Stephen Douglas was re-elected to his third term as Illinois' Senator in 1858, beating Abraham Lincoln in a tight election. 

Douglas supported popular sovereignty, "the doctrine under which slavery in the territories was to be determined by the settlers of the region (Ecelbarger, 28)." This countered the Dred Scott v Sanford decision of 1857 which said, basically, that slavery was permitted throughout the territories. In 1854 Douglas had pushed through Congress the Kansas-Nebraska Act which repealed the Missouri Compromise "and opened territories and future states west of the Mississippi River to slavery" (Ecelbarger, 5).

Lincoln saw all this and responded in his own way. He was a member of the new Republican Party, a party which had two wings with divergent views on slavery, one abolitionist and the other supporting popular sovereignty. He saw the need, if this new party was to be a truly national party, to somehow bridge these two points of view with a third point of view that could unite the Republican Party enough for it to indeed elect the next president. While Lincoln wasn't saying it publicly yet, he wanted to be that next president.

In a speech in Chicago in March, 1859, Lincoln placed himself between the two extremes, coming out against slavery, hoping not that the states could decide individually about slavery (popular sovereignty) or that it be allowed everywhere (Dred Scott), but that it "dwindle to extinction" (Ecelbarger,29) naturally.

The real hope of Lincoln's principled pragmatism was, of course, that the nominating Republican convention for the presidential election in 1860 would realize that Douglas' ambiguous position on slavery would make him an "un-Republican" candidate for the 1860 election, leaving the field to Lincoln.

Lincoln's position between the extremes both for and against slavery ultimately won him the nomination. Pragmatism won. So did the country. Not a bad strategy.

References

Ecelbarger, Gary. The Great Comeback. How Abraham Lincoln Beat the Odds to Win the 1860 Republican Nomination. Thomas Dunne Books. 2008.

Open sourcing your software makes sense. So does open sourcing your hardware, and your services, too.

Why do it? Open sourcing is tough to make money at, per se. Where the profits come from is the knowledge you gain by being the center of the action relating to your project, whether it be software, hardware or services.

References

Cook, Scott. The Contribution Revolution. Letting Volunteers Build Your Business. Harvard Business Review. October 2008. 60.

Thompson, Clive. Build It. Share It. Profit. Wired. November 2008. 166.

Pitching a business plan? Consider (Business Briefing, R2):

• It's hard to fake excitement about your plan. Make sure it shows.
• If they can't wait to break into your conversation, they're listening. Listening is good.
• If they are mirroring your gestures, that's a good sign. Mirroring is innate. Everybody notices what's going on. Take advantage of it.
• People can read your fluidity, the consistency of your presentation. Practice far in advance. People notice.

The bottom-line: Face to face dialogs are where the decisions get made. If you are attempting to work via email, reconsider your strategy. Spend more time at the water cooler.

Reference

Executive Briefing. The Power of Nonverbal Communication. Wall Street Journal. 20 October 2008. R2. http://online.wsj.com/article/SB122426675804545129.html

Two key facts (Engardio, 23):

1. The assumption that innovation and productivity alone will sustain the American standard of living may prove erroneous.
2. Real incomes have declined over the last decade, even as productivity increased.

Two interesting solutions:

1. Look for more state - and international support for - investment in production capacity in growth industries like autos (yes, there is growth coming), nanotech, and renewable energy.
2. That support will likely flow to companies in GDP producing industries: you've got to make something to survive.

Two interesting opportunities:

1. Position your company as a problem-solver in industries that will support high-paying, high technology jobs that create wealth.
2. Use that positioning to team with the government in high capitalization industries. Look for more government regulation in financial industries and manufacturing industries. If the government is going to provide subsidies, they are going to require new efficiencies that increase productivity - and GDP.

Reference

Engardio, Pete. Forget Adam Smith. Whatever Works. BusinessWeek. 27 October 2008. 22. http://www.businessweek.com/magazine/content/08_43/b4105022816429.htm

The financial crisis we are witnessing today was fed by greed, lack of leadership, lack of controls, and a whole lot more. All this has happened before. sometimes at some of the most well known companies in America. Sometimes, it is hard to remember that well-respected people were making all sorts of bad decisions, decisions that sometimes led to personal and business failure.

