Archive for the ‘Economics’ Category

More Jobs Please

Posted: December 7, 2012 in Economics

Today’s news from the Labor Department shows U.S. unemployment down to 7.7% on job growth of 146,000.  That’s good news unless you are hoping for a reversal that you can pin on the current administration, but let’s not go there.

A related piece in the Times this morning by Kenneth S. Baer and Jeffrey B. Liebman, printed prior to the announcement, gives good perspective:

“With more than 200,000 boomers exiting the labor force each month through retirement, the rule of thumb that the economy needs to add 140,000 jobs per month to keep up with population growth no longer holds. The new normal is 100,000, which is why 150,000 new jobs a month has brought the unemployment rate from 9.5 percent to 7.9 percent over the last two years.

So the economy is healing though not nearly fast enough and as Paul Krugman also notes in the Times today, this still means millions of people not working and that comes at a cost.

“When willing workers endure forced idleness society as a whole suffers from the waste of their efforts and talents. The Congressional Budget Office estimates that what we are actually producing falls short of what we could and should be producing by around 6 percent of G.D.P., or $900 billion a year.

So there’s no reason to celebrate beyond noting that it’s good news, of a sort.


At Cloudforce, New York last Friday, we heard a smattering of things we also got at Dreamforce.  That was part of the plan because Salesforce bills its regional events as a chance to bring Dreamforce to the customer.  As proof I heard that Marc Benioff and crew are off to Japan this week to do it all again and there are various other trips like Europe that they also do.  That’s quite a travel schedule.

One of the less well-known parts of both events is the press conference held immediately after the keynote for members of the technology and financial analyst communities as well as the technology press.  It’s also the most intimate part of the whole conference, the time when we get one on one with Marc and the atmosphere more resembles a graduate seminar than anything else.

Of course, Benioff has to maintain a certain reserve given his status as the head of a publicly traded company.  Questions about future earnings are not encouraged and they can’t really be answered but people still like to ask.  It’s fun to watch the non-answers.

Two ideas struck my radar in the press conference — one, the idea that Windows is “over” but also, a more mature attitude by Benioff toward competition.  First Windows.

This wasn’t the first time I have heard Marc say that Windows is over but this time it had the ring of truth rather than being more like the hyperbole of a competitor.  Benioff thinks Windows is no longer necessary and when you say Windows you might also include OSX or any other operating system whose purpose is to provide a general purpose operating environment for applications.

You know this in your bones by now.  With applications and data becoming increasingly cloud resident, a much smaller and more secure operating system that supports a browser and not much more is about all you need.  Google Chrome is a kind of new era OS and the Chromebook a new device that leverages these ideas.  So the stage is apparently being set and Benioff thinks that Windows 8 will be an important inflection point in the history of the operating system.

You can already see problems with Windows revenues especially in the latest numbers the company reported last week.  The Windows Division’s revenue was down 33% year over year and the company’s net income was off 22% with revenue down eight points over the prior year.

Microsoft has become another example of what Clay Christensen described in The Innovator’s Dilemma of a company wedded to its golden goose unable to pivot to the new revenue generator in part because the new generator would force revenues down.  New things cost less and in the ever-ongoing product commoditization cycle less means less and you have to make it up on volume — that’s the cloud.

So, devices are what’s driving the market — the handheld a.k.a. phone and tablet, which come in multiple sizes for different applications.  Devices use stripped down operating systems like iOS, Android and Windows Mobile (and Chrome) and users spend much more time in a vendor’s site or app than ever making the general purpose OS less and less necessary.

Microsoft has more or less seen the same thing coming, which explains at least on one level, the company’s rush to the cloud.  You might even say similar things for Oracle and its latest release 12c.  It goes without saying that the UI and the data center are different places and operating systems will continue to be as important in the data center as the air you breathe, at least for now.  But Oracle is showing that it understands the new reality though it isn’t necessarily playing at the same level as Salesforce, which brings us to my second point.

