Security Whistleblower wins $4.3M in Sandia Labs Suit

A network security analyst who lost his job in January 2005 for tipping off the Army and FBI about an egregious security break at Sandia Labs won a $4.3 million suit against Sandia, which fired him for his action. He tried telling his supervisors at Sandia first, but apparently an intelligence investigation is what caught their attention, and none too favorably.

So far as I've been able to tell, electronic security in this country is often a joke. My own reporting has turned up cases of airport and seaport systems being breached - not what you want to hear if safety of transportation is a concern. Or try going to Capitol Hill, where, according to experts I spoke with a few years ago, a good 40% of the wireless networks set up by government workers were totally unprotected. But major publications haven't seemed too interested - often I've heard "We've already 'done' security coverage."

And the problem extends to companies, where, according to the US government, intellectual property loss and theft runs to about $300 billion - with a b - a year. But, like with physical security, everyone wants to ignore it as uninteresting and unimportant until they get hit. Even then, unless the breach makes the news, companies are too ready to sweep the problems under the rug and hope that investors never hear about how much of their money is lost to what is often carelessness.

EMI Ready to Reform on Digital Rights Management - for a Big Price

Via Slashdot.org, I learned of this piece in Ars Technica - after indicating that it would be daring and forego digital rights management in selling digital music, EMI dropped the other shoe. Yes, it would be willing to license music without DRM, which prevents unauthorized copying and, among other things, makes iTunes music only playable on an iPod. But that would cost - a lot. In other words, the idea of reforming business practice because it was alienating the sea of customers went out the window. It sounds like a combination of EMI wanting every last penny it could pry out of people's hands and trying to primp itself for Warner's potential acquisition interest.

I can understand the labels being concerned about the possibility of music piracy by so many individuals that the material would essentially become free. What I fail to understand is why the companies stop with the sturm und drang and just test the concept. Pick a dozen or a hundred representative tracks, remove the DRM, and see what happens? Watch the results and see if sales go up (meaning DRM is a hinderance) or down (the naysayers are right and theft would be the result). And, as Steve Jobs has pointed out, the vast majority of digital music is sold via unprotected CD, with people able to rip MP3s to their heart's content. Ah, but then someone is making a decision, and when you do that, you could be held accountable.

Quigo Puts Pressure on Google, Yahoo by Doing What Customers Want

The New York Times has a story about online ad newcomer Quigo and how the company's way of doing business is pushing Google and Yahoo to do business a different way. What might be the secret? Quigo provides services in the way customers are seeking. Advertisers, for example, can specify on which sites their ads are to run and allows the site owners to have a relationship with those advertisers.

Google and Yahoo run ads blind, putting them anywhere in their networks. As the article states, "Google and Yahoo argue that because advertisers only pay when the ads are clicked on, that more specific information is irrelevant." Sure it's irrelevant - unless you're trying to test media or to build a relationship with a supplier or vendor. It's only a shame that such a basic business principle could be so remarkable.

Why Blame Job Security? Because It's Easier

The New York Times today ran a story about job security. Many economists, so the premise went, assume that the United States is successful at least in part because of employment flexibility. Companies are free to hire and fire as necessary so they can provide labor to the parts of their businesses that can most benefit. The proof was supposed to be growth in this country versus stagnation in Europe and Japan, where workers enjoy a greater amount of protection.

But now, again the writer argues, the Europeans and Japanese are seeing growth while the U.S. economy is slowing. After mentioning various factors, such as cyclical economic forces and modified approaches to maintaining a level of worker security while giving businesses flexibility, the article ends with this statement:

“That is an understanding that perhaps will take root among American economists and policy makers, deprived as they now are of their long-running contention that job security resulted in weak economic growth in Europe and Japan.”

I think it assumes too much. Those who are invested in believing that employee security is bad aren’t going to suddenly change their minds, because they already “know” that it hurts the economy. And given the evidence provided in the article, I don’t think it’s clear that anyone has proven anything yet.

