It is unwise to be too sure of one's own wisdom.
It is healthy to be reminded that the strongest might weaken and the wisest might err.
Indian ascetic & nationalist leader
It is unwise to be too sure of one's own wisdom.
It is healthy to be reminded that the strongest might weaken and the wisest might err.
In my post on rising prices and trying to pin the blame on somebody, the evidence against speculators creating the bubble seemed weak. On one side was Chief Investment Strategist for Charles Schwab Liz Ann Sonders , who in the interview with the Wall Street Journal seemed to bring the issue up and take it away in the same breath.
There's also a lot of speculation in commodities, and that type of money can turn very, very quickly on a dime. And I think we may be unwinding some of those speculative trades that had been sort of chasing economies on the upside on dollar on the downside. So I do think there is some relief.
Then there was the New York Times article on energy analyst Mr. Daniel Yergin's testimony before Congress.
“There is a shortage psychology in the financial markets and that is reflected in the price of oil,” Mr. Yergin said in the interview. “You are seeing a lot of people who have never invested in commodities who are now piling into the market. But calling it speculation is way too simplistic.”
What role financial institutions — pension funds, mutual funds, and hedge funds, among others — are playing in driving up the price of oil to nearly $140 a barrel remains a key question. Regulators in Washington have acknowledged that they do not have enough information on speculative trading in commodity markets. Even though the evidence is incomplete, speculators have nonetheless become prime targets for legislative action.
A bit more web-mining showed me, however, that my was complacency regarding the commodities market unfounded. Speculation in the commodities market is a serious issue but not so much because of the speculators.
Mack Frankfurter wrote a 3 part article on The Commodity Conundrum: Securitization and Systemic Concerns I, II, III. Longer, I know than the usual web-scan, but worth the trouble if you want to get an understanding of the issues.
First, let's address the oil bubble speculation. Not everybody it seems agrees with Mr. Yergin.
Oil executives told Congress that speculation might be responsible for half the current cost of oil. Leaders from five top companies agreed that current supply and demand levels should place the price near $55 a barrel, instead of the roughly $100 a barrel in recent days.” As reported by Lisa Desjardins, CNN Radio, April 3, 2008.
Mr. Frankfurter has a number of other well documented examples as to why the changes occuring now are a new paradigm. What was more interesting was Mr. Frankfurter's reasons why behind the changes, because in explaining his theory he also did a good job of explaining the basics.
Back to Futures Basics
Futures and forward contracts are intrinsically different instruments than securities which are derived from the capital markets (e.g., fixed income or equities). This is underappreciated.
Derivatives are risk management tools, a “zero-sum game,” fundamentally different from the “rising tide raises all ships” concept of the capital formation markets. While, there is an established theoretical basis and considerable empirical evidence that link investment in capital market assets to positive expected returns over time, notwithstanding the recent surge in commodity prices, a legacy of academic disagreement supports the claim that, on an inflation-adjusted basis, the same cannot be said about commodities.
So, it is not that we have more speculators, whether rational and less so, in the market but that the fundamental assumptions underlying the market process have changed. Its not the number of players at the poker game or how they play their own cards, its how the stakes of the game has changed. There is no way I am going to summarize Mr. Frankfurter's work better than this, so if you want details read the report, the entire report.
Mr. Frankfurter's solution to all of this:
It is time to rein in excessive market speculation which is occurring on the “dark exchanges’ and support the transition of unregulated commodity speculation back into the domain of the regulated futures industry.
The Center for American Progress also has a piece on this subject Speculators “R” Us: Commodities Markets Need Institutional Investors Like Us, which seems to fall in line.
However, from the ascendancy of my amateur armchair, I would still not focus on the speculation bubble as the most important economic factor currently effecting businesses.
My choice would have been the weak dollar, which has I realize now has good aspects and bad aspects depending upon where you are in the economy. Those good aspects could disappear quickly. The Center for American Progress also has a story on the weak dollar or as they put it Bush's Weak Dollar .
The real villian though would be the Current Account Deficit. The Center for Amercian Progress can arguably be accused of having a slanted perspective, the National Bureau of Economic Research far less so. Here is their telling article:
The amount of foreign capital inflows required to sustain an American economy in which both the government and individuals eschew savings and spend beyond their means -- and imports far exceed exports --has soared to record highs. But even if the foreign appetite for U.S. Treasury securities and other U.S. assets continues to grow, a day of reckoning for what economists call our "current account deficit" is likely to arrive soon. And the price will be paid in a currency drop that will significantly reduce domestic economic growth.
