Senator Pat Toomey on Syrian Involvement

Recently, I sent a letter to Senator Pat Toomey expressing my concerns about the U.S. becoming involved in Syria.  In essence, I stated that a) I don't believe the U.S. has much of a strategic interest there, and b) that we are broke and can not afford another adventure.  Here is his reply:

May 10, 2013

Dear Mr. Morphis,

Thank you for contacting me about U.S. assistance to the opposition against the regime of Syrian President Bashar al-Assad. I appreciate hearing from you.

With regard to foreign assistance, one of my concerns is the national security implications of our policies, as well as ensuring that such expenditures meet a rigorous test for fiscal responsibility. Especially during these challenging fiscal times, we should not be wasting taxpayer money and providing foreign assistance dollars to corrupt entities that abuse such aid. However, carefully focused funding supports the security interests of the United States.

As you know, the Syrian government, led by President Bashar al-Assad, has committed large scale human rights violations against the Syrian people since he assumed power in 2000. His oppression increased dramatically in 2011 as his forces conducted a brutal crackdown against widespread dissent. Tens of thousands of Syrian citizens have died since the uprising began. Additionally, a number are reported to have been casualties of chemical weapons. The Obama administration and many members of Congress have denounced these acts. Additionally, President Obama has called for President al-Assad to step down. Since the civil war began, the U.S. has provided hundreds of millions of dollars in nonlethal assistance and humanitarian aid.

I understand your concerns regarding U.S. financial assistance to the Syrian opposition and value your input. I remain concerned about providing lethal aid to the Free Syrian Army because of the danger it could fall into the hands of radical Islamic organizations. Please be assured that I will keep your concerns in mind as I continue to evaluate the relationship between the U.S. and the Syrian opposition.

Thank you again for your correspondence. Please do not hesitate to contact me in the future if I can be of assistance.

Sincerely,

Pat Toomey
U.S. Senator, Pennsylvania

While Senator Toomey and I don't see eye-to-eye on this issue, I appreciate the prompt reply, and I've become increasingly impressed by the PA Senator.

Gerry Birnbach Tribute

I recently attended the funeral for Gerald Birnbach.  Up from humble beginnings as the son of a Boston funeral director, and suffering from a variety of serious childhood ailments, Gerry became the CEO of Rowe Furniture, and, as far as anyone could determine, was the longest-serving NYSE CEO.  Employees at all levels called him “Mr. B.” and he treated them all with respect and a smile.

Gerry was the consummate salesman.  He had many standard lines and clever sayings that all his friends and acquaintances knew.  One that I recall well, was “I know my customer”.  And he did.  He knew all about them, and how to help them and how to help make their businesses grow.

He was also a family man, leaving four children and a growing band of grandchildren behind.  He hosted the entire bunch to Maryland University basketball games (in first row seats by the way).  He loved his grandchildren and, as far as I can tell, they returned his love and then some.

Gerry was my boss and a man far ahead of the times in his chosen industry, home furnishings.  Gerry had great personal taste (more on that in a minute) and was early in recognizing home furnishings as fashion, and in seeing what a poor job most furniture retailers did in presenting products in that manner.  He led by example, making the Rowe Furniture showroom at the semi-annual High Point Furniture Show a consistent leader in look and style, with each vignette ready for Architectural Digest.  Every detail was thought through, from pictures on the walls, to books on the shelves, to the candy in the candy dishes. He described the furniture industry as “ingrown, slow-moving and mired in tradition”.  He was right and did his best to foment change.

While I only reported to Gerry for about three years, he made an indelible impression.  On an investor swing to New York, we detoured through Ascot Chang, where he bought a variety of custom-made shirts in the best colors and finest fabrics.  He was a regular there, and the staff and managers all knew him by name.  The shirts, along with the suits he had made as well, were shipped to the office, not his house, so that he could take them to the laundry and then take them home in laundry bags in a (doomed) attempt to convince wife Miriam that he hadn’t been out buying something new when he already had more clothes than he could wear.  In his seventies, he was the best-dressed man I knew.  And I know some guys who dress well.

His funeral service drew hundreds, all the tales and reminisces.   There were far more smiles than tears, which I took as a great tribute.  RIP Mr. B.