Archer Daniels Midland Company has been a well respected pillar of the chemical, food and agricultural community for a long time. Things were wrong there in the early nineties. ADM's story is important because it reminds us that, while things have gone wrong today what with the financial mess we are experiencing, they have gone wrong in the past as well. That this has gone on in the past is not a pretty reality exactly.

The story boils down to this: a president of a division at ADM was stealing from the company to the tune of about ten million dollars over some years. To cover his tracks, he made up a story about someone from abroad threatening his family - and called the FBI. The FBI investigated, and, to continue to cover his tracks, the president reveals a whole series of illegal indiscretions the company has made and that he was privy to: price-fixing on an international scale and theft of company funds on a large scale (Eichenwald,30).

The story is intriguing and interesting. The facts are proven. People went to jail. Careers were ruined. That's all well and good.

The message of all this, while blatant, is subtle at the same time. Let's call it the "slippery slope" we are all so used to.

At ADM a culture grew in which both theft and price-fixing were accepted. Everyone did it. No one objected. It appears that some people left, but not many. The FBI was astounded that one person would reveal so much - the president of a division, no less - and further, that no else in this very large scheme even considered saying "This is wrong, we've got to stop," much less called the FBI. Some of the players were internationally known business leaders with contacts very high in the federal government. OK, greed played a role. The "I deserve more - this is a good way to get it," mentality grew too large. Lots of people participated.

This book should be required reading for all sorts of managers. Business schools should require it. Why? Because it reminds us all how easy it is for things to go very wrong in the management of a company. It happened to ADM. It can happen to your company, or mine, as well.

Reference

Eichenwald, Kurt. The Informant. A True Story. Broadway Books. 2000.

Gap is a specialty casual retailer; Old Navy is a value-oriented family store; Banana Republic is a moderately priced designer retailer (Rubinfeld, 299). 

You knew that already. But Gap, Old Navy and Banana Republic didn't know that until Paul Pressler left Disney and moved to Gap Inc. His first move was to clearly define the core values of each of the brands.

Once you know what the value of your retail operation is, now figure out how to turn your brand's values into growth. Rubinfeld plotted out the growth of Starbucks early on in his tenure during the period when Starbucks grew from one hundred to four thousand stores. Values first, yes; then lay out a framework that takes those values to the mundane of such issues as store daily opening and closing. Starbucks uses demographics to choose locations. Then it examines the parking lot of suitable locations. Oil on the tarmac? Good. That's evidence of lots of traffic which helps build sales. Cluster your stores. Budget opening properly. They've thought of it all (Ehrenfeld, 7).

Innovation is part of all this. Your insights - especially in retail - define your innovation path (Rubinfeld, 300) :

• Prove you have the license to expand the category or enter a new one by planning far in advance.
• Time your entry properly. Now, what with the changing financial statistics related to recession, might be a good time to dust off old plans and re-examine the possibilities that you have had time to consider before. Things, obviously, will turn around eventually.
• Finally, if you are abandoning your current demographic or expanding in to a related one, make sure your plan - and your products and facilities - make enough room for profits in the new one.

References

Ehrenfeld, Tom. Starbucks and the Power of Story. How the coffee retailer uses its own narrative to brew global success. strategy+business. 10 October 2008. http://www.strategy-business.com/press/article/08211?pg=0

Rubinfeld, Arthur and Collins Hemingway. Built for Growth. Expanding Your Business Around the Corner or Across the Globe. Wharton School Publishing. 2005.

Steven Jobs always gets the easy jobs.

• Create a new industry with the personal computer.
• Implement new technology for the first time with the MacIntosh computer.
• Battle with a CEO - and lose - in his battle with John Sculley.
• Return to a broken company with the aim of turning things around. 

In the first quarter of 1996, Apple Computer lost $69 million, laid off 1,300 staffers, fired their CEO, and, finally, brought in Gil Amelio as the new CEO. Amelio continued to cut out the pork in Apple's operation by reducing the number of projects from three hundred to about fifty. Amelio needed a new operating system for the Mac so he bought Jobs' NeXT computer because its operating system was up and running and perfect for the Mac. Apple had forty different product lines, a confusing, unfocused array that needed culling.

