0607_covdc"Why the economy is so much stronger than you think." –BW

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I was initially perplexed by this magazine cover, and it took me a few moments to figure out why.

Eventually, I concluded that it was one of two things; either this is a disingenuous cover, or the Editors at BW are in Denial.

If its disingenuous, then it comes across as an awkward attempt to be slyly contrarian by (follow this twist if you can) repeating the dominant view as if it were the minority perspective. With BusinessWeek itself rather Bullish about both the market and the economy, perhaps they are trying to convince themselves.

On the other hand, previously strong economic reports have begun to show the signs of slowing down.  After a good three year cycle, GDP has begun to weaken, we see real wages actually negative, the sabings rate has dropped to zero, and the mighty housing sector has irrefutably begun to slow.

Not to worry, BW admonishes us, the Econopy is stronger than you think. That sounds alot like denial to me.

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Let’s take a closer look at the mainstream media’s financial reporting about the economy:

First off, the economic headlines — misleading though they might be — have been primarily positive: GDP (ex-Q4), Unemployment Rate, Earnings growth, Real Estate gains, Merger Activity, Share Buybacks, Employment, and low inflation have all been reported by the MSM as very positive economic developments. A superficial glimpse anytime over the past year shows strong growth. 

Its only a few ornery cusses (like myself) who have been pointing out that the reality beneath the headline data paints a very different portrait. A closer look at how various economic components are calculated reveals that the CPI dramatically understates inflation, or that job creation this cycle is so very poor, or why the Unemployment rate is misleading.

Indeed, as one of the few people who actually believe the economy is not all that strong — and is about to get considerably weaker over next the 18 months — I wonder who BW is addressing this cover article to.

Second, as the special year in preview forecast revealed, the vast majority of Pundits were very bullish. I was the only person who suggested a greater than 10% correction was a possibility (One other pundit thought a 10% correction was probable). Wall Street Economist and Strategists have been constructive on both the market and the economy for some time now. With few exceptions, the crowd of experts have continually overestimated growth, forecast too aggressively on job creation, and to this day still underestimates inflation.

If the economy is actually stronger than this consensus, then we must have a helluva robust expansion going on.   

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The Disconnect: Perhaps BusinessWeek is addressing a different audience — the large group of people who in poll after poll rate the president poorly on his handling of the economy.

What BW fails to grasp is that most people aren’t thinking about the economy; I’m not sure if all that many people even have an opinion on the Macro issues. But they do have a sense of their own financial situation: Are they getting ahead, are they falling behind, is their standard of living rising or falling, how much confidence do they have about the future, etc.

On that score, much of the country has become increasingly pessimistic.

This is the source of "the Disconnect." Their own personal financial situation has gotten considerably worse. Their health care costs a lot more, but their employers now cover less of it; Food, Energy, Education, Housing, Healthcare all cost more — but their real wages (after inflation) are actually negative. Even the one bright spot — their Real Estate gains — are only relative. Why? The rising tide has lifted all boats homes. So while they can get more for their own homes, moving up now costs considerably more also. This makes gains somewhat illusory in relative sense — unless you move to a cheaper part of the country, or downsize, or rent post-sale.

Bottom line:  While most of the headline data up until recently has been positive, beneath the surface the recovery has been lumpy, being as overly dependent on government stimulus and Real Estate as it has been. It is starting to show signs of increasing weakness. People who do not rely on abstract models (i.e., non-economists) and instead only interpret their own financial situations are have been economically uncomfortable, and more recently increasingly so.

Perhaps BusinessWeek’s editors need to get out of the office more . . .

 

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Source:
Why The Economy Is A Lot Stronger Than You Think
By Michael Mandel, with Steve Hamm in New York and Christopher J. Farrell in St. Paul, Minn.
BusinessWeek, FEBRUARY 13, 2006
http://www.businessweek.com/magazine/content/06_07/b3971001.htm

Cover Image: Unmasking The Economy
http://www.businessweek.com/magazine/content/06_07/b3971002.htm

Category: Economy, Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “BusinessWeek Cover Story: Disingenuous or Denial?”

  1. Idaho_Spud says:

    Excellent post Barry. Yes there is a *huge* disconnect.

