Episode #50 - Free-Rider Friday - June 2015

Welcome to “Free-Rider Friday.” Most of our shows are “topic” driven, where we dive deep into one subject. Free-Rider Fridays are designed to be “event” driven—whatever issues are in the news that we (or you) find worthy of commentary.

In economics, free riding means reaping the benefits from the actions of others and consequently refusing to bear the full costs of those actions. This means Ed and Ron will free ride off of the news, and each other, with no advanced knowledge of the events either will bring up.

The song lyrics for “Free Ride” by The Edgar Winter Group. 

Ed’s Topic

The driverless car conundrum: should the car be programmed to swerve and kill 5 people, or to kill the driver? It’s a version of “Trolleyology” that we discussed on our August 22, 2014 show, Everyday Ethics: Doing Well and Doing Good.

It’s a fascinating question, and we discussed the ethics and legal implications of the driverless car.

Ron’s Topic

One traditional definition of “management” in older English dialects was, according to the Oxford English Dictionary, “to spread manure.”

According to David Whyte, a self-described corporate poet, in his book, Crossing the Unknown Sea:

Manager is derived from the old Italian and French words          maneggio and manege, meaning the training, handling and          riding of a horse.

It is strange to think that the whole spirit of management is          derived from the image of getting on the back of a beast,          digging your knees in, and heading it in a certain direction.

The word manager conjures images of domination, command, and ultimate control, and the taming of a potentially wild energy. It also implies a basic unwillingness on the part of the people to be managed, a force to be corralled and reined in. All appropriate things if you wish to ride a horse, but most people don’t respond very passionately or very creatively to being ridden, and the words giddy up there only go so far in creating the kind of responsive participation we now look for.

Sometime over the next fifty years or so, the word manager will disappear from our understanding of leadership, and thankfully so. Another word will emerge, more alive with possibility, more helpful, hopefully not decided upon by a committee, which will describe the new role of leadership now emerging. An image of leadership which embraces the attentive, open-minded, conversationally based, people-minded person who has not given up on her intellect and can still act and act quickly when needed.

Also, on work-life balance, our VeraSage colleague Dan Morris wrote a post back in 2006, “Work-Life Balance is PC for Slacker.”

On this topic, David Whyte also provocatively points out in his book The Three Marriages: Reimagining Work, Self and Relationship:

Poets have never used the word balance, for good reason. First of all, it is too obvious and therefore untrustworthy; it is also a deadly boring concept and seems to speak as much to being stuck and immovable, as much as to harmony. There is also the sense of unbalancing that must take place in order to push a person into a new and larger set of circumstances.

My mentor, George Gilder, says this with respect to work/life balance:

One of the things that really makes me laugh is when I hear about the “workaholic.” Workaholics are what the make the world go. Show me a success in any field, and I’ll show you an obsessive. If your life is “balanced” by languid afternoons at the museum, you cannot develop a new business, break an important story, or make a contribution to the world. …Our task on earth—laboring in the service to others—can only be satisfied thru hard and unbalanced work.

Balance is for ballerinas and tires.

Ed also talked about his new favorite word: Floccinaucinihilipilification, meaning “the estimation of something as valuless.” 

Ed’s Topic

Donald Trump announced his candidacy for US President to Neil Young’s song “Rockin’ in the Free World,” which created a controversy since Young doesn’t support Trump.

Ron’s Topic

We discussed The Economist May 23, 2015 article, “Democratising medicine: The crowd will see you now,” which talks about CrowdMed to diagnose rare diseases.

Ed’s Topic

The California Labor Commission ruled that Uber’s “independent contractors” are actually employees. This is an insane ruling, and another regulatory burden that the disrupter Uber will have to deal with.

Ron’s Topic

We discussed The Psychology of Pessimism, by Steven Pinker, from Cato’s Letter, Winter 2015. You can check out more of Steven Pinker’s work at Humanprogress.org.

If you are listening to this show in the year 2115, you will be worried about declining population! We don’t have an economic model for what happens when worldwide population declines, since it’s never happened in history.