After a series of losing quarters, the Board asked Amelio to leave and hired Jobs as CEO (Kahney, 22).

When Jobs came on board, Apple had forty product lines. His job: reduce the forty to the profitable few. Make a profit. Now. How'd he do it?

Job's Seven Key "Realignments" (Kahney, 26-33)

• Replace most of the Board with tech industry allies, including Larry Ellison from Oracle.
• Resolve the suit with Microsoft about similarities between Apple's operating system and Microsoft's. Persuade Mircosoft to invest in Apple to show good will.
• Hired a new marketing company - TBWA/Chiat/Day - to create a new, bold marketing campaign.
• Dump the clone business relationships. No more non-Apple computers shipped with the Apple operating system.
• Simplify the pipeline. Just four products for the company: Consumer Portable and Desktop and Professional Portable and Desktop. Every thing else got dumped, including a very profitable printer business.
• Refocus the suppliers (IBM and Motorola) so they provided concessions he wanted and supported Apple going forward.
• Finally, he re-focused on the twenty-five million current customers of Apple. They were the foundation for the re-emergence of Apple.

The biggest change of all: Jobs focused the company on the four product lines, trimmed any remaining fat and began again, all without all the bravado and temper tantrums he was known for.

The iPod and the iPhone were in the future. The initial steps of focus in 1997 and 1998 laid the groundwork for future success.

Reference

Kahney, Leander. Inside Steve's Brain. Portfolio. 2008.

I got hold of  a list of the "best non-fiction business books ever written" back in July (Nocera), not knowing that the list promised some amazing - and timely - reading. I've read about containers on ships, the movie business (twice), the New York Times, the sixties, the eighties, the nineties, you name it, it's in the list.

So, the latest book (Auletta) is scaring the day-lights out of me, I've got to admit. Our savings are tanking in the stock market, and I am reading a very exact description about the first time Lehman Brothers failed, in fact, the time Lehman Brothers first left its partnership business form and was purchased by another entity after 134 years of continuous operation In New York City.

Yes, I lived through this when it was in the papers. I suppose I am supposed to remember the facts. Maybe I did a little bit. But I never knew the story, the real story about what happened.

Auletta makes the case that it was greed that brought Lehman Brothers down.

For me, the failure of Lehman wasn't about greed, it was about power. Lewis Gluckman saw what he assumed was weakness in the current Chairman, Peter Peterson. He pushed, and he pushed, and he pushed until Peterson was gone, and he was in charge, able to do what he darn well pleased. Gluckman forgot a couple things. Yep, he'd been a wonderful Mr. Inside - he knew how to run the operations side of things. He thought that was all that mattered. Wrong. Mr. Outside - Peterson - was just as, if not more, important as he brought in the business and expanded what they already had. Some bad bets, combined with a downturn, put Lehman on the ropes within months after Gluckman's successful "coup" forcing a sale after nine months of Gluckman's tenure.

Amazing, sad, scary - all at one time. And the story isn't that different from this go around at Lehman. It is clear that history does provide guidance, if only we took the time to remember it.

Reference

Auletta, Ken. Greed and Glory on Wall Street. The Fall of the House of Lehman. Warner Books. 1986.

Nocera, Joe. The Best Business Books Ever? New York Times. 17 July 2008. http://executivesuite.blogs.nytimes.com/2008/07/17/the-best-business-books-ever/?hp

Scott Cook, the co-founder of Intuit, talks about a very specific add-on to the TurboTax website that some of his managers didn't expect to work very well. It was simple, actually, a Q&A community built in the the 2007 version of TurboTax on-line (Cook, 67).

Five weeks into the Q&A's test period, they were ready to score it a success. In 2008, they added another section to the site, a user review section. Expectations were for complaints. Didn't happen. The vast bulk of the responses were positive (Cook, 67). Good news.

Why do folks contribute (Cook, 68)?

