Business Insight Zone

One advantage of working at Hoover’s: I get thought-provoking e-mails like the one that follows from my co-workers. Chris Barton, besides being the person who ushered me in the door at Hoover’s nine years ago, is a keen student of industry trends (and a published author in his own right). Here’s what he sent me — all I’ve done is added links.

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http://17dots.com/

The skinny: eMusic, focused for its entire existence on the long tail of selling music from independent labels, just got the rights (starting on 7/1) to sell music from Sony (recordings at least two years old).

Bruce.

Bob.

Willie.

Miles.

Jacko.

Etc.

What’s this going to do to the company’s identity, and to the way they relate to their customers and the vendors whose product they’ve traditionally sold?

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I don’t have the answers to this, but given what I’ve seen at the 17 dots blog, I’ll bet that eMusic lands on something nifty that makes plenty of coin both for themselves and for Sony.

What do you think?

Well, it’s happened at last: sales of Nintendo’s Wii are finally slowing down:

• Bloomberg: Nintendo Forecasts Miss Estimates as Wii Sales Slow

Mind you, the company is still projecting an operating profit of $5 billion for the fiscal year that ends 10 months from now. Not bad for missing estimates in a dismal market.

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Related posts:

• The Nintendo Wii: Hitting its way into the Hall of Fame.
• The Wii little dragon-slayer of the video game industry.

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The other day I was making the case to a friend that Cary Grant was both the best and the most significant movie star in the history of Hollywood. I fully believe this, but after the fact I realized my wording came from a Benjamin Schwarz review in The Atlantic, in which Schwarz quotes David Thomson, who called Grant “the best and most important actor in the history of the cinema.”

After I sent that Atlantic link to my friend, I stumbled across this monumental Pauline Kael summa on Grant’s life and career. I managed to pull myself out of it after a few thousand words; as much as I love Grant (and love Kael’s writing), there are simply too many other things that need doing in a day. But before I abandoned the piece, I came across this gem, which meshes with everything I’ve read about deliberate practice:

ARCHIE LEACH found his vocation early and stuck to it. He studied dancing, tumbling, stilt-walking, and pantomime, and performed constantly in provincial towns and cities and in the London vaudeville houses. . . . The music-hall theatre became his world; he has said that at each theatre, when he wasn’t onstage, he was watching and studying the other acts from the wings.

How are you promoting the habits of deliberate practice in yourself? In your organization?

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Related posts:

• Deliberate practice in the working world.
• The work ethic of Will Smith: “deliberate practice” in action.
• This is how you get better: deliberate practice.
  

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Image source.

Business-oriented stories worth reading on a chilly weekend at home:

1. “Be Nice to the Countries That Lend You Money”

Anyone who’s read this blog for long (for example this post) will know that I’m an unabashed fan of James Fallows, who, besides being one of the best magazine writers alive, is, from my brief personal experience with him, a genuine mensch.

In this Atlantic interview, Fallows conveys the views of Gao Xiqing, a high official in Beijing who manages $200 billion of China’s highest-profile foreign investments. Even setting aside Gao’s official importance, it’s worth listening to him for his pure smarts, and because he studied and worked as a lawyer in the United States. His background gives him a highly informed view of both the Chinese and American sides of the world’s most important bilateral economic relationship.

2. There’s Plenty Of Oxygen In The Air

New York-based venture capitalist Fred Wilson explains how venture-backed companies like Tumblr can thrive even in a dismal economic climate: “For those web services with real usage and a manageable burn rate, I think there will be plenty of oxygen in the air.”

3. Why So Serious?

In this post, the anonymous Epicurean Dealmaker dissects the fundamental problems of thinking that underlie the current financial crisis:

It is my belief that many quants, hedge fund managers, and investment bankers came to believe — consciously or not — that, by explicitly embracing and accounting for chance, they had tamed it. They spent countless millions of man hours designing and implementing elaborate mathematical models and risk control systems based on aleatory principles that could predict, with remarkable accuracy, the variation in return and behavior of securities and derivatives under normal circumstances. They spoke confidently about “value at risk” and “maximum expected daily trading loss” as if they knew what they were talking about. As if those terms actually meant anything. And then they trotted off to their bank, or their prime broker, or the Discount Window to borrow a couple more turns of leverage against their proprietary positions.