    The cheerleaders of GDP, CPI and employment numbers fail to see what I see: The economic indicator that American families get every month when they’ve finished paying their bills.

  2. Anonymous says:

    It’s just another indication that America’s elite are getting worried. No matter how hard they whip the consumer we just can’t keep the necessary pace up.

    We’ve now reached the undeniable point where what is good for the top 10% of income-earners is NOT good for the rest of America. Somehow this disconnect must be resolved… in favor of the majority of us.

  3. Emmanuel says:

    Honestly, though, did we expect anything different? Just as CNBC plies its trade by puffing up everything out of proportion, so does BusinessWeek. You don’t sell copies with a headline like “Why the Economy is Weaker Than You Think.” Keep selling the drama, and when things get worse, come out with “Why the Recession Will Be Short-Lived.”

    Cue up the Billy Joel:

    Honesty is such a lonely word
    Everyone is so untrue
    (especially business journalists)

  4. alan says:

    Congratulations to Barry for having the intestinal fortitude to tell it like it really is for all this time, and I couldn’t say it any better than the three previous posts today.

  5. trader75 says:

    What Businessweek promotes in that story is essentially Andy Kessler’s “We think, they sweat” argument, aka the iPod Economy, the logistics of which are outlined in essay form on Kessler’s website (andykessler.com), in Kessler’s excellent book ‘Running Money,’ and also in a book by Gavekal Research called ‘Our Brave New World’.

    The idea that top rung countries can make more money by leveraging IP and outsourcing low cost production makes perfect sense. There is just one problem: the iPod economy, brilliant a notion as it is, applies to select industries, not entire economies.

    In a nutshell, countries can’t downsize. Bizweek (and others) are trying to suggest that America as a whole is benefiting from this enlightened leverage of IP and low cost manufacturing availability. Not true, not by a longshot.

    The reality is that there is a small contingent of folks in the US reaping the benefits of the iPod economy, and a much larger group of folks feeling the brunt of wage stagnation even as downward pressure on manufactured goods gets offset by upward pressure elsewhere (the natural result of a static inflation policy). America is not like a jack-be-nimble startup, or even like a General Electric where Neutron Jack can lay off 100,000 workers.

    As borders dissolve, opportunity spreads more evenly. This is very good for rich world players with leverage (knowledge, know-how etc) and developing world players looking for a leg up (88 cents an hour better than 0 cents an hour). It is very bad for rich world wage workers who were previously insulated from developing world competition.

    I don’t see how the likes of Bizweek miss this simple point (that countries can’t downsize). Not like it’s complicated. I suppose they miss it on purpose because the conclusion is so unpalatable: our warm-hearted notions of an egalitarian state with social bennies for all are being dashed to pieces on the rocky shoals of globalization.

    And what is with that goofball Zorro-the-gay-blade graphic. “Unmasking the economy?” Aye Caramba. They must have pulled that one out of their butts at two minutes to deadline.

  6. Mark says:

    Barry-

    From time to time we will send you periodic reports on the success of our marketing efforts to date. Please see the excerpted rankings for the month ending January 31, 2005 from Amazon.com below. We hope you are as pleased as we are.

    No.126432…..
    No.126433…….
    No.126444 Milli-Vanilli Karaoke Set (Album incl.)
    No.126455 Ronco Pocket Fisherman Deluxe
    No.126456 Ritholtz “The Sweater” (Autographed vers.)
    No.126457 Flo-Bee Home Haircut System
    No.126458 …….

    Thank you for entrusting us with your business.

    Signed,
    Mark McCormack
    President
    “The Sweater” Marketing Group LLC

  7. Tim says:

    I haven’t read the article yet (I will), but seeing that Mike Mandel and Chris Farrell are two of the authors goes a long way in understanding what its about.

    I subscribed to BusinessWeek for many years, just to get another Wall Street perspective, but they have become so over-the-top with their non-inflationary growth, Larry Kudlow,supply-side Nirvana that it became unbearable.

    Both of these guys are so far out of touch with Main Street – one of these days some layed off worker is going to give both of them a wedgie.

  8. B says:

    I’ve been a subscriber to BW since I was 18. That’s 23 long years. Last month I let my subscription lapse and do not plan to renew. I really only subscribed to look at the pictures :-) but I’ve become unhappy with their seemingly change in journalism over the years. Or maybe I’ve changed.

