There's little so demoralizing as knowing you have a good idea, only to have people shoot it down. It's even worse when the people shooting down your ideas are your colleagues. In his new book, Buy In: Saving your good idea from getting shot down, John Kotter, chief innovation officer at Kotter International and emeritus professor at Harvard Business School, identifies four basic ways that people attack bad ideas. And in order to get your idea through, he argues, you need to prepare for the possible attacks. He recently discussed the ideas in his book with Sarah Green of the Harvard Business Review:
In the information age, ideas may be seen as fuel for the digital economy. But only when they spread. And we need people to spread our ideas. The singular Seth Godin has listed 20 reasons people spread ideas. Here are a few choice selections:
#4...because I have no choice. Every time I use your product, I spread the idea (Hotmail, iPad, a tattoo).
#5...because there's a financial benefit directly to me (Amazon affiliates, mlm).
#9...because both my friend and I will benefit if I share the idea (Groupon).
#12...because your service works better if all my friends use it (email, Facebook).
and #18...because the tribe needs to know about this if we're going to maintain internal order.
Read the full list here.
Maddy Dychtwald, co-founder of Age Wave, is a Baby Boomer. And she feels her generation gets a "bum rap," as being self-centered and narcissistic. She believes Boomers should be recognized for how they shook up the world, for the better, with their entrepreneurial spirit and their push for innovation. Here she is speaking with Big Think about the contributions of Boomers to business and society:
Watch the full interview here.
The analysts at Macroeconomic Advisers are forecasting that employment in the US will return to pre-Great Recession levels...in 2013. Yes, jobs are being created (at least in the private sector), they say, but at a very slow pace. And they anticipate that pace to remain slow. Here's a look at their forecast, compared to previous recessions:
During the first two years following
recessions in the 1970’s and 1980’s, output in the nonfarm business
sector rose on average at a robust annual rate of 7.1%, but during the
most recent three recoveries, output growth averaged a much more tepid
3.4%. This is comparable to the
differences in private payroll employment, which rose at an average
annual rate of 3.5% during the earlier recoveries, but at only a 0.1%
(!) average annual rate during the last three recoveries. The
difference in these two growth rates — a reduction of 3.5 percentage
points — is comparable to the reduction in the rate of output growth of
3.7 percentage points.
Read Macro Musing: Are We in Another Jobless Recovery? here.
Alen Mattich, senior reporter for Dow Jones Markets, does not foresee good results from the Fed employing Quantitative Easing to help boost the economy. He says that equities prices are already inflated, and that QE is another case of the Fed "blowing bubbles":
We're always interested in any coverage of the migration of ad dollars from traditional print and broadcast media to online media. Russell Glass, CEO of the B2B marketing firm Bizo, has been watching as well, and he says that while billions of dollars a year (somewhere between 3 and 5 billion is his rough estimate), marketers are making one very big, and increasingly costly, mistake: they are using outdated metrics. He writes at MarketingProfs that some marketers remain wedded to using "click" and "click through rates" (CTR) to measure success in part because they are easy to measure and in part because, well, old habits die hard. Glass:
However, the click's days are numbered. There is an increasing
awareness of some "cracks" in the click's validity, and recent studies
by comScore, Microsoft, and others have effectively invalidated the
click as an important measure for display advertising.
Bizo's recent study of hundreds of B2B advertising campaigns that
ran from January through June of 2010 revealed some interesting
Among campaigns that were being measured and optimized to actions
(conversions, downloads, etc.), the CTR was approximately 10% lower
than that of campaigns that were being optimized to clicks. In short,
campaigns with actions as their goals drive 10% fewer clicks.
The data also shows that of the top 25 inventory sources based on
CTR, only six of them fall in the top 25 from a conversion-rate
perspective. That means that sites that have great CTRs typically do
not offer great conversion rates. Thus, using CTR as a meaningful
metric on publisher sites is just as big a mistake as doing so on ad
networks, as it would lead a campaign astray almost 80% of the time.
Considering that the goal of any advertising investment is to drive
a prospect to a conversion action (e.g., purchase, engagement, a user
filling out a form, etc.), the fact that the click-through rate is
lower when optimizing to the end action has a profound and clear
implication: Optimizing to the click harms a campaign's success.
Read How to Avoid Online Advertising's $1 Billion Mistake here.
