It’s 1982 Again

October 18th, 2021

Last week, the Social Security Administration announced it will increase payments to beneficiaries by 5.9% next year.  That is the largest increase since 1982.  For those of you in denial of getting old (like me), that was 40 years ago.  I almost cried when I read that.  I remember 1982.    

The same day the SSA announced its increase, the consumer price index (CPI) was announced at a 5.4% annual rate.  I (and many others) have argued for years that the CPI calculation grossly understates real inflation.  A safer car is a good thing but it still costs more in dollars than a car did years ago.  The government adjusts for product improvements in ways that I find questionable.  If I concede that CPI is accurate, the social security cost of living adjustment is essentially canceled out by the rise in prices.  Likewise, firms are starting to announce raises for 2022.  My gut tells me raises will be in line with inflation.

Unless inflation starts to moderate soon, I expect people to start to notice that they have less spending money than before.  Energy (up 25% over last year) and food (up 4.6% YOY) costs are a big part of most people’s spending.  If those costs continue going up, expect discontent from the general public.  That will not be good. 

How Are You Connecting With Your Customers?

October 11th, 2021

We recently purchased a new washer and dryer.  Like everything else these days, it is wi-fi enabled.  We can start washing clothes from our app! The app can’t get the clothes in the machine.  Yet.  The washer and dryer come with some preset programs but to get the full suite of programs, you need the app. 

At first, I thought that was a little annoying.  Then, I realized the genius behind having programs you can only use on the app: the manufacturer is getting real time data from customers on how they use their machines.  And the manufacturer is not paying for market research.  Brilliant!  (You can opt out from sharing data but that requires an additional step.)

The business to consumer world has always had numerous steps in the sales channel:  manufacturer to distributor to retailer to the consumer.  The feedback loop for product changes worked the same way in reverse.  That cycle is rapidly changing right before our very eyes.  How are the changes going to affect your business?  What are you doing about it?  Regardless of what business you are in, you better be using technology to connect with your customers.  More importantly, you better be taking action based on what your customers are saying. 

Alcohol shortages? Supply Chain Disruptions are Getting Real!

October 4th, 2021

I vividly remember a conversation I had with my older brother during the first few weeks of the shutdown last year.  We were joking about the run-on toilet paper and he said, “As long as we don’t run out of alcohol, we’ll be fine.’’  We laughed and I assured him I had enough wine in my house to make it through a prolonged shutdown.  He reminded me that he is not much of a wine drinker.  I reminded him that beggars cannot be choosers.  I also thought there is no way I am wasting my good wine on someone that does not appreciate it.

Well, here we are over a year and a half later and we have alcohol shortages.  A lack of liquor bottles is being blamed.  No supply chain is immune from the challenges we face with shipping, raw materials, and labor.

When you are in the middle of the storm, it feels like there is no end in sight.  The supply chain challenges are “transitory” as the Federal Reserve wants us to believe.  Of course, no one has put a stake in the ground and said what transitory really means.  My crystal ball is hazy but my best guess is six to nine months before things start to normalize in most supply chains. 

In the meantime, remember the line from the great philosopher, Homer J. Simpson: “Alcohol, the cause of and solution for, all of life’s problems.”  It’s 5 o’clock somewhere.    

Is FedEx the Canary in the Coalmine?

September 27th, 2021

FedEx released its earnings last week.  The stock went down as a result of an earnings miss and a disappointing outlook.  From the press release:

First quarter operating results were negatively affected by an estimated $450 million year over year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses. This was partially offset by higher package and freight yields, increased international export express shipments and a favorable net fuel impact. In addition, while commercial ground and U.S. domestic express package volume increased year over year, continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast. (Emphasis added.)

For more comments about the labor market and supply chain challenges, I encourage you to read the rest of the press release linked here.  You can read about FedEx’s price increase and additional surcharge.

Those of us that do not work for the Federal Reserve have been experiencing labor challenges and supply chain disruptions daily for months.  At some point, a lack of people to fill jobs and a lack of goods to buy will create an economic slowdown.  If that plays out, companies will be paying more to attract workers (rising wages =  good, lower profits = bad), consumers will be paying more for everything  (inflation = bad), and interest rates are still around zero so the Federal Reserve does not have a lot of leeway to cut interest rates.  Oh, and the knuckleheads in congress are talking about a massive tax increase. 

