The Entrepreneur’s Case for Donald Trump

This is the title of a nice article by Anthony Scaramucci that appeared in the Wall Street Journal on May 16th.

We don’t even have any substantive criticism of the article, for a change, other than to add that he is a turnaround artist, having bought many of his properties below market value and turned them around, profiting handsomely. It’s what we all aspire to do; we’ve done it with several companies.

The government clearly needs to think more entrepreneurially. Many of the agencies have lost sight of their original mission, which might be shrouded in the mists of time.

The EPA, for example, has probably outlived a lot of its original mission. Sure, we need clean air, clean water and better fuel economy, but do we need mandates?

Commerce is just as vital as it was, but needs to be more pro-business. Lower taxes, although we don’t have the financial resources anymore to lower them much without major cuts in spending, which can be done.

Health and Human Services? Again, much of what they do is either going away (Obamacare) or will be substantial modified. The mission really needs to be rethought.

The Department of Defense is certainly vital, but needs to be rethought. Readiness to fight needs to be a lot better. Let’s put performance metrics on the Air Force, Navy and Army; years ago, we did it through a Total Quality Leadership program, and it worked very well. Prune out a lot of middle managers, both civilian and military, to match the force reductions.

So, have at it Donald. Another point of differentiation from Hildary Hoo Hah. You weren’t going to get many votes in and around Washington DC anyway.’

 

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Apple’s Long Slow Slide

This was a headline referring to Apple’s stock price, but that’s not the point of this post.

It seems to us that Apple has gotten where it is by missing one of the tenets of business: if you’re an innovative company, you better keep innovating.

Clayton Christensen of Harvard first outlined this problem in the 1990s in two books about innovation that said basically once you start innovating, you can’t stop, or your company stagnates. Facebook appears to get this, but it’s where Apple was 20 years ago. Google has continued to innovate.

And, as a result of past successes, Apple is sitting on enough cash to go buy a small country. Seriously, why not go buy Vodaphone in Europe? And buy another telecom in China?

Seriously, the one product that really should have been introduced earlier is the low priced (comparatively) IPhone SE. But, we’ll bet there was a big fight inside Apple about diluting the brand. However, consumers here and abroad have been clamoring for a cheaper IPhone for the last five years.

The ICar looks most interesting, but we’ll bet that it comes out at too high a price, say $50k when it should be $35k.

As I’ve said before, but it bears repeating, Tim Cook doesn’t strike me as the most innovative guy. I’d like to see him move up to Chairman of the Board and put Jonny Ive into his job.

So, Apple, we hope you take these lessons to heed. See you at the stockholder’s meeting.

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Ronald Reagan Trump

This is supposed to be a business blog, and I’ve been meaning to write one on Trump, since I knew him a little bit at Wharton.

The foreign policy speech sounded like it was right out of Reagan’s playbook, other than Trump promised to make our foreign negotiations a win-win for us, Russia and the Chinese, which is what Reagan actually did. But there was the ‘we’ll bury you’ threat behind it, which no one should discount.

Presumably, one would add Mexico into the even handed mix. BTW, I saw an interview with a border patrol agent, from the Yuma section, and, with a wall, illegal crossings were down 89%. Trump just wants people to come legally, which he said last night.

In a business vein, what this all says is fair trade, unless it’s perceived that you’re taking advantage of us.

Trump is behaving more like the ACTUAL nominee than thee putative one. I suspect the foreign policy speech just put Barry, Ted, John and Hilary on the trailer.

But, the key thing is that the whole Trump era is going to be a paradigm shift. Go look it up in your Funk and Wagnalls, but I suspect the readers of this blog get it.

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The Pay Equity Police (Might) Get Some New Ammunition

The Equal Employment Opportunity Commission is at it again.

There are new proposed rules to equalize pay at companies employing over 100 workers. Those below the magic 100 presumably will stay the same as they are now, which is some, but not much reporting on the gender and ethnic mix of employees. There’s a form EEO-1, which has to be filed annually. Still a pain.

