Comments

Tom,

At what point will we consider phasing out the seemingly outdated "DJIA" in favor of "DJTA" or "DJSA" ("Dow Jones Technical Average" or "Dow Jones Service Average," respectively)???

Posted by Dan Gunter at June 1, 2009 10:29 AM

"Cisco replaces GM in DJIA!
Welcome to the 21st century! "

Or in the words of Marie-Antoinette,
let them eat cake.

Posted by dan at June 1, 2009 6:39 PM

Now five tech stocks in the 30. Well on the way Dan.

Posted by David Porter at June 1, 2009 7:14 PM

No doubt David. Signs of the times. Lagging, perhaps, but definitely "signs."

Posted by Dan Gunter at June 1, 2009 7:28 PM

Within this new smart savvy wholly high tech world, will we produce nothing of value that we need everyday for our survival and pleasure? Dow Jones Service Average??? What will our young people major in on average, service? Of what? Starbucks?

dan's (small d) point in another post is sounding pretty relevant.

Posted by Judith Ellis at June 1, 2009 10:16 PM

Intellectual capital is worth zillions more. Joe Batten: “Mindsets are yesterday?mind growth is tomorrow.”

Posted by Andres Agostini (Andy) at June 2, 2009 1:22 AM

Andy - Your quote has relevance for me as it always takes innovative ideas to forward any initiative. But to fantasize or better yet merely intellectualize that we are going to do so and be successful by becoming largely a service economy and thrive with a vibrant middle class is completely irrational and detrimental—no intellectual value there.

I think dan has a point in the other post about those "new hot" ideas.

How many trainers and service people will we need to train at Starbuck, Walmart, McDonalds etc to refuel this economy and build future ones? We can talk about intellectualism and service until we're blue in the face, and even provide service as such, but we better damn be creating engineers and scientists and producing things that will grow future economies.

Shall we become a nation that merely serves others and produce nothing? How much intellectualism will that take? Not a lot.

Posted by Judith Ellis at June 2, 2009 4:45 AM

Thinking of the Dow Jones Industrial Average. By renaming such the Dow Jones Service Average or the Dow Jones Technical Average does that indicate that there are no other industries of any kind save these? The Dow Jones Industrial Average has a plethora of industries and to merely deduce it to tech or service is ludicrous. Many of our fresh bright new ideas are simply silly, taking no real, shall I say, intellectual rigor to produce them. Again, dan, (small d) has some very lucid points in the other post.

Posted by Judith Ellis at June 2, 2009 4:53 AM

I recently fled the leaderless, poverty-stricken, frozen wastes of Michigan for a pleasanter climate--in all ways. It is amazing how much manufacturing remains in the United States. Once the MI "Big Three" blinders came off, I was able to see there is definitely a healthy, vibrant manufacturing base in other parts of the country. GM is no longer the US and has not been for a while. US manufacturing is certainly in a difficult trasition, but is a long, long way from death's door. Of course, in our new economy, technical skills, leadership skills, and other SKILLS will be required for individuals to be successful in manufacturing or any other industry. Judith laments the days of "went through high school, worked on the line for 30 years--learned nothing, achieved nothing--and retired" are gone (have been gone since the mid-eighties, actually). I say good riddance. It isn't about a "service" economy it is about a SKILLS economy.

Posted by Emigre at June 2, 2009 6:53 AM

"It isn't about a "service" economy it is about a SKILLS economy."

Good point. But skills for what service? Starbuck? Walmart? McDonalds? How much skill is needed for those low paying non-intellectual jobs? Will these minimum wage jobs rebuild the middle class? Who will be able to send their kids to college on these wages? In your brave new world what kind of SKILLS will produce the jobs needed?

Just so you know in case you didn't, my adult life was been largely spent in New York City, southern California and other places around the world. I have reached the PhD level. This is not about me, nor is it about a narrow view of the education needed in this brave new world. It is, however, about bringing the whole country along and not merely businessmen on this blog who basically live in a big white upper middle class bubble! (If the shoe fits, wear it. If not, well you know what to do with it. kick it!)

By the way, I am happy that you are now in a place where the sun shines on you. Good on you. But some of us both love and appreciate our home, and its many struggles, and travel regularly, unfettered by any one locale.

Regarding GM, I am NOT lamenting its restructuring. I am lamenting the ideas of the service economy presented on this blog lately. It's also damn funny that no one talks about the banking industry in similiar disparaging terms, those white collar SKILLED pieces of horse manure who require some kind of bailout every 10 years, pocketing hundreds of millions in the process with their SKILLS--damn SKILLED paper shufflers that don't produce any real value.

GOD, HELP ME. PLEASE! THESE TOO ARE YOUR CHILDREN! I THINK!

