of others.

There is a consistency there that I like.

*This is why some CDs bought in one country will not play in another.  This is why when making copies of anything at Kinko's you run into so many checks to keep you from "violating" copyright.


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Friday, June 7, 2013

USA Invades Iraq So China Can Have Cheap Oil

Very many of us saw this coming as we watched Colin Powell lie the USA into a war in Iraq:  China is getting the oil.

“We lost out,” said Michael Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.”
The depth of China’s commitment here is evident in details large and small.
In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic.
Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants.

We could have just bought the oil, just as China is proving today.  We need truth commissions to find out who said what when, and then prosecute these people and send them to the countries we invaded for punishment.

USA needs to get back on track and stop blaming Islam for our toleration of election fraud and third string leaders.

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Capitalism & Business Start-Up

As I have said, when I want the facts I read Marxists, because their strategy is expressly to argue with the right set of facts, and then proceed to their solution.  What worked for so long is to get on a soapbox in the town square, lay out the conditions as they truly are, and while people are all nodding their heads agreement, the Marxists then say "we'll lead you."  Problem is the Marxists are no better at running a state than capitalists.

Neocons have adopted this technique, and Charles Krauthammer is the best of breed.  He has an excellent command of the facts and polished delivery, but his conclusion is invariably "kill all the Muslims."  Theocons cannot get enough of him, and with a name like Krauthammer they can pretend he is not a Jew.  (Which brings up another question:  if countless Jews changed their name from Schneider to Taylor, why would Congressman Wiener not long ago changed his name to Vienna?  He would not have been the first.)

But back to the point:  if you want to understand Capitalism, then study Marxist criticism thereof.  Just skip the last paragraph where the author calls for revolution or whatever.

So as a start-up, what I often see is the mal-oriented approach of "borrow money, start up."  First, savings, not debt, is the best way to start up.  Use your own money.  If you do not have enoough money to finance what you contemplate, then reduce what you contemplate to match what you can finance.  If you want to design airplanes with parachutes, and do not have enough money to start an airplane with parachute business, then just do the airplane parachute business.

Finance is never THE problem in business,  The problem to solve is always to create customers.  Create customers and the finance problem will solve itself.

Now, in capitalism, which in essence argues that capital formation is a good thing (funny that, when economics is supposed to be value-neutral), the idea is you are granted a pool of capital, you launch the enterprise, and you hire hapless college graduates who you can now exploit, crippled as they are by debt and ignorance.

This capital is created by banks lending credit on fractional reserve at usury.  In this way the value of the wage slaves is transferred to the business owner (plantation master) and the bankers.

The bankers figured out how to lend what they do not have and harvest what they have not sown. It works, but it also has no rational limit, and at some point meets an irrational limit, and that is where people lose faith for whatever reason.  They don't call it "fiat" money for nothing.

All colleges, textbooks, INC & Forbes and so on all teach the above as the way to go.  All government business development programs assume no alternative to this process.  And why should it?  We live in a capitalist system.  The system is exploitative.

Now, that is not to say anyone is stuck.  For commodities there are the co-ops which are not exploitative, for example in Seattle we have Puget Consumer Co-op for food, Recreational Equipment Coop for sporting goods, Group Health Co-op for medicine, and so one.  Yet, careful, for there are plenty of things called co-op that are quite dreadful.  To the degree the State is involved, what is called co-op is dreadful. (For example some "co-operative" housing.)

The free market alternative is peers come together and mix their contributions and share out on some agreed basis.  It is as simple as that.

But here is the problem, people compare the two and prefer the former.  When Lewis wrote "Liars's Poker" as a cautionary tale and hopefully a corrective, he was appalled at all the letters from Ivy League students who wanted to know how they could get jobs abusing others they way Lewis had.  Everyone wants to be a plantation master.  Few want to actually work for a living.

So I get impatient when out of ignorance or larceny people want to be capitalists.  That is too easy, since essentially you depend on state violence to advance your personal wealth.

I like the more interesting and difficult process, depending on customers.  Free markets create community wealth, as they introduce innovation and over time lower the cost to the point everyone has access to the material goods and benefits.  And that is what I teach.

Capitalism cannot offer that.

