Indie Capital? It’s a Movement, Not a Place

By Bruce Nussbaum 

Here’s a shocking truth: Occupy Wall Street and the Tea Party actually agree on something. They both hate crony capitalism, and they both love Steve Jobs. If this sounds freaky, let me add another weird fact: Practically all my students at the New School in New York, where I teach a course on creativity and capitalism, want to start their own companies. The New School is renown for being a bastion of lefty thought, going back to the 1930s and ’40s. My students want to be entrepreneurs. They want to be Kickstarter, kickass entrepreneurs. These students want to belong to what I call Indie Capitalism.

I use the term Indie deliberately to reflect a new economy that shares many of the distributive and social structures of the independent music scene—and the value system as well. Indie bands are hyperlocal, and Indie Capitalism is a post-global, local economic phenom (think 3D printing, locavore eating, and crowdfunding new products). Indie capitalists are über-urban, too, feeding off the cultural/entrepreneurial energy of cities—New York, Portland, Chicago, Detroit, San Francisco, Los Angeles, Seattle, Austin. And they are, of course, super-participative. Indie Capitalists believe in our making of all things, with no clear boundaries between consumer and producer, investor and shopper. We are all of them.

There are many Indie Capitalists already among us. Alice Waters’s groundbreaking organic restaurant Chez Panisse has served as a model for the “source-local” food movement. Blue Marble Ice Cream, “Made in Brooklyn,” uses only local New York State cow milk and hires folks from the neighborhood. Chrysler Group tapped into the Indie culture when it hired Wieden + Kennedy to come up with the “Imported from Detroit” ad, with a song by Detroit-born Eminem.

My favorite Indie Capitalist is entrepreneur Elon Musk, the co-founder of PayPal (EBAY). He’s handcrafting Falcon rockets and Dragon capsules to take people and cargo to the International Space Station—and even to Mars. His company SpaceX integrates creativity, creation, and capitalism. So does his other company,Tesla Motors (TSLA), which is assembling and selling all-electric sports cars and four-door sedans out of an old California factory.

Indie Capitalism has three foundational principles:

• Creativity generates economic value. Creativity is the source of profit. Yes, efficiency can squeeze more out of what exists, but creativity gives us originality, which translates into a market advantage and big margins.

• Creativity drives capitalism. These past few years we have been victimized by the disastrous results of “creativity” applied to the financial sector (mortgage-backed securities, for starters). What we lost sight of is that the scaling of creativity to actually make things of value sold in the marketplace is the true heart of our economic system. It is the true generator of net new jobs, wealth, and tax revenue.

• Creative destruction is crucial to economic growth. Crony capitalism, which relies on monopoly and political power, is antithetical to entrepreneurial capitalism. A faster cycle of birth, growth, and death of companies boosts creativity, economic value, and growth.

The contours of Indie Capitalism are only just coming into view. They will change over time, as my students and millions of others build this new economic system. But in the reconnecting of creativity to capitalism, we have something to look forward to.

Nussbaum, a former assistant managing editor of Businessweek, is a Professor of Innovation and Design at Parsons The New School of Design and author of the forthcoming book, Creative Intelligence (HarperBusiness, March 2013). Follow him on Twitter or visit his Tumblr.

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The 10 Rules of Successful Entrepreneurship (Part 3 of 3 part series)

Continued from the previous post…

8.  Learn to sell – this is a must-have skillset, whether you have someone in charge of sales or not…  The good news, even if you’re not born with the gift of gap, you can become better by continually getting in front of prospects and practicing your pitch.  While I do not believe in entrepreneurs pitching vaporware but if you don’t believe in your products and services, it’s impossible to convince others to believe in them (you can read between the lines)…

9.  Redefine failure – when you have your own business, often the highs are so high and the lows are so low.  But even on their gloomiest days, successful entrepreneurs feel a compulsion to make sure that failure isn’t the end of their story.  It’s OK to fall down nine times, just make sure that you get back up the 10^th time.

10.  Don’t be in it just for the money – a tricky statement¸ since most entrepreneurs I know are red-blooded capitalists like me.  But as an old saying goes, money is a great motivator, not an end-all be-all.  Successful entrepreneurs are driven by desire to accomplish meaningful things while embracing it as a way of life.  Jobs once asked Sculley (back then a senior exec at Pepsi) when trying to convince him to join Apple, “do you want to spend the rest of your life selling sugar water or change the world?”  Sculley came on board as the CEO of Apple (only to get fired later but that’s for another post).

