July 30, 2008 by roland.

There has been a lot of talk lately in the financial community about how manufacturing jobs are now trying to move back on-shore because the high fuel costs have made it more expensive to ship from overseas than it is to pay decent American wages. A lot of other energy industry analysts are saying that gas will hit $6.00/gallon by this time next year.

What Wall Street and the rest of the analysts have completely overlooked is that two of their darling investments will simply cease to exist once gas hits $6.00/gallon. Those two investments would be eBay and Walmart.

eBay is the world’s yard sale. Granted it is full of thieves and con artists which eBay does absolutely nothing about, yet it has somehow survived. It has even managed to survive becoming the largest stolen items fencing operation on the planet. On any given day you can find more pirated entertainment media sold on this site than a New York street corner, yet eBay has survived. Why? Because a lot of people don’t care if an item is stolen or pirated, as long as it is cheap. eBay even went so far as to try and make money off the criminals with their PayPal shipping. Basically a scam which provides virtually no service, yet doubles the postal charges for anything shipped. Nice ethical markup eh?

Many eBay sellers have been asking for more in shipping than what it will cost to ship plus the price of the item for years. This is a time honored scam which is about to come crashing down. UPS, FedEx, and the Post Office have all been hit hard by $4.00 fuel. There is now more than a $2.00 difference in shipping charges to ship a book Priority Mail when you use your own shipping package instead of a flat rate box which lets the book slide around. There is now talk from all of the main shipping companies about about quarterly and weekly price adjustments for all small package shipping. It’s not really greed on their part, the trucks they use get around 6 MPG and there aren’t more fuel efficient models out there. We won’t speak about how much fuel their planes take.

This brings us back to the “cheap” factor and eBay. Pretty soon, if it hasn’t happened already, everyone and their brother is going to start paying attention to the shipping charges on an auction. Once that happens, eBay’s business will vaporize. I used to buy a good deal of things on eBay. Hell, I even bought a Jeep on eBay and had it shipped cross country. Wouldn’t do that today. Nine times out of ten it is cheaper for me to buy what I want in a local store paying both for the round trip gas and the sales tax. $4.00 gas has taken the “cheap” factor away from eBay. It cannot survive $6.00 gas.

Walmart: the last bastion of the anti-christ. This corporation’s list of sins makes the Chinese government look like Mother Theresa. They have enslaved multiple generations of Chinese citizens in their off-shore “company towns”. Those people will never know freedom or prosperity. Anybody who has ever watched the documentary “Walmart – The High Cost of Low Price” will never spend another nickel in that God forsaken place. There can really be no more un-American corporation on the face of the planet.
Be that as it may, Walmart has managed to rape, pillage and plunder its way into Wall Street’s heart. It did so by screwing every company insane enough to sell product to them, and by building its own knock-off factories in China using slaves as labor. (We won’t even mention the illegal alien cleaning crews they’ve been convicted of using here in this country.) Why did the building of off-shore slave operated factories work for Walmart? Because shipping was cheap. Back when gas was around $2.00/gallon it was cheap to pack a ship full of cargo containers and push them across the ocean. Now the push costs more than buying the real product from the real manufacturer at a retail chain which pays a living wage.

Diesel fuel is quite a bit higher than gas. Even today as gas dipped just below $4.00/gallon it was at least 80 cents higher. For some reason as the price of gas goes up, the spread between diesel and gas increases rather than remaining constant. When gas is $6.00/gallon, diesel will be over $9.00/gallon if the spread continues as it had.

Walmart’s ace in the hole has always been the throngs of off-shore slaves they keep in their company towns. Now those company towns are about to become their greatest burden. Walmart will have to actually try making nice with the thousands of suppliers it has screwed over the years. It will have to compete with K-Mart and Target who somehow have managed to avoid screwing those same vendors, or at least didn’t screw those vendors nearly as badly as Walmart did. It is highly unlikely any of those vendors are going to bother doing business with Walmart again. If they do, Walmart will be paying more for the same products than Target and K-Mart are. Because of this, when gas hits $6.00/gallon, Walmart will go out of business.

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July 22, 2008 by roland.

