Saturday, November 14, 2015

Bad Ideas Win Out

There is a great idea that many have been working on for decades: Mag Lev Transportation.  Government never moves forward with a good plan, they always wait for the harmful idea, so they can stay in power, ruling in hell rather than serving in heaven.

See here:
“Yet the smarter machines become, the greater the likelihood that the space remaining for uniquely-human skills could shrink further,” Haldane said. He said what was previously unthinkable even a decade ago is now reality, like a driverless car.
I was in a junior high school civics class recently when I first heard this. The groupthink assignment was, with driverless cars, should we be programming to die or kill?  That is to say, a driver instinctively will turn away from a colliding car to save his own live, with the result far more often passengers present are injured or killed in wrecks than drivers.  When programming driverless cars, should we program them to act like humans, or to save the optimum amount of people (utilitarianism).

This is a classic false dilemma, and of course the kids don't even know that word today, let alone the term.  "Driverless car" is not the answer to the risk, waste and cost of transportation.  Mag Lev is the answer, but apparently in the last few months that came off the table as a full frontal movement toward "driverless cars" is afoot.

When did they shift from MagLev to "driverless car"?  Who knows?  But Mag Lev means no oil, no tires, far fewer moving parts, faster, safer cheaper, more efficient.  And if privately provided, then confidential as to who is moving where...

With Mag Lev, central computers sort out in advance who is going where by what route safely.  There is no human last second decisions, no wrecks, no waste, no risk.  The model is more like data along fibre-optic cable, not driverless cars.

Mag Lev is savings, efficiency, safety... robotizing an internal combustion engine is nuts...

As usual, the hegemon hijacked a great idea and replaced it with a terrible one...  so now, as usual, the question for policy makers, Aztec priests all, is who dies?

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Friday, November 13, 2015

Robots: Again Blaming Cheap Labor

There never has been, nor ever will be, any evidence let alone proof cheap labor is a factor in international trade.  I know, you have never heard any different, therefore you believe it, but no one in int'l trade believes cheap labor is a factor.

The powers that be use that lie to divert attention from their policies that destroy work in the USA: blame the foreigners, who are as much victims themselves.  This is how convoluted it is: if we want to see manufacturing return to USA, we must delegitimize charging interest on loans.  Simple as that, as difficult as that.  Yes, I understand that lending asset-less credit is devastating, but no one would do it if he could not charge interest.  The core problem is charging interest on loans, that which leads to disaster  throughout history (and why every major religion and ethical system condemns it.)

But anyway, here they go again: robots, in essence, promise not only cheap labor but elimination of labor:
“Yet the smarter machines become, the greater the likelihood that the space remaining for uniquely-human skills could shrink further,” Haldane said. He said what was previously unthinkable even a decade ago is now reality, like a driverless car.
Of course bankers are touting this, since they want people to keep looking elsewhere for the source of the poverty and lack of prosperity.  We need not wait for change, I am finding out a critical mass of people can maintain a commonwealth of prosperity by merely eschewing usury.

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Thursday, November 12, 2015

Best Investment Advice: Get Married

The next era will be one in which the family business is the last bastion of self-actualization.  Since a town can now tell you what to pay employees, they do.  Since freedom to contract is necessary for business survival, no freedom to contract in wages means, well, no employees.

 (Why are govts so destructive in wage policies? It's tricky,  most gov't union contracts are minimum wage plus, so the push behind this is a raise for gov't workers, not some "justice" issue.)

This is too bad as far as it goes, but not insurmountable.  There is a genre of business, the family business, and while it once hired many people, may also be run as a family affair. And really, in life, there is nothing as satisfying as family and kids, etc.

At the same time, the trend is to not start a family, and I think Mish is typical among many economists who say "very good."  But to me this just means fewer families makes each one more valuable.  And fewer family businesses makes each family biz more valuable.

Mish is probably not uncommon among cold-blooded economic writers who are pro-abortion, and in a recent post he asked why not let refugees die in the Balkan winter cold, as a sway to check refugees.  Yikes.  How about instead USA stop creating refugees by starting wars (although in fairness, Mish also advocates that.)