While writing this 3-part post, I found myself reflecting on my own current endeavors.  Am I following the rules myself and doing everything I can to ensure their success?  What’s your answer?

The 10 Rules of Successful Entrepreneurship (Part 1 of 3 part series)

Many household names in the corporate world got their start during economic downturn.  In 2009 at the depth of the worst business climate in decades, Americans started nearly 7MM new businesses.  Most of them will fail, but some will succeed.  Bill Murphy Jr., author of The Intelligent Entrepreneur, wrote about the 10 rules of entrepreneur success.  As simple as they sound, there’s lots of wisdom in these rules…

1. Commit to entrepreneurship, rather than a specific business – being an entrepreneur is a lifelong decision.  And such commitment helps entrepreneurs stay flexible and react nimbly to market feedback.  My first company, RJSL Group, started out as a shipping container import business for automotive industry but turned into a CFO staffing shop.
2. Look for market opportunities before creating business solutions – don’t decide on products and services first then set out to convince the market to buy what you are selling.  You will be left out wondering why sales are flat.  Rather, use your expertise to first understand potential customers’ needs.
3. Focus on innovation and scale – most businesses are launched in unattractive, static fields and offer no competitive advantage.  The founders only employ themselves, cannot articulate growth plans and generate subpar topline.  The successful ones combine deep knowledge of customer needs with a commitment to achieve outsized goals.

Frustrating encounter with the USPS

Many of you don’t know me personally. While I write about buying islands and linen pants, I’m really a numbers guy.  I tend to lead and manage by the book (and as my partners claim, I keep them and the rest of the team in line). When I encounter a lack of process and transparency, my head spins. Such is the case with a recent order from Amazon that the United States Postal Service (USPS) managed to butcher.

Here’s my tale, with apologies in advance to hard working carriers out there, after placing an order with Amazon “delivered” by the USPS. The story starts with an online tracking effort via Amazon that shows USPS attempted to deliver the package on 11/16 and 11/17th and could not. Of course this is impossible since we have 24 hour doorman and receiving room in our apartment in downtown Chicago. Then USPS says they delivered it on the 19th but there is no sign of the package. With this information, I decide to stop by the main post office on Dearborn (downtown Chicago) on the 20th (Tuesday of Thanksgiving week) and ask to see the supervisor after the front desk clerks prove useless.  The USPS team then gives me an inside look. They send me to the loading dock in the back.  After talking to 2 or 3 mail carriers, finally I get hold of the supervisor (Mr. A) who says that he’s about to leave so come back tomorrow morning at 8AM.  I show up at the loading dock at 8AM on the 21st (day before Thanksgiving) only to find out that Mr. A did not show up for work – another carrier tells me to come back after Thanksgiving. I show up at the loading dock 8AM on the 26th (Monday after Thanksgiving) and another carrier tells me – I can’t make this up even if I wanted to — that Mr. A has retired.  By now, I’m livid based on the time wasted. I ask to see Mr. A’s replacement and a carrier sends me upstairs distribution area to see a supervisor named Mr. B. It is there that I learn that apparently I’m not supposed to upstairs under any circumstances due to Home Land Security concerns. Hence my walking through the distribution center unescorted (without a badge) ruffles some feathers. Regardless, Mr. B hears my story (he was actually trying to be helpful – even gave me his personal cell number) and tracks down a carrier named Mr. C who swears up and down that he has delivered the package to my building. Mr. B asks me to wait a week until they sort it out internally.  Well, I wait a week. And there’s still no package and my calls to USPS are not returned. By now, I am done with showing up at the dock at 8AM routine too. Enough.

I contact Amazon’s customer service this morning – an interesting process by the way because there is no 800 number given on the site, only after you plug in the order number and answer a bunch of questions, the site asks you to plug in your number and press either call me now or call me in 5 min button.  I press the “call me now” button and some lady from an Indian call center rings me exactly a second or two later.  I explain the story to her. She checks my accounts and sees that we have ordered an absolutely ton of stuff from Amazon the last 10 years (and have never had issues) and promptly offers next day delivery on replacement goods.  One call from Bangalore (Amazon): problem solved. Countless run-ins and phone calls with USPS: nothing. When interacting with USPS employees on US soil, I felt like I was talking to a wall.  Amazon on the other hand, leveraged technology and friendly, a low-cost Indian customer service center and solved the problem in 5 minutes, thus keeping me as a loyal customer at the end of the day.

Is it time to retire the USPS or can anyone fix this great institution of ours?

