Episode #362: One Thing!

One Thing!

Inspired by A. J. Jacobs when he appeared on Russ Robert's great podcast EconTalk, Ron and Ed have each been keeping a "One Thing" journal for the last few years. In this episode, they shared some of the best "One Things."

• Russ Roberts had A.J. Jacobs on his podcast some time ago. Jacobs mentioned he keeps a “one thing” journal. That is the root of today’s show. Here is the background: https://www.econtalk.org/a-j-jacobs-on-thanks-a-thousand/

• Here is Ed’s first one thing from October, 2018 - “Give up your illusion of control.” —The Stoics

• What is Ron’s first ‘one thing’. It comes from Rabbi Lappin and one of his earlier radio shows: “What separates a religion from a tennis club? Three questions: Where did we come from? Where are we going? What are we supposed to be doing?”

• Another first thing from Ron also courtesy of Rabbi Lappin: “It’s hard to succeed at something we think is morally reprehensible.”

• Another one thing from Ed is from the Andy Duke book, “Thinking and Bets”. In it, she suggests if you have some stated belief then ask yourself what % do you believe your belief is true. If you can’t say “not zero” or “100” you will be able to stop thinking in absolutes.

• Did you know you can get commercial free episodes PLUS bonus episodes on our Patreon page? Check it out at Patreon.com/TSOE

• We’d like to give a shout out to our Patreon member Blake Oliver of EarmarkCPE.com. Did you know you can earn CPE for listening to podcasts? Check it out.

• Another ‘one thing’ from Ron hails from Thomas Sowell: Economists don’t ask, “What do you want?” but rather, “What do you want more?”

• Another ‘one thing’ from Ron also stems from Rabbi Lapin: The use of energy is a major difference between man and animals because it enables us to gain time. Let’s not forget language, clothing, and ice in our drinks.

• Here’s a ‘one thing’ from Ed courtesy of Peter Thiel: There is Marxian theory that Marxism will come when interest rates reach zero.

• Consider this ‘one thing’ from Ed - short but powerful: Use “I think” instead of “I feel”.

• ‘One thing’ from Ron: There are two types of government - bricks and stones

• Another ‘one thing’ from Ron: If my pet chimp can understand what I’m doing then that’s physical. If they don’t understand what I’m doing then that’s spiritual.

• Here is a ‘one thing’ from Ed. From our episode with Peter block (#183): “A clear process is only an invitation for someone to say that you are doing it wrong.”

• Another ‘one thing’ from Ed which stems from Jordan Peterson: There is no correlation between virtue and intelligence.

• A ‘one thing’ from Ron: Would a child rather have more material things (as an only child) or a sibling? That’s a rather profound thought, no? It probably depends on when you ask them.

• Our Patreon offering at Patreon.com/TSOE is commercial free AND includes bonus episodes. It is sponsored by 90Minds.com. Need a mind? Contact @90Minds!

• Here is a ‘one thing’ from Ed dated July 31, 2020: If you are reading a letter from the late 1700s and assumed the words mean the same thing then that they do today, you would be laughed at. But somehow folks reading the Constitution think that today.

• A ‘one thing’ from Ron: Arthur Brooks is the former president of AEI and said, “How do you get down the road to serfdom? One policy at a time.”

• Also from Ron and take from Rabbi Lapin: “Only acts of faith, not facts, are the most rewarding.”

• A ‘one thing’ from Ed and dated February, 2021: “If you resist your destiny it drags behind you. But if you follow your destiny it guides you.”

• Also from Ed (and sourced from the TSOE show #329 featuring Donald Hoffman): “Science is not dogmatic but scientists are.”

• Here’s a great ‘one thing’ from Ron - “Anything random can’t happen just once.”

• Here is a ‘one thing’ from Ron that comes from a Chinese saying: “The future is certain we just can’t agree on the past.” Capitalism is probably the opposite of that.

• Ron’s “favorite” acronyms: DRIP - data rich, insight poor; (related to project management and workflow) FISH - first in, still here.

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Here are the links we went through during the show:

• Tesla will move its headquarters to Texas, Elon Musk says - CNN

• The Grinch Who Conditioned Christmas on Covid Caseload

• iRobot Select

• Pret A Manger & the Rise of Retail Subscriptions

• How Much per Person Does Your State Collect in Excise Taxes

• No Longer 30 Years Away: Two New Major Fusion Breakthroughs

• Innovation Elusive Hard to Measure But Essential

• J.D. Vance Says Government Should Seize Assets of Political Nonprofits – Reason.com

• The Sad State of Accounting Standards

• PwC offers U.S. employees full-time remote work

• NFL Scorigami

• Free Ride (song) - Wikipedia

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This pas week was bonus episode 362 - The Three Percent. Here are a few links discussed:

• August 2021 Quit Rate - The Three Percent

• Jay Bhattacharya on COVID vaccines, herd immunity, etc

• Household Makeup

• CBO Blows Up Democrats’ Spin on Taxes

• Microsoft shutting down LinkedIn in China - BBC News

• Biden’s Global Tax Cartel

• COVID-19's latest odd side effect: 'Restless anal syndrome'

• The Wrong Way to Reform the IRS

• Understanding the Difference Between Authoritarianism and Totalitarianism

• How I’m Responding to Australia’s Techno-Autocracy

• Political Sectarianism and the Presidential Cult | Cato Institute

• Keep Behavioral Economics Away from Our Kids

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #361: Free-Rider Friday Returns

We miss Free-Rider Friday's, so we brought it back, but just this once. We used to do this on the last Friday of every month. Most of our shows are “topic” driven, where we dive deep into one subject. Free-Rider Fridays were 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. It's also a chance to clear out our stacks of stuff!

“… Come on and take a free ride
Free ride
Come on and take it by my side
Come on and take a free ride!”

-Edgar Winter

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Here are the links we went through during the show:

• Tesla will move its headquarters to Texas, Elon Musk says - CNN

• The Grinch Who Conditioned Christmas on Covid Caseload

• iRobot Select

• Pret A Manger & the Rise of Retail Subscriptions

• How Much per Person Does Your State Collect in Excise Taxes

• No Longer 30 Years Away: Two New Major Fusion Breakthroughs

• Innovation Elusive Hard to Measure But Essential

• J.D. Vance Says Government Should Seize Assets of Political Nonprofits – Reason.com

• The Sad State of Accounting Standards

• PwC offers U.S. employees full-time remote work

• NFL Scorigami

• Free Ride (song) - Wikipedia

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This pas week was bonus episode 361: FRF Continued. Here are a few links discussed:

• Casa Bonita Update

• Melbourne overtakes Buenos Aires, is world’s most locked down city | news.com.au — Australia’s leading news site

• Single-Payer Banking and a USA CBDC

• Trillion-dollar platinum coin could be minted at the last minute - Axios

• The SEC’s Daddy Issues

• Taiwan asks for Australia's support in possible war with China

• Kevin Williamson on the Tax Debate, October 5, 2021

• China’s Housing Bubble Puts All Other Housing Bubbles to Shame

• Three Stories on Taiwan

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #360: Interview with Kimberlee Josephson

In an email, Dr. Kimberlee Josephson wrote to Ron and Ed saying, "I just began listening to your podcast and I’m glad to have stumbled upon it! I wanted to reach out about your Woke Capitalism/ESG segment since this is an area I am trying to voice concern over." It was a great conversation and we have included the full show notes and additional resources below.

But first, a bit more about Kimberlee Josephson…

Dr. Kimberlee Josephson is an Associate Professor of Business, Associate Dean for the Breen Center for Graduate Success at Lebanon Valley College in Annville, Pennsylvania, and Adjunct Research Fellow with the Consumer Choice Center. Her academic background is in international studies and strategic management and she teaches courses covering topics on global sustainability, international marketing, and workplace diversity. Prior to serving in academia, her professional career spanned from working in sales in Manhattan, as a producer for a web marketing firm, freelancing for on-air promotions at QVC, and as a research assistant for an international NGO. Her op-eds have appeared at University Business, Quartz at Work, and PA Capital Star. She holds a doctorate in Global Studies and Commerce from La Trobe University in Australia, a master’s degree in Political Science from Temple University in Philadelphia, another master’s degree in International Policy from La Trobe University, and a bachelor’s degree in Business Administration with a minor in Political Science from Bloomsburg University.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless, with my friend and cohost, Ron Baker. And folks, on today's show we have our interview with Kimberly Josephson. Hey, Ron, how's it going?

Ron

Very good. How are you?

Ed

I'm doing great, great week. It will be fun to interview Kimberly, I’ve been looking forward to this all week. And without further ado, let me get the bio read and get her get her back on the program here. Dr. Kimberly Josephson is an Associate Professor of Business, Associate Dean for the Breen Center for Graduate Success at Lebanon Valley College in Annville, Pennsylvania, and Adjunct Research Fellow with the Consumer Choice Center. Her academic background is in international studies and strategic management where she teaches courses covering topics on global sustainability, international marketing, and workplace diversity. Prior to serving in academia, her professional career spanned from working in sales in Manhattan, as a producer for a web marketing firm, freelancing for on-air promotions at QVC, and as a research assistant for an international NGO. Her op-eds have appeared at University Business, Quartz at Work, and PA Capital Star. Welcome to The Soul of Enterprise, Kimberly Josephson.

How does someone who goes from an on-air promotion analyst at QVC to teaching economics at Lebanon Valley College in Annville, Pennsylvania?

You sent us an email, having listened to one of our shows, and we have actually been paying attention to your work, Ron and I do a bonus episode after this on our Patreon channel, and FEE is one of our go-to sources. So we are we were somewhat familiar with your work already, so we're happy to have you on. And you've been writing a lot about corporate social responsibility, woke capitalism. So let's start, it’s attributed to Socrates, but he didn't really say it, that all wisdom begins with the definition of terms. Let's try to define some of these things, shall we? Let's define corporate social responsibility, if it can be, maybe It can't be.

This is great, it's great background to talk a little bit about this. In fact, you anticipated some of my additional questions about stakeholder capitalism and woke capitalism, or as I like to call it, marketing.

As you were talking, I was reminded, didn't we settle this with David Ricardo and the division of labor, why don't we focus on the things that we're really good at and not try to produce cheese, and wine, and do corporate social responsibility? Because all that really is is just another division of labor? I think, if I'm not mistaken here, the not-for-profit sector is the third largest sector in the US economy. If we just as employees were able to keep more of our own money, well, then how about we'll donate because that's what Americans do anyway.

Ron and I talked about this last week, that there's a standard now in Europe to try to get everybody to use USB-C ports instead of Apple’s, so Apple would have to shift, and of course then you're locked in and there can be no new better creation of a plug-in, so very confusing. Well, we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with our interview with Kimberly Josephson, and Kimberly, great discussion with Ed. I'm going to pull back and go to a macro question. I think you cited a Richard Branson paper, or quote, or speech that he gave at the World Economic Forum. And they claim that our economic model is broken. And you point out, how can you say that when in the last 20 years we've dropped poverty into single digits, bone crushing, dollar-a-day poverty. So we've created all this wealth and brought all these people out of poverty. You were talking about Bono and his Red movement. Somebody asked him at a TED talk, “Can you name one country that's developed because of foreign aid or NGO aid? Name one, there's not one out there. It's just amazing, and I love how you point this out—we’ve done this all without ESG!

We've had Professor Deirdre McCloskey on the show twice [Episode #6 and Episode #293], and her trilogy on bourgeois virtues and equality. Her whole premise is the Great Enrichment started because we gave entrepreneurs and innovators dignity. It was a cultural, language, and rhetoric change. It wasn't about oil, or scientific invention, or any of these materialist explanations. It was because people can now have a go and make other people's lives better. And I just find that so compelling, even though it's very hard to prove.

I just listened to something that was talking about an article about accountants are going to save the environment, because they're going to be able to attest to these new ESG standards that are coming out, and the Sustainability Accounting Standards Board, which I think is BlackRock’s or someone’s. And I'm thinking, geez, we've got the Big Four now offering this as an attest service. I worry that this is a wet blanket on innovation and dynamism because creativity is supposed to take us by surprise, otherwise it could be planned. And you can't, like you say, have standards on something new. And that's one of my biggest concerns about ESG. It's just a wet blanket on dynamism.

And it's entrenching big businesses. Bloomberg estimates ESG funds could hit $53 trillion by 2025. And like you say, they're controlling the standard setters and the jargon, and they're the ones that are doing the assessment or teaching companies how to make the grade, or whatever. I'm just going to ask this, is this a Trojan horse? Is this a way for unskilled people without any merit, or skills in business, or wealth creation, to get into the boardroom?

You just put your finger on it with the term tradeoffs. Thomas Sowell [Episode #25] says there's no such thing as solutions, there's only tradeoffs. The thing that scares me, Kimberly, as a recovering CPA from a Big Eight, is we have a knowledge problem here. How can the Big Four come in and attest to something they know nothing about?

Well, this is flying by, as we knew it would.

Ed’s Questions: Segment Three

We are back with Dr. Kimberly Josephson. I want to ask you about something I came across last week. Jonah Goldberg, in his newsletters, talked about the James Beard awards. I'm not sure if you're familiar with this, but these are basically the Oscars of the food world. The organization itself uses that as its unofficial motto. But they have just recently announced that their prestigious annual awards are going to be retooled based on the decisions that candidates have shown and demonstrated a commitment to racial and gender equality, community and environmental sustainability, and a culture where all of that can thrive. Not on who makes the best hamburger. I'm all for all of those things, those are all wonderful things that we all should strive for. But does it really matter when it comes to making a chicken Kiev?

It's really, I think, also partially responsible for some of the things that we're seeing with regard to the vaccine and COVID because we've just politicized everything. Gone are the days when LeBron James can say Republicans buy sneakers as well. Now we have to have red sneakers and blue sneakers, I guess. This actually happened in the software industry before the election last year. There was a company that came flat out saying we are against Donald Trump. Are we really going to have red apps and blue apps? I mean, is this what we're going to do?

I think this this goes back to a misunderstanding that John Mackey, from Whole Foods, in his book, Conscious Capitalism, makes this great point, he says: look, the purpose of business is not to make a profit—profit is the result. And that is the big problem. Everybody thinks you go into business to make a profit. No, that's the result. You go into business to do something for someone else. It's actually other- directed, it's altruistic. And people don't get that part of it, that it's about serving the customer.

Kimberlee Josephson  51:49

for I mean, Adam Smith saying, right, the butcher and the baker right, they don't do it for themselves, like they have a talent they have a skill and they're leveraging that skill and they should get a return for that and if people are willing to pay a good amount for it and it's all voluntary, everybody wins you have that specialization and people pursue what it is within their means and and what it is that they desire so that's really important my I mean with with the stakeholder model, the concern is with money that's objective right? That's just that we can use that as the tool of measurement right? If my profit margins are good, if people are purchasing if my price if the elasticity of demand right if it that changes if I lower my price or raise my that signals to me the perception of value and what people are willing to pay it's very useful. So focusing on profits not a bad thing because that that tells you if you're doing something wrong or right so that's smart to focus on it I don't want students to lose sight of that profit is not evil. It's a functional faith and you need it to scale and to reinvest and you know, grow the business or whatever you want to do with it. But with the stakeholder model, a lot of that's subjective right? I actually to help my students remember the stakeholders we focused on the core stakeholders I call it the spice model because we think in terms of society partners partners in the industry, investors, customers and employees but you have so many other secret the government media right we could go on forever there are so many stakeholders and sometimes I do a little exercise with them like okay now prioritize them and they can't right some people owe you the employees employees are the most important because if you don't have employees, you know, how are you going to provide Okay, well if you don't have customers, there's no point of the business okay? If you don't have the investors, right, that's how are you even going to get the business but so it's just it's so contestable. And and it varies and how you prioritize to is going to vary according to the industry, what the needs are, what the expectations are,

And sometimes they just outright conflict with one another.

I’ve got about one minute left in my segment here and I don't want to finish on a downer. So I'm going to take you back to an article that you wrote in January of this year, entitled “Four Netflix Hits That Agenda-Driven Corporate America Could Take a Cue From in 2021.” And I'm just going to pick one of them, feel free if you want to go to a different one, but I want to know what can we learn from Beth Harmon in Queens Gambit on Netflix?

Well this is this is great, it is flying by, and Kimberlee I'm going to pass it over to Ron, he's going to take you the rest of the way home, but from me thanks for being on the show today.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Dr. Kimberlee Josephson, and Kimberlee, I wanted to ask you about the 2019 Business Roundtable statement that basically threw out shareholder maximization theory [and replaced it with stakeholder theory]. It did move the Overton window, it seems pretty rapidly. You probably read this, The Wall Street Journal wrote a two year anniversary in 2021 of this statement. And they looked at these 181 members who signed the statement and said, You know what, nothing has changed with any of you. You haven't really done anything with this. Is this just virtue- signaling?

The stakeholder theory sounds so beautiful, because we have to watch out for our customers, and we have to watch out for the community, and pay our taxes, and all of that. But all of these things have conflicts. And for the C-suite, or the employees of the corporation, if they're accountable to more than the shareholders—in other words—now they're accountable to everyone, then they're accountable to no one. And a slave with two masters is a free man. And I worry about that, because how do they deal with these tradeoffs: As a customer, I want a lower price, as an employee I want a higher wage, as the government, we want more taxes. The price system deals with this beautifully without any conflict whatsoever, but now you lay over the ESG and the stakeholder theory, and it brings up all these conflicts that are unresolvable without a price system.

We made everything a Veblen good, all the way down. No luxury, just everything now is a Veblen good. Kimberly, this is great. I’ve got 15 seconds with you, but are you optimistic that we can push back on all this?

I'm glad to hear that. Well, Kimberly, this has been an honor. Thank you so much for appearing on The Soul of Enterprise. Ed, what do we have next week?

Ed

Next week, Ron, we are interviewing Marco Bertini, the author of The Ends Game.

