View from the Mountain

As the small stores leave

The scary thought that has never been far in the back of my mind is that some day we will get to the point that we will have to buy what the companies want us to buy instead of what we really need or want.

I am a big believer in not only small business but manufacturing driven by customer demand.  I am not so sure that we are headed in that direction.

The story of my bag of pea gravel is a cautionary tale. If you combine it with a story of gold plated USB cables, you might get the idea that we have something which is cause to worry.

A couple of years ago our local hardware, Wood's Ace Hardware, closed.  We had been going there since we moved to Roanoke in 1989.  We knew Bill and Monika Woods personally and understood their decision to close.

However, I knew that it would eventually end up making things that we used on a regular basis harder to find.  Bill was a master at knowing what people needed in the neighborhood.  Short of lumber which he never carried, there were few things which could not be found at Woods.

Today I wanted to fill a varmint hole behind one of our rock walls.  The natural choice would be something like pea gravel.  Over the years I bought a lot of pea gravel from Wood's.  Today I first went to Hammerhead Hardware in Salem, they did not carry it.  Then I went to Northwest Hardware on Brambleton in Roanoke.  They also did not have pea gravel.  Finally I ended up at Lowe's on Route 220 where I found my bag of pea gravel.  It was a lot of traveling one bag of pea gravel.

It is strange that as the area has grown, some services have moved to the outside edges of town.  When we first moved to Roanoke, there was a Lowe's over at the intersection of Apperson Drive and Keagy Road.  It was closed soon after we moved here.  Apparently it was too small to suit the company's taste.  There was also a Brendle's on Apperson.  You could get almost any small appliance or item for the house there.  It closed sometime after the Lowe's left.

Now if you want a small appliance or some lumber you have to drive either over near Valleyview or down to 220 south of Tanglewood.  As I drove by the still empty former home of Wood's Ace Hardware, I had a hard time remembering how many times I slipped over there on a Saturday afternoon to pick up something that I needed for the home.

So now we have been herded into only being able to shop in certain areas which are usually a distance from our homes.  How big a jump is it to the point that we end up having to buy what the manufacturers want to sell us?

Consider my case of the gold USB cables.  I bought an inexpensive printer a couple of years ago.  When I decided to get a dedicated cable for it, I found that most of the cables being offered were gold plated and priced at around $34.95 which is almost as much as I paid for the printer.

Fortunately there are still sources of cheap USB cables.  I recently got one for $9.95 at Walmart.

However, if you think about it much of what we buy today is more designed to meet the needs of a manufacturer than it is our needs.

I am a big fan of coffee made with a vacuum coffee pot.  A few years ago one of our died, and we had to get another one.  Black and Decker had stopped making them.  Apparently the volume was not there.  We were lucky to find a Bodum one.  A year or two after that one of our Bodum pots quit working.  In doing research we found Bodum had also stopped making electric ones.  The only ones available had to be used on the stove.  It is hard to say why the electric vacuum ones seem to be disappearing, but it might just be another case of manufacturers deciding what they want us to buy.

Another good example is Apple and their computers.  For years I fit in the category of a "prosumer," or someone who needed more features than the average consumer.  My requirements always took me to a desktop machine at Apple which most of the time I could get for $1595 to $1795.  Apple in its wisdom no longer sells standard desktops at that price point.  You have to be satisfied with an iMac which means all the nice displays that I use are no longer of use.  If I want a standard desktop I have to pay $2,495.

This does not just happen in electronics. 

I have done a lot of weed whacking over my years.  I quickly found out that there was only one kind that was the right tool for the job.  It was one with with a mostly wood handle.  As we have gotten more and more foreign goods in our stores, it has become nearly impossible to find the right kind of weed whacker.  Most of the ones sold now have a very small wooden handle and a cheap steel rod for the rest of it.  You can hardly use it before bending it.  It certainly will not last for seasons.  One of those will not even last a few hours in the kind clearing that I used to do.