The problem is that people overly simplify mind-numbingly complex systems and then look for black and white answers to questions about those systems. Instead of trying to prove or disprove something, maybe the debaters should spend some time trying to understand and see how answers might look one way at one time and then change at another. Then, when the right/wrong heat comes off a bit, perhaps we can start to discuss other questions, like to what degree should workers continuingly benefit from an economy when often their pain and loss is what fuels the gain for others.

Starbucks Admits to "Watering Down" of Brand Experience

A liitle over a week ago I wrote about Starbucks facing the danger of losing focus and the brand identity that has been an enormous strength. So I was pleasantly surprised in getting last night's wrap-up from the Wall Street Journal to find a story about Starbucks. It seems chairman Howard Schultz wrote in an internal memo that in the drive to expand, "we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." I'd like to commend Steve McKee for having brought up the issue in my interview with him. After the Advertising Age article appears, I'll post more from our conversation, as he made some interesting points - particularly for fast-growing companies - about where they can find momentum turn to mire.

Microsoft Loses One Patent Battle - But Another A Bigger Worry

Most people who might look at this blog have probably already read of Microsoft's loss in the Alcatel-Lucent patent suit. But what I stumbled across via Slashdot is a bigger worry - not just for Microsoft, but all companies interested in patenting software, which could mean virtually any business making anything. BetaNews reports that the U.S. Supreme Court has just taken up debate on whether software itself can be patented. Holy Do Loop, Batman - this is enormous. Yes, the majority of the court seems pro business, but when you have businesses on both sides, which way will it go? In fact, it was Microsoft itself that was arguing that no one could patent software.

It's an itneresting argument. Microsoft is pretty smart when it comes to intellectual property, as I wrote about in Chief Executive a couple of years ago. But isn't this shooting itself in the foot? Not necessarily. Code still enjoys copyright, so deriving anything from reverse engineered object code could be argued to be a derivative use. And the company has so much R&D going on that it's pace of development might be enough to push off many competitors. Who might have to worry? Those outsourcing code. Suddenly all those non-competes and turning over the intellectual property means the copyrights - not the methods themselves. A lot of companies could find that they've outsources their way into funding entities that could then use the essential work and sell it to competitors.

Wal-Mart Looks to Suppliers to Boost Diversity, Image, and Business

In a nice piece of reporting yesterday (sorry, but this was the paper version and online requires a paid membership), the Financial Times noted that Wal-Mart has plans to push its vendors "to hire more women and members of ethnic minorities."

I could add an ironic end - "but to not promote them" - and leave things there, given that the über-retailer is still facing the class action sexual discrimination suit in the U.S. And certainly the company has been known to take steps to try bolstering its image. But when it comes to changing its supply chain, Wal-Mart is not known as a company that will do things for show. This is the heart of its effectiveness. And the new program starts with suppliers to its financial department - and some key suppliers of food and merchandise.

This is not a company whose culture would allow monkeying with fundamental business relationships or processes without a good business reason. The FT quotes Wal-Mart general counsel Tom Mars as saying, "This is not about preferences, or supporting minority-owned businesses. It is about becoming more relevant to our customers by partnering to our key suppliers and encouraging them to bring more diversity to our account representative teams who are the people helping us to get the right merchandise and the right food to our customers."

And that's the heart of the lesson I think most companies could draw from this example. Diversity isn't about management feeling good about itself nor burnishing an image. As true so often with doing the right thing, emphasizing diversity is bottom-line smart long-term business. When you have people involved in key ways with your business that are from the communities and demographics to which you sell, you've got a better chance of making customers happy. Do right by employees, customers, and communities, and you can't help getting a positive image. I'd also suggest that doing well in such a context is a potentially far deeper and committed way than wanting to join a moralistic bandwagon. When you see that the right thing is really the right thing for you, then there's a much smaller chance of falling off that wagon.

Lexus Tries Product Placement in Fiction - Running in Its Own Magazine

A couple of days ago, the Washington Post ran a story on product placement in entertainment. For those who don't know, that means inserting product brand references in books, movies, video games, television shows, and other places that advertisers hope will influence the buying product.