• They don't realize they are.
• They want their practical solutions implemented quickly.
• Interaction is its own reward.
• Reputation enhancement.
• Expression
• Give back to your community.

Finally, what are the keys to making you community enhanced site work better - or to get your at-work community to happily contribute (Cook, 69)?

• Take your time.
• Don't expect a lot early on
• Celebrate your successes
• Use the process to experiment
• Let folks "vote" on what they like best and find most useful.
• This could be a bottom-up process - seek buy-in from the whole organization only after you've had some successes.

We're thinking of applying this process to two opportunities:

• Creating a red team web site to respond to economic development opportunities where no response is a normal response.
• Creating a community of communities who are inundated with abandoned homes because of the mortgage crisis with the ultimate goal of managing the sales process of abandoned homes so they end up being owner occupied, not renter occupied. This ensures that the community will grow healthy - and more valuable - more quickly (See Rundle).

What opportunities do you see?

References

Cook, Scott. The Contribution Revolution. Letting Volunteers Build Your Business. Harvard Business Review. October 2008. 60.

Rundle, Rhonda L. California Officials Try to Avoid Second Housing Hit. Wall Street Journal. 7 October 2008. A8. http://www.wsj.com/article/SB122334317101810201.html

"... social panics occur when large groups can't discern reliable sources of advice from unreliable ones (Cloud, 15)."

"In the middle years of this decade, we had negative real short-term interest rates. And that really means free money, which really distorts the system. Capitalism is premised on the idea that capital is a scarce commodity rationed with a price mechanism. ... People all over the housing and financial service industries figured out ways to lever themselves up way too far (Bartiromo, 22)."

"In the case of Fannie Mae and Freddie Mac ... Their massive lobbying machines thwarted every legislative attempt at reform (Rickards)."

"The problem is that Wall Street and regulators relied on complex mathematical models that told financial institutions how much risk they were taking at any given time, ... a colossal conceptual error: the belief that risk is randomly distributed and that each event has no bearing on the next event in a sequence (Rikards)."

"Since we have scaled the system to unprecedented size, we should expect catastrophes of unprecedented size as well (Rikards in Crovitz)."

Flip a coin. What are the odds that it will be a heads? Fifty percent. We all knew that. And we'd be right, at least most of the time.

The folks who make financial models for investment strategies have basically assumed the same thing. Every event is not related to any other event. Flip a coin. It's fifty-fifty whether it will be heads or tails. Every time. That's the assumption.

More complex situations muddy the math, but, basically, statisticians have always operated under the assumption that events were not related. They used those same assumptions when creating complex financial models to predict whether an investment would pan out. Most time, they were right.

Long-Term Capital Management made that assumption in the nineties. Trying to predict the volatility of the market, they assumed that volatility was a constant and could be predicted, or at least managed (Lowenstein, 68). They predicted that a group of bonds were good investment, even in an extremely volatile market. They invested on that assumption, big time. Not only did they invest their cash, they borrowed money to invest. That's called leverage. It is supposed to be a good thing in the right hands.

LTCM was sure that the investment was a good one, even as the volatility increased. The effect of the volatility, especially as other investors abandoned the investment, was that their leverage effectively increased. Now leverage can be good.

LTCM's leverage at its peak was one hundred to one (Lowenstein, 191) - one dollar invested of their money, ninety-nine dollars invested of someone else's money, money they would ultimately have to repay. Leverage is great if things go well. Leverage is not so great if things go wrong.

LTCM's market began to collapse with the collapse of Russian bonds in 1998. Their leverage foretold their ultimate demise. It was underlined by the fact that when LTCM bet, they bet big. Their bets were so big, in fact, that they couldn't unload them on the way down, because that unloading would have moved the markets even lower, yet. Ultimately, it took a near $3 billion investment to right LTCM. It survived. Everyone was supposed to remember that events are not independent. Panic ruled the bond market on a day when LTCM assumed it wouldn't. They couldn't abandon their positions quickly enough and got left holding the bag. It was a huge bag filled with bad investments.

The Fat Tail

One last thing about LTCM's assumptions.