Posted by Judith Ellis at June 2, 2009 7:48 AM

Hello all, interesting discussion. Surely "Industry" or "Industrial" is not just manufacturing. There's a lot more manufacturing going on in the US than the motor industry alone, including by Cisco. And there's a whole lot more to the service industry than just Starbucks or McDonalds.

Posted by RobCH at June 3, 2009 4:42 AM

Hello, Rob. Agreed. My point about the likes of Dow Jones SERVICE Average above is that it narrows industry; it certainly isn't inclusive. With regards to manufacturing, of all kinds, this is obviously true, perhaps it is the diversity of small business that matters here. But then, of course, there remain big box stores who have unskilled cheap labor which increase personal wealth with unskilled cheaper products made elsewhere. But there is a big market for these products which I recognize.

For me, there remains the concern that for the basics of what the people of a country need like food, oil, clothes, etc. are all manufactured and produced elsewhere, even computer hardward not to mention service such as technical support. Globalization has its benefits and its detriments with regards to national sustainability and security. Are there any real nation states?

Perhaps we are indeed heading towards that once hypothetical One World Order. We seem there to some degree already. The global financal crises proves this, where the financial systems of the whole world were in danger of collapse. How to avoid this again? I imagine this new world order will play out like our current "nation states," having attained much through dominance, where wealth determine rank; those with the most money win.

Posted by Judith Ellis at June 3, 2009 5:37 AM

Judith, we're agreeing. Keep calling it Industrial in my view; just don't define Industry as meaning only Manufacturing (or Service). To be honest, I'm not sure the replacement of GM by Cisco on the DJIA really even merits an exclamation mark. As TP says above, this is a symptom of creative destruction.

Posted by RobCH at June 3, 2009 6:05 AM

Thanks, Rob. Hmmm? Creative destruction. Sounds good. But I gotta think on that some more. My god-sister, Cristina, whose parents founded The Michigan Opera Theater and simultaneously served as artistic and education directors of Opera Pacific in California and Dayton Opera in Ohio, just wrote to tell me of the near collapse of the Michigan Opera Theater after so many years of very very very hard work. She has lived in Rhode Island for some time now and is feeling the pain upon recently visiting and seeing the plight of the people here, both rich and poor.

The Michigan Opera is in dire straights, after 38 years and having renovated an historic theater downtown some 13 years ago, restoring it to its former glory. I met the impresario and composer, David DiChiera, whose recent opera Cyrano to great international success and acclaim, and his wife, Karen, composer, educator, stage director and my second-mom, when I was kid. The Big Three were big supporters of the Opera House. Now, support has ceased. UGH! I have been up at an all-night cafe writing. But I suspect I will not get any sleep at all now.

Posted by Judith Ellis at June 3, 2009 7:24 AM

Yes, there's a pile of arts organisations and non-profits in trouble. Madoff hit a lot of them directly or indirectly (I saw a quote recently that Madoff has single-handedly destroyed a whole generation of Jewish philanthropy), the traditional corporate sources of funding are counting the pennies or disappearing, and arts organisations are suffering badly. As collateral damage goes I hate it, but it is an inevitable risk of the donor-based arts funding norm in the US. A much better case for bail-out in my view.

Posted by RobCH at June 3, 2009 7:58 AM

From my "bubble:" My point is that it is NOT about a service economy at all, it is about a SKILLS economy. You must have something to market, must bring something to the table, in order to be part of it. Schlepping parts down the line isn't an option any more. If you do not bring skills to the table, you will probably end up in the service sector. Learn the skills. (BTW--my school sucked. I learned on my own. So can anyone. Libraries are still free and have internet these days.) And no, Judith, they are not MY children. My children are my children, yours are yours, my neighbor's are his, etc. I am not responsible for making sure anyone else's children have "opportunity," "education," or "a fair chance." Life isn't fair and there has been enough tragedy in mine that I am fully aware of that.

Posted by Emigre at June 3, 2009 9:22 AM

Emigre, speaking as a fully paid-up (and I hope reasonably skilled) member of the service sector, I'm unclear why it's characterised as a place the unskilled will "end up". Its definition is broadly the production of intangible goods, which would include education, media, design, legal and management consulting, none of which seem to be dead-end unskilled jobs. I reckon that the service sector is full of opportunity and aspiration, not at all a sector of last resort. But then, I am biased...:)

Posted by RobCH at June 3, 2009 9:47 AM

RobCH, I concur. "Services" and "goods" are not mutually exclusive and are often impossible to differentiate. You can't manufacture goods without the services that support such manufacturing, and regardless of the goods you produce, there IS an element of service provision by the manufacturer inherent in the marketing, distribution, installation, repair, etc. of such. Back to the question of "What business are we in?" Companies like Xerox came to this conclusion a long time ago (see Rule #30 in Alan Webber's new book "Rules of Thumb.")