Oh, please. Advertisers are hyperventilating and reaching for the nearest paper bag because their ads don’t’ work anywhere near as well as they once did. It has to be the medium or audience “desensitization.” It couldn’t be because they are too greedy for attention, ready to crowd out anything that really interests people. It couldn't be that usually the products are poorly designed and built so that people just aren't interested or that the companies have saturated their markets. It couldn’t be that companies have so often come across as lying sacks of excrement that consumers have figured out that burying DVDs of advertisements in the garden makes plants grow.

So what’s the answer? Lie some more and pretend that references in entertainment just happen to be there. So what if the companies become directly or indirectly the subject of stories in the largest media outlets? So what if the efforts turn into PR messages that they are manipulative swine who compound the problem by having their own ad sensibilities injected into entertainment. Really, “In fact the car’s more like a super-powered laptop on wheels than anything else?” That doesn’t even rank as good brochure copy. Is the solution to their marketing problems to associate their corporate brand with lame drivel? And it’s in their flipping custom-published magazine! Do they think that isn’t getting their name into the hands of the people who already own one of the damned cars?? Are they afraid that readers don’t see the name of the magazine on every page? Is this a tacit admission that here’s one marketing vehicle that can’t pull its own weight? Oh, hold on, I’ve got the answer – let’s sponsor an event. Let’s buy the naming rights to a sports arena!

Satellite Radio Merger - Too Much Monopoly in a Nascent Industry

Satellite radio is literally a few years old, and yet XM and Sirius are planning a merger. Why? Because although they have 14 million subscribers between them, according to the New York Times, neither has yet turned a profit in the roughly six years they've been operating.

Well, duh. Even a new magazine can take a few years to hit profitability, and that's in an established market. This is an attempt to create not just a new venture but a new medium and industry. How long did cable television thrash about before becoming a profit powerhouse? Here's a bit of history to remind us. From its invention in 1948, cable TV had 14,000 subscribers by 1952. Ten years later and the number of subscribers was up to 850,000. Anyone want to hazard a guess as to how long they operated in the red?

Now we go from duh to dumb. To get enough cash in to invest, the satellite radio companies went public. That's understandable. But now investor feet get chilly and corporate managers, desperate for an answer to make shareholders happy and keep their jobs, start screaming economies of scale and elimination of duplicated resources. That is ridiculous. No one creates a new industry with only one company, and while satellite radio has a good start, it's not established yet. There has to be competition to make the companies try harder and, just as importantly, to create the perception of industry viability among consumers, investors, and potential business partners.

In the face of all academic studies and practical examples to the contrary, why do managers insist on the shopworn strategy of consolidation? A monopoly will not reduce the risk of all. Instead, given how many mergers completely fail to deliver the benefits they promise, this move will only increase risk. Better investors suck it up for now and realize that putting money into something new means recognizing that it's going to take time to pay off. Or should people have closed down an Amazon.com, let along a Federal Express, because they ran in the red for so many years?

Should Newspapers Become Charity Cases - or Businesses?

In Slate, Jack Shafer considers a Wall Street Journal op-ed by Steven Rattner, a major investor.

The problem with Rattner's view is that it's of an investor, not a businessperson. The two are conflated all the time in industry and the press, but unwisely because there are key differences. Looking at profit or loss of investments can significantly differ from trying to understand how to steer and correct a business.

The problem with the newspaper industry, I think, is that managers don't realize that it's not a product but a service, and the people who perform the service *are* the company to the customers. That means they can't downsize their way out of troubles nor can they find the magic format that will attract readers. Any publication is thought and emotion made manifest. Good format is necessary to intelligently communicate, but if you have ever less behind it, who cares? It does make me wonder that if the corporate owners want to treat newspapers like a business, why don't they do it completely and invest to protect and expand? Perhaps those that created newspaper conglomerates are still heir to an approach to business identified by Frank Norris in his story The Octopus: all -- the -- traffic -- will -- bear. However, when you people for what you can, they remember. And they wait.