I also saw a more mature attitude about competition than I could see just a few years ago and I think that was at least in part because Benioff knows he’s winning.  He made the comment that the competition used to say they had a better approach than Salesforce, as in Larry Ellison’s words that cloud computing was all vapor.  Competitors used to say that cloud or SaaS was dangerous to your business, that it was not secure or any of a hundred other things designed to spread FUD (fear, uncertainty and doubt).  But that’s ancient history.

Now, Benioff noted, all the competition is saying, “They have what Salesforce has”, which is typically a variant of cloud computing designed to provide infrastructure as a service (IaaS) and thus keep customers locked in.  Nevertheless, in other words, the dynamic has shifted and the competition has learned that is has to play a new game.

Finally, one more impression.  It seems that Salesforce has now articulated three distinct ways of socializing the enterprise and they’ve done a good job of showing how their products apply in each case.  The three cases involve socializing the vendor-customer interface, socializing the employer-employee interface and socializing the man-machine interface.

The vendor-customer interface is the oldest challenge and the place where Salesforce and CRM got started.  The employer-employee interface is a bit newer and it is still being fleshed out but Salesforce and its partner ecosystem with companies like Jobscience, are populating the market with credible solutions.  The man machine interface is both the newest and possibly the thing most dreamed about for the longest time.

Much of the advancement is coming by way of Chatter, which is advancing on all fronts.  With its suite of socialized business solutions Salesforce is now able to approach its customers on multiple levels.  Socializing the enterprise will be a slow process and there is no telling which socializing approach will first appeal to customers.  For example, GE and Coke are apparently starting with the man-machine interface but it will be logical to expect success to breed success.  Success in one area like the man machine interface will give a company confidence to try something in another area like the vendor-customer interface and in so doing a company will socialize itself.  Most importantly, and this should really be in ALL capital letters, the economy will be socialized as well.

I am fond of studying macroeconomics and looking at long-term economic cycles called K-waves after the Russian economist Kondratiev.  From Wikipedia we get this on the Kondratiev cycle:

Kondratiev’s economic cycle theory held that there were long cycles of about fifty years. In the beginning of the cycle economies produce high cost capital goods and infrastructure investments creating new employment and income and a demand for consumer goods. However, after a few decades the expected return on investment falls below the interest rate and people refuse to invest, even as overcapacity in capital goods gives rise to massive layoffs, reducing the demand for consumer goods. Unemployment and a long economic crisis ensue as economies contract.

If that sounds at all familiar you understand my interest.  So my big question as I continue to watch and report on the evolution of the Social Economy is simply to try and understand if social is the new K-wave or at least part of it.  It’s not the only contender and things like raw materials and resource management and alternative energy development seem to be more germane as fundamental K-wave candidates.  But social will at least be an important substrate for the next K-wave linking together people and, increasingly, devices and that’s why I go to events and try to listen carefully at press conferences.


Oh bother.  They’re at it again.  I’m on the long flight from Boston to Dreamforce in San Francisco and I have a lot of time to think.  First stop is the Zuora user group meeting “Subscribed” happening at the Ritz Carlton.  It’s Zuora’s second bash like this and it’s nice to see them doing well with a great idea like subscription billing.

I am on a Virgin flight, which is my choice for these long hauls.  The plane is full of Dreamforce attendees and the excitement is palpable.

It’s nice to have the option of WiFi and power for my computer so that I can work.  Signing onto the go-go inflight wireless service is always something of a Gumpian box of chocolates, you never know what THEY’RE going to get and today is no exception.

Back in July I wrote a post on a similar Virgin flight titled, “Like a Virgin” that delved into the murky world of product pricing and it looks like this might become a thing for me because I am doing my own little inflation study on the price of WiFi.  If you need to catch up on my musings, you can click the link but a synopsis of my study from the original post is here:

Thanks to go-go’s record keeping, I am able to access my account history.  It seems in 2010, the first time I bought the service, I paid $12.95.  The cost actually went down for several flights after that either because they were running a special to get people hooked or, and this is a dim memory, someone was giving free or discounted service to all passengers during the holidays.