They assumed that the bell curve of their variable went to zero out at the positive and negative extremes based upon their rationale that their assumptions were independent of other assumptions. They were wrong. Only approximately ninety-nine percent of the time do variables have zero percent extremes.

In times of panic, their extremes fall to one percent, not zero. That means that, inevitably, their projections will be different than they expected. When they're wrong, and they're leveraged, the losses are huge. Just like they were in 1998 - and in 2008. That's called panic.

What's that got to do with the fluctuations in the market in the last couple weeks?

• Bad information caused the markets to fall rapidly as folks assumed they were better off out of the market rather than waiting to see how things would shake out.
• Bad management of interest rates led some financial firms to create a market in mortgages that they shouldn't have been allowed to create.
• People bought too many of the new mortgages, then abandoned them when the markets made their investments in their homes worthless.
• The market grew huge faster than was expected, so huge, in fact, that no could get out without going bankrupt.

And bankrupt they went. We'll see how it all shakes out. Looks like someone is going to make a huge investment. I suspect it will be you and I. We all paniced. We all lost - big time.

References

Bartiromo, Maria. Blackrock's Peter Fisher On When the Pain Will End. BusinessWeek. 20 October, 2008. 21. http://www.businessweek.com/magazine/content/08_42/b4104000808352.htm 

Cloud, John. The Moment. 10/06/08. Time. 20 October 2008. 15. http://www.time.com/time/magazine/article/0,9171,1848734,00.html

Crovitz, L. Gordon. The 1% Panic. Wall Street Journal 13 October 2008. A17. http://online.wsj.com/article/SB122385689217827341.html

Lowenstein, Roger. When Genius Failed. The Rise and Rall of Long-Term Capital Management. Random House. 2000.

Rickards, James G. A Mountain, Overlooked. Washington Post. 13 October 2008. http://www.washingtonpost.com/wp-dyn/content/article/2008/10/01/AR2008100101149.html

The Civil War made a lot of people rich, John D. Rockefeller among them. He started as a trader in commodities (salt, clover seed, timothy seed and pork) and ended up a wealthy man. He was still in his twenties (Chernow, 71). During that period, Rockefeller learned one crucial technique, namely, how to make the railroads compete for your business. Since his commodities business had lots of shipping needs, and there were a myriad of railroads available - too many, really, as a shakeout had not yet occurred - Rockefeller attained the lowest price possible on his company's shipping. While later in life Rockefeller would shun debt financing of his business's growth, during the Civil War period he borrowed as need be. His lenders became his mentors, always helping him focus on the need to repay every loan he took. Yes, it was serious business for Rockefeller, but at the same time a joyous business. It was, truly, fun (Chernow, 68).  

During the same period that Rockefeller was building his business, he was also building his life. He married and began to grow a family. Just as importantly, he build a serious relation with his church, becoming an unfailing supporter of his church (the Erie Street Baptist Mission Church) in Cleveland (Chernow, 77).

He formed alliances with the railroads to secure kickbacks on his and others shipments of oil from the oil regions and refinery regions of Western Pennsylvania and Ohio to the East Coast, and then on to the world. The key word here was kickbacks. Since there weren't laws yet against such kickbacks, Rockefeller didn't mind plunging ahead with them no matter what his competitors thought.

Depending on your point of view, Rockefeller became, even this early in his career, either a religious homebody living a saintly life, or a scoundrel living on the spoils of other's work. As he retired thirty or forty years later, it still wasn't clear, and, basically, we still have a choice to make about it all. The government, finally, with the anti-trust legislation and court challenges and wins, forced the issue and broke up the empire that Rockefeller so carefully created. Rockefeller became a philanthropist - Churchill recognized Rockefeller for his generosity and discernment in science (St. Louis Post Dispatch) - who supported universities all over the country.

There was one final, saintly act that is forgotten, even in today's tumultuous financial markets. It was Rockefeller, in combination with federal money directed by Theodore Roosevelt, that turned the tide in the panic of 1907. J. P. Morgan got most of the credit. Rockefeller, quietly, supplied a lot of the funds that staunched the panic (Chernow, 544).