Ed’s Topic

Since we pre-recorded this show before the Supreme Court ruling on the ObamaCare case, we discussed how might the court rule. Ron thought the court would let it stand, but tell Congress to fix it. Ed thought they’d overturn it, but tell Congress to fix it.

We were both wrong. Ed was wronger!

Ron’s Topic

We discussed price-match guarantees, since they prevent rather than provoke price wars, from The Economist, Free Exchange, February 14, 2015.

It’s a pre-emptive defense as it persuades customers they don’t need to shop around, since they can invoke the guarantee instead of switching.

The result: tacit collusion, without any explicit communication between firms.

Episode #49 - Interview with former Disney Executive Lee Cockerell

Lee Cockerell is the former Executive Vice President of Operations for the Walt Disney World® Resort. "As the Senior Operating Executive for ten years Lee led a team of 40,000 Cast Members and was responsible for the operations of 20 resort hotels, four theme parks, two water parks, a shopping & entertainment village and the ESPN sports and recreation complex in addition to the ancillary operations which supported the number one vacation destination in the world."

One of Lee's major and lasting legacies was the creation of Disney Great Leader Strategies, which was used to train and develop the 7000 leaders at Walt Disney World. Lee has held various executive positions in the hospitality and entertainment business with Hilton Hotels for 8 years and the Marriott Corporation for 17 years before joining Disney in 1990 to open the Disneyland Paris project.

Lee has served as Chairman of the Board of Heart of Florida United Way, the Board of Trustees for The Culinary Institute of America (CIA), the board of the Production and Operations Management Society and the board of Reptilia a Canadian attractions and entertainment company. In 2005 Governor Bush appointed Lee to the Governor's Commission on Volunteerism and Public Service for the state of Florida where he served as Chairman of the Board.

He is now dedicating his time to public speaking, authoring a book on leadership, management and service excellence titled, Creating Magic…10 Common Sense Leadership Strategies from a Life at Disney, which is now available in 13 languages and his latest book, The Customer Rules…The 39 Essential Rules for Delivering Sensational Service. Lee also performs leadership and service excellence workshops and consulting for organizations around the world as well as for the Disney Institute. Lee has received the following awards: 

• Golden Chain Award for Outstanding leadership and business performance from the Multi-Unit Foodservice Operations Association (MUFSO).

• Silver Plate Award for Outstanding Operator in the foodservice industry from the International Foodservice Manufacturers Association (IFMA).

• Excellence In Production Operations Management and Leadership (POMS) from the Productions and Operations.

• Grandfather of the year from his three grandchildren, Jullian, Margot and Tristan.

Lee and his wife Priscilla live in Orlando Florida.

Topics discussed with Lee

1.    Ever meet J.W. Marriott? Yes.

2.    Joined Disney 1990, to open Disneyland Paris? (Euro Disney), which in the early days lost $1 million per day.

3.   Creating Magic: 10 Common Sense Leadership Strategies from a Life at Disney (2008) 

The Customer Rules: The 39 Essential Rules for Delivering Sensational Service (2013)

Time Management Magic (Jan 2015)

4.    Walt Disney World = size of San Francisco, or 2x Manhattan, 59,000 Cast Members

a.    Mickey = Teamster (13 or 14 unions in WDW)

b.    70% return rate

c.     Lowest turnover in hospitality industry

5.    Formula: Committed, responsible, inspiring leadership create a culture of care, which leads to quality service, which leads to Guest satisfaction, which leads to measurable business results and a strong competitive advantage.

6.    “Because all business problems boil down to leadership problems. The soft stuff is actually the hard stuff."

7.    Strategy #1: Remember, everyone is important: Cast was given freedom to set it’s own productivity targets. They set them very high!

8.    Feelings are never translated or passed on properly in a command chain

9.   No micromanagement = Trust!

10. Disney Institute Definition of Culture: “The system of values and beliefs an organization holds that drives actions and behaviors and influences relationships.” Established by design, not chance.

11.  You mentioned no price consistency at Disney’s food and beverage, because no one person in charge. How has pricing improved?