But you cannot tame chance. That is what makes it chance. At base, implicitly attributing the kind of predictability these individuals seemed to ascribe to chance was a fundamental error, a category-mistake.

4. How The Tonight Show Will Fuel New Media

Ask A Ninja impresario Kent Nichols speculates in interesting ways about the possible ripple effects of Jay Leno’s new variety show.

5. 10 Ways to Learn Faster - Speed Learning

Jim Estill, who heads the Canadian operations of SYNNEX, writes an interesting blog from a CEO’s perspective. In this post, he suggests 10 straightforward ways you can boost your rate of learning. (My personal area of focus: speed-reading, because I have a bad habit of reading too many things at the same speed I would if I were editing them.)

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Photo by Elvire.R.

Writing in the previous post about the boost Sony got from Hancock, I was reminded of the insane box-office run that Will Smith has been on. We talked about Smith at some length nearly a year ago, when he was promoting I Am Legend:

The work ethic of Will Smith: “deliberate practice” in action.

Since then, that film and Hancock have brought in more than $1.2 billion between them.

Just for fun, I thought I’d take a tour through his filmography and see how his recent work has fared on IMDB’s All-Time Worldwide Box office list. Here are his last eight films, in reverse chronological order, along with their rankings on that list and their total gross receipts:

38. Hancock (2008) — $623,546,274
45. I Am Legend (2007) — $583,986,216
189. The Pursuit of Happyness (2006) — $297,986,036
118. Hitch (2005) — $367,600,000
180. Shark Tale (2004) — $306,162,022
147. I, Robot (2004) — $342,795,350
230. Bad Boys II (2003) — $261,900,000
86. Men in Black II (2002) — $425,600,000

Total receipts for the eight films as a whole: $3.2 billion.

Of the films Smith has made this decade, only Ali (2001) and The Legend of Bagger Vance (2000) aren’t on the list — and Ali brought Smith his first Oscar nomination for Best Actor. (He was nominated again for The Pursuit of Happyness.)

Looks like his “sickening work ethic” is paying off.

ADDENDUM, one hour later: This Premiere feature offers excellent insight into Smith’s mindset and work ethic, for example by conveying his belief that “99 percent is the same as zero”:

Triumph of the Will

Near the end of the piece, Smith shares his career goals — which seem to be within reach:

When people look back at my filmography I want to have the most eclectic choices of roles in the history of Hollywood. The most-valued career. [beat] And the most box office.

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Photo by stevelyon, used under a CC-Share Alike license.

Whither the venerable electronics maker? Let’s read along from the Martin Fackler’s New York Times together, eh?

Sony’s Quarterly Profit Falls by 72 Percent

Well, that can’t be good.

TOKYO — Sony reported a 72 percent drop in profit in the most recent quarter on Wednesday, hurt by a stronger yen and the global slowdown. . . .

Sony has joined a procession of Asian exporters reporting lower earnings . . . They have blamed drops in global and particularly American demand, contradicting the once popular notion that Asian economies were decoupling from the United States. . . .

More and more I see analyses that emphasize this point about the interconnection of economies. For many years we’ve slung around the term “globalization” as though it were a new phenomenon, instead of something going back at least as far as Vasco da Gama. And previous slumps — whether we’re talking about the Great Depression of the 1930s or the Asian financial crisis of 10 years ago — have spread their woes across many countries.

What’s different now is the velocity of that spread. The deep integration of the industrial and consumer economies of the world’s more-developed nations, along with the immense size and speed of global capital flows, takes old problems like trade or currency imbalances and magnifies them in a gigantic 24/7 financial echo chamber.

Or, for short: when U.S. consumers stop spending money, trouble ensues.