Ron

I'm looking forward to it. I'll see you in 167 hours.
 

Other Resources

• The definition for Corporate Social Responsibility has changed over the years. Check out Carroll’s CSR pyramid for a modern day interpretation - https://thecsrjournal.in/understanding-the-four-levels-of-csr/

• Check out this article from Dr. Josephson - “Why corporations should cater to consumers not causes” https://fee.org/articles/why-corporations-should-cater-to-consumers-not-causes/ 

• Want to open your eyes into the harm that some foreign aid programs have caused? Check out the book, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa 

• Here is a link to Kimberlee’s FEE articles: https://fee.org/people/kimberlee-josephson/ 

• And here’s a portfolio of all her publications, including podcast interviews: https://muckrack.com/kimberlee-josephson-1/portfolio

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This pas week was bonus episode 360 - No Longer Dollar Tree. Here are a few links discussed:

• John Hinckley to be released

• Dollar Tree breaks the $1 barrier as costs take a bite - ABC News

• The Debt Limit Can Save Us

• Warby Parker soared in its market debut, setting a high bar for online retailers

• The Zero-Cost Canard

• Hong Kong government seeks to wind up Next Digital and hammer final nail in the coffin of Jimmy Lai’s media company | South China Morning Post

• Can We Stop Pretending That Anybody Talks This Way

• John Stossel Sues Facebook Alleging Defamation Over Fact-Check Label - Variety

• The Tax-Gap Myth

• Jen Psaki's economic illiteracy

• Tesla Opening New Store and Service Center on Tribal Land

• How Artificial Intelligence Completed Beethoven's Tenth Symphony

• Cheers, jeers, &c.

• Autonomous Paccar trucks hit the road with FedEx deliveries | The Seattle Times

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 359 - Third interview with Joe Woodard

Ron’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague Ed Kless. On today's show, folks, we have for the third time, Joe Woodard. Hey, Ed, how's it going?

Ed

If I were any better, it would be illegal.

Ron

Okay, good. Well, I'm looking forward to this conversation. Let me read Joe in here, as if people don't know him, but just real quick. Joe Woodard is an author, consultant, business coach, and national speaker. He's trained over 100,000 accounting and business professionals. He's been on the Accounting Today’s Top 100 Influential people in the profession for many years, and he is the CEO of Woodard events, which includes education, coaching resources, and a community for small business advisors and small business owners within the accounting industry. I love his vision: “To transform small businesses through small business advisors.” Joe Woodard, welcome back to The Soul of Enterprise.

You were here in December 2016 [Episode #119], and in September 2019 [Episode #258]. We had a little thing in the interim since we last met Joe, called COVID. What lessons did we learn?

I think it drove home the point for me that this, at the end of the day, is a relationship business. And you know, the tech stacks we talk about, and the transition to advisory, and all of that, at the end of the day, it is about belly button to belly button. And we're just like healthcare workers, we're on the front lines.

Something we have talked about with other guests on the show, if you spun back to 2010, or 2000, with COVID, I don't think many businesses would have been able to handle it very well without all the amenities we have today with the internet and everything. So what innovations have you seen from firms? I mean, we talked about the switch to the cloud and firms said, “Oh, this could never happen.” Obviously, remote work became a thing. And we're very interested here in the Results Only Work Environment [ROWE]. Have you seen other innovations come from firms during the past year-and-a half or so?

Have you seen more and more firms adopt a value pricing model out of this COVID pandemic?

That's wonderful, because that gives them capacity. And we've always argued that you should put capacity before revenue. Unfortunately, we find most firms do the opposite. They won't hire somebody until they're busting at the seams.

I love it. Last time we had you on, Joe, you said you changed your mind, I think it was before we went live, on two topics. And one of them was on timesheets. I'm just curious, in the training of these 1,000 firms or so in value pricing, what do you tell them about the timesheet and their measurements?

I love it because the timesheet has no granular information like that. And you're only able to get those insights because you were looking at how work flowed through the organization. Anyway, Joe, this is great, it’s flying by.

Ed’s Questions: Segment Two

We are talking today on The Soul of Enterprise with Joe Woodard. Joe, you and Ron having that love fest to the accounting profession. Now, I want to ask you, so what did they miss during COVID? What did they get wrong? What should they have done in addition to all that?

Well, one thing I think they did miss—and we're starting to see reverberations of this right now as we begin to come out of COVID, and last reports that I've read, there's some really good signs that we're starting to see that this last jump is starting to go back down, so maybe we're really coming around where we were maybe late June, early July—was the Great Resignation. I talked to one firm leader who had 17 people during COVID, and in the last two months 10 of them have left, 10 out of 17. Now, he's probably an outlier. But we're hearing stories, especially among some of the mid-size firms, that this is really a big problem. And I have my ideas as to what might be causing it, but I'd be curious as to your thoughts on it, and what you're seeing too, maybe in the smaller firms that you work with it's not so much of an issue?

You just don't want them to move to California so they have Nexus in California, that would probably be a bad idea, Joe.

See, I'm trying to get Baker to move to Texas for years now. But picking up on that, you said two things that reminded me of some previous guests. One is Jody Thompson, her great line is that work is a thing you do, not a place you go. And I think that’s critically important. I would agree with you that the purpose was part of it, because I think that part of the whole Great Resignation across the board was really pent-up demand. In other words, people didn't leave their job and then all of a sudden, boom, now we have the opportunity to do so. The attrition that would have happened normally over time, but I agree the reason why Disney didn't fall prey to that, and probably Southwest Airlines and The Container Store and all of these other places, is because they are purpose driven. That was a great story. Our saying on that is we want you to be efficient with things but effective with people. And what that woman was clearly being effective with that child to make sure that he understood. So, Joe, there's a lot of things going on right now with regard to the accounting profession where more and more companies are virtually abandoning their entire accounting department, and businesses that are in growth stages going through the transition of small to medium are not hiring people in accounting but instead going to CAS services right, client advisory services, as well as just outsourced bookkeeping. We've got only like about a minute or two left before our break, but I think this is a huge trend. I can truly see that five to ten years from now there are going to be very few companies that have anyone in their accounting department at all. Thoughts on that?

I couldn't agree more, and certainly this guy Jeff Bezos putting $400 million into a company called Pilot, so now the bookkeeping profession is also competing with, I don't know, Amazon, effectively. Maybe this will get someone's attention, but alright Joe, this is flying by, as Ron says.
 

Ron’s Questions: Segment Three

Welcome back, everybody. We're here for the third time with one of our most popular guests, Joe Woodard. Joe, I have to ask you, I saw I think you did a webinar, maybe it was this week, on the backseat driver client. I just have to ask you, what is that?

I was going to bring up that Starbucks story, so thanks for telling that story. I love that story. Have accountants gotten better with that?

Let me ask you this, Joe. We've been talking a lot for the last two-and-a-half years about the subscription economy. Ed and I are big believers that the customers of accounting firms should subscribe to the firm. We spent the whole first segment talking about the relationship. But let's face it, when you look at the business model, we don't monetize the relationship, we monetize the transactions. And I think that's a deep flaw. I want to move the accounting profession over to what concierge medicine, or Direct Primary Care medicine, where you subscribe to a general physician, and they handle anything you need, that they're capable of doing. And that's a big caveat—if you need a specialist, they'll get you that—but you’re covered for whatever they're capable of doing within their four walls, and it's inclusive in one price. Now, you could still have options and all of that. But what's your reaction to that?

I love that because that's really leveraging the social capital that all firms have. But it's the least leveraged of the three types of intellectual capital that we talk about. I've got to ask you, Joe, you did a reality TV show [called Tech Makeover], tell us about it.

Wow, that sounds awesome. I'm going to have to check that out. We will definitely link to that in the show notes. Real quick, what books have you read since we last spoke that have really impacted you?

Joe Woodard

Well, I was a little late to the party on it, but I finally got around to Measure What Matters to Customers [Ron’s book] finally, can you believe it? But it impacted me so significantly that it's revolutionized the way we run our business here, with the objectives and key results. We were big on KPIs, and we had really good predictive analytics, we were really good on financial measurements, but we weren't connecting, what we found is between purpose, which is the daily what you do, and vision, which is the magnetic north Compass Point. In between those two things, measurement must take place that is aligned with purpose and aligned with vision. And the key results are more connected to the purpose, the daily grind, the objective is more connected to the vision. And it was the missing bridge between our purpose and our vision. The second book, and I know that we're tight here for the next break, but the second one that really made a difference for me was The Advantage, by Patrick Lencioni. Particularly, his section in that book on company values, and the distinction between core and operational and aspirational values made a huge difference in our business.

Ron

That's awesome. Well, Joe, thank you so much. I'm going to let Ed take you all the way home but I just want to say thanks again for appearing on The Soul Enterprise for the third time.

Ed’s Questions: Segment Four

Finishing up our conversation, our third conversation, with Joe Woodard, Joe, I want to take a macro approach here to this last segment, and just get your thoughts on something that's concerning to me. I see a lot of the new regulations that are coming down from governments all over the place, statewide and also federal. And I think it's potentially starting to have an impact on the creation of new businesses and entrepreneurs really being able to create without permission in some ways. I know you do a lot of reading, are erudite on a lot of a lot of different subjects. Is this something that you're concerned with or have been thinking about as well?

I have a feeling that we're going to see a lot of companies that are 99 and fewer emerge out of what's going on with COVID regulation. At the same time, though, the challenge that I see is that states like California are making it harder and harder to really be classified as gig workers. And they're insisting that Uber and Lyft and all this pay their people as employees when they're really not.

Well, we've got about three or four minutes left. What are you working on?

Amen. We'll just give that an Amen, and we'll wrap it up from there. Joe Woodard, thanks so much for being on The Soul of Enterprise, we really appreciate it. Ron, what do we have coming up next week.

Ron

Next week, we have Kimberlee Josephson. She is the Associate Professor of Business Administration at Lebanon Valley College. I'm sure we'll talk to her about ESG and things that you were asking Joe about with these regulations, she writes for FEE [Foundation for Economic Education] so looking forward to that.

Ed

All right, outstanding, I'll see you in 167 hours.

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This pas week was bonus episode 359 - ABCs - Apple, Bees, and China. Here are a few links discussed:

• The nose knows, The Economist

• Hundreds Of Dead Migratory Birds In New York City Prompt Calls For Dimming Lights : NPR

• Establishing the cause of death, The Economist

• Apple opposes EU plans to make common charger port for all devices | European Commission | The Guardian

• BabylonBee

• Household net worth rises above $141 trillion, but debt up sharply as well

• On Ayn Rand

• The Ivermectin Mess by David Friedman

• Will We Accept Nuclear Fusion When It Comes? – AIER

• China declares all crypto-currency transactions illegal - BBC News

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #358: Subscription Economy Update

We’ve got a special update for you as a part of our show notes for episode 358 on the subscription economy. For our Patreon members, we always provide a short list of notes that follow along with the episode. We call these “Greg’s notes” — sort of like CliffsNotes but specifically for The Soul of Enterprise. For all readers this week, we are presenting these notes below. They follow the structure and timing of the show so they are great to have at your side while listening.

Here are our CliffsNotes (aka Greg’s notes) for the week on the subscription economy:

• Here's a subscription update for you: Taco Bell. I agree with the title to this article. We may have gone too far 🌮 🌮 🌮 https://www.theatlantic.com/technology/archive/2021/09/taco-bell-subscription-netflix-for-tacos/620109/

• On the other hand, Panera Bread seems to be on to something with their coffee subscription: https://www.panerabread.com/en-us/mypanera/mypanera-coffee-subscription.html

• One of the things you need to do with subscription? Your offering needs to be BETTER. You need to up your game. That’s why Ron likes Porsche. It’s not just one car. It’s 6 or 7.

• With subscriptions, “You’ve got to plus your offering”. Where have we seen that before?

• We love our Patreon members and want to give a big THANK YOU to Blake Oliver of EarMarkCPE.com. Earn CPE credits by listening to podcasts. Genius!

• Ron and Ed discussed the Apple v Epic ruling earlier today on the show. Here’s the background https://www.cnbc.com/2021/09/10/epic-games-v-apple-judge-reaches-decision-.html

• We are mucking around with the price system again. This drives Ed crazy. In this case it is the new law that targets DoorDash in Manhattan https://www.theverge.com/2021/9/15/22675517/doordash-sues-new-york-city-law-delivery-share-customer-data-restaurants

• SaaS - Sleep as a Service - courtesy of Better Bed Holdings https://www.globenewswire.com/en/news-release/2021/09/02/2290522/0/en/Beter-Bed-Holding-introduces-Leazzzy-the-sleep-subscription-powered-by-Beter-Bed.html

• Disney is constantly experimenting with new subscription models. Magic Key holders get pass and exclusive access + discounts that make a season pass holder look like a pauper. https://disneyland.disney.go.com/magic-key/

• Access to consumer electronics on a subscription basis? Enter Grover (but don’t get Ron started on the phrase “circular economy”) https://techcrunch.com/2021/04/12/grover-raises-71m-to-grow-its-consumer-electronics-subscription-business/

• We love to read (on the air!) reviews about the podcast. Spend 15 seconds and tap this link RateThisPodcast.com/TSOE

• Our Patreon channel is sponsored by 90Minds. If you need a mind, get one at 90Minds.com!

• CATO Daily Podcast: Onerous regulations will stick around after COVID (listen to the end when they talk about Direct Primary Care and Yoga all in one) https://www.cato.org/multimedia/cato-daily-podcast/will-onerous-regulations-stay-gone-after-covid

• Tesla cancelled their solar subscription offering. Was it just another financing option and didn’t “plus” the relationship at all? https://www.teslarati.com/tesla-solar-subscription-service-canceled/

• THIS, this, this is the “three subscription strategies” article referenced on the show today. It’s fantastic. Please read it. https://www.linkedin.com/pulse/building-future-past-talking-enterprise-architecture-robert-tien-tzuo/

• Why is profit a bad word? The chef of a pub in Marlow, UK has something to say about that https://www.marketingweek.com/tom-kerridge-price-premium/

• Experiential destinations with a purpose beyond shopping: “Retail Reinvents in the Subscription Economy” https://www.subscribed.com/read/news-and-editorial/retail-reinvents-in-the-subscription-economy

• Next week? Special guest Joe Woodard! See you in 167 hours!

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This pas week was bonus episode 358 - Trillions and taxes. Here are a few links discussed:

• The House’s $3.5 Trillion Tax-Hike Plan

• Microsoft will now let its users log in without passwords - CNN

• KPMG fined $613,000

• Media Attempt to Downplay Alarming August CPI Inflation Report - Foundation for Economic Education

• OSHA Vax Mandates

• Top earning New Yorkers could face 61.2% combined tax rate under House plan

• Regeneron’s Monoclonal-Antibody

• Queenslanders Lockdown

• Kim Jon Un Turns Down China’s Vaccine

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #357: Behavioral Biases

TSOE listener Geir, from Norway, sent us: Influences and Irrationalities of the Human Mind, Ogilvy Behavioural Sciences Practice.

The book lists 29 of most subtle and powerful nudges, “combining gravitas of academic understanding with application of real world communications.”

As Charlie Munger, Warren Buffet’s bridge and business partner said: “If economics isn’t behavioral, I don’t know what the hell is…”

Some of Our Biases

• Anchoring: Those whose last two digits of their Social Security number was above 80 were willing to spend $20 more on a bottle wine than those last two digits was below 20.

• Chunking: Ryanair, low seat price, add-ons, already attached to the idea of a holiday, more likely to purchase

• Over-Confidence: 93% are above average drivers. Lake Wobegon Effect

• Priming: French music played, French wine outsold German wines 5:1; German music, German wines outsold French wine 2:1

• Paradox of Choice: Often paralyzed by choice. Prius offered one choice, since the real choice was hybrid or not. If Toyota had offer several, customers might have postponed to buy the best one (Starbucks refutes this Paradox of Choice).

• Status Quo Bias: Nine out of ten people favor organ donation: Germany donation rate is 12%; Austria is 99%, because in Austria you are opted-in unless you opt-out.

• Loss Aversion: It’s two times as painful to lose something as a similar gain. “Lose $X if you don’t insulate your attic vs. you will save $x each year if you do.

But then The Economist, August 20, 2021, published this article, “A study on dishonesty was based on fraudulent data,” which questions the data and facts in one of the studies in Dan Ariely’s book, The Honest Truth About Dishonesty.

Jason Hreha, one of Ariely’s collaborators wrote “The Death of Behavioral Economics,” Undated, 2021, wherein he claims: “Behavioral economics is dead.” For two reasons:

1.     Failing to replicate a lot of the studies

2.     Interventions are surprisingly weak in practice

Even Loss Aversion, the field’s most important idea, has failed to replicate. Other have found losses and benefits equally effective in driving conversion because many see loss-focused messaging as gimmicky and spammy. Loss aversion does exist, but only for large losses.

Weak Effect

UC Berkeley researches looked at 126 Random Controlled Trials by two nudge units in the USA. According to papers, the average effect was 8.7%. The researchers found the actual effect to be 1.4%.

Hreha argues that behavioral economics offers up cookie-cutter solutions to complicated problems. Yet specific problems require specific solutions.

He also wrote, “Applied behavioral science is where creativity goes to die.”

Deirdre McCloskey [Episode #6 and Episode #293], in her book Bettering Humanomics, wrote:

Other recent neobehaviorist fashions, such as neuroeconomics and behavioral finance and happiness studies, are dubious—or, they treat creative adults like a flock of little children.

We need, they say, merely to “observe their behavior,” omitting for some reason linguistic behavior.

Ludwig von Mises further developed the idea of praxeology, the science preoccupied with psychology and understanding human decision making. He believed economics is the study of human praxeology under conditions of scarcity.