At any rate, my point is that the price of WiFi has gone up dramatically over less than two years.  Today I paid $17.95 for the same service I once paid $9.95 for.  Off the base of $9.95 we’re looking at an 80% increase and divided over two years that produces a 40% inflation rate.  Yikes!  Looks like the increasing cost of Internet is tracking the plane’s altitude.

Ok, so back to today.  Want to guess what WiFi costs today?  Today I plunked down $34.95 for a month because I am going to do this a lot this month, but a single day has a cost of $24.95 and a single day is the benchmark.  Going from $17.95 to $24.95 is a rise of a bit more than 33%.  Presumably they were making money at $17.95 and now that the equipment is fully amortized the additional fee is pure profit.

I know, the fee indirectly includes the free electricity for my computer but I prefer to think of it as something they throw in for the cost of a ticket since I could use the plug for anything else like charging my phone.  But if I am charging a phone and not using WiFi then am I technically freeloading on the WiFi users?  It gets complicated.

At any rate I think I’d have to go back to 2010 when I started using WiFi on these flights.  If you go back to the July post you see that I started paying $12.95 then it went to $9.95 before beginning its inexorable climb.  So take your pick.  I have to keep my socks on here so my math might be off but it looks like at least an inflation rate of 100% over two years.  But more interestingly, I know I am not paying double the cost of a ticket that I did in 2010 even though jet fuel is up considerably in that time.  Again some quick math with shoes on.  The cost of WiFi is now roughly equal to 3.8% of the ticket, not bad at all or about six gallons of jet fuel.

Ok, but like an economist I know there is more than one way to calculate this inflation rate.  Consider this: The cost of WiFi is so high now that they’ve come up with a new entry point, a ten dollar cost for one hour of service.  So that’s ten bucks an hour but when this started in 2010 it was ten dollars for the whole six hour flight or about $1.50 per hour.  If you use 12.95 as the basis then the cost per hour is more but no matter, this is back of the envelope stuff.  But the change suggests an inflation rate of 600%.  Six hundred percent!  Oops!  I really meant 300% per year over two years.  Feel better?  I do.

Well enough of this I am signing off from somewhere over Wisconsin traveling at 422 mph at an altitude of 36,199 feet.  It’s -73 degrees outside and $24.95 inside.


I am indebted to my friends at the Enterprise Irregulars, for the links in this piece.  The IE’s, if you didn’t know, are a rag tag group of certified smarties who know all kinds of stuff about the greater tech industry and I am flattered that they let me hang out with them.

The aftermath of the verdict from the patent infringement lawsuit between Apple and Samsung initially generated more heat than light.  But the last few days have made up for the light that failed to emanate from the weekend’s id fest and Armageddon prediction Internet confab.

Reuters is running an interesting story  about Apple CEO Tim Cook and Larry Page of Google keeping the hotline open — you really need to be a child of the 1960’s to fully appreciate this metaphor.  Suffice it to say that it is the origin of the little red phone.  But also, there was this really interesting post at ZDNet by Jason Perlow about Samsung and Google’s collective need for a new dress.

I particularly recommend Perlow’s article because, while the idea of product dress might seem weird to some people — especially those who take issue with the look and feel aspects of the Apple suit — it might interest you to know that product dress is a legal term.

Without giving away Perlow’s point, let’s just make the observation that the classic Coke Bottle, which has nothing to do with how the stuff tastes, is part of Coke’s dress and its IP, as much as its secret recipe.  Only Coke has Coke Bottles, for a good reason.  So go read that article.

My point here, other than giving a shout out to the IE’s and trying to enlighten others, is that Apple might have, at least momentarily, hit on the only look and feel for mobile devices that will ever be widely accepted.  Tapping, swiping, pinching — things that come natural not only to the members of our Genus but also our Family and, who knows, maybe even our Order — might be so hardwired into our beings that coming up with an alternative might be a waste of time.  Holy $%^& Batman that might mean that Apple could end up owning the mobile UI and someday soon be in a position to make a few pennies on every Samsung or HTC device running Andriod for ever.