Tie all of this up with the age-old problem of investor irrationality, and the results can turn absurd:

Many analysts say share prices of top Japanese companies have fallen so far as to defy reason. Not only Sony but many of Japan’s best-known brand names — including Toyota, Panasonic and Bridgestone — have seen their market value drop below their so-called book value, the total worth of their buildings, equipment and other physical assets.

As of Tuesday, Sony’s market value was $21.4 billion, or about 0.58 percent of its book value, according to Paul Migliorato, head of research at NamiNori, a Honolulu-based equity research firm. . . .

“The market is treating Sony and Toyota like pariahs,” Mr. Migliorato said. “Any sense of reality has been hijacked by momentum and fear.”

Two points come to mind here:

1. Sony actually had a very nice run before this, after a few years of bumpy road. For its last fiscal year, which ended in March 2008, Sony increased revenue by 27% and net income by 347%, nearly tripling its profit margin along the way. It has even boosted sales of the PlayStation 3 video game system — though not enough to catch Nintendo’s Wii — and enjoyed more hit movies from its entertainment division. (Last year, Sony’s savior was Spider-Man 3; this year, that role is being played by Will Smith’s Hancock.)

2. “Be fearful when others are greedy and greedy when others are fearful.” Looking at the abyssal share prices of Sony et al., the wisdom in Warren Buffett’s motto becomes clearer than ever. One of Buffett’s signature practices is never to buy an asset that he can’t get at a bargain price, and one of the things he observes closely is the relationship of a company’s price to its book value. Buffett distinguishes himself from many other financiers by his careful attention to the potential downsides of investments; buying a company at less than book value — especially if you think the company is basically well-run and you expect to hold the investment for some time — is a good way to insulate yourself from losses. One wonders whether Buffett is shopping among Japanese blue chips for bargains.

Sir Howard Stringer took the CEO job at Sony a few years ago with much fanfare: savvy Brit with strong American ties takes the helm at Japanese icon, and all that. When you look at the top- and bottom-line results from last year, you can hardly fault his management. But when you look at the results he just handed in, it’s clear that he’s got his work cut out for him.

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Related links:

• Sony management deserves no pity.
• The Nintendo Wii: Hitting its way into the Hall of Fame.
• Company of the Day (09/18/07): Sony.

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Before you laugh at the thought of the rockstar-cum-activist as a business counselor, ponder for a moment just how successfully U2 has kept up with the times — and kept themselves in the money — for the past 30 years.

I’m thinking of this because of a quote from a story headlined “New U2 album delayed till 2009″:

“We’ve hit a rich songwriting vein and we don’t want to stop,” Bono says on the band’s website. “It gets a bit dark down here but looks like we’ve found diamonds not coal. I thought a while back we might have the album wrapped by now, but why come up above ground now if there’s more priceless stuff to be found?”

Part of this may be the precious diction of the artiste, but hidden inside it is some genuine wisdom: If you’re going to try to create something that resonates, whether it’s an album or a new telecom router or a new Web browser, you can try to do a competent job that improves incrementally on what came before, or you can try to reshape the landscape.

In general, I’m a big fan of the competent-messy-NOW philosophy, since it seems to work so much better for most situations. You get an early version out the door without being too precious about it, and then you iterate it better, again and again. (If it sounds like I’m channelling Paul Graham and the 37signals folks, I am.)

Go Big

But sometimes, if you have the means and the motivation, it’s better to shoot the moon. U2 already has more money than they would ever spend; the challenge for them now is to stay fresh and relevant and creative in middle age. And who knows but what the extra time in the studio will let them come out with a Joshua Tree-caliber masterpiece?

The article linked above ends with a bit of snark about the band fouling up thir label’s fall release schedule. But if the album sells as well as How to Dismantle an Atomic Bomb, I’m guessing that Universal can live with booking the revenue in 2009 rather than 2008.

The same item on the band’s Web site from which the quote above is drawn ends with this tidbit from The Rose-Bespectacled One:

“We know we have to emerge soon but we also know that people don’t want another U2 album unless it is our best ever album. It has to be our most innovative, our most challenging . . . or what’s the point ?”

When you’ve reached the rarefied heights that U2 has, that’s precisely the way you keep on making history.