Humans engage in purposeful behavior, said Mises. Animals behave. Humans act. We have a goal in mind, and we learn. Human action vs. Human behavior:

1.     Each of us acts purposefully, with a goal in mind. It can be fixed, or changed frequently.

2.     Each of us learns

He also wrote: “Error, inefficiency, and failure must not be confused with irrationality. He who shoots wants, as a rule, to hit the mark. If he misses it, he is not irrational’ he is a poor marksman.”

Economist John Kay wrote Obliquity, where he said, “If people are predictably irrational, perhaps they are not irrational at all: Perhaps the fault lies not with the world but with our concept of rationality.

One of Ron’s Top Five book of 2019 [Episode #275] was Cents and Sensibility: What Economics Can Learn from the Humanities, by Gary Saul Morson and Morton Schapiro. They begin by noting the difference between humanities and economics: stories.

“Great novelists understand people better than any social scientist who has ever lived.”

“Surely no one in his right mind ever thought people are rational to begin with? Why, the whole heritage of Western literature has described people as irrational, and the social sciences point to many factors other than reason that shape behavior.

“Why would philosophers since Socrates have been urging people to act rationally, if they always did so anyway?

Behavioral Economics purports to adding the human dimension to economic models, but it does nothing of the kind. The human beings it imagines behave just as mechanically, only less efficiently. They are still abstract monads shaped by no particular culture.

“There’s no way to grasp most of what people do by deductive logic—we need stories. Novels are a distinct way of knowing. Ethics requires judgment, it cannot be reduced to theories, models, or sets of rules alone.

“Economics can’t deal with culture since culture can’t be mathematized. Same with wisdom.”

There is also no place for surprise in either classical or behavioral economics, and yet humans constantly surprise.

Dostoevsky wrote: [If someone would] “some day…truly discover a formula for all our desires and caprices,” there would be no caprices at all. “There will be no more incidents and adventures in the world.”

Another book highly critical of nudges and libertarian paternalism is The Manipulation of Choice: Ethics and Libertarian Paternalism, by Mark D. White.

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #356: Interview with David C. Baker

Let’s learn just a bit more about David C. Baker before we get into the show notes…

David C Baker grew up with a tribe of Mayan Indians in a remote village in the highlands of Guatemala. He's an author, speaker and advisor to entrepreneurial experts. Also a helicopter and airplane pilot, an avid photographer and has taught high performance motorcycle racing. He owned a marketing communications firm for 6 years, then started a management consulting firm focused on helping entrepreneurial experts make better business decisions through his writing, speaking, and advising. He has written five well received books, the third one, Managing Right for the First Time, recently being named by Inc. Magazine as one of the Top Ten Books on Management that Entrepreneurs Should Read.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless with my friend and co-host, Ron Baker, and folks on today's show, we are pleased to have our interview with David C. Baker. How's it going, Ron?

Ron

It's going good. This has been a weird week, but I'm really looking forward to our conversation with David.

Ed

Absolutely. It has been a weird week. We'll perhaps get into that on our bonus episode later. But let's get to our guest right away. David C. Baker was born in Michigan, but lived in Guatemala with a tribe of Mayans until he was 18 years old. He spent six years in graduate school earning advanced degrees in ancient languages in theology, but wishes he had a degree in anthropology. He's an author, speaker and advisor to entrepreneurial experts. And he owned a marketing communications firm for six years and then started a management consulting firm focused on helping entrepreneurial experts make their business decisions through his writing, speaking and advising. He's the author of three rock bench titles, Managing (Right) for the First Time, Financial Management of a Marketing Firm, and The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth. Welcome to The Soul of Enterprise, David C. Baker.

Well, we're happy to have you. So my first question is Mayans, fascinating. Talk to me.

Which, of course, probably led to your then getting advanced degrees in ancient languages and theology as part of the tie-in. I could see that would give you a push in that direction. But then you do say, in one of the bios that I read, and I worked it into the bio, that you preferred you would have had a degree in anthropology. And I think you probably know Rory Sutherland has called marketing the modern equivalent of anthropology in the current day, marketers are anthropologists on the current set of human beings that are around. So why did you want anthropology after all that?

Which leads me to this next question. I'm really curious as to your thoughts on this. And this is kind of a running theme, or question, that Ron and I have bounced back and forth on for quite some time. The word fair, and we often use in the business context of a “fair price.” Fair is an Anglo Saxon word, it only exists in Anglo Saxon type languages. Because if you translate fair to Spanish or French, it gets translated as “just” and then if you translate that word back to English, you would never translate it back to fair, you would translate it as “just,” that would be the word that you would use. And it's amazing to me how the concept of fair, which the opposite by the way in the original word is foul, and we would never say, “Well, that was a foul price.” And so in your in your experience with understanding languages, it's amazing to me how languages have concepts like that, that the concept doesn't even translate one to the other.

And that's what I wanted to lead to and ask you about this, because I think there's an analogy to business in that these different areas of expertise, and of course in your book, have different languages in a sense that are used, and some of them don't translate well, one to the other. So I think there is a language of marketing, a language of sales, a language of finance. And oftentimes, I think we're talking past each other linguistically, even though we're talking the same English, it's different concepts come into our mind when we talk about things like price, cost, value, they sometimes mean different things to different people when you say them, right?

I think it was Plato, all wisdom begins with the definition of words. We can't build wisdom unless we agree on what some term means. And I think oftentimes, a lot of people are talking past one another when we do say things like price, value, specifically those words in business. So curious as to when you hear value-based pricing, what does that mean to you? Why is that a struggle for you?

That's why I think Peter Drucker was great at, asking some of those very basic questions that you would think okay, what's the purpose of your business, sell what your customers buy. Well, duh, no kidding, but it's amazing how many people don't actually sell what their customers buy. It's really quite incredible. I've got of just a few minutes with you, so to pick on this value conversation, I agree with you that oftentimes people who have espoused some of the concepts that Ron and I talk about have done it and come about it more from a manipulative standpoint, I will not deny that stamp at all, which is why I always go back to the work of Mohan Khalsa and his book—and to me wrote the definitive book on the value conversation—which is Let's Get Real, or Let's Not Play. The whole concept is exactly what you said, we're going to have a real, authentic conversation, and I am going on a value quest with you in this conversation to try to find out if there's enough there there, as you know, the politicians once said, to see if it's worth us doing business at all, and I'll be the first one to say, I don't think we should do anything with you.

Interesting, well that's unfortunate, because I think one of the things that I found is that when people are really good at the value conversation, you do have that experience of being well-listened to. That's one of the things that people will say, and I will agree. I think Margaret Wheatley, a previous guest on this show [Episode #308], in one of her books, which is on great questions, about asking great questions. She does ask that exact question. When was the last time you experienced good listening? And that's a very challenging,

Yeah, it really is. And it changes the way we go about doing our business on a regular basis. Well look at this, we're up against our first break already.
 

Ron’s Questions: Segment Two

Welcome back, everybody, we're here with David Baker, and he's the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, published in 2017. David, this was a great book, I really got a lot out of it. I love how you talk about positioning, but on the wealth + making an impact in your subtitle, I just want to ask you about this from a knowledge worker perspective. When you look at doctors, or lawyers, or even advertising folks. They joined the profession or the industry for some reason, they wanted to help people, they wanted to make an impact, whatever. And then they get in there, and they spend half their time doing paperwork, like how doctors feel they're overwhelmed with too many patients, and they don't burn out—they rust out. What's your reaction to that? 

We have a saying around here: growth for the sake of growth is the ideology of the cancer cell not of a profitable, sustainable business. I love how you say it's not about revenue, or growth, it's about impact. You also wrote this, and I really want you to explain this: “Expertise (or insight) is based on focus, which is based on positioning. Now, I'm going to ask you later about vertical and horizontal positioning. But just unpack that why “expertise, or insight, is based on focus, which is based on positioning”?

And I love that because on the positioning end of it, it also gives you the ability to say no easier and I love when you say “Your only real control is to withhold your expertise.” I mean, he who says no has the power.

There's nothing more liberating than being able, and willing, to say no. But we learn that so late, or a lot of us do. I wish I would have known that in my 20s.

By the way, David, my favorite way to say no, is tell somebody, “I'd love to, but I don't want to.” And you'll get a really weird look, and they'll have to process that for a minute. But it's a very nice way to say no. Great conversation you were having with Ed about pricing. And you say pricing to you is a leading indicator, as a consultant you like to go in, take a look at their pricing, it gives you a sense of their confidence level, do they offer free consultations, you have all of these different things that you look at. Why do you think so many firms have a problem with pricing?

I'd rather have no business than bad business, or where I have to compromise my principles. I love the way you say—and I am a big fan of Dr. House—and the second law of medicine, which is prescription without diagnosis is malpractice. And you say, and I love this—and I am stealing this by the way—if you don't diagnose, or even prescribe, you're just the pharmacy. I love that. And it kind of leads to, if you kind of blow that up and go even higher, we have a saying that, and you say don't confuse expertise with implementation. I have a saying, good ideas are more valuable than the mere execution of them. In other words, to prescribe with the wrong diagnosis, there's no good way to implement a bad idea. I don't think good ideas are everywhere. I think they're rare. Otherwise, we wouldn't get the remake of The Dukes of Hazzard and Bewitched, and all this crap, all these sequels. But just wanted your reaction to that.

I love how you have the strategy room and the implementation room, and how the strategy room should slowly encroach, and grow bigger over execution. I learned this from economists, I know it's a very counterintuitive idea, but countries that come up with better ideas, and more ideas, have a higher standard of living than those countries that merely execute on those ideas. So I rather live in the country that comes up with the concept of the iPhone, rather than the country that assembles it. The other thing, and I love this, and I've only got about a minute, but maybe Ed can get into this, you say there's a temptation to match capacity to opportunity, which is kind of that whole growth for the sake of growth. You say the right size capacity is slightly smaller than the amount of opportunity within reach. That's brilliant, by the way, I love that.

And if you never have spare capacity, not only can’t you get better opportunities, or drive more opportunities for existing customers, but you're going to rust out your people if you put them on this treadmill, especially knowledge workers.

Awesome. Well, David, this has been great.

Ed’s Questions: Segment Three

And we are back with the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, David C. Baker. And David, would you walk us through a typical day for you? And if you don't get the reference there, that is the opening line of the two Bobs in the classic scene in the movie Office Space. So I want to I want you to talk to me a little bit about the Two Bob's podcast, which I assume is based on that great scene in that movie.

Probably the only more famous scene than that is the PC load letter, when they take the baseball bat to the printer. [The movie was] shot in North Texas, by the way. A lot of those interiors were shot in North Texas. But David, back to the book. So I'm going to quote for from the book here. And this, I think, alludes to the conversation that you were having earlier with Ron. You said, “If I could reach inside my unconfident clients and raise their confidence level, we would move on and solve the next challenge for them. Truth be told, I often thought more highly of their abilities than they did themselves.” Why do so many professional organizations actually suffer from, as crazy as this seems, self-esteem issues?

As one of our colleagues of VeraSage colleagues [Dan Morris] said when he was shifting his last customer over from billing by the hour to a fixed price agreement, he said to him, “I'm too old and too talented to continue to charge you by the hour. And I think that's part of it. But I also do think that it relates back to the conversation we were having earlier, which is the professional tends to focus on “It only took me 15 minutes.” The reality is no, it took you your whole lifetime to get to that 15 minutes. And then you're not selling expertise. And I was so much in agreement with what you were saying about them not being service workers. That's one thing I wish I could beat out of them, that you are not in a service firm, but in a knowledge firm, what we like to call access to, or transfer of, knowledge. That's what you're really selling.

Alan Weiss tells a story about this whole confidence thing. When he was a junior implementer for a larger consulting firm, and after the guy gave the price out to this bank manager, he would put a cigar in his mouth. And one day Alan Weiss screwed up the courage and asked him, “So Bernie, what's with the cigar?” He said, “I need the cigar, because if I don't put the cigar in my mouth I start to giggle.” We've only got about four minutes left, and you started this conversation with Ron, and I thought it was really interesting. You talk about the six different things about positioning, five are in one chapter and then you dedicated an entire chapter, chapter 10, to how positioning is built on your expertise and not your implementation. You started to talk a little bit about that with Ron. Unpack that with the last four minutes or so that we have left to talk here.

That's so great. Our friend, Tim Williams, who I know you know, talks about the difference between logic work and magic work. I think they are very similar to what you're talking about. Charge a lot for the magic work, and you can even “give away” the logic work, the stuff that's got to be done no matter what, say that's free. I mean, it's not, because the value is really on that magic work.

That’s right. None of us wants to be charged $150 an hour to resize a banner ad. We do not want that at all. Well, David, this has been great. Ron's going to take you home in the fourth segment, but I just want to thank you for appearing on the show today. We hope you'll come back and maybe talk to us some more. But right now, we want a word from our sponsors, and my employer, Sage.
 

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with David Baker, the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth. And David, we've only got about nine minutes, and you could probably use the whole thing [on this one topic]. And I just want to tell people, please, please, please read David's book, because your discussion on vertical versus horizontal positioning is brilliant. And there's a lot in there, and firms need to go through every portion of it. But you also say, “Most well positioned experts have vertical positioning.” So give me your explanation. How do you explain vertical versus horizontal positioning?

And you say that this needs to be reevaluated at least every five years or so, maybe 10 ideally. Explain that?

I know it's in your contract with Blair to give him a shout out. And I hope we've fulfilled that. Well, one more shout out to Blair. He says, “Positioning is an exercise in irrelevance.” Explain that?

And I love this, too. You have a really good way to explain how, when you're in a vertical positioning framework, it's so much easier to find prospects, because essentially, you can buy a list. And the other thing you said is, when people change jobs, they usually take you along with them, which is a fantastic point.

Yes, that's a fantastic acid test, can you buy a list. Then you say this, and I love this too, and I know this goes back to our conversation about growth for the sake of growth, but you say, “Drop the irrational fear that to keep a customer you have to meet all of their needs.”

I also love this, you said, “Quit protecting what you learned in the past and learn new things now.” I have this philosophy that I should give away my intellectual capital. That way, I have to replenish it to keep at the cutting edge. To me, it's a lagging indicator that your ideas are stale when you start copywriting your own jargon.

Excellent. Well, David, thank you so much for appearing on The Soul of Enterprise. We’ve got to bring you back and talk about some of your other books. And Ed, what’s coming up for next week?

Ed

Next week, Ron, we are going to talk about a little book that we found called on behavioral economics: Influences and Irrationalities of the Human Mind, by none other than our friend Rory Sutherland.

Ron

I’m looking forward to that, see you in 167 hours.

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This past week was Bonus episode 356 - Disasters and Drones. Here are a few links discussed:

• Another Looming Disaster

• Crazy Government Responses to COVID Part 1: Understanding Incentives

• The 20 Biggest Advances in Tech Over Last 20 Years

• A Couple of Thoughts on Medical Studies Given Recent Experience

• John Chisholm, Cover Article for Legal Business World, Australia - Online and PDF download

• Subscribe to a Veterinarian + $3,000 Emergency Fund

• Moderna Creates Twice as Many Antibodies as Pfizer, Study Shows

• China to ban kids from online video games for more than three hours per week

• Alphabet’s Wing says Logan is the ‘drone delivery capital of the world’, as Queenslanders order thousands of coffees and roast chooks by air

• 10 Billing myths that can undercut your value, Journal of Accountancy, September 1, 2021

• Half-shredded Banksy could fetch over $5 million at auction

• No Rhyme or Reason to COVID-19, Charles C. W. Cooke

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #355: Who Protects the Consumer More—Regulation or Reputation?

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

— Adam Smith, The Wealth of Nations

But what about fraud, shoddy, unsafe products and services? Or asymmetric information—is your doctor a Quack, or how do I know the used car I’m buying isn’t a lemon?

The criticisms of the invisible hand are valid. The question is: whether the government regulation cure is worse than the disease?

Listen to Episode #294 with Adam Thierer for our discussion on Evasive Entrepreneurs and Permissionless Innovation vs. the Precautionary Principle, an important concept in discussions around regulation.

The original meaning of regulation was to make regular; to standardize; to develop a standard under which nothing should fall. The industry being regulated loves regulation.

The law bubbles up from the bottom, a natural law—the norms to which all of us agree. But legislation is an imposition from the top down, it’s arbitrary (why 55MPH speed limit and not 60MPH?).

It’s similar with our topic today. Reputation is bottom-up, and regulation is top-down.

HISTORY OF REGULATION

This section draws from Milton and Rose Friedman’s classic book, Free to Choose: A Personal Statement.

A lot of regulation has been prompted by some event, such as Rachel Carson’s Silent Spring, Upton Sinclair’s The Jungle, Senator Estes Kefauver’s investigation into the drug industry, and Ralph Nader’s attack on the General Motor’s Corvair as “unsafe at any speed.”

Regulation quickened after the New Deal—half of the 32 agencies in in 1966 created after FDR’s election in 1932. Twenty-one new agencies were established from 1966 into the next decade.

Instead of being concerned with specific industries, these new agencies covered the waterfront: the environment, the production and distribution of energy, product safety, occupational safety, etc., with the goal of not only protecting the consumer from sellers but also from himself.

The Code of Federal Regulations in 1938 was 18,193 pages. In 2017, 186,374 pages. Edward Teller, “It took us eighteen months to build the first nuclear power generator; it now takes twelve years; that’s progress.”

The Interstate Commerce Commission was established Feb 4, 1887 to regulate railroads, because of fears of monopolization. The artificial high prices enabled the trucking industry to grow and The Motor Carrier Act  of 1935 gave the ICC jurisdiction over trucking to protect railroads, not consumers.

Truckers needed “Certificates of public convenience,” 89,000 applications were filed while only 27,000 were approved. The collective value of these Certificates in 1972 was $2-3 Billion, which also represents the economic loss to society

The ICC then went on to nationalize passenger traffic with Amtrak.

The Sherman Anti-Trust Act was passed in 1990. Listen to Episode #164.