That's the conclusion of a study by NBER Research Associate Sebastian Edwards. In Is the U.S. Current Account Deficit Sustainable? And If So How Costly Is Adjustment Likely to Be? (NBER Working Paper No. 11541), Edwards provides a detailed analysis that culminates in blunt answers to these questions: No, it is not sustainable and the adjustment, if history is any guide, is likely to be "painful and costly," causing U.S. economic output, measured as gross domestic product or GDP, to plummet. "
My rationale for looking at this is that whatever pathway we take, whether we truly think that free trade is the greater good for the greatest number of people or fair trade is the only way to insure economic justice, those efforts have to take place in an arena defined by these parameters. It is my personal belief that it is important for change-agents and social-entrepreneurs to understand them.
Now I have my own biases, which hopefully I can examine more thoroughly through this weblog. One of which is positively slanted toward technology and MIT. What I admire is that MIT combines the technological insights and scientific discoveries of their labs with the management and leadership of the Sloan School of Management. What is more is that they don't stay sequestered in an academic environment but venture out to help better the world and invite in those who have walked the walk. The question though is what walk exactly?
Recently MIT World had Ellen Kullman speaking on: Leading Global Growth by Protecting What Really Matters Most. The question I am asking myself is whether the same corporate entity can do both?
ABOUT THE LECTURE:
After 205 years, DuPont has transformed itself substantially while remaining true to its character, suggests Ellen Kullman. “We're a company with a passion for science,” says Kullman. DuPont, which got its start making black powder for explosives, pursued chemicals for its first 100 years, but is now taking its science into energy, biotechnology and nanotechnology, with products and services in agriculture, nutrition, coating and color technologies, performance materials and safety and protection.
It was Ms. Kullman's assertion that Dupont's core values were:
Ms Kullman came up with examples of Dupont's commitment to corporate responsibility. It is a concept, however, that can be attacked from both sides of the political spectrum. One such example was its membership in the World_Business_Council_for_Sustainable_Development . This is also subject to debate. Dupont's commitment to the environment can be questioned.
Yet, despite such concerns, there is still a great deal to be learned from Ms. Kullman's talk. Ms Kullman focused on 7 principles that can be as readily adopted by change-agents and social-entrepreneurs as they are by corporate businesses.7 principles
Ms Kullman emphasized Surrounding yourself with the right people with the right skills.
From the Leading Global Growth side of the question global exposure means global impact. To sustain the lead for growth meant looking to:
Ms Kullman has the same bias that I do, that most problems are solvable and that science will help. Organizations seeking to bring about change need to address short term pressures in addressing long term needs. We must realize that people must see innovation to appreciate it.
She left the audience with some optimistic inspiration.
If you want to build a ship, don't drum up people together to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea. - antoine de saint-exupery
My web-trekking explorations are back on economics. The self-educational pursuit has to stop during my time in Nanjing, China because for various reasons I can't get to the Berkeley macro-economics videos that I had been following. There are though a number of posts from other sites that provide me food for thought.
It may seem obvious that there is a difference between economics and business, though coming up with a quick answer may not be that easy. Perhaps it's the difference between recession and depression, it depends on whether it's happening to you or other people.
Rising prices hurt us because we are people … consumers … above all else.
But as businesspeople, the situation can be even worse if you happen to be in one of those businesses that use the commodities and materials experiencing record-high prices right now.
This is a direct business concern, creating what could turn into a vicious cycle as those higher prices are passed on to the end-use consumers with little supposed benefit to the business producers.
Think of food (restaurants); gasoline (businesses with fleets and delivery vehicles); and high heating costs (landlords and real-estate related businesses).
She asks the larger economic question whether inflation was the real worry, rather than recession. But after digging into the question a little further, it appears that the question of high prices is more complex than simply inflation.
Charles Schwab Town Hall meeting, Chief Investment Strategist Liz Ann Sonders suggesting that there is a bubble taking place in commodities, spurred partly by speculators. That seems to be contributing to the rising prices of certain categories such as food and gasoline. (She mentions commodities speculation in this Wall Street Journal interview, too.)
Ms Campbell goes on to address another economic question. Consider this: while the prices of food and fuel have skyrocketed, the prices of some things keep coming down. It's not a question of inflation across the board. It's really a matter of some things being at record highs, and others being at record lows.