    I agree and disagree with the outsourcing comments. It is a topic that gets surprisingly little attention in the press, in politics and amongst the general population. To say that we cannot outsource a country implies we, as a country, have control over where markets will allow us to win amongst international trading partners. In a sense, this is no different than challenges of yore where foreign companies/countries have forced radical change on American companies by thumping us in the market place. This includes the Japanese Syndrome in the 70s. The end result is a wide disparity between the working class and society’s elite. Seems like the movie Groundhog Day. I believe we are repeating the 70s in many ways. There is no doubt tremendous pain is being created for many. But, if we truly believe in the American economy’s flexibility and our innovative leadership, we will surely come out of this quagmire the baddest mutha on earth in terms of innovation, efficiency, productivity and general leadership. Those who survive will be the global leaders. Alternatively, we could be like the French and refuse to participate in the global economy and push back on transformation. Can you say double digit unemployment? Not that our numbers don’t hide an underemployed segment. A simple example is America’s furniture manufacturers. A bas ackwards industry with little regard for efficiency or the application of technology for improved productivity. There are radical transformations under way that will allow them to compete as world leaders in process, technology and innovation. In the end will the Chinese hack shop who copies designs and whose only value is cheap labor win in the global markets or will the world’s leader in innovation, productivity and efficiency? Which is more lasting? Temporary wage disparity or transformational leadership? Japan used to be a low cost producer. Their wages are as high as ours now. The same will happen with China as they develop an infrastructure and consumer based economy. Then it will be India, then South America and Africa.

    American management, although self serving, contrary to popular opinion does not typically want to lay off Americans. I’ve run a $100 million sales & consulting organization for a company involved in transformational innovation and consulting. There is not an executive in America who doesn’t wake up daily and worry about how to compete. I know because I’ve worked with hundreds of them. We aren’t going away and we aren’t outsourcing our economy. My point is this game is repeated constantly through cycles of innovation, transformation and new competition. The outcome? A work force that has to transform its skills to compete, the leanest companies on earth and new innovations which help us keep our commanding lead in industry. It’s free markets 101.

    Now, have companies and government done enough to help the working class deal with these dislocations? Hardly. They’ve done shit. That is my gripe. Spend some of that $2 trillion in Iraq on American competitiveness from the worker’s standpoint as it pertaint to retraining, innovation, new business development and the like. Can you imagine what innovation would take place if instead of spending on the military, we gave $1 trillion in tax incentives to create a energy independent economy? Uh…can you say jobs creation galore? Or created an infrastructure for competitive health care around common standards? And on and on and on. Instead we get healthcare accounts and more tanks while the average serviceman/woman lives in poverty.

    As far as the top 10%’s interests being aligned with the working class………..I don’t think that has ever been the case in the history of mankind. I do think there are long cycles of power shifts. If the workers want it, they need to take it back as they did in the industrial revolution. It was taken with blood and organization after saying enough is enough. If worker’s want to take back their rights, they need to develop a common voice and unite. When the pain is severe enough they will. Whether it is voting in politicians that will help their cause or whether it is unionizing Wal-mart or whatever else.

    Frankly, I believe a model where a board member is appointed as a representative of the employees is one that I think makes sense. Unions ought to give up griping and refusing change and trade it for a permanent board seat on companies.

  9. cm says:

    Barry, you call it denial, I call it BS. But then much of BS has a large denial component to it.

  10. Pilot Fish says:

    “Both of these guys are so far out of touch with Main Street – one of these days some layed off worker is going to give both of them a wedgie.”

    And I hope it’s atomic.

  11. cm says:

    B: As soon as something becomes commodity, the lowest-price purveyor wins. The “problem” (which may as well be viewed as a “virtue”) is that know-how and technology have reached a level where most things are just good enough for most practical purposes, which tends to shift the focus from upgrades to replacing “wear & tear”, or substantially lengthens the upgrade cycle, as improvements in products become more marginal in the time domain.