Buckle up.  The next few quarters are going to be a little bumpy.  Remember, chaos creates opportunity.  There are going to be a lot of opportunities to improve your business in the next few months.  Get ready!

Be Leery of the Nanny State

September 20th, 2021

Hudson, Ohio, is a very affluent community.  Its schools have an excellent reputation.  Recently, an assignment given in a high school English class in Hudson has sparked outrage.  The students were given a book titled “642 Things to Write About” and told to choose a topic.  Topics included:

  • “Choose how you will die.
  • Write a scene that begins: ‘It was the first time I killed a man.’
  • Describe your favorite part of a man’s body using only verbs.
  • You have a dream that you’ve murdered someone. Who is it, how and why did the murder happen, and what happens afterward?
  • You are a serial killer. What TV shows are on your DVR list? Why?
  • The kill fee.

Parents, the mayor, and other community leaders have called for the resignations of teachers, administrators, and the school board.  One parent quoted in the article linked above stood out to me: 

Erik Dirker, a police officer with the city of Stow, called for the school to install cameras in classrooms at the board meeting.

“Police officers wear body cameras to monitor their behavior, and they have brief interactions with the public. You guys have our kids all day and we don’t know what’s going on in the classrooms,” Dirker said at the meeting.

“I demand that there be cameras in classrooms as a matter of public record that we can pull and view what is being taught to our kids and what is being said to our kids,” Dirker said at the meeting.  (Emphasis added.)

Wow.  The parent in me thinks he has a point.  The libertarian in me is scared beyond belief.  We have accepted cameras in most public places.  But in every classroom?

Americans have long celebrated and defended freedom.  I might not agree with your choice but I respect your right to make your own decision.  I do not want cameras watching everything and allowing decisions to be second guessed.  The world already has too many Monday morning quarterbacks.  Placing cameras everywhere will only make things worse.

Take a Moment

September 13th, 2021

It is hard to believe that it has been twenty years since 9/11.  As I heard one pundit say, “That is almost a generation ago.  It is turning from a memory to history for many people.”  The memories of that day remain fresh in my mind.  My mother calling us in Chicago and telling us what happened.  Spending the day with a business school friend whose brother perished in one of the towers.  Wondering if colleagues I had worked with that summer were OK. 

Despite all of our challenges, the United States remains a special place.  We have freedom to question our government.  We have freedom to debate each other.  We have opportunities others do not. 

Take a moment to remember the good about our society today.  Take a moment to do something good today.  Honor those that died on September 11, 2001. 

The New Reality is Setting In

September 7th, 2021

I was in a hurry last week and ordered a sandwich on a fast-food company’s app. I planned on going through the drive thru. When I got there, the drive thru line was wrapped around the building. Stating the obvious, I thought waiting in that line contradicted the fast-food concept. I changed my order to pick up in the restaurant which the app allowed. I parked and went to the door. A big sign on the door said, “DINING ROOM CLOSED DUE TO LACK OF STAFF.” The door was locked. Apparently no one updated the app to stop pick ups inside the restaurant. I got charged for a meal I never got.

I went to another restaurant to pick up lunch and I am now disputing the initial restaurant’s charge with my credit card provider. Isn’t it ironic that all this technology that is supposed to save us time and make our lives easier is held up by a lack of workers?

I am a broken record. Not only are costs going up, but so is the time to get something. Americans are impatient by nature. To an extent, we tolerate prices going up. We do not do well with our time being wasted. The last few years of speedy delivery spoiled us. We’re all going to have to learn to move a little slower. Maybe that is not such a bad thing.

Bizzaro World Continues

August 30th, 2021

A few weeks ago, I was talking to a car dealer friend of mine.  He told me he had very little inventory on his lot.  I told him I bought a car last year.  (It is a Toyota.)  Without hesitation, he said, “I’ll pay you two grand more than you paid for it.”  He was half-kidding, or so I thought.  Intrigued, I went online and got bids on my car.  Two different sites offered me thousands more than what I paid for the car.  Keep in mind, I have used the vehicle and it is not a collector car. 