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Thursday, June 6, 2013

INC Magazine on Sweatshirts in USA Vs China

INC Magazine has an article comparing making a sweatshirt in USA vs. China.
Google grabbed headlines recently for its decision to make its wearable computer, Google Glass, in California. The tech giant is not alone. As wages in China rise and intellectual property laws continue to be ignored, more companies are doing their manufacturing closer to home.
I've always taught find the best supplier in the world, and if it is USA, then make it here.  But is anything new going on?  Trade data suggests not, contrary to this article.

Graph of International Trade Balances
http://www.census.gov/indicator/www/ustrade.html

The INC article goes on..
A lot of companies underestimate how much American suppliers have closed the price gap, particularly for high-quality materials.
Well, if they do underestimate then they did not do their job, and deserve to fail.  There is nothing new in this article, there are other examples of the same.  But if INC is right in its summary, then I worry for American Giant:

If Winthrop manufactured in China, he would face currency fluctuations and higher financing and inventory-management costs. Then there's the value of clear communication. Recently, a quick email exchange with a supplier saved a potential $70,000 fabric dyeing problem.
...But it Still Costs More at Home...Cost premium for manufacturing in the U.S.: 10%--30%
...Even So, the Bottom Line Still Works.Profit margin for direct-to-consumer online sales: 50%--75%

One reason contract manufacturing in China is still growing, according to the actual trade data, is currency fluctuations, finance and inventory management costs, and clear communications are all management functions, and mission critical components of a business.  Chinese management of these is every bit as good but costs no where near what it does in USA.  And working with first rate management in China (if you do your job in finding them) you would not have had the dyeing problem to begin with.

Yes, you can get junk made in China, or first rate products.  Apple produces in China because Chinese management costs less and is more effective than USA management.  There is no real way to measure that except in results (how is manufacturing in China working out for Apple overall?).  But by insisting the problem is labor rates, and by the government controlled media constantly repeating known, proven lies about Apple in China, Americans never have to face being responsible in managing businesses in USA.  Advantage China.

The summary about the profit margin is a non-sequiter.  The B2C internet model and its gross margin has little to do with the source cost.  What the model misses is it costs more to attract customers with direct website internet marketing than with the traditional manufacturer(importer)/wholesale model.  Overwhelmingly more. He may talk of a "tidy (gross) profit" but I can pretty much guarantee he is running a net loss.

But wait there is more.  All this attention American Giant is getting has brought a spike in sales.  And in response, the company has done exactly the wrong thing...
In a lengthy conversation, Winthrop argued that wasn’t the case. He walked me through the mechanics of the delay—why, exactly, my story had sparked such a lengthy backorder, and what the company has been doing in the past few months to meet demand. He also argued that scaling up has been good for the company. Everything about American Giant is now more giant than before—the firm’s production capacity has increased by 15 to 20 times what it was in December, and it’s now planning on launching new products, including a women’s line that will debut in the spring. “This is a whole new ball of wax for us—we’re entering a whole new phase of growth, permanently resetting the company at a new level,” the company’s founder says.
Increase production to meet a news article spike?  What happens when mean regression kicks in and for an equal while sales drop below average and then return to normal trajectory?  How will they pay for all that new production capacity and the staff to manage it without the sales to warrant it?  A news article spike is not even a fad so there is no point in trying to manage a fad into a mania, like Ty Warner showed how.

But I guarantee you the Chinese could have met the demand, but you have to have good inventory management to begin with, something American Giant does not seem to have in place.
Before my piece ran, Winthrop had been slightly worried about the holidays. “I’d had a planning meeting with my operations guy, and he warned me that we’d overbought for the holiday season—that we were just too deep in inventory,” he says. “Then your piece came out, and orders started to come in. Within a few minutes I was like, Oh, wait a second, this is starting to pick up steam. I called our e-commerce team and talked to my main contact there, and he told me they were trying to level-load the servers because traffic is rising. And then as we were talking, he says, ‘Dude, I don’t know if you understand what’s happening. In the last minute that we’ve spoken, 55 orders have come in.’ It was just crazy.”
My prediction is American Giant will go under like the 1000 others who tried what he is trying, for exact the same reason, but now faster because of Romney/Obamacare.  Romney/Obamacare reduces the quality of health care in USA while wildly raising the price (not the costs, the price.)  The difference is going into the pockets of the bigbiz/biggovt combines that call the shots.  Making things in USA is getting more costly without any improvement welfare, in fact matters are deteriorating fast.  Look at the employment figures.