    Economically, this makes it difficult to create a commercially successful innovative edge, and socially, if the technological state of affairs is good enough for most people of practical consequence, there is not enough interest in funding progress, and attention shifts to preserving/growing entrenched stakes, arbitrage games (i.e. making money by taking a cut as some type of middleman), turf fights by legal and bending-the-rules shenanigans, etc. The war that you quote I would put mostly in the first two categories.

  12. Anonymous says:

    Interesting comments “B”. I would say that the top 10% have been aligned occasionally with the working class. This generally happens when workers take steps to (as you put it) “take it back”. Nothing like a little fear to get one’s priorities in line.

    And while I may have once agreed that American management does not typically want to lay off Americans, the work experience of the past couple of decades tells a different story. The biggest and best in America have been downsizing, forcing early retirement and outsourcing like mad.

    Finally, it seems to me that today’s American businesses are not asking workers to transform their skills as much as they are asking that we lower our standard of living to make us globally competitive.

  13. camille roy says:

    The biggest ha-ha in our current group think is that globalization is like the weather: inevitable.

    ha-ha.

    Globalization is the result of political consensus, obviously. It’s a result of post-WWII prosperity. I hardly think voters in developed countries are going to allow themselves to become serfs “just because” a few fantasists on the right get overly excited about freedom = free markets.

    The Freedom that my ancestors fought and died for was Freedom for citizens. Corporations didn’t even exist.

    Wake up, corporate oligarchy. You are not the sum total of democracy in the US of A. You might be able to turn the Republican Congress and their lobbyists into your greedy slime crew, but you can’t do it to the rest of us.

    The nation-state is the unit of political and military power. And for those of you who disagree, do some back of the envelope calculations on how profitable our “multi-nationals” would be if they had to raise and fund their own armies.

    My ulitimate point is that if the govt, corporations and elites generally don’t get it together as far as the working people of this country are concerned, protectionism is inevitable.

  14. Periodista Miguel says:

    < <<<<>>>>>>

    Hey! I resent that!!

    Seriously, some of us are trying to get past the cheerleading.

    But let me tell you, the echo chamber for those cheerleaders is ubiquitous. When we write stories that note the economy’s problems, there is rapid feedback from the followers of Fox and Kudlow and Rush, etc. ‘How dare you try to pretend things are bad?’ Sometimes they are rational, sometimes just nasty and hateful. It is demoralizing to wade through the cesspool regularly.

    I know it’s our job to keep at it, and I think that I do. But I can’t say I am surprised that some people take the easy way out, e.g.: Unemployment rate at lowest point since… Economy humming along yatta, yatta, yatta.

  15. mh497 says:

    While I tend to agree that things aren’t as good as they seem, I don’t think it’s a good idea to dismiss opinions that don’t agree with one’s viewpoint out of hand. I hear so many people now saying there is darkness lurking on the horizon in one form or another that I am kinda nervous, particularly since I don’t like to stand with crowds. Still, it looks like there are more in the ‘goldilocks’ camp.

    But, there is some possibility that maybe we’re the ones that are wrong, and somehow, the US economy muddles through, Bernacke threads the needle with interest rates etc.

    Or maybe we’re just still early. That’s what I suspect.

  16. B says:

    You know, I’m not picking on you cm, because I here this often. I hate just the word commodity. I hate it because it’s a quitter’s word. I guess if we are going to commoditize everything, we might as well pack it up and go home because we’ll never beat China.

    The reality is that the there are no such thing as a commodity business or commodity product. Period. Just piss poor management. You give me any business that is viable and I can compete globally with American wages and a crack leadership team. I can hire a crack team to brand it, innovate around it, creatively package and market it and drive efficiency and employee loyalty that will whip anyone’s ass. I could even make Nike’s shoes here. That’s a statement of the talent available here that is available no where else in the world. Period. You think you’ll find those skills in China? OMG. NOT. It’s also an indictment of the fact that most management teams are mediocre. Doesn’t matter whether it is baseball, mathematics, Legos or senior management. The majority of people are average and tremendous leadership can transform a company from average to world class.

    How can Siemens, Toyota and Honda state that this is a great market to have your manufacturing base in while IBM, GM and Delphi want to move factories to China? How can Cat and Deere dominate construction and ag business globally with UAW wages? I just saw where one of Europe’s largest auto suppliers plans to open a boat load of new factories in the US as they plan an assault on our markets. A French company for God’s sake. And Delphi says it is moving its factories overseas to compete? Come on. I don’t doubt the UAW needs to be more flexible and accept work rule changes and pay for benefits but even China said they expected to open US factories when they sell cars here. The world’s best business leaders do not reside in Detroit.

