Archive for the ‘Brian’s Blog’ Category

Never Forget the Basics

Monday, August 10th, 2020

I was recently involved in a complex business negotiation.  There were multiple parties involved, including multiple advisors.  Ultimately, the negotiations ended with me having to make a choice between two competing offers.

Fortunately, I had good advisors on my side.  Even before we made our decision, they outlined a plan for how we would inform the parties of our choice.  Telling the “winning” party was quite easy – everyone likes good news.  Telling the other party, with whom we still have a relationship, was not quite as easy.  In addition to phone calls, we decided to send handwritten notes to everyone involved. 

It did not take much longer to write a note than it would have to compose an email.  The act of writing a note – finding stationary, finding stamps, addressing the envelope, and putting the letter in a mailbox – is a lot more involved than hitting send in your email program.  Those actions demonstrate a level of thoughtfulness that hitting send does not. 

We all learned these lessons in kindergarten.  Say please.  Say thank you.  When possible, express your gratitude in person.  If you cannot do so, remember the message a handwritten note sends.  People like knowing you care. 

Will Our Elected Officials Please Do Their Jobs?

Monday, August 3rd, 2020

The time leading up to an election always brings opportunities for political grandstanding.  Taking advantage of the current anti-success environment in the United States, large tech company CEOs testified to Congress last week.  Not wanting to miss the opportunity to show how much they care for the “little guy,” congressmen from both political parties attacked these business leaders.  Never one to miss an opportunity even President Trump weighed in, tweeting, “If Congress doesn’t bring fairness to Big Tech, which they should have done years ago, I will do it myself with Executive Orders.”  https://www.wsj.com/articles/tech-ceos-defend-operations-ahead-of-congressional-hearing-11596027626?mod=hp_lead_pos7

Congress seems to have forgotten it is their job to write the laws that govern corporations.  If they fear the monopolistic power of technology companies, change the rules!  El Presidente seems to have forgotten (or never knew) the job of the executive branch is to enforce the laws.  If the technology companies and/or their executives have broken laws, charge them with crimes.  Do not condemn them for building great businesses that comply with the current statutes.  That is un-American.  That both political parties find it advantageous to criticize success scares me. 

My personal views: Tech companies have complied with our current laws but the nature of their businesses, primarily the network effects online businesses have that are not as strong in the physical world, create opportunities that our current laws do not account for.  The laws need to change.

The tech titans have much more self-control than I do.  One of my goals in life is to make enough money that I am forced to testify in front of congress.  When one of them tries to insult me, my response will be, “With all due respect, congressman, companies I am invested in, employees I pay, and my family paid $X in taxes last year.  I believe you work for me and the other taxpayers and citizens of this country.  Please treat me respectfully.  Thank you.”  My lawyer friends have told me that response would likely get me charged with contempt of congress and a jail term.  It might be worth it. 

Is the Bloom Falling Off the Work from Home Flower?

Monday, July 27th, 2020

I have been involved in several discussions both internally and externally about bringing people back to the office.  Our essential employees in manufacturing and shipping have been working the entire time.  It is estimated that 37% of jobs can be done from home.  (https://bfi.uchicago.edu/wp-content/uploads/BFI_White-Paper_Dingel_Neiman_3.2020.pdf) That means 63% cannot.  My personal belief is society, let alone a company, cannot function if we have a dramatic bifurcation in how people work.  (I do recognize there are advantages to having people work from home and as a company, we have done this since I bought the business.  But that’s topic for another day.)

Anecdotally, here are summaries of a few conversations I have had over the last few weeks.

  1. A good friend is a partner at a major law firm.  He loves working from home.  He is concerned about the development of the younger staff.  “How do they bounce ideas off of someone else?” was his question.
  2. My sister works at a major bank.  She is tired of being at home and wants to get back in the office at least a few days a week.  Her team is struggling to meet productivity levels it had in the office.
  3. A long-time service provider just got promoted.  She told our HR team she is “sick of looking at people on screens.”  Taking on a new role without being around your boss or your team is challenging. 

Humans are social creatures.  Work is more than work. It is a social network.  It is a social outlet.  It is connection to something bigger than you are.  While some occupations and individuals can thrive working from home, I believe the vast majority of people (and companies) do better in a collaborative environment.  The lockdowns forced us to use tools (Zoom, Teams, Slack, etc.) that help collaboration.  But in person collaboration still wins.  We might not go back to 5 days in the office, but we won’t stay at zero either. 