What do you think is happening? Weigh in with your opinion about: Technology Prices Defy Inflation (So Far)
The area she focuses on for this crowd-sourced analysis is technology. My hypothesis is that its the ability of technology to increase productivity following Moore and other so-called laws. As long as this happens there will be lower costs, though how long this will happen is another technical question. It is also how business people from entrepreneurs to secretaries in corporate offices use this technology. That according to the Berkeley macro-economic class is where the majority of the productivity boost comes from.
But what happens to tech productivity if you can't feed those enginners beer and pizza.
Back to the direct business concerns.
Consequently, some small businesses are being hurt more than others in the current environment. If your business happens to depend heavily on commodities — say you run a pizza shop and depend on flour and cheese — you are being hit hard. But if you are in a business that relies primarily on technology, then your costs of doing business may be low.
Ms. Campbell is not alone is looking for culprits for rising prices, according to this New York Times article BUSINESS June 25, 2008 By JAD MOUAWADs, Congress Looks for a Culprit for Rising Oil Prices. This expert doesn't follow the same line of thinking as Strategist Liz Ann Sonders when it comes to oil prices.
A pre-eminent energy expert is to testify on Wednesday before lawmakers that the suspicion that investors are a large cause for skyrocketing oil prices is misguided.
"Everyone would like to believe that there is a silver bullet — like a bubble or speculation — that can solve our oil problem," he said. Instead, he said, it would be better for the nation to focus on conserving energy and reducing its oil consumption.
My last post looked at the effect of the commodities upheaval on the poor. The Financial Times article Food crisis is a chance to reform global agriculture, cited in the post, provided additional insights from a number of economists including Paul Collier and Bart van Ark who wrote in response to the article.
We need to examine the two phenomena – increased shortages due to a decline in the growth of supply, and price increases related to speculation and securitization of several commodities – in conjunction to fully understand what has happened and what is likely to happen next. There is no question that the securitization of various food commodity markets in early 2007 has played an important role in this crisis, especially over recent months. The mean of the price increases of securitized agricultural commodities (including coffee, cotton, soybean oil, soybeans, sugar, wheat, and corn) was 49 percent in the 15 months from January 2007 to April 2008, compared to 20 percent in the preceding 12 months. In comparison, prices of non-securitized agricultural commodities (including, rice, tea, cocoa and rubber) increased by only 14 percent in the last 15 months, compared to 11 percent in the 12 months before.
Despite the slower average price increase, the effects of speculation do appear to have spilled over into some of these non-securitized commodities, for example, to rice (69 percent since January 2007) and palm oil (88%). One should also ask, as Martin Wolf does: If this is truly a speculative bubble, where are the stocks of these goods? The answer is in part: still out in the fields, as future contracts deal with future harvests. In all likelihood, some of the recent price jumps stems from the perception among hedgers and investors that the harvests will disappoint.
The author of the FT article Martin Wolf, FT associate editor and chief economics commentator, argues that while:
I am grateful to Bart for his comments on securitisation and prices. I should note, however, that if futures prices are jumping because of the perception that harvests will disappoint, this is stabilising speculation. It acts to lower consumption now, thus preserving stocks.
I am unclear on how this happens unless the end user has transparent information that this is going to happen. So far, I don't see that being the case. Another philosophical and ethical question it raises for me is if the so-called speculator realizes through more insightful analysis and precise information the actual market value of the product is he gambling? Yes, there is risk, but there is a difference between statistical knowledge to understand and using tea leaves to assess the unknown. No doubt though that once somebody does benefit from a deeper understanding of the market, they are followed by those who jump on the bandwagon long after the music has stopped playing.
To finish off, I am throwing in the comments from Paul Otellini from this interveiw in the New York Times TECHNOLOGY section on June 1, 2008. You have the business, the technology and the price of oil all combined together.
Bits: Intel's Chief on Strategy, Globalization and the Price of Oil Steve Lohr
In a wide-ranging interview, Intel Chief Executive Paul Otellini talks about Intel's move into processors for smaller machines, the company's new chip plant in China, the challenges of programming many-core processors and the economic impact of the rising price of oil.
One of the broadest and most devastating economic issues currently is the food crisis. Not losing sight of the seriousness of the topic, it is still a source of debate between economic philosophies. Capitalist-oriented publications such as the Economist or the Financial Times weigh in on their perspective. FT.com The Economists’ Forum Food crisis is a chance to reform global agriculture. I will confess to basically following this philosophical perspective with perhaps a more liberal take on the issues. Liberal though can be a negative label from both ends of the economic/political continuum.