The Food and Drug Administration was established in 1906, as a reaction to Upton Sinclair’s novel, The Jungle, which documented unsanitary conditions in Chicago slaughtering and meat-packing houses. Sinclair said, “I aimed at the public’s heart and by accident hit it in the stomach.”

Even before The Jungle, Women’s Christian Temperance Union and the National Temperance Society formed the National Pure Food and Drug Congress (1898) campaign for legislation to eliminate medical nostrums—heavily laced with alcohol.

The 1906 act was limited to the inspection of foods and labeling of patent medicines. More by accident than design, it also subjected prescription drugs to control, a power which was not used until much later. The FDA was placed in the Department of Agriculture.

Concerned by restrictions on importation of U.S. meats imposed by European countries, due to the allegation that the meat was diseased. Meat sellers eagerly seized on government certifying meat was disease-free.

The Food, Drug, and Cosmetic Act of 1938, extended the government’s control over advertising and labeling and required all new drugs to be approved for safety by the FDA. The approval had to be granted or withheld within 180 days.

Then the Thalidomide episode of 1961–62 swept into law in 1962 the Kefauver amendments, which dealt more with quality than price . These amendments added proof-of-efficacy requirement to the proof-of-safety requirement of the 1938 law, and removed the time constraint on the FDA’s disposition of a New Drug Application.

Subsequently, the number of “new chemical entities” introduced each year fell more than 50 percent since 1962. Ten years after the 1962 amendments, no drug was approved for hypertension, whereas several were approved in Britain. In fact, in the entire cardiovascular area, only one drug was approved in the five year period from ’67 to ’72.

Economist Sam Peltzman’s research into the costs and benefits of the FDA was unambiguous: “The harm done has greatly outweighed the good.”

Fame and acclaim was awarded to the woman who held up approval of Thalidomide, Dr. Frances O. Kelsey, was given a gold medal for Distinguished Government Service by John F. Kennedy. Any doubt which mistake you will be more anxious to avoid?

In a Newsweek column from January 8, 1973, Milton Friedman laid out that for these reasons the FDA should be abolished,

A letter writer challenged him: “I do not believe that the FDA should be abolished but I do believe that its power should be” changed in such and such a way.

In a subsequent column, entitled “Barking Cats,” February 19, 1973, Friedman replied:

• What would you think of someone who said, “I would like to have a cat provided it barked”? You favor an FDA provided it behaves as you believe desirable is precisely equivalent.

• As a natural scientist, you recognize that you cannot assign characteristics at will to chemical and biological entities, cannot demand that cats bark or water burn.

• Why do you suppose the situation is different in the social sciences?

Here is “Barking Cats” by Milton Friedman and his response to a previous column in which he more or less argued for the FDA to be abolished.  

Also related to today’s show, check out Episode #192 with Mary Ruwart in which we discuss her book, “Death by Regulation.”

Interested in learning more about the futility of the US FDA and the bureaucratic delays we have seen with the vaccine for COVID-19? Here is yet ANOTHER great show featuring Mary Ruwart, Episode #321.

Economist Steven Landsburg suggest that we should pay the FDA Director should be paid in Pharma stock.

The Civil Aeronautics Board was established in 1938, with control over 19 domestic carriers. Intrastate fares were not regulated while interstate fares were. The intrastate flight in California from San Francisco to Los Angeles was cheaper than similar length interstate flights.

Ralph Nader filed a complaint in 1971 about this discrepancy. So the CAB increased the intrastate fares to match the permitted interstate CAB fares. How does this protect the consumer?

The National Highway Traffic Safety Administration was established December 31, 1970. It’s research into the infamous Corvair found, “The 1960–63 Corvair compared favorably with the other contemporary vehicles used in the tests.”

The Consumer Product Safety Commission was established October 24, 1972. This has to be the most Namby-pamby, eat your vegetables agencies ever founded. It’s main concern is not price or cost, but safety.

What is an “Unreasonable risk?” It is hardly a scientific term capable of objective specification. What decibel level of noise from a cap gun is an “unreasonable risk” to a child’s (or adult’s) hearing?

The example of Tris is illustrative of government failure. CPSC had responsibility for administering the “Flammable Fabrics Act,” dating back to 1953. CPSC issued regulations for children’s sleepwear and the cheapest way meet this standard was impregnating the cloth with a flame-retardant chemical—Tris. Soon, 99 percent children’s sleepwear produced and sold was covered in Tris. Later it was discovered that Tris was a potent carcinogen.

In a free market, Tris would have been introduced gradually. As Milton Friedman writes, “Often simply substituted government failure for market failure.”

The Environmental Protection Agency was Established December 2, 1970. While pollution is usually blamed on “business,” as Milton Friedman points out, “In fact, the people responsible are consumers, not producers, since they create a demand for pollution.”

He was in favor of imposing effluent charges, a tax of a specified amount per unit of effluent discharged. Then there would be objective evidence of the costs of reducing pollution.

Even if a high tax left much discharge, it would provide substantial sums to compensate the losers or undo the damage.

Price Controls are another form of regulation. President Carter argued for a massive program to produce synthetic fuels or else the nation would run out of energy by 1990.

Yet enterprises have to be confident that future prices will not be controlled, otherwise, the heads-you-win, tails-I-lose gamble will not be worthwhile. When price rises, controls and “windfall taxes” loom; but when price falls, they hold the bag.

To those who argue that the risks are too great and the capital costs too heavy for the market to absorb, they are wrong. Risk taking is the essence of private enterprise. Risks are not eliminated by imposing them on taxpayer. The Alaska pipeline, driverless cars, AI, satellites, and billionaires in space all demonstrate that private markets can raise massive sums for promising projects.

Economist George Stigler’s Thought Experiment

University of Chicago economists George Stigler was the originator of the Regulatory Capture Theory. Here’s his thought experiment:

“Suppose you want to figure out why a particular regulation passes and the way that it’s written.

“Imagine the legislature putting that regulation up for auction and people could bid on the terms of the regulation and the outcome went to the highest bidder.

“Under those rules it would be clear whose interest is served by a government restriction on freedom of exchange.”

Economist Ronald Coase asked why we don’t regulate ideas to the same extent we regulate products and services, since ideas have killed more people than products and services. After all, Marx’s and Hitler’s ideas have killed more than shoddy products.

REPUTATION: HOW THE MARKET REGULATES BEHAVIOR AND PROTECTS THE CONSUMER

This section draws from Howard Baetjer, Jr.’s wonderful book, Free Our Markets: A Citizens’ Guide to Essential Economics.

Thomas Sowell once said, “I don’t have faith in free markets; I have evidence.”

The elements of regulation by market forces are:

• Freedom among providers to enter the market and compete for buyers

• Freedom of buyers to take their business where they will

• Reputation of sellers, and customer experience spread by word-of-mouth/mouse

• Middleman, the Department Store

• Brand name—the value of which exceeds most assets of modern companies

• Tort liability, a legal means by which people can recover damages if they are harmed

• Requirements imposed by insurance companies as conditions of insurance

• Trial and error feedback loop

• Private testing organizations—Consumer Research 1928, Consumers Union 1935 publishes Consumer Reports (small size indicates minority of consumers are willing to pay, which shows they are satisfied with most sellers)

• Third-party certification of product quality and service competence (mechanics can be ASE certified—Automotive Service Excellence—or manufactured certified)

California growers formed Leafy Green Products Handler Marketing Agreement which pays for their own inspection system. The growers found the FDA regulation to be ineffective and insufficient. Participation was voluntary in California, yet 95%+ of the leafy greens industry signed up after major processors like Dole and Fresh Express agreed to participate.

Insurance companies have a strong incentive to regulate and insure the safety of products. So much so that it was insurance companies who created perhaps the largest third-party certifier, Underwriters Laboratories (UL) (“Underwriter” means “insurer” in this context).

This international organization “evaluates more than 19,000 types of products, components, materials and systems annually with 20 billion UL Marks appearing on 72,000 manufacturers’ products each year.”

If the law permits only one certifier to operate society loses the dynamic process through which better standards and methods can be discovered and used.

Every approach will have flaws. Our goal should be the more modest one of achieving the least-flawed institutional setting. The least-flawed, best available approach to regulation is one that:

• generates an on-going discovery of new and better knowledge and invention of new and better processes, and

• gives those involved a strong incentive to create value for other people in order to benefit themselves.

Parents can’t take time research different grocery store chains, shoes they might buy, or the different churches they might attend. Yet they have only pretty good grocery stores, shoes, and church options to choose from.

Why? Because in a free and competitive system enough other people do such research and do make such informed choices. If only half of all parents made careful school selections in a free system, no poor schools could survive.

No lobbyist for a newspaper chain or a religion goes to Washington to insist that any new newspaper or religion must first get a license assuring the quality of their news or doctrine.

Milton Friedman writes: “Ask yourself what products are currently least satisfactory and shown least improvement: Postal service, elementary and secondary schooling, railroad passenger transport. Which have shown the most satisfactory and improved the most: Household appliances, television and radio sets, computers, supermarkets shopping.”

“The imperfect market may, after all, do as well or better than the imperfect government. The difference is that a private firm that makes a serious blunder may go out of business. A government agency is likely to get a bigger budget. The most effective protection is free competition at home and free trade throughout the world.”

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This past week was Bonus Episode 355 - “Mask mania and more”. Here are a few links discussed:

• The Extinction Clock - Thanks, Hector!

• Do Box Office Numbers Even Matter Anymore? Talking Suicide Squad with Nick Cherrier | Subscribed.com

• Supreme Court Blocks Biden Administration’s New Eviction Moratorium - WSJ

• Why Most of the Pro-Mask Science Quoted in the Media is Absurd

• Andrew Cuomo loses his Emmy

• New York Governor Adds 12,000 COVID Deaths to Cuomo’s Count

• Infrastructure Bill Contains Poison Pill for Crypto

• Barack Obama’s Tower of Power

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Episode #354: Interview with James R. Harrigan

James R. Harrigan is the co-author of Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics, along with Antony Davies (interviewed in episode #351). We were thrilled when James agreed to join us on this episode of The Soul of Enterprise. Below are full show notes including the questions prepared by Ron and Ed and links to James’ work.

But first a bit more about James Harrigan…
James R. Harrigan is the F.A. Hayek Distinguished Fellow at the Foundation for Economic Education. He is also co-host of the Words & Numbers podcast. Dr. Harrigan was previously Dean of the American University of Iraq-Sulaimani, and later served as Director of Academic Programs at the Institute for Humane Studies and Strata, where he was also Senior Research Fellow. He was also Managing Director of the Center for Philosophy of Freedom at the University of Arizona. He has written extensively for the popular press, with articles appearing in the Wall Street Journal, USA Today, U.S. News and World Report, and a host of other outlets. His current work focuses on the intersections between political economy, public policy, and political philosophy.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless with my friend and co-host, Ron Baker, and on today's show we are pleased to have our interview with James R. Harrigan. Hey, Ron, how's it going?

Ron

I'm great, Ed. I'm looking forward to this. You know, when Antony Davies was on a few weeks ago [Episode #351], we did not read his book in anticipation of that show, which I felt really guilty about. The book is Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics, but I have read it now. So this will be great, because James tells us, of the two, he's the smarter one.

James Harrigan

That is correct. And let's not call it his book anymore.

Ed

Well, by way of quick introduction, James R. Harrigan is the F.A. Hayek Distinguished Fellow—that’s Friedrich, not Selma, by the way—at the Foundation for Economic Education and the senior editor for the American Institute of Economics Research. He's the co-host of the Words and Numbers podcast [with Antony Davies]. He was previously Dean of the American University of Iraq-Sulaimani, and later served as Director of Academic Programs at the Institute for Humane Studies and Strata, where he was also Senior Research Fellow. He’s written extensively for the popular press, with articles in the Wall Street Journal, USA Today, among others. His current work focuses on the intersections between political economy, public policy, and political philosophy, and his book today, which we're going to talk about, is Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics. Welcome to The Soul of Enterprise, James R. Harrigan

I'm a pretty quick reader because I'm from New York originally, so we get it in pretty quickly. So I had to make the Selma Hayek joke, I can't resist it.

Well, fill in some blanks. Where did you grow up, what led you both into and then out of academia?

Well we certainly found your book interesting as well. The book, again, is Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics. And Anthony, I'm sorry, James. Sorry, really big problem there! I have to ask you about this. It's chapter four of the book, but I'm going to jump into it because it's the lead in the news this week. Quoting from the book, “We have also brought our troops planes and drones to many nations. And the killing we have done in those places, some warranted, some not, will doubtlessly result in the kind of hatred for the United States that have led to the attacks that fired up this merry-go-round in the first place. Let's talk a little bit about that.

Yeah, by my calculation, that I heard on a podcast, on the low side we have spent $150 million a day, each day, for 20 years. Now, you probably recall a couple of weeks ago when people freaked out over billionaires spending their own money to go to space. And yet $150 million a day, each day, for 20 years. I can't reconcile that in my brain.

And that's one of the thoughts. Is there really an Afghani perspective? Is there really an Iraqi perspective? These are not nations like Japan and Germany were that we were able to rebuild in the sense that they had joined the quote, “community of nations” already. These are constructs. Afghanistan is a construct. It's not a real nation. Ouch.

One of the lines I've said to people is look, the folks in Afghanistan have been throwing rocks at each other for millennia. The mistake that we and the Soviets made was giving them anything more than rocks.

Yeah, unfortunately, I agree. Hopefully in my next segment with you it'll be a little bit more joyful but we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody, we're here with James R. Harrigan. He's the author of Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics. James, you say there's only two ways humans can work together: They can either cooperate, or they can coerce one another. The first is voluntary, and the second is involuntary. Explain that.

And James, one of the reasons this matters, and it matters, I know, for a lot of reasons, liberty, freedom, all of that. But one of the things you point out is that when you look at poor countries that rely more on cooperation than coercion, they have less poverty and less inequality. And I thought that was some really interesting empirical evidence, and it's kind of overwhelming, isn't it?

Yeah, I'm in awe of things like that. When you really, like you say, step back and think about it. I mean, the fact that I can go to another country whose language I don't speak, hand somebody a plastic card with my name on it, and they give me car—a car! That just kind of astonishing when you think about it.

I have to ask, who was the concert?

James

Oh, it's the greatest band in the world. I'm happy you asked. It's an English neo-progressive band called Marillion. If you could imagine Pink Floyd and Radiohead ground up into a fine paste, this is what it would sound like. I refer to it as the sound of Gods laughter. It's just that good.

Ron

Wow. It must be if you're willing to fly to Poland.

James, this is kind of unfair, I think we've only got about a minute-and-a-half, maybe two, left. But you talk about the knowledge problem. And I love it because you quote the guy from The Toaster Project, the guy who tried to make his own toaster and then the guy who made his own chicken sandwich. Those, like I, Pencil, are great stories. Why haven't we learned this lesson? Why do we keep asking government to do things and solve problems when nobody knows how to make a pencil?

We get the government we deserve. Well, James, this is just flying by and this is wonderful.

Ed’s Questions: Segment Three

And we are back with James R. Harrigan. The book is Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics. James, I wanted to ask you about something related to the book, but also in current events as well. And that is this notion of mask mandates. I know from listening to your show that, like Ron and myself, you're neither a maskafile nor a maskaphobe. So we're who are somewhere in the middle. But a federal mandate wouldn't make much sense because of the principles of federalism, and we wouldn't want to push that down. But here in the state of Texas, the governor has issued an edict that state agencies cannot, and local governments cannot, issue their own mandates. Does that violate the principle of subsidiarity, which would say the local government would be the best place to make that decision? Talk about the interplay between those two things.

The principle of subsidiarity is down to my household, because we are in a school district in Texas that is not requiring masks. I have my son who does not wear a mask and my daughter, who's four years younger, feels very comfortable and prefers wearing a mask. So guess what, we're letting them make the decision that works for them. As parents, that's what we're doing. So because, as you said, I don't even know what's right for me most of the time. So I'm going to jump subjects on you, I apologize. But this is one of my favorite historical asterisks, and that is the original First Amendment, or the First Article which was put forward, which is known as The Congressional Apportionment Amendment, which if enacted would increase the size of Congress from 435 to roughly 6000 Members today.

Interesting. My fantasy is that somehow more states ratified this original First Amendment, and we have to somehow deal with it. Just throw utter chaos into the situation. But I think you're right, I think that the better play for us all is more federalism. But as soon as you start to bring that up you get basically accused of being pro-slavery, and I’m like, wait, wait.

And interestingly enough, my understanding is this is one of the few times that George Washington actually broke his silence, and was very much in favor of this apportionment amendment, something that he actually believed in?

I heard this first on Jonah Goldberg’s podcast [The Remnant]. He was quoting somebody else, and I can't remember who he says said it, but what we should do is just change the pronunciation of the word “president” to “president.” That'll be a reminder that that is all they're supposed to do is preside.

Well, we are up against our last break. This has been great. So fun to have you on James. Ron's going to take you home in the last segment, but I just wanted to say thanks.  

Ron’s Questions: Segment Four

Welcome back, everybody, we're here with James R. Harrigan, and the book is Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics. James, I'm going to tap into your political philosophy and political science brain. I'm going to give you a series of rapid questions somewhat, because we've only got about seven or eight minutes. In the book, you talk about our propensity for having a war on nouns—drugs, poverty, terrorism. And I just want to ask you about poverty. It seems like on the war on poverty, poverty has won. Why do you think the people don't understand that the only antidote to poverty is wealth creation?

James, what's your position on the universal basic income? [See Episode #95].

Do you worry about Congress's impotence? I mean specifically, their willingness to give power to the president and bureaucracy, and just not make any major decisions?

George Will wrote a book in 1992 called Restoration: Congress, Term Limits and the Recovery of Deliberative Democracy. And it was one of the best arguments I've ever read for term limits at the federal level. Where do you stand on term limits?

Would you see any benefits to term limits if they did do it?

We’ve got about one minute, James, last question. What about a state constitutional convention?