So Mish welcomes this:
Delaying marriage is yet another deflationary trend the Fed is fighting. The Fed's inflation tactics and government interference are largely to blame.
Wages have not kept up with education costs and for someone in college the CPI is seriously understated. In addition, union handouts and ridiculous pensions that millennials have to support but will never receive, add greatly to the problem.
Millennials also have to overpay for health care, picking up the tab for overweight boomers etc.
Finally, attitudes towards having children have changed. Many women put their careers first, a smart thing to do in my opinion. Kids, who can afford them?
Well, if people waited until they could afford kids, none of us would be alive.  Most poor kids have no idea they are poor until someone points it out.   There is no preparing for kids, and as one who has raised three, the challenge is not monetary, no, not at all.

Find a mate, start a biz, get married, have kids... Mish advises not, I advise do.    Make sure you are both on the same page for the ups and downs of self-employment.  It is a lifestyle, not an accumulation method.

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Wednesday, November 11, 2015

The Wealth of the Yuan Dynasty

The Great Khan and his Mongol Horde managed a fantastic wealth-extraction system that Marco Polo reliably reported:
The Mongol state, on the other hand, is repeatedly engaged in the extraction of wealth at the point of a sword. Polo often notes in passing how the wealth produced by various populations serves to fill the coffers of Kublai Khan, the reigning Mongol emperor who regularly sent the Venetian abroad on government business.[4] One finds, for example, “a country thronged with towns and villages and rich in merchandise, yielding a great revenue to the Great Khan” (195), “a city…of great riches and splendour, where…the revenue accruing to the Great Khan…is so stupendous that, unless it were seen, it could scarcely be credited” (205), and “a city of innumerable ships, carrying quantities of goods and merchandise and consequently a great source of revenue to the Great Khan” (208–9). Polo reports a duty of 3 1/3 percent on spices and other merchandise imported by land, and a 10 percent duty on merchandise imported by sea, the products of agriculture and animal husbandry, and silk (228–29).
But what is not noted is Khan Dynasty, known as the Yuan, lasted less than 100 years (we have restaurants in UA that last longer, it came into being because leading Chinese defected to the Mongols since Chinese politics were so bad, and inevitably the Ming overthrew the Yuan because the Mongols took too much.  In turn the Ming went corrupt over about 350 years and the Manchus took over.

Solomon also gained fantastic riches in his wisdom, and stupidly showed it off to Persian ambassadors, and they came and took it, and wiped out Israel.

When we define wealth as accumulation, disasters ahead.



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Tuesday, November 10, 2015

Never Offer Free Samples

I recall when you could drive through the Napa wine country and sample wine form many wineries at no cost.  that became too popular, so they started charging for a "tasting" then give a discount on a bottle, etc.

How it came to be that food people gave free samples of their products, I'm not sure.  Maybe retail practices got backwardized, and I am completely familiar with slotting fees, returns, promotional dollars, etc.  All of which I reject.  If your product sells, then no need for all that.  If it does not sell, then none of that helps.  Don't work with people who will not work with you.  Don't divert production to where it's tough to make money.

Especially in food exports, some kid working off his kitchen table, putatively running Great Harvest International Foods will have you convinced he is the kind of imports and would like to test your range of wines, or you energy bars, or whatever.  Please fedex a sample.

Well, energy bars fedexed will cost you $175.  So you answer should be a link to a retailers website where he can pay $175 for a sample.  If he is legit, this is no big deal.  If not legit, then end of story.

Now, what if the buyer is legit, and demands a free sample.  What does the sample cost, all in to get to the buyer?  Say, $175?  Then you get ten times that value in trade information.

You find out all about the company, the buyer's open to buy, they seasons, distribution network, competitors, etc, inside info about this company, from this company.    You make the sale before you ship the sample, that is to say, you learn everything you need to know to get a sale from this buyer, before you send the sample. So by the time they get the sample, an order would be the most natural thing in the world.  that is to say, in all of your back and forth, you have found out, as noted in this blog three days earlier, just what it takes to get a sale, what the buyer wants, so you are selling that.

Or not, you find out, now knowing what the buyer wants, that you do not want his business.  And you then do not send the sample.  Keep testing.

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Monday, November 9, 2015

Science of Selling and Objections

You should always bear in mind we are selling a test of new products to buyers who desperately need to test new product. They need to find next hit item.  We may not prove to be that item, but test they must, and we make a test relatively risk free.

We hypothesize customers, and then we test the hypothesis.  As our offer, the hypothesis we are testing, meets customers, the customers will try to throw variables into your test, and render your test invalid.

Let’s review three possible objections:

1. The packaging is all wrong!  This is tricky... how so?  Is the bottle too tall for the shelf?  If so this is valid.  But is it reliable?  Is this true just of this customer, or do 100 customers also make this objection?  If so, then it is both valid and reliable, it is fact, science.  You’ll need to change your offer.  It may be valid for this one company, but if only for the one (or just a few) then it is not reliable, not science, and this business is not your customer.  Let them go.