USA economic policy is urging USA manufacturers to mechanize and robotize work to replace employees, and where that cannot be done, offshore the work.  Republican and democratic economic policy agrees: destroy the American economy.  Look around.

As to American Giant going under, I could be wrong.  They might survive.  If they change tactics and begin to produce in China.

***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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Google As A Start-Up

First versions of anything are hard to come by, lousy, expensive, and take time to access...  Early Google is a good example.  If you try to make your product or service perfect you miss out on market guidance.  If you go for market guidance, you "miss out" on "intellectual property rights" opportunity.

Smart startups skip then IPR.


But but but, google has lots of IPR.  No, they have copyrights and patents.  And they use them defensively.  If there was no such thing as copyrights, trademarks or patents, then Google would have succeeded anyway.  Almost none of the 8 million patented or countless copyrighted and trademarked items since 1789 have succeeded.  IPR negatively correlates with success.

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Wednesday, June 5, 2013

The Numbers Are Coming In: Economic Policies Destroying Incomes

The data is in, Romney/Obamacare and the Fed QE program is destroying USA paychecks and businesses.  Expect more of the same.  See Mish for the details...

or here...

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Housing Price Rise Means Economy Not Improving

The natural indicator of an improving economy is prices fall.  If prices are generally rising, then it is a signal something is wrong.  For us to get out of this economic mess, prices must fall.  The bottom is not low prices, the bottom is no market, at any price.

By Government policy, interest rates are dirt low.  Landbanking is popular, to buy up property and sit on it since the interest costs are negligible, and alternative investments are more risky.

Warren Buffett has announced the No. 1 investment pick right now is distressed housing.  (Houses do not get distressed, the owner do.)  Buffett recommends you do too.  The problem with Buffett's investment strategy is if he is wrong, he gets a bailout, whereas you lose your home.

If the economy were improving, housing and commercial real estate would be falling.  But it is going up.  It is going up because big money groups are buying up property to rent out.  This will result in more corporate control of housing, and fewer independent builders.

A just way out of this mess is to let prices fall to the point where an recovering economy allows people to afford houses again.  But capitalism is not a just economic model.

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Concrete Example Of Progressive Fraud

One reason we do not have a anti-war movement in USA is the progressives have been bought and paid for by the powers that be.    Look at this:

Japan will be the first nation to build a large-scale maglev route and hopes to be able to export the technology once it has been perfected.
Japan is famously the developer of the bullet train system – which can trace its genesis as far back as 1964 but is still regarded as one of the best high-speed mass transit systems in the world – but developers want to get in ahead of the competition for the next generation of trains.
JR Tokai points out that bullet train technology will be 60 years old by 2025, while maglev technology is less polluting than flights that presently link the cities.
Let's crunch numbers (converted to US$) from the article...


$ 83,673,584,118 cost

340 miles track

$246 million a mile.


Japan is replacing 60 year old bullet train technology which is superior to anything we have in USA with current state of the art.  And then they will sell it world wide (except they are behind China in installations of working models.  Now, let's look at what we are doing in Seattle.  We are spending $239 million a mile to install 1880s technology.

Why? Because Japan is getting its money worth, while in USA the difference in cost is stolen by the politicians who approve of all this and find the money laundered through vast networks of personal benefits to them and their families.  How do you think "public servants " all become millionaires?

We are spending $239 million a mile, but it probably costs something like $10 million a mile.  The rest is stolen from us to pay off the vast army of sinecured progressives.

We vote against these crazy projects, but election fraud is effective in USA (which when you can clear $220 million profit a mile, buying elections become mandatory.)  Like the Soviets who used to bill the families of those they executed for the bullet, the progressives bill us for the cost of ripping us off.  The Soviets billed after the fact, in USA we must pay up first.

Two reforms:

1. Following Kant, no officer of the court (lawyer) can serve in the legislative or executive branch.  Curb kleptomania.

2. All public employee pensions are progressively taxed up to 100% once they reach say $24,000, and the 100% on any second or third pensions.   They can refund the money mulcted from taxpayers with the money being stolen from taxpayers.  Stealing is immoral, and in this case threatens the economic security of USA.  They are lucky they are not imprisoned.

When Dennis Kucinich was mayor of Clevelend, he rejected federal mass transit funds for that city (and lost his next election.)  Kucinich is the only anti-war progressive.  Rare breed.