Hello Florrie,

I read your article and some of the selected quotes about Kindle and simply had to respond.

Before I get deep into a response, let me give you some background about myself so you have a frame of reference later on. While I do author and publish books, I’m primarily a software consultant. Not someone who calls themselves a consultant because they are suddenly unemployed, rather someone who has been consulting on their own for about 20 years now. I work primarily in the world of fault tolerant systems. In layman’s terms, fault tolerant systems are designed to operate, lights out, for decades without human intervention. Perhaps you read about the trading company which was using such a system spanning the twin towers and other locations on 9-11? Even though the Tower location was physically lost, they continued trading until the close of business without losing a single transaction. It may seem cold and calloused, but I promise you, it is exactly the mindset you want when developers are writing software to control nuclear reactors or to run that defibrillator people get implanted.

Speaking as “that guy”; the one old enough to remember searching for a PC that had dual 360K floppy drives and 64MEG of RAM for under $5000; save a place on your storage shelf next to your 8-track tape player, laser movie disk and Pong game for your Kindle. That’s exactly where it belongs, so just put it there now.

Remember Pong? The highly addictive video game which launched the video game industry is a fond memory to an ever shrinking group of people. Why? Pong was a one trick pony. It got trounced by Coleco Vision, which is now a memory as well.

There is a limited life for a fad. One trick ponies are always fads. How many people still carry a pager today? Of those, how many carry a pager by choice instead of because a support system at work was developed to automatically send a message to a pager? A pager was a one trick pony. There are times when its trick is better than a cell phone, but not enough of them to ever make a comeback. How many places (besides eBay) can you even find a plain cell phone? (One that doesn’t have a camera, text messaging, and all of that other stuff built in.)

eBooks will take off, but eBook readers will not. We will end up supporting up to three formats, but none of them for a specific reading device. Ebooks will be read on PDA and merged PDA devices. People will gladly spend $500 or more on a PDA. As screen sizes increase (both geographically and by resolution), these will become the defacto book reading devices. All of them will end up supporting some for of secured PDF file, even though it is not a good file format. They will be forced to support it because people will want one eBook subscription service unless work is willing to pay for the second one. Reference eBooks will be used on the desktop in a PDF reader. We already have such readers because non-secured documentation is distributed that way. Adobe needs to create a security system which works across all platforms though, and they have been incredibly slow to do it. Both MAC and 64-bit Linux distributions are quickly replacing corporate Windows PC’s, so Adobe needs to get over its love affair with Microsoft or become the next Wang.

Today’s hot “merged” device is the iPhone. I don’t currently own any Apple products, but I can read sales numbers and sense the devoutness of Apple’s followers. Apple hasn’t come out with it yet, but iBooks can’t be far behind iTunes. Unlike Kindle’s current rah-rah club, the Apple rah-rah club is multi-product strong.

Palm understands the truth of these matters. They have created a $30 piece of conversion software for those publishers willing to sell without DRM. Other software is available to create encrypted Palm eBooks. Palm has been clutching and grabbing at the eBook market for a while. They have also bowed to reality by letting Adobe put a reader on their platform.

If you are a hardware engineer looking to design the next “killer product”, you need to design a PDA which fits in the shirt pocket, is comfortable enough to be a phone with wireless headset of course, and expands to give you the two page view we are used to seeing in a book. It needs to “feel” like a book in our hands when reading. You also need to include reading software for every major eBook format. Kindle won’t be in that list.

All of this rah-rah Amazon stuff being printed in PMA has really stuck in my craw. Amazon, once described as a cancer in the publishing industry, has now grown into full blown publishing AIDS. You would have to be an Ostrich to miss it. Amazon roams around feeding on the young an innocent while squeezing tightly on the esophagus letting the rest of the industry breath.

How many reading this know that MobiPocket is now owned by Amazon? How many know about Amazon owning Bookmasters? It was interesting that the full page ad appearing in this issue of PMA didn’t have a blurb anywhere about Amazon owning Bookmasters while it was touting Bookmaster’s consumption of another POD pariah as a good thing for the industry. What do you want to bet they both now have a 65% mandatory discount for Amazon with Amazon automatically listing your title even if you don’t want to do one red cent of business with Amazon? My book distributor only takes a 55% cut when I do sales through them. How is this good for the industry? How is yet another eBook format good for the industry when most PDA’s and other devices already had a MobiPocket reader available?