If the new regulation sees the light of day, which it could under the Obamaites, just by diktat from the Department of Labor, not any legislative consideration, you’ll have to report on employees by 14 gender, race or ethnic groups, within 12 pay bands. Helluva matrix. Major pain.

Companies below 50 employees are exempt from all of this nonsense.

There was a hearing on this on March 16th, where the libs predictably thought the new rule was a good idea, rooting out pay discrimination. No record that any biz groups were invited; they weren’t reported upon. We didn’t see any reports from NFIB, which is usually on this sort of stuff.

Maybe the Office of Management and Budget won’t get the headcount required to do and administer the reporting.

Now, we don’t know of any pay discrimination between races, genders or whatever; employees are too hard to find, so they get paid well regardless. And this is Arizona, not exactly a bastion of liberal pay policies. Our minimum wage is still $7.05.

Just another impediment to growth, guys and gals. 9 months to go…..

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Watch Your 1099 Classifications

Recently, we attended a talk about independent contractor status, which is a controversial item these days because of Obamacare and the reqirement, if you’re over 25 employees, to have some sort of insurance in place.

We also had a chat with one of our former Solutions Forum members and outlined some of the things mentioned at the talk, and opened his eyes a little bit. He’s probably in compliance, but his #2 is probably going to do an internal audit.

We won’t go into all the requirements here, but suffice it to say that if you get audited by the IRS or the Department of Labor, your state revenuers might just pay you a visit to find out how many hours your independent contractors are working, and whether it’s over 29 per week, which would make them subject to employee status, which would make them subject to mandatory health insurance.

And now, they’re coming to take me away, haha…….and this is no April Fool’s joke, either.

To review, a person can be classified an employee if you  supply all or  of most of their income, give them a place and time to work for between 29 and 40 hours a week.

We don’t know (and are afraid to ask) if you can keep someone on independent contractor status 1099 while they’re in training. It’s easier to have a training status, but frankly, we don’t know if it’s legal. We do know that some large companies pay benefits from day one, but we don’t think this practice is widespread.

Below 29 hours, it seems to us that you can classify them as contractors. but you’re over 50% of their time.

Go consult a labor attorney before the IRS and the Department of Labor come snooping around.

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Why Companies Are Being Disrupted

I just found this article in the Wall Street Journal of January 26, and should have commented earlier.

Most of the article is forgettable, aside from the reference to Clay Christensen’s work on innovation and disruption, but there’s one phrase that is so true: “The reason that companies fail when they try to move the stack is simple: they don’t have firsthand empathy for what customers of the product one level above theirs in the stack actually want.”

Now, that’s a little jargon-y, but you must understand what your customers want. How do you get it? Here are some simple ideas:

  1. Ask your outside or inside sales people what they’re hearing about how the customers use the product or service; if they don’t know, then you’ve got another problem.
  2. Convene a focus group of your customers.
  3. Start a blog among your customers to find out what they’re thinking.
  4. Do some blind product evaluations by outside firms (secret shopping).
  5. Put a survey up on one of the public sites if the product is widespread.
  6. Find out if your promotional methods are reaching the customers. Is it a fit with how they’re using the product or service?

So, you CEOs, RELATE!

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Trumpism Does Add Up

If Princeton professor Alan Blinder were my student and had written a paper such as what appeared in the Wall Street Journal on 3/25, it would be marked either ‘incomplete’ or a ‘D’.

He’s a pretty well known guy and should know better.

Prof. Blinder has forgotten a few econ stats of Trumpism (he’s probably right on the reduction of revenue):

  1. Trump plans on cutting expenses in the government drastically. Goodbye most of EPA, Dept. of Commerce and Dept. of Education. The Defense Department is going to run better on 10% less money. There will be efficiencies at HHS. by replacing Obamacare with something that costs less and is optional based on customer circumstances. The TSA is privatized. Another saving. Medicare can run better on less money. Do these add up to 20% of expenses? Maybe. Blinder can do the math on his rework.
  2. He misses economic growth which is going to accelerate with lower taxes. Worked for Reagan, will work again. This will have a positive revenue effect, which Blinder doesn’t mention.
  3. If and when Trump renegotiates the treaties with China and Mexico to make them more balanced, our implicit subsidies of these two will also go away. This saves money. Our tariff is about 3%, and China and Mexico should get to the same rate.
  4. If tariffs are kept down, then Ford, Nabisco, et. al. can freely relocate their plants. Notice that they’re all coming out of unionized, high-wage states such as Michigan and Illinois. Trade expands. I would agree that Trump does need a little reeducation on this point, but I think he’d shift away from protectionism once elected.
  5. Now, the effect of all this on the dollar would be interesting. It’s high now, but might go higher, which might hurt exports. Wake up the Ex/Im Bank.