Question for further contemplation:

What can YOU do to “Go Big”?

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(Photo by The_Admiralty.)

If you remember the musical The Wiz, maybe you remember Evillene — originally played by the great Mabel King — who ran a subterranean sweatshop. The character is an analogue to The Wicked Witch of the West from The Wizard of Oz.

Evillene has a temperament to match her name, and her attitude is captured in her big singing number, “Don’t Nobody Bring Me No Bad News”:

When I wake up in the afternoon
Which it pleases me to do
Don’t nobody bring me no bad news
‘Cause I wake up already negative
And I’ve wired up my fuse
So don’t nobody bring me no bad news
. . .

Remind you of anyone you’ve ever worked with? Or even a whole organizational culture?

When the boss can’t handle the truth

Many years ago, I worked in an office where negative comments — even accurate, good-natured delivery of bad news — was treated as an indicator of an unhelpful attitude. With the benefit of hindsight, I trace this to the psychology of my department head, whose own insecurities dictated this sort of Pollyanna facade.

Fortunately, my direct supervisor was a realistic, brass-tacks type of manager who wanted to know all the news — good, bad, and in-between — so she could make better decisions. She was also an old hand at dealing with the department head, so she knew how to couch bad news in ways that would get through.

My department head wasn’t evil like Evillene, but she was blinkered by an overly narrow concept of having a “positive attitude.” She could have joined Evillene in the last lines of the song:

If you’re gonna bring me something
Bring me something I can use
But don’t you bring me no bad news

Good managers know that they can use bad news — and in fact they seek it out so they can avoid nasty surprises. Like Vito Corleone in The Godfather, they “insist on hearing bad news immediately.”

Real optimists can handle bad news

The best managers also express optimism, but not by denying painful truths. Instead, they look for the best, most fruitful ways of dealing with bad news. But that takes a level of maturity totally foreign to Evillene — and, unfortunately, often absent in my department head from all those years ago.

Here’s my question for you:

How do YOU handle bad news?

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Related posts:

• The Happy Path . . . to Perdition.
• Being wrong.
• What’s the straight line?
• Confirmation bias: fight the Procrustean instinct.
• Welcoming criticism.

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(Image via The Wiz Theatre Company, which apparently has done a good revival of the show. By the way, I was going to embed a video of the “No Bad News” song from YouTube, but I couldn’t find anything from that troupe, and all the choices I did find involved either bad singing, bad recording, or both. The singers I saw . . . well, they were all so very much not Mabel King.)

A while back I introduced a simple metaphor I use to think about changes in the business world:

• Landscape and weather in the business world.

The idea is simple: some things, like Generally Accepted Accounting Principles, form the durable “landscape” of business, while others, like market fluctuations, should be regarded as temporary “weather.” Just like in real life, if you get caught in a hurricane, it could ruin you. But so long as you avoid the worst of the weather and abide by the realities of the landscape — don’t walk off a cliff, don’t try to build a skyscraper over the deep ocean — you’ve got a good chance to prosper.

These days, it seems to me that I see ever more news suggesting a wave of changes to the business landscape. The obvious ones — energy prices, the massive repricing of U.S. real estate — we’ve discussed before. But here are two more from today’s reading.

The average TV viewer is now out of the demo.

From Variety (via Darren Barefoot) — “TV viewers’ average age hits 50“:

According to a study released by Magna Global’s Steve Sternberg, the five broadcast nets’ average live median age (in other words, not including delayed DVR viewing) was 50 last season. That’s the oldest ever since Sternberg started analyzing median age more than a decade ago — and the first time the nets’ median age was outside of the vaunted 18-49 demo.

One of my favorite adages in business is this: “If something can’t go on indefinitely, it won’t.” Sure, it seems obvious . . . except that people act contrary to this obvious truth all the time. As Darren rightly says in his post, “The writing seems to be on the wall for live television. As producers and advertisers react to this, expect some creative and hyper-irritating new advertising strategies.”

The only thing I might take issue with is “creative,” since I’ve been underwhelmed with the creativity coming out of the major networks in recent years. I might say “desperate” instead.

