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Wednesday, September 27, 2017

Thoughtful Disagreement

Over the last year or so, I have studied Ray Dalio very closely. He is the CEO of Bridgewater Associates. the largest hedge fund in the U.S. I watch his interviews on CNBC, Bloomberg, and Yahoo Finance very closely,  replayed his TED talk on management several times , and have watched any YouTube entries with him in them going back a few years.

He is disarming for a multi-billionaire. In his TED talk, he shows a clip of himself as a guest on “Wall Street Week” in 1982. When the sound bite is over, he says “what an arrogant jerk I was.” Shortly after that, his business almost went under and he had to re-trench. Clearly, he has come back with a vengeance.

One thing that interests me is the way that he runs his enterprise. He encourages what he calls “thoughtful disagreement.” From 24 year old rookie to 62 year old veteran, everyone is allowed and encouraged to state their views even it meaning criticizing the boss. Having viewed an army of yes men and women for 45 years, it is truly something to see and think about. Clearly, he works with a group of uber-intelligent analysts who, after a few years, begin to have independent means. So, they can speak their mind and not have the money worries that many of us have experienced. So, I have often wondered how applicable his approach is to other companies or industries.

Over the years, I conducted hundreds of personnel reviews. Many people told me beforehand that they wanted “constructive criticism”. Maybe I always did it wrong, but whenever, I criticized  a staffer even mildly, people generally became defensive and some visibly angry. The same was true when discussing issues with most, but not all of the top management, I encountered. Some made it clear that it was “my way or the highway” while others said they welcomed dissent but rarely embraced it even when it was mild. So “thoughtful disagreement” rarely saw the light of day in my career.

The same thing is true of discussing politics. I do not think that I ever changed anyone’s mind on a political issue even when the discussion was civil. So, I  usually avoid such issues. Why waste one’s time?

Dalio said business ideas should be discussed in front of your team and undergo a “stress test.” If it passes the test, then you have a good chance of success. My caveat to that is that everyone has to be honest in the discussion and pretty well informed on the issues. It has been rare, in my experience, to see both variables, honesty and well informed, present among all or even many members of the group. On a personal basis, I like to read outside my comfort or belief zone and put my ideas through stress tests all the time. Generally, they hold up pretty well but I have noticed my views on certain issues moderating a bit in recent years.

So, consider this. Bridgewater, led by Dalio, is the largest hedge fund among many. Clearly, they are doing more than a little right.  Do you encourage “thoughtful disagreement” among your team? Would they do it if you tried?

In advertising and marketing, things are changing faster than ever. All of us, if honest, know that we are having a difficult time staying on top of media changes that seem as if they are happening daily. You need to test a lot of little things on new platforms knowing that most will fail. The spirit of an entrepreneur is needed even if you are with a global brand powerhouse. The tiny failures will not even be a financial rounding error to a giant firm. You realize that you cannot stand still. Thoughtful disagreement and lively stress tests might be a great tool  going forward.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Friday, September 22, 2017

Where Are The New Entrepreneurs?

Historically, there has been an old cliche that small business was the growth engine of both the overall U.S. economy and job formation. A cliche, yes, but it was still true. As we write in late 2017, the landscape has changed. Fewer people are starting their own businesses than even a dozen years ago. What is causing this sea change and can it turn around?

The Great Recession of 2008-2009 savaged the U.S. economy and people who were hurt then and saw many others who had businesses go down for the count, appear to be a bit gun shy. So, while, the terrible downturn is still reasonably fresh in people’s minds, the memory of it probably inhibits some from doing a start-up. Here are some other reasons that I have pulled together from several sources plus some of my own personal conjecture:

1) Regulation—conservatives scream a lot about businesses being over-regulated but there is definitely some truth to it. Talk to anyone who has started even a small shop in the last few years and they will, to a person, complain about the heavy licensing and permitting that is needed for even the most modest enterprise. Also, many people who leave a job have non-compete clauses which prevents them from getting back into the same fray for months or even a few years.

2) The Wal-Mart-ization of America—no, this is not a complaint about how the world’s largest retailer underpays its workers and may be skinny on benefits. It is simply that ultra-big companies have scale and small players cannot compete against them in many categories. Add Amazon to the retail mix, and many rural businesses never see the light of day as online shopping continues to escalate.

3) Big companies are showing more entrepreneurial flair than ever. Leading firms such as Google and Facebook have venture departments within their companies that fund and experiment with new arenas. Many would be entrepreneurs embrace the heady atmosphere of being around lots of big brains in a super stimulating environment. The workplace has to be fascinating.

4) Immigration reform—The term entrepreneur was coined by early French economist Jean Baptiste Say and is translated as “adventurer”. I love immigrants—they are hungry, work their butts off, and come to our rocky shores hoping for a better life. By pulling up stakes and coming here, many, almost by definition, have the spirit of an “adventurer.” If we had a sane immigration policy that fast tracked people with skills that we desperately need, you can bet that more new companies would be formed.

5) Most new products fail and most new ventures go bust within three years. Only .4% of firms last 40 years. It is a high risk game. Today, many have become risk averse and it is hard to blame them.