Each quarter the Kauffman Foundation surveys leading economics bloggers to gauge their collective view of the state of the US economy. The survey results have been rather bleak, and the fourth quarter survey is no exception. Only 1% of the bloggers surveyed expressed belief that the economy is "strong with uncertain growth" (no respondents said the economy was "strong and growing"), while 34% believe we are either "facing recession" or "weak and recessing." As for the near-future outlook, respondents were bullish on global output, but not at all optimistic that we will see a decline in poverty or the federal deficit.
Projecting three years ahead, economics bloggers expect global output to rise faster than anything else. A gloomy tone remains with expectations of higher poverty and inequality levels in the United States, and no change to the trade deficit, and opinion is evenly split regarding U.S. competitiveness. The number of panelists expecting more rapid inflation exceed by a seven-to-one margin those predicting disinflation. Sixty-two percent of the panel anticipate higher budget deficits, which is consistent with the strong majority (six to one) anticipating higher real interest rates. The outlooks for employment and GDP per capita growth are net positive, but muted with one-third expecting stagnation for both variables.
Read the full survey results here.
(H/t Mark Thoma)
First, Greg Mankiw writes in his New York Times column that he will have less incentive to work if Democrats in Washington raise taxes. Read I Can Afford Higher Taxes. But They’ll Make Me Work Less here. Then he finds himself called mantioned on The Colbert Report:
And now, some Harvard students have responded by striking back at Colbert:
Seems the ball is in Colbert's court now.
We posted earlier on Coca-Cola's success in marketing with a sharp eye on the consumer experience. Melinda French Gates needs no convincing. She recognizes Coca-Cola's ability to reach all parts of the world, and she's envious. If we can get a Coke to the most remote villages, she wonders, why can we not get clean water, vaccinations, condoms? In this Ted Talk, Gates calls on the nonprofit sector to look closely at how companies like Coca-Cola have found global success, and emulate their practices:
Christina Romer, chair of President Obama's Council of Economic Advisers until last month, is back at her post in the University of California-Berkeley's economics department. And she will be writing a column for the New York Times (in the Sunday Business section). Her first column hit newsstands (wherever there are still newsstands) yesterday. In it, Romer argues that, while cutting the federal deficit is important, "now is not the time."
Some advocates of austerity argue that, contrary to the conventional
view, fiscal tightening now would lower long-term interest rates and
improve confidence so much that the impact could be positive. But an
ambitious new study in the World Economic Outlook of the International Monetary Fund confirms that fiscal consolidations — that is, deliberate deficit reductions — typically reduce growth substantially.
The study considers a wide range of advanced economies over the last
three decades, so it doesn’t put too much weight on unusual episodes or
focus on examples supporting particular conclusions. It also breaks new
ground by looking specifically at times when governments changed taxes
or spending with the aim of reducing deficits. Previous studies looked
at summary measures of the budget situation, and likely included cases
when strong economic performance caused lower deficits, not the other
The recent experience of countries already carrying out austerity
measures is consistent with the central finding of the I.M.F. study.
Ireland, Greece and Spain have all had rising unemployment after moving
to cut deficits.
Taking budget actions now that would further increase unemployment
would be not only cruel, but also short-sighted. The longer
unemployment remains high, the more likely it is to become permanent as
workers’ skills deteriorate and they gradually drop out of the labor
Such a situation would be terrible for both the affected workers and
the long-run budget situation. Imagine a patient with a slow-growing
tumor who is also recovering from pneumonia. The outcome is likely to
be worse if the patient is not given time to recover before undergoing
Read Now Isn’t the Time to Cut the Deficit here.
Joe Tripodi, Chief Marketing Officer for Coca-Cola, doesn't much care about ad impressions or ad views. He's much more in "experiential branding opportunities." He explains what he means by that, and shares some recent successes for Coca-Cola in this short interview from Advertising Age:
While attending the Blogworld conference, Lisa Barone realized that most small business owners have come to accept some key truths about using social media. And she shares them at Small Business Trends:
1. You can't be everywhere.
2. You can't always be "on."
3. You can't please everyone.
4. You're in social media to sell.
Do these seem obvious? Maybe. Barone:
While the four statements listed above may not seem like anything new,
I actually think they represent a growing shift in social media. In the
past, we were told to focus on connections, to answer every e-mail, to
respond to every blog comment, to be present on every platform
possible. However, now that we’re watching these sites mature and our
own energy deplete, we’re re-learning that it’s OK to say no. We’re
here to run a business, and sometimes our best has to be good enough.