    What about P&G? They sell soap, toothbrushes and deoderant. And they charge 3x the average street price for their products which are made in the USA. You ever wonder how? AG Lafley is one of the most brilliant marketers and business executives in the world. Their branding, innovation, packaging and employee loyalty are the best in the world. Just a decade before, they were talking tens of thousands of layoffs and couldn’t compete. He could do the same thing with sugar. Can’t compete against Wal-mart? Target is whipping their ass. So is Whole Foods. What’s the difference in a commodity business? Wages? Benefits? Both pay more. There is no commodity business just poor management.

    Isn’t it ironic the best performing investments are commodities over the last four years. And many of the most successful companies are American, Canadian and Australian companies.

    Whew. Awful management is a big peeve of mine. It gets me on my high horse.

  17. Mike Mandel says:

    Barry,

    I just call ‘em as I see them. I was optimistic in the mid-1990s, pre-boom, while Wall Street was worried about slow growth and inflation. I was pessimistic before the bust, while Wall Street was calling for an ever-rising stock market (remember my 2000 book “The Coming Internet Depression”? ). And now I’m optimistic again (to see what I’m arguing against, look at the January 14th issue of The Economist, “Danger Time for America”, and the latest issue of Time magazine).

    My last thought: My track record over the years has been pretty good. Just take a look before you dismiss this story out of hand.

    Mike Mandel

  18. d says:

    The Nation had an interesting article on the Davos economy that made pretty much these same poijnts – companies are setting government and economic policies that benefit themselves as corporations, not that benefit national economies.

    We have to stop thinking as a nation and think as a world.

  19. wondering says:

    w/r/t the BW article:

    I’m not a professional economist, but I do know that GDP is comprised of both business and personal spending. So let’s say that Company X is investing huge amounts of cash hiring engineers to come up with the Next Big Thing. Those R&D dollars don’t go into GDP as part of business spending, but the money those engineers are paid shows up when those engineers spend their salaries. And given that the savings rate in the US is zero these days, those salaries are being spent.

    So it seems to me that this ‘under reported’ GDP that BW is trumpeting really is there, it’s just showing up in places other than business spending. Or am I missing something here?

  20. cm says:

    B: I respectfully disagree on the commodity thing. The definition of commodity is a product of (more or less) standardized qualities with the main connotation that any two products conforming to the standard are exchangeable.

    In tech, standards specifying dimensions, interfaces, materials, operating environments etc. of equipment are created for the very purpose of making off-the-shelf products exchangeable/interoperable, and indeed transform them to commodity status. That’s the very purpose of standardization, not merely a side effect. It is the very hallmark of a solid technology base that things one has already figured out can be used off the shelf, and the qualified workforce does not have to spend their time engineering solutions to integrate incompatible products over and over.

    Neither is it a negative thing to say something is a commodity.

    And neither do I think it is a quitter’s term.

    Regarding management of large and/or complex organizations, most people and most managers are mediocre (or to use a more charitable term, average), or are embedded in environments where they cannot deliver better than mediocre performance, or where “going the extra mile” is not rewarded, and perhaps even penalized. That’s just the nature of things, and it’s an international phenomenon.

    It does not surprise me the least that corporations go the path of least (intellectual) resistance and outsource/offshore instead of improving management and organizational structures, or figuring out optimal business processes, which is in ways much harder.

    When I’m shopping, and two products on the shelf that given my level of familiarity with the subject matter look identical, and I cannot make a difference which fits my needs better or don’t have the benefit of informed advice, I typically go for the cheaper one. You?

    In my work, I pretty much see the commodity effect in action. I’m developing industrial software (individual contributor, not manager), and our customers make a specific point of not wanting to be locked in to a particular vendor, unless that product offers a feature of clear value that cannot be duplicated or even approximated with a competing product. Those features are always outside the standardized part of the tool. Whatever is standardized has meanwhile been figured out how to do well by all competitors, and competing solutions are more or less on par.