We need "things" and "services" equally. My hat is off to the skilled person who correctly assembled my car to begin with, and also off to the insurance agent who helped me find the right policy, and the I.T. folks who helped make it possible to pay my insurance premium online...

The list is endless.

But we should keep in mind that the old image of the "blue collar" worker has changed. Whether he realizes it or not, he is a "service" provider as much as he is a wielder of a screwdriver. If he's NOT seen as such, then there's a very good chance that the company he's working for is already beyond being worthy of a "bailout" from any crisis, financial or otherwise.

Posted by Dan Gunter at June 3, 2009 10:20 AM

Emigre - Sorry for your tragedy and your self-imposed bubble. If everyone thought as you, the world would be in far worse shape. Thank God we do not. You do not seem like one for young people to aspire, nor do you seem like a leader worth following. Let's hope that nothing befalls you or your family that will send you and your loved ones to the soup line. I pray not, sincerely. This would be indeed horrible. Yet, it is happening nationally and young people have to drop out of college.

Yes, parents all have personal responsibilities to their own. But as imperfect parents and people, this includes you, it doesn't always work out the way we have planned for one reason or another. Just think of all the parents who lost their children's college funds in the stock market over the past year. Were these parents by and large irresponsible? Should their children suffer? Should there be no relief? I have NO children. Yet, I give and support a great many others through my time AND finances.

Rob - Thanks for your words here. I have had a few hours of peaceful sleep and am back at it! Preparing to see a client at 2:00. I also especially appreciate your definition and distinction above with regards to service--much appreciated, in fact.

Posted by Judith Ellis at June 3, 2009 11:06 AM

So...I have been dying for a forum to get this off my chest...to me , this whole GM issue is not a symptom of a manufacturing company trying to compete in a service economy. It has very little to do with what category of business you are in. It has everything to do business fundamentals. Personally, I don't care if you are a service business, a manufacturing business or an "intellectual property" company, you still have to have a target market, you still have to provide that market with exceptional quality, service> An exceptional EXPERIENCE. GM can talk about the world changing in their new ads, they can talk about streamlining and looking forward to chapter 1 (and i think that the new commercial is extremely well written) but really...what a load of BS. Look...it's not complicated. Find out what people want, then find a way to deliver it. You do ...you succeed, you don't...you won't. Did GM have a lousy cost structure? Sure. Did they do a lousy job of trying to see the future ...for sure. But at the end of the day, they felt that they could cover up poor design and quality with rebates and incentives.They couldn't even stand behind the value of their product, so why should their clientel? They had their lunch eaten by the japanese, then the Germans, then the Koreans and didn't adjust. Now 1000 odd hard working car dealers and their respective employees are out in the dark. Tens of thousand auto workers are out of work and they talk of "the new GM". I hope they have learned something. Personally...I'd be surprised. Either way,thanks for giving me the venue to rant. The family has been hearing it for 15 years from me....now they get to hear the "I told you sos" for the next 15 years :)

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Posted by Dan Gunter at June 3, 2009 9:27 PM

Jamie, the truth in what you are saying is sad, but still very true. While the indications are that GM and the other American auto manufacturers have made huge strides in catching up in terms of quality, it has largely been "too little, too late." Besides the actual quality of the finished product, "quality" in manufacturing also encompasses so many hidden costs (at least they're hidden in that they are not itemized on the window sticker of the car, although they still end up in the bottom line of the price.) Meanwhile, foreign auto makers learned (largely starting in Japan with our very own home grown W. Edwards Deming, who we exported to Japan rather than listen to) how to do what we did -- but better, cheaper, and faster.

Add in all the legacy costs and it equates to no chance at competing. Government bailouts are the equivalent of subsidized farming. It works for a while... or does it? Is the U.S. government going to turn around and buy up G.M. automobiles and store them in old salt mines? Give them to third world countries that lack automobiles?

We have no clear solutions at hand. Although it sounds like a page out of Darwin, industries do have their own inherent evolutionary processes. I would love to see G.M. and other U.S. companies in similar situations figure out how to turn this all around and be competitive. There isn't time to build a bridge: it would take one very giant leap across a chasm that I just don't see happening.

Posted by Dan Gunter at June 3, 2009 9:40 PM

Why do we get upset when people burn an American Flag (a flag was probably made in China) but it's perfectly OK to shit all over GM (which actually provided the American Dream to millions of workers?)

We are pissing where we eat and pretending we are pragmatic.

Posted by dan at June 3, 2009 10:07 PM

Jamie, you mentioned the rebates and incentives issues. One of the few real success stories I've seen related to G.M. was the launch of Saturn. I can't count the number of people I talked with that said how much they liked going to a dealership where the price was the price. No playing games with the salespeople over the price. Like other big business exceptions (such as the IBM/Lexmark story), it often takes getting things out from under the big, overshadowing corporate wings to whatever extent possible to start seeing some good things happen.