Well, James Harrigan, thank you so much for appearing on The Soul of Enterprise, your book Cooperation & Coercion: How Busybodies Became Busybullies and What that Means for Economics and Politics is fantastic, a great read. We're going to link up everything that you guys have done up on the show notes. And Ed, what do we have coming up next week?

Ed

Next week, Ron, we are going to talk about a subject that is near and dear to both our hearts. We are going to talk about regulation versus reputation, which is the more important?

Ron

Excellent, I'll see 167 hours.

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This past week was Bonus Episode 354 - “Suggested changes for Congresscritters”. Here are a few links discussed:

• The Humor—and Wisdom—of Will Rogers, FEE, August 15, 2021

• Nurabuds: Subscription-only earbuds launch for US$5 per month - NotebookCheck.net News

• Moderna’s HIV Vaccine to Start Human Trials, using mRNA, Newsweek, August 13, 2021

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Episode #353: Left to Right: Why the Traditional Political Spectrum is Wrong

In government and political science courses, students are taught the traditional “political/economic spectrum.” It looks like this:

Yet this spectrum is not only misleading, it is false. Why should socialists and fascists be depicted as virtual opposites when they share so much in common?

The real spectrum should look more like this:

Objections to the Above Spectrum

1.     Communism and fascism can’t be close together because communists and fascists fought each other bitterly. Hitler attacked Stalin.

Al Capone and Bugs Moran hated and fought each other so they can’t both be considered gangsters?

Both systems had low regard for human life. Why expect either to be nice to the other, especially since they were rivals for territory or influence on world stage?

2.     Under communism, as Karl Marx defined it, government “withers away.” So it cannot be aligned closely with socialism because socialism involves lots of government.

Marx’s conception of the government “withering away” not only was purely hypothetical, it’s lunacy. There’s no example of a  despot of the all-powerful “proletarian dictatorship” walking away from power. 

3.     Communism and Fascism are radically different because in focus, one is internationalist and the other is nationalist (as in Hitler’s “national socialism”).

As Lawrence Reed answers: “Big deal. Chocolate and vanilla are two different flavors of ice cream, but they’re both ice cream. Was it any consolation to the French or the Norwegians or the Poles that Hitler was a national socialist instead of an international socialist?”

Communism and Fascism belong firmly on the socialist Left. Political and economic systems should be analyzed by who they empower—the State or the individual.

Resources Mentioned During the Show 

Lawrence W. Reed, “What the Nazis Had in Common With Every Other Collectivist Regime in the 20th Century,” FEE, July 29, 2021

Lawrence W. Reed, “The Only Spectrum That Makes Sense,” April 22, 2021, El American

This is one of Ed’s all-time favorite books. It was featured during one of our best book shows: The Vampire Economy

Also check out this YouTube video: “Hitler’s Vampire Economy” 

Ed is a fan of this 10 question quiz. It quickly covers your position on both personal and economic issues: The World’s Smallest Political Quiz 

Ron mentioned the Freedom Index when talking about Hungary. Check out the full index here.

And speaking of Fascism, here is the Wikipedia source on its Manifesto

As Ron and Ed study the antecedents of some of the political ideas discussed today, Ron recommends the #1 bestseller from Jonah Goldberg: Liberal Fascism

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This past week was Bonus Episode 353 - “Casa Bonita”. Here are a few links discussed:

• South Park Creators sign $900 million Deal with ViacomCBS

• South Park Creators to Buy Casa Bonita

• Netflix loses 400,000 subscribers in America and Canada

• Andrew Cuomo Announces Resignation

• Tax the Unvaxxed? Why Stop There? Kyle Smith, National Review, August 12, 2021

• Maybe We Can Handle the Truth, Kevin Williamson, National Review, August 3, 2021

• Ruling against Ron DeSantis on Cruise-Ship Passports, National Review, August 9, 2021

• Cheers to Jim Jordan and Darrell Issa for Investigating

• Will California’s Recall Doom Gavin Newsom? National Review, August 4, 2021

• Funding For All — Chartr: Data Storytelling

• Huawei chairman says the ‘aim is to survive’ as revenue slides 29%

• No Preferred Racial Term Among Most Black, Hispanic Adults

• Pay cut: Google employees who work from home could lose money | Reuters

• Leaky Vaccines Enhance Spread of Deadlier Chicken Viruses

• Disney+ Adds Another 12 Million Subscribers

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #352: Reginald Lee on Cost Accounting and The Subscription Model

Ron and Ed were joined by VeraSage Senior Fellow, and recidivist guest, Dr. Reginald Lee for this show. They engaged in a round-table discussion about value, pricing, cost accounting, project management, and capacity; and how they all change, and don’t change, in the subscription business model. This is an adaptation of a Bonus Episode from July 14th that ran for approximately 80 minutes, available to our Cost-Plus Subscribers on our Patreon channel (https://www.patreon.com/TSOE).

About Dr. Reginald Lee
Reginald Tomas Lee, PhD, is an author, international and TEDx speaker, corporate advisor and trainer in the areas of cash flow profit/ROI and capacity management. He is the author of three books, including Lies, Damned Lies, and Cost Accounting; Strategic Cost Transformation; and Project Profitability. He has written over 40 articles and white papers, and was a feature writer for the Journal of Corporate Accounting and Finance. Reginald has advised many major companies, including as Bristol Myers Squibb, Dell, Disney, DuPont, Home Depot, Lockheed-Martin, Toyota, and UnitedHealth Group. Professionally, Reginald has worked for GM, IBM, EY, has been a professor of both engineering and business, and currently teaches operations and supply chain at Miami University’s Farmer School of Business. Reginald has a PhD in mechanical engineering from the University of Dayton.

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 351: Interview with Professor Antony Davies

You will learn more about inflation in the first five minutes of this conversation than you thought you could. The interview with Professor Antony Davies only gets better from there!

[Editor’s note: Professor Davies current book can be found at this link.]

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’m Ed Kless with my good friend and co-host, Ron Baker, and folks on today's show, we are pleased to have Professor Antony Davies. Ron, how's it going?

Ron

Very good, Ed, I'm so looking forward to this.

Ed

Yes, it's going be a wide ranging conversation. Antony, as he has told us to call him, is very erudite and will often opines on anything and  everything. So we're looking forward to that. We will not have, as we like to call it, the Tyler Cowen problem with Antony. So let me read his bio and bring him on so we can start the conversation. Dr. Antony Davies is the Milton Friedman Distinguished Fellow at the Foundation for Economic Education (FEE), associate professor of economics at Duquesne University, and the co-host of the podcast Words and Numbers with James Harrigan. He authors monthly columns on economics for public policy for the Philadelphia Inquirer and Pittsburgh Tribune review. And he has written books on understanding statistics published by the Cato Institute. I'd love to ask him about that because I can't find it on the Cato Institute's website, and co-authored hundreds of op-eds, in, among others, The Wall Street Journal, Los Angeles Times and the Washington Post. Welcome to The Soul of Enterprise, Antony Davies.

Well, first, a couple of quick connections. First, you should know that both of my in-laws are Duquesne grads, although they graduated in the late 60s. But I am very familiar with Pittsburgh having a family of origin that started there, love the area. I think it's one of the most underrated places in the United States, actually, in my view, so I'm not sure your feelings on that. But the other connection I wanted to make is in your bio I saw you went to the all-male Catholic bishop [St. John] Neumann High School in Williamsport, PA, and I too am a graduate of an all-male Catholic institution, Chaminade high school in Mineola, NY. So, I think that that changes us somehow, I think there's something in there. What I wanted to ask you right out of the gate is I wanted to talk about inflation. You most recently did a great interview, I guess it was a video piece, for the Foundation for Economic Education refuting a Vox piece that really mis-defined inflation. So I'll ask the questions in succession, and we can unpack them. What do most people think inflation is? What is it really? And why is that important?

Sorry. What is it really? Why is that distinction important, too?

And I've might have heard this, but it seems to be that the money supply has increased recently. I don't know where I heard that?

Yeah, I remember when the Reese's Peanut Butter Cup was a quarter. But why haven't we seen inflation as a problem? If it's been going up since the 70s, the money supply [going up] since the 70s? Why haven't we seen it reflected? Has growth been equal to it, at least to some degree?

The one other aspect of inflation that I wanted to ask you about, because I've seen you talk about it quite eloquently, is that we also don't see in my iPhone, for example, does in 1976 $200,000 worth of stuff, or perhaps even more, and that's not reflected in the price either, because I only paid say $1,000 for this, correct?

Yes, tremendous. But then there's also the timing problem too, right? When the government pushed all of this money out, especially to the markets, and now even to us, it's six months late. We're already in recovery, so to speak, unless everything begins to reverse, which we saw a little bit at the end of this week, but let's not think about that. That's a timing problem, too?

Well, this is great conversation, flying by as usual, but we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody, we're here with Professor Antony Davies. And Antony, I'm probably going to bounce around on you a little bit more. But just to keep with what you were explaining about inflation, you wrote a great article in FEE, “Modern Monetary Theory Isn't Economics.” And you talked about the sleight of hand because it focuses on debt and dollars, rather than resources and products. And I just thought the way you explained it was fantastic. Can you kind of explain it and tell us why it's a sleight of hand?

Do you think this Modern Monetary Theory idea has permeated the halls of Congress and other politicians in Washington? It seems to have happened pretty fast. I mean, like faster than Keynes?

Well, I hope the economists can push back on it. The other thing, Antony, in just reading some of your stuff, you're not just an economist. I know you're a Chicago School economist, right? Very empirical, modeling, data, all of that. But you're a serial entrepreneur, as well. That's kind of a rare trait for an economist.

You just gave, very eloquently, why our show is titled The Soul of Enterprise; that is exactly what we try to convey. The thing that fascinates me about it, were you frustrated when you got to Chicago and realized that the economics profession doesn't have much to say about the entrepreneur, outside of maybe the Austrians, and I know you came to the Austrian School a little bit later, after your academic career. Outside of Schumpeter and maybe some amateurs like George Gilder, who write very passionately about the role of the entrepreneur, [they’re ignored by mainstream economics]. I mean, they're the lifeblood of a dynamic economy, without entrepreneurism an economy is just dead.

That’s very true. You did a podcast back on June 14 of 2017, “What You Should Know About Poverty in America.” And that made me think back to Nicholas Eberstadt, who wrote a paper once and he said, if we measured poverty by looking at consumption, rather than income, it would be like two or three percent. And it kind of set the world on fire, was [and still is] very controversial. And I think about the war on poverty and it seems poverty has won. What are the flaws in how we measure poverty?

I rather be poor today then rich anywhere 100 years ago. It's astonishing to me that we're still having this argument. Do you think Universal Basic Income (UBI), and I know there's all sorts of problems with, but as Charles Murray proposed it in his book, In Our Hands, where we have a Constitutional amendment that wipes out all the other programs, in his book even Social Security and Medicare, replaced it with a UBI, do you think that would be a better alternative?

Philosophically, Antony, if we did UBI the right way, I still worry about it from a moral level. Like, I'm here and the world owes me a living. There's something that rubs me wrong about that, the world was here first, it owes you nothing.

Sure, it's compassion and charity. It's just that those can't be coerced.

I love how you say that we've conflated poverty and inequality. My favorite proverb is a German one. And it says, “If you want equality visit a cemetery.” But Antony this is great, unfortunately, we're up against our next break.  

Ed’s Questions: Segment Three

And we are back on The Soul of Enterprise with Professor Antony Davies. He is the author, with James Harrigan, of Cooperation and Coercion: How Busybodies Became Busybullies, and What that Means for Economics and Politics. And, Antony, let me ask you the question that all authors dream of when on a book tour: Tell me about your book.  

So is using coercion in the first place that started the problem that you have to use coercion to correct?

Interesting. And so I want to ask you about that. And this is the notion of government getting involved in the price system. In most cases that's coercive, right? And I think this is why we see the high prices of healthcare and college education, all this stuff. It's government action begetting government action, correct?

Two quick points on that. Ron and I have interviewed Dr. Paul Thomas out of Detroit, he is one of the primary movers in the direct primary care movement, which I don't know if you're aware of that, but it is a great entrepreneurial solution to this problem, so again, this is a good example of cooperation out-doing coercion. But, the thing is, I think I've recently heard you talk tell this story on a podcast, and it has to get out there again. The absurdity of what you just painted with regard to wage and price controls, leading to all of this stuff, only to be outdone by Wickard v Filburn case, in the early 30s [1942 actually]. On how now the government controls absolutely everything, in the guise of interstate commerce. Tell the story of Wickard v Filburn.

By the standard of Wickard v Filburn, Winston Churchill is also a carrot. It's not interstate, it's not commerce, but it's interstate commerce. Okay.

And Winston Churchill is a carrot, again. Well, we're up against our last break, and I want to remind everybody that you can contact Ron or me by sending that email to asktsoe@verasage.com. We'd like to thank Professor Davies, he's going to finish up with Ron in the last segment, author of Cooperation and Coercion: How Busybodies Became Busybullies, and What that Means for Economics and Politics, go out and buy it at Amazon or a bookstore near you. But right now a word from our sponsor, and my employer, Sage.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Professor Antony Davies. And Antony, Jimmy Carter once said that “Our income tax system is a disgrace to the human race.” What would you replace it with, if you were King for the day?

That's really popular because people figure it’s going to get the drug dealer who goes and buys the Lexus, at least.

I am seeing more and more talk about, and a push for, industrial policy. You know, people are pointing to DARPA and moonshots, and especially Operation Warp Speed, and only the government can do this. Why is this a bad idea?

I know the idea that trial and error is done by the government better than the market is baffling to me. Operation Warp Speed, Pfizer didn't take any OWS money. And of course, the people that advocate for industrial policy, they don't have a good answer to that.

Which is kind of what the market does writ large, by itself, right?

A couple of weeks ago, we did a show on woke capitalism [Episode #349]. And I'm kind of concerned about the CEOs getting into these political fights and all of that. But more specifically, do you worry about the ESG regulations that are starting to come out of the SEC and the Federal Reserve? Because I think some of these things are just a wet blanket on the economy and innovation? 

Yes, you've talked about the Cobra problems, right, the unintended consequences. I’d love your opinion on this. Do we need intellectual property laws?

The only thing that gave me pause, in my younger self, was what about drugs? You know, these need to be protected, because it takes so much money. But of course, a lot of that is government driven, too.

We've probably got time for only one more, but since it's close to our shores, what do you think will happen in Cuba? Do you think we'll see reform?

Well, professor, this has been quite an honor. Thank you so much for appearing on The Soul of Enterprise. And stay with us as we go through a live close. Ed, what do we have coming up next week?

Ed

Next week, Ron, we're going to have excerpts from our conversation with Dr. Reginald Lee and his theories on how costing and project management and subscription all work together.

Ron

Excellent. I look forward to it. I'll see you in 167 hours.

Ed

This has been The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. Join us next week on Friday at 3pm Eastern, that's Noon Pacific. In the meantime, please feel free to visit us on our Patreon site, https://www.patreon.com/TSOE. Or just https://www.thesoulofenterprise.com.

Other Resources

Here is Ron’s favorite line from an AMA on Reddit that Professor Davies did: “I’m not a fan of macroeconomics at all. To my mind, macroeconomics is simply microeconomics done poorly.” https://www.reddit.com/r/IAmA/comments/5ff92j/im_antony_davies_associate_professor_of_economics/

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #350 - Interview with Ken Teasdale, Armanino Partner, Cannabis Group

About Ken Teasdale

Ken Teasdale is an audit partner responsible for audit, review and compilation engagements which include large privately held corporations, partnerships and employee benefit plans. Ken currently leads the cannabis audit practice at Armanino. Previously at LaRue, Corrigan, McCormick & Teasdale LLP, Ken managed the audit department and was responsible for maintenance and compliance with the firm’s quality control practices and procedures for 15 years. Prior to this, he was the chief financial officer for a publicly traded in-line skate company and was instrumental in the company’s initial public offering. He also served in a variety of roles at Grobstein, Horwath & Co. LLP. Ken was the former Chairman of Camp Ronald McDonald for Good Times, and is a current board member (and former Chairman) of the Child and Family Guidance Center, where he is Chairman of the Finance Committee. In 2019, Ken received the Public Service Award from the California Society of Certified Public Accountants, and was named as one of the “40 in their 40’s” leading accounting professionals by the Los Angeles Business Journal. Ken is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. He received a Bachelor of Science degree in Business Administration, Option: Accounting Theory and Practice from California State University Northridge.

[The transcript begins at Segment Two because that’s when our Tech Wizard (otherwise known as “Ed”) hit the record button].

Ed’s Questions: Segment Two

And we are back with accounting and auditing partner Ken Teasdale from Armanino, who specializes in the cannabis space. Ken, this is an issue near and dear to my heart. Full disclosure, I'm a full-on Libertarian, capital L Libertarian. But I have a very strange, let's call it Venn diagram, and that I'm a Libertarian who has never consumed, in any form, marijuana and never fired a gun. That's a very limited circle for those three intersections, but I understand now that marijuana is to some degree legalized in 45 out of 50 states, I believe, but it's still a Schedule I drug, which there is no scientific evidence, not even worthy of study at the federal level. This certainly has to cause complications with regard to things like taking MasterCard or Visa, and things like that. So talk a little bit about the complications that are laid out because of this, as [Justice] Clarence Thomas put it, “unsustainable legal regime.”

I would have you pause there, because I can only imagine them showing up at the tax office with a duffel bag of cash and the state employees going, “Oh my god, what do we do now?”

It literally sounds like a scene out of Breaking Bad. But, yet legally in the States. And I assume that things are going to get corrected probably in the next couple of years at the federal level and make this because it is really unsustainable. Question for you, though, you mentioned that they're looking to go vertical, a lot of these companies looking to go vertical. So are there restrictions in some states that you're aware of that do make it more like the alcohol industry, or like cars, you can't manufacture and sell a car in the same state. So are they trying to break up the distribution networks so that can't happen?