Fortune Favors the Bold

Monday, July 20th, 2020

Imagine you fell asleep in early March and woke up today.  You had no idea what happened between then and now.  If you happened to have a stock portfolio that was heavy in big technology stocks, generally considered risky, you would wake up, look at your portfolio and feel pretty good.  If you happened to have a portfolio full of real estate investment trusts (REITs), generally considered less risky than technology stocks, you would wake up, look at your portfolio, and pass out.  The “risky” assets outperformed the “safer” assets.

We continue to get news about the second wave of coronavirus and employers in the travel industry announcing major furloughs and/or layoffs.  We also are getting news about potential vaccines and treatments for covid-19.  Indeed, depending on your news source, you either think the world is ending or the economy is on the mend.  My advice: average them out.  Progress is being made but the road to economic (and societal) recovery is not going to be a straight line. 

Turning back to my high school Latin days:   audentes Fortuna iuvat: Fortune favors the bold. (https://en.wikipedia.org/wiki/Fortune_favours_the_bold) To my incredible Latin teachers: I apologize if the words are out of sequence.  I have not touched Latin since high school.  (I do have a life goal of re-translating Ovid’s Metamorphosos but I have to be honest:  If I didn’t do it during the lockdown, I’ll probably never do it.)

If coronavirus has knocked you down, reinvent yourself.  If you have just stumbled, consider yourself lucky and start running.  Yes, it is scary to take risks in a time like this.  But isn’t it even scarier to let things out of your control dictate your life? 

Will Some Good Come out of Coronavirus?

Monday, July 13th, 2020

Ever the optimist, I have been thinking about long-term positive changes that might come about from the challenges coronavirus has brought us.  Focusing on practicality, I will disregard the opportunities it gave people to think about work-life balance and other potential benefits that are hard to measure.  Here are a few comments/predictions/wishes of things that I hope change due to coronavirus.

  1. Our healthcare system.  It should be known as our “sick care system.”  Do you remember when we were told the shutdowns were going to cause untold numbers of deaths because people stopped going to their doctors and stopped “elective” procedures?  That has yet to happen and I certainly hope it doesn’t happen.  Maybe it will but I am skeptical. We spend way too much money on sick care.  Let’s change the system.  Let’s stop building the palaces we call hospitals.  Let’s focus on keeping people healthy rather than treating ailments.
  2. State and local governments realize there is not an endless pot of money.  They have been largely immune from the competitive forces the private sector faces.  I don’t like it when anyone takes a pay cut or loses a job, but it has been happening in the private sector for years.  A company must adapt or die.  It is about time that our government entities start to feel revenue pressure and cannot respond by increasing taxes or fees.  While the data below represents federal government workers vs. private sector workers, the trend is similar for state and municipal workers.  Private sector wages have stagnated while government workers have enjoyed significant increases in overall compensation.  That is not sustainable. 

https://www.cbo.gov/publication/52637#:~:text=Federal%20civilian%20workers%20with%20no,than%20their%20private%2Dsector%20counterparts.

3. The dignity of “real work” returns.  Our society looks down upon people who work with their hands.  Without those people processing food, stocking shelves, and delivering food (also making labels!), where would we be?  Let’s start treating them with the respect they deserve.

Out of every crisis comes opportunities for change.  I hope we take advantage. 

The Delivery Economy: Delivery isn’t Free

Monday, July 6th, 2020

Last week, Federal Express reported earnings that handily beat Wall Street expectations.  Revenue was also significantly above analysts’ forecasts.  Admittedly, expectations had come down because of shutdowns but it was still a solid quarter and a sign of things to come.

Traditionally in package delivery, business to business deliveries were more profitable than business to consumer deliveries.  Route density lowered costs and the importance of being on time for business deliveries allowed Fed Ex and UPS to earn higher margins on business deliveries versus consumer deliveries.  As e-commerce exploded and Amazon started its own delivery fleet, analysts were concerned about Fed Ex and UPS’ future profitability.  Then came the covid shutdowns.