We’ve long been told that what attracts customers in social media is
our ability to be human. Sometimes we have to remember that we are only human.
Read 4 Social Media Truths SMBs Can Finally Admit here.
In a speech last week at the Hudson Institute, Indiana Governor Mitch Daniels, director of the Office of Management and Budget under George W. Bush, talked about redesigning the tax system in the US, Politico's James Hohman reports. One of the ideas he put forward was to introduce a value added tax (VAT). And Isabel Sawhill, senior fellow in Economic Studies at Brookings, welcomed the public discussion of a VAT, which she says "would make our tax systems more pro-growth, simpler, and broader-based."
Read more of Sawhill's tax policy analysis here.
The latest chart from Catherine Mulbrandon of Visualizing Economics is a striking display of the volatility of the stock market--especially during October. As she shows, this is the month of some really bad days for the market--8 of the 22 worst days ever, in fact. But there have been some historically good days in October as well. Take a look:
For the full size chart, go to Visualizing Economics.
How does one know it is time to jump in the deep end and start a business? Brad Sugars, founder of the business coaching franchise ActionCOACH, says that the "more you know about your market and your numbers going in, the better off you'll be in the long run." And, in a helpful post at Entrepreneur, he shares three questions to help determine preparedness.
1) Is there really a market for my product or service?
2) Do I have enough capital?
3) Do I really know my numbers?
Numbers are the language of business, and you need to know and be able to measure your numbers to succeed and survive.
What do I mean?
If you look at your projections and see limited positive cash flow and
marginal profit on paper, there is little chance you will see anything
different in the market.
You can rationalize all you want about what a great salesperson you
are, or tell yourself that “if you build it, they will come," but you
need brutal honesty about the viability of a business that doesn't show cash flow and profit in the planning stages.
Simply put, how much of your product or service do you need to sell every day to break even? How much to profit? How much does it cost you
to get a new customer? How much will that customer buy the first time
around? When will that customer buy again (knowing that repeat business
is really where your profits lie)?
Read Are You Ready to Launch here.
How did the global economic crisis affect outsourcing? Sandip Sen, president (Americas) and chief marketing officer for Aegis, says that while some big firms cut back their global activities, outsourcing, at least in India, remained a growth area as companies turned to business services to meet new efficiency and cost-cutting goals. But for his company to continue to grow, Sen says Aegis needs to become ever more global in its scope, and provide more services more places. He discusses the future of outsourcing in this interview from the Wharton India Economic Forum:
Mobile ad spending is about to reach some big time numbers. After growing 30% in 2009, eMarketer is projecting mobile ad spending in the US will increase 79% and reach $743 million this year. And they project mobile ad spending will top $1 billion in 2011. Here is a look at the spending forecast through 2014:
Read Mobile Ad Spending Up Nearly 80% in 2010 here.
Forget org charts. Decisions, says Marcia Blenko--leader of Bain & Company's Global Organization Practice--are the "basic unit of organization." Blenko and her Bain colleagues studied companies in the US, the UK, Germany, France, China and Japan and found a strong correlation between financial results and companies that make and execute decisions effectively. Benko and co-authors Michael C. Mankins, and Paul Rogers write about how to make a company an effective decision-making organization in Decide & Deliver: 5 Steps to Breakthrough Performance in Your Organization. One of the more interesting finds from their research is that 7 is the the optimal number of people in a decision-making group. Also, companies that are best at making quick and effective decisions are also companies with high employee engagement. Blenko discusses the research and the book in this HBR IdeasCast with Harvard Business Review's Sarah Green:
The rise in "underwater mortgages"--roughly understood as when the principal owed on a house exceeds its market value--has been widely reported. But these maps from the Federal Reserve Bank of San Francisco highlight the change. Here's the share of underwater mortgages, state-by-state, in 2000:
Now look at the underwater rates for the fourth quarter of 2009:
These maps are from the latest Economic Letter, in which John Krainer, senior economist at the San Francisco Fed, and Stephen LeRoy, a visiting scholar there, examine the relationship between house prices and default rates. When housing prices drop and a mortgage is underwater, that does not, they say, mark the point where it is in the borrower's best interest to default:
At what point does it serve a borrower’s rational interest to default?