Believe it or not, such an outcome would not be unique in the annals of business or manufacturing.  It might have something to do with cross licensing (I know, but don’t confuse it with dressing mentioned above).  That’s when more than one company asserts ownership rights to an invention that each came up with the old fashioned way (you know, R&D?).  But rather than fighting about it for years, the two (or more) companies come to terms, some money and possibly other patents are traded and then it’s back to business.

The best example of this is the car industry.  Car radios, V-8 engines, automatic transmissions, how heating and air conditioning systems work, how the controls are set up and lots more, all have patents and if all cars look more or less alike in some basic features and functions, it might be because their makers went to the same patent swap meet.  Yes, patents expire so don’t go looking to fund the fifth generation grand kids college even if you have lot of patents.

So this brings us back to Larry and Tim and the hotline.  May we be informal for a moment and simply refer to each other using first names like they do in the music biz (Elvis, John, Paul, George, and especially Ringo; but also Bono, Sting, Eric and many others)?  So, Larry bought Motorola (early car radio patents, BTW) at least in part for its stable of patents to ward off just the kind of suit that Tim’s company is making famous in the mobile industry (Tim should file a patent! hahaha!).  And Larry, Tim and their minions are keeping the lines of communication open as they say.

What are the odds that the verdict put the discussions into high gear and that there’s an informal-formal patent swap meet happening out in the Valley between these principals?  Nothing would surprise me but I think that if both sides remain reasonable and use their inside voices and big words, that there will be an announcement in the not too distant future that they’ve struck a deal.

If so, the deal would create the stack of the decade.  Just as Wintel described a stack of Windows OS and Intel chips that made the personal computer; or as LAMP stands for Linux, Apache, MySQL and PHP for cloud application servers, some standard that combines Mobile/Google/Android/Motorola/Apple might emerge from all this chaos for mobile devices.

Let’s see, MOGAM? MOGA? GAAMMO? AGAMO? AAM? AA?  Who knows, naming might be the stickiest part of the negotiations that aren’t happening on the hot line at the moment.


The headline in the New York Times brought what I had thought would be unambiguous good news or at the very least non-news to most people.  A San Jose jury had found in favor of Apple in a patent infringement case against Samsung and awarded Apple one billion dollars in compensation.  The suit involved infringement on patents for the iPhone and iPad.

But of course there was diverse opinion over the verdict.  Much of the commentary in the Times was of this variety:

“This is an overreach of the patent law. If the first carmaker (Daimler) would have patented this new type of vehicle, there might never have been an American (sic) car industry. Apple ends up looking bad in the end, since it’s obvious that they are trying to stifle a competitor that is starting to get better at doing something Apple did first.

But I disagree.  In that vein, did you know that the Wright Brothers patented the airplane?  It’s U.S. patent No. 821,393 in case you are curious.  You can look it up.  That patent didn’t seem to slow down the evolution of the aviation industry.

I don’t usually comment on stuff like this but I feel compelled to because what passes for logic in this case is terrible.  Much of the commentary is a misguided attempt the re-examine the patent process.  The commentators disagree about whether this or that feature should be patented or patentable but that train left Dodge a long time before trial.  They also engage in retrograde thinking, by essentially saying that the patent is obvious today so why was it needed in the first place?  But the ideas that go into patents are rarely obvious at the time of invention and patents are awarded to protect an innovation by giving its authors time to profit from their invention.  Without patents would we still bother to invest billions in R&D not to mention the time and effort to invent things?

The patents were awarded fair and square regardless of what anyone thinks now. The only question before the court was whether or not Samsung illegally copied a feature or function for which Apple had won a patent. The answer was a resounding yes. Yes, Samsung deliberately and knowingly broke the law by using someone else’s property without paying for it.

The issue was never about how deserving Apple or anyone else is or was of receiving a patent.  It wasn’t even about Apple using its great wealth to prosecute an even wealthier corporation.

When did we as a people become so illogical?

China’s Incipient Recession

Posted: August 24, 2012 in Economics
Tags: ,

It was only a matter of time before slack demand in the rest of the world backed up into China, the world’s biggest manufacturer.  According to an article in the New York Times finished goods have been piling up in Chinese warehouses, car dealers’ lots and in the spaces between other things in factories.

