06 February

The Rules of the Road have changed ...

Bill Gross nominates Paul Krugman as the next Keynes

Bill Gross of PIMCO does the quick catch of noticing Paul Krugman's shift in economics from supply domination to demand. This is a big deal for both investors and entrepreneurs - we've all got to change our risk profile - or get burned. Read more...

Supply side and globalism brought us to the "triple zero" point in the stream of products flowing through Walmart. But, at some point, you can't go lower in price, you can't increase the volume, and everyone has enough diamond studded dog collars to go around - how does demand rise to meet supply?

Like in the 30's, it is the quality of life that matters - a fact that Roosevelt exploited at Hoover's cost. Our economic policy must shift to broaden our economic base. Which will be fought by the knee-jerk types for the role that government will have to take won't please them. Innovation in finance and industry will revolve around clever ways to fly under the radar of these flat earthers to realize the opportunities present.

Unsurprisingly, the economy has gone about as supply side as its ever going to get. If you stay too long with this notion with your investments and new ventures, you risk pressing on the money accelerator, only to find nothing happens, and yet others are passing you by.

Many start-ups I've visited last year had an instinctive wariness about this -- they wondered if they were venturing into dangerous offerings, depending on the sell through by key partners and customers that might not develop.

As a specific example, the focus on medium/large retail store chains to vend products and service to was tempered by developing a strategy to approach convenience stores as well. It drove marketing executives crazy, because logically you'd think with the incredible Chinese supply fire hose, you'd think that volume and price would dictate that big box stores would be the best customers -- yet the marketing exec's gut level instincts were being pulled to develop at least a minor position diametrically opposite.

Years back, when I was in Tandem Computers product management, we looked to C-stores as a revenue growth opportunity, and that the economics of these were largely driven by the service industries -- which are now in decline. So it was a complete surprise to be sitting with a VP of marketing who would be telling me why it was insane to direct some of his precious resources in this area, yet he knew he had to do it but not why.

Back in the 70's recession, all big box stores got hit hard. They couldn't discount to win volume. Smaller mom and pop retailers showed up overnight, and offered a better story and stole the customer base. Price wasn't any better - actually it was a little worse -- but the sale was made on value, where the perception of value through the small brand of the small store was seen as more genuine than the vapid brand of the big box retailers. For a while, these thrived, while about half of the big box stores vanished and the other half went on life support for a decade.

Could we be about to see a similar story, but not just retail but accross the bulk of the Internet?

Posted by william at 20:19 | Comments (0) | Trackbacks (0)
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