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Tuesday, June 4, 2013

Importing Start Up Seminar Los Angeles

Get your small business international trade company start-up kickstarted at an all day intensive start-up seminar. I lead one coming up at Orange Coast College, Los Angeles, June 29, 2013, 9 to 5pm.  Full info here...***

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Import & Exports Businesses Growing in 2013

Mish Notes bad news in the ISM, although the ISM itself shows one area of growth, importing and exporting, both:
Last month I stated "Manufacturing employment has grown for 43 months. I expect that trend to break next month. Production was up but inventories were way lower. The drop in inventories, in conjunction with a big slowdown in employment, is likely a leading indicator of future production. The positive surprise that does not fit into the above assessment is that new orders grew at a faster rate. Next month may be telling. I expect the new order divergence to resolve to the downside as the global economy and the US economy are both slowing."
The consensus estimate was for slower growth, but here we are. Manufacturing is in contraction and the economy continues to weaken. Given the plunge in new orders and backlog of orders, jobs and the overall economy will likely weaken as well. Expect that trend of 48 months of economic growth to break next month. 
That is the result of the terrible USA economic condition for new and start up businesses.

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Read William Patry On Copyrights - the Conclusion

Patry has said the point of his book was to change the way we talk about patents and copyrights.  This book does that, and should be required reading for anyone who wants to start up a business.    Note that I put it in my lineup of books to the left.

His summary is a warning to lawyers to knock off the abuse.  The last couple of chapters get into specific problems and contradictions with what we have now, especially the Rothbardian argument against copyright holders violating the real property rights of others.

As I read others and experts on "IPR" I see they all miss the practical business reason one should never engage in copyrights or patents or trademarks.  There is a better way, and once your mind is corrupted by the logic of "IPR" you cannot see the opportunity.

Apple computer attracts artists to their sales system because of the delivery system Apple devised serve the customers.  If there was no such thing as copyrights and patents, what Apple devised would still exist.  The artists would still flock to Apple, and Apple would still pay in order to incite artists to flock, thus creating the ever upward spiral Apple created.

Jobs at Apple, like me and every other independent actor, recognizes there is a copyright regime, and builds value in spite of that regime.  People who believe Apple is built on copyright contracts are delusional.  To build a business in which "IPR" plays a role is to pretty much guarantee failure, a fact born out by the fact 8 million failed attempts at business recorded by the USA patent examiners since 1789.  The fact that there is a wide swathe of people who fall for the error of survivorship bias reflects on them, not on those of us who eschew "IPR" as well as copyrights and patents.

Patry is arguing it is thinking of copyrights and patents as "intellectual" "property" "rights" is what ails our country (and he is another patent attorney who says our country is over unless we end the system as it is now.)  As probably the highest ranked copyright and patent attorney in USA, he ought to be heard by one and all.

 I've outlined a few problems  with this book, which are in any event irrelevant to Patry's argument.  My other favorite book on "IPR" "Against Intellectual Property" is also listed there, and I criticized its exception for trademarks.  I still hold trademarks are a bad idea.

Example 187,987,974:


Oprah Winfrey will have to defend in court her use of the phrase "Own Your Power" in her magazine and on her website, a U.S. appeals court said on Friday.

Overturning a lower court ruling, the 2nd Circuit U.S. Court of Appeals revived claims brought by Simone Kelly-Brown, owner of a motivational services business, Own Your Power Communications Inc, who says she owns a trademark on the phrase.


What a waste of time in USA.

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Selling Into Nordstroms

One point I make in my seminars is the best way to introduce yourself to people who you want to meet is by letter.  That is a piece of paper, signed, in an envelope and mailed.
But to get into Nordstrom, Robinson employed an old-fashioned sales technique. “I wrote a letter to the buyers,” she told a Houston Fox reporter. “I didn’t think I would get in, but I did.”
Now, I don't think this is the best way to get into Nordstrom, and you can be pretty sure after this article Nordstrom buyers are getting hundreds of thousands of letters, so this technique is now dead.

I also doubt social media is any way to market.  Yes, she is getting exposure, but Ogilvy 101, what about sales?  Yes, she is getting 1.3 million in sales, but what about overhead?  These Teddy Ruxpin, Pet Rock and Plastic clog things are fads, and end up net deficit unless they are converted to manias, like Ty Warner did with Beany Baby.  That takes a completely different set of management decisions than this article indicates is being taken.