China is in the early phase of an inventory recession, a situation that happens when production gets ahead — or in this case, way ahead — of demand.  It’s a textbook case of too many goods chasing too few dollars, Euros, Pounds — you get the idea.

We see much less of this kind of downturn in the west for some good reasons.  First, we have really good supply chain technologies and practices so we know early on that things will back up and manufacturers slow down production to avoid having the kind of glut that now affects the Chinese.  Second, and more important, we take the signals from the market seriously and have transparency in government.  We report the actual truth instead of what we think we want to see.  The Chinese?  Not so much, especially in the latter case.

Classically, the remedy in this situation is to curtail production, which leads to fire sale pricing.  Economists call this working off the excess inventory, real people call it unemployment.  The Chinese government can’t afford unemployment especially now because they are in a once in a decade leadership swap-out and because employment is the national unemployment plan.

See?  No?

They don’t have much of a social safety net and the government doesn’t want to throw a number of people out of work that might rival the entire population of a European country or large American state.  So the finished goods pile up.

Short term, WalMart has more to sell at lower prices.  But soon the reverse will have to happen.  Goods will get scarce and prices might actually rise.  Maybe.

The recession mania around the world is unfolding like a textbook demonstration of all possible types.  Here in the west for instance, we are having — or had depending on where you live and your political persuasion — a credit based recession.  That’s where there are too few dollars chasing goods and services but not leading to inflation because demand has dug a hole in the floor.

It’s not like there is no actual demand, but for some reason, banks have had to rebuild their balance sheets after the wild party they threw themselves five or so years ago and they aren’t lending.  So in this case, lack of credit is stifling demand.

Whatever happened to supply side economics?  You know, the idea that if you build it they will come?  The Chinese have done their jobs in the supply side scheme but the rest of us seem to be letting them down.

Actually, the part of supply side no one likes to talk about goes like this: all markets clear — at a price.  This means that products match up with buyers until all the product is all gone, but there’s no guarantee what the price will be for the marginal goods, i.e. those that were made in excess of reasonable demand.  That’s where the firesale comes in.

Oh sure, things are beginning to get better in selected places but in most cases the economy is still pushing on a string.  What to do?  Too many goods in the Far East, too little credit in the rest of the buying world and suddenly, too little employment all over the place.  The prevailing wisdom tells us to tighten our belts and show confidence but we’ve been doing that for many years already and the “Confidence Fairy” as Paul Krugman would say, has failed to materialize to sprinkle pixie dust on the economy.

We could always try some proven macroeconomic ideas.  Nah.


Under more normal conditions I react to blogs on a low key basis.  If I like something I might not even mention it and the same is true if I dislike or disagree with one.  The blogosphere is a big place and it is unproductive to be running around all day saying “Yes, I like this” or “No, not so much.”  But I am grateful that so many of you read and even comment on what I post.

However, when a vendor weighs in on an official site and clearly makes a statement that I think is wrong and or self-serving, I feel a need to provide a counterbalance.  Earlier this month Meg Bear, Vice President, Oracle Cloud Social Platform posted, “Multi-Tenancy and Other Useless Discussions” and from the headline I think you know where this is going.

The whole multi-tenancy debate of the last decade has been run by the same logic that a five-year-old uses at dinner — don’t let the peas touch the mashers or the chicken!  Ironically, the chocolate syrup does indeed touch the vanilla ice cream and that is socially acceptable, but I digress.

According to Bear, the debate is no longer relevant not because we have all grown up and understand that, just as a bank co-mingles everyone’s money keeping yours separate from mine by use of metadata (account number, balance, statement, things like this), our data can be co-mingled without worry about cooties.  No!  Bear’s rationale is that Oracle has a superior “modern application architecture.”

Can we please be serious?  I beg to differ for the following reasons.