Is anybody at PMA, reading the PMA newsletter, or anywhere else bothering to chart just how much of the industry Amazon has infected? Are self publisher’s getting more handing Amazon a 65% discount when a distributor would only bleed them for 55%. Has anybody read the fine print for the Kindle contract, or did you just agree to it all misty eyed? The fine print read to me as no matter what your book sells for, the best you will get is $1.50. One of my titles has an eBook version for $80, paper list of $90 and used copies in a few countries selling for $229. (Yes, that last may sound backwards, but Visa doesn’t have the “Shroud of Turin” bankruptcy law in that country the US handed out. Those people are paying cash and the retailer hasn’t been ordering new copies from my distributor, just buying up “trade show” copies.) I have no doubt Kindle will make Amazon a ton of money tossing out margins like that, but is it good for the industry?

How many here are old enough to remember the stock bounce Borders got when it announced it would partner with Amazon for on-line sales? How many here have now read about the share holders wringing their hands and praying to whatever God they worship Barnes & Noble buys Borders before Chapter 13 nails the doors shut forever?

While you do need a distributor to get your book listed with Barnes & Noble on-line, you don’t need a distributor for the half a dozen other on-line book stores who will handle your sales, give you an allowance for shipping, and cut you a check periodically for all of the sales you shipped. If you really are too busy to handle stuffing books into flat rate mailers for the Post Office, there are order fulfillment services which will do the last part for you if you give them a cut and some inventory. You end up with a bigger chunk of the sales.

If PMA really wants to benefit its membership, it has to stop the Amazon rah-rah stuff and run articles about these other services posting member experiences with them. It also needs to realize that the new trend in book sales isn’t eBooks or Amazon, but bundled sales. A bundled sale is an eBook version sold with a print version at the same time, usually for some substantial discount off of the combined list price. You can do this successfully if your eBook version is priced near your paper version. Creating the eBook version is a one time cost for each version. Every copy after that is basically “free”. The model works well for reference type books and can even work well for novels. If your paper novel is listing for $12, list your eBook version at $8, but offer the bundle for $15. You have, in affect, raised the price of your print book, at no additional cost to yourself.

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July 4, 2008 by roland.

I’ve been exposed to a new marketing pitch for ERP packages lately. Now many claim you can change your business “simply by turning a knob” in their software settings. I’ve watched management saddled with an older system get a gleam in their eye thinking about all of the programmers they wouldn’t need anymore. In short, I’ve watched a pink elephant dance on the conference room table and been the only one in the room who pointed out the elephant was pink.

This marketing scheme (which seems to be used by most of the big packages today) fits in well with the kaka Gartner has been spewing recently. In case you haven’t seen the spew, the gist of it is “For companies to get ahead they must marginalize IT”. How can you possibly marginalize IT? Quite simply, you need a package which lets you change your business direction simply by turning a knob. It all fits so well together, it couldn’t possibly be a coordinated marketing effort could it?

Let’s first take a look at the knob myth. Let us assume for the sake of this discussion that each knob has to be turned in units of a full degree, not partial degrees like an old fashioned radio tuner. That means each knob has 360 possible positions. Software vendors have learned that most of upper management is the same group of people who walk into an electronics shop to buy a stereo with “big knobs and lots of lights”, so they have lots of colors on the screens and an array of big knobs to turn.

Just how well do you think this has been tested? Assuming the math is combinatorial instead of a permutation, each knob doesn’t add another 360 possibilities, it adds a set of 360 instances of all preceding possibilities. That means 360 * 360 * 360 … until you have factored in all of the knobs. There is no way in Hell they ever run a full regression test for that. It doesn’t take too many knobs before you it takes you 4 complete months of 24×7 operation with absolutely no problems just to run the regression test. So, what you are really buying is a package where a few of the combinations have been tested and the rest are a poke of hope.