Okay, but you can stay in your state vertically. So it's okay to be a vertical within many states, correct? [Yes].

Okay, interesting. I want to also ask you about the sales tax issue. It has to be completely confusing, especially when you lay Wayfair on top of this?

Which leads to my next question, I'm sure you're aware that, bizarrely, in the state of California they have proposed, if I have my numbers right, a $100 million bailout of the cannabis industry because of the compliance issues that are on them. And they say mostly because of the cost of compliance of all of this stuff. And what perplexes me is that they had to have seen this going in; that putting all of these restrictions on this was going to cause this to be a huge problem from the get go for essentially what is a weed, it really is a weed, it will grow anywhere?

Well, I mean, the great example that I've heard is, take a bottle of water and say, “If this bottle of water is worth three or four times the amount over on this side of the room than it is on that side of the room,” there's a heck of a lot of economic incentive for getting this bottle of water from this side of the room to the other side of the room. And the same thing with cannabis, too, right?

And then ultimately having the exact opposite effect that you want to have on the health and safety issue. Because what you're encouraging then is for it to go underground and not have the regulation to make sure that the stuff that people are using is pure and is not going to harm them in some way.

I would argue that it's perhaps even safer because most people that I have seen on marijuana don't want to get behind the wheel of a car and drive. They're more paranoid about anything and then stay wherever they are, and they will Uber into the McDonald's. Anyway, we're up against our next break.

Ron’s Questions: Segment Three

Welcome back, everybody, we're here with Ken Teasdale, the audit partner at Armanino, and head of the cannabis group. We're getting a master's degree in cannabis. Ken walk us through some of the tax complications. These guys can only deduct cost of goods sold at the federal level and can't deduct anything else. Is that right?

And what are some of the strategies to help these folks get around that?

Ken, we were talking on the break about Canada, and I've read that there are several IPOs [Initial Public Offerings] up there. What's been your experience with the Canadian market?

That's interesting. How did the industry do through COVID, this last year-and-a-half?

Have you seen any subscription plays in this market, where people can sign up and get regular shipments, like you can't with Harry's Razors and things like that?

For sure. You want the annual recurring revenue, right? I know [Senator] Chuck Schumer has thrown a bill into the hopper to legalize marijuana at the federal level, but he also sets up a federal regulatory regime, and the federal tax regime. Any chance of this happening, do you see, within the Biden administration?

That will be a shot in the arm, won’t it, for the industry?

Do you think the stock markets will allow them to list?

Ken, I see a lot of smaller firms moving into this niche and specializing in it because, like you said, it's growing. I know Armanino was like the 21st, it may even be higher now, ranked firm in the country in the top 100. How many of the other top 100 firms are playing in this space as well?

That's fantastic. Well, Ken, this has been great. Thank you so much for coming on The Soul of Enterprise and educating us on this fascinating industry, its future looks bright. Looks like the Gold Rush has come back to California.

Ed’s Questions: Segment Four

And we are back with our last segment with Ken Teasdale. Ken, you mentioned in talking with Ron that you really think that the first step in this big unraveling and getting that more normalized is, I guess, the repeal, or at least the de-scheduling of marijuana from the Controlled Substances Act of 1970. If you were the Wizard of Marijuana Oz, and were to give a program for how to start to dismantle all of the craziness. After that, what comes next? What would be the best process to get this optimized as quickly as possible, in your view?

What about the notion that cigarette smoking is on the decline? Is it also the case that marijuana, the ingestion of marijuana through smoking it is also on the decline? And we're seeing much more of an increase in either edibles, or even vaping? Is that where the innovation is happening in the space?

The other thing I want to ask you about, you may not have too much because it’s not related in any way to the business side of it. But what do you think happens from the criminal justice standpoint in terms of all of these folks who are in prison for marijuana violations, which are no longer active, and let me ask you that question because I have a follow up to that that's related?

The mandatory minimums law was a complete disaster. And interestingly enough, so were a lot of the war on drugs stuff that, ironically, Joe Biden was a big part of, and even the Congressional Black Caucus was a huge proponent of these laws when they were first passed. Really interesting to see how that's coming full circle.

So that leads me to the follow up question. Do you have any idea what the exposure is, in the past or in current cases, of the civil asset forfeiture that's been involved in the marijuana industry? I mean, it's got to be a huge number.

Does that still happen? Have you had customers that have had that problem happened to them? When a state decides to get involved? Or even the feds, because they've still been involved in some of those cases relatively recently, in the last four or five years?

We had one thing down here in Texas with a friend of a friend of our family that owned a shop that they sold. It wasn't marijuana, it was the infused spice that they would do. And it was not supposed to be consumed. But everyone knew, wink-wink nod-nod, and a huge civil asset forfeiture case that was involved in that. So really, really, bad stuff. So, the future is bright for cannabis you're thinking, and that will continue to be the case for the foreseeable future?

Including the former Libertarian candidate for president, Gary Johnson, who ran an extraordinarily successful real estate and construction company in his home state. And now has shifted over to marijuana. So there you go. But no surprise there, I suppose.

But the question is will there be red and blue companies? Because, you know, we have to now divide everything. I think marijuana is going to be much more ubiquitous, more equal opportunity than a lot of people think.

Alright. Well, Ken Teasdale, thank you so much for appearing on The Soul of Enterprise. Really appreciate you spending time with us today and educating us on this fascinating industry. Ron, what do we got coming up next week?

Ron

We're going to be talking to economist Anthony Davies, Ed.

Ed

All right, Ron, I'll see you in 167 hours.

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week is bonus episode 350 - Cuba and Cleveland. Here are a few links we discussed:

• Biden repeals “wet foot, dry foot” approach to Cuban immigrants

• Cleveland Guardians?

• Jody Thompson and ROWE featured in The New Yorker

• China shuts down miners

• Biden’s Double Death Tax

• PwC to hire 100,000 new employees worldwide in next five years to help clients deal with climate and diversity reporting

• New York Times Admits CDC broken

• Scott Lincicome, and Veronique de Rugy and Adam Thierer on Industrial Policy

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #349: Woke Capitalism — Virtuous or Virtue-Signaling?

Should sustainability be our new standard for investing? According to Larry Fink of BlackRock (more than $7 trillion in assets) the answer is yes. The ESG movement is an investment trend focused on Environmental, Social, and Governance matters in assessing a company’s long-term value. American investors have put more than $20 billion into ESG funds in 2019. Will ESG save the world from climate change, increase social and racial justice, eliminate fossil fuels, etc.? This is a new variant of the prior ideas of Corporate Social Responsibility, Social Responsibility Investing, and the Stakeholder theory of corporations. Is ESG being used to alter the structure of the capital markets? Does it really offer superior returns? This is a complex issue and we can see it manifested in how corporate CEOs are more willing to be involved in politics.

Definitions

New York Times columnist Ross Douthat coined the term "woke capitalism" for companies signaling their support for progressive causes in order to maintain their influence in society.

Another definition of woke capitalism: A platform for political action, using power rather than money and entrepreneurship.

In The Dictatorship of Woke Capital, Stephen Soukup provides this definition: “Woke capitalism is the top-down, antidemocratic means by which some of the most powerful and best-known men and women in American business are endeavoring to change capitalism, the securities markets, and the fundamental relationship between the state and its citizens—and to save the world.”

Corporation, Latin corporare, meaning “to form one body”

SRI—Socially Responsible Investing dates back to the 1920s. ESG is the modern manifestation of SRI.

Stakeholder capitalism—A business should be operated for more than just shareholder value maximization—customers (who want lower prices), employees (who want higher salaries), suppliers (who want higher prices), community (who outnumber all others), etc. Good luck solving all these conflicting wants. We have a mechanism to do it—it’s called the price system.

The US Business Roundtable, issued “Purpose of a Corporation” on August 19, 2019:

A company’s management no longer owed an overriding duty to its shareholders. Instead, it must serve the interests of a number of stakeholders: customers, suppliers, employees, and communities, and to adopt sustainable practices across our businesses

Environment, Social responsibility, Governance (ESG): SEC Commissioner Hester Peirce said of ESG, “The first issue is we don’t even know what ESG means. Not only is it difficult to define what should be included in ESG, but, once you do, it is difficult to figure out how to measure success or failure.”

Warren Buffet has reservations regarding ESG standards; he opposes proposals for annual reports on climate change and diversity initiatives.

BlackRock, Larry Fink, CEO, $9 trillion, largest asset manager in world. On average, holds 22% of typical S&P 500: 18% Apple; 20% Citigroup, 18% BofA, 19% JPMorgan Chase, 19% Wells Fargo, one of largest investor in China (7% PetroChina, notoriously Ungreen!)

In Fink’s letter he wrote: “Sustainability should be our new standard for investing.” Apparently, only US companies.

Blackrock is an agent for its principals (investors), and has the same conflicts that corporations do. This allows Fink to impose his beliefs on capital markets with Other People’s Money.

Four Ways the Government Makes Corporations Woke

1. Govt as shareholder—CA Public Employees’ Retirement System (CalPers--$350B assets, CA constitution commits 40% of budget to education), FL and TX ($270B), NY, etc.

In 2018 CALPERS pressured retailers anywhere to stop selling guns banned in CA, even if not banned in other states.

2. Govt as customer—military and other govt contractors. Chick-fil-A can’t access airport space, San Antonio, Buffalo, San Jose

3. Govt as capital-market regulator—SEC, NYSE, NASDAQ, rating agencies, accounting firms all regulate and assist regulators. Even the Federal Reserve is now mandated to reversing climate change and promoting racial equity even though it has no expertise in these areas. Monetary policy can’t reverse weather or racism.

4. Govt workplace regulator—diversity, quotas, etc.

Woke CEOs

Trendy statements that are far from companies expertise (policies on guns, voting laws, abortion, climate change, etc.). It is easier for COKE’s CEO to speak on voting laws than obesity and diabetes.

But for whom are they speaking? Consent of the governed? Was this the agreed upon duty of the CEO when they were selected?

Milton Friedman argued: The CEO becomes a civil servant, even though an employee of a private enterprise. If they are a civil servant, they must be elected through a political process:

“This is the basic reason why the doctrine of social responsibility involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses…”

40% of Americans, on both sides, avoid companies for political reasons. Do we really want Red and Blue Corporations?

Political institutions are the least trusted, do we need more politics in our workplace? Whom do I call on Walgreen’s foreign-policy staff to ask about the Israeli-Palestinian conflict?

Shopify CEO: “Like any other for-profit company, we are not a family. Shopify is also not the government.” Mastercard and Citi are members of “plant a hundred million trees” collation: that’s great if they were logging companies.

Serve your customers, not politics and politicians.

Woke investors

They are diding behind the corporate veil, with limited liability, to effectuate a social agenda.

Pensions 

ERISA—Employee Retirement Investment Security Act (ERISA) imposes one of the highest legal duties: that of fiduciary.

Yet annual expenses of sustainable exchange-traded funds are 7-10 times more than index funds.

Tariq Fancy, former chief investment officer for sustainable investing at BlackRock: “The financial services industry is duping the American public with pro-environment, sustainable investing practices…being presented as something it’s not. Boils down to little more than marketing hype.”

Who Pays for the Mistakes?

Shouldn’t social-justice crusaders be held to the same moral standard they apply to companies? Grant-making foundations, NGOs (helping the poor), Greenpeace (opposing nuclear energy), Anti-child labor organizations, union opposition to school choice, professions support licensing, all hurt the poorest. The same standard should apply to them: First, do no harm.

Accounting

The Global Reporting Initiative (GRI) is the world’s most widely used standards for sustainability reporting. The Sustainability Accounting Standards Board (SASB) also promulgates standards.

French company Danone introduced a new metric: carbon-adjusted earnings per share.

Other examples of these metrics: charging credit-card companies for medical costs of depression connected to indebtedness; airlines for human toll of flight cancellations; food producers for health issues related to obesity.

That such ideas are taken seriously shows the rot spreading within business schools, C-suites, etc.

Other Resources

A fascinating article by Theodore Levitt, “The Dangers of Social Responsibility,” from Harvard Business Review, September-October 1958. Here’s one of his arguments against corporate social responsibility:

“The belief that one institution should encompass the complete lives of its members is by no means new to American society. There is a name for this kind of encircling business ministry, and it pains me to use it. The name is fascism.”

Not all corporations see alike on all things. Do we want them to? Lose pluralism for a monolithic society? Do we really want, as Levitt says, “a commercial demichurch.” Levitt also writes:

“And there is nothing more dangerous than the sincere, self-righteous, dedicated proselyte sustained by the mighty machinery of a powerful institution. The reformer, to borrow from Nietzsche, thinks of himself as ‘God’s ventriloquist.”

“The fact is, no matter how much business serves, it will never be enough for its critics.”

ESG is a form a utopianism, and corporations will never measure up. As Lord Acton said of the past, people sacrificed freedom by grasping at impossible justice.

Further Resources

Milton Friedman, “The Social Responsibility Of Business Is to Increase Its Profits,” NY Times, September 13, 1970

Theodore Levitt, “The Dangers of Social Responsibility,” Harvard Business Review, September-October 1958

National Review, July 1, 2021 Issue dedicated to Woke Capitalism

TSOE Episode #10, “Corporate Social Responsibility: Progress or PR?”

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #348: Second Interview with Mark Stiving

Each week for our Patreon members, we share notes from the live show. These notes are a quick hit summary of the live show. Easy to scan. Easy to digest and a great way to follow along when listening to the recorded show. They are our version of CliffsNotes (and we know you remember those).

What follows are those summary notes from the interview with Mark Stiving for all to enjoy!

• Mark’s most recent book — Win, Keep, Grow — is all about pricing your subscription business which we are ALL OVER here at The Soul of Enterprise.

• Acquisition, retention, and expansion were too close to consulting language for Mark, hence Win. Keep. Grow.

• If there is a recurring benefit then it makes sense to have a subscription model. That might sound more like common sense today than it did a few years ago but it’s still ultimately important.

• Customer success is all about making sure your users are getting value from your product. That means they will keep paying and maybe even upgrade.

• Shout out to Geraldine Carter, a Patreon member and listener. Check out her website at https://www.shethinksbigcoaching.com/

• Mark addresses the naysayer in his book. The one who says, “Why should I subscribe? I’m going to pay more over time.” The number one reason is that, at least in the world of software, the product keeps getting better and better over time.

• Are people resetting the value conversation from annual to monthly in the subscription world? Mark see that companies are choosing a time frame based on what they are building towards.

• You need to have a monthly subscription. It says that you are confident in your product and are going to deliver a ton of value. After a few months, a longer commitment is absolutely reasonable to put on the table. Providing only an annual offer takes away a big benefit of the subscription model.

• There are three value levers you have when thinking about the subscription business model: market segment, packaging, and your pricing metric

• A pricing metric is “what do you charge for?” Physical goods, for example. With subscriptions, we get to choose what we are going to charge for and it’s a really important decision.

• The value metric is how our buyers perceive value from our products. “I love your company because our x went from y to z.”

• GE went all in on value stories. Check this link out for more: https://www.ge.com/digital/industrial-managed-services-remote-monitoring-for-iiot/article/331691-performance-recovery-on-gas-turbines

• In SMBs it is tougher to do a dual business model that includes a mix of subscription business. Going from transactional to subscription can be smooth if done correctly.

• Here’s a great impact statement from Mark: Your new subscription product must be BETTER than your traditional product for your buyers.

• Did you know that Netflix FIRED customers who were not using the service? Here is a link to more info: https://about.netflix.com/en/news/helping-members-who-havent-been-watching-cancel

• “In subscription, if you are not calculating your Customer Lifetime Value (CLV) then you can’t run your financials.” —Mark Stiving

• Hey! Did you know that 15 seconds at this link could change your life? Well, probably not but as a listener, it could help us just a little bit :) RateThisPodcast.com/TSOE

• Carrots and sticks are how the transition from an older business model to subscription can be handled. In Mark’s experience, it starts with the carrots and then the sticks.

• We’re doing more for our customers anytime we transition to subscription. We are able to solve more problems for our customers.

• A big THANK YOU to Mark Stiving for joining us today to talk about his new book. Learn more about Mark at this link: https://impactpricing.com/

• What’s up for next week? Woke capitalism.

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 348 - more with Mark Stiving!

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #347: Project Management and the Subscription Model

What happens when Ed does 70% of the talking? Ron makes it through 100% of the show on project management and the subscription model.

Each week for our Patreon members, we share notes from the live show. These notes are a quick hit summary of the live show. Easy to scan. Easy to digest and a great way to follow along when listening to the recorded show. They are our version of CliffsNotes (and we know you remember those).

What follows are those summary notes for all of our listeners. Enjoy!

• Change Ed’s view: In the subscription model, project management is rendered completely irrelevant.

• It’s not PROJECT management anymore because that means it is a temporary engagement. What about relationship management?

• Part of the key challenge is vocabulary. We do not have good vocabulary yet for project management in a subscription environment.

• Maybe we should rename the project charter the “relationship charter” given that the phrase project is too temporary and the subscription relationship is not?

• For project management in a subscription business, you can eliminate the change request for changes to an objective. There is no formal change request process needed.

• We SHOULD go through the change request process if we change any goals.

• Shout out to our Patreon subscriber, Mark Gandy! Mark hosts the CFO Bookshelf podcast at CFObookshelf.com

• We should talk about means vs ends in subscription project management. If the ends change, it might just mean that a customer moves to a different tier in your pricing model.

• Think about the ends using the landscaper model. What is the customer buying? More here,

• For project management in a subscription business, the triangle of truth and the scope statement are both dead much to Ed’s dismay (and Ron’s elation).

• The cadence of conversation becomes paramount for project management in a subscription business. You need to set a minimum level of communication when thinking about a cadence.

• Have you listened to our show about POSITIVE risks? Check out show number 87 - Risk is not a four letter word

• What is quality in the context of project management? It is not determined by “good” but conformance to a requirement. Who’s requirement? The customer’s requirement.