Check back in five years and see where this goes.

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Monday, June 3, 2013

Patry Is Back On Track On Copyrights, All Hail Patry!

In my last post in Reading William Patry's Moral Panics and the Copyright Wars, I was disappointed that he had taken a turn into a confused discussion of copyrights as property and real estate a property.  That was up through chapter four.  He has come roaring back!

Chapter five started out with more of the same, then shifted back to brilliant stuff.  The book is already worth the price of the first four chapters, and it gets even better in six, seven, eight as he gets to specific cases and some unsavory history.  He gets into details of the music business that are pretty fascinating, such as credit card companies make more off the sale of music than do the artists, and how and why.  I'll have more to say on these brilliant chapters anon.

I wonder why Patry included the confused part on real property in this discussion, for if he left it out this book would be required reading for libertarians and anarchists, a voracious reading public.  (I say it still is, but he is going to get an argument with each copy he sells.)  His point is simple, copyrights are out of control if they are considered property, even if only metaphorically.  This Patry does brilliantly.

Patry notes the constitutional basis for patents and copyrights, here you go Article 1, Sec 8, clause 8:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

This is specifically aimed at the commonweal, not individual wealth.    It is about progress for us all, not  riches for one.  It left the fine tuning of what "limited times" "exclusive" "right" and what constitutes writings and discoveries up to congress to sort out later.

Now, Patry's thesis is the system is broken because the punishments are too harsh for too generous a reading.  And further, much of what passes for copyright law since the 1990s has, in his own words, moved us over to fascism.  As a centrist on the topic, he advises we get back to what the constitution calls for, which is law grounded in the regulation intended to promote the progress of science and the useful arts.

For this libertarians and anarchists world wide would all hail William Patry.  Then they would say, "Bill, show us proof that there is a regulation that can be written that will promote the progress of science and the useful arts."   And he would say, "Well, in 250 plus years, no such evidence has ever been developed, probably because it cannot be proven."

Then libertarians and anarchists would say, well, think about that.

There is something in here for conspiracy theorists, that Patry does not comment upon.  Patry does make Jack Valenti, head of the MPAA to be the arch-villian in USA copyright law.  So what?  In that famous picture of Jackie Kennedy standing next to Lyndon Johnson while Johnson is being sworn in after the killing of JFK, why, there, full faced in the lower left of the picture, is Jack Valenti.  Jack Valenti handled the news media for the assassination of Kennedy.  And then went from there to manage Hollywood as head of the MPAA.    Again, Patry makes no such association, but the book is full of fascinating items.  Read it.





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Q & A On My Book

On Jun 2, 2013, at 8:08 AM, MM wrote:

1) Your stance on patents and trademarks. One guy argued that it was foolhardy not to pursue patents on your designs. What if you innovate a highly profitable and valuable product that sets an industry standard? You could stand to lose without protecting your property.

***
1. No court has ever recognized patents or copyrights as property.  Only non-lawyers say such things.

2.  Of the near 7 million patents issued in 1789 in USA, almost nothing patented ever turns into a product.  Did you know that?  Of the extremely rare item that does become a product, almost none are ever profitable.  The only correlation in reality is patent = failure.  There is a reason for this, built into the patent law, and that is why they reversed it 2 years ago (but made it even worse.)

3. Nothing new is an industry standard.  It takes many iterations to get there, a process only possible in competition, never in monopoly.

4. What matters in business is customers, nothing else.  Marketing gets you customers.  Copyrights and patents get you nothing a business can use to advance the mission.

5.  We do have a copyright and patent regime.  But businesses merely work around that, just another aggravation among the many that the sate imposes.

6. If you have a highly profitable and valuable product that sets an industry standard, then keep you customers happy, don't sue other people whose customers are happy.  ***

2) In your book, you stated that the importer need not worry about the buyer or retailer going around you directly to the supplier.  A lot has changed since that book was written.

***Nothing of any substance has changed.  Some URLs, CHina became the #1 exporter (perhaps) and Canada became USA's #1 trading partner.  But nothing of substance.***

I wonder how the role of the importer will be affected in an Amazon.com  society where it is increasingly easy for a supplier to sell directly to customer.