What happens when the new business model you want to implement isn’t in the set of combinations which have been tested? That’s right, you wait months for the vendor to get around to solving your problem, OR, you have to bring in people who have expertise in this shiny new package. That’ll be cheap. Yes, you and every other company using an untested combination of those knob turns will be trying to bring in people with 3-5 years of experience on a package which has been shipping for a year. I’m sure you’ll get a deal.

How did we get here? Management never listened to their developers who said that legacy ERP package they had running the cash cow needed to be ported to a relational database to extend its life and make it easier to modify. They wanted a “quick win”. They wanted to turn a knob. They bought the shiny new thing, then found out they had nobody to do the data conversion because they had already marginalized their IT. Even if they did the conversion they couldn’t generate the exact same output because it just didn’t fit into the new system. So, for at least 7 years, they had to have two sets of staff. One set to keep the old system running so past invoices could be looked up, and one set to support the new system.

Bet you can guess what will happen to them next. Go on, take a guess.

Management gets an opportunity to do some profitable business which is just a tiny bit different from the old business that couldn’t be converted into the shiny new thing. They try turning a bunch of knobs, but it just doesn’t work. They try hiring consultants and paying the vendor for modifications, but it just doesn’t fit, or it will take a year to fit and they need to pull the trigger in months. Yes, they end up tweaking the old system and running this new profitable venture through it “just until the shiny new thing can handle it”.

We have all been here before. The spec the vendor started with was the spec you had when you started. In the year it took them to deliver, enhancements went in every week. Their deliverable isn’t even close. Management can’t turn a knob and make it fit. Vendor goes back into development mode and the handful of developers shepherding the old system into the grave get another round of enhancements from the business unit it is supporting. Management cannot unplug the shiny new thing because it did work for some lines of business they are currently in. They now have two ERP systems which can’t really talk to each other and can’t be unplugged. The really good people for the Heritage system have either retired or simply left because they were told there careers were coming to an end. Good margin.

Laugh all you want. I’ve been to companies with no less than 3 ERP systems running different business units, each was the best thing Gartner was selling in its day. Each have now been called Heritage to justify bringing in another system, and yes, they are looking at a fourth system.

What is that psychology term for a person continually repeating the same action which has the same outcome every time, but who expects it will be different “this time”?

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July 1, 2008 by roland.

Lately I’ve been seeing quite a few stories about reducing violence in the work place. Companies are rushing to pass out violence prevention pamphlets and provide checklists with 800 numbers so coworkers can report those meeting 3 or more requirements from the checklist. They call it prevention. They call it Intervention. They say they only want to get the person the help they need. Oddly enough they get away with this, not because it has any relevance to truth what-so-ever, but because those who do finally snap tend to take out more than management when they go. If those that snapped didn’t have that flaw, this ploy wouldn’t work.

When you finally trace all the way down to the bottom for many of these incidents you will find roughly 8 out of 10 are the direct result of piss poor management. In order to address the root of the problem, management would have to hold itself accountable, and that never happens.

You have to spin the dial on the Way-Back machine to the early 80s to understand this one. I was transitioning from High School to Junior College back then. The first wave of job off-shoring was in full swing. Factories were closing all over and Bruce Springsteen albums of beaten down desolation (Born in the U.S.A.) were selling like ice water in Hell. Anyone remember the catch phrase upper management types and marketing plants used to say when they knew they would be quoted in the media?

“You should be thankful you have a job!”

They got a lot of mileage out of that phrase, but it isn’t working so well for them now. What is different? Back in this time, management types were viewed as a class apart. Those who had lifestyle and privilege those of us from the blue collar background were never to obtain. They would always be the “haves” and we would always be the “have nots”. This is no longer the case.

To understand what happened to the mysticism surrounding the management class, you have to look at the rise of the Individual Retirement Account and the fall of the traditional pension system. When just about everyone learned that Social Security was in trouble for the first time, and inflation gripped the land, and banks had to turn down qualified mortgage applicants because the banks themselves didn’t have money to loan, Congress came up with the idea of the IRA. Force people to save money in banking institutions rather than their sock drawer by letting them take a small amount of that money off of their taxes. It in no way solved the Social Security crisis, but it made people feel better, and banks were suddenly able to issue mortgages again.

