Ending Usury - A Historical Account

As my regular readers are well informed, receiving or paying interest of any amount for any period of time is a moral crime, with dire consequences in all instances.  I've not advocated outlawing it, merely de-legalizing it, that is make it no longer enforceable in law, like say gambling debts.  Then the economy would self-correct.

It has been pointed out to me such a correction has been recorded in history, in the book of Nehemiah.

⁶ Then I was very angry when I had heard their outcry and these words. ⁷ I consulted with myself and contended with the nobles and the rulers and said to them, “You are exacting usury, each from his brother!” Therefore, I held a great assembly against them. ⁸ I said to them, “We according to our abilityhave ^[b]redeemed our Jewish brothers who were sold to the nations; now would you even sell your brothers that they may be sold to us?” Then they were silent and could not find a word to say. ⁹ Again I said, “The thing which you are doing is not good; should you not walk in the fear of our God because ofthe reproach of the nations, our enemies? ¹⁰ And likewise I, my brothers and my servants are lending them money and grain. Please, let us leave off this usury. ¹¹ Please, give back to them this very day their fields, their vineyards, their olive groves and their houses, also the hundredth part of the money and of the grain, the new wine and the oil that you are exacting from them.” ¹² Then they said, “We will give it back and will require nothing from them; we will do exactly as you say.”

The whole book is fascinating from this historical point of view, and a personal practical point of view. With the pro-usury (now called interest) arguments convincing almost everyone, there is no audience for eschewing usury.  At the same time, my experience of going staying away form paying or charging interest (no bond investments) certainly limits what I can do conventionally, but within these constraints remarkable alternatives emerge.

I will form time to time relate what some of these alternatives are, if not for the edification of readers, then at least to chronicle for myself.

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Trade Show and Social Media

Greyhound, the long distance bus ride company, got into the trade show business a long time ago for the simple reason that below those seats is a lot of shipping space and good revenue moving trade show exhibits and priority items, which perhaps surprisingly, Greyhound quite reliably delivered.  So Greyhound Exposition Services becomes GES.  You'll see them at all the shows.

They know there stuff, but outside their expertise their managers can be quite wrong, as in this instance:

After years of research, testing, and production, a trade show might be the first in-person interaction between customers and your product. The show represents an invaluable opportunity for you to observe how customers approach, think about, and use the product. What do they say about your product? How do they interact with it?
Unlike radio, TV, or the Internet, trade shows provide live feedback from consumers. The feedback can be varied, including focus groups during the show, pre-show surveys, at-show exit surveys, or post-show interviews. Be prepared to invest time in gathering feedback. Then, leverage the customer testimonials on social media, in print and online media campaigns, and in TV ads.

Terrible error if anyone spent years if research and testing on a product and only then presents it at a trade show for feedback.  To be fair his example is pharmaceuticals, a false-economy industry that necessarily takes too much time and spends too much to produce too little.  but instad of highlighting an exception, he should note that "the 15 minutes you came up with an idea to test, based on customer feedback, should be tested at a show."

Yes, with your salespeople telling all buyers at the show "NO!" to all requests for changes, so during the 4 days of the show you have 200 solid responses, with variables controlled, so you can apply science to developing the product lines of which you are passionate and have joy in producing.

200 sales pitches, 200 responses, controlled for variables, golden data from which to get to "enough orders to cover the suppliers minimum in a workable amount of time profitably" ... which is the basis for including an item in your line.

The rest of the article is about social media.  Reject the ideas.  Unless advertising and social media provably returns 10 times the cost (5 times in 30 days and another 5 times in 90 days) then do not spend the time or money.  Simple as that.  Read Ogilvy on Advertising or be ignorant of good advertising consumption.

Ogilvy on Advertising  Click on this if no image below...



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Small Business Metrics

John, I had not answered this that you requested… . “a list of sales by territory by rep by item for each month of the last three years” so you can guide me to the secret weapon for develop a sales plan…. I am attaching the information that I was able to prepare... ... What do you think?..how would we come up with a sales plan from this information? Regards! AA

Yikes!  That is scary...  I can see why you sold $2 mil and lost money.....

so you establish metrics...  