By order of the U.S. Supreme Court in May 1911, Standard Oil broke into thirty-four separate companies. We're not going to analyze here how well that split-up actually worked, as the entities were still owned by the same stockholders. There is, however, an interesting fact buried in the thirty four new companies created. Standard Oil of New Jersey inherited refineries, oil tankers, and marketing apparatus. It did not, however, inherit any oil to refine, ship or market. That spelled opportunity for another producer who had a lot of oil with no place to sell it (Davis, 77).

Edward L. Doheny had been developing oil fields in Mexico. In 1910 and 1911 his company had a couple gushers, a lot of oil, and no where to sell it. Standard Oil of New Jersey became one of the buyers for the Mexican oil, saving Doheny's company during the early development of the new fields in Mexico (Davis, 77).

Rockefeller's was a circuitous story with ups and downs all along the way. Doheny's wasn't much different. Revolution in Mexico ultimately made Doheny's ownership of the oil fields risky, as the Mexican government was interested in nationalizing them. In support of the Tampico oil fields, the U. S. Navy blockaded the port of Veracruz and supported American interests. The U. S. wanted the oil (Davis, 96).

Now, the Doheny story would have been a good Los Angeles boy makes good story except for one debacle that happened in the twenties, the Tea Pot Dome scandal. While finally found not guilty to all the counts against him, Doheny had hoped that his professional career wouldn't be judged by on scandal. It was not to be. Donheny spent his last years in declining health.

In contrast, Rockefeller targeted a one-hundred year life. He died in 1937 at ninety-seven, feeble, but bright to the end (Chernow, 674).

References

Chernow, Ron. Titan. The Life of John D. Rockefeller, Sr. Random House. 1998. 

Davis, Margaret Leslie. Dark Side of Fortune. Triumph and Scandal in the Life of Oil Tycoon Edward L. Doheny. University of California Press. 1998.

Gold, Russell. Market Slide Puts a Spotlight on Big Oil's Cash Hoard. Wall Street Journal. 7 October 2008. B1.

St. Louis Post Dispatch, 8 July 1936.

Containers - lots of them - come into the US through the Ports of Long Beach and Los Angeles. From a national point of view, the ports dominate west coast container shipments arriving from Asia.

Three key points:

1. Shippers will go where the costs are cheapest and the down time to unload cargo in port is shortest (Levinson).
2. Baja California is considering building a multi-billion dollar port south of Ensenada in Baja, California (Dickerson).
3. Local authorities, the Air Quality Mangement District if I am not mistaken, are beginning to ban older, more-polluting trucks from servicing the harbors (to pick up incoming containers) because they are polluting the air (Roth).

Trumping the billion dollar investments in the LA ports by the Mexican government and its contractors to build an entirely new port without green restrictions is an iffy proposition in a down economy.

Less pollution and less traffic flowing through the LA region is perhaps the only positive outcome of a Baja port. In the short run, a successful bid to build a port in Baja is a disaster for the middle-class truck drivers servicing the LA ports.

What should the ports do?

One solution is to slowly wind down. That'll will take some time as the investments and infrastructure are huge and not easily - or sensibly, I know - abandoned.

The other solution is to turn the problem - regulation leading to higher costs - into a marketing opportunity.

1. Make sure that every shipment through the ports is branded with the green port label.
2. Make sure the shippers know about the green port label.
3. Make sure ultimate consumers know about the green label, so much so that they demand green labeling on everything they buy.

The Ports have a choice:

• Wind down now or sometime in the future or
• View things as a very large marketing opportunity and act accordingly - now.

Given the large investments already sunk in the ports, I suggest the later.

One last thing about green labels: they only last so long before everyone else - the other harbors - have a green label of some sort of their own. While the label may work for a while the harbor's task is never done. After the green marketing effort, they need to address other things, like pay to employees (why do they always come first), technology to speed handling of containers, train and truck technologies, and other things to speed containers off the ships and on their way to consumers.