12.  What do you think of Disney’s new surge-pricing scheme?

13.  Your response to 9/11: evacuate 50,000 from theme parks; free hotel rooms; food vouchers; suspend charges for phone calls anywhere in world; costumed entertainers to occupy frightened children.

14.  Structured interviews by psychologists over the phone, create detailed profiles, powerful tool 1994?

15.    ¼ of the 25,000 Sommeliers work at WDW, sells more wine than any single site in the world (Vegas)

16.    Magical Moments and Take 5

17.    25 steps between trash containers!

18.  Sacrifice efficiency for safety and security (or Take 5, and MOMs). Snow White and Four Dwarfs

19.  Customers are human beings = Guestology

20.  Trading Pins! Two guys got idea at Olympics = millions dollar business!

21.   20% = active change agents; 30% = resist change; 50% on fence

Thanks to Lee for sharing how Disney spreads Pixie Dust, and how your organization can do it, too. 

Episode #48 - Interview with Kevin Mitchell, President PPS

Note: We had some technical difficulties during this show due to the State Wide Fiber Optic Network outage in Arizona, where Voice America is located. Thus, we go to the first break very soon, and the sound quality isn’t very good since we were on mobile phones. Sorry for the inconvenience.

Ed and I were honored to interview Kevin Mitchell, president of Professional Pricing Society (PPS), which is the premiere pricing organization in the world.

PPS was founded by Kevin’s father, Eric Mitchell, in 1984. Eric was a pioneer in the pricing field, having worked at Xerox, Intel, and Ford in the 1970s as a pricer, became a consultant in the field, then launched PPS.

Kevin recounted his work experience, including Colgate-Palmolive and General Electric, and how he returned to the family business of PPS in 2007. He has BA degrees in Economics and English from Duke University and an MBA in Marketing from The William E. Simon Graduate School of Business at the University of Rochester. Kevin lives in Atlanta, Georgia, USA and his hobbies include music, cooking, and sports.

He discussed the growth of the pricing field, not only in organizations, but also more women in the field (25% of PPS members are women, and between 30-40% of younger pricers are now women). Pricing has grown within academia as well. It’s much easier now to earn a degree in pricing, including an MBA in pricing at Kevin’s alma mater, University of Rochester.

I asked Kevin if he thought pricing is now a profession, and like Reed Holden, he thinks it is. We discussed how multi-disciplinary pricing is, and Kevin think an effective pricer has to be part artist and part scientist (this is also the view of Robert Cross).

Kevin also gave some of the demographics of PPS’s 5,000 members worldwide: North America comprises approximately 60% of members, with western and northern Europe comprising approximately 18%, 5% from Latin America, 5% Asia Pacific, and the rest from Australia, Africa, Middle East and other regions.

There’s no dominate industry among the memberships. Members come from these various industries:

•             Heavy goods

•             Industrial concerns

•             Hi-tech

•             Telecom

•             Retail

•             Life Sciences

•             Chemicals

•             Energy

Ed asked Kevin how organizations make the transition to value pricing, and discussed the 1% Windfall: how a 1% price increase, with no change in demand, can have more impact on profit than any other lever a business can pull, such as increasing efficiency, cutting costs, or even new customers.

Ed then asked Kevin about “charm pricing” (odd-number pricing) and how it applies to small business. Even-numbered pricing does send a signal that this is higher quality, such as Apple’s $17,000 watch. But why does Apple use charm pricing on its other products? Perhaps to convey a best of both worlds: you get Apple’s prestige and you’re also getting a deal.

And finally, Ron asked Kevin which industry he thought were the best pricers. Airlines and hospitality was his answer, along with heavy goods (Caterpillar is known for its pricing competence), and electronics. Robert Cross answered hotels.

We recommend you become a member of Professional Pricing Society, attend their conferences and webinars, and become a Certified Professional Pricer. It’s a fantastic organization, and thank you Kevin for being a guest on The Soul of Enterprise.