***I sell TO amazon.com and ON amazon.com.  Amazon is just another retail outlet. An electronic Sears catalog.  The only new thing there is the "long tail" Bezos was brilliant to see that info was more valuable than transactions, but countless people saw that before.  BUt that he would allow competitors and suppliers to compete with him on his own selling platform, he jumped ahead of the pack to the obvious conclusion.  The internet has lowered the cost of research and communication.  Amazon is the ultimate result.***


Some peers have stated that importing is a dying industry. ( I would argue that a need for innovation will never die, and as long as people are buying and selling goods, the role of a middleman will always be needed)

***Importing is a function at a border, completely contrived, hardly an industry.  An industry is a category of creation and distribution.  So whether it dies or not, it does not matter.  What matters is customers and supply.***

-What do you see as the future of importing? 
-If I asked you to write a movie set 50 years in the future about merchants and importers, what kind of future would you envision?

**When Steve Jobs stared Apple, microcomputers were a toy, and there were no telephone salespeople.  Stereo salesmen were as slimy as used car salesmen.    When Jobs died he was the worlds #1 telephone salesman, and the most admired man in the world for his stereo salesmanship.  And microcomputers are now an integrated tool in society.  There is no prophesying the future.  But there are customers today.  I would not guess what's next when my customers will tell me what is next.***


-What changes have you noticed since you wrote "How Small Business Trades Worldwide?" 

***
1.  We lost two generation of entrepreneurs.  Banking in the 80s, dotcom in the 90s, real estate in the 00s.  We have 2 younger generations who have no idea how to be self-employed.  this is dangerous.

2. The long tail.  See Anderson's book.  

3. While no one was looking, regulators made life extremely difficult for the self-employed.  (But when in history has that not happened?)

***
-What is the anatomy of a sale in the year 2013?

***Not sure what you mean...  nothing has changed in the sales process, paperwork is largely .pdf, but there has been no legal changes in the UCC.   Not sure what you mean.***

-Is the role of an Independent Sales Rep. the same as it was when you wrote the book? Is there a "new way"?

*** The sales rep and the trade show booth will always be.  Drucker says a business can innovate in only two ways: product design or distribution.  Innovation in distribution is extremely rare.  I have not seen any such change in 40 years, only things getting easier, but the same way.  Deregulation is not innovation.***

-Will companies start going around importers?

*** They always have.  But never around me in a way that mattered to me.  They never will.***

-What role do you see social media playing in this new future of trading?

*** So far, nothing.  Every test I have run shows it is a massive waste of time, a net waste for anyone who tries.  I know that because I have tested it constantly since the late 80s.  But it is young, and eventually it will shake out.  Social media is only advertising, but right now it costs more to gain a customer over the 'net than by traditional means.  (an online catalog is not social media.).  Social media will get there, I am pretty sure, and I will be the first to know. ***

-What do you think of the project funding websites such as Kickstarter.com?

***A wonderful thing.  Nothing new.  People used to propose a book and look for "subscribers" people who vowed to buy a copy if the book got written.  They signed their name under the title and the author.  On the strength of this the printer would print out that many copies to sell to the subscribers.

The US Government is working very hard to destroy indigogo and kickstarter.  The IRS will rule the currency raised is income, and therefore taxable at 35% or whatever the rate is.  So raise more than you need and set it aside for wars.***


-Do new US laws affect the industry in a way that didn't exist when the book was written?

***Absolutely.  But that has always been the case.  the ideas in the book don't depend on what any given set of laws are..***

-WIll you make a revised edition of the book to reflect today's standards?

***I'll revise the book for a tenth anniversary edition, change some urls, some data fact changes, but not to reflect today's standards.***

Sorry for the question bombardment, but you are my mine of information right now. I would be happy to support you in any way I could. I won't be able to attend you class, but I wish I could. There is a ban on Youtube in China, so I cannot access your videos.

***Social media is being advanced as a means of social control.  China understands that, so it is developing its own versions to maintain its own control.  My vids just reiterate what is in the book...

Feel free to forward this by email to three of your friends.


Sunday, June 2, 2013

Competing on Price as an Importer

A correspondent asked me to critique a sales approach letter.  I am reproducing it here, but removing any identifying info...  what I want to share is how to approach, but how I think, since this person proposes to compete on price, what he is up against...

This is what my correspondent received from me:

You do know we covered this, so I suspect you are in a bit of denial about what you are up against in this effort.

