The Speech:
Once upon a time, not many years ago, a speaker, the CEO of the Burnstone Tire Company, an Ohio subsidiary of the Japanese conglomerate Cobblerock Tire & Rubber, looked around the room at his peers at an industry meeting, and said,“You know, with these 80,000-mile tires, we’re not making much money. The simple truth is that the tires are too good, and they last too doggone long.”
There were nods of assent from around the room, where 80 top-level executives from the major tire producers were enjoying an after-dinner brandy. “Some of the cars don’t last as long as the tires,” a nearby exec shouted. “Damn right,” a voice came from across the room.
“Well,” the speaker continued, “I propose we do something about it.”
“What?” asked many in the crowd, practically in unison.
“Let’s make a better tire.”
A discontented sigh emerged from around the room. It was as if the crowd was saying, “He’s just another nutcase.”
The speaker waited just long enough for the sigh to die down, and said, “It depends entirely on what kind of better tire we build.”
Attention from the crowd was restored immediately; a hush fell over the room. Maybe this guy has an idea, the execs thought.
“Let’s make a tire that has the ability to run hot and is extremely safe at high speeds.”
The speaker could almost see the crowd’s thoughts gurgling up around him. Neurons fired simultaneously in each of the 80 brains: If we build a tire that will run hot and is safe at high speeds, it won’t last nearly as long. It’s brilliant. Geez, a tire that only lasts, say, for 20,000 or 30,000 miles.
The speaker had the tire chieftains in the palm of his hand now. “That’s not all,” he said. “We can make thin tires, too. You know what I mean — cool-looking low-profile tires. They may only last for 20,000 miles, since they will be able to handle high heat and speed, too. Darn, another problem with too-good tires.” He snapped his fingers and looked crestfallen, but in an obviously mischievous way.
The crowd rose to its feet and showered the speaker with applause. After he left the rostrum, people hugged the speaker and slapped him on the back. What he had done was to ensure profitability for the future, not just for his company, but for the entire industry.
The strategy meeting:
Two weeks later, at a meeting attended by the lobbyists for the World Tire and Rubber Association (WTR), the association president talked to the associated political operatives. It was agreed that the U.S. dominated the world tire market by a huge margin. “Will anyone actually drive at 160 miles per hour, asked one lobbyist?”
“Less than one-tenth of one-percent is our estimate,” answered another.
“So, it’s just that the car could go 160 mph, right?” asked another.
“Right. If the industry makes tires that could go 160 mph, we can’t make them last long, only make them work well at high speeds and last for a relatively short period.”
Another lobbyist — this one a lady concerned with government affairs for one of the tire company members — wanted to know how the government would react.
“Remember the speaker at the meeting last month? The Burnstone CEO who came up with the idea?”
“I wasn’t at the meeting,” the lady said, “but I heard all about it. Everyone did. Brilliant.”
“Well, the idea is to make classes of tires and have new car manufacturers agree to put the high performance class on new cars, and then have Washington create legislation so that when tires are replaced, by law, the replacements must be the same class as the tires that wore out.”
“You’re right! That guy is brilliant,” said one lobbyist, shaking his head in wonderment. He laughed out loud. “Let me restate this: The auto manufacturers put the 20,000- or 25,000-mile tires on new cars — let’s call them Class V tires — and then, when they wear out, tire dealers must replace them with ...” and here he paused and clapped his hands together, “… another set of 20,000- to 25,000-mile tires. So, when a car lasts 100,000 miles, we can sell four or five separate sets of tires.”
The president of the WTR spoke up: “It’s better than that. You guys and gals can work with Washington to have our congressional and senatorial friends write the legislation. Heaven knows, we give them enough money, and so long as the new tires have mileage that is no worse than the old,” and here he smiled rather wickedly, “or at least not much worse, it’s a win-win for everyone.”
“Do you think the public will catch on?” asked one.
“Not for five years or more. If they ever do catch on, it will be far too late. No, the only thing we have to worry about is one tire company breaking away from the pack and continuing to make high-mileage tires. Frankly, that’s not likely — who would want to sell one set of 80,000-mile tires when it’s possible to do three or four sets at roughly the same price?”
The problem:
Isn’t the trouble with the United States the fact that our politicians have for years accepted campaign funds and other emoluments from associations, businesses, business owners and lobbyists and that, year by year, the slippery slope gets slipperier?