Obviously the answer is competition, but there seems to be little of that at the low end of the scale.  While I can buy a terrific digital camera for $250 that has features which cost over a $1,000 only a year ago, it is nearly impossible for me to buy a good $17 weed whacker.  Heck I would pay a lot more for a good weed whacker

Perhaps there just are not enough people really using weed whackers to justify someone making good ones.

Maybe we will get to the day when a local shop ends up making small limited runs of quality custom products at the same time the foreign giants turn out millions of fantastic electronic products.

However, I remain a little suspicious.  Just think digital TV and check out all those new energy saving appliances that we all desperately need.  I just saw a refrigerator in Lowe's for $3,000.  I hope I never "need" one of those.

Here is my next bet.  The Kroger at Ridgewood Farm across from Lewis Gale Hospital will be closed because it is too small.

How do we get across the concept that keeping neighborhood stores alive is critically important?  Just look at the difficulty of getting them to come back to an area like downtown Roanoke.

Needed a new contract between workers and employers

There are warning signs all over the place.  You do not have to talk to many corporate employees to figure out that our current model of doing business doesn't necessarily do a great job for either consumers or workers.

Investors, CEOs, and corporate insiders do pretty well.  Obviously there are people who would probably disagree with me, but I think I have some evidence that is hard to refute.

There are exceptions to every general observation, but more and more I am convinced we have become a throw-away economy for both employees and products.

I can still remember when appliances lasted almost forever. Now our appliances break every few years.  I will admit that automobiles are much better built, but the only reason that happened is pressure from Japan. 

Employees also used to stay with corporations for life.

I am not so much worried about the throw-away trend on appliances as I am on skilled workers.  I know there are companies that understand how to harness the power of their workers, but I suspect they are far outweighed by companies whose vision is limited by that of their CEOs and the management structure around them.

I have often said the best way to build anything is to hire competent people and get out of their way.  That is a simplistic way of looking at things, but I think it is harder and harder to do.

There are companies like Apple which is idolized by investors and analysts because of the great products that turn out. It is a company where one person and one person only is in the driver's seat.  Yet Apple can be a terrible company to work for because you have to march to the orders from the top no matter what.  At least if you want to keep your job.

Apple is actually a ship headed for a ship wreck in spite of the fantastic results they are going to report this week.  It is a one person company, once Steve Jobs is gone, billions in valuation will disappear in a flash.  There was no great bench of replacements every developed at Apple.  You can't develop strength when performance is measured by how high you jump and how many times you can say yes.

Somewhere between a company like Apple and a company which has too many bosses is where American business needs to head.

We need companies which while achieving their current goals take bright, hardworking new college graduates and the best of their about-to-retire employees and build new lines of business or better ways of doing business.

It is the only way we will compete in a global economy.  While I nodded my head at a few of the points in David Brook's article, A Reality-Based Economy, (Times Select Required), I had to laugh at the following comment.

...companies are getting more efficient at singling out and rewarding productive workers. A study by the economists Thomas Lemieux, Daniel Parent and W. Bentley MacLeod suggests that as much as 24 percent of the increase in male wage inequality is due to performance pay.

Sixth, inequality is also rising in part because people up the income scale work longer hours.

I am sure there are companies that are good at handing out performance rewards, but I also know that the process is usually fatally flawed.  I can verify that many people who work long hours do so because they are afraid of losing their jobs if they don't.  Getting more pay for more work isn't usually part of the equation.

I know how hard I had to work to reward a couple of exceptional employees.  Really the only way that I could reward one was to help him go to work for someone else in the company.

I also know of a couple of exceptional employees who ended up working for a completely useless boss who decided they were not needed any more when they were exactly the type of employees the company needed.  He preferred to hire his friends even if they were not qualified.

American business has become more and more of a who you know is more important than what you know.

While some companies can escape this, most don't

I have made a lot of friends while in the business world, but I have not made mistake of hiring people because they were friends.