 

Making Small Business Partnerships Work

(Photo credit: o5com)

For a small business, alliances and partnerships can be an important path to growth, so learning how to nurture these relationships is critical.

In “Paid to Think: A Leader’s Toolkit for Redefining Your Future,” husband-and-wife authors David and Lorrie Goldsmith offer a number of tips for making partnerships and alliances work.

For starters, you need to be committed to these relationships so doubt doesn’t creep in. Make sure everyone is clear on timelines, expectations, deliverables, communication preferences, collaboration methods and other issues before you even move forward.

Don’t overpromise and under-deliver; that can be a sure way to undermine a partnership. Show attention to detail, even down to spell-checking documents. You want your organization to build a good reputation, so demonstrate your professionalism in all aspects of the partnership.

These relationships depend on trust and commitment, so there’s no place for apathy. Watch out for self-delusion and keep your eyes open; it’s easy to pretend everything’s going well when it’s not. Be up front about everything, even problems and mistakes. Integrity and honest communication will go a long way toward helping your alliances work.

Adapted from Ten ‘Sins’ That Can Destroy Your Alliances at Baseline Magazine. Original published at Time.com.

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The Costs of “Free” Social Media to SMBs

Summary: About one-third of SMBs are spending an average of $845 per month to manage their social media messages, according to new research from cloud marketing company Vocus.

By Heather Clancy for Small Business Matters | September 25, 2012 — 22:55 GMT (15:55 PDT)

Social media marketing is referenced often as an especially cost-effective tool for small businesses.

Even so, 36 percent of small and midsize businesses (SMBs) spend an average of $845 per month on tools or cloud services for managing their social media accounts, according to a new survey sponsored by Vocus.

Another 32 percent of those surveyed on behalf of Vocus said they spend $1,000 or more on social media management, while 22 percent are outsourcing these functions to someone else (the amount of that investment wasn’t given in the materials I reviewed for this post).

The average number of tools used by the SMBs to deal with social media accounts is three, while social media activities represent about 25 percent of the respondents’ overall marketing mix, the data show.

The research conducted by Duct Tape Marketing has an error ratio of +/- 4.9 percent.

“What I’ve been noticing more and more is there’s finally this acceptance that social media not only isn’t going away, it’s an essential element of the marketing mix and the real challenge now is to figure out how to integrate it into the total online and offline marketing presence,” said John Jantsch, marketing consultant and creator of Duct Tape Marketing.

Here are some other findings of the research:

- 76 percent of the respondents use referral traffic to their Web site or e-commerce platform as the primary means of measuring social media’s effectiveness

- 87 percent believe social media has been “somewhat helpful” or “helped a great deal”

- 40 percent are focusing on a small but highly engaged audience

- For 91 percent of the respondents, the most common use of social media is information sharing

Personally, $845 per month seems like a lot to spend for an especially small business or sole proprietor. But if you consider where else that money might go — newspaper advertisements, flyers and such — as well as the high potential impact of social media engagement, the investment makes more sense.

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Psychology of Design – by Richard Lee

One of my wife’s favorite stores for home furnishings is Restoration Hardware.  So when I saw its fall 2011 catalog sitting on the coffee table, I took a minute to glance through it.  It was nicely bound with luxurious cover page that read “There are pieces that furnish a home.  And those that define it.”  The CEO’s welcome letter started with a line “Every movement has a lunatic fringe…”  Huh?  He goes on to talk about America’s first Nobel Prize winner and how his company is inspired by progressive thinkers.  OK, I get it…  

I turn the pages to find more and more pictures of hallways, living rooms, kitchens that I would want to live in.  Nice layout; appropriate, insightful, witty commentaries; I could not put it down until I reached the end of the 600+ page catalog.  As far as RH is concerned, mission accomplished.  The founder of cult yogurt shop Pinkberry is famous for pushing form as well as function.  He once stated that his learning how lighting, mood and music affect consumer behavior did not come from formal education in design, rather his after-hours job as a doorman at a night club.  Well, who can argue with Pinkberry’s success, especially after recent 30MM in growth capital investment from the Starbucks founder.

The rest of the corporate world is catching on what the Madison Avenue and other advertising and PR executives have always evangelized – form counts as much as function.  Presentation is equally as important as content.  Who can forget a Silicon Valley urban legend of Steve Jobs walking into early Mac keyboard assembly line and asking an engineer to open up the cover to the back of the keyboard?  When the wiring behind the scenes did not meet his standards in the aesthetics department, he demanded a redesign. 