• Agile has its place in a subscription business for managing projects and relationships. Ed talked more about the two most popular - SCRUM and Kanban - at a high level during segment 3 of today’s show.

• “Subscription puts a premium on capacity.” —Ron Baker

• “We have to stop confusing being busy with being profitable.” —Ron Baker

• Check out RateThisPodcast.com/TSOE - 15 seconds could change your life.

• The subscription business model favors value over volume.

• Next week, we welcome the author of Win Keep Grow — Mark Stiving

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 347 - Alzheimers and Cosby. Here are a few links that helped drive the conversation:

• The Economist on Alzheimer drug approval 

• Broadway Hit Hamilton Could Get Up to $50 Million Federal Bailout 

• Keystone chimera, The Economist 

• Coming soon: Tom Peter's Course on Innovation 

• Bill Cosby released from prison, National Review 

• TSOE: Project Management Shows 

• Experiment in Labor Markets and Unemployment, National Review

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 346 - Interview with Mustafa Akyol

Ron’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague, Ed Kless, and on today's show, folks, we're thrilled and honored to have Mustafa Akyol on the show, talking about his books. Hey, Ed, how's it going?

Ed

It's going great, Ron.

Ron

So I'm really looking forward to this after reading his latest book. So let me read his bio, just briefly: A Turkish journalist and author Mustafa Akyol studied political science and history at Bogazici University. Since the early 2000s, he has been writing regular opinion columns for Turkish publications. He's a Senior Fellow at the Cato Institute since 2018. He's published six books. We're going to discuss two of them today. Ed's going to take his 2011 book, Islam without Extremes: A Muslim Case for Liberty. And I'm going to take his latest book from 2021, Reopening Muslim Minds: A Return to Reason, Freedom, and Tolerance. Mustafa, welcome to The Soul of Enterprise.

Well, before we dive into your book, your Introduction to Reopening Muslim Minds, the title is, “A Night with the Religion Police.” And this was from a lecture that you gave in 2017. If that doesn't draw you into your book, Mustafa, I don't know what would. Can you tell that story?

Well, Mustafa, I found your book incredibly enlightening and historically fascinating. You're a gifted writer. But I loved the way you weave in some of the history of Islam and quoting these various scholars, and there's a lot of caricatures of Islam out there, as you're more aware of than I am, and you correct the record. You taught me a lot about it. I was really impressed with the scholarship of the book. And the way I would sum it up is you chose the word “reopening” Muslim minds. It's like you're arguing we need to get back to our roots, because it's all there?

That's great, Mustafa, you're asking the right question. I think it's like the study wealth, right? We don't need to study poverty, we need to explain how wealth is created. And that's what you're trying to do by looking back 1000 years. Unfortunately, we're up against our break.

Ed’s Questions: Segment Two

And we are back with our guest, Mustafa Akyol. And Mustafa, I wanted to build on the conversation that you had with Ron and talk to you a little bit more about the whole notion of Islam and its relationship to democracy and liberalism. And I wonder if you would take us through…there's a very “scary phrase” that the American right tends to use when talking about Muslims, and that is “Sharia law.” That’s all you have to do is throw out Sharia law, and it sends people scattering into the woods. But Sharia law has a very strong foundation of property rights. And I wonder if you would take us through that?

I grew up in New York, and there is case law in New York, with New York State deferring decisions to the Jewish courts in certain circumstances. In fact, so much so that I was divorced about 25 years ago, a standard part of a divorce in New York includes, even though I'm not Jewish, that I will not resist what's called a get [in Hebrew, Gett], because that's part of the standard language.

I was having a conversation with my mentor this morning, and one of the things we talked about was religion, spin, and he said, it has taken Christianity almost 2000 years to embrace the concept of hate the sin love the sinner. But I wanted to just jump back. You mentioned this earlier, you say the Quran defines the Prophet as God's bounty, which I think is fantastic. And then later on in your book [Islam without Extremes: A Muslim Case for Liberty], you say that Muhammad is quoted as saying, “He who makes money pleases God.” Is that the Quran, or was that one of the sayings?

I wanted to ask you about this because I think this is important. We've had Rabbi Daniel Lapin on and he oftentimes goes back to the origin of words in Hebrew, and gets insight from them. The translation of the saying, “He who makes money pleases God.” I wanted to ask you about the verb “makes.”  Is that verb in Arabic, is it in the sense of create a new? Is that the same kind of word? Because what I think is so significant is that it's not “takes” money. It's “make,” we actually create new stuff. So I just wanted to ask you about that word, if you had any insight there?

Well, this is fantastic stuff, Mustafa, but we are against our break.

Ron’s Questions: Segment Three

Welcome back, everybody. We're here with Mustapha Akyol. We're talking about his book, Reopening Muslim Minds: A Return to Reason, Freedom, and Tolerance, his 2021 book. I did love the reference to [the philosopher, sociologist and historian] Ibn Khaldun, the originator of the Laffer Curve. He didn't draw it on a napkin either I thought that was pretty good. In chapter 11 of the book, you title it, “Freedom Matters.” And you ask, What is freedom? What does it mean? Let me give you one of my favorite definitions of this and I just want to get your reaction to it. I think that liberty is the absence of coercion. But I think freedom is a choice. If I choose to live under the edicts of Islam, or Kosher if I'm Jewish, whatever. I mean, that's a choice. Marriage is a choice, even though it restricts my freedom, but it's not coercive. What's your reaction to that definition?

Mustafa, you quote, Bernard Lewis, and he's about the only person of any serious scholarship that I've ever read about Islam. And he said, “The medieval Islamic world offered vastly more freedom than any of its predecessors.” And I guess my question is, are there liberal Muslim countries—you just mentioned a few—that you can point to as achieving what you're advocating?

Can you describe, and I hope I don't butcher this word, Irja. Because when you explain that, I just thought that was beautiful.

You also quote another verse from the Quran, the Qur’anic sura Ma’ida: Jews follow the Torah, Christians the Gospel. you Compete in doing good here in the world, and then, “You will all return to God and He will make clear to you the matters you differed about.” That was great.

Well, Mustafa, this has been excellent. Ed is going to take you home, but I just wanted to say thank you so much for appearing on The Soul of Enterprise. I thoroughly enjoyed your book, and we will promote it as best we can here. So thank you.

Ed’s Questions: Segment Four

And we are back with Mustafa Akyol, author of Reopening Muslim Minds: A Return to Reason, Freedom, and Tolerance as well as the book that I'm talking with him about, Islam without Extremes: A Muslim Case for Liberty. I wanted to ask you a couple of questions about—again, I'm a language person, my dad instilled this in me—a quote from [Fernand Braudel], who's a French historian, and you have this in your book, “Anything in Western capitalism of imported origin undoubtedly came from Islam.” And you take us through a couple of different terms: Sakk for check, mudaraba, which ultimately became the limited company, and of course, the word tariff. So there's just so many things and terms to build on from Islam that have made their way into our language today. So talk a little bit about that relationship.

One of my favorite quotes from your book is, “Islam, one could say, has produced the seeds of freedom. Regrettably, they were just not rooted in fertile soil.”

Well, we've only got about two or three minutes left, and speaking of autocratic states, I wanted to completely shift gears on you, to a place where Muslims are now oppressed. And that, of course, is the Uyghurs in China. Ron and I have talked a lot about this, we talk about Jimmy Lai and his experiences in Hong Kong. But what are your thoughts? Why does it seem that so many Westerners seem to be willing to talk a great game here in the States about freedom, but when it comes to the Uyghurs in China they completely ignore what's going on over there?

All right. Well, we still have so many questions for you, and of course, we didn't even touch your third book, which I haven't had a chance to read yet: The Islamic Jesus: How the King of the Jews Became a Prophet of the Muslims. We have 30 seconds left. Very quickly, are you working on another book?

Mustafa Akyol

Yes, a new one is coming out. You will like it, I think. It's titled, Why, as a Muslim, I Defend Liberty [due out September 28, 2021]. So it will put all my arguments about liberty in a nutshell, and with new arguments and new episodes from history. Hopefully, we can discuss that, too.

Ed

Yes, we would love to have you back on and do that. So Ron, what do we have coming up next week?

Ron

Next week, I'm taking the week off. We have project management in the subscription business model, so it's going to be your show.

Other Resources Mentioned

In Mustafa’s recent book, Reopening Muslim Minds: A Return to Reason, Freedom, and Tolerance he references Nathan the Wise, a play published by Gotthold Ephraim Lessing in 1779. It is a fervent plea for religious tolerance. https://www.amazon.com/Reopening-Muslim-Minds-Freedom-Tolerance/dp/1250256062

Mustafa not only recommends his own books (of course) but also Early Islam and the Birth of Capitalism, by Benedikt Koehler.

Mustafa wrote an article about China’s gulag for Muslims over two years ago.

---

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 346 - Tolerating intolerance and Subscription Air travel. Here are a few links that helped drive the conversation:

• Tolerating intolerance, The Economist

• One roof, three faiths, The Economist

• The Heights of Stupidity, Kevin D. Williamson, National Review

• California’s $100 Million Marijuana Bailout, FEE

• Restaurants Now Adding Equity Charges, FEE

• Comments by Warren E. Buffett in conjunction with his annual contribution of Berkshire Hathaway shares to five foundations

• People Are Saying "I Quit" At a Record Rate This Year

• The final years of John McAfee

• 5 Constitutional Amendments Americans Should Consider ASAP - Foundation for Economic Education

• Climate Activists Get So Woke They Cancel Themselves by Spencer Brown

• Prince Air: India

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #345 - Interview with Mark Wickersham

[Editor’s Note: Scroll to the bottom for some excellent resources that Mark provided to us for inclusion in the show notes.]

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’m Ed Kless with my friend and co-host, Ron Baker, and folks on today's show, we are pleased to have with us, Mark Wickersham. Hey, Ron?

Ron

Hey, Ed, how’s it going?

Ed

Going great, rehearsing a lot for my show. We'll talk more about that later, maybe in the bonus episode.

Ron

That's cool. Well, I'm excited about today, longtime friend Mark Wickersham is with us, by audience demand, too.

Ed

I know, which is great. So we expect some great ratings from this one, looking forward to it. Well, let me get the particulars out of the way. Mark Wickersham is a chartered accountant, public speaker and number one best-selling author. He is a most sought-after profit improvement expert in the accounting community. He also strongly believes that the old business model, the way accountants are taught to run accounting firms, is not only commercially stupid, but unethical. Mark is a widely published author on practice issues and in May 2011, his book Effective Pricing for Accountants was a number one Amazon bestseller. Welcome to The Soul of Enterprise, Mark Wickersham.

Well, we are happy to have you. For the benefit of our audience who don't know you that well, let's delve into what's the Mark Wickersham story. How’d you up here?

And why do you do this, Mark? Why you do what you do—the Simon Sinek “Why” question?

I love that part of your story. You improved your pricing in the firm that you had started, made it really profitable, but loved doing this so much that you said, “I'm going to walk away from that profit to go over here and start this other thing” because you were so passionate about it.

It's a great story. I have to ask you about this because I did pull that line that I used in your read in from your bio on your website. Why unethical? Why is the current model that most accountants use not only suboptimal, clearly, which you've demonstrated and proved over and over again in all the firm's, but why is it also unethical?

And I would add to that the flip side, which is all of the accounting professionals who put on their timesheets not what actually happened, but what they think should have happened so that when the boss, like you, is reviewing the account, you said, “Oh, look at this, we're right on budget where we thought we were going to be.”

Now, talk to me a little bit about this. In your practice, when you've helped people shift, do you find that some still try to cling on to the timesheet? And what is your advice to them? Or what is your admonition to them, I guess is a better word?

Right and that's clearly the value pricing to which we would certainly want to talk to you about, I just want to harp on the timesheet a little bit. Do you absolutely recommend that people rid themselves of the timesheet, and that’s one of the core messages that you preach?

I think I know the answer to this question, but I want to hear it from you. In your role as a consultant to the profession, how do you handle the question when they say to you, “Well, what's your hourly rate?”

I found it hysterical that people come occasionally to Ron and myself who want help with pricing, and then have they ask the unironic question, at least in their mind, about what our charge rate is.

Well, and so let's talk a little bit about that. We've got about two minutes before our break. Why don't you get that question? What is it that you do from a marketing standpoint that you just don't get that question?

Perfect. Well, we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with Mark Wickersham, of the Value Pricing Academy. Mark, so funny, you were talking about the timesheet and filling in all the non-billable time. Recently, there was a hurricane, I think it was a couple years ago, and one Big Four actually issued a code to its employees for the hurricane. So if you were put out of work by the hurricane, you had a code for your timesheet, unbelievable. I actually saw the memo that went out, it was hysterical. I have a question for you, Mark. You have said that, per a recent benchmarking report, over 50% of accounting firms don't make an economic profit. You didn't say profit, you said economic profit. Explain why you think that's happened?

I agree. But do you think it goes deeper than that? We do a lot of shows on strategy and positioning and our colleague, Tim Williams, who I think you saw, or met down in Allen, Texas when you came, he's really convinced me, and we say all the time, that you can't value price the wrong customer. And it just seems to me that so many firms try and be all things to all people. They’ve never met a billable hour they didn't like, a dollar they didn’t like, a customer they didn't like, and they just they refuse to niche down. Do you think that's also part of the problem?

I couldn't agree more. I actually think we pay lip service to the relationship. Because our business model is not aligned to monetizing the relationship. It's aligned to monetizing transactions, even to some extent that's true of value pricing, which pains me to say by the way, but I've come to that conclusion. What's your response to that?

I've come to that conclusion because we don't put the relationship is not at the center of the business model. What is at the center is this idea of pricing the customer and figuring out a scope of work and all this stuff, having change orders, if you go out of scope, all this crap. This is why I'm big proponent of subscription because it does away with all of that. I mean, it’s a topic we can talk about later, but I just  think we pay lip service as a profession to the relationship. Because as you say, Mark, there's no way to have a relationship with over 100 clients.

I totally agree. And I've come back to this idea that it's because that sitting down and thinking isn't billable, I can't put that on my pricing proposal, I can't put that on my timesheet. There's no reward structure for investing in the lifetime value of the customer, which the subscription puts at the forefront of your KPIs, your dashboard, and your mind, and innovation is baked into that model. That's why subscription is superior as a business model than just a value pricing firm.

To some extent, Mark, I think making the leap from hourly to subscription is easier than going from value pricing to subscription. So in some respects, those people that are stuck in hourly have an easier time of making that transformation. But that's something that we talk a lot about, we have multiple shows on it. But let me get your ideas on this. You published a book, I think it was in [2016], How to Build a Successful Bookkeeping Business. I think you've had a co-author, is that right? Yes, [Jane Aylwin]. We talk a lot about bookkeepers having deeper relationships with their customers then do the accountants because they're at the coal face, they're usually in there, and they might get called first by the customer when they're having a problem to find out what to do about it. Do you find that's true—that the bookkeepers actually have better relationships with the customers?

I have a feeling we're going to see more move to subscription from bookkeepers then we will form accountants, at least at the start, because they already understand the value of that relationship. And like you said, they have fewer customers as well. That helps because they have deeper relationships with every one of them. I don't know if you saw this, but there was an article recently in Harvard Business Review, of all places, which I just stopped reading because I think everything in it is pretty much wrong. But it was an interesting article called, “What Professional Service Firms Must Do to Thrive.” And they actually had a spectrum, a way to analyze your customer portfolio: commodity work, procedure work, gray hair work, where it requires more experience, and then rocket science, that's the real creative/innovative stuff. And what they pointed out was, firms as they grow, even if they start in their lane, will inevitably spread out across, maybe not the entire spectrum, but most of it, in one way or the other. Even if they start at rocket science, they'll slide down to commodity or the procedure work. And I just think this is a big problem in our profession. We just go after everything. And then we wonder why there's dissension among the leadership and disagreements. We wonder why it's hard to train team members; because we don't stand for anything, we’ll take anybody.

And that's a hard sell, I have found, to try and get businesses, or firms, to niche down and shed lines. I think you're defined by the customers you don't have, and the services you don't provide. Like you said, it makes it easier to say No, when you're easily in your lane, when you know what your lane is.

But it's so counterintuitive, it scares the heck out of people. Well, Mark, this is great. Unfortunately, we're up against our next break.

Ed’s Questions: Segment Three

And we are back with Mark Wickersham, chartered accountant, public speaker and number one bestselling author of the book Effective Pricing for Accountants, we will put a link in the show notes to hopefully drive some new book sales for Mark, maybe get back to number one for you, Mark, how about that? Mark, I wanted to talk with you a little bit about what has been your experience both personally and professionally. Is there anything that surprised you about the way the profession reacted to and it has handled, the COVID-19 situation?

Yeah, interesting you point that out, because I just was doing some rereading for a presentation I had to do this week, and I was reminded of Tim Harford's book, who's also in the UK, and wrote a great book called Fifty Inventions That Shaped the Modern Economy, one of them being double entry bookkeeping, and he makes the point in his book about this, that the very language of accounting is auditory, is language, right? It's a verbal accounting, it's auditors who were the listeners. And we're really getting back originally to the roots over that, over this relationship piece, which I just found fascinating. Any thoughts on that?

Check out Tim Harford, you can find a video of him, I think you would find his stuff pretty robust. And he's got a new one called The Data Detective, which I think you would like as well. You anticipated, in a way, my next question in your answer to the one about COVID-19. And you gave part of your answer, but I want you to expound on it a little bit. Talk about the problems with the partnership model.