JetBlue Cancelations More than Storm

The New York Times is noting more cancellations from JetBlue and more angry customers. In a quote:

On Friday afternoon, JetBlue’s chief executive, David G. Neeleman, acknowledged that he should have canceled more JetBlue flights on Wednesday to avoid stranding for more than six hours hundreds of passengers on nine planes that could not get to the gates at J.F.K. In an interview, Mr. Neeleman said of the spillover of delays to Friday: “Day three: unforgivable.”

Forget the public breast beating - and forget the storm. All airlines deal with problems. But when they cascade like this, no matter what the industry, it's an indication of deep operational problems. There is no way the company had an adequate plan for this degree of bad weather ... and, folks, if you've spent any time in the North during winter, you know things like this happen. Here's another example:

Ms. Dervin, the JetBlue spokeswoman, said that the airline called all of its pilots and flight attendants on Friday afternoon to determine where they were and how many hours of flight time they had left under government work rules, and simultaneously was patching together a new full schedule for the weekend.

You mean they don't track this normally? Jet Blue management management doesn't know where the pilots and attendants last were? Doesn't have schedules and logged hours on a computer system? Give me a break - a well-run small business would have this sort of information, and so must a large business that is subject to government regulations.

However, part of the blame for the surprise rests on the media and analysts covering this company and sector. There is too much interest in the new golden wonder, and people start annointing heads quickly, only to turn and pretend they saw it all along in situations like things going South up North.

Workplace Health Care Enforcement: Scotts Saves One Employee, Fires Another:

As this story from Businessweek shows, many companies are getting squirrelly when it comes to healthcare. Prices keep going up and this is an example of what one business - Scotts Miracle Grow - did to get employees to be healthier. But while company lawyers apparently decided it was legal to fire people who wouldn't stop smoking, some of the actions of the company, particularly of the CEO, sound as though they border on harrassment. Even if Scotts wins the suit brought by the Massachusetts employee fired because he was a smoker - right before he became eligible for healthcare help to stop smoking - you have to wonder if you can ultimately win when you appear to blame employees for business problems. Yup, health care was a frightening 20% of profits. So how much did waste in marketing run? How about executive perks? Employees can help drop some of the cost, but the relentless upward drive of health care isn't a result of individual choices; it's a systemic problem of a dysfunctional industry I wrote about a couple of years ago. Things haven't improved.

Hershey to Cut 1,500 Jobs: Real Savings or Wishful Shifting?

The AP, via Yahoo News, reports that American chocolate icon Hershey will cut 1,500 jobs and shift more production to Mexico. The report was a bit confusing. Were these cuts? Shifts to other plants? Outsourcing? So I checked the New York Times and found a report from Bloomberg saying that the 1,500 jobs represented 12% of the workforce and that the reductions would cost $575 million in before tax costs. AP reported that the company claimed it would save upward of $190 million a year, though notice that could be significantly different from the actual savings.

To hopefully avoid some of the confusion, let's go to the company's own announcement. It plans to close 1/3 of its product lines to get better utilization of manufacturing facilities, outsource production of low value items, and create a "flexible, cost-effective facility" in Mexico. The report goes on to say some other interesting things: finished products "will be sources from fewer facilities," each facility will be a "center of excellence" specializing in the company's proprietary product technologies, and [i]Increased access to borderless sourcing will further leverage the company's manufacturing scale within a lower overall cost structure." The process will take three years and afterward, it will make 80% of its candy in the US and Canada, down from 90%, according to Bloomberg.

A heck of a Valentine's Day present to the employees. Sometimes harsh measures are necessary to keep a company alive and well. But what's really going on? According to Bloomberg, the announcement came as the company also said that sales fell for the first time in 3.5 years. Obviously the company saw this coming and what has become the pat response in such cases is to look at production and labor. But in general the cost of manufacturing has become a relatively small part of total product costs. For example, in consumer electronics, labor is down to about 5% or possibly even less. How much of the product costs do labor represent? How long before the company will see the savings - whatever they turn out to be and my bet is that they probably wont' get measured let alone reported - that all this promises? It will take a number of years to at least make up the cost of the changes.