A handy rule of thumb is to use the underwater threshold at which the
outstanding loan balance equals the house’s market value as the
location of the default point. However, that underwater point is not
consistent with rational behavior on the part of the borrower (see
Merton 1974 and Krainer, LeRoy, and O 2009). To understand why,
consider a homeowner who is at the underwater point, with the house
value exactly equal to the outstanding balance of the mortgage. Should
this borrower strategically default? We argue that the borrower still
has incentive to stay in the house. Going forward, the borrower is in a
“heads-I-win, tails-you-lose” position vis-à-vis the lender. If house
prices fall further, then the borrower can default immediately, so that
declines in house prices translate into losses for the lender. On the
other hand, if house prices rise, then the gain accrues to the
borrower. With no downside risk, the borrower will not actually be
indifferent as to whether to default. Contrary to what many might
assume, the borrower will actively prefer not to default. With both
upside potential and downside protection against future losses, the
borrower rationally should wait before defaulting.
The observation that homeowners will not rationally default as soon as
they fall underwater on their mortgages has some powerful implications.
First, even though the borrower apparently has no equity in the house
because house value is equal to the amount owed on the mortgage, the
borrower behaves as though equity were positive by not defaulting. The
borrower does not default because the decision to do so is not based on
the book, or accounting, value of the homeowner equity, which is zero.
Instead, it is based on the economic or “market value” of the equity,
which remains positive.
Second, the fact that homeowners distinguish between market and book
values of their homeowner equity implies that they also distinguish
between the market and book values of their mortgages. This is a simple
relationship based on household balance sheet identity. The value of a
homeowner’s assets (in this case the house) must equal the sum of
liabilities (in this case the mortgage) plus the homeowner’s equity.
The big difference between the market and book value concepts for
mortgage valuation is that the market value of a mortgage depends on
house prices while the book value of the mortgage does not. Based on
market value, the default point is the house price at which the
benefits and costs of staying are exactly matched by the benefits and
costs of leaving. Put another way, the homeowner defaults when the
market, not the book, value of equity is equal to zero or,
equivalently, when the market value of the house is equal to the market
value of the mortgage liability. The default point calculated this way
is always lower than that based on book value, sometimes by a wide
Read Underwater Mortgages here.
After coming up a bit short of investment success with their purchase of a toxic asset (which they named Toxie), the reporters over at Planet Money decided to try something a little more old school. They bought some gold, which is trading at historically high levels. Listen to Jacob Goldstein and David Kestenbaum try to make sense of gold prices in the most recent Planet Money podcast:
Jeremy Victor, editor in chief of B2Bbloggers.com has come to the conclusion that "we are rapidly approaching mainstream adoption" by businesses of social media. This, he says, represents something of a turnaround in opinion for him. Writing at SmartBlog on Social Media, Victor says he was inspired to do a little analysis after reading Geoff Livingston's article, “The End of the Social Media Adoption Road." Livingston contended that social media has now been adopted. Victor was skeptical, so he created this adoption curve:
And now Victor is mostly convinced. Read Has social media for business hit the mainstream? here. (H/t Dana VanDen Heuvel)
The Troubled Assets Relief Program (TARP) may have expired at the beginning of the month, but the Congressional Oversight Panel--which was tasked with serving as a congressional watchdog over Treasury action--still has work to do. The latest monthly COP report focusses on Treasury's use of outside contractors in administering TARP. The practice comes under scrutiny largely because it may limit the degree to which the Treasury's actions are transparent to the general public (this is not the first time COP has shared concern about transparency issues). From the report:
In general, Treasury has taken significant steps to ensure that it has used private contractors appropriately, and indeed some experts have praised Treasury for going above and beyond the usual standards for government contracting. Treasury provided for competitive bidding for most of its contracts, and it has established several layers of controls to monitor contractor performance and to prevent conflicts of interest. Further, despite the pressing needs of the financial crisis, Treasury complied with the FAR, although it could have waived its provisions.
This praise must be viewed in context, however. The government contracting process is notoriously nontransparent, and although Treasury appears to have performed well on a comparative basis, significant transparency concerns remain. For example, contractors and agents are immune to requests under the Freedom of Information Act. Contractors may hire subcontractors, and those subcontracts are not disclosed to the public. Important aspects of a contractor‟s work may be buried in work orders that are never published in any form. Further, Treasury publishes no information on the performance of contractors during the life of thecontract. In short, as work moves farther and farther from Treasury‟s direct control, it becomes less and less transparent and thus impedes accountability.