Of the two crises disturbing the world economy – financial disarray and soaring food prices – the latter is the more disturbing. In many developing countries, the poorest quartile of consumers spends close to three-quarters of its income on food. Inevitably, high prices threaten unrest at best and mass starvation at worst.
There is immediately though an undeniable point where the philosophical debates have to cease and we are dealing with real people. That point is exemplified by Africa and how the world will assist in its development. How effective we are going to be though will depend in large part on which philosophy we follow. This weblog has featured a number of articles from TED, MIT and other organizations on their efforts in Africa and other developing third world countries through social-entrepreneurship, again following a free enterprise approach to these issues.
Here are two views of what is wrong with what we are doing in Africa, but they come from two very different perspectives. One is European and supposedly neo-liberal and other African and anti-colonial. My initial reaction is that I am not comfortable with either one of them but see valid points with both. Further education in this topic might move me one way or the other, but it will have to be in the opposite direction of one of them or it will have to be a middle path of some type.
If you follow the reasoning of the United Nation's World Food Program, then Kenya is a unique region when it comes to hunger catastrophes. In this east African country, a popular vacation destination with 32 million inhabitants, UN workers hand out more food on an annual basis than they do in southern Sudan, which civil wars have ravaged for decades. But is Kenya really dying of hunger?
How Europe underdevelops Africa and how some fight backfrom Pambazuka News
From above, many African elites have succumbed to what Olukoshi terms trade-balkanisation, following the lead set by colonial pigs in the 1884-85 Berlin conference that so irrationally carved up the continent. Since 2002, the EPAs have supplanted the agenda of the gridlocked World Trade Organisation, just as bilateral trade deals with the US, China and Brazil are also now commonplace.
A united Europe deals with individual African countries in an especially pernicious way, because aside from free trade in goods, Mandelson last October hinted at other invasive EPA conditions that will decimate national sovereignty: “Our objective remains to conclude comprehensive, full economic partnership agreements. These agreements have a WTO-compatible goods agreement at their core, but also cover other issues.”
Those other “Singapore” issues (named after the site of a 1996 WTO summit) include investment protection (so future policies don’t hamper corporate profits), competition policy (to break local large firms up) and government procurement (to end programmes like South Africa’s affirmative action). These were removed from the WTO by African negotiators during the Cancun summit in 2003, but have re-emerged through EPA bilaterals.
From Energy Net: Personal wind turbines are more often invented than actually manufactured. Those that make it to the commercial stage are mostly available at several thousands of dollars. That's why it is all the more surprising that as of next September you’ll be able to buy a true designer windmill for way less than that.
This weblog was created to obtain a better understanding of economic principles, among other subjects, with global trade and the rise of developing nations becoming of special interest. Now Wired Top Stories in an article by Spencer Reiss back in April takes a look at the economic miracle of China and asks whether it, once the World's Great Factory, is the Next Great Innovator?
The world's notorious source of low-cost labor is generating mountains of capital, tons of hot new companies and even some signs of technological innovation.
Everyone knows about China's emergence as a global manufacturing power. Well, guess what: the People's Capitalist Republic isn't just emerging or ascending — it's exploding. The world's go-to source for low-cost labor is generating mountains of capital, squads of hot new companies, and — surprise! — glimmers of innovation.
Even China's notorious environmental meltdown has an upside: It's both a sharp spur to innovation and the driver of a huge homegrown market for green technologies. The country will soon be the number one maker of windmills and solar cells.
Ireland found a more complementary economic partner, namely the United States. The Irish economic miracle is in part the American economic miracle.
By the turn of the century , according to some reckonings, 70 percent of Irish manufactured exports were by US-owned firms...This was, of course, encouraged by tax breaks and a form of industrial policy. But part of this process was a shift away from English investment:
Between 1960 and 1970 British-owned companies represented 22 percent of new industrial enterprises in Ireland. But by 1980 they accounted for less than 2 percent. Significantly, the proportion of exports to Britain from Ireland halved between 1956 and 1981.
Both countries have put a great deal of effort in becoming more innovative and providing services and products to other countries. Both countries could have been catergorized as at best 2nd world economies. Both countries have their own foreign aid programs with China making significant inroads into Africa. Both have arguably benefitted from Free Trade. The question I have is how did they or do they differ from other third world countries. Those answers are not, I am finding out, as obvious as I might have thought before working on this blog. This post will have to be satisfied with just raising the question.