Episode #47 - Entrepreneur Heaven - June 2015

Ed and I discussed four legendary individuals in our second installment of Entrepreneur Heaven: Steve Jobs, Thomas Watson, Sr., Charles Revson, and Mary Kay Ash. We also answered a listener question.

Steve Jobs (1955-2011)

In 1975, Jobs sold his VW microbus and Wozniak his scientific calculator, raised $1300.

Steve Jobs 7 Principles of innovation

1. Do what you love

2. Put a dent in the universe

3. Kick-start your brain (creativity = connection)

4. Sell dreams, not products

5. Say no to 1,000 things—I’m as proud of what we don’t do as I am of what we do

6. Create insanely great experiences

7. Master the message—story telling (“You’ve baked a really lovely cake, but then you’ve used dog shit for frosting”)

Other thoughts

• "Customers don’t innovate; they iterate."

• “Innovation distinguishes between a leader and a follower.”

• Apple Store NYC (opened 2001): Sales: $4,032/sq. ft vs. Tiffany’s $2600.

• Retail consultant David Goldstein: “I give them two years before they’re turning out the lights on a very painful and expensive mistake.”

• “Commentary: Sorry, Steve: Here’s Why Apple Stores Won’t Work,” BusinessWeek, May 21, 2001

• Made sense on spreadsheet; but emotional experiences are not well captured on Excel spreadsheets.

• Jobs benchmarked Four Seasons hotel for the store! Genius bar, concierge, etc.

• Stanford University, “You’ve Got to Find What You Love” June 14, 2005

• Oral History Interview with Steve Jobs, Smithsonian Institution, April 20, 1995

Thomas Watson (1874-1956)

Ed and the Think Pad He still has from IBM

See Richard S. Tedlow’s book, Giants of Enterprise: Seven Business Innovators and the Empires They Built.

Also, The Book of Entrepreneurs’ Wisdom: Classic Writings by Legendary Entrepreneurs, edited by Peter Krass.

Charles Revson  (1906-1975)

“The reason women by cosmetics is because they buy hope.”

Born Somerville, MA in 1906, father was a cigar roller.

No formal education, tough childhood, parents both Russian-born Jews (Revson = rabbi’s son).

With brother Joseph and Charles Lachman, formed Revlon, March 1, 1932 (Charles was 25)

Used to recall products based on just a complaint or two.

Did not want to compete on price, and he knew his company was not efficient!

Fashion accessory, not a beauty aid (selling turn of a head, touch of class).

Different shades for different outfits, moods, occasions.

Great admirer of GM—brand for each purpose and purse.

Fire and Ice: incredibly successful advertising campaign.

See one of Ron’s all-time favorite business books, the unauthorized biography of Charles Revson: Fire and Ice: The Story of Charles Revson—the Man Who Built the Revlon Empire

Mary Kay Ash (1918-2001)

Mary Kay Ash authored three books:

• Her Autobiography: Mary Kay

• Miracles Happen

• You Can Have It All

Listener Question

Jacqui Brauman

1 May 2015

I've been listening to you guys for a few months now. I came across Ron Baker's work in a workshop I did called "Law Firms of the Future". I Realised now that the facilitator has ripped off most of the content, but it was valuable. I've tried introducing a version of value billing to my law firm. I bought it as a sole practice 2 years ago. I now have one employee solicitor who has complete autonomy (except that I pay his professional indemnity insurance, so he won't really have full responsibility for his mistakes). What I really hope is that Ron is wrong when he says that economy of scale doesn't apply to a law firm. I hope it applies up to a point, say maybe 5 to 10 solicitors, which I hope to have? I'm still struggling with the old fashioned business model for law firms though, and am trying to think of a way to introduce some subscription service or retainer system for the ordinary mum and dad client. Love to hear a brief comment on this in one of your Free Rider Fridays.

Jacqui: There is a difference between leverage and economies of scale. I think at the level you are shooting for (5-10 employees), leverage can add to profitability.

For a study of this very issue, albeit done on accounting firms, check out this wonderful whitepaper by our friend Ric Payne: The Performance Characteristics of Accounting Firms that are Sending Their Owners Home with at Least $1 Million.