Between rebates, incentives, special discounts, dealer holdbacks, claiming to be selling at "dealer invoice" (which still ISN'T the actual cost to the dealer)... it's all nonsense marketing in my opinion (and apparently a lot of people share the same opinion.)

Just make a good car, put a reasonable price on the sticker, and be done with it.

While working for a Dodge/Chrysler dealership, I once bought a brand new P.T. Cruiser for a little over $14K. Sticker was almost $21K. So my question was: "Would it not be possible to sell more if the sticker simply read something like $17,500 and let the customer focus on picking out a nice car instead of coming to the dealership terrified (rightfully) of what the experience of 'dealing' would be like?"

Salesmen in the auto industry go through tons and tons of training that is 99% manipulation techniques. I outsold most of my fellow salesmen by breaking all the rules: I simply tried to help people find the right vehicle for their needs and bypassed as many of the games as I could. I was fortunate to have a sales manager that figured since we were more or less away from the "home office" (the dealership's owner's office), we could be a little brave. It worked wonderfully, up until someone in higher management decided we weren't playing the game "the right way." Our sales went down the toilet immediately.

From the factory to the dealership, there are LOTS of improvements to be found. Simply make a good product, price it fairly (best price up front), and back it up with good service. No games.

What a profound concept, huh?

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Posted by Dan Gunter at June 4, 2009 9:12 AM

P.S. to my above comment:

Another place I find disgusting pricing practices is big pharmacy. You hear the horror stories like HIV patients in the U.S. that can't figure out how to pay thousands of dollars a month for the medications they need, yet those same drugs can be provided to third world countries for a couple of hundred a month (currency exchange rates accounted for.)

I'm all for helping out the impoverished. But why not price them so they are (hypothetical numbers here) $500 a month across the board? If that represents enough of a profit for the manufacturer to stay in business and maintain R&D efforts, seek creative partnerships, benefactors, whatever to help those that can't afford the medications. There are better ways than simply gouging the ones who CAN afford to pay. Which is precisely why so many insurance companies refuse to pay the full retail price for a lot of medications. They don't want to be taken advantage of either.

Posted by Dan Gunter at June 4, 2009 9:22 AM

Dan - great story. I get quite irritated by such things too. One of the most annoying things for me on this sort of thing are flight advertisements that read for instance “FLY TO SPAIN FOR £2”

When one enquires it turns out that with airport taxes the ACTUAL cost is well over £150. The £2 is the cost of the flight ticket. I ended up having a not very philosophical discussion about the merits of telling the truth in business with a salesperson working at the travel agents. She kept on telling me “But the cost of the seat ticket is £2.” In the end I gave up because she clearly had a blind spot about common sense. I kept telling her the cost of the flight was over £150. She constantly repeated “No - the cost of the flight is £2.” At one point I though “Is it me?!!!!” and I almost lost the will to live. I think this type of behaviour borders on the illegal. At best it is lying. Why can’t sales people just tell us customers as it really is instead of trying to con us into believing we are getting something for nothing? My late beloved Dad was absolutely right – there is no such thing as a free meal! Just give it to us straight please – we are big boys and girls now – we CAN deal with the truth … HONESTLY WE CAN :-)

Posted by Trevor Gay at June 4, 2009 9:45 AM

Trevor, I don't think there's a person among us who hasn't been hit with B.S. like that. I am a practical and fair guy. I expect the manufacturer, dealer, repair folks... everyone... to make a fair profit. But do it by keeping things simple and honest. It isn't always the quality of cars, or the in-flight amenities (or lack of) or technical issues that hurts business sales of products or services: it's fundamental business practices.

In the case of G.M., I'm sure Tom's as empathetic as anyone (my gosh, who could be more interested in people having jobs -- and enjoying them -- than Tom is?)

We talk about great customer experiences, customer service magic, and so forth. There are places and situations where the best customer service improvement would be to cut the nonsense and get back to basics.

Good products.
Good services.
Convenience.
Fair pricing.
Treating people well.
Honesty.

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Sam Walton started with these kinds of ideas and built an empire that all but destroyed K-Mart. Whether they are still the same company at heart since his death is debatable, perhaps. But the point is that it IS a formula that has stood the test of time. Maybe the logistics are more complex now (despite the notion that technology is theoretically supposed to make them more manageable,) but it is still possible to run a business -- any business imaginable -- based on these ideas.

Back to Tom's basic premise that "It's about people... even if a 'lumpy object' changes hands somewhere along the way."

Posted by Dan Gunter at June 4, 2009 10:03 AM