My post on Ten Reasons John Mariotti Won't Use Social Media Sites received a comment from Michael S. Copeland who said...
I agree with John's thoughts somewhat. Yes it's good to do things in your local physical market. However, what if I wanted to get in contact with ALL the left handed trout flyfishing anglers? I would get online on places like Facebook or left handed fishermen dot com and find others. The Social Media Landscape isn't a scary place. It's a world of wonder. It should be explored, and used. As far as marketing, it's great to get to know your customers/users on a more personal level.
Truth is that I do as well, at least that component that Michael focuses on, Yes it's good to do things in your local physical market. A post by another social media maven Brand Autopsy does a good job of making the point. Blogger johnmoore from Brand Autopsy on 6/8/08 wrote about a recent editorial in Ad Age regarding JetBlue's current advertising campaign in which Advertising Age recommends NOT ADVERTISING.
JetBlue is missing the point with its recent ad push. What it needs is to get back to what made it a media and consumer darling: customer service and good internal and external communication."
>"Priority No. 1 should be getting back to a place where consumers want to share good stories.
From John: Let's take this a step further. BEFORE any company spends gobs of money on an advertising campaign, it should first spend money on improving the performance of a product/service and on ratcheting up the customer experience.
The questions being raised lately though go beyond just bottom line and cash flow concerns. The larger question being asked is whether social media is an effective tool for change. The Other Side of the Pillow - Official CoolPeopleCare.org Blog asked Social Networking, or Social Fragmenting? back in February. Sam Davidson brings up a number of issues but I am skipping to the conclusion of his article.
As someone who runs a digital property, I'm constantly looking for what all this means for CoolPeopleCare and our mission to enable people to change the world. Yeah – we've got the Facebook fan page, we've got the MySpace profile, we Twitter and we blog. But why do we do all this, especially when we believe in the power of the offline community so much and that change happens best face to face?
Because we have to be where people are. And people now gather online. Even if the ultimate action we're soliciting is one of offline, real world, or analog behavior, the doorway into people's minds is a digital one.So by all means use social media and use it well – but don't expect it to save the world in an instant. Countless individuals are finding that social networks could lead to social fragmenting. Rebecca's found that social networks don't create new leaders. Even if there is a digital doorway, the pathway to change has to still be traversed with two very real feet.The Rebecca he is referring to is Rebecca Thorman, who's blog post about how social media doesn't create a new generation of leaders was for Sam a prophetic beacon of how all of this online networking may not be getting us as far along as we'd like.
Rebecca's found that social networks don't create new leaders. Sorry, but I don't find this that insightful. We should know this already. Ecological niches do not create new species, but they do create the environment in which they can arise.
Another source of evidence, I would argue against proof, is Wired Magazine, in which Tim Harford explains why new technological tools, which intend to eliminate the importance of geography when it comes to collaboration, actually do just the opposite.
Business is more innovative, and its processes more complex. That demands tacit knowledge, collaboration, and trust – all things that seem to follow best from person-to-person meetings.
While fully agreeing that we are still most comfortable in establishing a relationship on trust if we can meet people in person, this does not really speak in oppostion to social media. There are a number of psychological and cognitive-neurological reasons for this bias, which have been touched on before and will be again. But, just as E-bay established greater online trust for the web transaction, so will greater degrees of trust occur through Social Media sites (and degrees of wisdom from too much trust).
I have a more basic philosophical beef with Hardford's approach, which is more to do with his often quoted argument that if you (I am paraphrasing here) have a choice whether to study the issues of an election or a new stereo then read up on woofers because your making a difference is so slight in the election. Actually my argument is more with the traditional Homo economicus argument. Not only in that there is a non-rational component to what we do as individuals, but when we interact as a collective or group it changes the paradigms. There is a Malcolm Gladwell-like Tipping Point, where if enough people follow Mr. Hardford's advice the system breaks down.
Yes, this is unlikely to happen, but the same principles that prevent this also serve the integrity of the social media systems. This raises questions on the "Popular" Theory Of Group and Individual Interaction. Social Media allows Howard Rheingold to speak on Collaboration Moving Masses Through Compassion and provide an avenue for Kevin Kelly's endeavors - The Universe Is Conspiring to Help Us Or At Least Kevin Kelly Is. I am suspicious of using old paradigms to judge new paradigms.