The contracting process has also created confusion about the role of small businesses in administering the TARP. In one case, Treasury awarded a contract to a “small disadvantaged business,” which in turn delegated roughly 80 percent of the contract to a “large business.” Thus, although on the surface it appears that the contract is being performed by a small business, in actuality a large business is essentially responsible for performance. Additionally, the Panel is concerned by the lack of outreach by Treasury to find qualified minority-owned businesses to participate in the TARP. Although several minority-owned businesses have received TARP financial agency agreements, only one prime TARP contract has been awarded to a minority- owned business.
Here is new COP Chair Sen. Ted Kaufman (D-DE), summarizing the report:
Read the COP October report, in full, here.
Vivek Wadhwa, visiting scholar in UC Berkeley's School of Information notices that a lot of online posts about women entrepreneurs tend to accept the notion that women are less likely to run startups because they have different responsibilities than men (he points to this TechCrunch post as an example). He thinks this line of thinking is framed by people looking closely at the startup culture of Silicon Valley. When we expand our view to startups across the country, even of tech startups, Wadhwa notes that many of the stereotypes of entrepreneurs get broken down. For example, after studying 649 different tech startups, Wadhwa's research team found that the average age of tech company founders is 39-40--not the early 20s. And, he writes, "there was almost no difference between men and women company founders."
Both groups had an equally strong desire to build wealth; wanted to
capitalize on business ideas; were attracted to the culture of
startups; had long-standing desire to own their own company; and were
tired of working for others. There were, however, slight differences
between the encouragement that women received from co-founders and what
men received; and women received slightly more funding than men did
from business partners.
Equally importantly, we found no difference in life circumstances between men and women founders. Their average ages when founding their first companies were the same. Likewise, successful men and women entrepreneurs founded their first companies when they had similar numbers of children living at home, though men were more likely than women to be married.
But there is certainly an imbalance between the sexes entering high-tech fields, and that imbalance is increasing over time. The proportion of women studying computer science decreased from 37 percent in 1985 to 19 percent today, according to the National Science Foundation. The imbalance stems from the lack of encouragement that girls receive from their parents to study mathematics and science, and escalates when they join the workforce and receive discouragement. Only one percent of high-tech startups have a woman CEO; there are almost no women in the ranks of chief technology officers.
Marital status when starting business
Read Men and women entrepreneurs: Not that different here.
Simon Johnson--Professor of Entrepreneurship and Global Economics and Management at MIT's Sloan School of Management, and former chief economist at the IMF--is not bullish on efforts by US policymakers to shore up the financial sector. In this interview with Steve Sherretta of Knowledge@Wharton, Johnson repeats some of his arguments from his book, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. In short, Johnson warns us that a new, big financial crisis is coming. But first, we are likely to see a "meta-boom."
Traditional wisdom--that is, most media reports--seem to accept as fact the notion that China's growth is wholly dependent on exports. But McKinsey researchers John Horn, Vivien Singer, and Jonathan Woetzel say that their most recent work shows that China's economy is moving toward more reliance on domestically driven economic growth. And this, they argue in the McKinsey Quarterly, has global business implications:
Arguments over the true nature of China’s economic reliance on exports
have been rooted in the difficulty of appropriately measuring the
export sector. The traditional measure governments and most analysts
use is the growth of total exports as a share of GDP growth. This
measure indicates that export growth has accounted, on average, for
almost 40 percent of the total growth in real GDP since 1990—rising to
almost 60 percent since 2000.
Yet these numbers, portraying a dominant and growing role of exports,
are at odds with the fact that China was one of the few countries that
escaped the great 2008–09 global downturn without a major economic
slowdown—suggesting that internal growth played an important role.
That’s one reason other economists have used a very different measure:
growth in net exports (total exports minus total imports) as a share of
GDP growth. By that metric, exports contributed only between 10 and 20
percent of China’s annual 10 percent GDP growth in recent years.
We contend that both measures are misleading. Using total exports
neglects the fact that many of China’s export shipments include a fair
number of imported goods that are reassembled, combined with domestic
content, or otherwise modified before being exported. Failing to remove
these imports from the total export figure overstates how much value
exports contribute to GDP. On the other hand, a strict net export
measure (exports minus imports) underestimates the contribution of
exports to GDP, because many imports aren’t used in assembly and exported but rather sold to Chinese consumers and businesses.
Here's a chart showing the shift in growth dependency from McKinsey:
Read A truer picture of China's export machine here.