We need to work hard to get back to a corporate environment which rewards not only hard work and intelligence, but the ability to get the job done.

That would be a far cry from the companies where personal ties determine the direction of the company and who gets rewarded or even who keeps their job.

Companies need to figure out how to absorb the critical assessment of their weaknesses which are often painfully obvious to long time employees leaving for retirement or another job.

One of the best sales people I have ever known is leaving Apple.  While having some stock options in the bank helps in the decision, the real push to leave is frustration in trying to do a job that management does not even understand much less help get done.

I wonder how many great workers are leaving companies with their secrets of how to get the job done while young workers are being thrown into a corporate meat grinder with the hopes that they might end up successful?

I often think America's hiring policy is take new workers, throw them up against the wall, and see who sticks.  Doing otherwise would be to take a long term view instead of focusing on quarterly profits.

Likely seeing who sticks is not going to be a strategy for success in the global economy.

Neither is our messed corporate performance reward system.

I would like to see corporations keep hiring those new workers, but actually commit real resources to growing them and making them part of the companies.

While blind corporate allegiance isn't very healthy, neither is this new environment where there is no corporate allegiance and certainly no attempt to build the kind of employees that could create unbelievable customer service and perhaps better ways of doing business.

I would like to see a minimum one year commitment between employees and companies with some challenges in the mix for both employee and company.

Right now too many good potential employees get ground up.  I would also like to see some basic fairness imposed on the whole process of when employees are let go.  In our current political and judicial environment companies can pretty well do whatever they want.

Just ask any aging technology person how they are being treated by their employers assuming they haven't already been shown the door because they were too expensive.

Some thoughts on insurance

The world of insurance whether it is for cars, health care,  or your home is a business world.  Businesses make money off of providing us the service of insurance.

One of the ways that they make money is by taking good risks.  Younger and healthier people get lower health care premiums.  Older people get more expensive ones.  Bad drivers get higher premiums or may even have trouble getting insurance just as people in hurricane prone areas might have trouble getting home owner's insurance.

In theory the market sets a rate and eventually everyone gets covered. Except that's not exactly the way it works.  You can pay insurance on your cars for years and years without any claims.  If you have an accident your premium will likely go up.  If you have a health problem and have lost your coverage, you'll probably have trouble getting coverage at any price.

It's too bad insurance isn't just people pooling enough of their money so that the ones who are unlucky enough to have claims can be covered.  I heard someone on the news tonight say that 30-40% of insurance premiums are administrative overhead used to screen people and claims.  While that might be good for business, it isn't exactly the best way to spend health care dollars.

I'll take any tax breaks that I can get, but the older you get, the more concerned you are about getting insurance period.  Using a tax break to make it affordable doesn't seem like a way to drive down health care costs.  The administrative costs seem the most sensible target for savings, and a single payer system appears to be the best way to get there, but I doubt there is any courage to create such a system.

NC snares Google equals Googlina

I am not exactly sure where I stand on government incentives for large corporations.  On the one hand, you needs some large  well respected corporations to give credibility to your development efforts.  On the other hand, there are lots of small businesses that make it just on their own grit.

Today the Raleigh  News & Observer confirmed that  Google will be locating a server farm in Lenoir, NC and investing $600M with the goal of creating 200 jobs in four years.  Tax incentives equaled $100M.

Would the money spent on capturing Google and Dell be better spent on helping small business deal with health care costs and other challenges?  I don't know.  What I do know is that I would rather spend money on Google than on a grocery store.  I think North Carolina's strategy works.  They will eventually get enough synergistic companies to make a difference in their situation.  The combination of their low cost higher education, state wide higher education system, a large work force and name brand corporations is hard to beat.

They have some geographic advantages over Virginia and perhaps some governmental ones also.  It's obviously a very complex situation.  I've written about it before most recently in "The chicken and egg equation for jobs in SW Virginia."

Development in southwest Virginia is disjointed.  If there is an overall strategy I haven't managed to grasp it.  There are some very good small companies, but all you have to do is drive south to North Carolina to see where real development is taking place.