Cars are typically a depreciating asset.  Given shortages, delays, and inflation, that is not true, at least right now.  Any gain I would make on selling my current vehicle would most likely be lost in the purchase of a new vehicle if I could find one.  I stopped in another car dealer last week.  The sales person said the dealer had a grand total of six new cars on its lot.  That dealer typically carries 300 – 400 cars on its lot!  It is not a good time to negotiate a lower price for a new car. 

Supply will eventually catch up with demand.  I think it is going to take a while for that to occur.  Until the supply chain improves, we will have government officials and pundits try to convince us that inflation is under control.  I know my story is anecdotal, but the more I see, the more I am convinced government officials see what they want to see in inflation data.  Those of us in the real world are having a completely different experience with inflation than what our government officials see in their data.  If things do not change soon, this will not end well for anyone. 

Come Clean When There is a Problem

August 24th, 2021

A few weeks ago, our son had some friends sleep over.  That night, I was in a deep sleep.  Our son came in our room.  I faintly heard him whisper, “Dad…Dad…”  I finally heard him and I screamed like a little kid on his first real roller coaster ride.  The following conversation ensued:

Me: “What the $#** are you doing?”

Son: “I need you.”

Me (I looked at the clock.  It was 1:47 AM.):  “It’s 2 in the $&*(#)_  morning.  What could you possibly need?”

Son: “I need you.” 

Me: “What do you need?”

Son: “No one is hurt.  The police are here.  The kids that slept over snuck out and got caught.  They can’t get reach their parents and they want to talk to you.”

We went downstairs and talked to the police officer.  The three teenage boys contacted a girl and snuck out to go hang out with her and her friends.  They got caught.  Fortunately, none of them had any illicit substances and the officer said they were respectful.  He said, “In a situation like this when it is the first time, we let the parents handle it.”  I know the parents of these young men and his assessment of what a worse punishment would be, a ticket or dealing with mom and dad, was spot on. 

The three young men apologized profusely and “owned” their mistake.  They did not give us any excuses. 

As we all deal with supply chain, shipping, and people issues, it is best to treat your suppliers and customers the same way.  Come clean with what you know.  Don’t sugar coat it.  People understand challenges and mistakes as long as you are honest with them. 

Oh, The Humanity!

August 16th, 2021

We had a severe storm last Wednesday.  Eighty mile an hour wind gusts turned beautiful century old trees into kindling.  Power lines were down.  Property damage was extensive.  Fortunately, no one was seriously injured.  But something even more dreaded happened: we lost internet connectivity for 36 hours!

After the storm passed, our first concern was checking for damage.  Other than losing a few small branches and some pots being blown over, we had no damage.  We were lucky.  While the rain continued, we decided to eat dinner.  As my wife and I were preparing the meal, our son said, “The internet doesn’t work.”  Like Pavlov’s dog, I went down the basement to check our router.  I turned it off and on and yelled up, “Does it work?”  The reply came quickly, “No!”  I took drastic measures.  I unplugged the router and disconnected its intake line.  I waited a few minutes.  I yelled up again and quickly got a negative response.  This was serious.

Our cellular network was overwhelmed.  After about fifteen minutes of my phone thinking as if I were on a dial up modem, I finally got to our internet service provider’s website.  Scrolling across the screen in bold font: “WE ARE EXPERIENCING MAJOR OUTAGES IN YOUR AREA.  PLEASE BE PATIENT.”  Uh-oh.

Prior to this storm, we had never lost internet connectivity for more than a few minutes.  We were lost.  Our teenage son picked up a real book.  It’s the summer!  My wife and I had a substantive conversation.  We made it through the first half hour.  Phew.  I checked the internet again.  Still no luck. 

After thirty-six hours, my wife woke up Friday morning and discovered the internet worked.  All was well in the world!  

If the last year and a half have taught us anything, it is that we crave connectivity, both perceived and real.  No pandemic or internet outage will ever change that.  Do not take your connections for granted.