Say you have (or want) a 5 mil a year biz...  then...

100% mark-up...

that would be maybe 500 SKUs

then, each item must support at least $10,000 in sales to make it into the line...

How does it get into the line?

It starts as a sample at a trade show that must get enough orders from customers to co ver the suppliers minimum order requirement in a workable amount of time, profitably.  if not, it is either redesigned to do so, or it is dumped...

If it gets to $10,000 in sales within a year, it stays....

Until it begins to drop...  the it is redesigned based on feedback or dropped...  about 20% of your items are dropped each year, and 20% new items added....  when you want stasis at say 5 mil/yr...

Your report looks as though you said yes to a lot of customers when "no" should be your most common reply to any request by buyers......  real buyers need a "no" before they can buy...

There is more, but this is the outline...

John

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Zulily QVC

Zulily management is not credible, and so its veracity here can be challenged too.  But as to their model....

The reason for the decline has been a reversal in Zulily’s fortunes. Founded in 2010 as a retailer of toys and children’s clothes, Zulily grew to top $1 billion in annual sales last year as it expanded into adult apparel and home goods.
Zulily offered deep discounts thanks to an unusual business model that allowed it to hold little inventory. It orders goods from vendors only after customers purchase them, takes two to three weeks to deliver and doesn’t accept returns.

Well, Amazon accepts returns.  Gets orders before it ships and can ship fast.  QVC is in essence a marketer to those with a bit of credit left on the card, and is snapping up zulily to get a younger set of QVC future customers.  As there is hyperinflation in mal-credit (it only buys what people can't use, ought not buy, or don't need), the kind used to support QVC and zulily, will they survive?

Alibaba has bought in.  Expect failure.

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Africa: Mal-credit v Bene-credit

I've said much on mal v bene credit, but here is another example of avoiding the mal-credit.  Here a false dilemma is presented, without mal-credit your small business is disadvantaged.

Yes, small businesses thrive on credit, but bene-credit, in essence vendor financing at zero interest.

He explained that this years’ international Trade Expo taking place at the Uganda Manufacturers Association grounds in Lugogo between August 25- 27 will attract at least 1,000 private sector members and over 2,000 Small and Medium Entrepreneurs (SMEs) and link them to over 1000 agro processors and traders. “Traders will have access to chat with over 15 leading banks, foreign missions, and experts in trade related issues,” he said. 

Why Indians can come to Uganda and thrive is they brought vendor-financing with them.  They were ejected by Idi Amin, but if the Ugandans could embrace vendor financing bene-credit instead of paying usury to bankers, their economy would thrive better faster.  But that is not the modern way, I guess.

There is a difference between money and credit, and banks have abandoned lending the former for the latter. An economy needs both money and credit, but mal-credit is disastrous. Ugandans don't need mal-credit, they need patterns and practices in law that support bene-credit and a regime that treats interest like gambling debts, unenforceable in law.

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Won't They Go Around Me?

On Aug 17, 2015, at 10:21 AM, MR wrote:

Dear John

You taught me that I should appoach a supplier who doesn´t export himself and convince him to let me be his export agent.

Nevertheless eventually the foreign importer, the one I will be selling to, may contact my supplier and cut me off the deal.

The questions are:

How do you convince the supplier about not cutting you our as the middleman?

Is there any strategy you use?

Thanks

MR

Hey MR,

The premise of your question is assumes everyone is looking to cut others out, they have the time and resources to do so, and your participation provides no value.  What if none of these premises are true.  What if the supplier is too busy doing what they do to mess with exporting?  What if even if they wanted to they don't have the resources, and finally, what if you provide a value for which people are willing to pay you?  All of this can be true in so many cases, in any event, in enough cases to make a living.

Also, the "cut you out" comes from small biz trying to do big big deals.  Whenever I meet someone who complains of actually being cut out, they were trying to do big deals and provided no value.  They are the ones who get cut out.