Fed Ex and UPS both implemented “temporary” surcharges on deliveries.  Being part of what is essentially a duopoly has its privileges.  Below is a quotation from Brie Carere, Fed Ex’s EVP, Chief Marketing and Chief Communications Officer, from last week’s earnings’ call:

We see a very rational market and we really see a great partnership with our largest customers. So, we are working with them absolutely to find a win-win solution, but part of that is that we will, as I mentioned, implement peak surcharges. This is part of the new normal. It will not be just for this fiscal year, but I anticipate customers to pay more for pricing in November and December moving forward. And I do think that, that will be a structural shift in the market.  (emphasis added)

We all got spoiled by subsidized home delivery of merchandise.  In addition to b to b shipments essentially subsidizing home deliveries, many retailers subsidized home delivery by using their physical locations and their employees there for fulfillment.  With retail stores closing, that subsidy goes away.  It was a good ride while it lasted but it is over.  When the government tells us there is no inflation, I encourage you to look at the prices you pay to have items delivered to your house.  Do not forget how much your Amazon Prime subscription increases every year in your calculation. 

We’re Halfway There and Truly Livin’ on a Prayer!

Monday, June 29th, 2020

We are halfway through 2020.  Isn’t that hard to believe?  Hasn’t everyday seemed the same since mid-March?  It’s not just me, is it?

As I’ve told our team numerous times, I believe the next few months will be even more challenging than the first few months of coronavirus.  And that was before the additional challenges the protests have brought.  With 20 million people unemployed and coronavirus hotspots occurring, there will be no “V” shaped recovery.  The economy is going to continue to putter along with good data one day and bad data the next. 

And then there’s the political arena.  When I think about our choices for president, I don’t know if I should laugh, cry, or close my eyes and pretend this is all a bad dream.  But we have to live in reality.  My hope for our economy is we have a divided government.  My hope for our country is someone stops Tweeting.  My hope for all of you is you are singing the #1 song of the 1980s as voted on by VH1 viewers in 2006.  If you need a reminder, I copied part of the lyrics below.  If you want to procrastinate, read the Wikipedia entry.  Jon Bon Jovi didn’t like the song.  Sure.  And Homer Simpson didn’t like beer.  Keep your head up, think positive thoughts and a little prayer every now and then to whatever Being you believe in won’t hurt.  (PS – PO I fulfilled my promise.  I worked in Bon Jovi.)

Have a safe and wonderful 4th of July.  God Bless America.

We’ve got to hold on to what we’ve got
It doesn’t make a difference if we make it or not
We’ve got each other and that’s a lot for love
We’ll give it a shot

Woah, we’re half way there
Woah, livin’ on a prayer
Take my hand, we’ll make it I swear
Woah, livin’ on a prayer
Livin’ on a prayer

Oh, we’ve got to hold on, ready or not
You live for the fight when it’s all that you’ve got
Woah, we’re half way there
Woah, livin’ on a prayer
Take my hand, we’ll make it I swear
Woah, livin’ on a prayer

https://en.wikipedia.org/wiki/Livin%27_on_a_Prayer

https://www.google.com/search?q=livin+on+a+prayer+lyrics&rlz=1C1GGRV_enUS753US753&oq=livin&aqs=chrome.4.69i59j46j69i57j0l5.3291j0j8&sourceid=chrome&ie=UTF-8

Travel will Come Back. Slowly.

Monday, June 22nd, 2020

Last week, I got on an airplane for the first time since March 1.  Looking back, the over 3 months since I last traveled is the longest time period I have gone without traveling in my career.  In no particular order, a few random thoughts from my journey:

  1. My friends that have traveled recently told me this and it’s true: “Airports are empty, but the planes are full.”  Airlines are managing capacity quite well.  Be warned:  there is very little flexibility to change your flight times on many routes, even to major cities. 
  2.  Every airline employee I encountered (and I flew an airline not known for service) was beyond nice.  It was almost scary.  Either they have furloughed the ornery employees or, gasp, the airline employees finally understand without passengers, their jobs go away.
  3. The badges of honor road warriors, including boarding the plane first, used to proudly wear are now worthless.  Boarding is done by row, not status.  To add insult to injury, the airlines board from the back of the plane!  It is a much more efficient process than letting the 19 elite groups and credit card holders board first. 
  4.  If you are hungry, eat before you get to the airport.  Most airport eateries are closed.  You can, however, get an individually wrapped donut in the airports I traveled through.  It warmed my heart to see two labels on each donut wrapper.  I think the government needs to mandate all food be individually labeled with a minimum of two labels per serving.  Public health is important.  Labels are important to public health!
  5. I found it (funny, hypocritical, stupid, insert your word of choice) that I was told, verbally and through signs, that I needed to stay at least six feet away from the person in front of me while I boarded the aircraft.  Then, I got on the plane and at least 8 of those individuals sat closer than six feet to me on said plane!  Am I missing something?
  6. The hotel I stayed at was at 10% occupancy.  The staff was excited because the next night, they expected 20% occupancy!  I don’t know how long hotels can last with occupancy rates that low.     
  7. I had a connection in Chicago.  It was quite strange to see no traffic on Chicago highways.  It was also quite strange to see empty flight boards in O’Hare.
  8. The credit card I use for travel was compromised and someone is using it.  Some things never change.
  9. There is nothing that takes the place of meeting in person.  Will we have less in person meetings for the foreseeable future?  Of course.  But eventually, the need for personal connections will win out.  Business travel is down but it isn’t out. 

The Words of a Great Leader

Monday, June 15th, 2020

In this turbulent time of protests and riots, I am comforted to know I discovered a new leader to help me think these challenges through.  He is Craig Arnold, the CEO of Eaton Corporation, a large manufacturer (that happens to be based in Cleveland).  I do not know Mr. Arnold, but he is now high on the list of people I’d love to have dinner with. 

Arnold penned a letter to Eaton’s employees that is linked below.  I encourage you to read it in its entirety.  I have read it several times and it makes me think deeper each time I read it.  In particular, one paragraph continues to challenge me.  I have shared this paragraph with all of our employees and I continue to reflect upon it. 

It would be easy for the events over the last few days to suggest that we are dealing with an insurmountable problem — certainly a problem that is too big for any one individual to confront. I disagree. Just imagine for a moment that you were one of the police officers on the scene the day that George Floyd died. And when he said, ‘I can’t breathe,’ you did what should have been done. You intervened and put a stop it. Where would we be today? Maybe still dealing with protests in the streets of major cities, maybe not. At a minimum, we would have one less senseless loss of life. One person can make a difference — you can make a difference. (emphasis added)

Thank you, Mr. Arnold, for your inspiring message. 

I am committed to making a positive difference in the world.  I hope you are as well.

https://www.industryweek.com/leadership/corporate-responsibility/article/21133073/eaton-ceo-enough-is-enough-stand-up-and-be-heard

What’s up with the Stock Market?

Monday, June 8th, 2020

As I write this, the stock market is up significantly yet again despite record unemployment and riots throughout the United States.  In a prior life, I was an equity analyst.  Following the markets is a hobby. (Yes, I’m a nerd.) so that makes me just as qualified as any other yahoo to opine on the stock market.  Without further ado, a few observations. 

  1. The stock market is not the economy.  The stock market is not the economy.  Repeat that over and over.
  2. Over the long run, a company’s market value should reflect the present value of the future earnings of the company.  Present value is determined by discounting the future earnings stream by a discount rate, typically defined as the risk-free rate (US treasury rates are often used.) plus an equity risk premium.  Interest rates are extremely low, making these models spit out crazy results.    
  3. Recent events favor large companies, especially large technology companies.  Guess whose stocks are going up?  As of June 1, 14 stocks represented 33% of the gains in the S&P 500 since its March 23 low.  Microsoft alone added 5% of the total increase in the S&P 500 from March 23 to June 1.  I hope you owned it.  (I do not directly own MSFT.  Darn.)

4. The Federal Reserve and US Treasury have thrown gobs of money into the markets.  Liquidity is not an issue.  That money has to go somewhere.

 5. Would you rather loan, for example, Germany money at a negative interest rate (they will pay you back less than you gave them) or own US stocks? See point number 4.   

I think the US economy is in for a tough few quarters ahead.  I have no idea what the stock market will do in the next few quarters.  I am confident, however, that many stocks will go up over the next ten years.  The ride will be bumpy (it always is) but the trend will be up.  Only invest in stocks if you have a long-time horizon and the ability to not panic when investments go down.