Welcome! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(16 January 2020) [SR] “An Amish Lesson for Small Business Success” The Wall Street Journal
——–“Dalton, Ohio is an unlikely place to find fresh insight into how to thrive in a chaotic 21st-century economy. It is the word’s largest Amish settlement and home to Pioneer Equipment, a manufacturer of plow, tillers, manure spreaders and other forms of horse-drawn farm equipment. Pioneer is owned and run by the Wengerd family, who are Old Order Amish, which means that they get around in a horse-and-buggy and keep their homes disconnected from the power grid, free of telephones, computers and other modern technologies. Yet despite the antiquated nature of what Pioneer Equipment makes and how they make it, the company is a success.”
One factor contributing to that success is that “the narrowness and complexity of Pioneer’s market is actually a strength. While 25,000 farmers aren’t enough to attract the full attention of the big players like John Deere, Kubota and Caterpillar, they are more than enough to support Pioneer and several other Amish farm equipment makers, all of which are growing healthily.” So, “companies like Pioneer offer an alternative path. By focusing obsessively and passionately on an audience that they know uniquely well, and by embracing the tools that will help them serve that audience while rejecting those that won’t, such small businesses are able to thrive in the 21st-century economy.”
********The author of the article, Adam Davidson, is also the author of The Passion Economy: The New Rules for Thriving in the Twenty-First Century. In the terms of Michael Porter’s book Competitive Strategy, it appears the Pioneer has adopted a strategy that is Narrow and Differentiated, the Differentiation Focus. You can see the 2×2 table of Porter’s four generic strategies here. Evidently these markets are too small—at present—for large firms to bother with.
Frieda Caplan, also known as the Kiwi Queen, provides another example of someone who was very successful by focusing on exotic fruits and vegetables that larger firms wouldn’t touch. Caplan recently passed away, and her obituary tells the story of how she became the “Mick Jagger of the produce world.” Caplan was “a tenacious maven credited for introducing kiwis, mangoes, habanero and shishito peppers, passion fruit, bean and alfalfa sprouts, baby carrots, sugar snap peas, starfruit, blood oranges, shiitake mushrooms, turmeric, and hundreds more fruits and vegetables into the supermarket mainstream.” She notes, “I had a reputation of trying anything new . . . I couldn’t compete with all the boys on the big items . . . so I built the business selling things that were different.”
(16 January 2020) [SR] “For the Economy, Climate Risks Are No Longer Theoretical” The Wall Street Journal
——–“Last year Australia’s central bank hoped that several interest-rate cuts would mark a turning point for its slowing economy. That was before the worst bushfires in Australia’s history hit tourism, consumer confidence and growth forecasts for this year. There is now a good chance the bank will cut interest rates again soon.” Although climate change “can’t be directly blamed for any single extreme weather event . . it is makes such events more likely.” It is thought that “Climate crises in the next 30 years may resemble financial crises in recent decades: potentially quite destructive, largely unpredictable and, given the powerful underlying causes, inevitable.” Accordingly, “Climate has muscled to the top of business worries.” This year at the annual meeting of the World Economic Forum in Davos, Switzerland, “climate-related risks took the five top spots in terms of probability, the first time a single issue had done so in the survey’s 14-year history.” Pointing to the importance of climate change, studies “reviewed by David Mackie of JPMorgan Chase suggest climate change could reduce global gross domestic product by 1% to 7% by 2100,” assuming “business as usual.”
********Clearly climate change is on the mind of business leaders, one example of which is provided by the article “The winning conservative climate solution,” The Washington Post, authored by George P. Shultz and Ted Halstead. They summarize the “newfound Republican climate position . . . as follows: The climate problem is real, the Green New Deal is bad and the GOP needs a proactive climate solution of its own. Our big question is what form it should take.” Shultz and Halstead note that there are “essentially three ways to reduce emissions—regulations, subsidies and pricing.” According to them, “The winning Republican climate answer is the third option: carbon pricing. Just as a market-based solution is the Republican policy of choice on most issues, so should it be on climate change. . . . Not surprisingly, this is the favored option of corpora America and economists—including all former Republican chairs of the president’s Council of Economic Advisers.” The thoughts of Shultz and Halstead are further developed in a downloadable and highly readable brochure “The Pricing Advantage.” This is likely as simple and concise argument one will find of the benefits or carbon pricing as one arrow in the climate change policy quiver.
A useful perspective on pricing solutions is provided by Robert J. Samuelson in “Can Wall Street save us from climate change? (Fat chance.)” The Washington Post. Told through a discussion of the role of Larry Fink of BlackRock, which manages a $7 trillion collection of investment funds, Samuelson rightfully points out that “First—and foremost—combating global warming is mainly a governmental problem and can’t conceivably be accomplished without acknowledging that. Private firms, whether electric utilities or vehicle manufacturers, may be the instruments to attack climate change, but they will respond to the policies and incentives created by the political process.” But the political reality is that, “although many Americans say they oppose global warming, they buying public prefers SUVs and lower electricity bills to smaller cars and higher bills. As a result, federal anti-climate-change laws are virtually nonexistent.”
(18 January 2020) “How the ‘Sharing’ Economy Erodes Both Privacy and Trust” The New York Times
——–In an age in which digital surveillance is increasingly prevalent, does the notion of trust lose its meaning? Brian Chesky, the CEO of Airbnb, holds that “we don’t think you can be trusted in a place where you’re anonymous.” So in order to “participate in services like his . . . you need to expose yourself. It’s a model of consumerism that depends on customers’ transparency. It’s also a model of consumerism that makes our traditional idea of trust irrelevant. To trust someone is to assume that you can rely on them—that they do not need to be monitored or policed. But the infrastructure of the sharing or trust economy is largely a series of technical advances that enable us to track people constantly, removing any need to trust them.” Ultimately, “Without private spaces, where life occurs beyond our vision or knowledge, there is no need for trust.”
********The article concludes, “Much of today’s privacy debate assumes that precious parts of our lives are under threat from intrusive corporations and governments. And this is so. But at an even more fundamental level, the design of our digital economy is steadily eroding the temperamental qualities that we need in order to treasure privacy at all: our tolerance for opaqueness, uncertainty and disconnectedness—and our faith in the decency of others.” Articles such as this drive home the importance of The Age of Surveillance Capitalism, by Shoshana Zuboff.
May you have a good week!