As WSJ recently proclaimed, forget B-school.  These days, D.school is the place to go.  The trend is yet another step up from mass customization.  It’s a combination of psychological and almost anthropological observation of human needs to solve problems that have yet to be articulated in order to best forecast demand.  From consumer products to professional services to B2B offerings, we can no longer ignore the psychology of design in order to arrive at desirable results.  Besides…   How else would Milli Vanilli have found a career in lip synching?

Why Does Education Matter?

Some recent research suggests that some cities are behind the curve on employment opportunities.  What is the issue? Is there a valid causation related to education to be found?  It appears that the percentage of residents who have college degrees can forecast the economic success of a locale pretty well.

According to Edward Glaeser, a Harvard economist, metropolitan areas where more than 1/3^rd of the population had college degrees (as of 2010) recently had an average unemployment rate of 7.5%, compared with a rate of 10.5% for those areas where less than 1/6^th of the population had a college degree¹.  The argument is that the latter areas are being left behind in the current economy.

The favored locales include expected economic powerhouses like New York, Boston, Chicago, and San Francisco, but also hot beds for technology and new startups like Raleigh, Austin, Madison, and the Washington, D.C. area.  Out of favor are older manufacturing centers including Dayton, Youngstown, and Tampa.  A table listing the data for the top 100 metropolitan statistical areas can be viewed here. As you can see from the data spread, the phenomenon is not a Red State/Blue State or North/South issue.

Lessons – if you have a small or young growing company in need of human capital, you have two choices.  If your management team is in place, or you need a long term supply of manual labor, look for those out of favor areas, they will have more of the type of labor that you need.  If you don’t have your brain power in place, or need a workforce heavy with technical skills (engineers, computer science, etc.) head to the in-favor locales, the environment for your high powered skill sets will be better there.  As a bonus, these high percentage areas self-reinforce with a higher quality of life  –  so the long term looks good.  The rich get richer, the not so try to improve slowly or they die off.

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Requiem / Paean for a Dot-Com Darling

It’s a tale that unfolds more than we care to count, but is heart-wrenching to see nonetheless.  We’ve seen it many times: a young star meets with great success early on.  Their ascent is met with many accolades and kudos.  Then, they fall from grace.  Scandal; missteps; a change in public sentiment.  No matter how hard they try, they can’t reverse their fall from the great heights.

Sock puppets and search engines

I’m talking, of course, about Yahoo!, the once-revered icon of the late 1990′s dot-com era.  Two young Stanford grad students, Jerry Yang and David Filo, unleashed on the world an indexing service that would help navigate journeys on the increasingly congested “information superhighway.”  In this context, Yahoo! was nothing short of revolutionary.  Even its silly name seemed to capture the slightly irrational, but very fun, mood of the time.  This was when “burn rate” was a proxy for a company’s growth prospects, Herman Miller chairs and foosball tables represented credibility, and Jack Welch could get upstaged by a sock puppet as a company spokesman.

I have fond memories of that era: it’s when I moved to Chicago, fell in love with the woman with whom I just celebrated 11 years of marriage, and arrived at the very satisfying answer to the Frequently Asked Question, “what the hell are you going to do with a History and French degree?“  It’s why I still have a great deal of affection for this Sunnyvale company, even after the Microsoft acquisition debacle, the dustup over Carol Bartz ignominious departure, and the Scott Thompson resume kerfuffle.

Having logged time at two financial services companies, I was obviously a big fan of Yahoo! Finance.  There were two services, however, that capture the era well.

Yahoo! Mail.  Washington University alums will recall standing in line waiting for the sterile “green screen” terminals to check their “Pinemail” in the Olin Library.  I quickly tired of the clunky interface I used to check my email after leaving St. Louis, and abandoned my “@wustl.edu” account for a Yahoo! one.  Granted, I am on the whole underwhelmed by Yahoo! Mail, given their glacial pace of introducing upgrades, and the fact that their integration with Outlook is a joke.   However, my Inbox is an ever-evolving scrapbook, a digital collection of moments I’ve shared with friends, family, and professional connections.  It’s why even though I have a Gmail account I’m still not parting with my Yahoo! account.