Get a supplier and a customer for a LCL MOQ FOB deal, and then see if you get cut out.  Wait until there is a problem before you worry.

John

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Do Not Take On Debt

Here is an article which highlights various economic debates, and one point:

Alan Greenspan said Monday that weak productivity is the most serious problem that confronts the U.S.
I disagree. The most serious problem clearly is a debt overload everywhere one looks (students, households, subprime auto loans, corporations doing into debt to buy back their own shares, etc.)
For that blame the Fed. One can also blame the Fed for its loosey-goosey monetary policy and nonsensical 2% inflation target.

That education loan is unbankruptable, and any work you are likely to get is not going to leave much for you to enjoy after taxes, etc.  Rents are terribly high, then ther eis the car to get to work, I think the argument is right both ways:  How does a retail clerk "work harder"?  How does someone witha  good job save anything?

It seems a point being missed is with debt, working harder or more gets you nothing, since it goes to the debt.  If you are an Uber qualified driver, you can walk onto an auto lot and get any car 4 years old or newer (remote controllable) on your signature.  The personal  "adjustment" is in the interest rate.   But once you have the car, and then where are you?  Working to death to make the payments and interest, mulcted weekly.  Miss a payment and that tow truck following you is radioing in your location so it can be repo'd and back on the lot before the negine cools if you get behind.

One way to navigate this is to simply refuse to take any and all credit.  Outside of the hegemon's world, the set of options is still very wide, but certainly counter cultural.

If you spent a bundle on a AA or BA degree and cannot find work, Tacoma Public Schools is desperate for substitute teachers. Say you have a BA, the pay is $140 a day, and you need no credential.  (I takes a bit for the background check, etc.)  You can work everyday. $140 a day is not much, but Tacoma is cheap, and a bus ride to Seattle.  And you have a way to make money while you develop your business.

Because self-employment is the only place to be the next 40 years, while the "stakeholders" fight over the trace resources that support our nominal economy.

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How to View Bad Economic News

So much bad news about the economy!  And there is the error, referring to the economy we have as THE economy.  It is A economy, the mainstream one, the result of policies that wittingly lead to misallocation and malinvestment, picked winners and losers, the false economy reported upon 24/7 by cable and other media.

At the same time there are other economies, real economies of productive enterprise, upon which todays depredations have no effect.  In fact, the destruction of THE economy is a boon to the real economy.  Come the crack-up, prices will fall on real estate, people will be able to rent cheap, and begin making things again.    The big, subsidized, centrally produced everything will break up back to local, which in fact has already been going on.

Imports will fall, but imports of things we should be making ourselves anyway, like clothes and sporting goods.  Those imports of what we cannot effectively make will continue to do well.  And we will export what we do best when unsubsidized.

Stockman keeps a good survey of what is going on... retail:

 Jim Quinn dissected the most recent financial results of four of the largest US mall retailers——Macy’s, Kohl’s, Sears and J.C. Penney. Their combined sales in the most recent quarter of $19.1 billion were down 10% from the prior year;

All those stores have huge pension liabilities, expect them to be wiped out Hostess Twinkie style in the next downturn.  Their business is huge and dropping, small businesses need only crumbs from their table to support a family business.

Small specialty retailers ought to trade in both new and used products, because a whole lotta stuff will come out of storage when the next crash crushes...

The relatively strong year over year furniture sales is also driven by the fact that you can finance the purchase at 0% interest for seven years. All is well for the Ally Financial, GE Capital and the myriad of fly by night subprime lenders until the recession arrives, unemployment soars, and defaults skyrocket. Then their bloated debt ridden balance sheets will explode in an avalanche of defaults. That’s when they insist on another taxpayer bailout to “save the financial system”.

And M&A, the technique of growing by destroying, is at its fastest pace...

Takeover-deal announcements would reach $4.58 trillion this year if the current pace of activity continues, according to data provider Dealogic. That tally would comfortably exceed the $4.29 trillion notched in 2007, a record year for deal making.

All this bad news is very good news for small, real economy business.  You'll be able to support a family with a small business again.  But then, you'll need a small business to support a family.

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