Maybe there are people who want to preserve the Roanoke Valley as it is,  but many professionals in the area will tell you that there is little mobility in the  area between companies.  What that means is that people  often move to the valley with a job.  If they lose the job, they move away from the  area.  They might come back when they retire, but  replacing a  well paying job in the Roanoke  Valley is very hard.

One of the most entrepreneurial people that I know recently moved to Raleigh from Blacksburg.  I know another CEO who moved to Richmond to chase additional business.  I am now spending a good part of my time on the North Carolina coast as a Realtor® with Bluewater GMAC in Cape Carteret, NC. (http://coastalnc.org/realtor/)  I certainly haven't abandoned the Roanoke area, but in a sense I'm like the others I mentioned  who are hasing what have become better opportunities.  I'm glad that I have a multi-faceted career that allows me to continue to enjoy Roanoke and the friends we have made here.

Someone once told me that if you were lucky enough to make it up the ladder in corporate America, you could afford to live in the Roanoke Valley as long as you kept your corporate job. 

I was born in North Carolina and have lots of family in the state so in a sense, going to North Carolina is going home to me.  I recently got to attend a meeting in Emerald Isle, NC and listen to their town manager.  I haven't heard anything as sensible as I heard in that meeting in a long time.  Perhaps some Roanoke Valley government folks should send some representative to the next Emerald Isle meeting.  They might learn something about cooperation.

Maybe I'm wrong, but I think the Roanoke & New River Valley needs some visionary leadership before the area's fate is sealed as a transportation corridor that just watches the traffic zoom on to another state.

On another note, I don't find the extra ten to fifteen cents per gallon in gasoline prices in North Carolina too much of a burden to pay for some better highways.   I hate to beat a dead horse but it sure is nice to drive on some Interstates where every third vehicle isn't a giant truck.  I'm glad my route back and forth between Roanoke and Cape Carteret doesn't get near Interstate 81.  A trip to Blacksburg once in a while on Interstate 81 is all the truck excitement I need.

The code of the CEO

So why is it so hard for corporate CEOs to say that they are wrong?  As far as I can tell they are all sort of human.  Yet it is very rare that we ever see a CEO admitting a mistake.

While formal education might have a part in it, I think it goes even farther than that.  We're in a world where it is easy for people to live in a cocoon that says they are never wrong.  We even have parents that will argue with teachers.

In the fifties and sixties that was unheard of.  If a teacher said you did something wrong, you were toast.  While we were taught to respect authority, many of the generation after us learned by experience they are the authority if they  just play their cards right.  If you assume the impossibility of  making an error, then everyone else is wrong including your parents.   It's not too big a reach to assume that a rule might not apply to you.  Look at how many people run red lights.  Does the red light not mean them.  Is it only for the guy following.

Just maybe we've gone a little far with building the self esteem of our future leaders.  While organizations such as the Boy Scouts with a structured authority system have fallen out of favor, we've have seen the growth of the cult of personality.  Athletes often believe themselves more important than their teams.  Individuals put themselves ahead of society as a whole.  It's all about the individual.  It's like everyone wants to be on the stage alone with the lights shining on them

Unfortunately that doesn't work in a society where people have to work together for success.  Eventually you end up with no loyalty to anyone but yourself and maybe your family.  With the number of divorces, you have to wonder if loyalty to family is even important.   While the business world needs to be ruthless,  it doesn't need to be stupid.  Making decisions with input from others is smart.  Unless we can teach CEOs and other supposed leaders that collective intelligence usually beats the brains of one, we're going to face a long haul in the next few years.

How many times have you heard that there are too many chiefs and not enough Indians? Fame, fortune, and a CEO title means never having to say you're wrong.   It shouldn't be that way.  Leadership involves more than thinking you're right.  Building a company that is successful is a real balancing act, but the odds of success decrease in proportion to the increase in difficulty of the company's CEO in admitting his own mistakes.