References

Dickerson, Marla. Mexico plans huge Baja port for U.S. trade. LA Times. 28 August 2008. http://www.latimes.com/business/la-fi-mexico28-2008aug28,0,844963.story

Levinson, Marc. The Box. How the Shipping Container Made the World Smaller and World Economy Bigger. Princeton University Press. 2006.

Roth, Alex. Two California Ports Will Ban Older Trucks. Wall Street Journal 29 September. A32.

Mexico wants to build a port in Baja to compete with the ports in Long Beach and Los Angeles. Dickerson nicely lays out all the positives and negatives here.

So why would anyone build a port south of the border for the American market? We don't have the financial numbers. I'll bet that they pencil out OK for the right investor, especially given the forty-five year term of the lease on the harbor. Deep pockets are involved. Maybe we accept that. Now comes the hard part.

Why would the shippers want to use the port? Since the inception of the containerized shipping industry in the fifties and its growth in the sixties and seventies, things have changed. What was once a growth industry has matured into a commodity business. Changes are occurring, of course, but they are coming slowly. Prices for shipping a container will likely remain fixed unless there is a change in technology that allows for more profitability for the lucky early adopters of the new technology.

A rough timeline of the changes in the industry shows changes in the container itself, the crane used to pick it up and either place in on or off the ship, the technology imbedded in the ship, the size of the ship, the speed of the ship and the ship's likely fuel economy. Quite a list.

The containers have gotten larger year by year. The early ones were six and a half feet tall. I notice that they're now nine and a half feet tall. Looks like the length has stayed constant at forty feet. The container itself is not likely to change too much, especially in a way that effects a Mexican port. Perhaps, the containers could get even larger than they are today - say fifty-five feet long versus today's forty feet - but that would require huge investments in cranes at every port the ships call at. The trucks would need a change. Finally, who is going to fill up a fifty-five foot long container?

Cranes are crucial. They're the key element that trap a ship in port, a losing proposition for the ship owner who isn't making any money unless the ship is under way to the next port. That means two things: there have to be enough cranes. The cranes that are available must be fast a both unloading a ship, and loading it. Mexico could compete here if they buy the newest, best cranes and keep them up-graded.

Ship technology continues to evolve. Early ships were converted WW II tankers. No longer. The ships are behemoths. The interactions between the cranes and the ships are computerized to ensure that the correct containers are swapped at the right time and that the ship is trimmed properly (flipping in port used to be a problem, way back when) at all times. There may be a place for more growth in the size of a ship, but it is my bet that the best place for improvement is in fuel economy and speed. That means hull design - and maybe even surface designs - that reduce drag from water and air might increase profitability.

All this ship design doesn't effect Mexican ports any more than American ports, unless there is some way to equate ship design with port utility. American ports are becoming more and more environmentally conscious, so Mexico may be able to take advantage of that, at least for the short term. Alternatively, the ship owners, or the shippers themselves (the ones that own the product in the containers), may be able to make a case to their customers that an environmentally friendly port helps them. Mexico has the opportunity to build green technologies into their port that exceed American technologies - and that reduce costs or time in port for shippers.

The California ports need help getting the containers to the trains. Congestion seems to be great between the ports and the train hubs in the Inland Empire of Riverside and San Bernardino Counties. If Mexican operator can negotiate with the rail roads to place an adequate train hub at the port, that could create an advantage, enough to reduce crucial shipping costs. Time is money, after-all. In this time of security checks at borders, it seems that a technology solution for speeding the containers over the border could make the Mexican proposal sensible.

Since some of the rail lines in Mexico will probably be new, there may be speed technologies that could be built into them as well as into the trains themselves. Fuel economy is still important as is speed to market. Some changes might be possible especially if the infrastructure is newly constructed with new, "buried" technologies.

Mexico may be able to add fuel to the ships to the equation. If they were able to fuel ships cheaply while they are in port, there may be pennies to be saved, enough to tip the balance toward the Mexican location. Same for the trains.

The Long Beach/Los Angeles ports are up and running. Yes, they are making continual improvements. If the Mexican port was able to make all the suggested changes add up to reduced shipping costs - and reduced time in port - they might have a case for creation and expansion of their proposed port.