I think one of the more cogent observations, reported by AP, came from Wachovia Securities analyst Jonathan P. Feeney: "We are skeptical that pulling capacity out of the system while allocating capital away from the core business accomplishes the critical mission, which is to reinvigorate consumer response to its core chocolate products."

When sales go down, it might be important to tighten belts, but the most important impulse is to figure out what is wrong with a) marketing, b) sales, c) the products. Is anyone talking to customers to see why they are buying less? What metrics are in place to understand the effectiveness of marketing and sales campaigns?

According again to AP, COO David West said, "The long-term benefits will include a significant, sustainable increase in investment behind Hershey's iconic brands and new product innovation, as well as targeted, profitable international expansion." Perhaps, but if you're driving down the wrong road, putting more gas in the car and going faster isn't going to help. When sales are askew, don't blame the employees and don't blame the supply chain. Changing how you manufacture, source, and deliver products is an enormous undertaking, not just in money but managerial time. That attention would be better focused at straightening out the causes of the problem, not trying to be more comfortable with the symptoms. And to wait until the new supply chain is in place - to wait for the savings to invest in where things are going astray - is too big a gamble for any company.

Is Starbucks in Danger of Losing Focus - and Market Share?

As part of the research for an Advertising Age piece I'm writing I spoke with Steve McKee, president of full-service ad agency McKee Wallwork Cleveland of Albuquerque. We were discussing a study his company had done of fast growth companies and the factors that derailed progress at the businesses. A major one was losing focus - easy enough to understand. But the practical implications are interesting. Look at Starbucks, for example, which has branched out into music and books. On the surface it all seems to make sense - you listen to music and read books at a place like Starbucks. But, in McKee's view, “What is the Starbucks brand exactly and how far is too far? You've got a charismatic founder who’s still in place [keeping things together] and they’re playing dangerously close to a lack of focus. If he was gone, it would be really easy to make a misstep."

I think the evidence supports McKee. Maybe Starbucks is doing well in these new lines and maybe management is right. Yet consider something simple, like wireless access. Sure, most Starbucks (maybe even all) have wireless available - and given how people have turned the company's locations into places to work and study, that makes sense. However, the access costs money. There there are plenty of competitors, from local coffee shops to chains like Panera Bread, that have free WiFi. Are Starbucks products really so unique and desirable that customers won't defect to alternatives? I doubt it. People go where other people are, and Internet users follow high bandwidth and free access. When the coffee lifers head someplace that isn't so overexposed and that offers unmetered Internet along with places to plug in the laptop, it's only a matter of time until other business goes also.

Another sign of the potentially impending times is how they roast coffee. Starbucks likes heavy dark roasts and genuinely thinks that is good coffee. I remember a number of years ago visiting the Starbucks east coast plant and talking to the people there. I asked why the coffee so often tastes burnt and they looked genuinely puzzled as though completely taken aback by the question. I think they are sincere in their affection for how they do coffee, and that's fine. But what if customers aren't so crazy about it? That doesn't matter if you're tightly focused and serving a particular niche, but when you want that logo everyplace people are, you have to reconsider your strategy.

In 2004 I interviewed Rick Schnieders, the CEO of food giant Sysco. We were talking about the intricacies of managing the supply chain of products coming in one door and then going out the other to customers. He mentioned bacon. “The food service business is one that is varied," he said. "The bacon flavor in the southeastern part of the US is different than in Denver. It’s phenomenal the differences regionally and city to city. In Sysco brand bacon, we may have a supplier from the southeast producing [one style of] bacon and a producer from the west coast [making another]." The company doesn't do that for the sake of being complicated. It is complicated for the sake of customer demands. I find it hard to believe that coffee tastes are really that uniform. Maybe Starbucks is already producing regional varieties, but I've got to wonder, because everywhere I've gone, it still tastes the same - burnt. And when I travel, I look for the other places with non-paid WiFi access - many of which also serve coffee that doesn't taste like charcoal.

Will Daimler Spin Off Chrysler?