Well as my brilliant co-host often says, when these big firms get together, it's dinosaurs mating—I  love that phrase. So, Mark, I'm going to ask you, I think this is probably my most challenging question. So just to give that as a run, we've got about three minutes left. A study was done about 10 years ago of Canadian accounting professionals, so it included accountants and bookkeepers, but people who were practitioners, small firms. Curiously, it came back with the following: that men-owned firms out charged women-owned firms, in roughly the same proportion as we see in the economy, women make 80 cents on the dollar compared to men. So the women-owned firms were charging 80%, roughly, of what the male-owned firms were charging. And what I found interesting about this is they're setting their own price. Do you find anything, in the folks that you work with—and again, this is a phrase that I stole from my mentor, Howard Hanson, this is not sexist, but gender specific. Do you find that there are challenges and differences between men and women in the way they set price?

And I would be curious If you have any data about that, because I think what you just said is absolutely true, because Ron and I have worked with a lot of, especially in Canada, that's where this whole thing started. And we find that the women who move are much more, let's call it, aggressive with their pricing, once it starts to click, I think they're better at it.

Yeah, that's great stuff, Mark. But we were up against our last break.

Ron’s Questions: Fourth Segment

Welcome back, everybody, we're here with Mark Wickersham. And Mark, I know your Value Pricing Academy has customers from around the world. And I would imagine the English-speaking world. So tell me, which countries do you see leading in the diffusion—that diffusion curve, the innovators, the early adapters, and the early majority, you've seen that bell curve diffusion curve? Which country is in the lead in terms of adoption—that is, percentage of firms adopting value pricing?

It's been my experience that the US is still in the lead in terms of diffusion. If you look at some of the AICPA stats, or the state societies, 30% to 40% of firms report they do value pricing. Now, I take those numbers with a huge vat of salt, because it's self-reported, it might not be a random sample, all of those problems. But there is no way if you roll the clock back 20 to 25 years, you would have got five or 10% of firms saying that they do value pricing, or fixed prices, or something like that. I just find it interesting, because I hear different things from different people who say that Britain's ahead, US lags, whatever. And it's just interesting to get different perspectives. The other thing, Mark, I know you like behavioral economics, the whole options, and anchoring, and framing, and choices, and all of that. Has there been any new insights from that field that have caught your eye in terms of how they can apply to pricing?

I haven't. The guy who I keep abreast of just to decipher this for me is Rory Sutherland. And he's from Ogilvy & Mather in the UK. He's all over on video, you can catch him speaking at conferences through YouTube or whatever. And he always comes up with some really interesting way to frame a pricing issue, because that's part of his work is in pricing. How about for firms that want to transition to value pricing, obviously, they should join your Value Pricing Academy. But I know you've published a lot of books, which of your books would you point them to? To get their feet wet? To be exposed to the idea?

Mark Wickersham 

That's a good question. I think that my second book, which is A Practical Approach to Value Pricing, is arguably the better one, because my first book I had no idea what I was doing. I had never written a book before, and so whilst people say wonderful things about it, it was a kind of a scattered getting my thoughts out, whereas the second one was much more structured in terms of some of the key foundations of value pricing. So that's the one I'd always recommend—start with A Practical Approach to Value Pricing.

Ron

Okay, excellent. And we'll link to all your books in the show notes. And then I'm also curious, have you got anything new in the works?

Mark, I just have to say this. I remember you sent me a video of one of your programs. And I was just amazed as you were going through something that had like 25 ideas for firms. One of them was to start a social club, a CEO/CFO club, I forget what you called it, CEO roundtable or something. And you went through all of these things. And I just thought, this guy is not just doing value pricing. Since value pricing touches everything else in the firm, your scope is far beyond value pricing. I get the branding, and I get why you want to say that, I'm just saying that I know that your content is way beyond pricing.

Awesome. And Mark, where can people find you? What's the best way to learn more about what you do?

Mark

All sorts of ways. So connect on LinkedIn, anyone who connects on LinkedIn, I can then send through some links to some free resources. I have a Facebook group called Value Pricing with Mark Wickersham. I actually spend more time on Facebook than LinkedIn. So I interact with people via that, and I run I do a lot of live streams on my YouTube channel. So follow my videos on YouTube, come to a live stream session, and type some stuff in the comments. And then we can start a conversation.

Ron

Excellent. Well, Mark, thank you so much. It's been an honor to finally have you on, it's long overdue but thrilled that you gave us some time here. Thank you so much. Ed, What do we have coming up next week?

Ed

Next week, Ron, I'm excited that we're going to welcome to the show Mustafa Akyol, author of Reopening Muslim Minds: A Return to Reason, Freedom, and Tolerance, and Islam Without Extremes: A Muslim Case for Liberty. It’ll be fun.

Ron

Looking forward to it, see you in 167 hours.

Ed

This has been The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless, with my friend and co-host, Ron Baker, and we are signing off, but please do us a favor and subscribe to the podcast on your player of choice. And we'll see you next week.

More Resources from Mark Wickersham

FREE BENCHMARKING SURVEY RESULTS

In July 2019 I carried out a survey of 2,683 accounting professionals to find out exactly how – and how much – they charge for bookkeeping services.  You can grab a free sample copy here:

https://www.wickersham.co.uk/store/eGMMmYv4 

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 345 - Sous Vide and Aduhelm. Here are a few links that helped drive the conversation:

• Lab-grown meat is on the rise. It’s time to start asking tough questions | Food | The Guardian

• Alzheimer drug, FEE

• New York Times admits Babylon Bee is satire

• Jimmy Lai and Jack Ma, National Review

• Filmakers take aim at lockdowns in Follow the Science documentary, FEE -- Trailer

• California offers $100 million to aid legal cannabis industry - Los Angeles Times

• OnlyFans Seeks Funding at $1B Valuation, Wants to Go Mainstream: Report

• Botswana diamond could be world's third largest

• See 1,098-carat diamond discovered in Botswana

• Track the recovery

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #344: Fifth Interview with Rabbi Daniel Lapin

Ron’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague Ed Kless. On today's show, folks, we're honored, we have Rabbi Daniel Lapin for the fifth time. Hey, Ed, how's it going?

Ed

It's going great. And at the risk of extending my stay in purgatory, I'm going to suggest a change to the Hail Mary, which is as follows: “Hail Mary, full of grace/Sirico is now in second place.

Ron

He doesn't need an introduction, but let me try and do it anyway. Rabbi Daniel Lapin, known widely as America's Rabbi, and to this audience, known widely as my rabbi, is a noted rabbinic scholar and best -selling author and TV host. In 2002, he published the fantastic book, Thou Shall Prosper: The Ten Commandments for Making Money. He followed that up with its sequel Business Secrets from the Bible, and I'm thrilled to see that they have been translated into different languages. Pairing his inheritance as a descendant of a multi-generational rabbinical family with his background in science and business, he teaches ancient Jewish wisdom in an unparalleled manner. And I can vouch for that, as a longtime listener. Rabbi Lapin, welcome back to The Soul of Enterprise.

It's our pleasure. Earlier this year, there was a couple weeks when your podcast didn't drop. And I thought, I wonder if he's traveling. Then you came back finally, and announced that you had COVID and had recovered. And I just wanted to ask you, what did you learn from that?

Ron

I hope you don't get this long COVID that they're talking about? Good, good. And I have to ask you, Rabbi, with what's been happening between Hamas and Israel and the attacks on Jewish people in the USA. You were talking on one of your shows recently, that you're very hesitant to use the term anti- Semitism. I know this is something you speak about a lot, and have even written about, but why?

That's very compelling. Rabbi, we were going to do a show today on envy, until you graciously agreed to come on. Michael Novak said that envy was the most destructive force in any free society, more so than hatred. And when you think about the seven deadly sins—they're called that because they lead to other sins. What does ancient Jewish wisdom teach us about envy?

That's true. Is envy as destructive in Jewish wisdom as it seems to be in some other religions?

I'm sure you saw, Rabbi, the ProPublica disclosure of the IRS tax data from all these rich people. Nothing frustrates me more. But when we talk about income inequality, and like you were saying about it, we fight it from the economic side with all these statistics, but what's the moral and ethical argument? I mean, what is my fair share of what you earn?

That's a great point. Well, Rabbi, we're up against our first break.

Ed’s Questions: Segment Two

We are back with our first ever five-time guest, Rabbi Daniel Lapin. So thrilled to have him on today. And I'm going to take advantage of the fact that I have a rabbinical scholar on, and you and Ron we're having a great conversation about envy and jealousy. I thought as I was preparing for this show, now would be the time to learn something, Ed. I’d really liked for you to go deep with us on the story of Cain and Abel in the Bible, because I think this is one of the original examples of envy. Because as a Catholic, I'd never read the Bible in Hebrew, so I know there's stuff I'm missing. One of the things that I never quite understood was, what did Cain do wrong with his offering? Is is just because they didn't like it? Help me there.

It's also the first offering that that takes place there, right? And the offering is, in a sense, it's the notion that I can I can put off today and benefit in some way tomorrow. In a way, it's almost the invention of time, isn't it?

So East of Eden is a very good explanation of that section of the Bible. Great movie with James Dean, too. We have just about 90 seconds before our break, and I want to ask you something. As I re-read the story of Cain and Abel today, I came across this. Tubal-cain, who is one of the descendants of Cain, he is the fashioner of bronze and iron weapons. So from Cain descended the creation of weapons, is that correct?

Very interesting. Well, thanks. I really wanted to take that to the essence of it, maybe get some insight, which I certainly did on envy. But right now we're up against our break. 

Ron’s Questions: Segment Three

Welcome back, everybody. We're here with my Rabbi, Daniel Lapin, and Rabbi, you were talking to Ed about names and how there's no Fred or Sally in the Bible. And I want to ask you about the first born Jew, who you had mentioned on your show, being named Isaac, and how in Hebrew that means laughter. What the significance of that is?

No, that's fine. It was great explanation. I remember John Cleese, of Monty Python, saying that “All humor is critical.” And that's so true.

Well, Rabbi, I'm going to change subjects on you again. You've taught me that anything random can’t happen just once. And this is why Darwinists must find life on other planets. Otherwise, life on earth is not just random. I have to ask you, I know you have a science background, and you're a pilot, and I have tremendous respect for pilots. They're not kooks, they tend to be very smart, practical people. Rabbi, tell me about these videos of these UFOs. What's your take?

Okay, make sense. And Rabbi, you did a show recently on Taiwan. Through Father Sirico, and others, we've been following Jimmy Lai and his travails in Hong Kong. How do you see it unfolding, and by the way, we recently had on Charles Cooke [Episode #342] from National Review. And he's a big Second Amendment proponent, even though he's from Britain. And he thinks maybe we should maybe provide the Taiwanese citizens with guns. What's your take on all that?

Unfortunately, I think you're right, Rabbi. Well, this is great, we're up against our next break.

Ed’s Questions: Segment Four

We are back with Rabbi Daniel Lapin, and Rabbi, I'm going to take you back out of the present day. And we're going to go back to some scripture. Because I want to take advantage of this wonderful time with you and I want to read you a story from another Rabbi and get your reaction to it. Someone in the crowd said to him, “Rabbi, tell my brother to divide my inheritance with me.” The rabbi said, “Man, who appointed me a judge or arbiter between you?” And he said to them, “Watch out. Be on guard against all kinds of greed. Life does not consist in abundance of possessions.” So what are your thoughts on that story? Now, the rabbi Jesus. But he's the only other Rabbi I know.

Well, I think you've done an excellent job of explaining that parable even with your lack of knowledge of the New Testament, in that it's really about, Hey, work on your relationship before you worry about the division of this inheritance thing, connect back with your brother, first. Rabbi, we only have about a minute left. Here's the impossible question in a minute. In a world where there is envy and jealousy, what's the best thing for us as individuals to do?

I love the fact that you said “build on small accomplishments” and also, and I think Father Sirico would join me in saying this, recognize the humility of when you find out what that small accomplishment is, to realize that yes, that's just it. That's all, be humble, that's all you're capable of. So do it and make it happen.

Absolutely. Well, Rabbi, thank you so much for being on The Soul of Enterprise again, this was a fantastic visit, as usual. Ron, what do we got coming up next week?

Ron

Next week, Ed, we have Mark Wickersham. A lot of our listeners have been asking for him, so we got him on.

Ed

Excellent, see you in 167 hours.

Ron

This has been The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so that organizations can thrive. Join us next week, folks, Friday at noon. In the meantime, feel free to check us out at www.thesoulofenterprise.com. We'll post full show notes on our interview with Rabbi Lapin, who you can find at www.youneedarabbi.com you should subscribe to his Thought Tools, which is his weekly newsletter, which is fantastic, and listen to his show [The RDL Podcast]. Thanks for listening, folks. Have a great weekend.

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #343: Price Sensitivity Factors in the Subscription Business Model

This episode was a reboot of Episode #61. See that show’s notes for more detail on the 10 price sensitivity factors. In this episode, we discussed these 10 factors in the context of the subscription business mode.

The following is excerpted from Chapter 14 of Ron’s book, Pricing on Purpose: Creating and Capturing Value.

Price Elasticity vs. Price Sensitivity
Certainly mathematics has its place in pricing, allowing us to test, predict, and determine elasticity. Yet, since pricing is an art more than a science, judgments are also vitally important and cannot be substituted with mathematical precision.

Even if a company possesses a precise elasticity calculation it knows is accurate, it would only be part of the puzzle of pricing. Since elasticity normally lumps “consumers” together, it does not help us in segmenting customers into different value propositions, thereby offering individuals different bundles in order to maximize profit.

Ten Factors of Price Sensitivity
Thomas Nagle identifies ten factors affecting price sensitivity in their book, The Strategy and Tactics of Pricing.

1. Perceived Substitutes Effect

   This effect states that buyers are more price sensitive the higher the product’s price relative to its perceived substitutes.
   

2. Unique Value Effect

   Buyers are less price sensitive the more they value the unique attributes of the offering from competing products. This is precisely why marketers expend so much energy and creativity trying to differentiate their offering from that of their competitors.
   

3. Switching Cost Effect

   Buyers will be less price sensitive the higher the costs (monetary and nonmonetary) of switching vendors.
   

4. Difficult Comparison Effect

   Customers are less price sensitive with a known or reputable supplier when they have difficulty in comparing alternatives.
   

5. Price Quality Effect

   Buyers are less sensitive to a product’s price to the extent a higher price signals better quality. These products can include image products, exclusive products, and products without any other cues as to their relative quality.
   

6. Expenditure Effect
   Buyers are more price sensitive when the expenditure is larger, either in dollar terms or as a percentage of household income. Business purchasers look at the total amount of the purchase, while households will compare the expenditure to total income.
   

7. End-benefit Effect

   This effect is especially important when selling to other businesses. What is the end-benefit they are seeking? Is it cost minimization, maximum output, quality improvement? The fulfillment of the end-benefit is often gauged by its share of the total cost.
   
   The end-benefit effect is also psychological. Think of going out for a romantic anniversary dinner and paying with a two-for-one coupon. Think of the Michelin tire ads showing a picture of a baby in diapers next to its radial tire proclaiming, “Michelin. Because so much is riding on your tires.”
   

8. Shared-cost Effect

   When you spend someone else’s money on yourself, you are not prone to be price conscious. This is one reason airlines, hotels, and rental car companies can all price discriminate against business travelers, because most of them are not paying their own way.
   

9. Fairness Effect

   Notions of fairness can certainly affect customers, even when they are not economically (or mathematically) rational. We accept discounts more naturally than premiums.
   

10. Inventory Effect

    The ability of buyers to carry an inventory also affects their price sensitivity. The perishability of the item in question is another factor to consider.

In the subscription model, these ten factors reside in your strategy, positioning, branding, marketing, and value proposition. They are spread across the entire portfolio of customers.

Search, Experience, and Credence Attributes
From a marketing perspective, products and services can be separated into three useful classes: search products, experience products, and credence products.

Search products or services have attributes customers can readily evaluate before they purchase. A hotel room price, an airline schedule, television reception, and the quality of a home entertainment system can all be evaluated before a purchase is made. Price sensitivity is high with respect to products with many substitutes, and since most buyers are aware of their alternatives, prices are held within a competitive band.

Experience products or services can be evaluated only after purchase, such as dinner in a new restaurant, a concert or theater performance, a new movie, or a hairstyle. These types of products tend to be more differentiated than search products, and buyers tend to be less price sensitive, especially if it is their first purchase of said product.

Credence products or services have attributes buyers cannot confidently evaluate, even after one or more purchases. Thus, buyers tend to rely on the reputation of the brand name, testimonials from someone they know or respect, service quality, and price. Credence products and services would include healthcare; legal, accounting, advertising, consulting, and IT services; baldness cures; pension, financial, and funeral services; and even pet food (since you have to infer if your pet likes it or not). Credence services are more likely than other types to be customized, making them difficult to compare to other offerings. Because there are fewer substitutes to a customized service, and there is more risk in purchasing these types of services, price sensitivity tends to be relatively low.

Our New Patreon Offerings
Check out our new ways to subscribe to The Soul of Enterprise.

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Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week is bonus episode 343 - Heros and Rich Life Guards

Here are some links discussed in the bonus episode:

• Tesla has to ship Texas-made EVs out of state to sell them to Texans 

• 8 million job openings in America 

• Hero pay laws cause stores to close 

• Does Bitcoin use “too much” electricity 

• Why CA lifeguards make so much money 

• During COVID, Suicides down, Births Down

• Biden Admin Fighting 4th of July at Mount Rushmore

• Tariffs will add to Harley-Davidson troubles 

• Conference Board latest C-Suite Challenge Survey, most critical issues they face 

• China’s population reached 1.41 billion, up 5.4% from a decade ago 

• $100 minimum, strict dress code at Philadelphia restaurant draw Twitter’s ire - pennlive.com

• United Airlines agrees to purchase 15 Boom supersonic airliners | TechCrunch

• MIT Data Scientist: Lockdowns Not Correlated With Fewer Deaths (But Are Correlated With More Unemployment)

• Fauci’s Mask Flip-Flop, Explained (by Economics) 

• COVID Bureaucracy in United Kingdom: Kafkaesque | National Review 

Click the “FANATIC” image to learn more about pricing and member benefits.