If we think of all this from the US side of the border, the same suggestions apply. If the trains can't cross the border, the Mexican port can't pencil out. Alternatively, the US ports can make environmental and efficiency changes that increase the odds that their ports are cheap enough and speedy enough to hold their current clientele and attract others.

A lot of pencils are going to need pushing on this deal before it is done.  The shippers may perceive savings in dropping containers in a Mexican port. The investments to make that happen will be large - and risky - for all sides.

Reference

Dickerson, Marla. Mexico plans huge Baja port for U.S. trade. LA Times. 28 August 2008. http://www.latimes.com/business/la-fi-mexico28-2008aug28,0,844963.story

Levinson, Marc. The Box. How the Shipping Container Made the World Smaller and World Economy Bigger. Princeton University Press. 2006.

We all know Speedo for their sleek racing swimwear designs from way back when. We also know that Speedo made Michael Phelps' swim suit at the recent Olympics where he won all his medals. What we probably didn't realize was that Nike also made swimwear for the Olympics, but it just wasn't as good as Speedo's. In fact, some of the swimmers sponsored by Nike were allowed to use Speedo equipment (Associated Press).

Speedo's been around a long time. They've probably made changes to their products in a sustainable fashion, meaning that they make incremental changes to increase utility and speed, but didn't shake things up too much. Until now. Their new swim wear really shook up these Olympics with demonstrably successful changes that won medals. Sustainable changes mean slow, incremental changes.

Disruptive changes shake things up. It looks like Speedo had a disruptive change going on as their latest upgrades helped swimmers in their suits win more medals.

The most interesting part of the story is yet to come: apparently, Nike is abandoning the swimwear market and leaving it to Speedo (Associated Press). It looks like Nike wasn't able to effectively out-perform Speedo in the engineering department where it counted. Nike left a market to a smaller, seemingly more innovative company. It'll be interesting to see if and when they return.

Reference

Associated Press. Nike to exit elite swimwear market. New York Times. 22 September 2008. http://www.nytimes.com/aponline/business/AP-Nike-Swimwear.html

Everything was fine, until everything on Wall Street was not fine. Now two old players in the investment banking business are more bank, less investment. Goldman Sachs and Morgan Stanley, after resisting change and insisting all was well, have changed their stripes and are now regulated bank holding companies (White). Less risk. Lower rewards. That's Wall Street today.

In parallel, as the investment banks become less investment and more bank, the remaining investment bankers are looking to build market share. Jefferies & Company and Evercore Partners are thinking of becoming more dominant in the new Wall Street (Story).

The rules have changed. The deck has been re-shuffled, disrupted. Disruptive strategies have pretty set processes, although they aren't sometimes obvious.

• Simple as compared to complex strategies make more sense. Warren Buffet said back in 2003 some of the derivatives he was looking at "weapons of financial mass destruction (Serwer, 24)." I think that pretty well describes some of the products that failed in the last couple of months.
• Cheap launches are more likely to succeed.
• Speed to market is a good indicator of future success for technology companies. It might be a predictor for service companies as well.
• Disruptive companies might actually not be as good as their competition. They'll have fewer bells and whistles on their products, but they'll be simple and easy to understand.
• Innovation in tech products does show, usually in unique design features that make the experience easier or more fun. Making a service product more fun makes it easier to use if done correctly.

The bigger investment banks are becoming more commercial and will probably leave opportunities for smaller investment banks to grow. Some people say the big companies will retain their business; others say the little guys have a change (Story). It seems to me that, if handled correctly, the smaller banks have a chance if they follow the disruptive strategy game-plan.

References

Serwer, Andy and Allan Sloan. The Price of Greed. Time. 29 September 2008. 32.

Story, Louise. As the Giants of Wall Street Topple, Smaller, Nimbler Rivals Move In. New York Times. 23 September 2008. http://www.nytimes.com/2008/09/23/business/23streets.html?_r=1&ref=business&oref=slogin

White, Ben and Louise Story. Last Two Big Investment Banks Reinvent Their Businesses. New York Times. 23 September 2008. http://www.nytimes.com/2008/09/23/business/23streets.html?_r=1&ref=business&oref=slogin