There are a number of other points that Sam makes that should be addressed, but I am going to leave those for another time. I will also admit taking advantage by changing the order of Sam's argument, but one of the best arguments against the hand-wringing regarding social media sites is Sam's own CoolPeopleCare.
So perhaps all of this worrying about technological innovation not taking us as far as we think or as fast as we would like is not all that useful. Maybe it's just a better way to play Scrabble or better yet the Free Rice Game. Not as social, but at least you will be doing some good while improving your vocabulary and you will get better at Scrabble.
I will finish off by fully agreeing that Even if there is a digital doorway, the pathway to change has to still be traversed with two very real feet.
A couple of posts again I said that a post featuring Ivana Taylor would be forthcoming. This is it. Why Social Media Should Be a Key Ingredient in Your Marketing Mix via Small Business Trends by Ivana Taylor from May of this year. I am also letting her take the point in arguing for social media.
What Role Should Social Media Play?
Social media's primary benefit to your communication strategy is its ability to build relationships and communities between individuals who share interests AND who would not be brought together otherwise except for those interests.
5 Easy Ways to Spice Up Your Mix with Social Media
1. Develop a social media strategy YESTERDAY.
Its insane to ignore the movement to this kind of communication. But it's wise to learn and make decisions about how to use it so it doesn't use you.
2. Choose the critical few social media applications. Always ask yourself: Who is my ideal customer? What is important to them when they are buying what I'm selling? And which tool will help them connect with my business in an easy and relevant way
3. Build your brand from the inside out. Use your smart, knowledgeable and active employees to build your brand.?
Ms Taylor also cites the Groundswell book that is making such an impact.
Forrester Research has taken what they've learned and published a book called Groundswell. The authors of the book Charlene Li and Josh Burnoff (both VPs and analysts for Forrester) are also active members of the social media community and have developed a dedicated fan base that will use their products and services.
4. Find the right place for social media in your strategy. The real work is in finding the right balance between social media and more traditional marketing tools like your printed materials. The ideal outcome is to have them all working together.
5. Go mobile. Many blog platforms offer mobile applications (like Typepad) that you can download to your phone. Twitter is designed to be mobile. This gives you the opportunity to report and communicate discretely in real time.
As usual, I am advocating applying business methodology to change-agent and social-entrepreneurial organizational objectives. Ms Taylor's ideas, especially her last idea, make all the more sense if the clientele one is working on is more dependent upon the cellphone than the laptop.
Anita Campbell of Small Business Trends, who was featured in the last post, lead me to this article by John L. Mariotti.
John’s viewpoint represents the view of the vast majority of businesspeople today — they aren’t ready to drink the Kool-aid on social media sites just yet (maybe never). — Anita Campbell, Editor
I find it difficult to summarize Mr. Mariotti's ideas in any effective manner, so I am merely listing the categories. My personal perspective is that his points are either overblown or if valid there is no argument that traditional and web 2.0 marketing approaches are mutually exclusive. The chance that the majority of businesspeople may agree with him does not dissuade me.
10 Reasons I Won't Use Social Media Sites by John L. Mariotti
Plus, if you act now you will also get:
4 Better, Safer and More Personal Alternatives to Social Media
And for a limited time with this special offer:
Other, More Profitable Mainstream Marketing Options
As Mr. Mariotti tells us, I recognize that the marketing landscape is changing. I love and embrace new technology — but for the sake of profitable business and not because it's a shiny new toy. It's easy to get caught up in complexity and we know that complexity increases costs and cuts profits.
I also agree with him that, Nothing good comes easy. If this were all it took, everyone in the world would be connected to everyone else in the world and it would all be such a wonderful place. What I disagree with is that it is not worth making the effort.
My last post was on making the pitch and having that pitch repeated by word-of-mouth. This post takes its lead from Anita Campbell's article on why its a good idea to Tell Stories and Improve Your Marketing through her Small Business Trends blog. There are important differences between pitches and stories. Strangers pitch to each other, people in a community create and share stories. This applies to change-agent organizations as much as it does to businesses. It is good if you can get your customers to delivery pitches for you, it is great if they tell each other positive stories about you. Ms. Campbell's article first appeared in OPEN Forum (which seems a pretty good description of social media on its surface).