In the case of Burnstone and the WTR (neither exists insofar as I can determine; both are creations of my imagination), the idea is to make money at the expense of the general public and with the full compliance of both houses of Congress and the executive branch. If you doubt that this is possible and you have a late model car, waltz on down to your friendly tire dealer and check prices. My wife’s Toyota Camry hybrid has barely made 25,000 miles and already needs Class V (160 mph tires). I predict this car will never see 160 mph; even Toyota doesn’t believe that it will — the speedometer maxes out at 140. Hmm. Isn’t it illegal to drive at 160 in all states?
Forget cars! Forget tires! The logic in my fable applies to credit default swaps (think: AIG and its counterparty, Goldman), bank loans (think: Sub-prime and/or adjustable-rate mortgages for people who cannot afford them), mutual fund fees (think: The former attorney general of N.Y. collecting huge fines from lots of investment and mutual fund companies that were decidedly not protecting consumers), SEC investigations (think: Madoff), Medicare drug programs (think: Donut holes) and add virtually every consumer protection scheme that the politicos have touched.
The idea seems to be to protect consumers in such a way as to make money for the businesses that donate millions to political campaigns. The result is nothing like what the founding fathers had in mind, right? Did the founding fathers want to protect businesses at the expense of citizens? As ABC’s John Stossel says, give me a break.
The latest miracle of government gobbledygook I’ve seen relates to the proposed new health insurance program. The idea from the get-go was to make health insurance mandatory for all; however, in mid-July, the President said that he may request a hardship exception for those who could not afford health insurance. Huh? Say what? Wasn’t the idea to cover the people who couldn’t afford health insurance? Why do I feel like a character in “One Flew Over the Cuckoo’s Nest”?
By the way, one might consider viewing the aforementioned John Stossel’s piece about government-run health insurance at: http://abcnews.go.com/2020/Stossel/. It’s titled Government Run Health Care: Since When Is Government Needed To Stoke Competition?
Broker's Bookcase
SuccessMapping — Achieve What You Want… Right Now! by Arlene Johnson (Emerald Book Company, 2009). The author is the president and founder of Sinequanon Group, Inc. and is an internationally-known speaker and writer.
The author is one smart lady, smart enough to know that we write scripts in our head — why won’t I finish Project X? Because I don’t have the time? Because the kids need new shoes? Because my wife won’t understand? Because, because, because. Johnson has been at this work for 20 plus years; she shows us how to deal with the enemy, and mostly, the enemy is, as the cartoon character Pogo once said, us!
Johnson writes: “Even if claiming responsibility for all you are and do sounds like a bummer idea, it’s not. Why not? Because what you claim is what you can change. Otherwise you are the mercy of others to keep you on top of the world and feeling good. Well, good luck with that.”
You may, like me, be resistant to making maps and defining roadblocks. However, if you suspend annoyance and angst for a few hours, this book will help you know yourself, and to resolve issues that separate us from our own potential. Is overcoming issues and becoming happier worth a few hours?
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101 Activities for Delivering Knock Your Socks Off Service by Performance Research Associates, with Ann Thomas and Jill Applegate, and with illustrations by John Bush (2009, Amacom). The late Ron Zemke was a service legend, and this book is in part homage to his legacy by two of his associates. Thomas and Applegate are part of a team that has authored over 40 books; a team that travels the globe to help companies everywhere.
As the title suggests, there are “activities;” not chapters. The activities are designed to be done in groups or three to five. However, I’m sure one could do alone if you have a one-person operation. (Just watch the grading, okay? Don’t be too gentle.)
Did you know that each of us has internal and external customers? I never thought about it, but most of us do work for people inside and outside of organizations. Gee, I even do work for me sometimes.
In thinking about our investment world, if you — like many — work alone, or with part-time help, it might make sense to meet with two other similarly situated advisors, perhaps also with your broker-dealer, for 90 or 120 minutes a month. This study group concept might work well for learning about Delivering Knock Your Socks Off Service.
One cool exercise involves placing names — LeBron James, Abe Lincoln, Paula Abdul, Prince William, Sarah Palin (to name a few) — on a partner’s back. The trick is to discover what name is on your back by asking questions. The only question that can’t be asked is this: “Who is the person (named) on my back?”
Of course, the biggest challenges in our business are, in my view: (1) Asking the right questions, and (2) Really listening to the answers and to information given freely as well, and by paying deep attention to both.
101 Activities for Delivering Knock Your Socks Off Service can help you get to where you wish to be, and even help you with cultural sensitivity and obnoxious customers.
Richard Hoe, CLU, ChFC, AEP, has been an investment professional for 40 years, and is a registered
representative and investment advisor representative. He is a member of the adjunct faculty at the California Institute of Finance, a graduate school at California Lutheran University. Readers may e-mail Richard Hoe at richardhoe@richardhoe.com.