6) As technology improves, there is no question that new jobs are created. Yet, do not forget one important point. A tech company today can get to $1 billion in sales with a relative handful of employees compared to any time in the past.

7) New companies seem to be mushrooming the most in areas that are the usual suspects—Silicon Valley, The Boston Area, Austin, and Brooklyn and Manhattan. As rural areas empty out, there is little growth in business startups there even though living and operational costs may be low.

There is one statistic that has me encouraged. Over the last two years, there has been more small business births than deaths. If this is the beginning of a trend rather than a short term blip on the screen, there may be fine things on the horizon for our country.

Take the advertising business, for example. Few people are starting new advertising agencies these days. Always a highly speculative venture, advertising is changing so fast that starting a full service shop these days from scratch is generally a child’s dream.  However, small boutiques with speciality services are popping up all over. Graphic designers who were doing project work a year or two ago are morphing in to small shops known for fast turnaround, zero pretense and low fees. Experts on mobile are doing well although some of the real stars are getting snapped up by WPP and other giants. There will always be talented and unappreciated men and women who will go out their own. Others may simply have to be their own boss and hang out a shingle.

Watch new business formation carefully. It is an important bellwether for tracking the vibrancy of a free market economy.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.



Monday, September 18, 2017

Sleepwalking Through Life





I, as many of you, am a big fan of Warren Buffett. Recently, I was watching a You Tube video where the great Oracle of Omaha was speaking to an MBA class. When asked to give advice he gave his normal admonitions about business ethics and responsible investing. In this one, however, he added the advice of “Do not go sleepwalking through life.” I was pleased as it is a theme that I think is vitally important but neglected in pop psychology and often commencement addresses.

Buffett commented that you should find out what you love to do and then make that your career. He suggested doing what you would do if you were not getting a salary and did not need the money. Then, he said he actually did that by offering value investor guru Ben Graham his services for free if Warren could simply work for the master for a while. Graham hired Warren but did not take him up on the working for free offer.

When I was becoming an adult most people were keen to give me advice. Often, they would tell me to not worry about what you were going to do for a living. The line most often used was “you will fall in to something and then make it your career.” Even then, growing up in rural Rhode Island, I knew that had to be limiting. Given my free market proclivities a career in government was unlikely and unappealing. Heavy industry or production had little pull for me and, in finance, I could make a decent living but always be in the minor leagues. Only my father spoke to me sensibly and directly and told me to try a few things and find something that I really liked. It was profoundly good advice.

Hearing Buffett’s words recently, I was struck by how many people I had observed over the years who were truly sleepwalking through life. Things always seemed to be on auto-pilot with them. They had no plans beyond the next paycheck. I found it particularly annoying when I found it happening with the many people who are far more intelligent than I. They watched a great deal of TV, were addicted to sports, but seemed to have little awareness of what was going on around them. Others seemed to fritter away their time with hobbies or make work projects. Yes, many of these things are stress relievers or some persnickety people want to have things just so in their homes. Yet, it takes time and over the years, some of them become breathtakingly boring. Their world has become tiny.

In my advertising career, I was accused of being overly interested in talking with sales reps. My response was simple—“Sales reps see more people in a week than you, Mr. or Ms. Account Person in a year. They know where the marketplace is going if they pay attention at all and, if they pay close attention, they have a great view of trends forming. You do a nice job of servicing our clients marketing needs but sales reps can give us a nice idea of competitive threats”.  Most dismissed me as a neanderthal.

Over the years, I have been a very ambitious reader. I used to mail books to friends and colleagues a great deal but have cut back drastically. The response often was “that is way too long. I will never get through that.” Or, “This is great. I will be on a long flight in three months and, if I remember, I will take it along.” I was trying to help their careers. They did not get it.

Another form of sleepwalking is what used to be known as the “let George do it” syndrome. Some days I feel that I am one of the few people left in America who are concerned about our $21 trillion + national debt and our entitlement overhang of perhaps $200 trillion or more. Mention it and people dismiss me as a crank or more annoyingly say, “Someone will do something and take care of it.” I shoot back, “I am been waiting for over 40 years and regardless of the party in power, not much gets done.”

So, at the risk of sounding like an angry old scold, may I suggest that you get engaged. Do not live an un-examined life. There is a big world out there and you have something to contribute. You might even have more fun than you are having now.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.

Thursday, September 7, 2017

The Future of Jobs--A Contrarian View

A few years ago, two people approached me and asked for my opinion of what the job market would look like in about 10 -12 years. I went at an answer tooth and nail pulling together data from a wide variety of sources. Then, as a trial balloon, I sent my forecast out to a few people whose opinions I value greatly. The response was mixed. We will come back to that but first here is my forecast:


By 2027, we will not have a two tiered employment market but actually three.

From what I see today it  will likely shake out as follows:


1) The top 10-12% will be made up of very smart individuals. These sharpies will have mastered the new technologies or will have so much money or power in a firm that they can manage those who have. They will push and likely succeed in making their products or services even more efficient and will garner increasing profits and market share.