    And our margins are suffering accordingly. We have to throw in more and more (quasi) free features, support, and services.

    On the side of the computing/development platform, both we and our customers are increasingly converging on Linux, with its free tools. It is very hard, and close to impossible for platform vendors to compete with free (or lower cost, as you still have to pay for incremental hardware, IT management, and commercial Linux support), and offer value increments so great that their customers are willing to shell out real money. In particular when their products are being commoditized.

  21. B says:

    cm,
    I can understand what you are saying but I suspect your actions are a little different than your words.

    First, I doubt you always buy the cheaper product if “all things are equal” because that scenario never arises. There are no products where all things are equal. So, you buy store branded cola? You buy generic toothpaste? You don’t buy J&J bandaids? You buy store brand mayo? You buy a generic MP3 player and not an iPod? You buy Kroger brand beer? You buy generic laundry detergent? You buy your shoes at Wal-mart? You you drive a Yugo? And because programming is programming you chose the University of Phoenix online in lieu of MIT? There are very few products which are exactly the same where you can buy an appreciably cheaper product.

    If you indeed do all of these things, you are the only consumer in the US to do so and no one wants you as a customer anyway. And, you believe standardization results in commoditization? So, AIX is no different than HP-UX and no different than Solaris to use examples your customers deal with every day? And JD Edwards, SAP, Oracle and QAD ERP systems are no different? And IBM or BEA are no different than open source when it comes to delivering functionality to build a SOA? If that is so, then why do all of those vendors spend billions annually hiring sales teams to extoll the virtues of their product? Standardization allows interoperability or the ability to snap in components or interface with other standardized products but it isn’t commoditization. Even the dreaded PC is far from a commodity. IBM may offer a magnesium case which allows it to be dropped three feet without damage. HP may offer a three year warranty. Dell may offer free asset management software. Even Linux is not Linux without blathering on about why that is so. And there ain’t no Fortune 1000 company going to bet their future running their production order entry system on freeware. They may allow development to be done on it because you can hit the big red one without losing tens of millions of dollars a minute as Merrill Lynch would………

    Your company’s margins are suffering because competition is fierce and your competitors are innovating. Not because of commoditization.

  22. Mike G says:

    A work force that has to transform its skills to compete

    The IT companies I have worked for have shown jack-all interest in transforming the skills of their workforce.
    Doing the job cheap without regard to quality, making the stats look good by any means possible and bullying self-serving micromanagement appear to be the organizational priorities.
    The only training we received was worthless rah-rah scripts to parrot to the customer and learning to keep your mouth shut or get fired.
    Actually developing technical skills received no attention at all. I couldn’t get sent to a tech conference or training seminar if my life depended on it, and they discontinued reimbursement for the tech textbooks I studied on my own time during one of their endless rounds of ‘belt tightening’.
    All in all, this Texas IT operation beared many resemblances to the secretive, fear-driven mendacity, cronyism and incompetence of the Bush Administration.
    Management textbooks bear about as much resemblance to the nasty real world of corporate America and its employee throwaway mentality, as BW’s economists do to the economic reality for most of us.

  23. cm says:

    B: Apparently your definition of commodity is much stricter than mine, and also commodity status is not a yes/no thing, as many of your examples illustrate. And I did not say everything is a commodity. That’s a ridiculous suggestion to make.

    Let me just offer the following in an attempt of further clarifying:

    * I may purchase a product for specific uses that don’t exhaust all the product’s (potential) features or applications. In that case I may compare products only at the feature subset I intend to use. (This kind of extrapolates to “not locked in” if you add the respective motivation.) A vendor trying to improve their offering by a feature outside my subset will not get my attention. (OTOH if their market research/marketing is any good, many customers will want those extra features.)

    For example, I compare toothpaste by ingredients, and typically go for the no-frills version of whatever matches my preference in the basics, as I don’t care for particular flavors or colors, or whatever is on sale or comes in a larger size. The price variation is typically not large (one sign of a commodity situation).

    Having said that, I also typically stick with what I like, unless there are compelling reasons to switch.

    * I purchased a PC when I came to this country 5+ years ago. It still performs adequately, and I will replace/upgrade only when it breaks, or some application comes up for which it is not adequate. These days, that takes longer and longer. Before Y2K I had to upgrade every 1-2 years, and upgraded only every 3 because of lack of funds.