IT is over.  Note I didn’t say finished or in any way imply irrelevant.  IT is over as a disruptive innovation and driver of the economy.  Some macroeconomists who study the long economic wave a.k.a the Kondratiev Cycle have begun noting that the IT wave is over — just look at the economy today and you know this.  IT is the economy in much the same way that cars and petrochemicals, once big drivers in their own right, are the economy.  They don’t grow a zillion percent any more and now neither does IT.  Over, finito, gonzo.  Bring on the next Kondratiev Cycle, please, and hurry up!

But quickly back to Ms. Bear.  IT is rapidly commoditizing — that’s the real message of cloud computing.  The cloud frees up budget once spent on hardware for more productive pursuits.  Under those conditions, dedicating spindles that remain half empty for everybody’s peas, mashed potatoes and chicken and dedicating separate database instances is both wasteful and unprofitable for the vendor.  It also doesn’t seem very modern to me.

Fortunately, Ms. Bear assures us equally that the Oracle Fusion HCM applications are multi-tenant and that it doesn’t matter.  If it doesn’t matter then, “the lady doth protest too much, methinks,” thanks to Mr. S.

So what is the point?  Apparently it’s business value as in the value the applications enable the business to realize through their use.  But according to Bear, multi-tenancy is not an enabler by, say, enabling greater throughput, faster processing and quicker searches over fewer spindles; things like that, because multi-tenancy doesn’t matter.

And that’s because…?


What’s the world coming to?  Microsoft lost money in the software business last quarter, the first loss in a decades long string of positive earnings from the world’s biggest software company.  Sheesh!  Yes, there were extenuating circumstances that you can read about here, but the loss signals the breadth and depth of the impact that the tablet is having on the hardware market.  The iPad tablet to be precise and its economy size, iOS sharing little brother, the iPhone.  For a quick slide show on iPad’s penetration and adoption check out this presentation from Business Insider.

Last time I asked if hardware was becoming sexy again and why.  The answers seem to be “Yes” and “Because tablets have reached a new price point that opens up more emerging global markets to computing.” Tablets and their near kin, smartphones, are defining a global computing platformfor the next decade and beyond promising first world information access to many people formerly left in the dust.

The writing was already on the wall when analyst firms IDC and Gartner recently documented a stall in the PC/laptop forward momentum.  Lower PC sales means fewer operating system sales and all that goes with it.  To be sure, tens of millions of units are still being sold this year along with operating systems and productivity software often bundled in.  But growth has stalled as new customers in emerging markets are voting to type on Gorilla Glass over keyboards.

Every paradigm goes through a predictable lifecycle and the computer operating system dependent on hardware sales is another example, not an exception.  Microsoft, Intel and others invested heavily in thin, ultra-light laptop machines as the next thing that would protect the franchise and compete with tablets, but they were still too expensive and ultimately not cool enough.  If Microsoft expects to get its OS mojo back it will need to cajole its hardware partners into really being competitive with tablets.

Right now, everything is going the way of the tablet and Apple can almost do no wrong.  Even when a European judge made a finding in favor of Samsung in a patent dispute with Apple recently, he declared the Samsung gear “not as cool” as Apple’s and therefore not infringing on Apple patents.  That’s just amazing.

Windows 8 comes out later this year and Microsoft has introduced a tablet of its own, the Surface.  The game is far form over but the latest brush with reality suggests Microsoft might have been prescient in going “all in” as Steve Ballmer said of the company’s approach to cloud computing some time ago.  Microsoft is at some intermediate point in its journey from vendor of licensed software to ringmaster of a giant subscription economy.  Like many companies in similar transitions, the going isn’t always smooth but if anyone can pull this off it ought to be the guys in Redmond.

When I’ve spent time with the Redmond gang over the last couple of years I’ve been impressed with how much they get it, not just at a high level but throughout the organization.  All in, Azure, and retail stores suggest a company thinking its way through the changes.  And analytics and social networks suggest they really get it.  Maybe all in should be replaced by we get it or better, we get you, but not quite yet.

But on a cautionary note getting to the cloud or to tablets won’t be enough; this is a business model change that every company has to deal with and Microsoft has done more than many already.  Now, Microsoft’s partners have to pick up the gauntlet and evangelize more than ever.