Geocities.  Facebook, Twitter, YouTube, and Instagram have found a captive audience in folks looking for exposure – sometimes a little too much, as in the case of the “oversharenting” moms and dads examined in The Wall Street Journal.  It wasn’t always this easy.  I hate pulling out the “in my day” card, but you had to sort of know what you were doing in the late 90′s to publish content.  Geocities was the middle ground between Facebook and WordPress, that offered some primitive drag and drop tools for building and maintaining Websites.  Through Geocities I was able to share pictures with relatives in India, develop a Web portfolio to show hiring managers that a liberal arts grad could write code, and acquire a minor following from folks interested in sound clips from Goodfellas (one of my all-time favorite flicks).   Geocities has unfortunately gone the way of Delicious, Briefcase, and other sunsetted properties.

Holding out for a Hero (or a Good Product)

Ashton Kutcher was recently tapped to play Steve Jobs in an upcoming biopic.  At time of writing, if we were to associate a celebrity with Yahoo!, it would unfortunately be the likes of Lindsay Lohan or some other misstep-prone, washed up train wreck.  I’m holding out hope though.  Few seem to recall that the Apple of today was very much like Yahoo! before Jobs rescued it from the brink in the late 90′s – incidentally, while Yahoo! was riding high.  To win over the hearts and minds of customers and investors, Yahoo! needs to completely reinvent itself like Jobs did with the iPod, as opposed to half-baked, poorly executed attempts at innovation such as Livestand, and now Axis.

I’d like the next chapter of  the Yahoo! story to unfold like the amazing scene in Limitless when Eddie Mora shakes off the cobwebs, gets to work, and starts kicking some serious butt.  It would be nice for Yahoo! to replace “LiLo” with Bradley Cooper as the star with whom they are identified.  As talented as he is, however, I’m not sure Cooper could pull off the Jerry Yang look.  There’s always Eddie Murphy.

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Masters of the Universe, by Richard Lee

Traders as Masters of the Universe – Comic Fantasy with Real Money?

I went straight from the military (served 6 years, 2 months and 15 days) to business school.  Turned in my dog tags and flak vest on Friday and was sitting in a quantitative analysis lecture on Monday.  So imagine the culture shock when my peers and professors started discussing CDOs, market neutral hedging strategies, velocity of money, traders being the masters of the universe, etc…  After the initial WTF wore off, I recall thinking (despite my lack of market know-how) –

• Collateralized debt obligations – if the underlying assets themselves are toxic, e.g. bad real-estate loan portfolio, how can re-packaging them into different segments and formats then selling them to third parties increase the inherent value of the asset?  Spread the risk maybe, but increase the value?
• Market neutral trading strategies – if your risk is completely hedged (if there is such a thing in the first place) through buying and selling call and put options and other hedging instruments depending on the position you’ve taken in the market, how is it possible to come out on the top under any scenario?

Obviously we now know the CDO’s role in the United States real-estate collapse…   The recent debacle at JPMorgan illustrates how sometimes you can be too smart for your own good.  Simply put, JPM’s trader nicknamed “London Whale” sold too many CDS or credit default swaps, designed to hedge against a downturn when JPM thought European bank funding worries eased.  But when regional bond defaults flared up again, JPM’s position was so big that it could not unwind fast enough, resulting in 2BN+ losses so far.

Heads are rolling already at JPM – at least three senior officers are either resigning or retiring.  JPM’s defiant CEO Jamie Dimon stated that while the trades themselves did not violate the Volcker rule (designed to limit banks’ risk taking), it did violate Dimon principle.  I don’t get it…  Just what the heck is this Dimon principle?  Don’t let complex risk run wild and deny any potential for error until it was too late?  One thing is for sure, while its board is closing ranks to protect Dimon, JPM and its leadership will have rough time at the next shareholders meeting, and will face further scrutiny from the proponents of Dodd-Frank financial overhaul at the Capitol Hill (by the way, Senator Levin gives me nightmares – looks too much like my high school math teacher with his nose-tip spectacles and all).

Please don’t get me wrong – this post is not meant to endorse government regulations introduced since the near-death experience of our financial market back in ’08.  Being a free market economist at heart, I do believe less is more when it comes to government interventions.  Having said that, reading the details of complex web of trades tied to corporate debt at the center of JPM’s debacle made my head spin…   The current mess has yet again proved that the biggest dangers in finance are arrogance, group think and self-deception.  Masters of the Universe?  Please…   In case you were feeling sorry for Ina Drew who used to run JPM’s Chief Investment Office, I think she’ll be just fine having earned ~30MM in the past 2 years and ~15MM in additional equity awards due upon her departure.   She survived LTCM, she will survive JPM and resurface somewhere else.

LATEST NEWS via @YAHOONEWS

From Associated Press:

Dimon wins votes on pay, chairmanship

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