Given the success of the IRA at helping heal the economy, investment firms started lobbying congress with newer and better retirement account options. These options would all involve mutual funds that would invest a large portion of the money in the stock market which (in theory) brought much higher over all returns. Since Congress wanted to grow the economy, and the average blue collar worker only bought stock through their company’s stock purchase plan, if they bought it at all, Congress yielded. After all, the only way to really fix Social Security was to create a much higher percentage of retirees that would be ineligible to receive Social Security, they could get around to declaring who would not receive it later.

Stock markets boomed for a while. Once the limits were raised high enough to make not having a retirement account simply stupid to even someone with a fourth grade education, cash poured in. There was one unexpected consequence though. For the first time, blue collar workers started listening to the business news for more than word about plant closings and openings. They started paying attention to what management was doing and making. The management class was demystified.

Not all that much later, we had the advent of individual investors and low priced brokerage services. The stock market boom made it easy for anyone to toss a dart at a stock list and make money. People started putting more and more of their money into stocks. More than they should have because it was always returning more than they lost. Then we faced the DOT BOMB flame out, MCI, Enron, and a rash of other nasty stories caused a huge drain from the blue collar pool of wealth. The demystified management was now not a class above, but a class below. Common, ordinary criminals, all intent upon running some kind of scam. Didn’t matter who they were, they were all painted with the same brush. The cucumber theory was put to good use by many. “If you stay in the brine long enough, you become a pickle.”

How did this lead to the rash of workers snapping and offing those around them? Back in the 80s there were a lot of management books out there expounding the virtues of “winning through intimidation”. Usually they invoked a name like Atilla the Hun or some other unsavory character from history who rose to greatness via the rape-pillage-plunder method of management. Those practices were put into wide use, quite simply because they worked as long as management had this “mystic shroud” around it. Now, management doesn’t have that shroud, but it is still using the old tools. Pushing someone who isn’t mentally stable at the time (for whatever reason) is playing a game of roulette with your life when you don’t have the protection of the “mystic shroud”.

What prompted me to write this wasn’t some pent up anger, but the most recent of these stories to hit the news. I’ve had the theory for a long time, but the most recent story fit it absolutely perfectly. This event seemed to stem from some employee not wishing to wear safety glasses. Rather than simply write him up N times and fire him, management chose the intimidation route. According to news reports the employee and immediate supervisor had multiple heated discussions about it. The final discussion was more of a screaming match in the parking lot. (Warning! Danger Will Robinson!) After some heated phone call to his girl friend he stormed back into the plant/factory/whatever with a gun and shot his supervisor along with several coworkers, then himself.

There is no way you cannot chalk this event up to piss poor management, yet management around the world seems more focused on identifying who they might have pushed too far than fixing the problem. The management culture at the company in question obviously allowed for, if not made direct use of, management through intimidation. They did not realize management no longer possesses the “mystic shroud” which strikes fear into the hearts of mere mortals. They chose to push an individual who, for whatever reason, was not completely stable at the time, and in a down economy, probably didn’t have the option of getting a higher paying job at a different company in the area.

To anyone who looks at the big picture, this was a predetermined outcome. A class, now perceived to be from inferior and corrupt stock, chose to harshly exert itself over an entity which viewed them as inferior. Once the entity bearing the intimidation started to view the intimidating entity as a criminal outside of prison, it was a short put to the violent response.

Gone is the day where people view a company as this shining empire to which they make a life long commitment. Many now believe they will hold no less than 15 jobs at 15 different companies before they retire. Individual Retirement Accounts have made that a much more plausible reality. Once the workforce gets some form of portable health care, it will be closer to 20 jobs before they retire. Many will never actually retire, they will simply go independent and work at what interests them this month.

You cannot manage this type of workforce by intimidation. It won’t even work now when thousands are being laid off each week by major employers. Instead of this “mystic shroud” of kingly or god-like infallibility, successful management is going to have to wear the clothes of a beggar.

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