The business press is full of Chrysler's restructuring today. But if you're not one of the people facing a lay-off in a hurting industry, an even more interesting bit of news is that the Daimler CEO is considering spinning off Chrysler. It was in 1998 that the German company picked up the American auto manufacturer, so this might not even make a ten-year run. Someone badly wanted the deal all those years ago, spending a reported $25 million on a PR blitz - apparently in one day - according to a New York Times story from 1999. (You have to be a Times Select member to get the full text.)

Yet cheerleading does not a good business deal make. A strategy+business story suggests that the two companies had completely incompatible business models, each of which was successful when left alone. By 2005, the Daimler CEO was gone. Many academic studies have suggested that the failure rate - measured by financial promise to shareholders - for mergers and acquisitions could run anywhere from 50% to 70% (here is a collection of links to studies). So why do CEOs continue on a path of high risk? I think saying ego is too easy and a bit deceptive. People in upper management tend to be driven by wanting to come out big winners, so, yes, bigger is often better. The more subtle dynamic, I expect, is that the CEOs figure they'll be the ones to beat the odds. That's where the real danger of ego enters - not in wanting to be on top, but in believing that you're the one that can do it. Certainly that arrogance is necessary to success, but so is some humility and the willingness to listen to those who disagree. (Certainly there must have been people at both Daimler and Chrysler who smelled disaster.) Business is always a balance between taking risks and mitigating their effects, making it like controlled gambling. CEOs and board chairs should always remember that in a large corporation, the money being risked is someone else's. Maybe that would help bring some of the monetary sobriety so badly needed.

GE Regulatory Lobbying Tarnishes Green Image

In today's Wall Street Journal a story says that General Electric efforts to weaken smog controls on railway locomotives goes counter to the company's efforts at an environmental positioning.

It''s easy to get up in arms, and I think the lobbying is a huge mistake. Brand isn't something slapped onto a company. It's the communication of the embodiment of the company. A company is foolish to spend the money and effort to communicate something that isn't true - that's an expensive form of lying.

That said, what is GE? It's a conglomerate, comprising companies in a wide range of industries. The company's CEO buys and sells companies, and then tries to push corporate culture into any acquisition. What anyone has to ask in a conglomerate in particular is how well orders from above make their way down. It's not enough to say "we're going to do this." Eventually the company will run into a wall because employees will suddenly face competing priorities. In this case, GE's division building locomotives apparently wasn't enthusiastic about meeting new smog reduction guidelines for smoke-belching diesel engines. It was a tale of two greens: environment and money. Which one do employees pick? Whichever one saves their jobs, raises, and bonuses.

It's an old story in which people vote for their compensation. If a GE wants to be green, that's fine, but it had better realize what that could mean and be ready to pay employees to achieve that over other goals.

No-Name TV Brand Story Misses Flat Panel Industry Dynamic

In a New York Times story, Damon Darlin (nope, I'm not trying to pick on him - just a chance occurance that I mention a couple of his stories within a couple of days) writes about how a new name in the TV unit business - Syntax-Brillian and its Olevia line of flat panel TVs - was driving down the price of televisions to the potential annoyance of the premium brands. But the story is missing some analysis and industry knowledge that puts things into a more complex perspective.

One is that some of the brand names don't just assemble televisions under brand names. LG, Sharp, Philips, and Samsung, at least, are all big names in building the actual display panels. That means they can stomach far more of a price drop than a company like Syntax-Brillian because they make one of the most expensive and necessary components. Some of the other "value brands" in competition with Syntax-Brillian are Zenith and Magnavox. But according to a New York Times blog, LG owns the former and Phillips owns the latter. Philips also owns Sylvania. So claiming that "With the exception of Zenith, which has become the value brand of the Korean company LG, these brands are used by 'virtual companies' that, like Syntax, contract with assemblers to build the TVs" doesn't seem accurate so far as I can tell.