2.  Your price is too high!  Now, this can not be valid, since your item is new.  In the measure it is new, then the buyer cannot possibly know if the price is right.  And here you will find the objection is reliable, since all buyers will tell you your price is too high.  So here, although, reliable, it is not valid, so you manage this case differently.  In this case you ask at what price you need to be to gain their order.  They name $X price.  At that point you acknowledge the price mentioned, and then begin to get agreement on need on all other points.  When the buyer has accepted all conditions, except for price, you return to the price and refuse to meet the price the buyer demanded.  You point out you cut the price for no one, tht otherwise the product is completely acceptable, and as noted, they buyer simply cannot know if the price works until he tests the price.  If the buyer refuses to buy, move on.  But do not cut price unless and until you verify the complaint is both valid and reliable, based on market test.  And even then, your response is to redesign, not cut price.

3. The flavor (speed, size, weight, color, material... whatever) if the wrong profile for our market! Here again, how would they know without testing that?  You job is to note the specific objection (too salty, not salty enough) and simply keep a running tally of the objections.  Never add salt at the next trade show, for if you do you failed to control the variables, and you lose all of your work to date, since you are no longer testing what you were testing.  Keep the offer the same until you achieve both valid and reliable facts upon which to make any changes.

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Sunday, November 8, 2015

What Buyers Want

A beginners mistake is offer what we want to sell instead of what buyers want to buy, and focus and price and product and not consider the overall offer.  This from the HKTDC.com research group:
Novelty refers to people's strong desire to try out new products and new tastes. "Every time distributors came for replenishments, they would ask whether we have any new products, new varieties and new tastes to offer," said Deng. "Distributors face the end-users and their expectation for new products is led by end-users. Since consumers are always looking for new varieties, distributors are also more than happy to give new varieties a try," he said.
This is exactly what I teach, competing on design, even in food.  What few people understand in specialty foods, where you work less for the same amount of money, the buyers’ first question is “what is new?”  You are new.  But their second question is “What is your minimum?” because no buyer knows what will sell.  They manage this uncertaintly buy buying minimal amounts to test.  The solution is LCL MOQ FOB, which, apparently,  I am the only person teaching.  And so universities and industry groups keep calling me back to do it again.

Next, note this problem from the article. 
"Although health is the prevailing trend, we are very cautious about food that claims to be organic. Due to frequent reports of fake organic food, consumers have little confidence in organic food. Moreover, the price of imported organic food is very high, often several times more expensive than similar local varieties. Lack of demand means few end-users." 
This problem is huge: false claims.  Big business is the worst false claimant, ruining definitions for everyone.  So as their reputations suffer, specialty traders can beat the problem with traceability. When a potential customer in Chengdu picks up a package of your product, they can scan the QR code and be brought to your website for verification.  By the same token, you trace your product worldwide.  Win-win.

Next payment standards in small business international trade is covered. You’ll note below exporters are paid in advance, contrary to what is taught by national export promotion agencies.
Yin Tai Hang's current distribution system has wholesalers as its mainstay. Its clients include small and medium-sized supermarkets, individually-owned small businesses, restaurants and online stores. In principle, the distributors also work on a cash and carry basis to reduce liquidity pressure.Deng Zhiyong frankly admitted that the biggest difference between dealing in imported food and local products lies in the return of goods. Local products basically have return guarantees, but this is not the case with imported food because tariffs are involved. A company has to be cautious when choosing products and suppliers.
Again, solution: lcl moq fob, but note in exporting, exporters are paid cash up front.

Now this is where this particular example goes off the rails:
Yin Tai Hang mainly deals in the import of prepared foods and its cooperation with Hong Kong companies mainly centres on condiments, including leading Hong Kong brands like Amoy, Lee Kum Kee and Yummy House. According to Deng Zhiyong, these Hong Kong brands usually market their products on the mainland in two ways: On the one hand, they cooperate with the key accounts and deal with them directly. On the other hand, they choose suitable distributors and deal with them on a cash basis by supplying goods to them at ex-factory price. 
Those are huge brands... and they are competing against themselves in this model, the whole thing is Yin Tai Hang trying to have it both ways.  I would advise they test unknown brands in their markets against the performance (ROI) in specialty with no known brands.  Its clients include small and medium-sized supermarkets, individually-owned small businesses, restaurants and online stores. Yhose customers are brand enough: necessary and sufficient.