    * Companies are spending so much on marketing and market research in good part because only with large branding efforts can they successfully sell their otherwise commodity products, and/or identifying particular customer whims that can be exploited to marginally increase market share takes some effort.

    In other words, marketing is in good part about selling a lifestyle or fashion message, not emphasizing particular subject-matter merits of a product (unless the very purpose of a product is to make some type of fashion statement). Just look at most ads.

    * As you know something about industrial computers, vendors are typically not just selling the boxes, but a complete package with service contracts and software (vendor or third party). The hardware is just a vehicle to run the applications, and standard and benchmarks exist precisely to make them commodity. And from my perspective, yes AIX, HPUX, Solaris, Linux, etc. are all the same to the extent my software can use the POSIX/Unix subset of functionality. Standard bodies have made a good amount of effort to make it possible for me to write portable software in a standard development & deployment environment. If that’s not commodity, I don’t know what it is.

    The downside is, while I may appreciate non-standard innovation, there are clear counterincentives to using them, as this means committing oneself and one’s time to significant extra development efforts and architectural contortions. Vendors know this, and I don’t know of many such innovations, unless they are hidden behind the POSIX/Unix abstractions.

    And yes, I agree that makes me an undesirable customer. I’m fully aware of it.

  24. cm says:

    B: There is some inovation in my field, but customers are very much into standards, for the reasons of:

    * long-lasting legacy applications
    * avoiding vendor lock-in (commodity products)
    * ubiquitous labor skills (commodity labor)

    Don’t underestimate the latter. Nobody wants to be held hostage by uppity workers.

    Plus, my industry is characterized by relatively few large vendors and relatively few large customers. In a sense that creates a stalemate situation, where vendors compete for relatively fixed, and definitely stagnating funds, and customers OTOH can only play so many vendors against each other.

  25. cm says:

    Mike G: Sounds not too unfamiliar (not from direct personal experience fortunately). Somebody who feels in a safe and comfortable position (and thinks at least for the time being they have arrived skill building wise) may retort to you that it’s up to you to retrain, not your employer. You grow the fruit, they pick. Until it’s their turn to “upgrade” their skills. Then we will hear about it I’m sure.

  26. cm says:

    B: One aspect I overlooked is that as competition shifts to more marginal (in a quantitative, not judging sense) features, selling products becomes more of a zero-sum game. There is so much demand, and when somebody purchases one product or type of product, they won’t purchase another. And once they have a product that does the job, they are not going to buy the next very soon.

    Not that is admittedly not a very decisive point, and the degree of its truth depends on the particulars, but I believe it’s significant.

  27. iasius says:

    “Frankly, I believe a model where a board member is appointed as a representative of the employees is one that I think makes sense. Unions ought to give up griping and refusing change and trade it for a permanent board seat on companies.”

    Just don’t go as far as Germany did in the 70s and give half the seats to union representatives, especially not to people from union bureaucracy. They tend to put the union above the company and its workers.

  28. cm says:

    iasius: This is true for most bureaucrats and functionaries; the subject matter happenings are just a tool for securing their positions, incomes, and sense of importance. And that includes most executives, if it shouldn’t be obvious.

  29. cm says:

    Mike G: As long as I’m not losing my pontificating mood, the quick side note that “keeping your mouth shut” is what is usually called “soft skills”, and I gather you upgraded that already! Learning on the job, indeed.

  30. Mike says:

    Right on Barry. That’s why I put all of my 401k in cash in December. I just don’t like what I see down the road,

    I live in Central Florida in a nice neighborhood. In the last five years every home up for sale has had a contract on it within 2 weeks. A home for sale on the next street over has been on the market for 2 months. It is a nice home offered at a reasonable price but no takers yet.

    I just got my homeowners insurance renewal bill. It jumped 85% over last year. I have a friend in Illinois who just received his heating bill($467) for 1 month just after he received his real estate tax bill which has jumped 70% in 2 years.

    I’m single, have no dependents, make a pretty decent income and am having trouble making ends meet. I can just imagine what people with families are going through. If oil spikes to $100, the nail is in this economy’s coffin.

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