In other words, this upstart - actually the 2005 merger of two different companies, one public and one private - is slugging it out in a brawl with a number of competitors that make money off competitors through supplying the actual displays and that have enormously deep pockets to boot. The story quotes someone from Sharp saying "The off-brands are residing in a price band where we are simply not going to reside." Of course they won't - they don't need to because they already are getting their cuts of those markets and can afford to watch the low-priced companies financially bleed themselves to death. Of course, a quick web search shows that Syntax-Brillian has another brand: Brillian high definition televisions, which by their specs appear to be a higher-end line at better margins. So maybe the entire premise of the article, that a spunky upstart is using price as its primary weapon, is slightly out of focus.

Pizza Niche Marketing Shows You Need to Speak Customers' Language

The New York Times Magazine had a story today about Pizza Patrón, a pizza chain aiming at Hispanics, not though some gimmicked up pizza toppings, but through branding and having bilingual help. As the story says, "That didn’t mean a new kind of pizza, but a new context for pizza. One that sort of feels . . . Hispanic."

Branding isn't about a faked appearance or an advertising campaign. Branding is an expression of the essence of a business. And the chain operators realized that the only way to appeal to customers is to speak their language - literally. That's what they did. No wonder business during the final quarter of 2006 was reportedly up 35% over the same period of the previous year. Too many companies make the enormous mistake of thinking that customers have to do things their way, rather than the business accommodating the customers. That doesn't mean, by the way, that a smart company always bends over backward for everyone. It will want customers that fit the business model and that are good, both in loyalty and payments. But too many corporations are inflexible and inappreciative of their customers, expecting them to bring translators. Then management teams wonder why their competitors toss them about like a pie about to go into the oven.

Noka Chocolates Show that Marketing Isn't Rational

The New York Times reported about $2000 a pound candy from Dallas-based Nobo, a story that's been making rounds on food blogs. That's staggeringly expensive, even when compared to top chocolatiers around the country. To explain the phenomenon, reporter Damon Darlin went to one economist after another, who couldn't find a rational explanation.

That's because there is no rational explanation, and anyone experienced in business could have told him so. Marketing is not a rational process, and no one buys products on a rational basis. No one. Not I, not you, not Mr. Darlin, not the couple that owns Nobo - no one. Sure, there are things you will get because you need them, but that's probably a small part of purchasing. And once you identify a need, reason takes a holiday while emotion leaps into place. In this case, there are many emotional needs that such a purchase can feed. For example, there's ego, showing that you can afford an extravagance. There's trying to make the recipient feel small and incapable of returning the favor. Such a gift could let the giver feel safe, offering something abundant and yet clinically antiseptic. (Notice in the story how the chocolate comes in a stainless steel case - certainly an image of cold cleanliness.)

I could go on and still cover only a portion of the emotional triggers of such a purchase. But the point isn't a list. You can only start to understand business if you begin to understand how people work, and that's what makes commerce one of the most intently human activities there is.

Business Needs Business-Knowledgeable Press, Not Business-Friendly

Rupert Murdoch announced that News Corp. would create a business news channel "“more business friendly" than rival CNBC, according to this New York Times article. That's given all sorts in the media something to worry, like a dog with an old familiar torn slipper, but it's going down the wrong direction.

It's a familiar theme: businesspeople think that the press is antagonistic to them. But from the view of someone who is a business journalist and who also used to be in business, that's not the problem. Sure, fawning coverage might occasionally help boost an ego or stock price for a day, but I've talked to many managers about their views of business coverage. When you get them to articulate the real problem, what businesspeople say is that coverage is shallow and uninformed. Journalists take the classic "there are two sides to every story" and paint a monochromatic image of winners and losers, good guys and bad guys, oppressors and victims.

That's too easy and generally doesn't get the real story. Reporters don't see the trade-offs that might lead to one decision or another. On the less positive side, they also reduce everything to a quest for money and often miss the issues of ego or fear or other emotional dynamic that can determine what a company will do next.

what would do everyone some good is to get those in journalism school off on internships - in corporations. They'll have plenty of time in newsrooms. Why not let them see what marketing is from the inside, or have them handle the call of an irate customer, or put in long hours to finish a challenging project, understanding the pleasure that trying to do business well can be? The coverage wouldn't be friendly or hostile - it would be understanding. And I think in the long run that's really what businesses crave.