HBR Online Article

Senior marketing guru Kimberly Whitler asked me to co-write an article on how CFOs and CMOs can work together more effectively, based on our experience at in those positions at David's Bridal.  After many, many drafts, it is now published on the Harvard Business Review blog.  You can follow Kim on Twitter: @kimwhitler.
Please check it out and give us your thoughts. 

High-level Comparison of Amazon vs. Wal-Mart

This is a high-level and admittedly simplistic comparison of 2012 financial performance of $AMZN versus $WMT.  Full disclosure: I own $WMT and have for a long time.  I don’t own $AMZN.

The numbers are from each company’s earnings release (linked below).   All ratios are calculated from GAAP amounts.

Sales: WMT $469.2 bil; +5.0%; an increase of $22.2 bil; AMZN $61.1 bil; +27.1%; an increase of $13.0 bil.  EBIT and EBIT margin: WMT $27.8 bil; 5.92%;  AMZN $0.7 bil; 1.1%. Net income: WMT $17.0 bil +11.1%; AMZN $(0.39) bil. Negative -NM;  ROE: WMT 21.6%; AMZN (0.5)%. (ROE was calculated using two-point average equity: beginning and end of year.)

EPS and growth: WMT $5.02 +11.1%; AMZN $(0.09) Negative - NM.

PE using trailing EPS and Feb. 23 closing prices: WMT 14.0; AMZN NA.   Market cap to Sales: WMT .50X, AMZN 1.97X.

I’m a regular shopper of both firms, frequenting Sam’s Club and Wal-Mart, and ordering regularly from Amazon.  I love Amazon’s smooth and helpful website.  And I’m increasingly unhappy with the length of checkout lines in both Sam’s and WalMart  (anybody from Bentonville reading this?) but that doesn’t mean I understand the investor infatuation with Amazon.  The theory apparently is that, at some date in the future, Amazon will expand its margin.  And then there will be earnings for investors.  But then does their business still work?  Shipping individual boxes to homes can never be as efficient as shipping truckloads to stores and having consumers drive to the store.  So margin expansion comes from pricing, not from be more efficient than WMT. And if they raise prices, then doesn’t their advantage go away?

 At the dawn of the Internet age, in a meeting in 1999, Boston Consulting Group consultants and Internet business CEOs told me that AMZN was clearly worth more than WMT.  Further, WMT’s growth was over.  Since then WMT has added $331 billion in revenue.  Oh, and WMT pays a dividend.

I didn’t get the valuation difference then, and I don’t get it now.  Although I would really like it if Wal-Mart traded at the Amazon price-to-sales ratio….

http://stock.walmart.com/

http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=1779040&highlight=

Review: Enchantment by Guy Kawasaki

Entrepreneur and venture capitalist Guy Kawasaki has become a prolific author.  I’ve reviewed some of his previous books including The Art of the Start and Reality Check.  A common theme of those books, continued and further developed in Enchantment, The Art of Changing Hearts, Minds and Actions, is action-oriented ideas for both startups and existing businesses. 

 

The core concept of this book is that in our hyper-competitive world, one must go far beyond meeting a customer’s basic requirements, particularly if one is attempting to convert a prospect to your offering from a competitor.  One must enchant those customers to get a trial.  One of the techniques Mr. Kawasaki uses with great effectiveness is liberal use of real-world examples.  Almost all of the detailed concepts for winning customers (and obtaining real commitment from employees, and for making one’s boss a fan, e.g. enchanting your employees and your boss) come with a story taken from an existing business that has done exactly that.

As a side note, Mr. Kawasaki is assiduous in the surroundings of the core content.  The Table of Contents is much more than that; more like an outline and checklist of the contents of each chapter.  The bibliography is complete and detailed.  The index is extensive.  Even the Acknowledgements are entertaining.

While he is diligent in those details, he writes in a friendly, conversational style.  While some business-oriented books are dull, he writes with verve and tongue-in-cheek humor, delivering a book that is approachable and practical.

While an underlying positioning of his books is to aid entrepreneurs in founding and then growing businesses, a theme he brings out and stresses, is likeability.  In Reality Check, he wrote about how to be a mensch.  The second chapter of Enchantment deals with likeability, including topics on smiling and laughing, find shared passions with others, and finding a path to saying yes to help and assist others.