This week (on July 25) Zuora will release a Fireside Chat video discussion that I am participating in.  It will be all about the cloud and subscriptions and I expect an important theme will be the attention that subscription companies need to pay not to selling but to service and ensuring customer happiness.  And, oh, heck, while I am talking about myself I might as well mention that my new book is coming out around the same time — “The Subscription Economy — How Subscriptions Improve Business.”

While the changes in the industry might be painful for some, they also represent innovation and creative destruction which is the hallmark of a vibrant economy.  The issue for us is not how to slow down change but how to embrace and leverage it.  Once the election clears out I think Q4 could be an important turning point as winners and losers get back to the work of inventing the future and making money.

 


A few years ago, Harvard Business School professor, John Quelch penned a post in which he invented the term, “middle aged simplifier” which is a person of middle age in the process of breaking down the household that raised and launched children.  This simplifier was, according to Quelch, mostly female and mostly interested in acquiring services and experiences of all types, rather than buying more products.

Quelch’s metaphor is of selling the house in the ‘burbs and migrating to a city for its cultural attractions, restaurants and quality of life that does not include mowing the lawn or renovating the kitchen.  Now a new study from sociologists at UCLA documents the pathology behind the catharsis of simplifying.

Researchers from UCLA’s Center for/on Everyday Lives of Families (CELF) studied 32 families and their possessions and wrote “Life at Home in the Twenty-First Century: 32 Families Open Their Doors,” complete with pictures of over stuffed rooms and the obligatory garage that no longer accommodates a car.  The research team included archaeologists, anthropologists and other social scientists.

Among their findings which I am quoting from UCLA Newsroom:

  • Managing the volume of possessions was such a crushing problem in many homes that it actually elevated levels of stress hormones for mothers.
  • Only 25 percent of garages could be used to store cars because they were so packed with stuff.
  • The rise of big-box stores such as Costco and Sam’s Club has increased the tendency to stockpile food and cleaning supplies, making clutter that much harder to contain.
  • The addition of costly “master suites” for parents proved the most common renovation in the homes that were studied, yet the spaces were hardly used.
  • Consistent and troublesome bottlenecks emerged in the homes, yet families rarely devoted renovation dollars to remedying these obvious problems.
  • Even in a region with clement year-round weather, the families hardly used their yards, and this was the case even among those who had invested in outdoor improvements and furnishings.
  • Most of the families relied heavily on convenience foods like frozen meals and par-baked bread, yet they saved an average of only 10 to 12 minutes per meal in doing so.
  • Fragmented dinners — those in which family members eat sequentially or in different rooms — threaten to undermine a sacrosanct American tradition: the family dinner.

So what’s the CRM angle on all this?  In the interest of brevity, I thought I would bullet some ideas.

  • Clearly, with or without CRM, consumer society has reached a zenith and the limit to acquisition of even more stuff may just be the lack of space to store it.  The joke about expanding to fill the available space is coming home to roost (if it can find a toehold).
  • As an economic reality, if current households are literally full AND new household formation is below what would normally be forecasted AND wages are stagnant AND the consumer makes up two-thirds of consumption in America, it is hard to see how growth resumes.
  • I think you need to tease apart the ideas of hanging onto children’s toys and clothes for the “grand kids” from getting a deal on paper towels at Sam’s or Costco.  At least the towels get used up; the toys are waiting for toy Godot.
  • Our eating habits drive the obesity epidemic.

No wonder the simplifiers were documented by Quelch; they were the leading edge of the wave.  But they were coming out just as the recession hit and now with house prices depressed the whole process might be in semi-permanent arrest.  People with big suburban homes have found it hard to get their price, which backs up the process of deleveraging the garage, which might add to the stress.

What to do?

Regardless of one’s ability to move house, with fewer spaces to park additional acquisitions, it would make sense that more vendors will focus on services and experiences.  Hence the software, especially the social software that helps us discover attitude and sentiment.