You propose to contact your target customer by email. An email will be deleted and you'll never hear from them.  This approach needs to be a paper letter in the mail delivered by a postman.

You said you can save these people 15%.  That is likely the only thing they care about, but I would be stunned if your target companies did not already know the very best prices and the very best sources on planet earth... but to proceed...

Every paragraph in your draft email starts by talking about you...  no one will read it.  “My... I... my , I,...”   If you talk about yourself, it is not needed in the letter. 

What you do need is the word "you" (referring to your reader) in the first 3 words of the letter.

The first paragraph needs to be something like "If you could get a 15% lower cost of manufacturing on your bags, and maintain quality down to the thread and the pressure settings on the sewing machines, would you test a small order, no risk, to prove it?"

Your approach better be something that overwhelms their uninterest.  If you cannot offer them something they are not getting now, then you have nothing to offer.  What you do offer is 15% less.  If they are interested, they will require you prove it, not just state it.

See my points below...

Dear XXX,

My name is X (Denver native) and I am contacting you on behalf of my factory, New Phoenix Goods.  We are a professional manufacturer of bags based in China. 

***No one will care, you'll sign the letter, that is sufficient and necessary introduction. Delete this entirely.***

I believe we can offer you the same quality bags that (customer name) is currently  purchasing; at a price 15% lower than your existing suppliers.

***They believe you cannot.  You do not know what they are paying so you cannot possibly make this claim.  So don't make the claim.  Pose a possibility:    "If you could get a 15% lower cost of manufacturing on your bags, and maintain quality down to the thread and the pressure settings on the sewing machines, would you test a small order, no risk, to prove it?" ***

Since 2008, we have been producing bags for many major brands in the bag industry.  We are a fully owned and operated Chinese manufacturer and are now looking to establish business relationships with brands directly.  

***No one cares....***

Since 2010, I have been living and working full time in China. I will be returning to Denver on June 15th and staying until July 15th, at which point I will return to China.

***No one cares...***

During my visit I am hoping

***emotional blackmail as a sales technique... "I I I I I and now I need you to..."  this email gets deleted for unprofessionalism....***

I could have the chance to meet with you for twenty to thirty minutes to show you sample bags, let you know more about my factory and answer any questions you may have.  Please let me know what day and time works best for you.

***  No way.  In connection with the other paragraph I composed above, you might say:

“If you have a few minutes anytime between June 15 and July 15 I'd be happy to drop by  to show you production bags and see if you agree (your company) should test order a risk-free run of bags.  Please contact me by any of the means below.”

So I will reproduce the letter as it should go out in entirety:

Dear X,

 "If you could get a 15% lower cost of manufacturing on your bags, and maintain quality down to the thread and the pressure settings on the sewing machines, would you test a small order, no risk, to prove it?"

“If you have a few minutes anytime between June 15 and July 15 I'd be happy to drop by  to show you production bags and see if you agree (your company) should test order a risk-free run of bags.  Please contact me by any of the means below.”

Sincerely,

Y
New Phoenix goods
etc

Your email for all of its problems gets a delete.  The letter I have composed is a sales approach, and setting up for an agreement on need (in the meeting).  If the meeting takes place, you'll need no more than 3 or 4 minutes total for the meeting... these people are busy.

Anything short of a no-risk trial will not be answered (and even that may not be answered)...  With this in mind, your factory needs to be ready to do a run of say 100 bags only at $50 apiece, whatever minimum they need balanced against the cost of having them all returned.  If you expect full container load test shipments, then that is delusional.

I don't think you'll ever get an order except on open account.  These established USA importers pay legitimate bills, and they will not waste one second in wondering if they can get a refund from "Phoenix whatever" in China.

Should this approach get you into the USA importer for 4 minutes, and you convince them immediately or over time you can truly get them a 15% cost savings, then your target customer will show their present supplier what you did on the 100 bags, and their present supplier will match the price and that will be the end of Phoenix suppliers relationship with your USA target customer.

I have seen this for 40 years.  The Chinese slaughter each other over price, running themselves all out of business.  USA buyers play one off the other. The Chinese are figuring out how to compete on design, which will save them.

My guess is nothing will ever come of this.

Where you can make money is to bring to suppliers your own designs proven to be of interest in the USA market.  Now there you can build your own business.


John