Next note how new suppliers are found:
On the issue of contacting and choosing suppliers and products, Deng Zhiyong said Yin Tai Hang mainly relies on food fairs and market observation to collect information on suppliers. After collecting the information and making initial contact, it will decide whether a supplier is a suitable partner for cooperation based on five considerations: First, it will make a net search to find out how the products of that brand are selling locally. Second, it will try to find out the reputation of that brand on the mainland (Yin Tai Hang is inclined to choose brands of considerable fame). Third, give the products a try to see what they taste like and judge according to its experience whether they are suitable for the mainland market. Fourth, understand the price situation and compare the suppliers' price with the market price for similar products to judge whether there is sufficient profit margin. Fifth, understand the supplying channel to ensure the stability of supplies.
New suppliers are found by trade shows,  very good.  But the trade show is a nexus between pre and post show activity, and crucial is to get into a show without spending too much.  How to manage this I am I am happy to detail in an .pdf if you email me for a copy.  

Since from the article you now know what Deng Zhiyong wants as a buyer, your offer would include the answer to those five up front.  Then you would propose he place an order.  If not, he'd be obliged to say why not, and you could then work on overcoming objections. 

Privately, I would not approach this buyer, for I think his model is flawed. I think this is backwards:
As a distribution agent familiar with the mainland market, Yin Tai Hang is mainly responsible for selling goods but will also make proposals to suppliers on marketing and promotion based on its own experience, including conducting suitable brand publicity and printing relevant product catalogues and pamphlets for distribution to clients. 
I say you find a market first, and little to no expense, by testing the product with your known book, and then if you discover contours of some new market for a new product, you then work on finding similar demographics, knowing any money yu spend will go towards reaching known demographics.  I don't like advertising into a fog.

Here again we see how Yin Tau Hang off the rails, quite confused and jumbled... three topics conflated in one...  (it could be poor story editing, though)
Suppliers are mainly responsible for handling the documentation required for the marketing of relevant products on the mainland, customs clearance procedures (this may be entrusted to relevant service providers), delivery and replenishment of goods, 
So 1. Supplier are responaible for docs and clearance ....dead wrong, exactly backwards, this is big biz presumption, and reflects Yan Ting Hang's eerror in pursuing big brand names, who also compete with him.
and brand and product marketing and promotion. "We have come across some good products with great marketing potential, but their suppliers lacked the motivation to get to know the mainland market themselves and wanted to leave everything to their agents, which gave us the impression that they lacked long-term commitment in expanding the mainland market," said Deng. 
So 2, Ungh! Whatl is great marketing potential?  Marketing is a means not a goal. Either the importer has a meand for testing new products, up or down, yes or no, or not.  A specialty company trying to work with commodities is trying to have it bothways  Mistake in the long run.  The lack of commitment s not in the supplier but a lack of systematic testing of the market by the importer.
"In my view, cooperation is necessary to win the market. Doing business is like raising a kid, not raising pigs. You have to come to see the mainland market to fully understand this market and this is the only way to gain consensus for marketing and future development," he said.
So no 3....  No way I am going to go study the mainland market.  The importer is the expert there, I sell LCL MOQ FOB, and the importer either builds market or not,  If not this importer then another.  There is no way for and American to wrap his brain around the China markeet, so why try, and it maylead to sympathy and trying to help out the overseas buyer.  No good deed goes unpunished in int'l trade.  LCL MOQ FOB is necessary and sufficient engagement i tin'l trade.

Finally, this interesting -
"Suppliers must have a clear system for the management of distributors. Without a proper system, chaotic management will result in a chaotic market," said Deng. "A good supplier will always have a clearly-defined system that covers two respects: First its distributors must have clearly-defined regional dealerships. This will prevent competitive pricing among distributors, which will disrupt market order. Second, concessions to and protection of the interests of distributors. Suppliers usually have requirements on the amount of goods ordered by distributors and those with big orders are eligible for concessions. Suppliers cannot set targets for orders at random and must have a full understanding of the market. They cannot compel distributors to hold large stocks or frequently change distributors. They also must deliver and replenish supplies in a timely manner." Suppliers and distributors must work closely together to achieve win-win results. 
What did I say above, this guy has tactical problems... and now he says exactly that.    The  solution to the problem he elucidates is precisely the LCL MOQ FOB ... it is all in there.

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