Perhaps there is a silver lining and some future entrepreneurs will make money by returning usable square footage to the homestead (clutter busters?).  People armed with a dumpster and trained in the hard science of evaluating and tossing the unwanted and the exhausted or broken might become the new go-to professionals.  I can just hear Steely Dan singing “Kid Charlemagne” — “…just get it all outta here…”

Jeff Foxworthy made many jokes and dollars defining rednecks as people with aging and non-running cars in the front yard. Turns out they were not unusual among humankind; they simply had bigger yards. There is a suburban equivalent and they need a name.  Please help!


This bookends yesterday’s piece about economics.

I have always been interested in the similarities between biology and economics and ultimately business. In the last few years we’ve adopted some of the parlance of biology when we talk about business, especially social business. Perhaps the best example is the analogy we freely make between a vendor and its partners and supply chain, i.e. “the ecosystem.” But itdoesn’t stop there; it extends to the customer as well.

We use “ecosystem” in a truncated form, assuming all relationships are good or beneficial, but that doesn’t have to be the case, and reality does not support this sanguine view. After all, there is a relationship between the gazelle and the lion, though it only seems to benefit one side. But even here, the lion provides a valuable service — if not to individual gazelles, at least to the species — by weeding out the least well-adapted and the plain unlucky.

If you study an ecosystem, there are at least four kinds of relationships, and one defines each species’ place in it. You can even represent these relationships in a two-by-two chart that describes these symbiotic relationships. Let’s take a quick look at them and then make the CRM point of this piece.

The four symbiotic relationships that define life in an ecosystem are:

  • Mutualism, a relationship between two species of organisms in which both benefit from the association.
  • Commensalism, a type of relationship between two species (plant, animal, fungus, etc.) in which one lives with, on, or in another without damage to either.

The next two are tricky because they seem rather similar.

  • Amensalism is a symbiotic relationship in which one organism is harmed or inhibited and the other is unaffected.
  • Parasitism is a relationship between organisms in which one lives as a parasite on another.

We well understand parasites, but the relationship does not have to be destructive. The big difference between the last two is that parasites may harm their hosts but the best parasites derive all their needs from the host without harm. There can be parasites that are amensalists, but that’s getting rather technical. How would you describe the relationship between the dairy farmer and his herd?

I sometimes think that one of the big tests of CRM and especially our socialized version is that much of business has evolved along the lines of the last two — parasitism and amensalism. If the last decade of CRM has taught us anything, it is that business needs to get to commensalism or mutualism. Customers are demanding it, and even our language about business suggests this.

Do we have customers or consumers? In my mind, customer describes a more mutualistic relationship, while consumer suggests a relationship that is at best parasitic, and maybe not in a neutral way. Our software necessarily reflects our take on the relationship. For instance, is our sales software designed to accelerate deals or to help us do good, mutually beneficial business?

You can’t let customers off the hook, either. How many of us seek only the best deal regardless of whether that deal leaves the vendor without sufficient margin to provide decent support? In these Occupy Wall Street Days, it might not be fashionable to feel for the vendor, but you can’t have a relationship with only one party, so the condition of the opposite member is always a concern. Note that our four definitions make that implicit point.

Social technology is what enables mutualism; it is a necessary but far from sufficient condition of the relationship that social technologies exist. Interestingly, without it we are all independent actors interfacing with a sometimes impossibly large vendor. Without social we are all nothing more than consumers, and that’s the point of business today.

Economics may need to be reconsidered in light of social media. Think about it: One of the bedrock assumptions of economics is the rational actor theory. We’re all rational actors who make decisions and take actions based on our analysis of available information. So how is this affected when information is so much more available through social media? Does having more knowledge — including knowing that others know more or ought to — reduce our options in the market? I think it does, and it means relationships need to be more equal — commensalism or mutualism.

It’s my observation that companies that have yet to adopt social approaches and technologies have consumers. But as time goes on and those same people interact in different ways with each other and with other vendors, the differences between being a consumer and a customer become glaringly apparent.

Companies can adopt social technologies and techniques in an attempt to “speed up” conventional relationships. But the more successful companies already show that social moves the needle in the direction of mutualism.