Microsoft no longer dictates your OS from on high.

From the NYT’s “Bits” blog (via James Fallows) — “Et Tu, Intel? Chip Giant Won’t Embrace Microsoft’s Windows Vista“:

Intel, the giant chip maker and longtime partner of Microsoft, has decided against upgrading the computers of its own 80,000 employees to Microsoft’s Vista operating system, a person with direct knowledge of the company’s plans said.

The person, who has been briefed on the situation but requested anonymity because of the sensitivity of Intel’s relationship with Microsoft, said the company made its decision after a lengthy analysis by its internal technology staff of the costs and potential benefits of moving to Windows Vista, which has drawn fire from many customers as a buggy, bloated program that requires costly hardware upgrades to run smoothly.

Time was, Microsoft was the landscape of the desktop PC world, and it more or less dictated the weather as ewll. Any predictions of a steep decline in that realm would be premature, but it’s worth noting that previous versions of the Windows operating system, especially the NT and XP editions, rolled out and penetrated the market despite users’ objections.

Microsoft has long been in a position to say “Welcome to your new OS” whenever it rolled out a new version of Windows. But the wide backlash against Vista — which has been building for quite a while now — may indicate a change in that.

What other changes to the business landscape do you see?

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Related:

• Landscape and weather in the business world.
• Economic forecasting: How’s the weather for YOU?

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(Photo by jmagnusphoto.)

Who knows if he meant it this way, but Shatner offered a lovely piece of guidance in his Esquire “What I’ve Learned” interview, published in 2006:

I was always working. Maybe you weren’t aware of the movies I was making, or the television I was doing, or the shows I was creating, or the books I was writing; there have been thirty.* But I have always been solidly at work, running as fast as I can. You just haven’t been conscious of it. Suddenly I’m above the radar.

This reminds me of another quotation from a long-time actor, one noted for the prolificity of his oeuvre. I’m talking about Michael Caine, who had this to say about his nonstop career:

First of all, I choose the great roles, and if none of these come, I choose the mediocre ones. If they don’t come, I choose the ones that pay the rent.

I like these quotes because they do two things at once: (1) display good-humored self-awareness; Shatner knows you probably haven’t read the TekWar books or seen The Devil’s Rain, and Caine knows he’s been the best thing in some bad films. (2) They emphasize the idea that you just have to keep on working. Despite their long careers, Shatner and Caine apparently don’t see their work as a chore. They keep at it.

When I read the Shatner quote to my Hoover’s colleague Russ Somers, he immediately mentioned the concept of the “overnight success” in music. (Russ used to be has for many years now been a musician.) Generally, so-called overnight successes take 15 years or more to see the light of day. It seems like they come out of nowhere, but in fact they’re able to say exactly what Shatner said:

“I was always working.”

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UPDATE, a bit later Friday morning: After I wrote this post, I came across the New York Times obituary of the great comic actor Harvey Korman, who was one of my favorites when I was a kid. (We watched a lot of “The Carol Burnett Show” chez Walker.)

He left college for service in the U.S. Navy, resuming his studies afterward at the Goodman School of Drama at the Chicago Art Institute. After four years, he decided to try New York.

“For the next 13 years I tried to get on Broadway, on off-Broadway, under or beside Broadway,” he told a reporter in 1971.

He had no luck and had to support himself as a restaurant cashier. Finally, in desperation, he and a friend formed a nightclub comedy act.

“We were fired our first night in a club, between the first and second shows,” he recalled.

After returning to Chicago, Korman decided to try Hollywood, reasoning that “at least I’d feel warm and comfortable while I failed.”

For three years he sold cars and worked as a doorman at a movie theater. Then he landed the job with [Danny] Kaye.

So, a man whom Mel Brooks described as a “dazzling” comic talent took, by my count, more than sixteen years to get his big break. It’s a lesson in persistence.

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* To be entirely accurate, Shatner didn’t write all those books, or at least he didn’t do all the writing on all of those books.

(Image from Wikipedia.)