T.J. Walker, a public speaking consultant to the rich and famous, wrote about the power of telling stories. Quoting the book "Made to Stick" by Chip Heath and Dan Heath, he notes that 63% of people will remember a story from a talk or presentation, versus only 5% who remembered statistics.
He also said this: "Stories are not a luxury; they are the single most effective way to get your audience to remember your messages."
If you want your business to be memorable, and for your message to reach as many people as possible and persuade them to buy, learn to tell stories around your business.
Ivana Taylor, who will be featured in a future post on this topic of social media provided a comment by on May 29th, 2008
Amen Anita! Stories are indeed the most powerful (and FREE) marketing vehicle a small business can use. But getting to the story is sometimes really difficult because we are too focused on the “features” of our business than on the benefits. Here’s a helpful hint on how to get your story started.
- Think of an incident that served as a “eureka” moment. This would be a specific moment in time where you suddenly had a revelation of sorts or a moment where your passion was ignited. This needs to be a real moment in time
Going back to S.O.P. of combining ideas together, I found insights from a master storyteller, novelist Amy Tan, who tells her own story at a TED talk where she sets fire to the TED Commandments in the first minute, and rolls from there. Nothing catches the audience like a good intro. Stories well told will go beyond marketing and into clearing the pathways for beneficial paradigms.
Amy Tan: Where does creativity hide? Novelist Amy Tan digs deep into the creative process, journeying through her childhood and family history and into the worlds of physics and chance, looking for hints of where her own creativity comes from. Watch this talk >>
This weblog often looks to Entrepreneurial Mind for basic insights on free enterprise. Not that I agree with everything written, but it is very good resource into the pragmatic philosophy of small business capitalism. It often provides insights into "why" you should do something and connects those whys to larger concerns in life. The fact that Professor Cornwall recognizes that there are larger concerns in life is to be respected.
Lately this weblog has been considering some of the ongoing musings regarding online social media including comparing its advantages and disadvantages to person-to-person communications. The Entrepreneurial Mind back in June wrote on how to Develop an Effective Pitch. This, the most basic component of business communication, minimal time, maximum information, optimal impact, has traditionally been face-to-face. The ability to deliver a good pitch is recognized as essential to being good at business, not any particular aspect of business, but leading the business. This apparently is still be true at Belmont University.
We teach our students about the art of the pitch. Most entrepreneurs will have only moments to grab the attention of an investor or a customer, so they need to learn how to explain what they do and how it creates value in a very short few moments.However, as with so much in communication today, it is no longer only face-to-face or limited by geography as the Entrepreneurial Mind also informs us.
TechCrunch has an on-line site for elevator pitches. Visitors can vote "up" or "down" on the product ideas and offer their comments.
If a pitch is in your future go to this site and watch some of the pitches. It helps to see which pitches work and why. It really helps you to see what makes a pitch effective.
Even if you don't pitch for money, you will pitch to gain customers, attract employees, talk your spouse into your crazy idea, etc., etc. Learn how to pitch!
One of the goals of this weblog is to combine ideas together and one that seemed to be in the same vein comes from Zane Safrit writing for Small Business Trends Why's Word-of-Mouth So Important? back in May.
The pitch is recognized as a one chance at bat attempt. It seems that it would be rather beneficial if your pitch was good enough that others would be willing to continue to deliver it for you. As with the pitch, word-of-mouth no longer needs to have two mouths in the same room or area code. If the word-of-mouth community-created script is as tight as the sucessful pitch then branding should be all the more assured.
With effective, positive, powerful, self-sustaining, word-of-mouth you have the core mission statement, a fundamental mission statement that gets visceral, emotional, physiological, borderline irrational buy-in from your customers and your employees.
Zane Safrit argues that this directly helps the bottom line by improving CASH-FLOW.
The most important financial result for a small business is its cash-flow. Here's how cash-flows grow with a word-of-mouth marketing as core to your strategy:
Word-of-Mouth Arises from a Profound Connection. Word-of-mouth results from a profound connection and engagement both with and between your customers AND your employees. The experience they share, they create together, INSPIRES communication.
So who is most likely to take part in this effort? Those who are already friends, use the tools of web 2.0 and will find common ground in your product or service, in other words your customer base. Even when they don't use the same systems, they still find ways to communicate with each other as the following news article from the New York Times demonstrates.
TECHNOLOGY May 4, 2008 Essay: Friends May Be the Best Guide Through the Noise New companies are trying to solve a problem that the Internet itself created gathering the dense jungle of user-generated content across several platforms into one stream.