So, I think we’re making maybe a $100 MM investment in Trumpism before it begins to work as outlined above, but we should be at a surplus before the end of his first term. Prof, how about a redo? Maybe Paul Gigot of the Journal will edit the redo better.

Subsequent comment: Trump wants to cut individual and corporate rates to 15%, which is great, but somewhere the revenue impact of this needs to be outlined, along with spending cuts to the budget, so it doesn’t get out of whack.

 

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What’s the most important leadership skill

In the march issue of Entrepreneur, employees were asked what they thought were the most important leadership traits. This will be a two part post.
Here are five traits:
1. Be prepared to do anything you are asking your employees to do;
2.Trust and empowerment; they have to trust you, and you in turn have to empower your employees; interestingly, Zappos has gotten in trouble with its employees because it seems that they weren’t given enough guidance, and maybe they weren’t used to being empowered, because when they were hired, no one said they would operate largely on their own. (We are going to do a post on this);
3. Authentic, vulnerable, bold, resilient, self aware and adaptable ; the authentic tag is interesting, because it means you can just be yourself. Your folks will follow you or not because they believe in you and/or the company.
4. Have a compelling purpose AND be accountable for the results of the individuals and the team you lead; also, the individuals should be responsible for their own results, too; you’re the motivator and the measurer;
5. Be honest and authentic; walk the talk. Admit when you are wrong wrong; praise at every opportunity; share your passion

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Wall Street Journal Agonistes

It’s fun to watch the venerable WSJ gnash its journalistic teeth to come to support Trump.
Dan Henninger in particular, in his latest column. Dan, you had ‘The Speech” when Trump rode down the escalator and declared I want to make America great again. As of that moment, the rest of the Repubs were on the trailer.

And they’re still on the trailer.

Bret Stephens still is agonizing over supporting Trump, even getting the Mussolini reference import WRONG.

Eventually, the establishment of the R’s might figure out that it’s about leadership, stupids.

Trump’s not the perfect candidate, but then the revered Reagan wasn’t either when he ran and won.

C’mon, WSJ, put on your seatbelt.

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Tim, Fire Your Flacks

Argh. The flacks advising Tim Cook should be fired.

Was reading an article about what a great leader Tim Cook is (we still have our doubts), but his stance on not allowing the Feds (or Apple) to open IPhone of the terrorists is a public relations disaster.

I come at this as a retired Navy cryptanalyst, one who directed teams to catch people who wish to do us harm.

It’s quite possible that the IPhone has something on it that would be useful to the Feebs in finding out more about our homegrown terrorists.

The smart play for Cook and Apple would be to invite the Feds back in, have the warrant cover only that one phone, or announce that it does, and disclose to the FBI exactly what is or isn’t on the phone, maybe with a datamap. Apple controls the process. The rest of the world doesn’t need to know, and the Feebs should sign affadavits that they won’t disclose anything. There’s always the chance something will get leaked, but that’s a risk worth running.

There’s actually a precedent for this sort of behavior: when NSA wants to look at some domestic target, it has to go to the Foreign Intelligence Surveillance Board and get a warrant for the surveillance from a judge, based on probable national security harm that would occur if the warrant weren’t granted..

Judges are normally cooperative, even in the Ninth Circuit, where Apple lives.

And, if Apple ‘ol Tim could just say that ‘we’ve taken another look at this thing, and decided to cooperate with the Feds, under certain conditions.” Disaster not averted, but maybe mitigated a bit.

As a CEO, getting your feet set in cement is not a good idea.

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