2) The next group will not be that large; perhaps 5% of the workforce. These people will not be tech mavens but they will cater to the whims of the top 10%. Personal trainers, interior decorators, financial planners (although index funds will hurt them), SAT Tutors, and household managers will top the list. Suppose an investment banker (a woman) marries a successful surgeon (man). Their income will be huge but the one commodity they will not have much of is time. A manager will be hired who will get the kids to school, pick them up after squash practice, make dinner and do the laundry. They will be paid quite well.

A new servant class will emerge to address the needs of the emerging 2nd gilded age.

3) Things get rough for the group below these two which may be 80-83% of the population. Robots will take some of these jobs and continued growth in offshoring will do even more damage. Lawn services, roofers, building security, some food service and home health care are likely to be here. These jobs can often resist automation as you will need some hands on action. Importantly, you will need less. I saw a video of a coffee shop in the Bay Area that has machines that make a perfect cup of quality coffee (not the dreadful vending machines that "brewed" coffee years ago!) . It had one employee who collected the cash that some customers still used and was there in case of a machine malfunction. So food service jobs will still exist but there will be far fewer of them. A problem, of course, will be that these jobs will ALWAYS have low salaries as one can digest the necessary skills in a few days and you are very easily replaceable.

Now, will all 80-83% have dead end jobs? Of course not. But, and this is important, raises for middle managers will likely be smaller over time and upward mobility will get tougher except for the most resourceful. I have always bristled when people would say “this time it is different.” They say it with real estate or stock market booms or even overpriced media properties. Yet, here I am saying this time it IS different. When The Industrial Revolution came along many people were free to leave the farms and move to urban areas as improvements in farm equipment had made yields higher with less labor. As electricity came along and steel mills started to roar, millions of new non-farms jobs were created. Henry Ford used his assembly line to build cars, paid workers well, and cars came to the masses.  And so it went for decades.

Historically, increases in technology have increased the number of jobs, good paying jobs, too. Now, we face something a bit different. Like many of you, I am fascinated by the future of self drive cars and trucks. What, however, will happen to the hundreds of thousands of truck drivers in the U.S? No, they will not all go away, but major companies will find self drive vehicles safer and cheaper to operate. Efficiency will always win out.

Also, don’t forget Big Data. It will not simply be a turbo-charged marketing tool. As I write people are working on ways for Big Data to measure worker productivity. Workers will be under more pressure than ever and will face greater scrutiny. The coming together of data points will not be dissimilar to your credit score. It will be hard to fight this in performance or compensation reviews.

Right now, some plants are using robots along with people. I read of one where when a night shift is required they go 100% robots as they are more dependable. Schools do more online courses which cut the number of faculty required and do not use up much classroom space or heat or electricity. I would not want to be a 26 year old Latin or Greek professor these days!

The media world is affected, too. As mega-shops place more on line advertising on exchanges, fewer people can handle billions more in billing. The logarithms get more sensitive and effective every day. An acquaintance has told me he loves what they do but is glad he is 60 and can pull a platinum parachute as he leaves his media giant.

Should the top tier get far wealthier due to the efficiency, the flip side is that the bottom 80% but especially the bottom half could get poorer. We have seen how the wealthy have an aversion to tax increases and they have the contacts and deep pockets and influence to fight them. So, we are heading toward a world of the tech haves or financial heavies and the tech have nots regardless of how many of us own the latest smartphone.

When I looked at this almost inescapable trends to deeper inequality in the US, I went back to my first teacher in Economics—Adam Smith. At 20, I read the WEALTH OF NATIONS (1776) for the first time. The father of modern economics taught me the merits of the market system and the tremendous benefits of free trade. In WEALTH OF NATIONS, the great Dr. Smith wrote: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” Amazing. He wrote that way back in 1776 but it appears that we are headed that way in the next 10-15 years. What to do? Elect Bernie Sanders or a clone in 2020? No way. That could kill the economy. Smith often talked about the value of unfettered markets but admitted that sometimes they needed a little fettering. While he bristled at his own prescription as government entering in to markets was against what he called “natural liberty”, perhaps a progressive income tax and some careful financial regulation would prevent consolidation of economic power in to the hands of a few. My libertarian friends would argue that unfettered markets are great and that crony capitalism has caused much of the inequity in society. Let me be clear—there will ALWAYS be unequal distribution of income in a relatively free market. Some people are more intelligent, some work harder and some are just plain lucky. Yet, if the trends that I see continue, we will be seriously out of whack.


The response to my thesis has been interesting. A few said that I had read too much science fiction and others said that I was a gloom and doomer.  Some quietly agreed and admitted that they will be on top. I consider myself an optimist but, to me, the handwriting is already on the wall. Companies will use tech to squeeze out costs and as one person said to me several years ago, "Robots and logarithms do not require vacations, sick leave, health insurance, raises or a  401K."

I sincerely hope that I am totally wrong with this hard nosed forecast.  Yet, unless things change in a big way, I do not see how much of it is unavoidable.

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com or leave a message on the blog.