I’ve been happy to recommend his prior books and I’m happy to recommend this one. As a reviewer, I would say that, for someone preparing to pitch a venture capitalist, The Art of the Start and Reality Check might be more on target.  For someone in an existing enterprise looking for practical advice on growth and development, you’ll find this useful, fun, and more than a little inspiring.

 I thoroughly enjoyed it and found it highly entertaining.

Book Review- The Power of Habit

As researchers and scientists learn more about the functioning of our brains, an increasing number of articles and publications are developed to help us understand how are brain works, and particularly how to be aware of the shortcuts the brain tends to take that aren’t always appropriate and how certain brain functions happen incredibly quickly without conscious thought.  I’m going to recap some of those to set up Charles Duhigg’s The Power of Habit.

The autonomous brain functions were explored brilliantly by Daniel Goleman in Emotional Intelligence.  As an example, if we accidentally touch something hot, we’ll jerk our hand back almost instantly, as the super-fast reptilian brain reacts.  James Surowiecki, in The Wisdom of Crowds, explored subconscious biases, and logic shortcuts that we frequently take, that lead to poor choices and bad decisions – but how, in many circumstances, groups and markets are more likely to make the correct choice, or come up with closer estimates.

Thinking Fast and Slow, by Daniel Kahneman, which I previously reviewed here, is a must read.   Professor Kahneman is a scientist, and takes a researcher’s approach.  The professor gives us a very thorough and thoughtful presentation of the many shortcuts and logic flaws that the human brain is capable of, and gives us advice on how to recognize situations where our more logical, analytical reasoning must be brought to bear (e.g. investing decisions) rather than let our more spontaneous brain capability generate answers and make decisions.  As we age, we are even more susceptible to clever offers and sales pitches, and aren’t as aware of situations as we should be – making the effort to reason even more critical.  I strongly recommend this book, particularly to those of us over 50.  It turns out that there aren’t that many Warren Buffets….  Having said that, some parts of this book are challenging.  Kahneman uses several mathematic and statistical examples.  I like to think of myself as reasonably math-literate, but there were occasions that I not only didn’t get the same answers to math problems that the book presented, I couldn’t figure out how to get those answers.

That brings us to The Power of Habit, subtitled Why We What We Do in Life and Business.   Mr. Duhigg covers some of the same material that the previously mentioned authors have, but with concentration on how habits form, how the brain uses habits to permit multi-functioning (e.g. - how easy is it for you to sing along with your car radio/cd/IPOD while driving your daily commute?) and what is required to change a habit once formed.  However, in  contrast to Professor Kahneman, Mr. Duhigg is a story-teller.  And a good one.   The book then is less rigorous but more approachable.   His begins with a touching story of a man whose brain was damaged by an infection, but whose habits were so ingrained that he could function at a reasonably high level.  He explores how AA successfully rehabilitates so many alcoholics by habit change and how disciplined training habits helps produce Olympic athletes like Michael Phelps.  He has numerous business examples of how habits of workers can be changed for the better (including Alcoa and Starbucks) and also how businesses can exploit our habits (Fabreze; Target). 

There are inspirational stories about Rosa Parks and the civil rights movement and Rick Warren and the creation of the Saddleback Church.  There is also a cringe-worthy tale of a gambling addict unable to shake her gambling addiction and the destruction of her life as a result.

The book concludes with a very practical explanation of how habits can be changed.  Note: the author is upfront that changing habits is hard work – no miracle cure.

Highly recommended.

EBAY's Store of the Future

English: A photograph of eBay's Whitman Campus (corporate headquarters), taken from Greylands Dr. on Memorial Day 2009. For more photos of eBay and Google, visit http://www.foothillwebdesign.com (Photo credit: Wikipedia)

I had the opportunity to tour EBAY's store of the future  courtesy of my friend Veronica Katz.  (OK, I don't know that they call it that, but that's what it is anyway).  It has a variety of sample formats, from a toy store to a food truck, and demonstrate how integrated messaging, customer access via mobile devices, real-time inventory measures can improve retail productivity.

While I have some reservations about how some of this works under the restrictions imposed by the Payment Card Industry (PCI) standards for isolating credit card info, they assured me that they understand that complexity and it is comprehended in their systems.

It is very impressive and very cool technology.  I would think that retailers would be quite interested - and perhaps a little intimidated - at how fast this stuff is moving.